Ancestry.com LLC Reports Q2 2013 Financial Results
Ancestry.com LLC Reports Q2 2013 Financial Results – Ancestry.com Subscriber Growth of 5% Year-Over-Year – – Q2 Non-GAAP Revenues $138 million, Up 16% Year-Over-Year – – Adjusted EBITDA Growth of 26% Year-Over-Year – PROVO, Utah, July 30, 2013 (GLOBE NEWSWIRE) -- Ancestry.com LLC, the world's largest online family history resource, reported financial results today for the second quarter ended June 30, 2013. "Ancestry.com performed solidly in the second quarter, and through the first half of 2013 we have seen steady subscriber increases and strong growth in non-GAAP revenue and adjusted EBITDA," said Tim Sullivan, Chief Executive Officer of Ancestry.com. "These first half results have enabled us to de-lever our balance sheet more quickly than we had anticipated, while maintaining our commitment to healthy levels of investment. We remain focused on delivering unique content and user experiences through new features and advancements in our sharing, mobile and DNA capabilities." Second Quarter 2013 Financial Highlights * Total revenue for the second quarter of 2013 was $131.9 million. * Non-GAAP revenue^1 for the second quarter of 2013 totaled $137.7 million, an increase of 15.6% over $119.1 million in the second quarter of 2012, driven by growth in our core Ancestry.com branded websites revenues, Archives.com revenues and AncestryDNA revenues. * Adjusted EBITDA^2 for the second quarter of 2013 was $54.2 million, compared to $42.9 million in the second quarter of 2012. The adjusted EBITDA margin of non-GAAP revenues for the second quarter of 2013 was 39.4%, compared to 36.0% in the second quarter of 2012. * Net income (loss) for the second quarter 2013 was a loss of $(21.3) million, compared to net income of $20.0 million in the second quarter of 2012. The loss was primarily due to the non-cash amortization of acquired intangible assets of $46.3 million, due to the December 2012 transaction. * Free cash flow^3 totaled $12.1 million for the second quarter of 2013 compared to $16.3 million for the second quarter of 2012. * Cash and cash equivalents totaled $32.6 million as of June 30, 2013. * Obligations under long-term debt totaled $930.8 million as of June 30, 2013. Recent Business Highlights * Total subscribers across all websites, including Ancestry.com, Archives.com, Fold3.com and Newspapers.com, were approximately 2,715,000 as of June 30, 2013. * Subscribers of Ancestry.com branded websites totaled approximately 2,112,000 as of June 30, 2013, a 5.3% increase over the end of the second quarter of 2012 and up slightly from the end of the first quarter of 2013. * Launch of StoryView product experience that enables users to create a highly sharable narrative around a person in their family tree. * Launch of the Shoebox by Ancestry.com mobile app that empowers members to easily scan and upload photos and documents to the site using their mobile phones. * The Company added more than 100 million records during the quarter. New collections added in Q2 included: * National Archives and Records Administration records spanning 1812 Pensions to the Mexican Civil War – 450,000 records * Surrey, England Parish records, 1538-1987 – 2.6 million records * Puerto Rico Social and Population Schedule records, 1935-1936 – 1.7 million records * Canadian Pre-Confederation Military collections – 1.9 million records ^1 Non-GAAP revenues are defined as the revenues that would have been recognized, except for the write-down of deferred revenue to fair value as a result of the application of purchase accounting for the merger transaction. ^2 Adjusted EBITDA is defined as net income (loss) plus non-cash adjustments to revenue from purchase accounting, interest expense, net; other (income) expense, net; income tax expense (benefit); non-cash charges including depreciation, amortization, impairment of intangible assets and stock-based compensation expense. ^3 Free cash flow subtracts from adjusted EBITDA capitalization of content databases, purchases of property and equipment and cash received (paid) for income taxes and interest. Conference Call & Webcast Ancestry.com will host a conference call today at 3:00 p.m. MT (5:00 p.m. ET). Participants can access the conference call by dialing (719) 325-2362 approximately ten minutes prior to the start time. Use of Non-GAAP Measures The Company believes that non-GAAP revenues, adjusted EBITDA and free cash flow are useful measures of operating performance because they exclude items that the Company does not consider indicative of its core performance. Non-GAAP revenue is calculated by adding the effects of non-cash adjustments to revenue from purchase accounting for the merger transaction. In the case of adjusted EBITDA, net income (loss) is adjusted for such expenses as non-cash adjustments to revenue from purchase accounting, interest expense, net; other (income) expense, net; income tax expense (benefit); and non-cash charges including depreciation, amortization and stock-based compensation expense. Free cash flow subtracts from adjusted EBITDA the capitalization of content databases, purchases of property and equipment and cash received (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, revenue, net income (loss) 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 summary financial statements. The Company uses non-GAAP revenues, adjusted EBITDA and free cash flow as measures of operating performance; for planning purposes, including the preparation of the annual operating budget; to allocate resources to enhance the financial performance of its business; to evaluate the effectiveness of its business strategies; to provide consistency and comparability with past financial performance; to facilitate a comparison of its results with those of other companies; and in communications with its operating committee concerning its financial performance. The Company also uses non-GAAP revenues and adjusted EBITDA as factors when determining the incentive compensation pool. About Ancestry.com Ancestry.com is the world's largest online family history resource with approximately 2.7 million paying subscribers across all its websites. More than 11 billion records have been added to the Ancestry.com sites and users have created more than 50 million family trees containing more than 5 billion profiles. In addition to its flagship site www.ancestry.com, the company operates several Ancestry international websites along with a suite of online family history brands, including Archives.com, Fold3.com and Newspapers.com, all designed to empower people to discover, preserve and share their family history. 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 the Company's 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 the Company's subscriber base, its reach, its activities to enhance subscribers' experience and deliver product innovations and enhancements, improved features and tools, its activities to develop and promote its products (including DNA services), its business outlook, its leadership position and its 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 the Company 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 the Company's control. In particular, such risks and uncertainties include the Company's continued ability to attract and retain subscribers; its continued ability to acquire content and make it available online; its ability to add tools and features and provide value to satisfy customer demand; difficulties encountered in integrating acquired businesses and retaining customers; the timing and amount of investments in the Company's DNA service; market conditions; the Company's substantial debt obligations as a result of the acquisition of the Company by a company controlled by the Permira funds and co-investors; the availability of cash and credit; the adverse impact of competitive product announcements; 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 events or results to differ materially from those projected in the forward-looking statements is contained under the caption "Risk Factors" in our Registration Statement on Form S-4 and in discussions in other of our Securities and Exchange Commission 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 LLC CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) June 30, 2013 December 31, 2012 ASSETS (unaudited) Current assets: Cash and cash equivalents $32,645 $35,651 Restricted cash 60,170 83,863 Accounts receivable, net of allowances of $539 and $661 at June 30, 2013 and December 10,800 11,089 31, 2012, respectively Income tax receivable 28,817 41,799 Deferred income taxes 7,067 -- Prepaid expenses and other current assets 8,977 9,816 Total current assets 148,476 182,218 Property and equipment, net 33,175 27,813 Content database costs, net 266,587 270,984 Intangible assets, net 507,946 600,628 Goodwill 944,267 945,619 Other assets 42,760 50,192 Total assets $1,943,211 $2,077,454 LIABILITIES AND MEMBER'S INTERESTS Current liabilities: Accounts payable $13,157 $11,432 Accrued expenses 34,388 62,120 Acquisition-related liabilities 60,170 83,863 Deferred revenues 139,416 116,953 Current deferred income taxes -- 2,021 Current portion of long-term debt 34,105 6,432 Total current liabilities 281,236 282,821 Long-term debt, net 875,860 936,797 Deferred income taxes 207,720 235,167 Other long-term liabilities 6,005 13,323 Total liabilities 1,370,821 1,468,108 Commitments and contingencies Member's interests 687,772 682,021 Accumulated deficit (115,382) (72,675) Total member's interests 572,390 609,346 Total liabilities and member's interests $1,943,211 $2,077,454 ANCESTRY.COM LLC CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands) Successor Predecessor Successor Predecessor Three Months Ended Six Months Ended June 30, June 30, 2012 June 30, June 30, 2013 2013 2012 (unaudited) Revenues: Subscription $122,708 $113,037 $236,482 $215,633 revenues Product and other 9,240 6,041 18,988 11,981 revenues Total revenues 131,948 119,078 255,470 227,614 Costs of revenues: Cost of subscription 21,661 16,403 43,404 32,697 revenues Cost of product and 5,937 3,584 11,668 6,369 other revenues Total cost of 27,598 19,987 55,072 39,066 revenues Gross profit 104,350 99,091 200,398 188,548 Operating expenses: Technology and 21,418 18,778 41,935 35,405 development Marketing and 34,364 34,944 71,322 74,493 advertising General and 13,456 12,733 25,275 23,375 administrative Amortization of acquired intangible 46,296 3,224 92,682 5,785 assets Total operating 115,534 69,679 231,214 139,058 expenses Income (loss) from (11,184) 29,412 (30,816) 49,490 operations Interest expense, (29,492) (128) (51,500) (294) net Other income (161) 74 (712) 279 (expense), net Income (loss) before (40,837) 29,358 (83,028) 49,475 income taxes Income tax benefit 19,557 (9,381) 40,321 (15,951) (expense) Net income (loss) $(21,280) $19,977 $(42,707) $33,524 Comprehensive income $(21,280) $19,578 $(42,707) $33,391 (loss) Successor Predecessor Successor Predecessor Three Months Ended Six Months Ended June 30, June 30, June 30, June 30, 2013 2012 2013 2012 (Unaudited) Reconciliation of adjusted EBITDA and free cash flow to net income (loss) (in thousands): Net income (loss) $(21,280) $19,977 $(42,707) $33,524 Non-cash revenue 5,750 -- 17,249 -- adjustment Interest expense, 29,492 128 51,500 294 net Other income 161 (74) 712 (279) (expense), net Income tax expense (19,557) 9,381 (40,321) 15,951 (benefit) Depreciation 4,055 3,606 7,828 7,153 Amortization 52,862 5,811 105,755 10,922 Stock-based 2,740 4,056 3,186 7,003 compensation expense Adjusted EBITDA $54,223 $42,885 $103,202 $74,568 Capitalization of content database (3,919) (7,538) (8,672) (12,678) costs Purchase of property (9,667) (5,024) (13,190) (10,117) and equipment Cash paid for (25,524) (83) (37,305) (200) interest Cash received (paid) (3,037) (13,904) 18,731 (20,524) for income taxes Free cash flow $12,076 $16,336 $62,766 $31,049 Successor Predecessor Successor Predecessor Three Months Ended Six Months Ended June 30, June 30, June 30, June 30, 2013 2012 2013 2012 Reconciliation of non-GAAP revenues to (Unaudited) total revenues (in thousands): Total revenues $131,948 $119,078 $255,470 $227,614 Non-cash revenue 5,750 -- 17,249 -- adjustment (1) Non-GAAP revenues $137,698 $119,078 $272,719 $227,614 (1) Represents non-cash adjustments to revenue or the revenues that would have been recognized, except for the write-down of deferred revenue to fair value as a result of the application of purchase accounting for the merger transaction. ANCESTRY.COM LLC Total Subscribers and Net Subscriber Additions (in thousands) Three Months Ended June 30, March 31, June 30, 2013 2013 2012 Total subscribers 2,112 2,096 2,005 Net subscriber additions 16 80 136 CONTACT: Media: Heather Erickson (801) 705-7104 firstname.lastname@example.org Investors: Mike Houston (801) 705-7942 email@example.com Ancestry.com, Inc.