Ancestry.com Climbs On Q2 Results, Growth Catalysts
Shares of online genealogy service Ancestry.com (ACOM) were up 3.5% in afternoon trading Thursday, a day after the company posted better-than-expected second-quarter results and raised its full-year guidance.
Ancestry earned 44 cents a share, up 33% from the year-ago quarter and 3 cents better than analysts were targeting. Sales rose 18%, topping Wall Street’s forecast for $117.3 million.
Ancestry ended the quarter with 2 million subscribers, up 20% from a year ago and up 7% from Q1.
Based on the midpoint of its guidance, Ancestry expects Q3 revenue of $123.5 million and Q4 revenue $125.4 million, both up 20%. Analysts were targeting $121.3 million and $122.1 million, respectively.
Ancestry has several potential catalysts for growth, despite the cancelation of the NBC celebrity genealogy show “Who Do You Think You Are?,” which Ancestry sponsored, says Wedge Partners analyst Martin Pyykkonen. They include the indexing of the 1940 U.S. Census and a new DNA tool for determining genetic ethnicity, Pyykkonen said in a research note Thursday.
Ancestry launched the $99 DNA service in May on an invitation-only basis to existing subscribers. The company is slowly rolling out the service because demand is outstripping supply, CEO Tim Sullivan said on a conference call with analysts Wednesday.
The Provo, Utah-based company also is rolling out its fully indexed database of the 1940 Census to all 50 states within the next few months.
Ancestry decided to make the 1940 Census data free as a promotional tool to attract new subscribers. It has created individual person pages for everyone in the census to be optimized for Google (GOOG) and other search engines to discover.
Sullivan declined to comment on speculation that Ancestry might be for sale. The stock got a boost on reports that company management was considering a buyout strategy.
Ancestry isn’t giving up on television programming, Sullivan says.
“We remain as committed as ever to finding, supporting and sponsoring high-quality television programming that communicates the powerful emotions that come from making amazing family history discoveries,” he said. “Without addressing any specific plans, our long-term goal would be to continue to invest in television programming that celebrates family history, highlights our brand and contributes to profitable customer acquisition, so long as such a show has the right distribution and the overall economics of involvement make sense to us.”
Ancestry reported 361,000 gross subscriber additions in Q2, compared with 322,000 in the year-earlier period. Monthly churn, or the percentage of subscribers who quit the service, fell to 3.4% from 4.6% a year ago.
Ancestry lowered its churn rate by adjusting its pricing schemes to encourage customers to sign long-term subscriptions, Sullivan said. The changes also should increase the lifetime value of new subscribers, he says.
Described as the world’s largest online family history resource, Ancestry.com has about 10.4 billion records available for family historians to search.
