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.

  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