Welcome to the Angie's List Second Quarter 2014 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions). As a reminder, today's call is being recorded. At this time, I would like to pass the call to Leslie Arena Vice President of Investor Relations Angie's List. Please go ahead, Ms. Arena.

Thank you, operator. Good afternoon, and welcome to Angie's List second quarter 2014 earnings conference call. With me today are Bill Oesterle, the company's CEO; Angie Hicks, our Chief Marketing Officer; and Tom Fox, our CFO. As a reminder, today's discussion will include statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including predictions, expectations, estimates, or other information that might be considered forward-looking. Throughout today's discussion, we will present some important factors relating to our business, which may potentially affect these forward-looking statements. While these forward-looking statements represent our current judgment, these statements are also subject to risks and uncertainties that may cause actual results to differ materially from statements made today. As a result, we caution you against placing undue reliance on these forward-looking statements. We encourage you to review our public filings, including our 2013 annual report on Form 10-K and subsequent quarterly reports for a complete discussion of these factors and other risks that may affect our future results or the market price of our stock. We are not obligating ourselves to revise our results or publicly release any revisions to these forward-looking statements in light of new information or future events. In addition, as we refer to earnings, we will also refer to adjusted EBITDA, which we define as earnings before interest, income taxes, depreciation and amortization and excluding non-cash stock-based compensation. Adjusted EBITDA is a non-GAAP financial measure and you can find a reconciliation of adjusted EBITDA to the most directly comparable GAAP financial measure in our second quarter 2014 earnings release, which is posted on the Investor Relations section of our website. We believe that the use of adjusted EBITDA provides additional insight for investors to use an evaluation of ongoing operating results and trends. However, non-GAAP financial measures, such as adjusted EBITDA, should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP. I would now like to turn the call over to Bill.

Thanks Leslie and good afternoon everyone. Our long-term operating strategy remains unchanged we will grow revenue and margin while increasing investment. In the second quarter we continued to successfully execute on that strategy. We grew revenue 33% and increased the number of marketplace transaction by 51% inspite of lack luster performance in our big deal offering which I will discuss shortly. We delivered these results while simultaneously increasing our investment in marketing, selling, product and technology for the first half of the year we increased operating income margins by 500 basis points compared to the same period a year ago, even with the dramatic increase in growth investments. In addition, we made progress in the ongoing evolution of our business from a paid membership, information sharing model to an outcome based marketplace models that includes, both membership and transaction revenue. We achieved new records for total paid household and new paid household added. And also executed a record high number of consumer purchases on our platform. In the second quarter, we saw nearly 300% increase in interactions on our platform. This includes messaging, purchasing, scheduling and the like. This incremental activity is deepening our relationship with existing service provider. Let me turn for a moment to sales force productivity. Service provider sales productivity on a per head basis remained stable sequentially, despite adding capacity and increasing our focus on training and on-boarding. As we discussed earlier in the year, the emphasis in the second quarter would be on investment, particularly in marketing and technology. On the marketing side, we followed our historical, seasonal emphasis and successfully invested $36 million, an increase from $23 million in the first quarter. This investment produced nearly 400,000 new gross paid memberships, as I mentioned a record high for the business. Importantly, our advertising also…

Thanks Bill. We're very pleased with the significant progress we made growing both membership and marketplace transactions. We have broadened our messaging to include e-commerce and our deepening level of engagement with our members and service providers. We invested significant marginal marketing dollars with total spend at 36 million which was squarely in the middle of the guidance we provided on last quarter's call. Not only that this investment drive record high membership addition, but it also contributed to the significant increased in marketplace transaction that Bill discussed. While early this validates our view that we can continue to improve marketing efficiency as we build and scale our e-commerce business. Our decision to increase our marginal spend was the right one. Although CPAs increased to $90 from $82 in the first quarter, we've never had anything close to this level spend and deliver this level of efficiency and we conservatively estimate that e-commerce provides us within even greater opportunity to generate more value from every member. Member engagement increased on a per member basis indicating our members are finding more ways to use our product and we continue to drive more e-commerce purchasing behavior from a larger percentage of the member base. The percentage members purchasing the number of members purchasing within the pay wall and the activity on the platform continues to grow. Additionally app download ands and digital magazine downloads and more than doubled year-over-year. This is meaningful and encouraging progress. Turning to member retention. As noted, we continue to have very loyal engaged member. Well, our first two renewal rates were down one percentage point for the quarter and two percentage points for the half year, this level of variance was within the normal range. We're pleased to continue to see consistent renewal rates given the factory…

Thanks Angie. Let me summarize the financial results for the quarter. Total revenue increased 33% from the year ago quarter to $79 million. Membership revenue increased 16% over last year, total service provider revenue increased 39%. Within that service provider revenue, advertising revenue increased 37%, to $53 million and E-commerce revenue was $7.8 million. In addition, our service provider contract value backlog ended the second quarter at $138 million, up $6 million sequentially. As a reminder the backlog consists of that portion of contract value that has not yet been recognized as revenue. Turning to our expenses. We made significant investments in the quarter to grow our base of membership and service providers and to develop products to improve how our members address their local service needs. Our operating loss for the quarter was $18 million, down from a loss of $14 million a year ago. Selling expense increased $8 million compared to the second quarter of 2013. And we ended the quarter with a total of 1,266 people in our sales organization with 1,001 responsible for originations in traditional ad sales and E-commerce and 265 responsible for renewals. Adjusted EBITDA, a non-GAAP financial measure, was a loss of $15 million for the second quarter compared to a loss of $12 million in the year-ago period. Moving on to the balance sheet and cash flow. We ended the quarter with approximately $57 million in cash, cash equivalents and investments. We generated approximately $3 million in cash from operations during the second quarter compared to $4 million in the year ago quarter. Turning to our outlook for the third quarter, we expect total revenue of $80.5 million to $82.5 million and marketing expense of $20 million to $23 million. We anticipate capital expenditures for the second half of the year to…

Thank you. (Operator Instructions). Our first question comes from the line of Jason Helfstein with Oppenheimer. Your line is open.

Thanks. Can you talk about the impacts of the lower monthly or annual price? So I mean it’s been in place along enough, so you’ve probably seen certain metrics. And so perhaps are you seeing an improvement in conversion rates? And if so, when we think about you are lowering marketing in the third quarter, do CPAs come down as conversion rates go up or just give us a little more detail given you probably have now several weeks at the lower price and how that impacts the model? And then just, I’m going to actually ask three, so I apologize. Then second is housekeeping, just if you could provide third quarter D&A and stock comp that would be helpful. And then lastly Bill stock is at an all-time low after hours, can you comment on your stock sales and is there a target amount that you’re intending to sell or kind of when you’re think about concluding that stock program? Thanks.

Yes, sure. I’ll have Angie handle the first question with respect to the tiered pricing.

I'll get the D&A and stock comp...

Great. And then I'll return for the stock sale.

Sure. On the tiered pricing, it’s going well. So the pricing has worked effectively to allow us to improve conversion, you're exactly right; version is going up. On the Q3 spend and what we're expecting, that is really us taking advantage of moving dollars for the second quarter, moving spend up in the first part of the year to take advantage of the curve. As we talked about before, the second quarter is a time for us to really invest in the business because we take advantage of the seasonality of that spend and we've done that. So we would expect some tail from Q2 to spend in the third quarter as well as we move into a lower spend.

Specific to CPAs or CPAs stay about the same?

The spend -- as we’ve seen traditionally, you expect to tail on your spend, so you expect efficiency in the CPA as you move in the back half for the year.

On the second question you asked Jason, this is Tom about stock-based compensation and D&A. I would tell you for Q3, we're looking at approximately 2.5 million on the stock-based compensation side and somewhere in the range of about 1.5 million to 2 million on the D&A side?

Okay. And just on my stock sales, they've been -- obviously I've had a plan that’s been in place since November of last year. It’s had very modest monthly sales this quarter that have been a part of that targeted liquidity. And I’ve worked very hard, I attempt to approach the business and my own personal dealing is on a long-term basis and irrespective of the particular fluctuations that was sort of the intent of the 10b5-1 Plan in the first place. Given the recent performance of the stock, it is my intent when the trading windows to terminate that plan. Now there is not much time left in it, it’s somewhat symbolic but that can only be terminated when the trading window is open. If and when it reopens for the management team, I intend to terminate it. And I think the company is actually performing quite well right now. And I believe it’s good time to do that for me.

Thank you.

Our next question comes from the line of Paul Bieber with Bank of America Merrill Lynch. Your line is open.

Hi, thanks for taking my questions. I was wondering if you could give some context around the service provider systems during the quarter. Given all the sales force systems, why aren’t you adding more service providers? And then on the guidance with the lower marketing spend, what gives you confidence that you could basically drive robust revenue growth when you are pulling back marketing spend to a multiyear low?

Yes. So we actually -- so there are service provider additions, we had a fairly healthy growth in that. But I think it’s important to understand the context of what we are doing with the service provider base these days. We are attempting to deepen our relationships through commerce with the existing service provider. And so the vast majority, almost exclusively the e-commerce revenues that we are driving was generated through relationships that we already have, so very, very significant amount of that was. And that continues to be the focus of the business. There is lots and lots of activity in commerce that can be captured in the existing service provider base. We want to start there and expand out and so more of the salesforce is dedicated to that activity than ever before. We expect to get growth, because we're getting efficiency out of the activities, the investment activities that we are engaging in it's a recurring revenue business, it remains one. So, we expect to be able to drive, carry forward the growth that we had last year and carry forward the growth that we've generated in the first part of this year. We're just going to do so more efficiently in the second half of the year. We're going to rely on the efficiency of the recurring revenue.

And one quick follow up, how should we think about the member ARPU going forward, now that you have rolled out the tier prices to all markets?

Yes. I think you saw some really good evident. We rolled out tier pricing are really in the quarter and our total ARPU went up. We have rolled our tier pricing, because we actually think it allows us to optimize against member ARPU. We get adoption at higher tiers, we are able to drive more access to the services that incremental access is being monetized both in advertising end and in e-commerce. So, we expect total ARPU to go up.

Our next question comes from the line of Shawn Milne with Janney Capital. Your line is open.

Thanks. Just couple of questions. Bill and just start at the top and strategically, I understand that could be have been a little bit of frontloading of the ads then but what I am hearing is you are going to slow advertising down which clearly is reducing the revenue growth in the second half. At the time where obviously competitors in the space are not cutting back. So I understand you had a goal of driving positive EBITDA, but it just seems to me that there is something else limiting the business. The one thing that stuck out to us is that service provider ARPU extra marketplace did slowdown quite a bit. Are you just seeing lower pricing growth on that side? And I have sort of two interrelated thoughts there. Thanks.

No. The marketing budget in and of itself we have never assumed that we're just going to continue to drive that and drive that and drive that, I mean we always anticipated that we were going to begin to harvest against that budget. We’re also -- as Angie described in her script we're beginning to get some leverage out of this where it's driving commerce and membership growth which means we get efficiency for doing it right. If we can increase the effectiveness and the leverage of that spend we don't need to scale the spend as much. And then I would Shawn the basic premise in terms of the service provider ARPU is one we want to -- sort of the premise of the question is the office and the direction that we are going meaning we're trying to drive diversified revenue in the service provider. We are looking at this in terms of exiting out e-commerce versus advertising, we're trying to get the advertising to look more like commerce and the commerce to be more integrated part of the service provider relationship that is the over strategy and we actually made a lot of progress on that in the quarter. So, your question I think the heart of your question and let me try to get to that which is, hey wait a minute you’re slowing down your marginal investment in marketing because we’re increasing our marginal investments in product and in selling, we’re increasing those dramatically because we think we can deepen these service provide relationships. And as Angie said we’re beginning to find ways to open up the platform outside of the traditional paid membership model. So if we’re able to do that and get all those things working then we are not as dependent on marginal marketing growth and we can still drive transaction and revenue growth.

Okay. Maybe just as a follow-up I mean clearly the third quarter revenue growth is slower than certainly we expected and the Street expected, how much of that delta would be big deals if you can help classify that? Thanks.

Yes, it is a big chunk of it. Big deal, we were counting this year on big deal which is obviously revenue rich, it’s a current period it’s a go get it every quarter but it’s a fast revenue piece of the business for us. It hasn’t been performing, but it’s better year-over-year but not anything close to what we were looking for. There are lots of reasons for that, some of which are well understood some of which are not. So that’s a meaningful portion of what we’re talking about here. The other parts of the business, traditional advertising and our core e-commerce offerings are growing nicely. We like their performance, we feel good about it for the rest of the year and those are the strategically important.

Our next question comes from the line of Sameet Sinha with B. Riley. Your line is open.

Yes, thank you very much. A couple of questions; Bill, maybe I'm a little confused but you've mentioned that the 100 sales people, you increased that the 125 while you are trying to get more revenues out of existing sales providers. So if you can help us understand the confusion there? And secondly in terms of digital, Angie can you speak about some of the initiative there, what sort of spend levels do you expect digital to be as a percentage of total marking by year-end? And then final question is in terms of big deals the slowdown that saw that issue with e-mail open rates, I mean that's been there for about a year now, did you see step down in those rates sequentially or is it just similar decline that you've been seeing on all now? Thank you.

Yes. So I'll start with the 100 point, just to be clear on the, I think I forget the term we use for it, selling a headcount something like that. That's total sales people not just the hunters as you describe them. So that includes our commerce, that includes our account management, that includes, that's the total sales force growth. And in fact a disproportionate amount of that growth went to commerce and to account management and support, support of both of those. We did grow the hunter force but that wasn't the 420. We grew that, we got productivity out of it and that's what’s driving we had the additions to total service providers participating, but much of the salesforce and increasing percentage of the salesforce dramatic increased percentage of the salesforce is dedicated to commerce origination, commerce fulfillment and commerce support. Let’s see you were asking second question on digital spend.

So the digital spend we nearly doubled that year-over-year in the second quarter. And as we continue to find vehicles that we really like and are well we’ll continue to invest dollars in those. I mean that’s always been our process as we find that works we continue to invest in it until we see less desirable marginal return from those. So we’ll continue that process, I don’t have a guidance as to what percentage digital make up as the year end so.

And the final question was regarding the email open rate.

Yes. I think -- so I am not sure what specific trend you are speaking of in terms of email open rates, what that’s -- the one that started a year ago.

This is specifically Gmail introducing the promotions tabs which kind of filter out some of the promotional emails from regular emails. So they are not show up in the inbox technically and many people did not see those promotional emails and hence didn’t on them or transacted through them?

Yes. So that effect clearly has put an ongoing but as you have said that’s been going on for better part of a year. So I mean that makes it harder on a scaling basis under any of circumstance. But our expectation, there has been quite a bit of popular speculation about daily deals fatigue and about a number of things, the specification of our targeting as people have already purchased deals, there are accumulation of e-commerce and you have to keep the inventory fresh, it's got to be -- all of those things, all things that work contending with in that particular, again deep discounted outbound e-mail program. And we expect it to be doing better with that. It did grow year-over-year. It did not grow the way that we had anticipated and there are variety of reasons for that.

Okay. Thank you very much.

(Operator Instructions). Our next question comes from the line of Kerry Rice with Needham. Your line is open.

Thanks. Maybe two really short more housekeeping. But Bill obviously went through the restructuring couple of quarters ago. And I wonder if you could provide a little context on where you think salesforce productivity is, is it back to historical levels, is it kind of above where it was before you did the restructuring? And then the last question that Angie kind of alluded to, the big deals and talked about the shortfall there below or the growth below what you expected. Is that again related productivity or what else is kind of going on there that maybe it's not performing the way you expected? And then finally Angie on the digital spend, could you just highlights briefly how do you think about the growth in digital spend impacting CPAs? I would assume that would help keep that stable or even lowered a little bit. Thanks.

Yes. So let’s see. The productivity, okay The sales force productivity, so we went through -- well I guess a couple of points to make. So, sales force productivity remains strong. We went through the transitioning commission last year; we saw dip in productivity and we've seen a nice return. Now a very important point to understand here is that that is associated with the sales force that drives our traditional advertising and account management product. An increasing percentage of the sales force that we disclosed, 1,001 is associated with other activities. And it's now meaningful whereas a year or so ago, it was virtually an inconsequential number of people, it is now a rapidly growing percentage. And productivity there takes different, takes a completely different form. We're establishing relationships that we intend to broaden, we expect them to have a long tail but the traditional metrics that you would use, the measure, the productivity of the sales force from the outside are becoming less and less relevant. So we've had good -- our ad sales force is productive, our account management sales force is productive. We've got -- we're investing in a tremendous number of people to build out commerce. Your ability to examine their productivity and our full understanding of that productivity is evolving. So now, Big Deal certainly has an impact, its revenue rich. So The Big Deal teams were not as productive as they have been and that’s a big team. Now obviously if they’re unable to, we can manage the marginal efficiency of that team and if we aren’t getting the yield out of them then we’ll redeploy them to other parts of the business where we think we can. That’s the opportunity for overall sales efficiency that we have going forward. But yes, we’re through the transition of the traditional sales forces, they’re performing just fine.

On the digital impact on CPA question, yes, we expect that as we continue to scale over the long-term that the shift to digital, our goal is to put more efficiency into the marketing.

Okay. Thanks.

Our next question comes from the line of Gene Munster with Piper Jaffray. Your line is open.

Hey, good afternoon. Just a question on The Big Deal side, is it safe to say that the headwinds that we’ve seen and they’ll probably progress in subsequent quarters. So should we think if this as kind of a full quarter a headwind if you will around Big Deals or do you feel some of the challenges are things that can be adjusted in remedy? Thanks.

Well, clearly, we have -- as we mentioned in the script, we’re tampering our expectations significantly for Big Deal for the remainder of the year. So, while I believe there are opportunities to improve the product, and we still are driving lots of purchases, so it’s not -- and it did grow. We think there is lots of ways to improve it, we’re just not going -- we're not going to be very bullish on what we're predicting out of it until we see the effects of our efforts. So that's how it’s characterized. There is still opportunity for that product, I think in -- for a variety of reasons, it's just going to -- it's decreasing and important for us, we're not going to expect much out of it, we're going to continue to pursue it. I expect it to grow but not at the rate that we might otherwise have expected.

Okay. And then one question, subscription pricing going in the tiered model, you're seeing some good effects of that. Do you see that as being kind of the game plan for the next several quarters or should we continue to see, I know you’ve made a lot of adjustments to price over time. How should we kind of think about that progressing? Is the work kind of done now and we wait and see or is this going to be kind of progressive type of approach?

Yes, on tiered pricing, we feel that it really gives us framework for which we can work from for a long-term period. So while we might do some experimenting with specific price points or items inside the tier, we feel like substantially the tiered format will give us platform from which to play.

I will say from an -- let me say a couple of words about experimentation. We got 20 years worth of experimenting with our offer, our pricing, our merchandising on the number side. I don't expect that to abate. And in fact what Angie just said is really important. That framework gives us a greater platform to experiment. We've seen meaningful uptake, significant uptake and we've been pleasantly surprised with the uptake in our top tier. It’s interesting because that just means you might have incremental opportunities for higher tier. And then Angie spend a fair amount of time describing this notion of marketplace outside the pay wall and bundling membership inside of those purchases. I mean whether you classify those as price experiments or not, they are certainly experiments with a construct of the membership model and we are going to be engaged in those for as long as, as far as the eye can see.

Next question operator?

Our next question comes from the line of Rohit Kulkarni with RBC Capital Markets. Your line is open.

Thank you. Just digging a bit further on the CPA outlook, what gives you more confidence that CPAs would continue to decline or holistically can you comment on what, how many members you hope to gain from tiered pricing versus marketplace join versus your other any traditional approaches that you used to have and as that member base shifts what is the ultimate LTV, how is that trending? Do you think the members that you are getting from of particularly new channel cheaper price versus marketplace join, one has a higher LTV versus other and hence you can shift gears accordingly?

Yes. Well, I think you can divide the business into -- tiered pricing, we now have a fair amount of experience with; we have been dealing with it for a while. And we were very careful about examining what the impact was on our demographics and our -- and what those, how those members behaved when they came in, and we're very happy with that. Because we believe that will be significantly LTV accretive. We're getting more members and they are the demographic and as Angie mentioned they are more active and the total ARPU went up. So, ARPU is up, renewal rates are strong that tells you that LTVs are going up, despite almost any calculation. So, we're very optimistic about the impact of tiered pricing. The marketplace outside the pay wall that is freshly minted. So, we are developing our experience that with bundling membership with purchases that people make in that platform. We are beginning to measure their activity and their demographic characteristics and we don't know yet. There is a lot of it, a lot to suggest that, that will work for us. But it's just way too early for us to determine. But the core model is built around, the traditional membership model, tiered pricing and all of the indicators there with respect to powered scaling, what's happening with CPAs, what the LTVs look like. All of that looks very good.

Okay. Alright, if I could ask one follow up on the service provider side is the net ads in this quarter were among the lowest we have seen in a while. Any one time item you would want to call out or is that?

Yeah, let's see now I think you get a certain degree of, we've discussed this in previous calls that number is a little bit of an output. It depends on how much we're originating inside the existing base relative to how much we're, what sort of due originations take place. And there were nothing in particular that's just is a, it's a bit of an output number for us we are devoting tremendous resources deepening the relationships that we have in place, we're very successful with that. If we have the ability to invest with an existing provider and deepen the revenue we will always prioritize that over incurring the cost of the new provider. It is just from a rationalization investment margin investment standpoint we'll always do that. But there is nothing in the quarter that stands out.

Next question operator?

Our next question comes from the line of Jeff Houston with Barrington Research. Your line is open.

Hi, thanks for taking my questions. I know you haven’t provided guidance for profitability in 2015 the current street consensus has a pretty dramatic round at least on EPS basis in '15 from '14, could you provide some color about the dynamics in your business models that could make that become a reality maybe touch on the profitability differences between the renewal contracts which I think is much, much higher than the first year contracts? Thank you.

Yeah nearly the entire business with the exception of big deal has this notion of recurring revenue. And so you can think of it as the average age of the relationship increases, the margin increases. And so when you’re adding lots of new relationships to the model, your margin decreases quite a bit. And so, secondly what we -- the way that you get appreciation is just by allowing the average age of the relationships that increase and almost the recurring base that we have bigger than as it’s ever been. So, the existing base that we have is bigger than as ever been its margin characteristics what we referred to internally as the P2 margin characteristics are dramatically better than the P1 or new origination margin characteristic so just from a weighted average standpoint as more of the base shifts into that P2 bucket relative to the P1 you get very dramatic margin increase. As we’ve stated in the script you can expect to see that in the second half of the year.

Next question operator.

Our next question comes from the line of Todd Van Fleet with First Analysis. Your line is open.

Hi good afternoon. Bill, a couple of quarters ago you’d indicated that you thought that the goal for the company was to increase the gross members added in the quarter over prior year and I am just wondering with the decline in marketing spend in Q3, whether it’s possible for the company to demonstrate an increase over prior year in gross member so that’s the first part of the question. Second part I guess is a quick one, if you can give us the renewal of P1 service revenue in the quarter. Thanks?

Yes. So let’s see. I think we’re going to work as hard as we can to add households in meaningful numbers and in the future quarters and we would like to see growth out of those. Will that be achievable with the lower marketing spend to the second half for the year on a consistently sequential basis, I don't know and we're not projecting. We have and there is a bunch and interesting stuff in the quarter. How much leverage we are able to get out of the marketing spend with respect to commerce activity and with respect to marketplace join or membership outside the pay wall, we'll have a dramatic impact on that particular topic. So we aren't projecting it, we're going to be working on getting as much yield out of those dollars as we can possibly get and we'll see where that comes out. The P1 renewal is also interesting we're seeing, we interpret that as I've stated over and over again. We're investing in deeper relationship with the service provider. And what we're seeing is significant uptake there. Our total dollar relationship with the service providers and by that I mean all of the things that they consume. All traditional add contracts, new add products and commerce, dollars of commerce, them performing very well and are renewing at greater than a 100% and in fact that some of the best renewal rates that we've never had. So we are seeing nice, very nice retention of those relationships and in fact deepening of those relationships.

Thanks.

Our next question comes from the line of James Cakmak with Telsey Advisory Group. Your line is open.

Hi. I wanted to touch on the kind of how you are thinking about the revenue per member which seems to be flat right now with last year, any of the tailwinds that you are seeing on the e-commerce side are being offset by the declining monetization on the membership side. So just wanted to see how you are thinking about and we should think about where that number can trend as we look forward? And then secondly, with the decline in marketing spend and I guess the less in turn that we are seeing how should we think about Q3 contribution of membership revenue relative to I guess Q2 which was roughly flat with Q1? And then lastly, on the e-commerce you have previously provided on the transaction counts, can you provide some color around how those are trending and I guess any additional color you have on the transactions that take place the average value? Thank you.

Yes so lets see. So, I would, our member ARPU I am actually very, ARPU per member total ARPU per member which was I think your first question was about. it looks really good we added a record number of new members in the quarter and yet we were able to maintain total ARPU which is hard to do. So, in high growth quarters we expect some deterioration and we hold serve, we held strong. And that is indicative of the long-term trend in ARPU is clear you can go back and did while on a sequential quarter over quarter basis it will go up and down depending on how many units there are, how many household? It's been a steady and progressive trend upward, we expect that to continue. It's become easier to drive that trend upward when your growth rate are as dramatic as they are in during the second quarter of the year.

Our next question comes from the line of...

Hang on, there were couple of additional points.

The membership revenue, kind of how to think about that for 3Q? And then any color on transaction.

Yes. So membership revenue, there has been an ongoing progression downward in membership revenue. Because we've been very intentionally attempting to expand the member base lower the friction to entry, because we're making it up on the service provider side and the commerce side. There is an interesting thing that's happening as a result of that, I mean it's a very and we view it as a very positive thing. The dollars that members pay up, sort of the GMV of the member is going up dramatically. But to some degree, we're willing to trade, we're going to see a declining rate of sort of, traditional member ARPU declines. But what the members are paying in terms of membership and commerce is going up, the combined contribution of member payments going up dramatically. And that is strategically important to us. They are buying more on the platform but they are more engaged as [member]. So we will continue to see that in the form of commerce growth.

Our final question comes from the line of Lloyd Walmsley with Deutsche Bank. Your line is open.

And Tom, given how you mentioned that you are looking at possibly raising debt, just wondering how much debt you would be comfortable carrying on to balance sheet? Thank you.

Yes. So the first answer would be yes, we're seeing good, by any historic measure we're seeing very good performance of the traditional sales force that's traditional ad sales and traditional account management. But it's really important to understand it is a significant lot of growth in the sales force coming on the commerce side and interestingly we're beginning to enable, beginning to build out the sales force such that they can sell both advertising products and commerce products. We've been careful about that -- we sort of created two sales forces in order to preserve the structures. We're now comfortable enough that we're beginning to merge with the activities of those sales. Much like the marketing spend, we view that as an opportunity for a significant leverage because they can just managing a single rep, managing a relationship that’s originating multiple points of revenue looks like a very promising opportunity for us. And it allows us to sort of introduce leverage, good leverage into that commerce sales force. So the traditional activities look good. We see lots of upside in generating commerce growth and doing it more efficiently than we have up until this point.

So Lloyd on your question with respect to the debt financing. So, as I said in the script, we’re looking to do a relatively modest financing. We’ve talked at length in the script about our growth initiatives and some with respect to the CapEx and things that we’re sort of catching up on in terms of the growth the company has experienced over the past years in particular that the operating cash flow characteristics of the business remain very strong. And we still are producing cash and we’re using that cash to fund initiatives in the business. But given the particular free cash flow dynamic this year, we felt that was appropriate and especially given that emerging EBITDA on the business giving us initially expanded flexibility to enjoy more attractive rate, now is a good time -- this year was a good time to execute the modest financing. But I don’t expect it to be a huge dead load for the business.

All right. Thank you.

And at this time I’d like to turn the call back to Bill Oesterle for closing remarks.

All right. Thank you very much. We had -- while this quarter we did have a hick up with Big Deal, the fundamentals of the business remain very, very strong. And we are seeing some very, very interesting things on the development of our marketplace. It is an exciting time for us. So, I look forward to speaking with everyone in one-on-one call. Thank you.

Thank you.

Thanks for joining us.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a good day.