CRCM Care com Inc

Strong Revenue and Member Growth with Increased Operating Leverage

Care.com, Inc. (NYSE: CRCM), the world's largest online destination for finding and managing family care, today announced financial results for the third quarter ended on September 26, 2015.

“We delivered solid revenue and member growth, increased operating leverage, and executed well against our strategic plans,” said Sheila Lirio Marcelo, Founder, Chairwoman, and CEO of Care.com. “We continue to lead the market with our consumer matching and payments solutions, with a focus on mobile innovation and better pricing and packaging to meet the needs of our consumers. We are also investing more in workplace solutions as we see continuous strong growth of this high ROI business. As a result of these on-going investments, we’ve aligned our company focus on these high growth areas, while managing costs to meet our target of break-even for our entire business by mid-2016."

Highlights

• Third quarter consolidated revenue was $38.9 million, an increase of 21% over the third quarter of 2014. Organic revenue, which excludes revenue from Citrus Lane, a company we acquired in Q3 2014, grew 22%. Organic sales and marketing expense declined 3%, as compared to the third quarter of 2014, this led to a 15.4 percentage point reduction in organic sales and marketing expenses as a percent of revenue.
• Third quarter net loss on a consolidated basis was $17.4 million, as compared to a net loss of $14.5 million in the third quarter 2014. Excluding the impact of Citrus Lane, net loss margin improvement was 23 percentage points.
• On an adjusted EBITDA basis for the consolidated business, the third quarter 2015 loss was $3.9 million. This compares to an adjusted EBITDA loss of $8.7 million in third quarter of 2014. The resulting margin improvement was 17 percentage points. Excluding the impact of Citrus Lane, adjusted EBITDA margin improvement was 15 percentage points.
• As part of its cost-savings initiatives and desire to focus on investment in the workplace solutions (WPS) and payments businesses, the Company decided during the third quarter to evaluate the advisability of a sale or wind down of the Citrus Lane business and on October 26, the Company decided to wind down Citrus Lane. As a result, the Company wrote off $9.7 million dollars in goodwill and intangible assets during the third quarter of 2015.

Financial Results

• Revenue for the third quarter of 2015 was $38.9 million, compared to $32.1 million in the third quarter of 2014.
  • Revenue attributable to the US Consumer Businesses totaled $30.2 million in the third quarter of 2015, a 23% increase from $24.6 million in third quarter of 2014.
  • Revenue attributable to the WPS, International and B2B businesses totaled $5.9 million in the third quarter of 2015, an increase of 19% from Q3 2014, or 26% on a constant currency basis.
  • Revenue attributable to the Citrus Lane, which we acquired in Q3 2014, totaled $2.7 million in the third quarter of 2015, an 11% increase from $2.5 million in third quarter of 2014.
• GAAP net loss for the third quarter of 2015 was $17.4 million, compared to a net loss of $14.5 million in the third quarter of 2014.
• Adjusted EBITDA was a loss of $3.9 million in the third quarter of 2015, compared to an adjusted EBITDA loss of $8.7 million in the third quarter of 2014.
• GAAP EPS was a $(0.54) loss in the third quarter of 2015 compared to a $(0.46) loss in the third quarter 2014. Q3 GAAP EPS was based on 32.1 million weighted average basic shares outstanding versus 31.4 million shares outstanding in the third quarter of 2014.
• Non-GAAP EPS was a $(0.18) loss in the third quarter of 2015 compared to a $(0.31) loss in the third quarter 2014. Non-GAAP EPS excludes the impact of non-cash stock based compensation and non-recurring items, such as M&A expenses and impairment charges.
• The Company ended the quarter with $59.7 million in cash and cash equivalents

Business Highlights

• Our total members grew 34% to 17.8 million at the end of the third quarter of 2015, compared to 13.3 million at the end of the third quarter 2014.
  • Total families grew to 10.1 million at the end of the third quarter of 2015, a 36% increase over the third quarter of 2014, and total caregivers grew to 7.7 million at the end of the quarter, a 32% increase over the third quarter of 2014.
  • Third quarter 2015 US Consumer Business end-of-period paying members grew to over 296,000, a 25% increase over the third quarter of 2014.

Financial Expectations

    Q4 2015 Full Year 2015 Revenue           Organic (ex. Citrus Lane) $ 35.0 - $ 37.0 $ 136.0 - $ 138.0 Citrus Lane $ 2.5   -     $ 2.5   $ 11.0     -     $ 11.0   Total $ 37.5 - $ 39.5 $ 147.0 - $ 149.0   Adjusted EBITDA Organic (ex. Citrus Lane) $ 4.5 - $ 5.5 $ (7.0 ) - $ (6.0 ) Citrus Lane $ (0.5 ) -     $ (0.5 ) $ (3.7 )   -     $ (3.7 ) Total $ 4.0 - $ 5.0 $ (10.7 ) - $ (9.7 )   Non-GAAP EPS $ 0.08 - $ 0.11 $ (0.57 ) - $ (0.54 )   Figures in millions except for Non-GAAP EPS Non-GAAP EPS based on weighted average shares  

Earnings Teleconference Information

The Company will discuss its third quarter 2015 financial results during a teleconference today, October 29, 2015, at 4:30 PM ET. The conference call can be accessed at (877) 407-4018 or (201) 689-8471 (international), conference ID# 13622024. The call will also be broadcast simultaneously at http://investors.care.com. Following the 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 (877) 870-5176 or (858) 384-5517 (international), conference ID # 13622024. The telephone replay will be available from 7:30 PM ET October 29 through 11:59 PM ET November 5, 2015. Additional investor information can be accessed at http://www.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 17.8 million member consumers* across 16 countries, including the US, UK, Canada and parts of Western Europe, and approximately half a 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 household payroll and tax services provided by Care.com HomePay. Care.com builds employers customized benefits packages covering child care, back up care and senior care consulting services through its Global Workplace Solutions, and serves care businesses with marketing and recruiting support. To further connect families, Care.com has expanded its consumer service with its 2013 acquisition of Big Tent, a community platform. Headquartered in Waltham, Massachusetts, Care.com has offices in Berlin, Austin, New York City and Silicon Valley.

*As of September 2015

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 anticipated profitability of our business in 2016 on an adjusted EBITDA basis and the Company’s financial guidance for the fourth quarter of 2015 and full year 2015.

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 "expect," "anticipate," "should," "believe," "hope," "target," "project," "goals," "estimate," "potential," "predict," "may," "will," "might," "could," "intend," 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, 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, costs associated with the expected wind down of our Citrus Lane business, 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: organic revenue and revenue growth; adjusted EBITDA, organic sales and marketing expenses; non-GAAP net loss 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: organic revenue and revenue growth, adjusted EBITDA, organic sales and marketing expenses, non-GAAP net loss and non-GAAP EPS as non-GAAP financial measures in this press release. We define organic revenue as total revenue excluding Citrus Lane revenue. We define organic revenue growth as revenue growth excluding Citrus Lane. We define adjusted EBITDA as net loss, plus: federal, state and franchise taxes, other expense (income), 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 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 organic sales and marketing expenses as those expenses excluding Citrus Lane. We define non-GAAP net loss as net loss, plus stock-based compensation, accretion of contingent consideration, merger and acquisition related costs and other unusual or non-cash significant adjustments. We define non-GAAP EPS as non-GAAP net loss divided by weighted basic shares outstanding.

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)

September 26,2015

December 27,2014

Assets (unaudited) Current assets: Cash and cash equivalents $ 59,736 $ 71,881 Accounts receivable 3,478 2,592 Unbilled accounts receivable 3,643 3,541 Prepaid expenses and other current assets   6,423     8,046   Total current assets 73,280 86,060 Property and equipment, net 6,723 6,323 Intangible assets, net 4,111 8,965 Goodwill 59,011 68,685 Other non-current assets   3,093     3,071  

Total assets

$ 146,218   $ 173,104     Liabilities and stockholders' equity Current liabilities: Accounts payable $ 1,544 $ 5,463 Accrued expenses and other current liabilities 20,297 12,732 Current contingent acquisition consideration 15,884 10,685 Deferred revenue   16,124     13,346   Total current liabilities 53,849 42,226 Contingent acquisition consideration - 7,267 Deferred tax liability 3,139 2,119 Other non-current liabilities   3,958     3,442   Total liabilities 60,946 55,054   Stockholders' equity

Common stock, $0.001 par value; 300,000 shares authorized; 32,127 and 31,615shares issued and outstanding, respectively

32 32 Additional paid-in capital 282,184 277,583 Accumulated deficit (196,456 ) (159,859 ) Accumulated other comprehensive (loss) income   (488 )   294   Total stockholders' equity   85,272     118,050   Total liabilities and stockholders' equity $ 146,218   $ 173,104                         Care.com, Inc. Consolidated Statement of Operations (in thousands, except per share data) Three Months Ended Nine Months Ended

September26,2015

September27,2014

September26,2015

September27,2014

(unaudited) (unaudited)   Revenue $ 38,893 $ 32,054 $ 109,666 $ 83,161 Cost of revenue * 10,326 9,132 29,098 20,616 Operating expenses: Selling and marketing 22,128 22,900 61,891 61,371 Research and development 5,808 4,417 16,229 12,559 General and administrative 7,597 9,479 24,526 22,299 Depreciation and amortization 1,087 1,113 3,613 3,249 Impairment of goodwill and intangible assets   8,766     -     8,766     -   Total operating expenses   45,386     37,909     115,025     99,478   Operating loss (16,819 ) (14,987 ) (34,457 ) (36,933 ) Other expense, net   (272 )   (644 )   (976 )   (3,323 ) Loss before income taxes (17,091 ) (15,631 ) (35,433 ) (40,256 ) Provision for (benefit from) income taxes   259     (1,178 )   1,164     (384 ) Net loss $ (17,350 ) $ (14,453 ) $ (36,597 ) $ (39,872 ) Accretion of preferred stock   -     -     -     (4 ) Net loss attributable to common stockholders $ (17,350 ) $ (14,453 ) $ (36,597 ) $ (39,876 )   Net loss per share attributable to common stockholders:

 

Basic and diluted $ (0.54 ) $ (0.46 ) $ (1.15 ) $ (1.42 )

Weighted-average shares used to compute net lossper share attributable to common stockholders:

Basic and diluted 32,069 31,362 31,938 27,995  

*Note that $1.0 million of the Citrus Lane impairment charge in 2015 resides within the Cost of Revenue line

              Care.com, Inc. Consolidated Statement of Cash Flows Nine Months Ended (in thousands)

September 26,2015

September 27,2014

(unaudited) Cash flows from operating activities Net loss $ (36,597 ) $ (39,872 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation 4,179 4,829 Depreciation and amortization 4,273 3,914 Deferred taxes 1,053 (548 ) Contingent consideration expense 777 404 Change in fair value of contingent consideration payable in preferred stock - 2,258 Change in fair value of stock warrants - 606 Foreign currency remeasurement gain 983 - Impairment of goodwill and intangible assets 9,741 - Other non-operating expenses (42 ) - Changes in operating assets and liabilities, net of effects from acquisitions: Accounts receivable (906 ) (1,003 ) Unbilled accounts receivable (339 ) (974 ) Prepaid expenses and other current assets 1,419 (797 ) Other non-current assets (13 ) 490 Accounts payable (3,349 ) 3,479 Accrued expenses and other current liabilities 8,637 9,270 Deferred revenue 3,110 3,705 Other non-current liabilities   623     639   Net cash used in operating activities (6,451 ) (13,600 )   Cash flows from investing activities Purchases of property and equipment (4,287 ) (878 ) Payments for acquisitions, net of cash acquired - (23,364 ) Cash withheld for purchase consideration 73 (73 ) Net increase in other assets   -     (2,825 ) Net cash used in investing activities (4,214 ) (27,140 )   Cash flows from financing activities Proceeds from initial public offering net of offering costs - 96,007 Proceeds from exercise of common stock options 630 319

Payments of contingent consideration previously established in purchase accounting

  (1,840 )   (2,845 ) Net cash (used in) provided by financing activities (1,210 ) 93,481   Effect of exchange rate changes on cash and cash equivalents   (270 )   383   Net (decrease) increase in cash and cash equivalents (12,145 ) 53,124 Cash and cash equivalents, beginning of the period   71,881     29,959   Cash and cash equivalents, end of the period $ 59,736   $ 83,083                 Care.com, Inc. Reconciliation of Adjusted EBITDA (in thousands) Three Months Ended Nine Months Ended

September 26,2015

September 27,

2014

September 26,2015

September 27,2014

(unaudited) (unaudited)   Net Loss $ (17,350 ) $ (14,453 ) $ (36,597 ) $ (39,872 )   Federal, state and franchise taxes 310 (1,129 ) 1,305 (157 ) Other expense, net 272 644 976 3,323 Depreciation and amortization   1,295     1,394     4,273     3,914     EBITDA (15,473 ) (13,544 ) (30,043 ) (32,792 )   Stock-based compensation 1,584 2,747 4,179 4,829 Accretion of contingent consideration 155 257 777 404 Non-cash rent expense - 398 - 398 Merger and acquisition related costs 122 1,457 748 2,109 Impairment of goodwill and intangible assets 9,741 - 9,741 - IPO related costs   -     -     -     164     Adjusted EBITDA $ (3,871 ) $ (8,685 ) $ (14,598 ) $ (24,888 )               Care.com, Inc. Reconciliation of Non-GAAP Net Loss Three Months Ended Nine Months Ended (in thousands, except per share data)

September 26,2015

September 27,2014

September 26,2015

September 27,2014

(unaudited) (unaudited)   Net loss $ (17,350 ) $ (14,453 ) $ (36,597 ) $ (39,872 )   Stock-based compensation 1,584 2,747 4,179 4,829 Accretion of contingent consideration 155 257 777 404 Merger and acquisition related costs 122 1,457 748 2,109 Impairment of goodwill and intangible assets 9,741 - 9,741 - Non-cash rent expense - 398 - 398 IPO related costs - - - 164 Preferred stock and warrant valuation adjustments   -     -     -     2,864   Non-GAAP net loss $ (5,748 ) $ (9,594 ) $ (21,152 ) $ (29,104 )    

Non-GAAP net loss per share attributable tocommon stockholders:

Basic and diluted

$ (0.18 ) $ (0.31 ) $ (0.66 ) $ (1.04 )

Weighted-average shares used to compute non-GAAP net loss per share attributable to commonstockholders:

Basic and diluted 32,069 31,362 31,938 27,995                     Care.com, Inc. Reconciliation of Non-GAAP Organic Revenue Three Months Ended Nine Months Ended (in thousands)

September 26,2015

September 27,2014

September 26,2015

September 27,2014

(unaudited) (unaudited)   Revenue $ 38,893 $ 32,054 $ 109,666 $ 83,161   Citrus Lane revenue   2,714     2,450     8,535     2,450     Organic revenue $ 36,179 $ 29,604 $ 101,131 $ 80,711         Care.com, Inc. Three Months Ended Nine Months Ended Reconciliation of Non-GAAP Organic Sales and Marketing

September 26,2015

September 27,2014

September 26,2015

September 27,2014

(in thousands) (unaudited) (unaudited)   Selling and marketing $ 22,128 $ 22,900 $ 61,891 $ 61,371   Citrus Lane selling and marketing   785     883     2,096     883     Organic selling and marketing $ 21,343 $ 22,017 $ 59,795 $ 60,488       Care.com, Inc. Reconciliation of Organic Adjusted EBITDA Three Months Ended Nine Months Ended (in thousands)

September 26,2015

September 27,2014

September 26,2015

September 27,2014

(unaudited) (unaudited)   Adjusted EBITDA $ (3,871 ) $ (8,685 ) $ (14,598 ) $ (24,888 )   Citrus Lane adjusted EBITDA  

(775

)

  (1,608 )   (3,234 )  

(1,608

)

  Organic adjusted EBITDA $ (3,096 ) $ (7,077 ) $ (11,364 ) $

(23,280

)

        Care.com, Inc. Supplemental Data (in thousands)   Three Months Ended

September 26,2015

September 27,2014

Total members** 17,828

13,280

Total families** 10,112 7,454 Total caregivers* 7,715 5,826   Paying members - US Consumer Matching & Payments 296 237     ** data is cumulative as of the end of the respective period and includes approximately 300k members via our acquisition of Citrus Lane * data is cumulative as of the end of the respective period   Three Months Ended

September 26,2015

 

September 27,2014

 

Monthly Average Revenue per Member

US Consumer Matching & Payments $ 37 $ 37  

View source version on businesswire.com: http://www.businesswire.com/news/home/20151029006565/en/

Investor Relations:ICR, Inc.Denise Garcia, 781-795-7244investors@care.com