Care.com Announces First Quarter 2019 Financial Results; Highlights Increased Focus on Safety

WALTHAM, Mass.--(BUSINESS WIRE)--Care.com (NYSE: CRCM), the world's largest online destination for finding and managing family care, today is announcing financial results for the first quarter ended March 30, 2019.

“In Q1 we saw strong revenue growth of 13% versus Q1 2018,” said Sheila Lirio Marcelo, Founder, Chairwoman and CEO of Care.com. “In addition to sharing our solid Q1 financial results, we are making important safety-related announcements today. We believe that investing in our new safety enhancements while maintaining our investments in the overall user experience will enable us to continue to build trust in our leading brand – thereby driving member growth, improving lifetime value, and sustaining ongoing profitable growth.”

Financial Results

• Revenue for the first quarter of 2019 was $53.3 million, an increase of 13% from $47.3 million in the first quarter of 2018.
  • Revenue attributable to the US Consumer offering totaled $40.8 million in the first quarter of 2019, an increase of 10% from $37.1 million in the first quarter of 2018.
  • Revenue attributable to our Other businesses totaled $12.5 million in the first quarter of 2019, an increase of 22% from $10.2 million in the first quarter of 2018.
• Net loss was $1.0 million in the first quarter of 2019, compared to net income of $2.7 million in the first quarter of 2018, a decrease of $3.7 million.
• Adjusted EBITDA was $4.3 million in the first quarter of 2019, compared to $6.7 million in the first quarter of 2018, a decrease of $2.4 million.
• GAAP EPS (Diluted) was a loss of $0.05 in the first quarter of 2019, compared to income of $0.05 in the first quarter of 2018. Q1 GAAP EPS (Diluted) was based on 32.2 million weighted average diluted shares outstanding versus 33.3 million in the first quarter of 2018.
• Non-GAAP EPS (Diluted) was $0.12 in the first quarter of 2019, compared to the first quarter of 2018, which was $0.19. Note that Non-GAAP EPS excludes the impact of non-cash stock-based compensation, adjustments relating to preferred stock and other non-recurring items, such as M&A expenses and restructuring costs.
• The Company ended the quarter with $125.1 million in cash and cash equivalents and short-term investments.

Business Highlights

• Our total members grew 16% to 32.9 million at the end of the first quarter of 2019, compared to 28.4 million in the same period of 2018.
• Total families grew to 19.1 million at the end of the first quarter of 2019, an increase of 18% over the same period of 2018, and total caregivers grew to 13.9 million at the end of the first quarter of 2019, an increase of 14% over the same period of 2018.

Financial Expectations

	Q2 2019 Guidance					Full Year 2019 Guidance
Revenue	$	52.0	-	$	52.3	$	217.0	-	$	221.0
Adjusted EBITDA	$	3.7	-	$	4.0	$	25.0	-	$	27.0
Non-GAAP EPS	~$0.08					$	0.52	-	$	0.56
Figures in millions except for Non-GAAP EPS
Q2 Non-GAAP EPS based on approximately 39 million weighted average dilutive shares
FY'19 full-year Non-GAAP EPS based on approximately 40 million weighted average diluted shares

Future GAAP Net Income 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 [phone] or [phone] (International). 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 [phone] or [phone] (International), conference ID# 13689392. The telephone replay will be available from 11:00 AM ET May 9, 2019 through 11:59 PM ET May 23, 2019. Additional investor information can be accessed at http://investors.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 19.1 million families and 13.9 million caregivers* across more than 20 countries, including the U.S., UK, Canada and parts of Western Europe, and approximately 1.7 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. Headquartered in Waltham, Massachusetts, Care.com has offices in Berlin, Austin and the San Francisco Bay area.

*As of March 2019

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 expected results of product investments and initiatives, anticipated revenue growth, and the Company’s financial guidance for the second quarter of 2019 and full year 2019.

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 and extending the length of time that paying members continue to pay for our services, 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 has no intention nor undertakes any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. 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 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: adjusted EBITDA, non-GAAP net income and non-GAAP EPS as non-GAAP financial measures in this press release. We define adjusted EBITDA as income / (loss), which excludes the accretion of preferred stock dividends and issuance costs, as well as: federal, state and franchise taxes, other income (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), 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)
	March 30, 2019			December 29, 2018
Assets	(unaudited)
Current assets:
Cash and cash equivalents	$	90,022		$	92,432
Short-term investments		35,099			35,099
Accounts receivable (net of allowance of $100 and $100, respectively) ^(1)		6,732			4,663
Unbilled accounts receivable ^(2)		6,033			6,394
Prepaid expenses and other current assets		8,398			7,223
Total current assets		146,284			145,811
Property and equipment, net		3,260			3,423
Intangible assets, net		6,770			4,061
Goodwill		73,134			68,176
Other non-current assets		2,908			2,859
Operating lease right of use assets, net		20,871			-
Deferred tax assets		43,978			43,737
Total assets	$	297,205		$	268,067
Liabilities, redeemable convertible preferred stock, and stockholders' equity
Current liabilities:
Accounts payable ^(3)	$	1,740		$	3,437
Accrued expenses and other current liabilities ^(4)		19,292			20,463
Current contingent acquisition consideration		917			1,527
Deferred revenue ^(5)		26,797			20,176
Current operating lease liabilities		4,481			-
Total current liabilities		53,227			45,603
Non-current contingent acquisition consideration		-			438
Other non-current liabilities		1,428			6,806
Non-current operating lease liabilities		23,303			-
Total liabilities		77,958			52,847
Series A Redeemable Convertible Preferred Stock, $0.001 par value - 46 shares designated; 46 shares issued and outstanding at March 30, 2019 and December 29, 2018; at aggregate liquidation and redemption value at March 30, 2019 and December 29, 2018		53,725			53,007
Stockholders' equity
Preferred Stock, $0.001 par value; 5,000 shares authorized at March 30, 2019 and December 29, 2018, respectively		-			-
Common stock, $0.001 par value; 300,000 shares authorized; 32,426 and 32,057 shares issued and outstanding at March 30, 2019 and December 29, 2018 respectively		32			32
Additional paid-in capital		290,898			286,295
Accumulated deficit		(125,150	)		(124,122	)
Accumulated other comprehensive (loss) income		(258	)		8
Total stockholders' equity		165,522			162,213
Total liabilities, redeemable convertible preferred stock, and stockholders' equity	$	297,205		$	268,067

^(1)	Includes accounts receivable due from related party of $822 and $421 at March 30, 2019 and December 29, 2018, respectively
^(2)	Includes unbilled accounts receivable due from related party of $255 and $680 at March 30, 2019 and December 29, 2018, respectively
^(3)	Includes accounts payable due to related party of $0 and $530 at March 30, 2019 and December 29, 2018, respectively
^(4)	Includes accrued expenses and other current liabilities due to related party of $1,031 and $403 at March 30, 2019 and December 29, 2018, respectively
^(5)	Includes deferred revenue associated with related party of $172 and $1 at March 30, 2019 and December 29, 2018, respectively

Care.com, Inc.
Consolidated Statement of Operations
(in thousands, except per share data)
	Three Months Ended
	March 30, 2019			March 31, 2018
	(unaudited)
Revenue ^(1)	$	53,336		$	47,325
Cost of revenue		13,802			9,443
Operating expenses:
Selling and marketing ^(2)		18,604			16,857
Research and development		11,224			8,288
General and administrative		11,308			10,467
Depreciation and amortization		447			418
Restructuring charges		231			462
Total operating expenses		41,814			36,492
Operating (loss) income		(2,280	)		1,390
Other income, net		269			562
(Loss) Income before income taxes		(2,011	)		1,952
Benefit from income taxes		(983	)		(745	)
Net (loss) income		(1,028	)		2,697
Accretion of Series A Preferred Stock dividends		(718	)		(680	)
Net income attributable to Series A Redeemable Convertible Preferred Stock		-			(276	)
Net (loss) income attributable to common stockholders	$	(1,746	)	$	1,741
Net (loss) income per share attributable to common stockholders (Basic):	$	(0.05	)	$	0.06
Net (loss) income per share attributable to common stockholders (Diluted):	$	(0.05	)	$	0.05
Weighted-average shares used to compute net (loss) income per share attributable to common stockholders:
Basic		32,209			30,551
Diluted		32,209			33,344

^(1)	Includes related party revenue of $946 and $637 for the three months ended March 30, 2019 and March 31, 2018, respectively.
^(2)	Includes related party expenses of $3,221 and $3,036 for the three months ended March 30, 2019 and March 31, 2018, respectively.

Care.com, Inc.
Reconciliation of Adjusted EBITDA & Non-GAAP Net Income
(in thousands, except per share data)
	Three Months Ended
	March 30, 2019			March 31, 2018
	(unaudited)
Net (loss) income	$	(1,028	)	$	2,697
Federal, state and franchise taxes		(859	)		(439	)
Other expense (income), net		(269	)		(562	)
Depreciation and amortization		739			463
EBITDA		(1,417	)		2,159
Stock-based compensation		4,054			3,712
Merger and acquisition related costs		1,436			176
Restructuring related costs		231			462
Litigation related costs		21			-
Software implementation costs		8			153
Severance related costs		-			67
Adjusted EBITDA	$	4,333		$	6,729
Add back for Non-GAAP Net Income
Federal, state and franchise taxes		859			439
Other income, net		269			562
Depreciation and amortization		(739	)		(463	)
Non-GAAP net income	$	4,722		$	7,267
Non-GAAP net income per share:
Basic	$	0.15		$	0.24
Diluted	$	0.12		$	0.19
Weighted-average shares used to compute non-GAAP net income per share :
Basic		32,209			30,551
Diluted		39,725			38,195

Care.com, Inc.
Reconciliation of Non-GAAP EPS
(in thousands, except per share data)
	Three Months Ended
	March 30, 2019			March 31, 2018
	(unaudited)
Weighted-average shares used to compute net income per share:
Diluted		39,725			38,195
Net (loss) income per share (Diluted):
Net (loss) income per share attributable to common stockholders	$	(0.04	)	$	0.05
Impact on net income per share of Series A related costs		0.02			0.03
Adjusted net (loss) income per share	$	(0.03	)	$	0.07
Stock-based compensation		0.10			0.10
Merger and acquisition related costs		0.04			0.00
Restructuring related costs		0.01			0.01
Litigation related costs		0.00			-
Software implementation costs		0.00			0.00
Severance related costs		-			0.00
Non-GAAP net income per share - diluted	$	0.12		$	0.19

Care.com, Inc.
Supplemental Data
(in thousands, except monthly average revenue per paying family)
	Period Ended
	March 30, 2019		March 31, 2018
Total members		32,944		28,420	16	%
Total families		19,062		16,195	18	%
Total caregivers		13,882		12,225	14	%
Paying families - US Consumer Business		350		318	10	%
	Period Ended
	March 30, 2019		March 31, 2018
Monthly Average Revenue per Paying Family
US Consumer Business	$	40	$	40