ACOM Ancestry.Com Inc. (MM)

- Total Revenue Up 14% for Full Year 2009 - - Revenue Increase Driven by 17% Revenue Growth in Ancestry.com Web Sites - - Q4 2009 Adjusted EBITDA Increased 38% - - FY09 GAAP EPS $0.51, Compared to First Call at $0.36 and Up From $0.06 in FY08 - PROVO, Utah, Feb. 18 /PRNewswire-FirstCall/ -- Ancestry.com Inc. (NASDAQ: ACOM), the world's largest online family history resource, today reported financial results for the fourth quarter and full year ended December 31, 2009. "Our strong financial results capped a year of great milestones for Ancestry.com," said Tim Sullivan, Chief Executive Officer, Ancestry.com. "We surpassed 1 million subscribers to our flagship service; generated record revenue and net income; expanded our margins; and successfully completed our initial public offering. The outlook for continued subscriber growth in 2010 appears healthy across all markets, supported by accelerated investments in product enhancements and continued investments in content, as well as increased visibility of both our company and the family history research category via such television programs as NBC's Who Do You Think You Are?, slated to air in March." Ancestry.com Web Sites Highlights -- Subscribers totaled 1,066,000 as of December 31, 2009, a 17% increase over 2008. -- Subscriber additions were 165,000 in Q4 2009, a 15% increase over Q4 2008. -- Monthly Subscriber Churn(1) decreased to 3.6% in Q4 2009 compared to 4.0% in Q4 2008 and flat with 3.6% in Q3 2009. -- Subscriber acquisition cost(2) in Q4 2009 was $85.21, compared to $79.26 in Q4 2008 and $70.55 in Q3 2009, reflecting investments in new television commercials for both our domestic and international markets. -- Average Monthly Revenue per Subscriber(3) in Q4 2009 was $16.67, compared to $16.45 in Q4 2008 and $16.48 in Q3 2009. Fourth Quarter and Full Year 2009 Financial Highlights Total revenue for the fourth quarter of 2009 was $60.1 million, an increase of 14.6% over $52.4 million in the prior year period, led by growth in our core Ancestry.com Web sites of 17.4%. For the full year 2009, total revenue was $224.9 million, up 13.8% over the full year 2008. Had average exchange rates remained the same in both periods, our reported revenues would have been approximately 3% higher for the quarter and 4% higher for the full year. Operating income for the fourth quarter of 2009 was $8.8 million, compared to $0.8 million in the prior year period. For the full year 2009, operating income was $32.0 million, compared to $15.7 million in 2008. Adjusted EBITDA(4) for the fourth quarter of 2009 was $18.7 million, compared to $13.6 million in the fourth quarter of 2008. Adjusted EBITDA margin for the fourth quarter of 2009 was 31.1%, compared to 25.9% in the fourth quarter of 2008. The increase in adjusted EBITDA reflects the operating leverage inherent in our business model. For the full year 2009, adjusted EBITDA was $71.6 million, compared to $62.6 million in 2008. Adjusted EBITDA margin for the full year 2009 was 31.8%, up from 31.7% for the full year 2008. Adjusted EBITDA includes an expense related to a legal settlement in the third quarter of 2009 of $2.3 million. Net income was $9.1 million, or $0.20 per fully diluted share, for the fourth quarter of 2009 compared to a net loss of $(1.1) million, or $(0.03) per fully diluted share, in the fourth quarter of 2008. For the full year 2009, net income was $21.3 million, or $0.51 per fully diluted share, compared to $2.4 million, or $0.06 per fully diluted share, in 2008. Income taxes The Company recorded a tax benefit in the fourth quarter of 2009 of $5.2 million related to the use of net operating losses, resulting in a net benefit of $1.6 million in the fourth quarter. Stock-based compensation was $1.2 million for the fourth quarter of 2009, flat with the prior year period. For the full year 2009, stock-based compensation was $5.5 million, compared to $4.7 million in the full year 2008. Free cash flow(5) totaled $29.6 million in 2009 compared to $31.7 million in the prior year, with higher adjusted EBITDA offset by an increase in cash paid for income taxes. Balance sheet As of December 31, 2009, cash, cash equivalents, and short-term investments were $100.3 million and total debt was $100.0 million. Business Outlook The Company's financial and operating expectations for the first quarter and full year 2010 are as follows: First Quarter 2010 -- Revenue in the range of $61.0 to $62.0 million -- Adjusted EBITDA in the range of $15.5 to $16.0 million -- Ending subscribers of approximately 1,135,000 Full Year 2010 -- Revenue in the range of $250 to $255 million -- Adjusted EBITDA in the range of $83 to $85 million -- Ending subscribers in the range of 1,200,000 to 1,225,000 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). 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 800-967-7187 (within the United States), or 719-457-2658 (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 Wednesday, February 24, 2010. To access the replay, dial 888-203-1112 (within the United States), or 719-457-0820 (international callers) and enter the replay passcode 5594199. 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 is increasingly using free cash flow as measures of operating performance; as factors when determining management's incentive compensation; 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. About Ancestry.com Ancestry.com Inc. (NASDAQ:ACOM), the world's largest online family history resource, has digitized and put online over four billion records over the past 13 years. Ancestry users have created over 13 million family trees containing nearly 1.4 billion profiles. Ancestry.com has local Web sites directed at nine countries, including its flagship Web site at http://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," "could," "expect," "intend," "plan," "seek," "anticipate," "believe," "estimate," "predict," "potential," or "continue" or the negative of these terms or other comparable terminology. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond our control and that could materially affect actual results, levels of activity, performance, or achievements. Factors that could materially affect actual results, levels of activity, performance or achievements, and our ability to execute on our business strategy include those listed under the caption "Risk Factors" of the Ancestry.com Prospectus dated November 4, 2009. 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. (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, we divide the results by three. (2) Subscriber acquisition cost is external marketing and advertising expense, divided by total subscriber additions in the period. (3) Average monthly revenue per subscriber is total subscription revenues earned in the period from subscriptions to the Ancestry.com Web sites divided by the average number of subscribers in the period, divided by the number of months in the period. The average number of subscribers for the period is calculated by taking the average of the beginning and ending number of subscribers for the period. (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. Ancestry.com Inc. Unaudited Consolidated Statements of Operations (in thousands, except per share data) Three Months Ended Twelve Months Ended December December December December 31, 2008 31, 2009 31, 2008 31, 2009 Revenues: Subscription revenues $47,775 $55,201 $181,391 $207,707 Product and other revenues 4,658 4,908 16,200 17,195 ----- ----- ------ ------ Total revenues 52,433 60,109 197,591 224,902 Costs of revenues: Cost of subscription revenues 10,488 10,428 38,187 40,183 Cost of product and other revenues 2,135 1,927 5,427 6,140 ----- ----- ----- ----- Total cost of revenues 12,623 12,355 43,614 46,323 ------ ------ ------ ------ Gross profit 39,810 47,754 153,977 178,579 Operating expenses: Technology and development 9,501 9,546 33,206 36,236 Marketing and advertising 15,707 17,399 52,341 61,625 General and administrative 7,896 7,971 28,931 32,540 Amortization of acquired intangible assets 5,947 4,052 23,779 16,217 ----- ----- ------ ------ Total operating expenses 39,051 38,968 138,257 146,618 ------ ------ ------- ------- Income (loss) from operations 759 8,786 15,720 31,961 Interest expense (3,028) (1,355) (12,355) (6,139) Interest income 240 46 872 792 Other income (expense), net 10 7 (8) 21 --- --- --- --- Income (loss) before income taxes (2,019) 7,484 4,229 26,635 Income tax (expense) benefit 903 1,587 (1,845) (5,340) --- ----- ------ ------ Net income (loss) $(1,116) $9,071 $2,384 $21,295 ======= ====== ====== ======= Net income per common share Basic $(0.03) $0.22 $0.06 $0.55 ====== ===== ===== ===== Diluted $(0.03) $0.20 $0.06 $0.51 ====== ===== ===== ===== Weighted average common shares outstanding Basic 38,199 40,857 38,113 38,930 ====== ====== ====== ====== Diluted 38,757 45,458 38,529 41,533 ====== ====== ====== ====== Reconciliation of adjusted EBITDA and free cash flow to net income (loss): Net income (loss) $(1,116) $9,071 $2,384 $21,295 Interest expense, net 2,788 1,309 11,483 5,347 Income tax (benefit) expense (903) (1,587) 1,845 5,340 Depreciation expense 2,579 2,844 10,732 10,936 Amortization expense 7,607 5,868 30,046 23,214 Stock-based compensation 1,163 1,209 4,672 5,474 Other (income) expense, net (10) (7) 8 (21) Impairment of intangible assets 1,475 - 1,475 - ----- ------- ----- --- Adjusted EBITDA $13,583 $18,707 $62,645 $71,585 ------- ------- ------- ------- Capitalization of content database costs (2,582) (3,543) (8,965) (9,398) Purchase of property and equipment (4,263) (5,796) (11,621) (13,362) Cash paid for interest (2,862) (1,116) (10,068) (7,740) Cash paid for income taxes (182) (2,487) (279) (11,472) ---- ------ ---- ------- Free cash flow $3,694 $5,765 $31,712 $29,613 ------ ------ ------- ------- Ancestry.com Inc. Unaudited Consolidated Balance Sheets (in thousands) December 31, 2008 2009 Assets Current assets: Cash and cash equivalents $40,121 $66,941 Restricted cash 6,572 2,181 Short-term investments - 33,331 Accounts receivable, net 5,155 5,860 Income tax receivable 3,089 2,017 Deferred income taxes 7,582 8,797 Prepaid expenses and other current assets 3,674 5,380 ----- ----- Total current assets 66,193 124,507 Property and equipment, net 17,004 19,430 Content database costs, net 47,244 49,650 Intangible assets, net 57,701 41,484 Goodwill 285,466 285,466 Other assets 4,367 2,811 ----- ----- Total assets $477,975 $523,348 ======== ======== Liabilities and stockholders' equity Current liabilities: Accounts payable $4,827 $6,877 Accrued expenses 19,536 18,850 Escrow liability 5,682 1,763 Deferred revenues 61,178 69,711 Current portion of long-term debt 21,457 28,416 ------ ------ Total current liabilities 112,680 125,617 Long-term debt, less current portion 111,543 71,609 Deferred income taxes 33,710 30,117 Other long-term liabilities 254 1,115 --- ----- Total liabilities 258,187 228,458 ------- ------- Commitments and contingencies Stockholders' equity: Common Stock 38 42 Additional paid-in capital 218,669 272,513 Accumulated other comprehensive income (loss) - (41) Retained earnings 1,081 22,376 ----- ------ Total stockholders' equity 219,788 294,890 ------- ------- Total liabilities and stockholders' equity $477,975 $523,348 ======== ======== Ancestry.com Inc. Other Data Three Months Ended December March June September December 31, 31, 30, 30, 31, 2008 2009 2009 2009 2009 ----------------- -------- ------ ------ ---------- --------- Total subscribers 913,683 959,411 990,959 1,028,180 1,066,123 Subscriber additions 143,769 188,561 160,394 159,795 165,241 Monthly churn 4.0% 4.3% 3.8% 3.6% 3.6% Subscriber acquisition cost $79.26 $62.23 $73.27 $70.55 $85.21 Average monthly revenue per subscriber $16.45 $16.46 $16.42 $16.48 $16.67 --------------- ------ ------ ------ ------ ------ Twelve Months Ended December December 31, 31, 2008 2009 ----------------- --------- --------- Total subscribers 913,683 1,066,123 Subscriber additions 556,045 673,991 Monthly churn 4.0% 3.8% Subscriber acquisition cost $71.99 $72.46 Average monthly revenue per subscriber $16.09 $16.55 --------------- ------ ------ ACOM-C DATASOURCE: Ancestry.com Inc. CONTACT: Investors, Corey Kinger, +1-212-986-6667, ; or Media, Ray Yeung, , or Nancy Zakhary, , all of Brainerd Communicators, Inc., +1-212-986-6667, for Ancestry.com Inc. Web Site: http://www.ancestry.com/

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