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Nov-05-2009Ancestry.com Hopes to Stand Test of Time(topic overview)
CONTENTS:
- NEW YORK — Genealogy Web site Ancestry.com ]] Ancestry.com has succeeded in raising $100 million in its initial public offering. (More...)
- In the nine months that ended Sept. 30, the company earned $12.2 million, or 30 cents per share, a more than threefold increase from the $3.5 million, or 9 cents per share, it earned in the same period a year earlier. (More...)
- Allen calls Ancestry's IPO "fantastic" for the whole genealogy business. (More...)
- With more than 600 employees, Ancestry.com was spun off from The Generations Network, a group of businesses offering other Web tools, DNA testing services and Ancestry magazine. (More...)
- Ancestry's revenue jumped from $122.6 million in 2004 to $197.6 million in 2008. (More...)
- Ancestry.com ( ACOM ), a subscription-based online community for researching family histories, is expected to go public this week. (More...)
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NEW YORK — Genealogy Web site Ancestry.com ]] Ancestry.com has succeeded in raising $100 million in its initial public offering. With more than a million paying subscribers, little competition, a small debt load and a record of increasing revenue, it fared better than other IPOs that have recently priced below their filing ranges. The Provo, Utah-based company, which is the world's largest online resource for birth certificates and marriage records, priced the shares at $13.50 each late Wednesday — the midpoint of its expected $12.50 to $14.50 range. [1] NEW YORK, Nov 4 (Reuters) - Spectrum Equity Investors-backed website Ancestry.com Inc (ACOM.O: Quote, Profile, Research ) priced its initial public offering of 7.4 million shares at $13.50 per share on Wednesday, within the expected range. Ancestry.com, which operates a website that allows people to trace their family roots by scouring online records, will begin trading on Nasdaq under the symbol "ACOM" ACOM.N on Thursday. The Provo, Utah-based company had expected to sell 7.4 million shares in its IPO for between $12.50 and $14.50 each, in a $100 million offering.[2]
Underwriters are being offered up to an additional 1.1 million shares to cover overallotments, which would boost total proceeds to nearly $115 million. Five of the last nine IPOs have closed below their offering price in the first day. Experts say that shouldn't be the case for Ancestry because technology IPOs have collectively performed about twice as well as other sectors so far this year. The company is a profitable niche market leader and it's growth story will likely resonate well with investors, said Scott Sweet, senior managing partner at IPO Boutique, who is optimistic about the stock debut. "Currently they're alone out there, and for the time being their financials are showing it," Sweet said. "There is definitely strong demand for researching and building a family tree, and the people who do get involved with this really get deeply involved, going as far back as the software will allow them out of curiosity."[1]
The Provo, Utah-based company had expected to sell 7.4 million shares in its IPO for between $12.50 and $14.50 each, in a $100 million offering.[3]
Before the start of trading, the stock was expected to be priced between $12.50 and $14.50 per share, with $100 million in total proceeds. Morgan Stanley ( MS ) and Bank of America Merrill Lynch ( BAC ) are listed as the lead underwriters of the public offering.[4] According to the New York Times: "The genealogy Web site hopes investors will provide $100 million in an initial public offering, valuing the whole thing at $572 million. That seems too high for Ancestry to cement a happy legacy with investors."[5]
In 2008 revenues were $197.6 million, up 18.8% from 2007, when revenues were $166.4 million. That's respectable for most companies, but a bit slower than investors may want to see in a newly public tech company. "This is a company that's growing, but not at a speed that is typical for a technology company," says David Menlow, founder of IPO Financial. "It's not really moving the needle off the scale." Of concern is a high attrition rate: About 4% of users leave the site each month, which means that nearly half of its subscribers leave over the course of a year.[4] The average monthly subscriber churn rate, or the rate at which it lost customers, is relatively high at 4 percent, Guja said. He expects the stock to do well. "This deal in particular will appeal to a specific kind of investor base," Guja said. "This is a unique company that's invested more than $80 million to build up its content, and it will continue to benefit from its large user base."[1]
About 45 percent of the shares are coming from existing shareholders, the company said. Private equity firm Spectrum Equity Investors, through its affiliated funds, will own about 54.8 percent of the outstanding stock after the offering.[1]
Ancestry.com's public offering comes after a relative drought for IPOs, owing to the weak economy and lack of investor confidence that prevented businesses from going public. A handful of other technology companies, including software maker Solar Winds ( SWI ) and Internet startup OpenTable ( OPEN ), have gone public this year with some success.[4]
"Now that things have stabilized there's more of an appetite." Will the family tree Web site have the staying power of other publicly traded Internet companies, like eBay ( EBAY ) and Amazon.com ( AMZN )? Analysts applaud the subscription model of Ancestry.com, which sees more than 1 million users paying over $150 per year for access to genealogical records they can't find elsewhere. "They've built an incredible subscription model, which is not easy to do.[4] Ancestry.com's registered users have built 12 million family trees containing 1.25 billion profiles, according to the filing. Its revenue in the first nine months of 2009 was $164.8 million, largely from subscriptions, up 13.5 percent from the year earlier period. Over the same period, its profit rose 250 percent to $12.2 million.[3]
More than a decade later, the site has eclipsed the magazine and grown into a profitable online destination for genealogical research, with 11 million family trees and the world's largest online database of birth certificates and marriage records. On Nov. 5, Ancestry.com ( ACOM ) is slated to begin a new chapter in its history as it lists on the Nasdaq stock market.[4] Commercial entities, including online genealogical research services, library content distributors, search engines and portals, retailers of books and software related to genealogical research and family tree creation and family history oriented social networking websites. Other non-profit entities and organizations, genealogical societies, governments and agencies that may make vital statistics or other records available to the public for free.[5]
We generally compete on the basis of content, price, ease of use, technology, brand recognition, breadth of products, service and support, and the number of network members with whom other subscribers can collaborate. We believe that we compete favorably with respect to these factors, and that none of our competitors offers as broad an array of products and services or as compelling a value proposition to consumers interested in online family history research.[5]
The main attraction is a collection of census lists, birth and death certificates, military, marriage, and other records in which the company has invested more than $80 million. "They're obviously the market leader in online family history research," says Eric Guja, analyst with Renaissance Capital. The popularity of free social networking sites such as Facebook, which many people use to look up and interact with family members, is a growing threat to Ancestry.[4] We have been a leader in the family history market for over 20 years and have helped pioneer the market for online family history research. We believe that most people have a fundamental desire to understand who they are and from where they came, and that anyone interested in discovering, preserving and sharing their family history is a potential user of Ancestry.com. We strive to make our service valuable to individuals ranging from the most committed family historians to those taking their first steps towards satisfying their curiosity about their family stories.[5]
FamilySearch has an extensive collection of paper and microfilm records (more than 2.3 million rolls of microfilm and 180,000 sets of microfiche), which it maintains in a central storage facility in Utah. FamilySearch has digitized a large quantity of these records and has published them online at FamilySearch.org, where it makes them available to the public for free and through over 4,500 family history centers located throughout the world. FamilySearch is a well funded organization and has stated its intention to undertake a massive digitization project to bring most of its collection online over the next few years.[5] Ancestry.com is the world's largest online resource for family history, with more than one million paying subscribers around the world as of September 30, 2009.[5]
The increase in our subscription revenues of $18.9 million in the nine months ended September 30, 2009 as compared to the nine months ended September 30, 2008 was primarily the result of an increase in the number of total subscribers and to some extent an increase in higher monthly revenue per subscriber.[5] The increase in our cost of subscription revenues of $2.1 million in the nine months ended September 30, 2009 as compared to the nine months ended September 30, 2008 was primarily due to a $1.0 million increase in our web hosting costs, an increase in amortization of content costs of $0.6 million and an increase in equipment maintenance related costs of $0.4 million.[5] The increase in our cost of product revenues of $0.9 million in the nine months ended September 30, 2009 as compared to the nine months ended September 30, 2008 was primarily due to a $0.4 million increase as a result of the introduction of our vital records products in the United Kingdom and a $0.4 million increase in shipping costs.[5]
In the nine months that ended Sept. 30, the company earned $12.2 million, or 30 cents per share, a more than threefold increase from the $3.5 million, or 9 cents per share, it earned in the same period a year earlier. [1]
Ancestry.com expects net proceeds of $48.4 million from the IPO, and will use the money in part to repay $12.1 million it owes CIT Lending Services Corp, a unit of CIT Group Inc ( CIT - news - people ), and use the rest for working capital.[3] Ancestry.com, which said it had 1 million subscribers as of September, was founded in 1983 and is majority owned by private equity firm Spectrum, whose stake in the company will fall to 54.8 percent after the IPO from 67 percent.[3] The existing shareholders are selling about 45 percent of the shares in the IPO, with the rest coming from the company.[3]
Allen calls Ancestry's IPO "fantastic" for the whole genealogy business. "Ancestry.com is about building your historic family tree," he says. [4] Francis Gaskins, president of IPOdesktop, said on-demand software, or the "log me in" segment, has been strong during the economic downturn. Ancestry, which relies heavily on recurring revenue from annual subscriptions, has funded its growth through internal cash flow. "At first blush, some may think this looks like a high price-earnings ratio, but compared to other companies in the broadly defined segment it's a very attractive price," Gaskins said. It's unclear how large the potential market is for its products, however, because Ancestry is something of a pioneer in online genealogy, said Eric Guja, an analyst for Greenwich, Conn. -based Renaissance Capital.[1] In 1997 a publication called Ancestry magazine launched a Web site, Ancestry.com, to complement the glossy print product.[4] Not only does the Web site make family history research less painstaking and time consuming, but it lets customers collaborate with other subscribers. That gives it the edge of a social networking Web site, Sweet said.[1]
The company is a leader in the relatively small space of online genealogy. In September, Ancestry.com sites saw 4 million unique online visitors, according to the market research firm ComScore ( SCOR ), compared with 1.1 million for its next largest competitor, FamilyLink.[4] Founded in 1983 as Ancestry Inc., the company started out publishing books to help genealogy buffs research family lineage and moved to Web-based documents and tools.[1]
With more than 600 employees, Ancestry.com was spun off from The Generations Network, a group of businesses offering other Web tools, DNA testing services and Ancestry magazine. [1] If it performs well, Ancestry's offering could help open up the market for IPOs.[4]
Ancestry's revenue jumped from $122.6 million in 2004 to $197.6 million in 2008. [1] Ancestry plans to use net proceeds of about $48.4 million for general corporate purposes and to repay debt.[1]
Ancestry.com ( ACOM ), a subscription-based online community for researching family histories, is expected to go public this week. [5]
SOURCES
1. The Associated Press: Ancestry.com raises $100 million in IPO
2. UPDATE 1-Ancestry.com prices IPO at $13.50 per share | Business News | IPOs | Reuters
3. UPDATE 1-Ancestry.com prices IPO at $13.50 per share - Forbes.com
4. Ancestry.com Hopes to Stand Test of Time - BusinessWeek
5. Ancestry.com Has High Expectations for Upcoming IPO -- Seeking Alpha
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