Ancestry.com LLC Reports Second Quarter 2016 Financial Results

— Second Quarter Revenues of $211.4 million, Up 25% Year-Over-Year —

— AncestryDNA Database Now Includes More Than 2 Million Samples —

LEHI, Utah, July 20, 2016 (GLOBE NEWSWIRE) -- Ancestry.com LLC (the "Company"), the leader in family history and consumer genomics, reported financial results today for the second quarter ended June 30, 2016.

"Ancestry's performance continued to accelerate in the second quarter," said Tim Sullivan, Chief Executive Officer of Ancestry.  "The combined value proposition of our market-leading family history and DNA offerings has helped deliver over $750 million in revenue in the last four quarters.  We are excited about the opportunities ahead and remain focused on execution and investing in the long-term growth of the company."

Second Quarter 2016 Financial Highlights

  • Total revenues for the second quarter of 2016 were $211.4 million compared to $169.4 million in the second quarter of 2015, resulting from revenue growth in both AncestryDNA and the core Ancestry websites.
     
  • Net (loss) income for the second quarter of 2016 was $(10.5) million compared to $13.7 million in the second quarter of 2015, primarily due to the impact of $30.9 million in transaction-related expenses(1) incurred during the second quarter of 2016.
     
  • Adjusted EBITDA(2) for the second quarter of 2016 was $70.4 million compared to $67.3 million in the second quarter of 2015. Adjusted EBITDA for the second quarter of 2016 excludes the impact of $30.9 million in transaction-related expenses(1) incurred during the second quarter of 2016.  Additionally, adjusted EBITDA for the second quarter of 2016 included $3.7 million of non-operating costs such as business optimization consulting, litigation and transaction-related severance. The prior year quarter included $0.3 million of similar non-operating costs. 
     
  • Free cash flow(3) for the second quarter of 2016 was $16.2 million compared to $20.4 million for the second quarter of 2015.
     
  • Cash and cash equivalents totaled $118.9 million as of June 30, 2016.
     
  • Obligations under long-term debt(4) totaled $1.0 billion as of June 30, 2016.

Ancestry Business Updates

  • Company — On May 23, 2016 the Company announced the successful closing of the previously-announced transaction whereby Silver Lake Partners and GIC acquired substantial equity stakes in Ancestry at an enterprise value of approximately $2.6 billion.  As a result, Silver Lake and GIC each now hold equal minority ownership positions while the Permira funds, Spectrum Equity, and Ancestry management remain as meaningful equity investors.
     
  • AncestryDNA — During the second quarter the AncestryDNA database surpassed 2.0 million samples, after reaching 1.0 million less than a year earlier.
     
  • Subscribers — Subscribers of Ancestry websites totaled approximately 2,419,000 as of June 30, 2016, up 2% compared to March 31, 2016 and up 9% compared to June 30, 2015.
     
  • Content — During the second quarter of 2016, the Company added to its collection of more than 18 billion records through launching and adding to significant collections from various sources including:
     
    • Netherlands birth, marriage, and death records, over 80 million records
       
    • Indiana vital records, over 30 million records
       
    • German Lutheran records, over 15 million records
       
    • Update to US Yearbooks, over 10 million records
       
    • US naturalizations, over 10 million records
       
    • Australia WW2 military records, over 1 million records
       
  • Adpay/Memoriams Acquisition — The Company completed the acquisition of Adpay, Inc., the creator and operator of the Memoriams.com obituary input network during the quarter. Memoriams.com submits obituaries to approximately 3,000 newspapers in the U.S. from its growing network of funeral homes.
 
       
  (1 )  Transaction-related expenses represent expenses associated with the May 2016 transaction involving Silver Lake Partners' and GIC's investment in the Company.
  (2 ) Adjusted EBITDA is defined as net income (loss) plus interest expense, net; other (income) expense, net; income tax expense (benefit); non-cash charges including depreciation, amortization and stock-based compensation expense; and transaction-related expenses, as defined in Footnote 1 above.
  (3 ) Free cash flow subtracts from adjusted EBITDA the capitalization of content databases, purchases of property, equipment and software and cash received (paid) for income taxes and interest.
  (4 ) This amount does not include $390.2 million in senior unsecured PIK notes issued by our parent company, Ancestry.com Holdings LLC. While not required, Ancestry.com LLC has made and intends to pay future distributions or loans to its parent related to the PIK notes, provided that such payments are permitted under Ancestry.com LLC's debt covenants.
       
 

Conference Call and 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 (844) 831-3026 (domestic toll-free) or (315) 625-6887 (international) approximately ten minutes prior to the start time.

Use of Non-GAAP Measures

The Company believes that 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. In the case of adjusted EBITDA, net income (loss) is adjusted for interest expense, net; other (income) expense, net; income tax expense (benefit); and non-cash charges including depreciation, amortization, and stock-based compensation expense; and transaction-related expenses. Free cash flow subtracts from adjusted EBITDA the capitalization of content databases, purchases of property, equipment and software 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, net income (loss) and net cash provided by operating activities, or other financial measures prepared in accordance with GAAP. A reconciliation to net income (loss), the most directly comparable GAAP financial measure of these non-GAAP measures, is contained in tabular form on the attached unaudited summary financial statements.

The Company uses 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 adjusted EBITDA as a factor when determining the incentive compensation pool.

About Ancestry

Ancestry, the global leader in family history and consumer genomics, harnesses the information found in family trees, historical records, and DNA to help people gain a new level of understanding about their lives. Ancestry has more than 2.4 million paying subscribers across its core Ancestry websites and more than 2 million DNA samples in the AncestryDNA database. Since 1996, more than 18 billion records have been added, and users have created more than 80 million family trees on the Ancestry flagship site and its affiliated international websites. Ancestry offers a suite of family history products and services including AncestryDNA, Archives, ProGenealogists, Newspapers.com and Fold3. 

Forward-Looking Statements

This press release contains forward-looking statements that 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 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, financial and operating performance, its leadership position and its opportunities and prospects for growth, including growth in revenues, adjusted EBITDA and number of subscribers. 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. 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; and its ability to add tools and features and provide value to satisfy customer demand. Information concerning these and 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, 2016, which was filed with the Securities and Exchange Commission on April 29, 2016, 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,
2016		   December 31,
2015
  (unaudited)    
ASSETS
Current assets:      
Cash and cash equivalents $ 118,901     $ 128,157  
Accounts receivable, net of allowances of $733 and $997 at June 30, 2016 and December 31, 2015, respectively   14,573     13,624  
Prepaid expenses 9,916     12,228  
Other current assets 15,042     8,700  
Total current assets 158,432     162,709  
Property and equipment, net 85,707     54,795  
Content databases, net 274,934     282,281  
Intangible assets, net 132,043     159,736  
Goodwill 959,399     948,283  
Other assets 14,351     13,956  
Total assets $ 1,624,866     $ 1,621,760  
LIABILITIES AND MEMBER'S INTERESTS
Current liabilities:      
Accounts payable $ 13,940     $ 13,120  
Accrued expenses 53,191     52,871  
Deferred revenues 193,394     171,822  
Current portion of long-term debt, net 7,103     7,087  
Total current liabilities 267,628     244,900  
Long-term debt, net 988,077     989,256  
Financing obligation 45,661     22,900  
Deferred income taxes 39,777     59,809  
Other long-term liabilities 26,263     23,977  
Total liabilities 1,367,406     1,340,842  
Commitments and contingencies      
Member's interests:      
Member's interests 397,241     422,603  
Accumulated deficit (139,781 )   (141,685 )
Total member's interests 257,460     280,918  
Total liabilities and member's interests $ 1,624,866     $ 1,621,760  
               

 

 
ANCESTRY.COM LLC
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
 
(in thousands)
 
  Three Months Ended June 30,   Six Months Ended June 30,
  2016   2015   2016   2015
  (unaudited)   (unaudited)
Revenues:              
Subscription revenues $ 160,203     $ 145,408     $ 314,847     $ 287,125  
Service and other revenues 51,221     24,016     93,087     46,896  
Total revenues 211,424     169,424     407,934     334,021  
Costs of revenues:              
Cost of subscription revenues 27,641     25,584     54,991     51,279  
Cost of service and other revenues   28,222     13,882     52,632     28,148  
Total cost of revenues 55,863     39,466     107,623     79,427  
Gross profit 155,561     129,958     300,311     254,594  
Operating expenses:              
Technology and development 27,643     24,282     53,647     47,725  
Marketing and advertising 55,433     41,203     107,233     84,380  
General and administrative 19,533     12,427     33,451     23,882  
Amortization of intangible assets 18,052     27,464     36,642     54,927  
Transaction-related expenses 30,874     —     32,306     —  
Total operating expenses 151,535     105,376     263,279     210,914  
Income from operations 4,026     24,582     37,032     43,680  
Interest expense, net (19,731 )   (16,622 )   (39,812 )   (33,830 )
Other (expense) income, net (279 )   190     (448 )   (73 )
(Loss) income before income taxes (15,984 )   8,150     (3,228 )   9,777  
Income tax benefit 5,520     5,512     5,132     6,679  
Net (loss) income $ (10,464 )   $ 13,662     $ 1,904     $ 16,456  
               
Comprehensive (loss) income $ (10,464 )   $ 13,662     $ 1,904     $ 16,456  
                               

 

 
ANCESTRY.COM LLC
 
(in thousands)
 
  Three Months Ended June 30,   Six Months Ended June 30,
  2016   2015   2016   2015
  (unaudited)   (unaudited)
Reconciliation of adjusted EBITDA and free cash flow to net (loss) income:(5)                
Net (loss) income $ (10,464 )   $ 13,662     $ 1,904     $ 16,456  
Interest expense, net 19,731     16,622     39,812     33,830  
Other expense (income), net 279     (190 )   448     73  
Income tax benefit (5,520 )   (5,512 )   (5,132 )   (6,679 )
Depreciation 6,191     5,544     11,904     11,106  
Amortization 27,255     35,298     54,836     70,404  
Stock-based compensation expense 2,053     1,876     3,937     3,801  
Transaction-related expenses 30,874     —     32,306     —  
Adjusted EBITDA $ 70,399     $ 67,300     $ 140,015     $ 128,991  
Capitalization of content databases (5,669 )   (9,140 )   (11,889 )   (16,540 )
Purchases of property, equipment and software (14,925 )   (2,292 )   (20,775 )   (6,444 )
Cash paid for interest(6) (25,881 )   (22,824 )   (35,249 )   (29,253 )
Cash paid for income taxes (7,687 )   (12,600 )   (8,148 )   (12,805 )
Free cash flow $ 16,237     $ 20,444     $ 63,954     $ 63,949  
                               

 

 
ANCESTRY.COM LLC
Total Subscribers and Net Subscriber Additions
 
(in thousands)
 
  Three Months Ended
  June 30,
2016		   March 31,
2016		   June 30,
2015
  (unaudited)
Total subscribers 2,419     2,372     2,220  
Net subscriber additions   47     108     1  
                 

 

   
       
  (5 )  Net loss (income) and therefore adjusted EBITDA and free cash flow for the three and six months ended June 30, 2016 include $3.7 million and $4.2 million, respectively, of non-operating costs such as business optimization consulting, litigation and transaction-related severance. For the three and six months ended June 30, 2015, net income and therefore adjusted EBITDA and free cash flow include $0.3 million and $0.6 million, respectively, of similar non-operating costs.
  (6 ) Cash paid for interest for the three and six months ended June 30, 2016 excludes an $18.7 million payment made to our parent related to interest obligations on the senior unsecured PIK notes. Cash paid for interest for the three and six months ended June 30, 2015 exclude $18.7 million and $19.1 million, respectively, of payments made to our parent related to the interest obligations on its senior unsecured PIK notes.
       
   

 

Contact:

Media:
Brandon Borrman
[email protected]
(415) 795-6786

Investors:
Jon Laudie
[email protected]
(801) 705-7925