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Ancestry.com LLC Reports Second Quarter 2016 Financial Results

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– 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.
 
    
 (1Transaction-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 expenses9,916  12,228 
Other current assets15,042  8,700 
Total current assets158,432  162,709 
Property and equipment, net85,707  54,795 
Content databases, net274,934  282,281 
Intangible assets, net132,043  159,736 
Goodwill959,399  948,283 
Other assets14,351  13,956 
Total assets$1,624,866  $1,621,760 
LIABILITIES AND MEMBER'S INTERESTS
Current liabilities:   
Accounts payable$13,940  $13,120 
Accrued expenses53,191  52,871 
Deferred revenues193,394  171,822 
Current portion of long-term debt, net7,103  7,087 
Total current liabilities267,628  244,900 
Long-term debt, net988,077  989,256 
Financing obligation45,661  22,900 
Deferred income taxes39,777  59,809 
Other long-term liabilities26,263  23,977 
Total liabilities1,367,406  1,340,842 
Commitments and contingencies   
Member's interests:   
Member's interests397,241  422,603 
Accumulated deficit(139,781) (141,685)
Total member's interests257,460  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  $287,125 
Service and other revenues51,221  24,016  93,087  46,896 
Total revenues211,424  169,424  407,934  334,021 
Costs of revenues:       
Cost of subscription revenues27,641  25,584  54,991  51,279 
Cost of service and other revenues  28,222  13,882  52,632  28,148 
Total cost of revenues55,863  39,466  107,623  79,427 
Gross profit155,561  129,958  300,311  254,594 
Operating expenses:       
Technology and development27,643  24,282  53,647  47,725 
Marketing and advertising55,433  41,203  107,233  84,380 
General and administrative19,533  12,427  33,451  23,882 
Amortization of intangible assets18,052  27,464  36,642  54,927 
Transaction-related expenses30,874    32,306   
Total operating expenses151,535  105,376  263,279  210,914 
Income from operations4,026  24,582  37,032  43,680 
Interest expense, net(19,731) (16,622) (39,812) (33,830)
Other (expense) income, net(279) 190  (448) (73)
(Loss) income before income taxes(15,984) 8,150  (3,228) 9,777 
Income tax benefit5,520  5,512  5,132  6,679 
Net (loss) income$(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, net19,731  16,622  39,812  33,830 
Other expense (income), net279  (190) 448  73 
Income tax benefit(5,520) (5,512) (5,132) (6,679)
Depreciation6,191  5,544  11,904  11,106 
Amortization27,255  35,298  54,836  70,404 
Stock-based compensation expense2,053  1,876  3,937  3,801 
Transaction-related expenses30,874    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 subscribers2,419  2,372  2,220 
Net subscriber additions  47  108  1 
         


  
    
 (5Net 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 bborrman@ancestry.com (415) 795-6786 Investors: Jon Laudie jlaudie@ancestry.com (801) 705-7925

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