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Ancestry.com LLC Reports Q1 2013 Financial Results

Ancestry.com, Inc.

Ancestry.com Subscriber Growth of 12% Year-Over-Year –

– Q1 Non-GAAP Revenues $135 million, Up 24% Year-Over-Year –

– Generates Free Cash Flow of $51 million –

PROVO, Utah, May 1, 2013 (GLOBE NEWSWIRE) -- Ancestry.com LLC, the parent of and successor to Ancestry.com Inc., the world's largest online family history resource, reported financial results today for the first quarter ended March 31, 2013.

"The first quarter marked a solid start to our year, and our business continues to perform well," said Tim Sullivan, Chief Executive Officer of Ancestry.com. "As we progress into 2013, we continue to execute on delivering a global family history experience. Our strategy remains constant as we strive to provide our subscribers with unique and compelling content, build our brand through smart marketing, and continue to enrich our users' experience through new features and advancements in our sharing, mobile, and DNA capabilities."

First Quarter 2013 Financial Highlights

  • Total revenues for the first quarter of 2013 was $123.5 million.
  • Non-GAAP revenues1 for the first quarter of 2013 was $135.0 million, an increase of 24.4% over $108.5 million in the first quarter of 2012, driven by growth in our core Ancestry.com branded websites revenues, Archives.com revenues and AncestryDNA revenues.
  • Adjusted EBITDA2 for the first quarter of 2013 was $49.0 million, compared to $31.7 million in the first quarter of 2012. The adjusted EBITDA margin of non-GAAP revenues for the first quarter of 2013 was 36.3%, compared to 29.2% in the first quarter of 2012.
  • Net income (loss) for the first quarter 2013 was a loss of $(21.4) million for the first quarter of 2013 compared to net income of $13.5 million in the first quarter of 2012.
  • Free cash flow3 totaled $50.7 million for the first quarter of 2013 compared to $14.7 million for the first quarter of 2012.
  • Cash and cash equivalents totaled $72.0 million as of March 31, 2013.
  • Obligations under long-term debt totaled $968.3 million as of March 31, 2013.

Recent Business Highlights

  • Total subscribers across all websites, including Ancestry.com, Archives.com, Fold3.com and Newspapers.com, were approximately 2,700,000 as of March 31, 2013.
  • Subscribers of Ancestry.com branded websites totaled approximately 2,096,000 as of March 31, 2013, a 12.1% increase over the end of the first quarter of 2012 and a 4.0% increase from the end of the fourth quarter of 2012.
  • The Company ended the quarter with approximately 11.6 billion records. New collections added in Q1 included:

-- Ireland, Lord Viscount Morpeth's Testimonial Roll, 1841 – a 420-meter long scroll containing the names of more than 160,000 Irish men and women
-- Canada, City and Area Directories, 1819-1906 – 8 million records
-- UK BT27 Passenger Lists, 1890-1960 – 24 million records
-- US State Vital Records – more than 2.3 million records
-- Manchester Parish Records, 1541-1985 – 6 million records

  • Expanded our Interactive Image Viewer to nearly all record collections on Ancestry.com. This updated feature added in early 2012 to our census collections is an enhanced way to view records and interact with them on the site.

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 (719) 325-2463 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 revenue is calculated by adding the effects of non-cash adjustments to revenue from purchase accounting for the merger 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); 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 (paid) received for income taxes and interest. However, these non-GAAP measures should be considered in addition to, not as a substitute for or superior to, revenue, 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 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; to provide consistency and comparability with past financial performance; to facilitate a comparison of its results with those of other companies; 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 LLC is the world's largest online family history resource with approximately 2.7 million paying subscribers across all its websites. More than 11 billion records have been added to the Ancestry.com sites and users have created more than 47 million family trees containing more than 5 billion profiles. In addition to its flagship site www.ancestry.com, the company operates several Ancestry international websites along with a suite of online family history brands including Archives.com, Fold3.com and Newspapers.com, 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, its reach, its activities to enhance subscribers' experience and deliver product innovations and enhancements, improved features and tools, its activities to develop and promote its products (including DNA services), 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; 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 acquisition of the Company by a company controlled by the Permira funds and co-investors; the availability of cash and credit; the adverse impact of competitive product announcements; failure to achieve anticipated revenues 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.

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.

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 merger 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, net; income tax expense (benefit); non-cash charges including depreciation, amortization, impairment of intangible assets and stock-based compensation expense; and expenses associated with the merger transaction.

3 Free cash flow subtracts from adjusted EBITDA capitalization of content databases, purchases of capital and equipment and cash paid (received) for income taxes and interest.

ANCESTRY.COM LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31,
2013
December 31,
2012
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $71,978 $35,651
Restricted cash 68,655 83,863
Accounts receivable, net of allowances of $559 and $661 at March 31, 2013 and December 31, 2012, respectively 10,894 11,089
Income tax receivable 25,667 41,799
Deferred income taxes 4,375 --
Prepaid expenses and other current assets 9,261 9,816
Total current assets 190,830 182,218
Property and equipment, net 27,563 27,813
Content database costs, net 269,230 270,984
Intangible assets, net 554,276 600,628
Goodwill 944,267 945,619
Other assets 41,069 50,192
Total assets $2,027,235 $2,077,454
LIABILITIES AND MEMBER'S INTERESTS
Current liabilities:
Accounts payable $15,173 $11,432
Accrued expenses 40,361 62,120
Acquisition-related liabilities 68,654 83,863
Deferred revenues 140,171 116,953
Current deferred income taxes -- 2,021
Current portion of long-term debt 6,432 6,432
Total current liabilities 270,791 282,821
Long-term debt, net 936,009 936,797
Deferred income taxes 222,611 235,167
Other long-term liabilities 6,783 13,323
Total liabilities 1,436,194 1,468,108
Commitments and contingencies
Member's Interests
Member's Interests 685,143 682,021
Accumulated deficit (94,102) (72,675)
Total member's interests 591,041 609,346
Total liabilities and member's interests $2,027,235 $2,077,454
ANCESTRY.COM LLC
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Successor Predecessor
Three Months Ended
March 31, 2013 March 31, 2012
(Unaudited)
Revenues:
Subscription revenues $113,774 $102,596
Product and other revenues 9,748 5,940
Total revenues 123,522 108,536
Costs of revenues:
Cost of subscription revenues 21,743 16,294
Cost of product and other revenues 5,731 2,785
Total cost of revenues 27,474 19,079
Gross profit 96,048 89,457
Operating expenses:
Technology and development 20,517 16,627
Marketing and advertising 36,958 39,549
General and administrative 11,819 10,642
Amortization of acquired intangible assets 46,386 2,561
Total operating expenses 115,680 69,379
Income (loss) from operations (19,632) 20,078
Interest expense, net (22,008) (167)
Other income (expense), net (551) 206
Income (loss) before income taxes (42,191) 20,117
Income tax (expense) benefit 20,764 (6,570)
Net income (loss) $(21,427) $13,547
Comprehensive income (loss) $(21,427) $13,813
Successor Predecessor
Three Months Ended
March 31, 2013 March 31, 2012
(Unaudited)
Reconciliation of adjusted EBITDA and free cash flow to net income (loss) (in thousands):
Net income (loss) $(21,427) $13,547
Non-cash revenue adjustment 11,500 --
Interest expense, net 22,008 167
Other (income) expense, net 551 (206)
Income tax expense (benefit) (20,764) 6,570
Depreciation 3,773 3,547
Amortization 52,893 5,111
Stock-based compensation expense 446 2,947
Adjusted EBITDA $48,980 $31,683
Capitalization of content database costs (4,753) (5,140)
Purchase of property and equipment (3,523) (5,093)
Cash paid for interest (11,781) (117)
Cash (paid) received for income taxes 21,768 (6,620)
Free cash flow $50,691 $14,713
Successor Predecessor
Three Months Ended
March 31, 2013 March 31, 2012
Reconciliation of Non-GAAP revenues to total revenues (in thousands): (Unaudited)
Total revenues $123,522 $108,536
Non-cash revenue adjustment (1) 11,500 --
Non-GAAP revenues $135,022 $108,536
(1) 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.
ANCESTRY.COM LLC
Total Subscribers and Net Subscriber Additions
(in thousands)
Three Months Ended
March 31,
2013
December 31,
2012
March 31,
2012
Total subscribers 2,096 2,016 1,870
Net subscriber additions 80 (4) 167

CONTACT: Media: Heather Erickson herickson@ancestry.com (801) 705-7104 Investors Ancestry.com Investor Relations ir@ancestry.com (801) 705-7942

Source:Ancestry.com, Inc.