Market Overview

Care.com Announces Strong Second Quarter 2018 Financial Results

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Care.com (NYSE:CRCM), the world's largest online destination for finding
and managing family care, today is announcing financial results for the
second quarter ended June 30, 2018.

"We had a strong second quarter of 2018, with revenue at the top end of
our guidance range and – while we were just below breakeven on GAAP net
income as a result of the foreign exchange impact of a weakening Euro –
EBITDA generated across our businesses exceeded our expectations and
EBITDA margin was double prior year at 13%. These notable EBITDA gains
were driven by the strength in the underlying health of our core US
Consumer business, which continued to show strong improvements in unit
economics as we also grew end-of-period paying families by 10% versus
prior year. As a result, we generated an incremental $7 million in
cash," said Sheila Lirio Marcelo, Founder, Chairwoman and CEO
of Care.com. "Over the past couple of years, we have been pleased with
our continuous progress on initiatives that we expect will drive
consistent long-term profitable growth – including top line acceleration
in 2019 and beyond."

Financial Results

  • Revenue for the second quarter of 2018 was $46.0 million, an increase
    of 10% from $42.0 million in the second quarter of 2017.
    • Revenue attributable to the US Consumer offering totaled $35.6
      million in the second quarter of 2018, an increase of 7% from
      $33.4 million in the second quarter of 2017.
    • Revenue attributable to the Care@Work and other B2B Offerings, as
      well as our services in our international markets, totaled $10.4
      million in the second quarter of 2018, an increase of 21% from
      $8.6 million in the second quarter of 2017.
  • Net loss was $0.2 million in the second quarter of 2018, compared to
    net income of $1.7 million in the second quarter of 2017, a decrease
    of $1.9 million, primarily attributable to an increase in stock-based
    compensation expense and a foreign exchange loss resulting from the
    weakening of the Euro.
  • Adjusted EBITDA was $5.9 million in the second quarter of 2018,
    compared to $2.6 million in the second quarter of 2017, an improvement
    of $3.3 million.
  • GAAP EPS (Diluted) was ($0.03) in the second quarter of 2018, compared
    to $0.03 in the second quarter of 2017. Q2 GAAP EPS (Diluted) was
    based on 30.6 million weighted average diluted shares outstanding
    versus 32.2 million in the second quarter of 2017.
  • Non-GAAP EPS (Diluted) was $0.14 in the second quarter of 2018,
    compared to $0.11 in the second quarter of 2017. Note that Non-GAAP
    EPS excludes the impact of non-cash stock-based compensation,
    adjustments relating to preferred stock and other non-recurring items,
    such as M&A expenses and restructuring costs.
  • The Company ended the quarter with $113.6 million in cash and cash
    equivalents and short-term investments.

Business Highlights

  • Our total members grew 17% to 29.6 million at the end of the second
    quarter of 2018, compared to 25.2 million in the same period of 2017.
  • Total families grew to 16.9 million at the end of the second quarter
    of 2018, an increase of 19% over the same period of 2017, and total
    caregivers grew to 12.7 million at the end of the second quarter of
    2018, an increase of 16% over the same period of 2017.

Financial Expectations

  Q3 2018 Guidance   Full Year 2018 Guidance
 
Revenue $ 49.0 - $ 49.3 $ 191.5 - $ 193.0
 
Adjusted EBITDA $ 5.25 - $ 5.75 $ 31.0 - $ 32.0
 
Non-GAAP EPS ~$0.12 $ 0.65 - $ 0.67
 
Figures in millions except for Non-GAAP EPS
Q3 Non-GAAP EPS based on approximately 39 million weighted average
dilutive shares
FY'18 full year Non-GAAP EPS based on approximately 40 million
weighted average diluted shares
 

Future GAAP Net Income and GAAP EPS may be significantly affected by
changes in ongoing assumptions and judgments, and may also be affected
by non-recurring, unusual or unanticipated charges, expenses or gains,
which we are not able to estimate and which therefore are excluded in
the calculation of the Company's non-GAAP EPS guidance as described in
this press release. Due to the nature of any such items, we are not able
to estimate their significance, and it is therefore currently not
practical to reconcile adjusted EBITDA and non-GAAP EPS guidance to the
most comparable GAAP measure.

Earnings Teleconference Information

The Company will host a conference call at 8:00 AM ET today to discuss
these results. The conference call will be accessible at (877) 407-4018
or (201) 689-8471 (International). The call will also be broadcast
simultaneously at http://investors.care.com.
Following completion of the call, a recorded replay of the webcast will
be available on Care.com's website. To listen to the telephone replay,
call toll-free (844) 512-2921 or (412) 317-6671 (International),
conference ID# 13681410. The telephone replay will be available from
11:00 AM ET July 30 through 11:59 PM ET August 13, 2018. Additional
investor information can be accessed at http://investors.care.com.

About Care.com

Since launching in 2007, Care.com (NYSE:CRCM) has been committed to
solving the complex care challenges that impact families, caregivers,
employers, and care service companies. Today, Care.com is the world's
largest online destination for finding and managing family care, with
16.9 million families and 12.7 million caregivers* across more than 20
countries, including the U.S., UK, Canada and parts of Western Europe,
and approximately 1.4 million employees of corporate clients having
access to our services. Spanning child care to senior care, pet care,
housekeeping and more, Care.com provides a sweeping array of services
for families and caregivers to find, manage and pay for care or find
employment. These include: a comprehensive suite of safety tools and
resources members may use to help make more informed hiring decisions -
such as third-party background check services, monitored messaging, and
tips on hiring best practices; easy ways for caregivers to be paid
online or via mobile app; and Care.com Benefits, including the household
payroll and tax services provided by Care.com HomePay and the Care
Benefit Bucks program, a peer-to-peer pooled, portable benefits platform
funded by household employer contributions which provides caregivers
access to professional benefits. For enterprise clients, Care.com builds
customized benefits packages covering child care, back up care and
senior care consulting services through its Care@Work business, and
serves care businesses with marketing and recruiting support.
Headquartered in Waltham, Massachusetts, Care.com has offices in Berlin,
Austin and the San Francisco Bay area.

*As of June 2018

Cautionary Language Concerning Forward-Looking Statements:

This press release contains "forward-looking statements" within the
meaning of the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, including but not limited to, statements
regarding the expected results of product investments and initiatives,
anticipated revenue growth, and the Company's financial guidance for the
third quarter of 2018 and full year 2018.

These forward-looking statements are made as of the date they were first
issued and were based on current expectations, estimates, forecasts and
projections as well as the beliefs and assumptions of management. Words
such as "plan," "expect," "anticipate," "should," "believe," "hope,"
"target," "project," "goals," "estimate," "potential," "predict," "may,"
"will," "might," "could," "intend," "designed," variations of these
terms or the negative of these terms and similar expressions are
intended to identify these forward-looking statements. Forward-looking
statements are subject to a number of risks and uncertainties, many of
which involve factors or circumstances that are beyond the Company's
control. The Company's actual results could differ materially from those
stated or implied in forward-looking statements due to a number of
factors, including but not limited to: our ability to grow our
membership while leveraging our investment in sales and marketing, our
success in converting non-paying members to paying members and extending
the length of time that paying members continue to pay for our services,
our ability to cross-sell new and existing products and services to our
members and to develop new products and services that members consider
valuable, our ability to protect our brand and maintain our reputation
among our members, and other risks detailed in the Company's other
publicly available filings with the Securities and Exchange Commission.
Past performance is not necessarily indicative of future results. The
forward-looking statements included in this press release represent the
Company's views as of the date of this press release. The Company
anticipates that subsequent events and developments will cause its views
to change. The Company undertakes no intention or obligation to update
or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. These forward-looking
statements should not be relied upon as representing the Company's views
as of any date subsequent to the date of this press release.

Use of Non-GAAP Financial Measures

To supplement the financial measures presented in the Company's press
release and related conference call or webcast in accordance with
accounting principles generally accepted in the United States ("GAAP"),
we also present the following non-GAAP measures of financial
performance: adjusted EBITDA, non-GAAP net income and non-GAAP earnings
per share ("EPS").

A "non-GAAP financial measure" refers to a numerical measure of the
Company's historical or future financial performance, financial
position, or cash flows that excludes (or includes) amounts that are
included in (or excluded from) the most directly comparable measure
calculated and presented in accordance with GAAP in the Company's
financial statements. The Company provides certain non-GAAP measures as
additional information relating to its operating results as a complement
to results provided in accordance with GAAP. The non-GAAP financial
information presented here should be considered in conjunction with, and
not as a substitute for or superior to, the financial information
presented in accordance with GAAP and should not be considered a measure
of the Company's liquidity. There are significant limitations associated
with the use of non-GAAP financial measures. Further, these measures may
differ from the non-GAAP information, even where similarly titled, used
by other companies and therefore should not be used to compare the
Company's performance to that of other companies.

The Company has presented: adjusted EBITDA, non-GAAP net income and
non-GAAP EPS as non-GAAP financial measures in this press release. We
define adjusted EBITDA as income / (loss), which excludes the accretion
of preferred stock dividends and issuance costs, as well as: federal,
state and franchise taxes, other income (expense), net, depreciation and
amortization, stock-based compensation, accretion of contingent
consideration, merger and acquisition related costs, and other unusual
or non-cash significant adjustments, such as impairment and
restructuring charges. Adjusted EBITDA eliminates the effects of
financing, income taxes and the accounting effects of capital spending,
which is based on the Company's estimate of the useful life of tangible
and intangible assets. We define non-GAAP net income as income / (loss),
which excludes the accretion of preferred stock dividends, plus
stock-based compensation, accretion of contingent consideration, merger
and acquisition related costs, and other unusual or non-cash significant
adjustments such as impairment and restructuring charges. We define
non-GAAP EPS as non-GAAP net income divided by diluted weighted-average
shares outstanding, using the treasury stock method.

The Company believes the use of non-GAAP financial measures, as a
supplement to GAAP measures, is useful to investors in that they
eliminate items that are either not part of the Company's core
operations or do not require a cash outlay, such as stock-based
compensation. Care.com's management uses these non-GAAP financial
measures when evaluating the Company's operating performance and for
internal planning and forecasting purposes. The Company believes that
these non-GAAP financial measures help indicate underlying trends in the
Company's business, are important in comparing current results with
prior period results, and are useful to investors and financial analysts
in assessing the Company's operating performance.

Care.com, Inc.    
Consolidated Balance Sheets
(in thousands)

June 30,

December 30,

2018

2017

Assets (unaudited)
Current assets:
Cash and cash equivalents $ 98,455 $ 86,728
Short-term investments 15,099 15,000
Accounts receivable (net of allowance of $139 and $102,
respectively) (1)
4,714 5,171
Unbilled accounts receivable (2) 5,692 5,454
Prepaid expenses and other current assets   6,235     4,883  
Total current assets 130,195 117,236
Property and equipment, net 3,469 3,651
Intangible assets, net 2,188 1,142
Goodwill 64,603 60,281
Other non-current assets   2,708     2,066  
Total assets $ 203,163   $ 184,376  
 
Liabilities, redeemable convertible preferred stock, and
stockholders' equity
Current liabilities:
Accounts payable (3) $ 2,042 $ 1,873
Accrued expenses and other current liabilities (4) 16,928 17,086
Current contingent acquisition consideration 485 -
Deferred revenue (5)   21,579     18,626  
Total current liabilities 41,034 37,585
Non-current contingent acquisition consideration 428 -
Deferred tax liability 1,327 1,292
Other non-current liabilities   6,347     5,779  
Total liabilities 49,136 44,656
 
Series A Redeemable Convertible Preferred Stock, $0.001 par value -
46 shares designated; 46 shares issued and outstanding at June 30,
2018 and December 30, 2017; at aggregate liquidation and redemption
value at June 30, 2018 and December 30, 2017, respectively
51,604 50,259
Stockholders' equity
Preferred Stock: $0.001 par value - authorized 5,000 shares at June
30, 2018 and December 30, 2017, respectively
- -
Common stock, $0.001 par value; 300,000 shares authorized; 31,239
and 30,390 shares issued and outstanding at June 30, 2018 and
December 30, 2017 respectively
31 30
Additional paid-in capital 276,580 266,030
Accumulated deficit (174,484 ) (177,145 )
Accumulated other comprehensive income   296     546  
Total stockholders' equity   102,423     89,461  
Total liabilities, redeemable convertible preferred stock, and
stockholders' equity
$ 203,163   $ 184,376  
(1)   Includes accounts receivable due from related party of $896 and $307
at June 30, 2018 and December 30, 2017
(2) Includes unbilled accounts receivable due from related party of $389
and $222 at June 30, 2018 and December 30, 2017
(3) Includes accounts payable due to related party of $10 and $128 at
June 30, 2018 and December 30, 2017
(4) Includes accrued expenses and other current liabilities due to
related party of $780 and $542 at June 30, 2018 and December 30, 2017
(5) Includes deferred revenue associated with related party of $92 and
$2 at June 30, 2018 and December 30, 2017
 
Care.com, Inc.        
Consolidated Statement of Operations
(in thousands, except per share data)
Three Months Ended Six Months Ended

June 30,

July 1,

June 30,

July 1,

2018

2017

2018

2017

(unaudited)
 
Revenue (1) $ 45,966 $ 41,972 $ 93,291 $ 85,338
Cost of revenue 9,823 9,000 19,266 17,766
Operating expenses:
Selling and marketing (2) 15,901 17,853 32,758 37,050
Research and development 8,492 6,666 16,780 12,655
General and administrative 11,593 8,433 22,060 16,688
Depreciation and amortization 411 423 829 847
Restructuring charges   17     -     479     -  
Total operating expenses   36,414     33,375     72,906     67,240  
Operating (loss) income (271 ) (403 ) 1,119 332
Other (expense) income, net   (768 )   1,008     (206 )   1,309  
(Loss) Income before income taxes (1,039 ) 605 913 1,641
Benefit from income taxes   (870 )   (1,068 )   (1,615 )   (856 )
Net (loss) income (169 ) 1,673 2,528 2,497
Accretion of Series A Preferred Stock dividends (665 ) (660 ) (1,345 ) (1,262 )
Net income attributable to Series A Redeemable Convertible Preferred
Stock
  -     (139 )   (163 )   (169 )
Net (loss) income attributable to common stockholders $ (834 ) $ 874   $ 1,020   $ 1,066  
 
Net (loss) income per share attributable to common stockholders
(Basic):
$ (0.03 ) $ 0.03 $ 0.03 $ 0.04
Net (loss) income per share attributable to common stockholders
(Diluted):
$ (0.03 ) $ 0.03 $ 0.03 $ 0.03
 
Weighted-average shares used to compute net (loss) income per share
attributable to common stockholders:
Basic 30,591 29,556 30,792 29,352
Diluted 30,591 32,220 33,486 31,746
(1)   Includes related party revenue of $705 and $432 for the three months
ended June 30, 2018 and July 1, 2017, respectively. Includes related
party revenue of $1,342 and $825 for the six months ended June 30,
2018 and July 1, 2017, respectively.
(2) Includes related party expenses of $2,617 and $4,120 for the three
months ended June 30, 2018 and July 1, 2017, respectively. Includes
related party expenses of $5,653 and $7,820 for the six months ended
June 30, 2018 and July 1, 2017 respectively.
 
Care.com, Inc.    
Consolidated Statement of Cash Flows
(in thousands)
Six Months Ended

June 30, 2018

July 1, 2017
(unaudited)
Cash flows from operating activities
Net income $ 2,528 $ 2,497
 
Adjustments to reconcile net income to net cash provided by
operating activities:
Stock-based compensation 8,700 3,551
Depreciation and amortization 924 1,199
Deferred income taxes (1,691 ) 196
Contingent consideration expense 19 -
Loss on impairment of intangible assets 142 -
Foreign currency remeasurement loss 478 1,157
Changes in operating assets and liabilities, net of effects from
acquisitions:
Accounts receivable 441 (1,448 )
Unbilled accounts receivable (241 ) (191 )
Prepaid expenses and other current assets 390 (1,358 )
Other non-current assets (381 ) -
Accounts payable 178 879
Accrued expenses and other current liabilities (715 ) 1,258
Deferred revenue 3,086 3,469
Other non-current liabilities   780     (69 )
Net cash provided by operating activities 14,638 11,140
 
Cash flows from investing activities
Purchases of property and equipment; and software (399 ) (387 )
Payments for acquisitions, net of cash acquired (5,309 ) -
Purchases of short-term investment (15,099 ) (15,000 )
Sale of short-term investement   15,000     15,000  
Net cash used in investing activities (5,807 ) (387 )
 
Cash flows from financing activities
Proceeds from exercise of common stock options   3,192     2,037  
Net cash provided by financing activities 3,192 2,037
 
Effect of exchange rate changes on cash and cash equivalents   (296 )   (2,045 )
Net increase in cash, cash equivalents, and restricted cash 11,727 10,745
Cash, cash equivalents and restricted cash, beginning of the period   86,728     61,094  
Cash, cash equivalents and restricted cash, end of the period $ 98,455   $ 71,839  
 
Care.com, Inc.
Reconciliation of Adjusted EBITDA & Non-GAAP Net Income
(in thousands, except per share data)
 
  Three Months Ended   Six Months Ended

June 30, 2018

  July 1, 2017

June 30, 2018

  July 1, 2017
(unaudited)
 
Net (loss) income $ (169 ) $ 1,673 $ 2,528 $ 2,497
 
Federal, state and franchise taxes (783 ) (1,004 ) (1,222 ) (710 )
Other expense (income), net 768 (1,008 ) 206 (1,309 )
Depreciation and amortization   461     598     924     1,199  
EBITDA 277 259 2,436 1,677
 
Stock-based compensation 4,988 1,948 8,700 3,551
Merger and acquisition related costs 335 95 511 95
Restructuring related costs 17 - 479 -
Litigation related costs 20 - 20 75
Software implementation costs 150 216 303 216
Severance related costs - 90 67 121
Impairment of intangible assets   142     -     142     -  
Adjusted EBITDA $ 5,929   $ 2,608   $ 12,658   $ 5,735  
 
Add back for Non-GAAP Net Income
 
Federal, state and franchise taxes 783 1,004 1,222 710
Other (expense) income, net (768 ) 1,008 (206 ) 1,309
Depreciation and amortization   (461 )   (598 )   (924 )   (1,199 )
Non-GAAP net income $ 5,483   $ 4,022   $ 12,750   $ 6,555  
 
Non-GAAP net income per share:
Basic $ 0.18 $ 0.14 $ 0.41 $ 0.22
Diluted $ 0.14 $ 0.11 $ 0.33 $ 0.18
 

Weighted-average shares used to compute non-GAAP net income per
share:

Basic 30,591 29,556 30,792 29,352
Diluted 38,047 36,879 38,401 36,405
 
Care.com, Inc.
Reconciliation of Non-GAAP EPS
(in thousands, except per share data)
 
  Three Months Ended   Six Months Ended

June 30,

 

July 1,

June 30,

 

July 1,

2018

2017

2018

2017

(unaudited)
Weighted-average shares used to compute net income per share:
Diluted 38,047 36,879 38,401 36,405
 
Net income per share (Diluted):
Net (loss) income per share attributable to common stockholders $ (0.02 ) $ 0.02 $ 0.03 $ 0.03
Impact on net income per share of Series A related costs   0.02     0.02     0.04     0.04  
Adjusted net income per share $ (0.00 ) $ 0.05 $ 0.07 $ 0.07
 
Stock-based compensation 0.13 0.05 0.23 0.10
Merger and acquisition related costs 0.01 0.00 0.01 0.00
Restructuring related costs 0.00 - 0.01 -
Litigation related costs 0.00 - 0.00 0.00
Software implementation costs 0.00 0.01 0.01 0.01
Severance related costs - 0.00 0.00 0.00
Impairment of intangible assets   0.00     -     0.00     -  
Non-GAAP net income per share - diluted $ 0.14   $ 0.11   $ 0.33   $ 0.18  
 
Care.com, Inc.
Supplemental Data
(in thousands, except monthly average revenue per paying family)
 
  Period Ended

June 30, 2018

  July 1, 2017
Total members 29,560 25,198
Total families 16,874 14,239
Total caregivers 12,686 10,959
 
Paying families - US Consumer Business 324 294
 
Period Ended

June 30, 2018

July 1, 2017

Monthly Average Revenue per Paying Family

US Consumer Business

$

37

 

$

38

 

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