Ancestry.com Is No Black Sheep

Ancestry.com (NAS: ACOM) is back on track after a rough fourth quarter.

The leading genealogy website operator delivered blowout quarterly results last night. Revenue climbed 19% to $108.5 million, fueled by a 16% spike in premium subscribers and average monthly revenue per subscriber climbing from $18.05 to $18.49. Making the most of its ambitious share repurchase efforts, net income climbed 50%, but it was a 67% ascent on a per-share basis to $0.30.

Analysts were only expecting a profit of $0.23 a share on $107.4 million in revenue.


Ancestry shares took a hit after the company posted disappointing fourth-quarter results two months ago. Subscriber acquisition costs spiked to a high of $107.88 for every gross subscriber added to its rolls. Average monthly revenue per member shrank to $18.38. There was sequential improvement on all fronts. Subscriber acquisition costs declined to $88.11. Ancestry.com's monthly churn rate of 3.6% is the lowest it has been in two years. The website operator's move to tweak its pricing late last summer -- where monthly rates were bumped higher but larger discounts on long-term subscriptions were created to encourage longer memberships -- appears to finally be paying off.

The good news doesn't end there. Ancestry.com is paying $100 million to acquire Archives.com. The smaller competitor was charging $39.95 a year -- far less than Ancestry.com's annual rate of $155 -- to its 380,000 members for access to a smaller yet still compelling catalog of genealogy records. Whether Ancestry.com chooses to keep Archives running as a value offering or combines the services, it's a smart move with favorable pricing implications.

The third season of Who Do You Think You Are? -- the primetime genealogy series that Ancestry.com and Comcast's (NAS: CMCSK) (NAS: CMCSA) NBC Universal put out -- began airing its third season in February. The publicity is obvious. This has been Ancestry.com's strongest seasonal quarter since the show was introduced two years ago, though a lot of that has to do with New Year's Day resolutions to brush up on family trees.

However, things are clearly improving. Ancestry.com is moving its guidance for all of 2012 higher than where it was just two months ago. In short, the company doesn't have to be embarrassed at the family reunion this time around. Ancestry.com is no longer the black sheep of the family.

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At the time this article was published Motley Fool newsletter services have recommended buying shares of Ancestry.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

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