Attached files
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| 8-K - FORM 8-K - Ancestry.com LLC | d763350d8k.htm |
Exhibit 99.1
ANCESTRY.COM LLC REPORTS SECOND QUARTER 2014 FINANCIAL RESULTS
- Q2 Non-GAAP Revenues $156.1 million, Up to 13% Year-Over-Year -
PROVO, Utah, July 23, 2014 – Ancestry.com LLC, the world’s largest online family history resource, reported financial results today for the second quarter ended June 30, 2014.
“Despite softer performance in the second quarter, our core subscriber base retention remains solid and the business is healthy,” said Tim Sullivan, Chief Executive Officer of Ancestry.com. “We’re continuing to make strategic investments in content, product and technology as well as new product initiatives like our rapidly growing AncestryDNA business, all of which are designed to drive long-term growth, further strengthen our market leadership, and leverage the benefits of our attractive business model.”
Second Quarter 2014 Financial Highlights
| • | Total revenues and non–GAAP revenues1 for the second quarter 2014 were each $156.1 million. Non-GAAP revenues increased 13.3% from $137.7 million in the second quarter of 2013 driven by growth in revenues from the Company’s core Ancestry.com branded websites and AncestryDNA. |
| • | Net loss for the second quarter of 2014 was $(7.6) million compared to net loss of $(21.3) million in the second quarter of 2013. |
| • | Adjusted EBITDA2 for the second quarter of 2014 was $55.4 million, compared to $54.2 million in the second quarter of 2013. Adjusted EBITDA for the three and six months ended June 30, 2014 includes $2.6 million and $3.5 million, respectively, of professional service fees related to litigation and costs associated with the return of capital transaction declared in February 2014 by our parent. For the three and six months ended June 30, 2013, adjusted EBITDA includes $1.0 million and $2.2 million, respectively, of professional services related to litigation, costs associated with reorganizing our corporate structure and registering the Company’s senior unsecured notes with the SEC. |
| • | Free cash flow3 totaled $10.2 million for the second quarter of 2014, compared to $12.1 million for second quarter of 2013. |
| • | Cash and cash equivalents totaled $91.5 million as of June 30, 2014. |
| • | Obligations under long-term debt4 totaled $903.3 million as of June 30, 2014. |
Ancestry.com Highlights
| • | Subscribers – Subscribers of Ancestry.com websites totaled approximately 2,109,000 as of June 30, 2014, compared to 2,161,000 as of March 31, 2014 and 2,112,000 as of June 30, 2013. |
| • | New Content – The Company added more than 700 million new records during the quarter. New records include the final wave of already digitized collections made available through our collaboration with FamilySearch including: |
| • | Philippines, Civil Registration, 1888-1981 – 24.2 million records |
| • | Czech Republic, Land Records, 1450-1889 (in Czech) – 3.9 million records |
| • | Netherlands, Census and Population Registers, 1645-1940 – 2.7 million records |
| • | Zimbabwe, Death Notices, 1904-1976 – 329 thousand records |
| • | La Libertad, Peru, Civil Registrations 1903-1988 – 1.3 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 acquisition of Ancestry.com Inc. by a company controlled by Permira funds and co-investors (the “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; income tax expense (benefit); and non-cash charges including depreciation, amortization, 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. |
| 4 | This amount does not include $400.0 million in senior unsecured PIK notes issued by our parent company, Ancestry.com Holdings LLC. While not required, Ancestry.com LLC intends to make distributions to its parent in order to fund cash interest payments of these notes. |
| • | Other new record collections added in Q2 include: |
| • | Quaker Birth, Marriage, Death, and Memorial Records, 1650-1910 – 8.5 million records |
| • | New York, State Census, 1905 – 7.2 million records |
| • | Surrey, England, Land Tax Records, 1780-1832 – 1.9 million records |
| • | Puerto Rico, Civil Registrations, 1885-2001 – 5.4 million records |
| • | Montana, County Marriages 1865-1950 – 1.9 million records |
| • | Michigan, Divorce Records, 1897-1952 – 1.1 million records |
| • | Expanded Search Controls – Ancestry.com expanded the functionality of the sliding controls in search results to allow more of the fields entered in the search form to be controlled by sliders – up to 10 fields. Additionally, improvements were added to the display of the fields entered that are not editable with sliders. With this update, users can expand the section of fields below the sliders to see all of the entered search criteria. |
| • | Ancestry Mobile App Award – The Ancestry mobile app was a finalist for the 2014 Appy Award for the second year in a row. |
AncestryDNA Highlights
| • | Database – DNA database samples at approximately 500,000 to date (cumulative since May 2012), an increase of 25% since April 30, 2014. |
Archives Highlights
| • | New Content – Launched ten new vital records collections, with more than 42 million records in total. Included in this release are U.S. Obituaries, South Dakota State Census Records, Idaho Marriage Records, Utah Birth Records, and Utah Federal Service Veterans Burial Records. |
Other Business Highlights
| • | Find A Grave – Has now reached a total of 118 million memorials and 96 million photos. |
| • | New Mobile App User Profiles – During the quarter, Ancestry.com released several follow-ups to the initial Find A Grave mobile app, which introduced user profiles, including the ability to view, create and add a user’s own profile, as well as the ability to view the profiles of other users. |
| • | New Mobile Photo Upload Feature – Additionally, as users take new photos at a cemetery, instead of waiting for each to upload before continuing to use the app, the photos are sent to a queue to be uploaded in the background. As a part of this capability, a user now also has the ability to pause a photo upload queue until connected via Wi-Fi. |
| • | Newspapers.com – Now with more than 70 million online newspaper pages, the site recently completed a full digital archive of the Brooklyn Daily Eagle by digitizing negative microfilm of the paper provided by the Library of Congress dating from 1841 to 1955. |
| • | Fold3 – Has more than 430 million total records, and in Q2 launched military collections, including rich Civil War records like photos from the New York State Military Museum. |
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 315-625-6887 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 revenues are calculated by adding the effects of non-cash adjustments to revenue from purchase accounting for the 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, total revenues, 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; 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 14 billion records have been added to the Ancestry.com sites and users have created more than 60 million family trees containing more than 6 billion profiles. In addition to its flagship site www.ancestry.com, the Company operates several global Ancestry international websites along with a suite of online family history brands, including Archives.com, Fold3.com, Newspapers.com, and offers the AncestryDNA product, sold by its subsidiary, Ancestry.com DNA, LLC, all of which are 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, future earnings, growth outlook and financial and operating performance, 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; continued service outages or a significant disruption in service on its websites; 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; its intention to pay dividends to its parent; the availability of cash and credit; the adverse impact of competitive product announcements; failure to achieve anticipated revenues, adjusted EBITDA 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 Quarterly Report on Form 10-Q for the period ended March 31, 2014, which was filed with the Securities and Exchange Commission on May 7, 2014, 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, | December 31, | |||||||
| 2014 | 2013 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: |
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| Cash and cash equivalents |
$ | 91,465 | $ | 86,554 | ||||
| Restricted cash |
51,786 | 60,740 | ||||||
| Accounts receivable, net of allowances of $591 and $605 at June 30, 2014 and December 31, 2013, respectively |
10,345 | 11,382 | ||||||
| Income tax receivable |
3,505 | 3,285 | ||||||
| Deferred income taxes |
9,523 | 20,350 | ||||||
| Prepaid expenses and other current assets |
14,559 | 11,530 | ||||||
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| Total current assets |
181,183 | 193,841 | ||||||
| Property and equipment, net |
40,293 | 37,613 | ||||||
| Content databases, net |
277,994 | 272,758 | ||||||
| Intangible assets, net |
342,683 | 416,735 | ||||||
| Goodwill |
948,283 | 948,283 | ||||||
| Other assets |
32,194 | 35,512 | ||||||
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| Total assets |
$ | 1,822,630 | $ | 1,904,742 | ||||
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| LIABILITIES AND MEMBER’S INTERESTS | ||||||||
| Current liabilities: |
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| Accounts payable |
$ | 11,389 | $ | 12,575 | ||||
| Accrued expenses |
48,100 | 51,923 | ||||||
| Acquisition-related liabilities |
51,686 | 60,640 | ||||||
| Deferred revenues |
144,455 | 137,864 | ||||||
| Current portion of long-term debt |
36,832 | 36,760 | ||||||
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| Total current liabilities |
292,462 | 299,762 | ||||||
| Long-term debt, net |
852,478 | 869,620 | ||||||
| Deferred income taxes |
147,484 | 185,553 | ||||||
| Other long-term liabilities |
13,625 | 9,110 | ||||||
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| Total liabilities |
1,306,049 | 1,364,045 | ||||||
| Commitments and contingencies |
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| Member’s interests: |
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| Member’s interests |
678,942 | 693,072 | ||||||
| Accumulated deficit |
(162,361 | ) | (152,375 | ) | ||||
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| Total member’s interests |
516,581 | 540,697 | ||||||
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| Total liabilities and member’s interests |
$ | 1,822,630 | $ | 1,904,742 | ||||
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ANCESTRY.COM LLC
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
| Three Months Ended June 30, |
Six Months Ended June 30, |
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| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||
| Revenues: |
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| Subscription revenues |
$ | 137,961 | $ | 122,708 | $ | 275,155 | $ | 236,482 | ||||||||
| Product and other revenues |
18,091 | 9,240 | 34,543 | 18,988 | ||||||||||||
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| Total revenues |
156,052 | 131,948 | 309,698 | 255,470 | ||||||||||||
| Costs of revenues: |
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| Cost of subscription revenues |
23,895 | 20,786 | 47,263 | 41,519 | ||||||||||||
| Cost of product and other revenues |
10,615 | 6,812 | 21,928 | 13,553 | ||||||||||||
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| Total cost of revenues |
34,510 | 27,598 | 69,191 | 55,072 | ||||||||||||
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| Gross profit |
121,542 | 104,350 | 240,507 | 200,398 | ||||||||||||
| Operating expenses: |
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| Technology and development |
24,236 | 21,418 | 48,801 | 41,935 | ||||||||||||
| Marketing and advertising |
40,986 | 34,364 | 86,191 | 71,322 | ||||||||||||
| General and administrative |
15,341 | 13,456 | 29,555 | 25,275 | ||||||||||||
| Amortization of acquired intangible assets |
37,001 | 46,296 | 74,052 | 92,682 | ||||||||||||
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| Total operating expenses |
117,564 | 115,534 | 238,599 | 231,214 | ||||||||||||
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| Income (loss) from operations |
3,978 | (11,184 | ) | 1,908 | (30,816 | ) | ||||||||||
| Interest expense, net |
(17,759 | ) | (29,492 | ) | (35,150 | ) | (51,500 | ) | ||||||||
| Other income (expense), net |
306 | (161 | ) | 325 | (712 | ) | ||||||||||
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| Loss before income taxes |
(13,475 | ) | (40,837 | ) | (32,917 | ) | (83,028 | ) | ||||||||
| Income tax benefit |
5,866 | 19,557 | 22,931 | 40,321 | ||||||||||||
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| Net loss |
$ | (7,609 | ) | $ | (21,280 | ) | $ | (9,986 | ) | $ | (42,707 | ) | ||||
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| Comprehensive loss |
$ | (7,609 | ) | $ | (21,280 | ) | $ | (9,986 | ) | $ | (42,707 | ) | ||||
ANCESTRY.COM LLC
(in thousands)
| Three Months Ended June 30, |
Six Months Ended June 30, |
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| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||
| Reconciliation of adjusted EBITDA and free cash flow to net loss: (1) |
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| Net loss |
$ | (7,609 | ) | $ | (21,280 | ) | $ | (9,986 | ) | $ | (42,707 | ) | ||||
| Non-cash revenue adjustment (2) |
— | 5,750 | — | 17,249 | ||||||||||||
| Interest expense, net |
17,759 | 29,492 | 35,150 | 51,500 | ||||||||||||
| Other (income) expense, net |
(306 | ) | 161 | (325 | ) | 712 | ||||||||||
| Income tax benefit |
(5,866 | ) | (19,557 | ) | (22,931 | ) | (40,321 | ) | ||||||||
| Depreciation |
5,199 | 4,055 | 10,298 | 7,828 | ||||||||||||
| Amortization |
44,201 | 52,862 | 88,338 | 105,755 | ||||||||||||
| Stock-based compensation expense |
2,018 | 2,740 | 3,824 | 3,186 | ||||||||||||
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| Adjusted EBITDA |
$ | 55,396 | $ | 54,223 | $ | 104,368 | $ | 103,202 | ||||||||
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| Capitalization of content databases |
(11,533 | ) | (3,919 | ) | (19,519 | ) | (8,672 | ) | ||||||||
| Purchases of property and equipment |
(8,483 | ) | (9,667 | ) | (12,978 | ) | (13,190 | ) | ||||||||
| Cash paid for interest |
(23,424 | ) | (25,524 | ) | (30,346 | ) | (37,305 | ) | ||||||||
| Cash received (paid) for income taxes |
(1,711 | ) | (3,037 | ) | 886 | 18,731 | ||||||||||
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| Free Cash Flow (3) |
$ | 10,245 | $ | 12,076 | $ | 42,411 | $ | 62,766 | ||||||||
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| Three Months Ended June 30, |
Six Months Ended June 30, |
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| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||
| Reconciliation of Non-GAAP revenues to total revenues: |
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| Total revenues |
$ | 156,052 | $ | 131,948 | $ | 309,698 | $ | 255,470 | ||||||||
| Non-cash revenue adjustment (2) |
— | 5,750 | — | 17,249 | ||||||||||||
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| Non-GAAP revenues |
$ | 156,052 | $ | 137,698 | $ | 309,698 | $ | 272,719 | ||||||||
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| (1) | Net loss and therefore adjusted EBITDA and free cash flow for the three and six months ended June 30, 2014 include $2.6 million and $3.5 million, respectively, of professional service fees related to litigation and costs associated with the return of capital transaction declared in February 2014 by our Parent. For the three and six months ended June 30, 2013, net loss, adjusted EBITDA and free cash flow include $1.0 million and $2.2 million, respectively, of professional services related to litigation, costs associated with reorganizing our corporate structure and registering the Company’s senior unsecured notes with the SEC . |
| (2) | 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 Transaction. |
| (3) | Free cash flow does not include an $18.4 million return-of-capital distribution paid to our parent company, Ancestry.com Holdings LLC, to pay accumulated interest on its PIK notes. |
ANCESTRY.COM LLC
TOTAL SUBSCRIBERS AND NET SUBSCRIBER ADDITIONS
(in thousands)
| Three Months Ended | ||||||||||||
| June 30, | March 31, | June 30, | ||||||||||
| 2014 | 2014 | 2013 | ||||||||||
| Total subscribers |
2,109 | 2,161 | 2,112 | |||||||||
| Net subscriber additions |
(52 | ) | 21 | 16 | ||||||||
Contact:
Heather Erickson
herickson@ancestry.com
(801) 705-7104