Care.com Announces Third Quarter 2015 Financial Results

Strong Revenue and Member Growth with Increased Operating Leverage

WALTHAM, Mass.–(BUSINESS WIRE)–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 31,615
shares 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

September
26,
2015

September
27,
2014

September
26,
2015

September
27,
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 loss
per 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 to
common
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 common
stockholders:

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
 

Contacts

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