February 24, 2011

Ancestry.com Inc. Reports 2010 Financial Results

– Ancestry.com Subscriber Growth of 31% Year-Over-Year –

– 2010 Total Revenue Up 34% Year-Over-Year –

– Provides FY 2011 Outlook –

PROVO, Utah, Feb. 24, 2011 (GLOBE NEWSWIRE) -- Ancestry.com Inc. (Nasdaq:ACOM), the world's largest online family history resource, today reported financial results for the quarter and full year ended December 31, 2010.

"2010 was a productive and very successful year for Ancestry.com. We drove substantial gains in our subscriber base both domestically and internationally, delivered strong financial results and executed on our plan to position the Company for long-term growth," said Tim Sullivan, Chief Executive Officer of Ancestry.com. "Highlights included investments in our product and our talent base, the completion of three complementary acquisitions, and our highly successful partnership with NBC in bringing Who Do You Think You Are? to the U.S. The hard work will continue in 2011, but we believe these achievements give us a solid foundation for growth in the coming year and beyond."

Ancestry.com Web Sites Highlights

  • Subscribers totaled 1,395,000 as of December 31, 2010, a 31% increase over the end of 2009 and up modestly since the end of the third quarter of 2010.
  • Gross subscriber additions were 203,000 in the fourth quarter of 2010, compared to 165,000 in the fourth quarter of 2009 and 252,000 in the third quarter of 2010.
  • Monthly churn[1] was 3.9% in the fourth quarter of 2010, compared to 3.6% in the fourth quarter of 2009 and 4.0% in the third quarter of 2010.
  • Subscriber acquisition cost[2] in the fourth quarter of 2010 was $96.87, compared to $85.21 in the fourth quarter of 2009 and $81.58 in the third quarter of 2010.
  • Average monthly revenue per subscriber[3] in the fourth quarter of 2010 was $17.78, compared to $16.67 in the fourth quarter of 2009 and $17.75 in the third quarter of 2010.

Fourth Quarter and Full Year 2010 Financial Highlights

  • Total revenue for the fourth quarter of 2010 was $82.7 million, an increase of 37.6% over $60.1 million in the fourth quarter of 2009, driven by growth in our core Ancestry.com Web sites revenues of 41.1%. For the full year 2010, total revenue was $300.9 million, an increase of 33.8% over the full year 2009, with Ancestry.com Web site revenue growth of 37.7%.
  • Operating income for the fourth quarter of 2010 was $17.9 million, compared to $8.8 million in the fourth quarter of 2009. For the full year 2010, operating income was $60.6 million compared to $32.0 million for the full year 2009.
  • Adjusted EBITDA[4] for the fourth quarter of 2010 was $29.7 million, compared to $18.7 million in the fourth quarter of 2009. Adjusted EBITDA margin for the fourth quarter of 2010 was 35.9%, compared to 31.1% in the fourth quarter of 2009. For the full year 2010, adjusted EBITDA was $101.0 million, compared to $71.6 million for the full year 2009. Adjusted EBITDA margin for the full year 2010 was 33.6%, up from 31.8% for the full year 2009.
  • Net income was $12.6 million, or $0.25 per fully diluted share, for the fourth quarter of 2010 compared to $9.1 million, or $0.20 per fully diluted share, in the fourth quarter of 2009. For the full year 2010, net income was $36.8 million, or $0.76 per fully diluted share, compared to $21.3 million, or $0.51 per fully diluted share, for the full year 2009. The fourth quarter of 2010 included expenses of $1.0 million ($0.02 per share) associated with the November 10, 2010 secondary offering.
  • Free cash flow[5] totaled $60.4 million for the full year 2010 compared to $29.6 million for the full year 2009.
  • Cash, cash equivalents, and short-term investments totaled $65.5 million as of December 31, 2010.

Recent Business Highlights

  • Partnered with NBC for the second season of the Who Do You Think You Are? television series, which premiered on February 4, 2011.
  • Added several new important content collections, including U.S. Military cadet applications, U.S. Penitentiary records, and early London parish registers spanning nearly 300 years.
  • Released new iPad app, available for free at the iTunes App Store, allowing consumers a new way to share and update family trees, old photos and records.
  • Released Ancestry.com Family Tree Maker® 2011 for Mac on the Mac App Store.

Business Outlook

The Company's financial and operating expectations for the first quarter and full year 2011 are as follows:

First Quarter 2011

  • Revenue in the range of $86.0 to $88.0 million
  • Adjusted EBITDA in the range of $22.0 to $24.0 million
  • Ending subscribers of approximately 1,545,000

Full Year 2011

  • Revenue in the range of $370.0 to $375.0 million
  • Adjusted EBITDA in the range of $125.0 to $130.0 million
  • Ending subscribers of approximately 1,700,000 to 1,725,000

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 888-578-6632 (within the United States), or 719-325-2226 (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, March 4, 2011. To access the replay, dial 888-203-1112 (within the United States), or 719-457-0820 (international callers) and enter the replay passcode 1368993. 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 the incentive compensation pool.

About Ancestry.com

Ancestry.com Inc. (Nasdaq:ACOM) is the world's largest online family history resource, with nearly 1.4 million paying subscribers. More than 6 billion records have been added to the site in the past 14 years. Ancestry users have created more than 20 million family trees containing over 2 billion profiles. Ancestry.com has local Web sites directed at nine countries that help people discover, preserve and share their family history, 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 reach, our activities to enhance subscribers' experience, our activities to promote our products, our business outlook, our leadership position and our opportunities and prospects for growth, including growth in revenues, adjusted EBITDA and number of subscribers.  These forward-looking statements are based on information available to us as of the date of this press release. Forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from those anticipated by these forward-looking statements. Such risks and uncertainties include a variety of factors, some of which are beyond our control. In particular, such risks and uncertainties include our continued ability to attract and retain subscribers; our continued ability to acquire content and make it available online; difficulties encountered in integrating acquired businesses and retaining customers; failure of our products to continue to meet customer demand; the adverse impact of competitive product announcements; failure of the second season of Who Do You Think You Are? to yield results comparable to the first season; failure to achieve anticipated revenues and operating performance; changes in overall economic conditions; the loss of key employees; competitors' actions; pricing and gross margin pressures; inability to control costs and expenses; and significant litigation.

Information concerning additional factors that could cause results to differ materially from those projected in the forward-looking statements is contained under the caption "Risk Factors" in our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2010, and in discussions in other of our SEC filings.

These forward-looking statements should not be relied upon as representing our views as of any subsequent date and 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.

Ancestry.com Inc.
Consolidated Balance Sheets
(in thousands)
 December 31,December 31,
 20102009
Assets (unaudited)  
 Current assets:    
 Cash and cash equivalents  $ 65,519  $ 66,941
 Restricted cash  2,476  2,181
 Short-term investments  --   33,331
 Accounts receivable, net  6,990  5,860
 Income tax receivable  8,094  2,017
 Deferred income taxes  3,873  8,797
 Prepaid expenses and other current assets  9,243  5,380
 Total current assets 96,195  124,507
 Property and equipment, net  21,252  19,430
 Content database costs, net  65,418  49,650
 Intangible assets, net  34,281  41,484
 Goodwill  303,374  285,466
 Other assets  1,666  2,811
 Total assets  $ 522,186  $ 523,348
Liabilities and stockholders' equity    
 Current liabilities:    
 Accounts payable  $ 9,451  $ 6,877
 Accrued expenses  30,785  18,850
 Escrow liability  6,193  1,763
 Deferred revenues  89,301  69,711
 Current portion of long-term debt  --   28,416
 Total current liabilities 135,730 125,617
 Long-term debt, less current portion  --   71,609
 Deferred income taxes  20,571  30,117
 Other long-term liabilities  2,018  1,115
 Total liabilities 158,319 228,458
Commitments and contingencies    
 Stockholders' equity:    
 Common stock  45  42
 Additional paid-in capital  328,957  272,513
 Accumulated other comprehensive income (loss)  643  (41)
 Retained earnings  34,222  22,376
 Total stockholders' equity 363,867 294,890
Total liabilities and stockholders' equity  $ 522,186  $ 523,348
 
Ancestry.com Inc.
Consolidated Statements of Income
(in thousands, except per share data)
         
 Three Months EndedYear Ended
 December 31, 2010December 31, 2009December 31, 2010December 31, 2009
Revenues: (unaudited)  (unaudited)    
 Subscription revenues  $ 77,327  $ 55,201  $ 281,670  $ 207,707
 Product and other revenues  5,408  4,908  19,261  17,195
 Total revenues  82,735  60,109  300,931  224,902
Costs of revenues:        
 Cost of subscription revenues  12,413  10,428  46,409  40,183
 Cost of product and other revenues  1,769  1,927  5,698  6,140
 Total cost of revenues  14,182  12,355  52,107  46,323
Gross profit  68,553  47,754  248,824  178,579
Operating expenses:        
 Technology and development  11,849  9,546  42,296  36,236
 Marketing and advertising  23,512  17,399  94,573  61,625
 General and administrative  10,475  7,971  35,390  32,540
 Amortization of acquired intangible assets  4,810  4,052  15,959  16,217
 Total operating expenses  50,646  38,968  188,218  146,618
Income from operations  17,907  8,786  60,606  31,961
 Interest expense  (187)  (1,355)  (5,083)  (6,139)
 Interest income  46  46  386  792
 Other income, net  41  7  439  21
Income before income taxes  17,807  7,484  56,348  26,635
 Income tax expense  (5,256)  1,587  (19,503)  (5,340)
Net income  $ 12,551  $ 9,071  $ 36,845  $ 21,295
         
Net income per common share        
Basic  $ 0.28  $ 0.22  $ 0.85  $ 0.55
Diluted  $ 0.25  $ 0.20  $ 0.76  $ 0.51
Weighted average common shares outstanding        
 Basic   45,125  40,857  43,592  38,930
 Diluted   49,980  45,458  48,722  41,533
         
Reconciliation of adjusted EBITDA and free cash flow to net income:      
Net Income  $ 12,551  $ 9,071  $ 36,845  $ 21,295
 Interest expense, net  141  1,309  4,697  5,347
 Income tax expense  5,256  (1,587)  19,503  5,340
 Depreciation expense   3,418  2,844  11,773  10,936
 Amortization expense  6,813  5,868  23,526  23,214
 Stock-based compensation  1,528  1,209  5,069  5,474
 Other income, net  (41)  (7)  (439)  (21)
         
Adjusted EBITDA  $ 29,666  $ 18,707  $ 100,974  $ 71,585
 Capitalization of content database costs  (5,340)  (3,543)  (13,874)  (9,398)
 Purchase of property and equipment  (5,071)  (5,796)  (12,968)  (13,362)
 Cash paid for interest  (117)  (1,116)  (2,645)  (7,740)
 Cash paid for income taxes  (4,783)  (2,487)  (11,128)  (11,472)
Free cash flow  $ 14,355  $ 5,765  $ 60,359  $ 29,613
 
Ancestry.com Inc.
Other Data
           
 Three Months Ended
 December 31, 2010September 30, 2010June 30, 2010March 31, 2010December 31, 2009
Total Subscribers  1,394,910  1,376,974  1,310,562  1,211,978  1,066,123
Gross subscriber additions  202,509  251,738  290,589  279,100  165,241
Monthly churn 3.9% 4.0% 4.3% 3.3% 3.6%
Subscriber acquisition cost  $ 96.87  $ 81.58  $ 74.04  $ 69.57  $ 85.21
Average monthly revenue per subscriber  $ 17.78  $ 17.75  $ 18.02  $ 16.70  $ 16.67

 

[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.

CONTACT: Investors:

         Ancestry.com Inc.

         Ryan Ostler

         (801) 705-7942

         rostler@ancestry.com

         

         Media:

         Brainerd Communicators, Inc.

         Ray Yeung / Jo Anne Barrameda

         (212) 986-6667

         yeung@braincomm.com / barrameda@braincomm.com


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