July 28, 2011

Ancestry.com Inc. Reports Second Quarter 2011 Financial Results

— Ancestry.com Subscriber Growth of 28% Year-Over-Year —

—Total Revenues Up 36% Year-Over-Year —

— Raises FY 2011 Outlook —

PROVO, Utah, July 27, 2011 (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, 2011.

"Our strong second quarter financial performance demonstrates that our investments in content, product and marketing continue to drive subscriber growth, enhance the user experience, and increase our brand awareness," said Tim Sullivan, Chief Executive Officer of Ancestry.com. "Going forward we plan to continue to make investments that can help drive our business and position us well for long-term growth."

Ancestry.com Web Sites Highlights

  • Subscribers totaled 1,672,000 as of June 30, 2011, growth of 28% from the end of the second quarter of 2010 and 4% since the end of the first quarter of 2011.
  • Gross subscriber additions were 322,000 in the second quarter of 2011, compared to 291,000 in the second quarter of 2010 and 425,000 in the first quarter of 2011.
  • Monthly churn1 was 4.6% in the second quarter of 2011, compared to 4.3% in the second quarter of 2010 and 3.7% in the first quarter of 2011.
  • Subscriber acquisition cost2 in the second quarter of 2011 was $81.23, compared to $74.04 in the second quarter of 2010 and $69.56 in the first quarter of 2011.
  • Average monthly revenue per subscriber3 in the second quarter of 2011 was $18.88, compared to $18.02 in the second quarter of 2010 and $18.05 in the first quarter of 2011.

Second Quarter 2011 Financial Highlights

  • Total revenues for the second quarter of 2011 were $101.3 million, an increase of 36.1% over $74.5 million in the second quarter of 2010, driven by growth in our core Ancestry.com Web sites revenues of 36.6%.
  • Operating income for the second quarter of 2011 was $26.5 million, compared to $15.8 million in the second quarter of 2010.
  • Net income was $16.6 million, or $0.33 per fully diluted share, for the second quarter of 2011 compared to $8.5 million, or $0.18 per fully diluted share, in the second quarter of 2010.
  • Adjusted EBITDA4 for the second quarter of 2011 was $38.4 million, compared to $25.3 million in the second quarter of 2010. Adjusted EBITDA margin for the second quarter of 2011 was 37.9%, compared to 33.9% in the second quarter of 2010.
  • Free cash flow5 totaled $27.1 million for the second quarter of 2011 compared to $14.4 million for the second quarter of 2010.
  • Cash and cash equivalents totaled $71.0 million as of June 30, 2011.

Recent Business Highlights

  • Extended relationship with NBC for the third season of the "Who Do You Think You Are?" television series in the U.S; in addition, NBC is currently re-airing episodes from season 2.
  • Addition of several new important content collections, including U.S. Navy Cruise Books, Sons of the American Revolution membership applications, vital records from Liverpool, Dorset and West Yorkshire, England and church books from Brandenburg, Germany from 1700-1874.
  • Multiple product releases, including New Web Search to provide easy access to additional content on the internet, as well as improvements to our new user conversion experience.

Business Outlook

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

Third Quarter 2011

  • Revenues in the range of $102.0 to $104.0 million
  • Adjusted EBITDA in the range of $38.0 to $40.0 million
  • Ending subscribers of approximately 1,700,000

Full Year 2011

  • Revenues in the range of $398.0 to $402.0 million (increased from the previously expected range of $395.0 to $400.0 million)
  • Adjusted EBITDA in the range of $140.0 to $144.0 million (increased from the previously expected range of $135.0 to $140.0 million)
  • Ending subscribers of approximately 1,710,000 to 1,730,000 (unchanged from the previously expected range)

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 877-627-6544 (within the United States), or 719-325-4821 (international callers) approximately ten minutes prior to the start time.

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 expense and certain non-cash and non-recurring items. Free cash flow subtracts from adjusted EBITDA the capitalization of content database costs, purchases of property and equipment and cash paid for income taxes and interest. 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 net income, the most directly comparable GAAP measure, 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 1.7 million paying subscribers. More than 7 billion records have been added to the site in the past 14 years. Ancestry users have created more than 26 million family trees containing over 2.6 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 "may," "designed," "expect," "intend," "seek," "anticipate," "believe," "estimate," "predict," "potential," "should," "continue" or "will" or the negative of these terms or other comparable terminology. These statements include statements describing our activities to enhance subscribers' experience, our activities to promote and enhance our products, our business outlook, our plans to invest in our business, our intent to acquire content, our leadership position and our opportunities and prospects for growth, including growth in revenues, adjusted EBITDA, 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; our inability to develop and refine new and existing products; failure of subsequent seasons of Who Do You Think You Are? to yield results comparable to prior seasons; failure to achieve anticipated revenues and operating performance; changes in overall economic conditions; the inability to attract and retain 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 quarter ended March 31, 2011, 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, except as required by law.

1 Monthly churn is a measure representing the number of subscribers that cancel in the quarter divided by the sum of beginning subscribers and gross 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 and other (income) expense; income tax expense; and non-cash charges including depreciation, amortization, impairment of intangible assets and stock-based compensation expense. 

5 Free cash flow subtracts from adjusted EBITDA capitalization of content database costs, purchases of property and equipment and cash paid for income taxes and interest.

 
Ancestry.com Inc.
Consolidated Balance Sheets
(in thousands)
 June 30,December 31,
 20112010
Assets (unaudited)  
Current assets:    
Cash and cash equivalents  $ 71,019  $ 65,519
Restricted cash  1,940  2,476
Accounts receivable, net  5,679  6,990
Income tax receivable  15,362  8,094
Deferred income taxes  2,779  3,873
Prepaid expenses and other current assets  8,977  9,243
Total current assets 105,756  96,195
Property and equipment, net  19,234  21,252
Content database costs, net  71,098  65,418
Intangible assets, net  25,825  34,281
Goodwill  302,802  303,374
Other assets  2,010  1,666
Total assets  $ 526,725  $ 522,186
Liabilities and stockholders' equity    
Current liabilities:    
Accounts payable  $ 9,970  $ 9,451
Accrued expenses  38,224  36,978
Deferred revenues  114,285  89,301
Total current liabilities 162,479 135,730
Deferred income taxes  16,534  20,571
Other long-term liabilities  2,017  2,018
Total liabilities 181,030 158,319
Commitments and contingencies    
Stockholders' equity:    
Common stock  47  45
Additional paid-in capital  362,968  328,957
Treasury stock  (78,095)  -- 
Accumulated other comprehensive income  1,025  643
Retained earnings  59,750  34,222
Total stockholders' equity 345,695 363,867
Total liabilities and stockholders' equity  $ 526,725  $ 522,186
 
 
Ancestry.com Inc.
Consolidated Statements of Income
(in thousands, except per share data)
         
 Three Months EndedSix Months Ended
 June 30, 2011June 30, 2010June 30, 2011June 30, 2010
Revenues: (unaudited)  (unaudited)    
Subscription revenues  $ 96,707  $ 70,544  $ 181,890  $ 130,104
Product and other revenues  4,601  3,916  10,446  8,777
Total revenues  101,308  74,460  192,336  138,881
Costs of revenues:        
Cost of subscription revenues  14,111  11,228  27,998  22,729
Cost of product and other revenues  1,841  1,280  3,669  2,774
Total cost of revenues  15,952  12,508  31,667  25,503
Gross profit  85,356  61,952  160,669  113,378
Operating expenses:        
Technology and development  14,242  9,992  27,910  19,919
Marketing and advertising  30,250  24,490  64,058  46,936
General and administrative  10,111  8,032  19,468  15,774
Amortization of acquired intangible assets  4,297  3,679  8,567  7,358
Total operating expenses  58,900  46,193  120,003  89,987
Income from operations  26,456  15,759  40,666  23,391
Interest and other income (expense), net  (429)  (1,429)  (536)  (2,573)
Income before income taxes  26,027  14,330  40,130  20,818
Income tax expense  (9,470)  (5,807)  (14,602)  (8,333)
Net income  $ 16,557  $ 8,523  $ 25,528  $ 12,485
         
Net income per common share        
Basic  $ 0.36  $ 0.20  $ 0.56  $ 0.29
Diluted  $ 0.33  $ 0.18  $ 0.51  $ 0.26
Weighted average common shares outstanding        
Basic  45,596  42,764  45,484  42,612
Diluted  49,893  48,015  50,082  47,754
         
Reconciliation of adjusted EBITDA and free cash flow to net income:      
Net income  $ 16,557  $ 8,523  $ 25,528  $ 12,485
Interest and other expense, net  429  1,429  536  2,573
Income tax expense  9,470  5,807  14,602  8,333
Depreciation  3,188  2,740  6,452  5,604
Amortization  6,576  5,509  12,982  11,022
Stock-based compensation expense  2,201  1,262  3,926  2,266
Adjusted EBITDA  $ 38,421  $ 25,270  $ 64,026  $ 42,283
Capitalization of content database costs  (4,204)  (2,349)  (9,951)  (5,141)
Purchases of property and equipment  (3,693)  (2,221)  (4,418)  (3,628)
Cash paid for interest  (111)  (476)  (226)  (1,477)
Cash paid for income taxes  (3,282)  (5,778)  (3,557)  (6,181)
Free cash flow  $ 27,131  $ 14,446  $ 45,874  $ 25,856
 
 
Ancestry.com Inc.
Other Data
           
 Three Months Ended
 June 30, 2011March 31, 2011December 31, 2010September 30, 2010June 30, 2010
Total subscribers  1,672,319  1,615,169  1,394,910  1,376,974  1,310,562
Gross subscriber additions  321,687  424,531  202,509  251,738  290,589
Monthly churn 4.6% 3.7% 3.9% 4.0% 4.3%
Subscriber acquisition cost $81.23 $69.56 $96.87 $81.58 $74.04
Average monthly revenue per subscriber $18.88 $18.05 $17.78 $17.75 $18.02
CONTACT: Investors:

         Ancestry.com Inc.

         Ryan Ostler

         (801) 705-7942

         rostler@ancestry.com

         

         Media:

         Ancestry.com Inc.

         Heather Erickson

         (801) 705-7104

         herickson@ancestry.com


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