Good day, ladies and gentlemen, and welcome to the Angie's List Fourth Quarter and Full Year 2014 Earnings 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, this call is being recorded. I would now like to introduce your host for today’s conference Leslie Arena, Vice President, Investor Relations. Ma’am, you may begin.

Thank you. Good morning, and welcome to the Angie’s List Fourth Quarter and Full Year 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. At the conclusion of our prepared remarks, we will be happy to take your questions. 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, such forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially. More information about those risks and uncertainties is contained in our SEC filings. We caution you against placing undue reliance on these forward-looking statements and disclaim any intent or obligation to update them. In addition as we refer to earnings, we also will refer to adjusted EBITDA, which we define as earnings before interest, income taxes, depreciation and amortization, loss on debt extinguishment, noncash stock-based compensation, the legal settlement accrual adjustment, and a non-cash long-lived impairment charge. Adjusted EBITDA is a non-GAAP financial measure, and you can find a reconciliation to the most directly comparable GAAP financial measure in our fourth quarter 2014 earnings release, which is posted on the IR section of our website. We believe that the use of adjusted EBITDA provides additional insight for investors to use in evaluation of ongoing operating results and trends. However, it 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 morning, everyone. Two years ago, I outlined a three-pronged strategy to one increase revenue; two invest in growth; and three, do this while simultaneously growing margins. Since that time we’ve made good progress executing on these objectives, and 2014 was no exception. In 2014, we increased revenue 28%, improved operating margins by 9 percentage points, and generated positive adjusted EBITDA for the first year in Company history, all while investing to build our marketplace. We added $1.2 million new paid members and grew our base to a record high $3 million households. Our service continues to resonate strongly with consumers. During the year we made meaningful investments in our product, technology and mobile capabilities. This is reflected in higher year-over-year CapEx. These investments helped us to advance our mobile strategy with the launch of a completely redesigned mobile app, build our back-end architecture and fulfillment capabilities and make meaningful progress enhancing our technology platform. In September, we increased our liquidity with a successful debt refinancing resulting in improved financial flexibility and lower cost borrowing. In addition to executing on our three-pronged strategy, we strengthened our team over the course of the year by adding talent throughout our organization including in product, technology and analytics. Importantly, we built the foundation for marketplace in five key areas. First, we grew inventory by more than 220% from 2013, we continued to stock the shelves adding more offers from more service providers. While we have work to do to ensure that we are adding the best inventory in the right locations this was tangible progress. Second, we grew storefront net units sold by more than 70% for the year. Third, we grew Gross Merchandise Value or GMV which represents the total value of transactions on our platform. Fourth, we increased…

Thanks, Bill. In 2014 we began to shift our marketing focus from solely driving member growth to increasing the number of transactions on our marketplace. We expanded our marketing methods to include commerce, improve the logic use to display and present offers to consumers, and effectively moved the pay wall enabling nonmembers to shop first and then be presented with membership at checkout. The objective was to take better advantage of the traffic to our site and open up our platform to a broader base of consumers. In addition, we developed a growing array of on-demand tools which are improving consumer ability to shop, fix through our SnapFix app and search. We launched our iOS app in Q3 and we’ve seen growing consumer uptick. We expect to launch the Android version in the coming months, with the app consumers and SPs will be able to access the full range of Angie’s List functionality no matter where they are. In addition, during the quarter, we continue to invest in technology to enable the rules and tools by which we objectively measure the quality of interactions between service providers and members, which is an important component of our focus on driving member of transaction, on driving better transaction outcome. Our newly launched digital magazine Angie's List Weekly is performing very well, after only eight weeks in market it achieved the number one ranking in Apple's Home and Garden Newsstand Category. The Weekly Digital publication remains in high standing in both the iPad and iPhone newsstands Home and Garden and Craft and Hobbies category. AL weekly features exclusive articles on topics like home improvement, landscaping, decorating and more. The magazine which is available to members and nonmembers provides another significant channel through which we can market commerce. These tools are driving results. During…

Thanks, Angie and good morning. Let me summarize the financial results for the quarter and year and provide our outlook for 2015. Total revenue for the quarter increased 20% from the year ago quarter to $82 million. Fourth quarter membership revenue increased 2% over the last year reflecting our midyear move to tiered pricing which is expected to be a drag on year-over-year ARPU through 2016. Total service provider revenue in the fourth quarter increased 26%. Within service provider revenue, advertising revenue increased 29% to $58 million. And e-commerce revenue was $6 million. For the year, total revenue grew 28%; membership revenue increased 12% from 2013, while SP revenue grew 34% led by advertising revenue growth of 36% and e-commerce growth of 23%. In addition, our service provider contract value backlog ended the fourth quarter at a $153 million up 26% from the year ago quarter and 5% sequentially. As a reminder, the backlog consists of that portion of contract value that has not yet been recognized as revenue. Turning now to our expenses, as Bill and Angie discussed we significantly reduced our marketing spend in the quarter, which contributed to a year-over-year improvement in operating margin. Operating margin in the fourth quarter grew 19% from 5% a year ago. Our operating income for the quarter was a record high $16 million, up $3 million from a year ago. Selling expense increased $4 million compared to the fourth quarter of 2013. We ended the quarter with a total of 1,043 people in our sales organization with 776 responsible for originations and 267 responsible for renewals. Adjusted EBIDTA a non-GAAP financial measure was a record $21 million for the fourth quarter compared to $10 million in the year ago period. This includes a onetime non-cash adjustment of $1.8 million in the…

Thank you. [Operator Instructions] Our first question comes from Sameet Sinha with B Riley. Your line is open.

Yes, thank you very much. I wanted to focus in on service provider business specifically on the sales team. It seems like the number of sales guys decline sequentially. Can you talk about that? And as you collapse the number of sales teams into two from four earlier and now that e-commerce is taking on a different sort of structure where you're deemphasizing take – how are you changing the compensation or what sort of – do you expect any sort of disruption because of that? And then I have a follow-up.

Yeah. So we focused on efficiency. We had run some – what I will call expeditionary sales forces dedicated to commerce and we collapse those into the traditional sales force in order to introduce leverage. So that was an opportunity to consolidate and eliminate redundancy and make sure that we were very focused on per rep productivity and that was highly successful. They’re actually isn’t much of a compensation change. If anything it’s a return to a more standard compensation. And so we don’t expect much disruption there at all. We’re beginning to add into our traditional compensation, some incentives for commerce, but that’s a relatively minor change. So, we don’t expect much disruption, and in fact what we now have as a core, once you have your service provider – I mean sorry, your per rep productivity up, you’re able to then go about scaling the sales force again. So we’re in a position now that we can begin to carefully scale the sales force because we have the unit economics, correct.

And secondly a follow-up for Angie. As you think about your marketing budget for next year, you're going to increase digital as a percentage of total. Can you talk about what sort of media you've been using, what has worked and where do you see more efficiencies coming from? Thank you.

We haven’t given a great deal of detail around the specifics in the media buy. We just continue to optimize – we've moved more dollars into digital as we’ve talked about between display and real time networks as we’ve mentioned in previous calls. And as we find success with that, we’ll continue to make sure we’re optimizing that balance between television and digital as we move along, it’s just a real time iteration kind of as we go.

Okay. Thank you.

Next question operator.

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

Hi, good morning guys. Bill, so just thinking about the metrics that you guys are going to be tracking or just trying to think a little bit ahead about the metrics that you'd like us to focus on given that you're going to move away from reporting e-commerce revenue separately I guess beginning in Q1. You broke out the number of service providers this quarter that do commerce only. So that kind of leaves us with – even if you did break those out but you stopped reporting e-commerce, that leaves us with kind of like an implied revenue per service provider metric to kind of focus on as a way of assessing how much additional economics you're getting from these service providers. You're kind of increasingly focusing on a more narrow band of service providers. So I'm just trying to think about what you would like us to focus on as a means of tracking progress for the business in 2015?

Yeah. Tom is formulating our – the plans for guidance and particularly the plans for guidance around commerce. Obviously, we want to give you a very accurate picture of what’s going on in the business and but I’ll let him.

Yeah, so Todd this is Tom. I think, we obviously, didn’t share any details in this script for obvious reasons. I think, we are still – it's kind of formulating our plans as to what we’ll disclose 60 days from now when we talk to you guys again. I certainly, think as both Bill and Angie mentioned GMV or the gross value of the transactions kind of flowing through that kind of the top-line of the platform is critical in terms of kind of driving both consumer behavior as well as SP kind of loyalty to the marketplace, and so we’ll be looking very closely at development along the GMV lines and then of course unit volumes. So the transaction counts themselves are going to be critically important to establishing the kind of the track record of the marketplace. I think you are right in the sense that it does have the kind of all come down to revenue and so as Bill mentioned, we are looking very closely at the renewal rates because as we bring pricing down from a take rate perspective, we expect that revenue is kind of translate to number one, really just greater SP retention on a unit basis meaning just more folks adding with the value of commerce that causes them to want to up their relationship with the Angie’s List and then really just greater size of relationship over time and that’s kind of manifest by contract value.

Okay. So if I understand then the incentive for an advertiser, an advertising service provider to stick with and renew with Angie's List, I'm just trying to think about the types of incentives that you would offer them from a commerce perspective. Is it kind of simply a lower take rate from Angie's on the offer that they put forth? Because as an advertiser, I was bound to give an offer initially anyway to the members or some sort of a deal. But now I was just having trouble kind of synthesizing this blend between the commerce and the advertising. Maybe you could give us the typical pitch to the service provider like okay if you were paying us $350 a month advertising services before, the blended commerce advertising model looks like this. Can you give us an example?

Yes. So essentially, it’s just we are attempting to get to a processing fee take rate in conjunction with sort of an unlimited minutes plan for the advertiser. The very specific objective there is to get them to put all of their inventories up onsite, so that they don’t feel as though – some of their inventory is high margin; some of their inventory is low margin. This is the way for them to effectively add any inventory and feel good about the marginal cost of that. So it’s much easy and we’ve seen this – we are driving larger unit price offers. The service providers are putting bigger offers up and they are putting more of them up. And that just increases direct engagement and those are no longer leads their actual business or all sorts of benefits to that, they get better reporting out of that, there is a much higher reporting rate on those transactions, so all sorts of good stuff that comes with that.

Okay, thanks. I’ll circle back off-line.

Next question operator.

It comes from Lloyd Walmsley with Deutsche Bank. Your line is now open.

Hi, thank you for taking the question this is actually Kevin LaBuz on behalf of Lloyd. The first is on the quarter-over-quarter decline in service providers. Can you just walk me through what you saw there and also any change in renewal rate for service providers? And I've got a follow-up. Thank you.

Yeah. So again we had a – that was a quarter-over-quarter decline in advertising service providers, that was dramatically offset by growth that we had – this number that we haven’t reported until today, which is the commerce only service providers. And we will continue to see – we have spent some time previously talking about how we’ve implemented the scorecard system on advertisers. And that scorecard system by design is to take consumer traffic and get it to the best of the best in our system. That will result in turnover, it’s a focusing of traffic on the empirically better service providers, and that’s resulting in larger contracts per service provider, there are winners in this. And so that – this is a number again, we’ve talked about a lot historically, it’s a bit of an – it’s an output number, we’re not managing to this number, we are managing to total revenue and quality of experience for the consumer and particularly, as we transition the business this year and fully rollout our scorecard capabilities this number is going to be choppy. We’ve seen, so traditional service provider renewals over the course of this year have declined slightly that result of the slower pace of growth on the member household side. New members consume a lot and we don’t, when you’re not growing that number by 40%, 50%, you’ll get some downward pressure on service provider renewal rates, but they’re still very, very strong.

All right. Thank you for that. Just as a follow-up, you mentioned the strategy of lowering the take rates on the e-commerce side of the business. So I'm just wondering is this something you've tested and what have you seen as a result of those tests? Thank you.

Yes. So take rates, let me try to be as transparent about the pricing. If you’re commerce only service provider you’re still paying healthy take rate. If you’re a subscription, if you buy our subscription plan, which looks like our traditional advertising contract then you’ll get a very, very low marginal take rate, so you are buying down again it’s an unlimited minutes plan.

More of a processing fee at that point.

Yes. And we are referring to it as a processing fee, we wanted to be exchange rate pricing and we have tested this and what we’re seeing is that service provider put up more inventory and interestingly, they move their average ticket price on their inventory up, all of which is really good. They are putting more of their offering on the platform, they are not cherry picking and that has a dramatic, if it’s got a benefit for everyone.

All right. Thank you.

Thank you, our next question comes from Kerry Rice with Needham and Company. Your line is open

Thanks. Kind of the follow-up question on the commerce service providers. I think when you guys started the programs initially, e-commerce maybe it was just big deal was open to all service providers and I think you at one point had indicated you had 450,000 service providers on the platform in total. Can you talk a little bit -- is the kind of new subscription plan again open to all service providers or is there some sort of benchmark that they have to meet to be part of that program? And then I've got one follow-up question to that.

Yes, let me just clarify it. We’ve always had screening criteria, so the 450,000 that you described those are eligible advertisers, where they have received positive ratings from our members that our total service provider base is several million as you are aware. So, we’ve always had that qualification that qualification continues. So, in order to be a subscription – a unlimited minutes plan user you have to qualify on that regard, that’s the same qualification that you would have, if you just wanted to pay per individual transaction. Now, the scorecard introduces that there are going to be winners inside of that with scorecard. If you are the highest scoring most traffic service provider as determined by our member, you are going to get more traffic.

That’s helpful. And then one thing, I had just noticed and I was hoping maybe you could help clarify – I know it kind of the footnote under the cohort you indicated that according to the study that your U.S. households and your target demographic was 27 million, I think, historically, that’s actually been a little bit higher and I didn’t know what maybe had changed there?

So that demographic study is something we commissioned from a third-party and so it was the change in their data, the change it wasn’t something internally to us.

But is that – I don’t have that study, so is it the recession and so there’s fewer – just in general there’s fewer households because of the recessions, so there is not obviously people loss their household…

Yes, I mean there was – sure, the results vary from quarter-to-quarter, if you look back you will see that number has moved from time-to-time as we’ve recommissioned it. But you are exactly right, lot of people are just kind of move in and out based on the various demographic, so there is some ownership income, et cetera…

I don’t have any problem, we’ll figure out how to get the actual results of that study. It’s available to everybody, because it’s a study of…

The data card, yes…

Yes, it’s a data card and so we are happy to give you transparency on that you can see. The recession certainly had something to do with that we saw, we just had people drop out of the demographic.

I think we’ve seen that number come down rather than go up above last year.

Yes.

Yes.

Okay. That would be helpful. Thank you so much.

Thank you. Our next question comes from Peter Stabler with Wells Fargo Securities. Your line is open.

Hi, good morning, thanks for taking the questions. Just circling back for some further clarification. Apologies, Bill and Tom, but on the e-commerce shift here in terms of reporting metrics, are you going to start giving us more marketplace type data for instance? Are you going to give us GMV growth? How should we be thinking about tracking this? And I know I'm kind of retreading a question here that was asked a couple of minutes ago. Then secondly, could you remind us do you guys have any exposure to revenue share payments through mobile tech either Apple or Google? And that's it for me, thanks.

I’ll take the first one. And again, we are trying to preserve some flexibility here, we’re still considering, it’s not – we are not finished with Q1 yet and we haven’t concluded our discussions internally about what we’ll share, but I think that I tried to give you a little bit of a flavor for what we are looking at. And what we think so important and we certainly think that gross merchandise value or GMV is very, very important. We think transactions unit sold is very, very important. We’ve shared already in the last few quarters, some of the base driver a leading indicator metrics around inventory and the like. So, I think we are beginning ourselves to collapse around a series of metrics and we’ll make some discussions in the coming weeks about what we share on in April.

Yes. Certainly, GMV and units are the strong candidates. I mean, but now yes, so we are building into our mobile offerings, some compatibility with Apple Pay and you will see that over as we released products over the of course of the year.

But in terms of any sort of sharing of revenue because you have the credit card information directly through the membership sign up, you are not subject to revenue sharing through the mobile app stores?

Unless it would be marginal business I believe not.

Yes. It’s not through the mobile app from a commerce perspective, we don’t, we don’t, we’re not subject to a rev share there. No.

Okay, and last one for me. On the increasing focus on partnerships, you mentioned Allstate, you mentioned a paint provider. Are there any sort of economic relationships there that you could offer color on? Thanks.

Let us, there are.

Yes.

We’re not quite prepared, we didn’t prepare the details of those, but they’re sizable economic relationships.

Yes, it’s also just have the matter, of course that there is there are revenue relationships there and I think that and we don’t want to get into a practice of getting into specific customer level, contract discussion, so we’ll share those highlights as they develop but we certainly are seeking significant revenue relationships in all cases.

I’ll just give you, some frame of reference on the side. These are relationships that are in the millions of dollars. So these are big relationships and we’re receiving the millions it’s not us paying the millions. So we’re clear on that, but that give you a sense of the size of opportunity that we’re out pursuing these days.

Great, thanks a lot.

Our next question comes from Kevin Kopelman with Cowen and Company. Your line is open.

Hi, thanks. Could you give us any more color on the cadence of the marketing spend plan just given we saw big fluctuations in 2014. Is that the kind of new seasonality that we should expect should look kind of like 2014? Thanks.

When looking at the marketing spend, I mean generally speaking, it behaves on a bell curve we’re ramping up here in the spring headed into the peaks in the summer, but we do reserve kind of the ability to kind of manage this real time as we see opportunity, which is what you saw, as we were - as we did in 2014 where we ramped a little heavier in the second quarter.

And in terms of – we just saw Q4 being much lower this year. Is that how you're thinking about it or is it just too early to tell?

Yes, at this point it’s too early to tell what we will do, on a specific quarter but you know the fourth quarter typically is our lowest quarter relative to the other three.

The wildcard this year is what Angie talked about in her script, which is - we’re beginning to deploy advertising directly behind commerce and evaluating that based on a GMV performance and that just puts – that potentially changes or just add the dynamic in – it’s difficult of forecast late in the year. Because that if - we’re seeing a lot of success on that it could impact the total spend at the end of the year. So that we’re reserving a little bit of flexibility here, because there is just a couple, there is seasonality which we know we have, and then these new experiments that we have, we are putting at dollars directly behind commerce.

Yeah, and then just a separate question on membership revenue per paid membership. The decline accelerated a little bit more in Q4. Is there any change in strategy when you talked about tiered pricing affecting that or do you think that decline is going to moderate? Thanks.

It will continue to take place through this year, that’s just the ageing of the base, we’re taking old members and any of the – and replacing old members have paid higher prices and replacing them with new members they paid lower prices. And that has the work it ways through the base and that will continue throughout this year. And will stabilize and will return to grow over time. But it will damp in this year and we’re looking at. The nice thing about tiered pricing is give you some flexibility to go after that, so we’re looking to mitigate that dynamic over the course of the – we’ve got this pig in the python thing and we want to reduce the size of the pig.

Thanks for the color.

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

Hey, Bill, Tom and Angie. Thanks for taking my questions. I was curious could you talk a bit about the characteristics of the 2000 service providers that only sell commerce? Are they in certain verticals, revenue size, geographies? And how does that compare with the other two buckets, those service providers that just do advertising and then the 30% I think you said that do both e-commerce and advertising? What are the characteristics of those three different groups of service providers?

Yeah, this is interesting, during the year as we were beginning to just experiment with how do we get this stuff full, we had a dedicated sales team and they were lighting up primarily new provider, because we restricted them for that, they were working with both who had not typically advertised and they were working with the higher take rate and so as a result we had lower transaction buying and we tended to have very high margin stuff. So service contracts things like that. All of these have coalesced around our traditionally strong vertical, so there hasn’t been much change in there. But the way we are selling now on a combined basis and effectively bundling in offers or commerce into the traditional contracts. We’re seeing this dynamic and we’re just getting more inventory and we’re getting bigger inventory. So, now all of the sudden, things like furnishes are showing up, which are traditionally very low margin, but high expense for the service provider, now they can handle that on our platform with any sort of take rate on that it just becomes uneconomic for them. If you’ve got a low marginal take rate, they are happy to put that up.

Okay, great, and then shifting gears a bit. I think this is the first time that you’ve provided full year guidance. What gives you the confidence to provide your guidance – full year guidance at this stage of your corporate development? And could you just talk a bit about what level of conservatism is included?

I can speak a little bit to the first one and I’m not going to answer to the second one. I think that – I think annual guidance is I think the business has always had a great degree of visibility, right. We’ve got a – we’ve liked the business model, we think – we know we have to grow the business. So, there is always risk and uncertainty with any projection, any forecast and so we understand that, but we like to what annual guidance does in terms of kind of driving the business forward and driving the kind of leadership in management behaviors that we think real important to achieving the goals that we have for the year. So, at this point, we just saw like the transition, annual guidance is the right thing for the business.

Okay, all right, thank you.

Our next question.

Well…

I will say that – we are helped by that if we managed to build up wrap commerce into our traditional pricing methods, it stabilizes, we had some seasonal shocks based on transaction pricing and it smoothed out those dynamics if we aren’t successful we have to pull that off, but if we are, it helps the predictability of the business.

Next question operator.

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

Okay, great. Thank you. Two questions please. One on marketing spend on one on 2015 revenue guidance. First for Angie, if you put aside the reallocation of dollar amount that you have done spending from traditional to digital to real-time bidding, can you provide more thoughts on what's driving the fundamental drivers leading to marketing spend efficiencies? Have you reached critical mass in large markets and hence do you think you have reached a positive point of network effects in those local markets to acquire new members and new service providers or your pricing -- price elasticity whatever you call it in theory is really working and that's leading to efficient marketing spend? Or any other strategic moves that you've done over the last 18 months leading to more sustainable marketing spend efficiency outlook?

When you really look at the fourth quarter, I think the biggest drivers for the efficient CPAs on the fourth quarter, was really the spent earlier in the year. I mean, which we’ve talked about this before there is like a flywheel that we go and create that has momentum that carries through to the fourth quarter, so the spend - the actual spend within the fourth quarter isn’t all that comes to play in the fourth quarter, it’s also that tail that you are working off. But we are working hard to develop commerce outside the Paywall as an initiative, the tiered pricing is certainly helped and word of mouth is an ever present thing in the business. So, I think that is something that continues to be a contributor.

I will add to that. We evaluate market we always have based on its relatively short-term return on a unit basis. We managed to the unit economics and so this is really as much about how well we are monetizing the memberships on the backend and we’ve got that monetization in transition right now, with the development of market, with our marketplace and pricing with our service providers. And we are unwilling to bid substantial amount of marginal marketing on unproven monetization. So we are - there is less appetite for us to drive increases in marketing spend. I don’t think, we’ve had kind of the maximum penetration in some of this big market. I think there is much room for us to go, but we are going to make sure that we have the monetization economics on the backend completely locked down and we have a tremendous opportunity to grow those. But we are not going to spend ahead of that growth.

Okay, great. And one quick follow-up for Tom on that 2015 revenue guide and particularly around your pig in a python comment. As in do you think we should anticipate membership revenue to decline year on year all of 2015 and the majority of the spend will come through service provider revenue as you lap through the cohort of users, members going from higher ARPU to lower ARPU and so on and so forth?

Yeah, I think that’s a safe assumption, I think what Bill was mentioning that there is efforts underway to try to mitigate that that decline. But you’ve seen that decline and I think because we are kind of moving through tiered pricing we do expect to see that kind of downward pressure on member ARPU and member revenue, but we are not, kind of come placing in that regard we’re trying to, floor ways where we can actually make tiers work even better and try to find ways to drive members to adopt even higher levels of member benefits

Next question operator

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

Hey, good afternoon. Just a follow-up question and a couple of clarifications. In terms of the membership and the pay wall just to be clear, you're still committed to the pay wall but you're going to be tweaking the pricing to optimize that? And then separately in terms of the service providers, I think the word you said is to expect it to be lumpy in 2015. I just wanted to confirm that's the way to best think about that. Thanks.

Yeah, I will reverse the order, yeah you should certainly think about it that way. Because we’re just not managing directly to that number, we are managing to other objectives that could result in growth, could result in temporary declines and ultimately long-term, we are going to grow that number. But this year in particular because of the implementation of scorecard, they’re going to be winners and losers. So that yeah, do you have that right? Now on the pay wall, this is an interesting dynamic, we’ve effectively, we’ve a pay wall, but it’s for a very specific set of services. Commerce for us, we’re running a premium model today. We continue to hear that gosh we're so committed to the pay wall and dogmatic about it that our commerce efforts are the free front porch for our members for consumers. So transaction model, marketplace models and membership model have existed throughout time, Costco, Amazon, I mean, they those things go on and on, we have a good membership model, we’re building the transaction model up underneath it, so a member or a consumer who buy the deal with us, is effectively paying us and we think that's their fee trial of the service that they would like heighten level with all sort of the things that we can add on, then we’ll recruit them into – we’ll recruit them into a full traditional membership.

Next question operator.

Our next question comes from Darren Aftahi with Northland. Your line is open.

Good morning. Thanks for taking my questions, just a couple. On the gross member number, can you give any sense as to what percentage of that came from sort of a commerce only or commerce first transaction and then secondarily of the – your e-commerce revenue figure around 6 million, how was that broken out between the 2000 kind of commerce only service providers in the overlap of 30%? Thanks.

On the question about commerce only consumers coming at the side, we’ve talked about – it’s been growing but it is in a small base, so, that is something that we’re working on as an initiative as we head into 2015.

So I don’t know, we have handy the breakout between – I will say the revenue will bias towards the higher take rate commerce only because they are high take rate, so, the revenue biases that way, which is kind of exactly the point, it’s disproportionate to unit growth. It deviates just because we kind of treat one as a direct transaction revenue and treat another as a traditional service provider revenue, so, that’s what we’re trying to address in our reporting change.

Great. And just one last one. Tom, I think you had said free cash flow if I heard right for the year will approach I think you said either breakeven or positive. Can you just clarify – I think with your CapEx and capitalized software comments being flat year over year, that kind of implies – just kind of help me with the math there in terms of what you meant by approaching breakeven for the year. Thanks.

Yes. My comments were pertained to 2016 not 2015. So, that should help you right there.

Great, my apologies.

That’s all right.

Okay, and we have time for one last question operator.

Our last question comes from Blake Harper with Wunderlich Securities. Your line is open.

Yes, thanks. I'll be quick. Bill, could you maybe talk about the supply and demand balance that you see in the marketplace, since you had ramped up the supply previously but didn't have the commensurate demand there? And then also you had talked I think a little bit about it in the mobile app before. But both of those just maybe talk about how the supply and demand is balanced there right now and how you do if it's not how you kind of get it there in the future?

Yes, I think - I think inventory management is a big – we are really learning how we have to get the right offer or in front of the right consumer at the right time. And if you are not careful you can stake them so that they never get seem you could – there is also mistakes that you can and we have made. But we are just - we are getting better and we are learning. And so we are doing much better with attracting appropriate inventory and then getting input in the appropriate place.

Okay, thank you. We’ll throw back to Bill for closing comments.

All right, well thank you – thank you everyone for your time. We will look forward to talking to you in the one-on-one..

Thanks everyone

Goodbye.

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