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| 8-K - 8-K - Ancestry.com LLC | d864390d8k.htm |
Exhibit 99.1
ANCESTRY.COM LLC REPORTS FOURTH QUARTER AND FULL YEAR 2014 FINANCIAL RESULTS
– 2014 Non-GAAP Revenues $619.5 million, Up 10.3% Year-Over-Year –
– 2014 Adjusted EBITDA $215.3 million, Up 1.8% Year-Over-Year –
PROVO, Utah, February 3, 2015 – Ancestry.com LLC (the “Company”), the world’s largest online family history resource, reported financial results today for the fourth quarter and full year ended December 31, 2014.
“Ancestry.com ended the year on a positive note, with solid growth in adjusted EBITDA and improving subscriber trends,” said Tim Sullivan, Chief Executive Officer of Ancestry.com. “After a year of strategic investments, we are focused on strong execution in the core business in 2015. We remain very pleased with AncestryDNA, which doubled its customer base in 2014, just launched in its first international markets, and is demonstrating its potential for broadening the base of consumers seeking to discover more about their family history.”
Fourth Quarter and Full Year 2014 Financial Highlights
| • | Total revenues and non–GAAP revenues1 for the fourth quarter 2014 were each $155.2 million. Non-GAAP revenues increased 6.3% from $145.9 million in the fourth quarter of 2013, driven by growth in revenues from the Company’s core Ancestry websites and its AncestryDNA product. For the full year 2014, total revenues and non–GAAP revenues were each $619.5 million, with an increase in non-GAAP revenues of 10.3% from $561.5 million for the full year of 2013. |
| • | Net loss for the fourth quarter of 2014 was $(7.1) million compared to net loss of $(23.3) million in the fourth quarter of 2013. For the full year 2014, net loss was $(18.3) million compared to $(79.7) million for the full year of 2013. |
| • | Adjusted EBITDA2 for the fourth quarter of 2014 was $55.1 million, compared to $53.6 million in the fourth quarter of 2013. For the full year 2014, adjusted EBITDA was $215.3 million, compared to $211.6 million for the full year 2013. Adjusted EBITDA for the three and twelve months ended December 31, 2014 includes $5.9 million and $10.1 million, respectively, of accrued interest to be paid on restricted cash held pending resolution of the shareholder appraisal litigation, professional service fees related to litigation and costs associated with the return-of-capital distribution paid in February 2014 by our parent company, Ancestry.com Holdings LLC. For the three and twelve months ended December 31, 2013, adjusted EBITDA includes $2.0 million and $5.6 million, respectively, of professional services related to litigation, reorganizing our corporate structure, registering our existing senior notes with the SEC, costs associated with the return-of-capital distribution paid in September 2013 by our parent company, Ancestry.com Holdings LLC and costs related to the settlement of litigation. |
| • | Free cash flow3 totaled $20.7 million for the fourth quarter of 2014, compared to $15.6 million for the fourth quarter of 2013. For the full year 2014, free cash flow totaled $94.1 million compared to $132.9 for the full year 2013. |
| • | Cash and cash equivalents totaled $108.5 million as of December 31, 2014. |
| • | Obligations under long-term debt4 totaled $884.5 million as of December 31, 2014. |
Ancestry Business Updates
| • | Subscribers – Subscribers of Ancestry websites totaled approximately 2,115,000 as of December 31, 2014, compared to 2,140,000 as of December 31, 2013. |
| 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 payments on these notes. |
| • | Content – The Company added 3.1 billion new records during 2014. New collections added in the fourth quarter included: |
| • | Pennsylvania Vital Records, 1708-1985 – 2.2 million records, bringing the total to 7 million Pennsylvania Vital records |
| • | American Indian Collection – 1.3 million records, bringing the total to 9 million American Indian records |
| • | UK WWI Service Medal and Award Rolls, 1914-1920 – 6.5 million records |
| • | Sweden Selected Indexed Household Clerical Surveys, 1880-1893 – 1.6 million records |
| • | New York Sing Sing Prison Admission Registers, 1865-1939 – 70,000 records |
| • | AncestryDNA – AncestryDNA now has a database with DNA samples from 700,000 people. AncestryDNA was also launched in the United Kingdom and Ireland in January 2015. |
| • | International – Ancestry.com rolled out over 30 new databases as part of its expansion into the German market, encompassing 11.7 million records covering areas including Berlin, Bavaria and Mecklenburg-Western Pomerania. |
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 more than 2 million paying subscribers across all its websites. More than 15 billion records have been added, and users have created more than 60 million family trees to the core Ancestry websites, including its flagship site www.ancestry.com and its affiliated international websites. Additionally, Ancestry.com offers a suite of online family history brands, including Archives.com, Fold3.com, Newspapers.com, as well as the AncestryDNA product, sold by Ancestry.com DNA, LLC, which, along with its core Ancestry websites, are 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, 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 Transaction; its intention to pay distributions to its parent in order to service its parent’s indebtedness; 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 September 30, 2014, which was filed with the Securities and Exchange Commission on November 3, 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.
Contact:
Heather Erickson
herickson@ancestry.com
(801) 705-7104
ANCESTRY.COM LLC
CONSOLIDATED BALANCE SHEETS
(in thousands)
| December 31, 2014 |
December 31, 2013 |
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| (unaudited) | ||||||||
| ASSETS |
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| Current assets: |
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| Cash and cash equivalents |
$ | 108,494 | $ | 86,554 | ||||
| Restricted cash |
49,086 | 60,740 | ||||||
| Accounts receivable, net of allowances of $540 and $605 at December 31, 2014 and December 31, 2013, respectively |
11,241 | 11,382 | ||||||
| Income tax receivable |
458 | 3,285 | ||||||
| Current deferred income taxes |
5,277 | 20,350 | ||||||
| Prepaid expenses and other current assets |
12,143 | 11,530 | ||||||
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| Total current assets |
186,699 | 193,841 | ||||||
| Property and equipment, net |
37,106 | 37,613 | ||||||
| Content databases, net |
282,815 | 272,758 | ||||||
| Intangible assets, net |
269,054 | 416,735 | ||||||
| Goodwill |
948,283 | 948,283 | ||||||
| Other assets |
28,514 | 35,512 | ||||||
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| Total assets |
$ | 1,752,471 | $ | 1,904,742 | ||||
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| LIABILITIES AND MEMBER’S INTERESTS |
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| Current liabilities: |
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| Accounts payable |
$ | 11,515 | $ | 12,575 | ||||
| Accrued expenses |
46,579 | 51,923 | ||||||
| Acquisition-related liabilities |
49,086 | 60,640 | ||||||
| Deferred revenues |
145,010 | 137,864 | ||||||
| Current portion of long-term debt |
47,495 | 36,760 | ||||||
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| Total current liabilities |
299,685 | 299,762 | ||||||
| Long-term debt, net |
824,742 | 869,620 | ||||||
| Deferred income taxes |
115,461 | 185,553 | ||||||
| Other long-term liabilities |
16,406 | 9,110 | ||||||
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| Total liabilities |
1,256,294 | 1,364,045 | ||||||
| Commitments and contingencies |
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| Member’s interests |
666,830 | 693,072 | ||||||
| Accumulated deficit |
(170,653 | ) | (152,375 | ) | ||||
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| Total member’s interests |
496,177 | 540,697 | ||||||
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| Total liabilities and member’s interests |
$ | 1,752,471 | $ | 1,904,742 | ||||
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ANCESTRY.COM LLC
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
| Three Months Ended | Year ended | |||||||||||||||
| December 31, 2014 |
December 31, 2013 |
December 31, 2014 |
December 31, 2013 |
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| (unaudited) | (unaudited) | |||||||||||||||
| Revenues: |
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| Subscription revenues |
$ | 139,693 | $ | 133,556 | $ | 553,810 | $ | 499,557 | ||||||||
| Product and other revenues |
15,469 | 11,430 | 65,734 | 40,834 | ||||||||||||
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| Total revenues |
155,162 | 144,986 | 619,544 | 540,391 | ||||||||||||
| Costs of revenues: |
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| Cost of subscription revenues |
24,556 | 23,090 | 95,899 | 86,889 | ||||||||||||
| Cost of product and other revenues |
10,730 | 8,548 | 43,654 | 28,553 | ||||||||||||
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| Total cost of revenues |
35,286 | 31,638 | 139,553 | 115,442 | ||||||||||||
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| Gross profit |
119,876 | 113,348 | 479,991 | 424,949 | ||||||||||||
| Operating expenses: |
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| Technology and development |
21,677 | 21,825 | 94,221 | 85,723 | ||||||||||||
| Marketing and advertising |
40,195 | 37,231 | 168,536 | 145,103 | ||||||||||||
| General and administrative |
18,039 | 16,182 | 60,521 | 55,691 | ||||||||||||
| Amortization of acquired intangible assets |
36,636 | 46,161 | 147,681 | 185,193 | ||||||||||||
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| Total operating expenses |
116,547 | 121,399 | 470,959 | 471,710 | ||||||||||||
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| Income (loss) from operations |
3,329 | (8,051 | ) | 9,032 | (46,761 | ) | ||||||||||
| Interest expense, net |
(17,298 | ) | (27,268 | ) | (69,680 | ) | (97,837 | ) | ||||||||
| Other expense, net |
(512 | ) | (221 | ) | (368 | ) | (655 | ) | ||||||||
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| Loss before income taxes |
(14,481 | ) | (35,540 | ) | (61,016 | ) | (145,253 | ) | ||||||||
| Income tax benefit |
7,416 | 12,193 | 42,738 | 65,553 | ||||||||||||
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| Net loss |
$ | (7,065 | ) | $ | (23,347 | ) | $ | (18,278 | ) | $ | (79,700 | ) | ||||
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ANCESTRY.COM LLC
| Three months ended(1) | Year ended(1) | |||||||||||||||
| December 31, 2014 |
December 31, 2013 |
December 31, 2014 |
December 31, 2013 |
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| (unaudited) | (unaudited) | |||||||||||||||
| Reconciliation of adjusted EBITDA and free cash flow to net loss (in thousands): |
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| Net loss |
$ | (7,065 | ) | $ | (23,347 | ) | $ | (18,278 | ) | $ | (79,700 | ) | ||||
| Non-cash revenue adjustment(2) |
— | 953 | — | 21,115 | ||||||||||||
| Interest expense, net |
17,298 | 27,268 | 69,680 | 97,837 | ||||||||||||
| Other expense, net |
512 | 221 | 368 | 655 | ||||||||||||
| Income tax benefit |
(7,416 | ) | (12,193 | ) | (42,738 | ) | (65,553 | ) | ||||||||
| Depreciation |
5,636 | 4,675 | 21,498 | 16,931 | ||||||||||||
| Amortization |
44,095 | 53,141 | 176,755 | 211,974 | ||||||||||||
| Stock-based compensation expense |
2,008 | 2,849 | 8,004 | 8,324 | ||||||||||||
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| Adjusted EBITDA |
$ | 55,068 | $ | 53,567 | $ | 215,289 | $ | 211,583 | ||||||||
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| Capitalization of content database costs |
(8,358 | ) | (7,507 | ) | (37,566 | ) | (22,239 | ) | ||||||||
| Purchase of property and equipment |
(2,712 | ) | (9,466 | ) | (21,821 | ) | (26,714 | ) | ||||||||
| Cash paid for interest |
(23,227 | ) | (24,666 | ) | (60,450 | ) | (70,311 | ) | ||||||||
| Cash received (paid) for income taxes |
(107 | ) | 3,682 | (1,334 | ) | 40,601 | ||||||||||
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| Free cash flow(3) |
$ | 20,664 | $ | 15,610 | $ | 94,118 | $ | 132,920 | ||||||||
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| Three months ended | Year ended | |||||||||||||||
| December 31, 2014 |
December 31, 2013 |
December 31, 2014 |
December 31, 2013 |
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| (unaudited) | (unaudited) | |||||||||||||||
| Reconciliation of Non-GAAP revenues to total revenues (in thousands): |
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| Total revenues |
$ | 155,162 | $ | 144,986 | $ | 619,544 | $ | 540,391 | ||||||||
| Non-cash revenue adjustment(2) |
— | 953 | — | 21,115 | ||||||||||||
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| Non-GAAP revenues |
$ | 155,162 | $ | 145,939 | $ | 619,544 | $ | 561,506 | ||||||||
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Footnotes:
| (1) | Net loss and therefore adjusted EBITDA and free cash flow for the three and twelve months ended December 31, 2014 include $5.9 million and $10.1 million, respectively, of accrued interest to be paid on restricted cash held pending resolution of the shareholder appraisal litigation, professional service fees related to litigation, and costs associated with the return-of-capital distribution paid in February 2014 by our parent company, Ancestry.com Holdings LLC (“Holdings LLC”). Net loss and therefore adjusted EBITDA and free cash flow for the three and twelve months ended December 31, 2013 include $2.0 million and $5.6 million, respectively, of professional services related to litigation, reorganizing our corporate structure, registering our existing notes with the SEC, costs associated with the return-of-capital distribution paid in September 2013 by our parent company, Holdings LLC, and costs related to the settlement of litigation. |
| (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 for the three and twelve months ended December 31, 2014 does not include $19.2 million and $37.6 million, respectively, for distributions paid to our parent company, Holdings LLC, to pay accumulated interest on its PIK Notes. |
ANCESTRY.COM LLC
Total Subscribers and Net Subscriber Additions
(in thousands)
| Year ended December 31, |
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| 2014 | 2013 | |||||||
| (unaudited) | ||||||||
| Total subscribers |
2,115 | 2,140 | ||||||
| Net subscriber additions |
(25 | ) | 124 | |||||