July 29, 2010

Ancestry.com Inc. Reports 2010 Second Quarter

 

  • Ancestry.com Subscriber Growth of 32% Year-Over-Year
  • Total Revenue Up 36% Year-Over-Year
  • Raises FY 2010 Outlook


PROVO, Utah, July 29, 2010 (GLOBE NEWSWIRE) -- Ancestry.com Inc. (Nasdaq:ACOM), the world's largest online family history resource, today reported financial results for the quarter ended June 30, 2010.

"Greater than anticipated subscriber additions drove impressive performance in the quarter and boosted our revenue and EBITDA expectations for the full year," said Tim Sullivan, Chief Executive Officer of Ancestry.com. "It's particularly noteworthy that retention rates and customer behavior trends are remaining consistent despite the rapid subscriber growth in the first half of 2010. As we move forward, we will continue our focus on building awareness of the family history category, improving the customer experience and adding important content collections to Ancestry.com."

Ancestry.com Web Sites Highlights

  • Subscribers totaled 1,311,000 as of June 30, 2010, a 32% increase over the end of Q2 2009 and an 8% increase over the end of Q1 2010.
  • Gross Subscriber additions were 291,000 in Q2 2010, an 81% increase over Q2 2009 and a 4% increase over Q1 2010, driven by the continued success of marketing programs and the airing of Who Do You Think You Are? early in the quarter.
  • Monthly Subscriber Churn1 increased to 4.3% in Q2 2010, compared to 3.8% in Q2 2009 and 3.3% in Q1 2010, as expected, reflecting the large number of new monthly subscribers added in the first half of 2010.
  • Subscriber acquisition cost2 in Q2 2010 was $74.04, compared to $73.27 in Q2 2009 and $69.57 in Q1 2010.
  • Average Monthly Revenue per Subscriber3 in Q2 2010 was $18.02, compared to $16.42 in Q2 2009 and $16.70 in Q1 2010.

Second Quarter 2010 Financial Highlights

  • Total revenue for the second quarter of 2010 was $74.5 million, an increase of 36.4% over $54.6 million in the prior year period, driven by growth in our core Ancestry.com Web sites of 41.9%.
  • Operating income for the second quarter of 2010 was $15.8 million, compared to $8.7 million in the prior year period.
  • Adjusted EBITDA4 for the second quarter of 2010 was $25.3 million, compared to $18.4 million in the second quarter of 2009. Adjusted EBITDA margin for the second quarter of 2010 was 33.9%, compared to 33.8% in the second quarter of 2009.
  • Net income was $8.5 million, or $0.18 per fully diluted share, for the second quarter of 2010 compared to $4.7 million, or $0.12 per fully diluted share, in the second quarter of 2009.
  • Free cash flow5 totaled $14.4 million in the second quarter of 2010 compared to $6.7 million in the prior year period.
  • Balance sheet As of June 30, 2010, cash, cash equivalents, and short-term investments were $134.0 million and total debt was $76.2 million.

Recent Business Highlights

  • The Company closed the acquisition of Genline.se, the leading Swedish family history Web site. At closing, Genline had more than 17,000 paying members with access to 26 million pages of digitized Swedish church records spanning more than 400 years from the 17th to the 20th century.
  • NBC announced its renewal of Who Do You Think You Are? for a second season, which is currently expected to air in the first quarter of 2011.
  • Season 1 of Who Do You Think You Are? is currently expected to air in re-runs starting on August 13, 2010.
  • The Company added several new important content collections, including U.S. Land Ownership Atlases from 1860-1920 and the UK Waterloo Medal Roll from 1815.

Business Outlook

The Company's financial and operating expectations for the third quarter and full year 2010 are as follows:

Third Quarter 2010

  • Revenue in the range of $75.0 to $77.0 million
  • Adjusted EBITDA in the range of $24.0 to $26.0 million
  • Ending subscribers of approximately 1,345,000

Full Year 2010

  • Revenue in the range of $290 to $295 million (increased from the previously expected range of $275 to $280 million)
  • Adjusted EBITDA in the range of $93 to $97 million (increased from the previously expected range of $90 to $95 million)
  • Ending subscribers in the range of 1,360,000 to 1,370,000 (increased from the previously expected range of 1,280,000 to 1,300,000)

Conference Call & Webcast

Ancestry.com will host a conference call with analysts and investors today at 3:00 p.m. MT (5:00 p.m. ET). An accompanying slide presentation and a live webcast of the conference call will be available at the investor relations section of the Ancestry.com Web site, http://ir.ancestry.com/. Participants can also access the conference call by dialing 888-668-1643 (within the United States), or 913-312-6688 (international callers) approximately ten minutes prior to the start time.

A replay of the call will be available approximately two hours after the call has ended and will be available through Friday, August 6, 2010. To access the replay, dial 888-203-1112 (within the United States), or 719-457-0820 (international callers) and enter the replay passcode 7549001. The webcast replay will also be available for 12 months on the investor relations section of the Ancestry.com Web site, http://ir.ancestry.com/, under Events and Presentations.

Use of Non-GAAP Measures

Management believes that adjusted EBITDA and free cash flow are useful measures of operating performance because they exclude items that we do not consider indicative of our core performance. In the case of adjusted EBITDA, we adjust net income for such things as interest, taxes, stock-based compensation and certain non-cash and non-recurring items. Free cash flow subtracts from adjusted EBITDA the capitalization of content database costs, capital expenditures and cash paid for income taxes and interest expense. However, these non-GAAP measures should be considered in addition to, not as a substitute for or superior to, net income and net cash provided by operating activities, or other financial measures prepared in accordance with GAAP. A reconciliation to the GAAP equivalents of these non-GAAP measures is contained in tabular form on the attached unaudited financial statements.

Our management uses adjusted EBITDA and free cash flow as measures of operating performance; for planning purposes, including the preparation of our annual operating budget; to allocate resources to enhance the financial performance of our business; to evaluate the effectiveness of our business strategies; to provide consistency and comparability with past financial performance; to facilitate a comparison of our results with those of other companies; and in communications with our board of directors concerning our financial performance. We also use adjusted EBITDA and have used free cash flow as factors when determining management's incentive compensation.

About Ancestry.com

Ancestry.com Inc. (Nasdaq:ACOM) is the world's largest online family history resource, with more than one million paying subscribers. More than 5 billion records have been added to the site in the past 13 years. Ancestry users have created more than 18 million family trees containing over 1.8 billion profiles. Ancestry.com has local Web sites directed at nine countries, including its flagship Web site at www.ancestry.com.

Forward-looking Statements

This press release contains forward-looking statements. These statements relate to future events or to future financial performance and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from those anticipated in these forward-looking statements. In some cases, you can identify forward-looking statements by the use of words such as "appears," "may," "designed," "expect," "intend," "focus," "seek," "anticipate," "believe," "estimate," "predict," "potential," "should," "continue" or "work" or the negative of these terms or other comparable terminology. These statements include statements describing our subscriber base, our activities to enhance subscribers' experience, our business outlook and our opportunities and prospects for growth. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond our control and that could materially affect actual results, levels of activity, performance, or achievements.

Factors that could materially affect actual results, levels of activity, performance or achievements, and our ability to execute on our business strategy include an inability to continue to add subscribers through our marketing programs or integrations or inability to add subscribers at a cost that would support or increase margins, increase in churn, inability to provide additional products or services to allow for increases in per subscriber revenues, inability to acquire attractive additional content and other "Risk Factors" described from time to time in our filings with the Securities and Exchange Commission.

We assume no obligation to publicly update or revise these forward-looking statements for any reason, whether as a result of new information, future events, or otherwise. 

1 Monthly churn is a measure representing the number of subscribers that cancel in the quarter divided by the sum of beginning subscribers and subscriber additions during the quarter. To arrive at monthly churn, the results are divided by three. 

2 Subscriber acquisition cost is external marketing and advertising expense, divided by gross subscriber additions in the quarter. 

3 Average monthly revenue per subscriber is total subscription revenues earned in the quarter from subscriptions to the Ancestry.com Web sites divided by the average number of subscribers in the quarter, divided by three. The average number of subscribers for the quarter is calculated by taking the average of the beginning and ending number of subscribers for the quarter. 

4 Adjusted EBITDA is defined as net income (loss) plus net interest (income) expense; income tax expense; non-cash charges including depreciation, amortization, impairment of intangible assets and stock-based compensation expense; and other (income) expense.  

5 Free cash flow subtracts from adjusted EBITDA capitalization of content database costs, capital expenditures and cash paid for income taxes and interest expense.


 

Ancestry.com Inc.
Consolidated Balance Sheets
(in thousands)
 June 30,December 31,
 20102009
Assets (unaudited) 
 Current assets:  
 Cash and cash equivalents $ 103,417 $ 66,941
 Restricted cash 2,351 2,181
 Short-term investments 30,535 33,331
 Accounts receivable, net 4,925 5,860
 Income tax receivable 473 2,017
 Deferred income taxes 9,176 8,797
 Prepaid expenses and other current assets 3,510 5,380
 Total current assets 154,387 124,507
 Property and equipment, net 17,454 19,430
 Content database costs, net 51,130 49,650
 Intangible assets, net 34,126 41,484
 Goodwill 285,206 285,466
 Other assets 2,142 2,811
 Total assets $ 544,445  $ 523,348
Liabilities and stockholders' equity  
 Current liabilities:  
 Accounts payable $ 9,339 $ 6,877
 Accrued expenses 21,019 18,850
 Escrow liability 1,883 1,763
 Deferred revenues 88,799 69,711
 Current portion of long-term debt 10,395 28,416
 Total current liabilities 131,435 125,617
 Long-term debt, less current portion 65,835 71,609
 Deferred income taxes 27,859 30,117
 Other long-term liabilities 1,115 1,115
 Total liabilities 226,244 228,458
Commitments and contingencies  
 Stockholders' equity:  
 Common stock 43 42
 Additional paid-in capital 283,290 272,513
 Accumulated other comprehensive income (loss) 7 (41)
 Retained earnings 34,861 22,376
 Total stockholders' equity 318,201 294,890
Total liabilities and stockholders' equity $ 544,445 $ 523,348
 
Ancestry.com Inc.
Consolidated Statements of Operations
(in thousands, except per share data)
     
 3 Months Ended6 Months Ended
 June 30, 2010June 30, 2009June 30, 2010June 30, 2009
Revenues: (unaudited) (unaudited)
 Subscription revenues $ 70,544 $ 50,719 $ 130,104 $ 99,903
 Product and other revenues 3,916 3,854 8,777 7,903
 Total revenues 74,460 54,573 138,881 107,806
Costs of revenues:    
 Cost of subscription revenues 11,228 9,966 22,729 19,722
 Cost of product and other revenues 1,280 1,310 2,774 2,824
 Total cost of revenues 12,508 11,276 25,503 22,546
Gross profit 61,952 43,297 113,378 85,260
Operating expenses:    
 Technology and development 9,992 8,692 19,919 17,548
 Marketing and advertising 24,490 15,065 46,936 29,986
 General and administrative 8,032 6,777 15,774 14,340
 Amortization of acquired intangible assets 3,679 4,055 7,358 8,113
 Total operating expenses 46,193 34,589 89,987 69,987
Income from operations 15,759 8,708 23,391 15,273
 Interest expense (1,493) (1,515) (2,709) (3,356)
 Interest income 76 567 139 698
 Other income (expense), net (12) 2 (3) 10
Income before income taxes 14,330 7,762 20,818 12,625
 Income tax expense (5,807) (3,082) (8,333) (4,442)
Net income $ 8,523 $ 4,680 $ 12,485 $ 8,183
     
Net income per common share    
Basic $ 0.20 $ 0.12 $ 0.29 $ 0.21
Diluted $ 0.18 $ 0.12 $ 0.26 $ 0.21
Weighted average common shares outstanding    
 Basic  42,764 38,287 42,612 38,257
 Diluted  48,015 40,159 47,754 39,625
     
Reconciliation of adjusted EBITDA and free cash flow to net income:   
Net Income $ 8,523 $ 4,680 $ 12,485 $ 8,183
 Interest expense, net 1,417 948 2,570 2,658
 Income tax expense 5,807 3,082 8,333 4,442
 Depreciation expense  2,740 2,687 5,604 5,330
 Amortization expense 5,509 5,771 11,022 11,541
 Stock-based compensation 1,262 1,277 2,266 2,803
 Other income (expense), net 12 (2) 3 (10)
     
Adjusted EBITDA $ 25,270 $ 18,443 $ 42,283 $ 34,947
 Capitalization of content database costs (2,349) (1,886) (5,141) (3,672)
 Purchase of property and equipment (2,221) (3,546) (3,628) (6,151)
 Cash paid for interest (476) (1,388)  (1,477) (5,416)
 Cash paid for income taxes (5,778) (4,919) (6,181) (4,956)
Free cash flow $ 14,446 $ 6,704 $ 25,856 $ 14,752
 
Ancestry.com Inc.
Other Data
       
       
 June 30, 2010March 31, 2010December 31, 2009September 30, 2009June 30, 2009March 31, 2009
Total Subscribers 1,310,562 1,211,978 1,066,123 1,028,180 990,959 959,411
Subscriber additions 290,589 279,100 165,241 159,795 160,394 188,561
Monthly churn 4.3% 3.3% 3.6% 3.6% 3.8% 4.3%
Subscriber acquisition cost $ 74.04 $ 69.57 $ 85.21 $ 70.55 $ 73.27 $ 62.23
Average monthly revenue per subscriber $ 18.02 $ 16.70 $ 16.67 $ 16.48 $ 16.42 $ 16.46
CONTACT:  Brainerd Communicators, Inc.
          Investors:
          Corey Kinger
            (212) 986-6667
             investorrelations@ancestry.com
          Media:
          Ray Yeung
            yeung@braincomm.com 
          Jo Anne Barrameda
            barrameda@braincomm.com
          (212) 986-6667

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