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Care.com Announces Second Quarter 2017 Financial Results

06:00 EDT 10 Aug 2017 | Businesswire
  • End-of-Period Paying Families year-over-year growth of 10%; third quarter in a row of acceleration
  • Revenue increased 10% vs. the second quarter of 2016 to $42.0 million
  • Net income of $1.7 million as compared to a net loss of $3.4 million for the second quarter of 2016
  • Adjusted EBITDA of $2.6 million as compared to $1.0 million for the second quarter of 2016
  • Year-to-date cash provided by operating activities from continuing operations of $11.1 million, up 84% versus prior

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 July 1, 2017.

“Q2 was another strong quarter for us, highlighted by better-than-expected performance on both the top and bottom lines. During the quarter, we saw continued improvement in end-of-period paying families growth and strong year-over-year growth in cash generation of 84%," said Sheila Lirio Marcelo, Founder, Chairwoman and CEO of Care.com. "Longer-term, we remain excited about the growth trajectory of the business, as well as our progress towards achieving our EBITA margin target of 20-25%, while continuing to focus on innovation and the roll-out of Care 3.0, an entirely new end-to-end mobile-first experience designed to improve our core subscription offering."

Financial Results

  • Revenue for the second quarter of 2017 was $42.0 million, a 10% increase from $38.2 million in the second quarter of 2016.
  • Revenue attributable to the US Consumer offering totaled $33.4 million in the second quarter of 2017, an increase of 9% from $30.7 million in the second quarter of 2016.
  • Revenue attributable to the Care@Work and B2B Offerings, as well as our services in our international markets, totaled $8.6 million in the second quarter of 2017, an increase of 15% from $7.5 million in the second quarter of 2016.
  • Income from continuing operations in the second quarter of 2017 was $1.7 million compared to a loss of $3.4 million in the second quarter of 2016, an improvement of $5.1 million or 12.8 percentage points of margin.
  • Adjusted EBITDA was income of $2.6 million in the second quarter of 2017, compared to $1.0 million in the second quarter of 2016, an improvement of $1.6 million.
  • GAAP EPS (Diluted) was $0.03 in the second quarter of 2017, compared to a loss of $0.11 in the second quarter of 2016. Q2 GAAP EPS (Diluted) was based on 32.2 million weighted average diluted shares outstanding versus 32.1 million in the second quarter of 2016. Note that GAAP EPS (Diluted) for the second quarter includes $0.02 of costs associated with our Series A preferred stock.
  • Non-GAAP EPS (Diluted) was $0.11 in the second quarter of 2017, compared to a loss of $0.03 in the second quarter of 2016. Note that Non-GAAP EPS excludes the impact of non-cash stock-based compensation and other non-recurring items, such as M&A expenses and restructuring costs.
  • The Company ended the quarter with $86.8 million in cash and cash equivalents and short-term investments.

Business Highlights

  • Our total members grew 22% to 25.2 million at the end of the second quarter of 2017, compared to 20.7 million in the same period of 2016.
  • Total families grew to 14.2 million at the end of the second quarter of 2017, an increase of 23% over the end of the second quarter of 2016, and total caregivers grew to 11.0 million at the end of the second quarter of 2017, an increase of 20% over the end of the second quarter of 2016.

Financial Expectations

     
Q3 2017 Full Year 2017
 
Revenue $ 43.9 - $ 44.4 $ 172.0 - $ 173.5
 
Adjusted EBITDA $ 5.0 - $ 5.5 $ 19.5 - $ 21.5
 
Non-GAAP EPS $ 0.07 - $ 0.08 $ 0.37 - $ 0.40
 

Figures in millions except for Non-GAAP EPS
Q3 Non-GAAP EPS based on approximately 37 million weighted average dilutive shares
Full year Non-GAAP EPS based on approximately 37 million weighted average diluted shares

Future GAAP Net Income (Loss) 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), conference ID# 13666047. 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# 13666047. The telephone replay will be available from 11:00 AM ET August 10 through 11:59 PM ET August 17, 2017. 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 14.2 million families and 11.0 million caregivers* across more than 20 countries, including the U.S., UK, Canada and parts of Western Europe, and approximately 1.2 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. To connect families further, Care.com acquired community platforms Big Tent and Kinsights in 2013 and 2015, respectively. Headquartered in Waltham, Massachusetts, Care.com has offices in Berlin, Austin and the San Francisco Bay area.

*As of June 2017

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 projected future EBITDA margins of the business, anticipated investments and future product innovations and the expected results of those investments and innovations, and the Company’s financial guidance for the third quarter of 2017 and full year 2017.

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, 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 (loss) from continuing operations and non-GAAP earnings per share from continuing operations (“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 (loss) from continuing operations and non-GAAP EPS as non-GAAP financial measures in this press release. We define adjusted EBITDA as income (loss) from continuing operations, which excludes the accretion of preferred stock dividends and issuance costs, plus: federal, state and franchise taxes, other 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) from continuing operations, 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)
 

July 1,
2017

December 31,
2016

Assets (unaudited)
Current assets:
Cash and cash equivalents $ 71,839 $ 61,094
Short-term investments 15,000 15,000
Accounts receivable (net of allowance of $175 and $163, respectively) (1) 4,264 2,789
Unbilled accounts receivable (2) 5,734 5,541
Prepaid expenses and other current assets   5,224     3,787  
Total current assets 102,061 88,211
Property and equipment, net 4,621 4,947
Intangible assets, net 1,267 1,708
Goodwill 59,380 57,910
Other non-current assets   2,466     2,448  
Total assets $ 169,795   $ 155,224  
 
Liabilities, redeemable convertible preferred stock, and stockholders' equity
Current liabilities:
Accounts payable (3) $ 3,379 $ 2,483
Accrued expenses and other current liabilities (4) 13,859 12,798
Deferred revenue (5)   19,522     15,971  
Total current liabilities 36,760 31,252
Deferred tax liability 4,472 4,276
Other non-current liabilities   5,338     5,087  
Total liabilities 46,570 40,615
 
Series A Redeemable Convertible Preferred Stock, $0.001 par value; 46 shares designated; 46 shares issued and outstanding at July 1, 2017 and December 31, 2016; at aggregate liquidation and redemption value at July 1, 2017 and December 31, 2016 48,922 47,660
Stockholders' equity
Preferred Stock: $0.001 par value - authorized 5,000 shares at July 1, 2017 and December 31, 2016, respectively
Common stock, $0.001 par value; 300,000 shares authorized; 29,737 and 28,984 shares issued and outstanding at July 1, 2017 and December 31, 2016 respectively 30 29
Additional paid-in capital 259,366 255,031
Accumulated deficit (185,311 ) (187,808 )
Accumulated other comprehensive income (loss)   218     (303 )
Total stockholders' equity   74,303     66,949  
Total liabilities, redeemable convertible preferred stock and stockholders' equity $ 169,795   $ 155,224  
 

(1)Includes accounts receivable due from related party of $196 and $150 at July 1, 2017 and December 31, 2016

(2)Includes unbilled accounts receivable due from related party of $180 and $286 at July 1, 2017 and December 31, 2016

(3)Includes accounts payable due to related party of $44 and $107 at July 1, 2017 and December 31, 2016

(4)Includes accrued expenses and other current liabilities due to related party of $1,438 and $1,055 at July 1, 2017 and December 31, 2016

(5)Includes deferred revenue associated with related party of $80 and $151 at July 1, 2017 and December 31, 2016

         
Care.com, Inc.
Consolidated Statement of Operations
(in thousands, except per share data)
 
Three Months Ended Six Months Ended

July 1,
2017

June 25,
2016

July 1,
2017

June 25,
2016

(unaudited)
 
Revenue (1) $ 41,972 $ 38,184 $ 85,338 $ 77,450
Cost of revenue 9,000 7,619 17,766 14,861
Operating expenses:
Selling and marketing (2) 17,853 18,561 37,050 38,028
Research and development 6,666 5,036 12,655 9,911
General and administrative 8,433 7,933 16,688 15,752
Depreciation and amortization 423 947 847 1,919
Restructuring charges   -     714     -     714  
Total operating expenses   33,375     33,191     67,240     66,324  
Operating (loss) income (403 ) (2,626 ) 332 (3,735 )
Other income (expense), net   1,008     (129 )   1,309     (143 )
Income (loss) from continuing operations before income taxes 605 (2,755 ) 1,641 (3,878 )
(Benefit) provision for income taxes   (1,068 )   620     (856 )   620  
Income (loss) from continuing operations 1,673 (3,375 ) 2,497 (4,498 )
(Loss) income from discontinued operations, net of tax   -     (44 )   -     7,834  
Net income (loss) 1,673 (3,419 ) 2,497 3,336
Accretion of Series A Preferred Stock dividends (660 ) - (1,262 ) -
Net income attributable to Series A Redeemable Convertible Preferred Stock   (139 )   -     (169 )   -  
Net income (loss) attributable to common stockholders $ 874   $ (3,419 ) $ 1,066   $ 3,336  
 
Net income (loss) per share attributable to common stockholders (Basic):
Income (loss) per share from continuing operations attributable to common stockholders $ 0.03 $ (0.11 ) $ 0.04 $ (0.14 )
Income per share from discontinued operations attributable to common stockholders   -     -     -     0.24  
Net income (loss) per share attributable to common stockholders $ 0.03 $ (0.11 ) $ 0.04 $ 0.10
 
Net income (loss) per share attributable to common stockholders (Diluted):
Income (loss) per share from continuing operations attributable to common stockholders $ 0.03 $ (0.11 ) $ 0.03 $ (0.13 )
Income per share from discontinued operations attributable to common stockholders   -     -     -     0.23  
Net income (loss) per share attributable to common stockholders $ 0.03 $ (0.11 ) $ 0.03 $ 0.10
 
Weighted-average shares used to compute net income (loss) per share attributable to common stockholders:
Basic 29,556 32,136 29,352 32,183
Diluted 32,220 32,136 31,746 34,082
 

(1)Includes related party revenue of $432 and $825 for the three and six months ended July 1, 2017, respectively
(2)Includes related party expenses of $4,120 and $7,820 for the three and six months ended July 1, 2017, respectively

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

Six Months Ended

July 1,
2017

June 25,
2016

(unaudited)
Cash flows from operating activities
Net income $ 2,497 $ 3,336
Income from discontinued operations, net of tax   -     7,834  
Income (loss) from continuing operations 2,497 (4,498 )
Adjustments to reconcile net income (loss) from continuing operations to net cash provided by operating activities:
Stock-based compensation 3,551 3,014
Depreciation and amortization 1,199 2,314
Deferred taxes 196 538
Foreign currency remeasurement gain 1,157 200
Other non-cash operating income - (78 )
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable (1,448 ) (68 )
Unbilled accounts receivable (191 ) (449 )
Prepaid expenses and other current assets (1,358 ) (508 )
Other non-current assets - (14 )
Accounts payable 879 514
Accrued expenses and other current liabilities 1,258 3,014
Deferred revenue 3,469 1,452
Other non-current liabilities   (69 )   610  
Net cash provided by operating activities by continuing operations 11,140 6,041
Net cash provided by operating activities by discontinued operations   -     2,481  
Net cash provided by operating activities   11,140     8,522  
 
Cash flows from investing activities
Purchases of property and equipment (387 ) (84 )
Payments for acquisitions, net of cash acquired - (420 )
Purchases of short-term investment (15,000 ) -

Sale of short-term investment

  15,000     -  
Net cash used in investing activities by continuing operations (387 ) (504 )
 
Cash flows from financing activities
Proceeds from exercise of common stock options   2,037     925  
Net cash provided by financing activities by continuing operations 2,037 925
Net cash used in financing activities by discontinued operations   -     (14,510 )
Net cash provided by (used in) financing activities   2,037     (13,585 )
 
Effect of exchange rate changes on cash and cash equivalents   (2,045 )   (56 )
Net increase (decrease) in cash and cash equivalents 10,745 (5,623 )
Cash and cash equivalents, beginning of the period   61,094     61,240  
Cash and cash equivalents, end of the period $ 71,839   $ 55,617  
 
 

Care.com, Inc.
Reconciliation of Adjusted EBITDA & Non-GAAP Net Income (Loss)
(in thousands, except per share data)

         
Three Months Ended Six Months Ended

July 1,
2017

June 25,
2016

July 1,
2017

June 25,
2016

(unaudited)
 
Income (loss) from continuing operations $ 1,673 $ (3,375 ) $ 2,497 $ (4,498 )
 
Federal, state and franchise taxes (1,004 ) 727 (710 ) 816
Other (income) expense, net (1,008 ) 129 (1,309 ) 143
Depreciation and amortization   598     1,145     1,199     2,314  
EBITDA 259 (1,374 ) 1,677 (1,225 )
 
Stock-based compensation 1,948 1,646 3,551 3,014
Merger and acquisition related costs 95 16 95 74
Restructuring related costs - 714 - 714
Litigation related costs - - 75 -
Software implementation costs 216 - 216 -
Severance related costs   90     -     121     -  
Adjusted EBITDA $ 2,608   $ 1,002   $ 5,735   $ 2,577  
 
Add back for Non-GAAP Net Income (Loss)
 
Federal, state and franchise taxes 1,004 (727 ) 710 (816 )
Other income (expense), net 1,008 (129 ) 1,309 (143 )
Depreciation and amortization   (598 )   (1,145 )   (1,199 )   (2,314 )
Non-GAAP net income (loss) $ 4,022   $ (999 ) $ 6,555   $ (696 )
 
Non-GAAP net income (loss) per share:
Basic $ 0.14 $ (0.03 ) $ 0.22 $ (0.02 )
Diluted $ 0.11 $ (0.03 ) $ 0.18 $ (0.02 )
 
Weighted-average shares used to compute non-GAAP net income (loss) per share :
Basic 29,556 32,136 29,352 32,183
Diluted 36,879 32,136 36,405 34,082
 
         

Care.com, Inc.
Reconciliation of Non-GAAP EPS
(in thousands, except per share data)

 
Three Months Ended Six Months Ended

July 1,
2017

June 25,
2016

July 1,
2017

June 25,
2016

(unaudited)
Weighted-average shares used to compute net income (loss) per share:
Diluted 36,879 32,136 36,405 34,082
 
Net income (loss) per share (Diluted):
Net income (loss) per share attributable to common stockholders $ 0.02 $ (0.11 ) $ 0.03 $ 0.10
Impact on net income (loss) per share of Series A related costs   0.02   -     0.04   -  
Adjusted net income (loss) per share $ 0.05 $ (0.11 ) $ 0.07 $ 0.10
 
Income from discontinued operations, net of tax - 0.00 - (0.23 )
Stock-based compensation 0.05 0.05 0.10 0.09
Merger and acquisition related costs 0.00 0.00 0.00 0.00
Restructuring related costs - 0.02 - 0.02
Litigation related costs - - 0.00 -
Software implementation costs 0.01 - 0.01 -
Severance related costs   0.00   -     0.00   -  
Non-GAAP net income (loss) per share - diluted $ 0.11 $ (0.03 ) $ 0.18 $ (0.02 )
 
     
Care.com, Inc.
Supplemental Data
(in thousands, except monthly average revenue per member)
Period Ended

July 1,
2017

June 25,
2016

Total members* 25,199 20,698
Total families* 14,239 11,588
Total caregivers* 10,959 9,110
 
Paying families - US Consumer Business 294 267
 
* data is cumulative as of the end of the respective period and excludes families from discontinued operations
 
Period Ended

July 1,
2017

June 25,
2016

Monthly Average Revenue per Paying Family

US Consumer Business $ 38 $ 38
 

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

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