##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-K
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 001-34518
 Ancestry.com Inc.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    26-1235962(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification Number)360 West 4800 NorthProvo, Utah
    
    84604(Address of Principal Executive Offices)
    
    (Zip Code)
 (801) 705-7000  (Registrants telephone number, including area code)
 Securities registered pursuant to Section 12(b) of the Act:
 Title of Each Class
    
    Name of Each Exchange on Which RegisteredCommon stock, $0.001 par value
    
    The NASDAQ Stock Market LLC
 Securities registered pursuant to Section 12(g) of the Act:
None
 Yes þ No o
 Yes o No þ
 þ o
 o o
 þ
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(do not check if a smaller reporting company)
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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Ancestry.com, Inc.
 TABLE OF CONTENTS
 PagePART IForward Looking Statements
    
    
    3Terminology
    
    
    4Item 1. Business
    
    
    4Item 1A. Risk Factors
    
    
    9Item 1B. Unresolved Staff Comments
    
    
    24Item 2. Properties
    
    
    24Item 3. Legal Proceedings
    
    
    25Item 4. (Removed and Reserved)
    
    
    25PART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    25Item 6. Selected Financial Data
    
    
    27Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    30Item 7A. Quantitative and Qualitative Disclosures about Market Risk
    
    
    47Item 8. Financial Statements and Supplementary Data
    
    
    47Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    47Item 9A. Controls and Procedures
    
    
    48Item 9B. Other Information
    
    
    49PART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    49Item 11. Executive Compensation
    
    
    50Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    50Item 13. Certain Relationships and Related Transactions and Director Independence
    
    
    51Item 14. Principal Accountant Fees and Services
    
    
    51PART IVItem 15. Exhibits and Financial Statement Schedules
    
    
    51Exhibit 10.5Exhibit 10.7Exhibit 10.20Exhibit 10.34Exhibit 10.35Exhibit 21.1Exhibit 23.1Exhibit 31.1Exhibit 31.2Exhibit 32.1
   2




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PART I
 
 Forward-Looking Statements
  
    
    our future financial performance, including our revenues, cost of revenues, operating
expenses and ability to sustain profitability;
    
    our rate of revenue and expense growth;
    
    the pool of our potential subscribers;
    
    our ability to attract and retain subscribers;
    
    our ability to manage growth;
    
    our ability to generate additional revenues on a cost-effective basis;
    
    our ability to acquire content and make it available online;
    
    our ability to enhance the subscribers experience and provide value;
    
    our success with respect to any future or recent acquisitions;
    
    our international expansion plans;
    
    our ability to adequately manage costs and control margins and trends;
    
    our investments in technology and the success of our promotional programs and new
products;
    
    our development of brand awareness;
    
    our ability to retain and hire necessary employees;
    
    our competitive position;
    
    our liquidity and working capital requirements and the availability of cash and credit;
    
    the seasonality of our business;
    
    the impact of external market forces;
    
    the impact of claims or litigation; and
    
    the impact of potential legislation on privacy, subscription renewal or other aspects
 of our business.
   3




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Terminology
    
 Item 1.
    
    Business
 Mission
  Overview
       4




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Growth Strategy
   Ancestry.com Web sites
 Ancestry.com.
    Product
    
    Monthly
    
    
    AnnualU.S. Deluxe
    
    $19.95/month
    
    $155.40/yearWorld Deluxe
    
    $29.95/month
    
    $299.40/year
 International Ancestry.com Web sites.
 Other Products and Web sites
 Family Tree Maker.
 Ancestry.com DNA.
  5




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Footnote.com.
 ProGenealogists.
 Mundia.com.
 Other Sites.
 Subscribers
  Marketing and Advertising
  Brand
Marketing and  Subscriber
Acquisition.
 Retention Marketing.
 Conversion Marketing.
 Search, Family Tree and Collaboration Technologies
  Vertical Search Engine.
  6




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Record Hinting.
 Sharing and Collaboration.
 Content Process and Technologies
 Company Content Acquisition.
 Digitization.
 Indexing.
 User-Generated Content.
 Operations
 Web Sites and Technology Operations.
  Subscriber Services.
  7




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Competition
   
    
    FamilySearch, and its Web site FamilySearch.org, a genealogy
organization that is part of The Church of Jesus Christ of
Latter-day Saints. FamilySearch has an extensive collection of
paper and microfilm records. 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 thousands of family history centers located
throughout the world. FamilySearch is a well funded organization
and is undertaking a large-scale digitization project to make its
collection available online. FamilySearch could partner with commercial
entities to broaden the distribution of its records.
    
    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 Web sites.
    
    Non-profit entities and organizations, genealogical societies,
governments and agencies that may make vital statistics or other
records available to the public for free or that partner with
commercial entities to make their records widely-available. For
example, Yad Vashem, a Jerusalem-based archive devoted to the
documentation, research, education and commemoration of the
Holocaust, has recently partnered with Google to facilitate free
online access to the worlds largest historical collection on the
Holocaust.
  Intellectual Property
   8




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Employees
  At December 31,2010
    
    
    2009Web hosting and other fulfillment services
    
    
    54
    
    
    
    25Technology and development
    
    
    258
    
    
    
    212Marketing and advertising
    
    
    70
    
    
    
    62General and administrative
    
    
    111
    
    
    
    104Subscriber services
    
    
    156
    
    
    
    151Digital processing services
    
    
    146
    
    
    
    105Total
    
    
    795
    
    
    
    659
  Financial Information about Segments and Geographic Areas
  Other Information
 http://corporate.ancestry.com
  http://ir.ancestry.com
 
 Item 1A.
    
    Risk Factors
 A wide range of factors could materially affect our performance. The following factors
and other information included in this Annual Report should be carefully considered. Although the
risk factors described below are the ones management deems significant, additional risks and
uncertainties not presently known to us or that we presently deem less significant may also impair
our business operations. If any of the following events actually occur, our business, financial
condition and results of operations could be adversely affected.
  9




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Risks Related to Our Business
 If our efforts to retain and attract subscribers are not successful, our revenues will be adversely
affected.
   Our recent performance may not be sustainable, which could negatively affect our stock price or
financial condition and results of operations.
  If we experience excessive rates of subscriber cancellation, or churn, our revenues and business
may be harmed.
   A change in our mix of subscription durations could have a significant impact on our revenue, churn
and revenue visibility.
   10




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Because we recognize revenues from subscriptions to our service over the term of the subscription,
downturns or upturns in subscriptions may not be immediately reflected in our operating results and
therefore could affect our operating results in later periods.
  If our marketing and advertising efforts fail to generate additional revenues on a cost-effective
basis, or if we are unable to manage our marketing and advertising expenses, it could harm our
results of operations and growth.
   We cannot predict whether the television show Who Do You Think You Are? will continue to have an
impact on our business in the future
   11




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Because we generate substantially all of our revenue from online family history resources,
particularly in the United States and United Kingdom, a decline in demand for our services or for
online family history resources in general, and particularly of the United States and United
Kingdom, could cause our revenue to decline.
  
    
    individuals interest in, and their willingness to spend time and money, conducting family history research;
    
    availability of discretionary funds;
    
    awareness of our brand and the family history category, including through the television show Who Do You
Think You Are?;
    
    the appeal, reliability and performance of our services;
    
    the price, performance and availability of competing family history products and services;
    
    public concern regarding privacy and data security;
    
    our ability to maintain high levels of customer satisfaction; and
    
    the rate of growth in online commerce generally.
  Challenges in acquiring historical content and making it available online could adversely affect
our ability to retain and expand our subscriber base, and therefore adversely affect our business,
financial condition and results of operations.
     12




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We depend in part upon third party licenses for some of our historical content, and a loss of these
licenses, or disputes regarding royalties under these licenses, could adversely affect our ability
to retain and expand our subscriber base, and therefore adversely affect our revenues, financial
condition and results of operations.
   Digitizing and indexing new content can take a significant amount of time and expense, and can
expose us to risks associated with the loss or damage of historical documents. Our inability to
maintain or acquire content or make new content available online in a timely and cost-effective
manner, or liability for loss of historical documents, could have an adverse effect on our
business, financial condition and results of operations.
   We face competition from a number of different sources, and our failure to compete effectively
could adversely impact our revenues, results of operations and financial condition.
   
    
    FamilySearch, and its Web site FamilySearch.org, a genealogy
organization that is part of The Church of Jesus Christ of
Latter-day Saints. FamilySearch has an extensive collection of
paper and microfilm records. 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 thousands of family history centers located
throughout the world. FamilySearch is a well funded organization
and is undertaking a large-scale digitization project to make its
collection available online. FamilySearch could partner with commercial
entities to broaden the distribution of its records.
    
    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 Web sites.
  13




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
    
    Non-profit entities and organizations, genealogical societies,
governments and agencies that may make vital statistics or other
records available to the public for free or that partner with
commercial entities to make their records widely-available. For
example, Yad Vashem, a Jerusalem-based archive devoted to the
documentation, research, education and commemoration of the
Holocaust, has recently partnered with Google to facilitate free
online access to the worlds largest historical collection on the
Holocaust.
  Our failure to attract, integrate and retain highly qualified personnel in the future could harm
our business.
  Our growth could strain our personnel, technology and infrastructure resources, and if we are
unable to implement appropriate controls and procedures to manage our growth, and hire and
integrate appropriate personnel, we may not be able to successfully implement our business plan.
  Any significant disruption in service on our Web sites or in our computer systems, which are
currently hosted primarily by a single third-party, could damage our reputation and result in a
loss of subscribers, which would harm our business and operating results.
   14




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Businesses or technologies we acquire could prove difficult to integrate, disrupt our ongoing
business, dilute stockholder value or have an adverse effect on our results of operations.
  
    
    potential disruption of our ongoing business and distraction of management;
    
    difficulty integrating the operations and products of the acquired business;
    
    use of cash to fund the acquisition or for unanticipated expenses;
    
    inability to effectively operate the new business;
    
    exposure to unknown liabilities, including litigation, against the companies we acquire;
    
    additional costs due to differences in culture, geographical locations and duplication of key talent;
    
    acquisition-related accounting charges affecting our balance sheet and results of operations;
    
    difficulty integrating the financial reports of the acquired business in our Consolidated Financial
Statements and implementing our internal controls in the acquired business;
    
    potential impairment of goodwill and acquired intangible assets;
    
    dilution to our current stockholders from the issuance of equity securities; and
    
    potential loss of key employees or customers of the acquired company.
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We face many risks associated with our plans to continue to expand our international offerings and
marketing and advertising efforts, which could harm our business, financial condition and results
of operations.
  
    
    exposure to foreign currency exchange rate fluctuations;
    
    compliance with changing tax laws and the interpretation of those laws;
    
    compliance with changing and conflicting legal and regulatory regimes;
    
    compliance with U.S. laws affecting operations outside of the U.S., including the Foreign Corrupt Practices Act;
    
    compliance with varying and conflicting intellectual property laws;
    
    difficulties in staffing and managing international operations;
    
    prevention of business or user fraud; and
    
    effective implementation of internal controls and processes across diverse operations and a dispersed employee base.
  
    
    difficulties in developing and marketing our offerings and brands as a result of distance,
language and cultural differences;
    
    more stringent consumer and data protection laws;
    
    local socio-economic and political conditions;
    
    technical difficulties and costs associated with the localization of our service offerings;
    
    strong local competitors; and
    
    lack of experience in certain geographical markets.
   If we are unable to improve market recognition of and loyalty to our brands, or if our reputation
were to be harmed, we could lose subscribers or fail to increase the number of subscribers, which
could harm our revenues, results of operations and financial condition.
   16




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Our future growth may differ materially from our historic growth rates and our projections, which
could harm our results of operations and financial condition.
  If we are unable to continually enhance our products and services and adapt them to technological
changes and subscriber needs, we may not remain competitive and our business may fail to grow or
decline.
  
    
    anticipate demand for new products and services;
    
    enhance our existing solutions, cross-platform compatibility, systems
capacity and processing speed; and
    
    respond to technological advances on a cost-effective and timely basis.
  Undetected product or service errors or defects could result in the loss of revenues, delayed
market acceptance of our products or services or claims against us.
  
    
    require us to make extensive changes to our subscription services or software product, which would increase our
expenses;
    
    expose us to claims for damages;
    
    require us to incur additional technical support costs;
    
    cause a negative registered user reaction that could reduce future sales;
    
    generate negative publicity regarding us and our subscription services and software product; or
    
    result in subscribers delaying their subscription or software purchase or electing not to renew their subscriptions.
   17




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Privacy concerns could require us to incur significant expense and modify our operations in a
manner that could result in restrictions and prohibitions on our use of certain information, and
therefore harm our business.
  Our possession and use of personal information presents risks and expenses that could harm our
business. Unauthorized disclosure or manipulation of such data, whether through breach of our
network security or otherwise, could expose us to costly litigation and damage our reputation.
     Any claims related to activities of registered users and the content they upload could result in
expenses that could harm our results of operations and financial condition.
   18




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Increases in credit card processing fees would increase our operating
expenses and adversely affect our results of operations, and the termination of our relationship
with any major credit card company could have a severe, negative
impact on our ability to collect revenues from subscribers.
   Our operating results depend on numerous factors and may fluctuate from period to period, which
could make them difficult to predict.
  
    
    our ability to retain existing subscribers and attract new subscribers;
    
    the mix of annual and monthly subscribers at any given time and the mix of packages to which they subscribe;
    
    the success and timing of television programming relating to family history and its impact on our market
and our marketing expenditures;
    
    timing and amount of costs of new and existing marketing and advertising efforts;
    
    timing and amount of operating costs and capital expenditures relating to expansion of our business,
operations and infrastructure, including content acquisition and international expansion costs;
    
    the cost and timing of the development and introduction of new product and service offerings by us or our
competitors;
    
    downward pressure on the pricing of our subscriptions;
    
    system failures, security breaches or Web site downtime;
    
    fluctuations in the usage of our Web sites; and
    
    fluctuations in foreign currency exchange rates.
   19




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If government regulation of the Internet or other areas of our business changes or if consumer
attitudes toward use of the Internet change, we may need to change the manner in which we conduct
our business in a manner that is less profitable or incur greater operating expenses, which could
harm our results of operations.
  Our revenues may be adversely affected if we are required to charge sales taxes in additional
jurisdictions and/or other taxes for our products and services.
  Our new credit facility contains a number of financial and operating covenants which could limit
our flexibility in operating our business.
   
    
    make us more vulnerable to unfavorable economic conditions;
    
    make it more difficult to obtain additional financing in the future for working capital, capital expenditures or
other general corporate purposes;
    
    limit our flexibility in planning for, or reacting to, changes in our business and the markets in which we operate;
    
    require us to dedicate or reserve a large portion of our cash flow from operations for making payments on our
indebtedness, which would prevent us from using it for other purposes;
    
    make us susceptible to fluctuations in market interest rates that affect the cost of our borrowings to the extent
that our variable rate debt is not covered by interest rate derivative agreements; and
    
    make it more difficult to pursue strategic acquisitions, alliances and collaborations.
  We face risk associated with currency exchange rate fluctuations, which could adversely affect our
revenues and operating results.
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Our business may be significantly impacted by a change in the economy, including any resulting
effect on consumer spending.
  The loss of one or more of our key personnel could harm our business.
  We have and will continue to incur significant increased costs as a result of operating as a public
company, and our management is required to devote substantial time to compliance initiatives.
   We have made significant estimates
in calculating our income tax provision and other tax assets and liabilities. If these estimates are
incorrect, our operating results and financial condition may be
adversely affected.
  Expenses or liabilities resulting from litigation could adversely affect our results of operations
and financial condition.
  Risks Related to Intellectual Property
 If our intellectual property and technologies are not adequately protected to prevent use or
appropriation by our competitors, the value of our brand and other intangible assets may be
diminished, and our business may be adversely affected.
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Confidentiality agreements with employees and others may not adequately prevent disclosure of trade
secrets and other proprietary information. Failure to protect our proprietary information could
make it easier for third parties to compete with our products and harm our business.
  Intellectual property claims against us could be costly and result in the loss of significant
rights related to, among other things, our Web sites, content indexes, and marketing and
advertising activities.
   22




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If we are unable to protect our domain names, our reputation and brand could be affected adversely,
which may negatively impact our ability to compete.
  Risks Related to our Common Stock and Corporate Structure
 Delaware law and our corporate charter and bylaws contain anti-takeover provisions that could delay
or discourage takeover attempts that stockholders may consider favorable.
   Our share price may be volatile due to fluctuations in our operating results and other factors,
each of which could cause our stock price to decline.
  
    
    actual or anticipated fluctuations in our key operating metrics, financial condition and operating results;
    
    a greater than expected gain or loss of existing subscribers;
    
    a change in one or more of our key metrics;
    
    actual or anticipated changes in our growth rate;
  23




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
    
    issuance of new or updated research or reports by securities analysts;
    
    our announcement of actual results for a fiscal period that are higher or lower than projected or expected
results or our announcement of revenue or earnings guidance that is higher or lower than expected;
    
    fluctuations in the valuation of companies perceived by investors to be comparable to us;
    
    share price and volume fluctuations attributable to inconsistent trading volume levels of our shares;
    
    sales or expected sales of additional common stock;
    
    announcements from, or operating results of, our competitors; or
    
    general economic and market conditions.
  Our stock price may be affected by coverage by securities analysts.
  Financial forecasting by us and financial analysts who may publish estimates of our performance may
differ materially from actual results.
  Spectrum Equity Investors and its affiliates own a substantial portion of our outstanding common
stock, and their interests may not always coincide with the interests of the other holders of our
common stock.
  
 Item 1B.
    
    Unresolved Staff Comments
  
 Item 2.
    
    Properties
   24




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Item 3.
    
    Legal Proceedings
   
 Item 4.
    
    (Removed and Reserved)
 
 PART II
 
 Item 5.
    
    Market for Registrants Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
  Fiscal Year 2010 Quarters Ended
    
    High
    
    
    LowMarch 31, 2010
    
    $
    19.10
    
    
    $
    13.35June 30, 2010
    
    $
    20.92
    
    
    $
    15.23September 30, 2010
    
    $
    23.58
    
    
    $
    16.95December 31, 2010
    
    $
    30.70
    
    
    $
    22.22
 Fiscal Year 2009 Quarter Ended
    
    High
    
    
    LowDecember 31, 2009 (beginning November 5, 2009)
    
    $
    16.32
    
    
    $
    12.80
  Stock Performance Graph
 Notwithstanding any statement to the contrary in any of our filings with the SEC, the
following information shall not be deemed filed with the SEC or soliciting material under the
Securities Exchange Act of 1934 and shall not be incorporated by reference into any such filings
irrespective of any general incorporation language contained in such filing.
   25




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COMPARISON OF CUMULATIVE TOTAL RETURN OF ANCESTRY.COM INC., NASDAQ COMPOSITE
INDEX AND S&P NORTH AMERICAN TECH INTERNET INDEX
 
 
 Recent Sales of Unregistered Securities
   Issuer Purchase of Equity Securities
  Total Number of Shares
    
    
    Maximum Number ofPurchased as part of
    
    
    Shares that May YetTotal Number
    
    
    Average
    
    
    Publicly Announced
    
    
    Beof Shares
    
    
    Price Paid
    
    
    Plans
    
    
    Purchased Under thePeriod
    
    Purchased
    
    
    per Share
    
    
    or Programs(1)
    
    
    Plans or ProgramsOctober 1- 31, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    November 1-30,
2010(2)
    
    
    1,009,489
    
    
    $
    24.765
    
    
    
    1,009,489
    
    
    
    December 1-31, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total shares
repurchased
    
    
    1,009,489
    
    
    $
    24.765
    
    
    
    1,009,489
    
    
    
    
 (1)
    
    On September 23, 2010, we announced a share repurchase
program under which we could repurchase $25.0 million
of shares of our common stock.(2)
    
    In this period, we used all $25.0 million
authorized under our share repurchase program to
purchase shares. Accordingly, no additional shares of our common
stock may be repurchased under this authorization.
  26




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Dividend Policy
  
 Item 6.
    
    Selected Financial Data
 SELECTED CONSOLIDATED FINANCIAL DATA
  Successor
    
    
    Predecessor(1)Period from
    
    
    Period fromDec. 6, 2007
    
    
    Jan. 1, 2007
    
    
    Year EndedYear Ended December 31,
    
    
    through
    
    
    through
    
    
    December 31,2010
    
    
    2009
    
    
    2008
    
    
    Dec. 31, 2007
    
    
    Dec. 5, 2007
    
    
    2006(in thousands, except per share data)Operations Data:Subscription revenues
    
    $
    281,670
    
    
    $
    207,707
    
    
    $
    181,391
    
    
    $
    11,692
    
    
    $
    141,141
    
    
    $
    137,643Product and other revenues
    
    
    19,261
    
    
    
    17,195
    
    
    
    16,200
    
    
    
    1,278
    
    
    
    12,269
    
    
    
    12,909Total revenues
    
    
    300,931
    
    
    
    224,902
    
    
    
    197,591
    
    
    
    12,970
    
    
    
    153,410
    
    
    
    150,552Total cost of revenues
    
    
    52,107
    
    
    
    46,323
    
    
    
    43,614
    
    
    
    2,962
    
    
    
    36,142
    
    
    
    31,039Total operating expenses
    
    
    188,218
    
    
    
    146,618
    
    
    
    138,257
    
    
    
    10,358
    
    
    
    106,040
    
    
    
    108,895Income (loss) from operations
    
    
    60,606
    
    
    
    31,961
    
    
    
    15,720
    
    
    
    (350
    )
    
    
    11,228
    
    
    
    10,618Net income (loss)
    
    
    36,845
    
    
    
    21,295
    
    
    
    2,384
    
    
    
    (1,303
    )
    
    
    7,771
    
    
    
    8,149Net income per common
share:(2)Basic
    
    $
    0.85
    
    
    $
    0.55
    
    
    $
    0.06Diluted
    
    $
    0.76
    
    
    $
    0.51
    
    
    $
    0.06
 
 (1)
    
    We operated as the predecessor, until December 5,
2007, when Spectrum Equity Investors V, L.P. and
certain of its affiliates acquired the predecessor in a
transaction we refer to as the Spectrum investment. As
a result of the accounting for the Spectrum investment,
our fiscal year 2007 is divided into a predecessor
period from January 1, 2007 through December 5, 2007
and a successor period from December 6, 2007 through
December 31, 2007.(2)
    
    In connection with the Spectrum investment, we were
recapitalized. As a result, the capital structure of
our predecessor is not comparable to that of the
successor. Accordingly, net income per common share is
not comparable or meaningful for periods prior to 2008
and has not been presented.
  27




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Successor
    
    
    PredecessorAs of December 31,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006(In thousands)Balance Sheet Data:Cash, cash equivalents and
short-term investments
    
    $
    65,519
    
    
    $
    100,272
    
    
    $
    40,121
    
    
    $
    12,277
    
    
    $
    43,219Total assets
    
    
    522,186
    
    
    
    523,348
    
    
    
    477,975
    
    
    
    476,212
    
    
    
    140,640Deferred revenues
    
    
    89,301
    
    
    
    69,711
    
    
    
    61,178
    
    
    
    56,730
    
    
    
    52,307Long-term obligations(1)
    
    
    498
    
    
    
    100,025
    
    
    
    133,000
    
    
    
    140,000
    
    
    
    15,000Total liabilities
    
    
    158,319
    
    
    
    228,458
    
    
    
    258,187
    
    
    
    263,830
    
    
    
    95,129Total stockholders equity
    
    
    363,867
    
    
    
    294,890
    
    
    
    219,788
    
    
    
    212,382
    
    
    
    45,511
 (1)
    
    Includes the current and long-term portions of
long-term debt outstanding and, in 2010, amounts payable under capital lease obligations.
 Successor
    
    
    PredecessorPeriod from
    
    
    Period fromDec. 6, 2007
    
    
    Jan. 1, 2007
    
    
    Year EndedYear Ended  December 31,
    
    
    through
    
    
    through
    
    
    December 31,2010
    
    
    2009
    
    
    2008
    
    
    Dec. 31, 2007
    
    
    Dec. 5, 2007
    
    
    2006(In thousands)Other Financial Data:Adjusted EBITDA(1)
    
    $
    100,974
    
    
    $
    71,585
    (3)
    
    $
    62,645
    
    
    $
    3,755
    
    
    $
    39,344
    
    
    $
    30,455Free cash flow(2)
    
    
    60,359
    
    
    
    29,613
    (3)
    
    
    31,712
    
    
    
    1,774
    
    
    
    14,025
    
    
    
    4,212
 
 (1)
    
    Adjusted EBITDA.We define adjusted EBITDA as net
income (loss) plus net interest (income) expense;
income tax expense; non-cash charges including
depreciation, amortization, impairment of intangible
assets and stock-based compensation expense; other
(income) expense and expenses associated with the
Spectrum investment, such as in-process research and
development and transaction related expenses.(2)
    
    Free cash flow.We define free cash flow as net
income (loss) plus net interest (income) expense;
income tax expense; non-cash charges including
depreciation, amortization, impairment of intangible
assets and stock-based compensation expense; other
(income) expense and expenses associated with the
Spectrum investment, such as in-process research and
development and transaction related expenses, and minus
capitalization of content database costs, capital
expenditures and cash paid for income taxes and
interest.(3)
    
    Income from operations and net income, and
therefore adjusted EBITDA and free cash flow, include
an expense related to a settlement in the third quarter
of 2009 of a claim regarding the timeliness and
accuracy of a content index we created. The settlement
resulted in an expense of approximately $2.3 million in
2009.
   28




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
    
    adjusted EBITDA and free cash flow do not reflect our future
requirements for contractual commitments and adjusted EBITDA does
not reflect our cash expenditures or future requirements for capital
expenditures;
    
    adjusted EBITDA and free cash flow do not reflect changes in, or
cash requirements for, our working capital;
    
    adjusted EBITDA does not reflect interest income or interest expense;
    
    adjusted EBITDA does not reflect cash requirements for income taxes;
    
    adjusted EBITDA and free cash flow do not reflect the non-cash
component of employee compensation;
    
    although depreciation, amortization and impairment of intangible
assets and acquired in-process research and development are non-cash
charges, the assets being depreciated or amortized will often have
to be replaced in the future, and adjusted EBITDA does not reflect
any cash requirements for these replacements; and
    
    other companies in our industry may calculate adjusted EBITDA or
free cash flow or similarly titled measures differently than we do,
limiting their usefulness as comparative measures.
  Successor
    
    
    PredecessorPeriod from
    
    
    Period fromDec. 6, 2007
    
    
    Jan. 1, 2007
    
    
    Year EndedYear Ended December 31,
    
    
    through
    
    
    through
    
    
    December 31,2010
    
    
    2009
    
    
    2008
    
    
    Dec. 31, 2007
    
    
    Dec. 5, 2007
    
    
    2006(In thousands)Reconciliation of adjusted EBITDA and free cash flow to net income (loss):Net income (loss)
    
    $
    36,845
    
    
    $
    21,295
    
    
    $
    2,384
    
    
    $
    (1,303
    )
    
    $
    7,771
    
    
    $
    8,149Interest (income) expense, net
    
    
    4,697
    
    
    
    5,347
    
    
    
    11,483
    
    
    
    857
    
    
    
    (1,295
    )
    
    
    (1,292
    )Income tax expense
    
    
    19,503
    
    
    
    5,340
    
    
    
    1,845
    
    
    
    103
    
    
    
    5,018
    
    
    
    4,595Depreciation expense
    
    
    11,773
    
    
    
    10,936
    
    
    
    10,732
    
    
    
    754
    
    
    
    10,594
    
    
    
    9,559Amortization expense
    
    
    23,526
    
    
    
    23,214
    
    
    
    30,046
    
    
    
    1,974
    
    
    
    7,094
    
    
    
    6,489Stock-based compensation
    
    
    5,069
    
    
    
    5,474
    
    
    
    4,672
    
    
    
    77
    
    
    
    898
    
    
    
    3,789Other (income) expense, net
    
    
    (439
    )
    
    
    (21
    )
    
    
    8
    
    
    
    (7
    )
    
    
    (266
    )
    
    
    (834
    )Impairment of intangible assets and acquired in-process research and
development
    
    
    
    
    
    
    
    
    
    
    1,475
    
    
    
    1,300
    
    
    
    
    
    
    
    Transaction related expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,530
    
    
    
    Adjusted EBITDA
    
    $
    100,974
    
    
    $
    71,585
    
    
    $
    62,645
    
    
    $
    3,755
    
    
    $
    39,344
    
    
    $
    30,455Capitalization of content database costs
    
    
    (13,874
    )
    
    
    (9,398
    )
    
    
    (8,965
    )
    
    
    (1,129
    )
    
    
    (10,591
    )
    
    
    (11,285
    )Purchase of property and equipment
    
    
    (12,968
    )
    
    
    (13,362
    )
    
    
    (11,621
    )
    
    
    (852
    )
    
    
    (10,572
    )
    
    
    (10,127
    )Cash paid for interest
    
    
    (2,645
    )
    
    
    (7,740
    )
    
    
    (10,068
    )
    
    
    
    
    
    
    (756
    )
    
    
    (1,031
    )Cash paid for income taxes
    
    
    (11,128
    )
    
    
    (11,472
    )
    
    
    (279
    )
    
    
    
    
    
    
    (3,400
    )
    
    
    (3,800
    )Free cash flow
    
    $
    60,359
    
    
    $
    29,613
    
    
    $
    31,712
    
    
    $
    1,774
    
    
    $
    14,025
    
    
    $
    4,212
  29




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Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
 You should read the following discussion together with Item 6 Selected Financial Data
and our Consolidated Financial Statements and the related Notes included elsewhere in this Annual
Report. This discussion contains forward-looking statements about our business and operations. Our
actual results may differ materially from those we currently anticipate as a result of many
factors, including those we describe under Risk Factors and elsewhere in this Annual Report. See
Forward Looking Statements.
 Company Overview
    Recent Developments
 Registration of Securities
  iArchives Acquisition
  Share Repurchase Program
   30




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New Credit Facility
  ProGenealogists Acquisition
  Genline Acquisition
  Key Business Metrics
  
    
    Total Subscribers.A subscriber is an individual who pays for
renewable access or redeems a gift subscription to one of our
Ancestry.com Web sites. Total subscribers is defined as the number
of subscribers at the end of the period.
    
    Gross Subscriber Additions.A subscriber addition is a new
customer who purchases a subscription or redeems a gift
subscription to one of our Ancestry.com Web sites, net of
subscriber returns.
    
    Monthly Churn.Monthly churn is a measure representing the number
of subscribers that cancel in the quarter divided by the sum of
beginning subscribers and subscriber additions during the quarter.
To arrive at monthly churn, we divide the result by three.
Management uses this measure to determine the health of our
subscriber base.
    
    Subscriber Acquisition Cost.Subscriber acquisition cost is
external marketing and advertising expense, divided by gross
subscriber additions in the period. Management uses this metric to
determine the efficiency of our marketing and advertising programs
in acquiring new subscribers.
    
    Average Monthly Revenue per Subscriber.Average monthly revenue
per subscriber is total subscription revenues earned in the period
from subscriptions to one of the Ancestry.com Web sites divided by
the average number of subscribers in the period, divided by the
number of months in the period. The average number of subscribers
for the period is calculated by taking the average of the beginning
and ending number of subscribers for the period.
  31




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Year Ended December 31,2010
    
    
    2009
    
    
    2008Total subscribers
    
    
    1,394,910
    
    
    
    1,066,123
    
    
    
    913,683Gross subscriber additions
    
    
    1,023,936
    
    
    
    673,991
    
    
    
    556,045Monthly churn
    
    
    3.9
    %
    
    
    3.8
    %
    
    
    4.0
    %Subscriber acquisition cost
    
    $
    79.19
    
    
    $
    72.46
    
    
    $
    71.99Average monthly revenue
per subscriber
    
    $
    18.34
    
    
    $
    16.55
    
    
    $
    16.09
    Components of Consolidated Statements of Income
 Revenues
 Subscription Revenues.
  Year Ended December 31,2010
    
    
    2009
    
    
    2008United States
    
    $
    212,346
    
    
    $
    156,150
    
    
    $
    134,112United Kingdom
    
    
    40,929
    
    
    
    34,402
    
    
    
    33,223All other countries
    
    
    28,395
    
    
    
    17,155
    
    
    
    14,056Total subscription revenues
    
    $
    281,670
    
    
    $
    207,707
    
    
    $
    181,391
 Product and Other Revenues.
  32




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Expenses
  Cost of Revenues
 Cost of Subscription Revenues.
 Cost of Product and Other Revenues.
 Operating Expenses
 Technology and Development.
 Marketing and Advertising.
 General and Administrative.
 Amortization of Acquired Intangible Assets.
 Other Income (Expense) and Income Tax Expense
 Interest Expense.
 Interest Income.
 Income Tax Expense.
  33




---



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Critical Accounting Estimates
   Recoverability of Indefinite-Lived and Long-Lived Assets
     Amortization of our Content Database Costs
   34




---



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Stock-Based Compensation
   Income Taxes
     35




---



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Results of Operations
  Year Ended December 31,2010
    
    
    2009
    
    
    2008(In thousands, except per share data)Revenues:Subscription revenues
    
    $
    281,670
    
    
    $
    207,707
    
    
    $
    181,391Product and other revenues
    
    
    19,261
    
    
    
    17,195
    
    
    
    16,200Total revenues
    
    
    300,931
    
    
    
    224,902
    
    
    
    197,591Costs of revenues:Cost of subscription revenues
    
    
    46,409
    
    
    
    40,183
    
    
    
    38,187Cost of product and other revenues
    
    
    5,698
    
    
    
    6,140
    
    
    
    5,427Total cost of revenues
    
    
    52,107
    
    
    
    46,323
    
    
    
    43,614Gross profit
    
    
    248,824
    
    
    
    178,579
    
    
    
    153,977Operating expenses:Technology and development
    
    
    42,296
    
    
    
    36,236
    
    
    
    33,206Marketing and advertising
    
    
    94,573
    
    
    
    61,625
    
    
    
    52,341General and administrative
    
    
    35,390
    
    
    
    32,540
    
    
    
    28,931Amortization of acquired
intangible assets
    
    
    15,959
    
    
    
    16,217
    
    
    
    23,779Total operating expenses
    
    
    188,218
    
    
    
    146,618
    
    
    
    138,257Income from operations
    
    
    60,606
    
    
    
    31,961
    
    
    
    15,720Other income (expense):Interest expense
    
    
    (5,083
    )
    
    
    (6,139
    )
    
    
    (12,355
    )Interest income
    
    
    386
    
    
    
    792
    
    
    
    872Other income (expense), net
    
    
    439
    
    
    
    21
    
    
    
    (8
    )Income before income taxes
    
    
    56,348
    
    
    
    26,635
    
    
    
    4,229Income tax expense
    
    
    (19,503
    )
    
    
    (5,340
    )
    
    
    (1,845
    )Net income
    
    $
    36,845
    
    
    $
    21,295
    
    
    $
    2,384Net income per common share:Basic
    
    $
    0.85
    
    
    $
    0.55
    
    
    $
    0.06Diluted
    
    $
    0.76
    
    
    $
    0.51
    
    
    $
    0.06
  36




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Year Ended December 31,2010
    
    
    2009
    
    
    2008Revenues:Subscription revenues
    
    
    93.6
    %
    
    
    92.4
    %
    
    
    91.8
    %Product and other revenues
    
    
    6.4
    
    
    
    7.6
    
    
    
    8.2Total revenues
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Costs of revenues:Cost of subscription revenues
    
    
    15.4
    
    
    
    17.9
    
    
    
    19.3Cost of product and other revenues
    
    
    1.9
    
    
    
    2.7
    
    
    
    2.8Total cost of revenues
    
    
    17.3
    
    
    
    20.6
    
    
    
    22.1Gross profit
    
    
    82.7
    
    
    
    79.4
    
    
    
    77.9Operating expenses:Technology and development
    
    
    14.1
    
    
    
    16.1
    
    
    
    16.8Marketing and advertising
    
    
    31.4
    
    
    
    27.4
    
    
    
    26.5General and administrative
    
    
    11.8
    
    
    
    14.5
    
    
    
    14.7Amortization of acquired
intangible assets
    
    
    5.3
    
    
    
    7.2
    
    
    
    12.0Total operating expenses
    
    
    62.6
    
    
    
    65.2
    
    
    
    70.0Income from operations
    
    
    20.1
    
    
    
    14.2
    
    
    
    7.9Other income (expense):Interest expense
    
    
    (1.7
    )
    
    
    (2.7
    )
    
    
    (6.2
    )Interest income
    
    
    0.1
    
    
    
    0.3
    
    
    
    0.4Other income (expense), net
    
    
    0.2
    
    
    
    0.0
    
    
    
    (0.0
    )Income before income taxes
    
    
    18.7
    
    
    
    11.8
    
    
    
    2.1Income tax expense
    
    
    (6.5
    )
    
    
    (2.3
    )
    
    
    (0.9
    )Net income
    
    
    12.2
    
    
    
    9.5
    
    
    
    1.2
 Years Ended December 31, 2010, 2009 and 2008
 Revenues
 Year Ended December 31,2010
    
    
    2009
    
    
    2008(In thousands)Subscription revenues
    
    $
    281,670
    
    
    $
    207,707
    
    
    $
    181,391Product and other revenues
    
    
    19,261
    
    
    
    17,195
    
    
    
    16,200Total revenues
    
    $
    300,931
    
    
    $
    224,902
    
    
    $
    197,591
 Subscription revenues
 2010 compared to 2009.
  37




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2009 compared to 2008.
 Product and other revenues
 2010 compared to 2009.
 2009 compared to 2008.
 Cost of Revenues and Gross Profit
 Year Ended December 31,2010
    
    
    2009
    
    
    2008(In thousands)Revenues:Subscription revenues
    
    $
    281,670
    
    
    $
    207,707
    
    
    $
    181,391Product and other revenues
    
    
    19,261
    
    
    
    17,195
    
    
    
    16,200Total revenues
    
    
    300,931
    
    
    
    224,902
    
    
    
    197,591Cost of revenues:Cost of subscription revenues
    
    
    46,409
    
    
    
    40,183
    
    
    
    38,187Cost of product and other
revenues
    
    
    5,698
    
    
    
    6,140
    
    
    
    5,427Total cost of revenues
    
    
    52,107
    
    
    
    46,323
    
    
    
    43,614Gross profit
    
    $
    248,824
    
    
    $
    178,579
    
    
    $
    153,977Gross profit percentage
    
    
    82.7
    %
    
    
    79.4
    %
    
    
    77.9
    %
 Cost of subscription revenues
 2010 compared to 2009.
 2009 compared to 2008.
  38




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Cost of product and other revenues
 2010 compared to 2009.
 2009 compared to 2008.
 Operating Expenses
 Year Ended December 31,2010
    
    
    2009
    
    
    2008(In thousands)Operating expenses:Technology and development
    
    $
    42,296
    
    
    $
    36,236
    
    
    $
    33,206Marketing and advertising
    
    
    94,573
    
    
    
    61,625
    
    
    
    52,341General and administrative
    
    
    35,390
    
    
    
    32,540
    
    
    
    28,931Amortization of acquired
intangible assets
    
    
    15,959
    
    
    
    16,217
    
    
    
    23,779Total operating expenses
    
    $
    188,218
    
    
    $
    146,618
    
    
    $
    138,257
 Technology and development
 2010 compared to 2009.
 2009 compared to 2008.
 Marketing and advertising
 2010 compared to 2009.
 2009 compared to 2008.
 General and administrative
 2010 compared to 2009.
  39




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2009 compared to 2008.
 Amortization of acquired intangible assets
 2010 compared to 2009.
 2009 compared to 2008.
 Other Income (Expense) and Income Tax Expense
 Year Ended December 31,2010
    
    
    2009
    
    
    2008(In thousands)Other income (expense):Interest expense
    
    $
    (5,083
    )
    
    $
    (6,139
    )
    
    $
    (12,355
    )Interest income
    
    
    386
    
    
    
    792
    
    
    
    872Other income (expense),
net
    
    
    439
    
    
    
    21
    
    
    
    (8
    )Income tax expense
    
    
    (19,503
    )
    
    
    (5,340
    )
    
    
    (1,845
    )Other data:Effective tax rate
    
    
    34.6
    %
    
    
    20.0
    %
    
    
    43.6
    %
 Interest expense
 2010 compared to 2009.
 2009 compared to 2008.
 Interest income
 2010 compared to 2009.
 2009 compared to 2008.
 Other income (expense), net
 2010 compared to 2009.
  40




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2009 compared to 2008.
 Income tax expense
   Unaudited Quarterly Results of Operations
  Three Months EndedDecember 31,
    
    
    September 30,
    
    
    June 30,
    
    
    March 31,
    
    
    December 31,
    
    
    September 30,
    
    
    June 30,
    
    
    March 31,2010
    
    
    2010
    
    
    2010
    
    
    2010
    
    
    2009
    
    
    2009
    
    
    2009
    
    
    2009(In thousands, except per share data)Consolidated Statements of Income
Data:Revenues:Subscription revenues
    
    $
    77,327
    
    
    $
    74,239
    
    
    $
    70,544
    
    
    $
    59,560
    
    
    $
    55,201
    
    
    $
    52,603
    
    
    $
    50,719
    
    
    $
    49,184Product and other revenues
    
    
    5,408
    
    
    
    5,076
    
    
    
    3,916
    
    
    
    4,861
    
    
    
    4,908
    
    
    
    4,384
    
    
    
    3,854
    
    
    
    4,049Total revenues
    
    
    82,735
    
    
    
    79,315
    
    
    
    74,460
    
    
    
    64,421
    
    
    
    60,109
    
    
    
    56,987
    
    
    
    54,573
    
    
    
    53,233Cost of revenues:Cost of subscription revenues
    
    
    12,413
    
    
    
    11,267
    
    
    
    11,228
    
    
    
    11,501
    
    
    
    10,428
    
    
    
    10,033
    
    
    
    9,966
    
    
    
    9,756Cost of product and other revenues
    
    
    1,769
    
    
    
    1,155
    
    
    
    1,280
    
    
    
    1,494
    
    
    
    1,927
    
    
    
    1,389
    
    
    
    1,310
    
    
    
    1,514Total cost of revenues
    
    
    14,182
    
    
    
    12,422
    
    
    
    12,508
    
    
    
    12,995
    
    
    
    12,355
    
    
    
    11,422
    
    
    
    11,276
    
    
    
    11,270Gross profit
    
    
    68,553
    
    
    
    66,893
    
    
    
    61,952
    
    
    
    51,426
    
    
    
    47,754
    
    
    
    45,565
    
    
    
    43,297
    
    
    
    41,963Operating expenses:Technology and development
    
    
    11,849
    
    
    
    10,528
    
    
    
    9,992
    
    
    
    9,927
    
    
    
    9,546
    
    
    
    9,142
    
    
    
    8,692
    
    
    
    8,856Marketing and advertising
    
    
    23,512
    
    
    
    24,125
    
    
    
    24,490
    
    
    
    22,446
    
    
    
    17,399
    
    
    
    14,240
    
    
    
    15,065
    
    
    
    14,921General and administrative
    
    
    10,475
    
    
    
    9,141
    
    
    
    8,032
    
    
    
    7,742
    
    
    
    7,971
    
    
    
    10,229
    
    
    
    6,777
    
    
    
    7,563Amortization of acquired intangible
assets
    
    
    4,810
    
    
    
    3,791
    
    
    
    3,679
    
    
    
    3,679
    
    
    
    4,052
    
    
    
    4,052
    
    
    
    4,055
    
    
    
    4,058Total operating expenses
    
    
    50,646
    
    
    
    47,585
    
    
    
    46,193
    
    
    
    43,794
    
    
    
    38,968
    
    
    
    37,663
    
    
    
    34,589
    
    
    
    35,398Income from operations
    
    
    17,907
    
    
    
    19,308
    
    
    
    15,759
    
    
    
    7,632
    
    
    
    8,786
    
    
    
    7,902
    
    
    
    8,708
    
    
    
    6,565Other income (expense):Interest expense
    
    
    (187
    )
    
    
    (2,187
    )
    
    
    (1,493
    )
    
    
    (1,216
    )
    
    
    (1,355
    )
    
    
    (1,428
    )
    
    
    (1,515
    )
    
    
    (1,841
    )Interest income
    
    
    46
    
    
    
    201
    
    
    
    76
    
    
    
    63
    
    
    
    46
    
    
    
    48
    
    
    
    567
    
    
    
    131Other income (expense), net
    
    
    41
    
    
    
    401
    
    
    
    (12
    )
    
    
    9
    
    
    
    7
    
    
    
    4
    
    
    
    2
    
    
    
    8Income before income taxes
    
    
    17,807
    
    
    
    17,723
    
    
    
    14,330
    
    
    
    6,488
    
    
    
    7,484
    
    
    
    6,526
    
    
    
    7,762
    
    
    
    4,863Income tax benefit (expense)
    
    
    (5,256
    )
    
    
    (5,914
    )
    
    
    (5,807
    )
    
    
    (2,526
    )
    
    
    1,587
    
    
    
    (2,485
    )
    
    
    (3,082
    )
    
    
    (1,360
    )Net income
    
    $
    12,551
    
    
    $
    11,809
    
    
    $
    8,523
    
    
    $
    3,962
    
    
    $
    9,071
    
    
    $
    4,041
    
    
    $
    4,680
    
    
    $
    3,503Net income per share:Basic
    
    $
    0.28
    
    
    $
    0.27
    
    
    $
    0.20
    
    
    $
    0.09
    
    
    $
    0.22
    
    
    $
    0.11
    
    
    $
    0.12
    
    
    $
    0.09Diluted
    
    $
    0.25
    
    
    $
    0.24
    
    
    $
    0.18
    
    
    $
    0.08
    
    
    $
    0.20
    
    
    $
    0.10
    
    
    $
    0.12
    
    
    $
    0.09Weighted average shares outstandingBasic
    
    
    45,125
    
    
    
    43,984
    
    
    
    42,764
    
    
    
    42,459
    
    
    
    40,857
    
    
    
    38,327
    
    
    
    38,287
    
    
    
    38,226Diluted
    
    
    49,980
    
    
    
    48,774
    
    
    
    48,015
    
    
    
    47,454
    
    
    
    45,458
    
    
    
    41,059
    
    
    
    40,159
    
    
    
    39,139
  41




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##### Table of Contents



Three Months EndedDecember 31,
    
    
    September 30,
    
    
    June 30,
    
    
    March 31,
    
    
    December 31,
    
    
    September 30,
    
    
    June 30,
    
    
    March 31,2010
    
    
    2010
    
    
    2010
    
    
    2010
    
    
    2009
    
    
    2009
    
    
    2009
    
    
    2009Consolidated Statements of
Income Data:Revenues:Subscription revenues
    
    
    93.5
    %
    
    
    93.6
    %
    
    
    94.7
    %
    
    
    92.5
    %
    
    
    91.8
    %
    
    
    92.3
    %
    
    
    92.9
    %
    
    
    92.4
    %Product and other revenues
    
    
    6.5
    
    
    
    6.4
    
    
    
    5.3
    
    
    
    7.5
    
    
    
    8.2
    
    
    
    7.7
    
    
    
    7.1
    
    
    
    7.6Total revenues
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Cost of revenues:Cost of subscription revenues
    
    
    15.0
    
    
    
    14.2
    
    
    
    15.1
    
    
    
    17.9
    
    
    
    17.4
    
    
    
    17.6
    
    
    
    18.3
    
    
    
    18.3Cost of product and other revenues
    
    
    2.1
    
    
    
    1.5
    
    
    
    1.7
    
    
    
    2.3
    
    
    
    3.2
    
    
    
    2.4
    
    
    
    2.4
    
    
    
    2.9Total cost of revenues
    
    
    17.1
    
    
    
    15.7
    
    
    
    16.8
    
    
    
    20.2
    
    
    
    20.6
    
    
    
    20.0
    
    
    
    20.7
    
    
    
    21.2Gross profit
    
    
    82.9
    
    
    
    84.3
    
    
    
    83.2
    
    
    
    79.8
    
    
    
    79.4
    
    
    
    80.0
    
    
    
    79.3
    
    
    
    78.8Operating expenses:Technology and development
    
    
    14.4
    
    
    
    13.3
    
    
    
    13.4
    
    
    
    15.4
    
    
    
    15.9
    
    
    
    16.0
    
    
    
    15.9
    
    
    
    16.7Marketing and advertising
    
    
    28.4
    
    
    
    30.4
    
    
    
    32.9
    
    
    
    34.9
    
    
    
    28.9
    
    
    
    25.0
    
    
    
    27.6
    
    
    
    28.0General and administrative
    
    
    12.7
    
    
    
    11.5
    
    
    
    10.8
    
    
    
    12.0
    
    
    
    13.3
    
    
    
    18.0
    
    
    
    12.4
    
    
    
    14.2Amortization of acquired
intangible assets
    
    
    5.8
    
    
    
    4.8
    
    
    
    4.9
    
    
    
    5.7
    
    
    
    6.7
    
    
    
    7.1
    
    
    
    7.4
    
    
    
    7.6Total operating expenses
    
    
    61.3
    
    
    
    60.0
    
    
    
    62.0
    
    
    
    68.0
    
    
    
    64.8
    
    
    
    66.1
    
    
    
    63.3
    
    
    
    66.5Income from operations
    
    
    21.6
    
    
    
    24.3
    
    
    
    21.2
    
    
    
    11.8
    
    
    
    14.6
    
    
    
    13.9
    
    
    
    16.0
    
    
    
    12.3Other income (expense):Interest expense
    
    
    (0.2
    )
    
    
    (2.8
    )
    
    
    (2.1
    )
    
    
    (1.8
    )
    
    
    (2.2
    )
    
    
    (2.5
    )
    
    
    (2.8
    )
    
    
    (3.5
    )Interest income
    
    
    0.1
    
    
    
    0.3
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    1.0
    
    
    
    0.3Other income (expense), net
    
    
    
    
    
    
    0.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income (loss) before income taxes
    
    
    21.5
    
    
    
    22.3
    
    
    
    19.2
    
    
    
    10.1
    
    
    
    12.5
    
    
    
    11.5
    
    
    
    14.2
    
    
    
    9.1Income tax benefit (expense)
    
    
    (6.3
    )
    
    
    (7.4
    )
    
    
    (7.8
    )
    
    
    (3.9
    )
    
    
    2.6
    
    
    
    (4.4
    )
    
    
    (5.6
    )
    
    
    (2.5
    )Net income
    
    
    15.2
    
    
    
    14.9
    
    
    
    11.4
    
    
    
    6.2
    
    
    
    15.1
    
    
    
    7.1
    
    
    
    8.6
    
    
    
    6.6The following table presents a reconciliation of adjusted EBITDA and free cash flows to
net income, the most comparable GAAP measure and other financial data, for each of the quarters
indicated. For additional information, please see the discussion of adjusted EBITDA and free cash
flow in Item 6 Selected Consolidated Financial Data.Three Months EndedDecember 31,
    
    
    September 30,
    
    
    June 30,
    
    
    March 31,
    
    
    December 31,
    
    
    September 30,
    
    
    June 30,
    
    
    March 31,2010
    
    
    2010
    
    
    2010
    
    
    2010
    
    
    2009
    
    
    2009
    
    
    2009
    
    
    2009(In thousands)Reconciliation of adjusted EBITDA and free
cash flow to net income:Net income
    
    $
    12,551
    
    
    $
    11,809
    
    
    $
    8,523
    
    
    $
    3,962
    
    
    $
    9,071
    
    
    $
    4,041
    
    
    $
    4,680
    
    
    $
    3,503Interest expense, net
    
    
    141
    
    
    
    1,986
    
    
    
    1,417
    
    
    
    1,153
    
    
    
    1,309
    
    
    
    1,380
    
    
    
    948
    
    
    
    1,710Income tax (benefit) expense
    
    
    5,256
    
    
    
    5,914
    
    
    
    5,807
    
    
    
    2,526
    
    
    
    (1,587
    )
    
    
    2,485
    
    
    
    3,082
    
    
    
    1,360Depreciation expense
    
    
    3,418
    
    
    
    2,751
    
    
    
    2,740
    
    
    
    2,864
    
    
    
    2,844
    
    
    
    2,762
    
    
    
    2,687
    
    
    
    2,643Amortization expense
    
    
    6,813
    
    
    
    5,691
    
    
    
    5,509
    
    
    
    5,513
    
    
    
    5,868
    
    
    
    5,805
    
    
    
    5,771
    
    
    
    5,770Stock-based compensation
    
    
    1,528
    
    
    
    1,275
    
    
    
    1,262
    
    
    
    1,004
    
    
    
    1,209
    
    
    
    1,462
    
    
    
    1,277
    
    
    
    1,526Other (income) expense, net
    
    
    (41
    )
    
    
    (401
    )
    
    
    12
    
    
    
    (9
    )
    
    
    (7
    )
    
    
    (4
    )
    
    
    (2
    )
    
    
    (8
    )Adjusted EBITDA
    
    $
    29,666
    
    
    $
    29,025
    
    
    $
    25,270
    
    
    $
    17,013
    
    
    $
    18,707
    
    
    $
    17,931
    
    
    $
    18,443
    
    
    $
    16,504Capitalization of content database costs
    
    
    (5,340
    )
    
    
    (3,393
    )
    
    
    (2,349
    )
    
    
    (2,792
    )
    
    
    (3,543
    )
    
    
    (2,183
    )
    
    
    (1,886
    )
    
    
    (1,786
    )Purchase of property and equipment
    
    
    (5,071
    )
    
    
    (4,269
    )
    
    
    (2,221
    )
    
    
    (1,407
    )
    
    
    (5,796
    )
    
    
    (1,415
    )
    
    
    (3,546
    )
    
    
    (2,605
    )Cash paid for interest
    
    
    (117
    )
    
    
    (1,051
    )
    
    
    (476
    )
    
    
    (1,001
    )
    
    
    (1,116
    )
    
    
    (1,208
    )
    
    
    (1,388
    )
    
    
    (4,028
    )Cash paid for income taxes
    
    
    (4,783
    )
    
    
    (164
    )
    
    
    (5,778
    )
    
    
    (403
    )
    
    
    (2,487
    )
    
    
    (4,029
    )
    
    
    (4,919
    )
    
    
    (37
    )Free cash flow
    
    $
    14,355
    
    
    $
    20,148
    
    
    $
    14,446
    
    
    $
    11,410
    
    
    $
    5,765
    
    
    $
    9,096
    
    
    $
    6,704
    
    
    $
    8,048Stock-based compensation expense included in:Cost of subscription revenues
    
    $
    60
    
    
    $
    57
    
    
    $
    49
    
    
    $
    28
    
    
    $
    18
    
    
    $
    17
    
    
    $
    32
    
    
    $
    29Technology and development
    
    
    654
    
    
    
    550
    
    
    
    490
    
    
    
    397
    
    
    
    408
    
    
    
    388
    
    
    
    360
    
    
    
    475Marketing and advertising
    
    
    283
    
    
    
    204
    
    
    
    118
    
    
    
    68
    
    
    
    97
    
    
    
    104
    
    
    
    81
    
    
    
    88General and administrative
    
    
    531
    
    
    
    464
    
    
    
    605
    
    
    
    511
    
    
    
    686
    
    
    
    953
    
    
    
    804
    
    
    
    934Total stock-based compensation expense
    
    $
    1,528
    
    
    $
    1,275
    
    
    $
    1,262
    
    
    $
    1,004
    
    
    $
    1,209
    
    
    $
    1,462
    
    
    $
    1,277
    
    
    $
    1,526
  42




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##### Table of Contents



Three Months EndedDecember 31,
    
    
    September 30,
    
    
    June 30,
    
    
    March 31,
    
    
    December 31,
    
    
    September 30,
    
    
    June 30,
    
    
    March 31,2010
    
    
    2010
    
    
    2010
    
    
    2010
    
    
    2009
    
    
    2009
    
    
    2009
    
    
    2009Key Business Metrics:Total subscribers
    
    
    1,394,910
    
    
    
    1,376,974
    
    
    
    1,310,562
    
    
    
    1,211,978
    
    
    
    1,066,123
    
    
    
    1,028,180
    
    
    
    990,959
    
    
    
    959,411Gross subscriber additions
    
    
    202,509
    
    
    
    251,738
    
    
    
    290,589
    
    
    
    279,100
    
    
    
    165,241
    
    
    
    159,795
    
    
    
    160,394
    
    
    
    188,561Monthly churn
    
    
    3.9
    %
    
    
    4.0
    %
    
    
    4.3
    %
    
    
    3.3
    %
    
    
    3.6
    %
    
    
    3.6
    %
    
    
    3.8
    %
    
    
    4.3
    %Subscriber acquisition cost
    
    $
    96.87
    
    
    $
    81.58
    
    
    $
    74.04
    
    
    $
    69.57
    
    
    $
    85.21
    
    
    $
    70.55
    
    
    $
    73.27
    
    
    $
    62.23Average monthly revenue
per subscriber
    
    $
    17.78
    
    
    $
    17.75
    
    
    $
    18.02
    
    
    $
    16.70
    
    
    $
    16.67
    
    
    $
    16.48
    
    
    $
    16.42
    
    
    $
    16.46
 Liquidity and Capital Resources
     
    
    the levels of advertising and promotion required to retain and acquire subscribers;
    
    the development of new services;
    
    market acceptance of our services;
    
    the launch of additional services and improvement of our competitive position in
the marketplace;
    
    the level of new content acquisition required to retain and acquire subscribers;
    
    the expansion of our development and marketing organizations;
    
    our engaging in additional business acquisitions;
    
    amounts we must spend to integrate and operate acquired businesses;
    
    stock repurchases by us;
    
    the building of infrastructure necessary to support our growth; and
    
    our relationships with subscribers and vendors.
  43




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##### Table of Contents



Year Ended December 31,2010
    
    
    2009
    
    
    2008(in thousands)Net cash and cash equivalents and short-term investments provided by 
(used in):Operating activities
    
    $
    105,941
    
    
    $
    67,604
    
    
    $
    55,245Investing activities
    
    
    (41,432
    )
    
    
    (22,760
    )
    
    
    (20,586
    )Financing activities
    
    
    (99,306
    )
    
    
    15,348
    
    
    
    (6,814
    )Effect of changes in foreign currency exchange rates on cash and cash
equivalents and short-term investments
    
    
    44
    
    
    
    
    
    
    
    Increase (decrease) in cash and cash equivalents and short-term investments
    
    $
    (34,753
    )
    
    $
    60,192
    
    
    $
    27,845
 Cash Flow Analysis
 Sources and Uses of Cash
  Net Cash Provided by Operating Activities
     44




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##### Table of Contents



Net Cash Used in Investing Activities
    Net Cash Provided by or Used in Financing Activities
    Contractual obligations
  Payments Due by PeriodLess than
    
    
    1-3
    
    
    4-5
    
    
    AfterTotal
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    5 Years(In thousands)Operating leases
    
    $
    11,817
    
    
    $
    2,803
    
    
    $
    4,522
    
    
    $
    3,937
    
    
    $
    555Co-location service agreement
    
    
    6,582
    
    
    
    3,291
    
    
    
    3,291
    
    
    
    
    
    
    
    Capital leases
    
    
    498
    
    
    
    330
    
    
    
    168
    
    
    
    
    
    
    
    Total contractual cash
obligations(1)
    
    $
    18,897
    
    
    $
    6,424
    
    
    $
    7,981
    
    
    $
    3,937
    
    
    $
    555
 
 (1)
    
    Amounts exclude uncertain tax position liability of $0.9 million,
for which timing of payments are not determinable.
  45




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##### Table of Contents



Long-term debt
     Off-balance sheet arrangements
  Indemnifications
  Recent Accounting Pronouncements
   46




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##### Table of Contents



Item 7A.
    
    Quantitative and Qualitative Disclosures about Market Risk
      
 Item 8.
    
    Financial Statements and Supplementary Data
  
 Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
   47




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##### Table of Contents



Item 9A.
    
    Controls and Procedures
 (a) Evaluation of Disclosure Controls and Procedures
   (b) Managements Annual Report on Internal Control Over Financial Reporting
   Report of Independent Registered Public Accounting Firm
 The
Board of Directors and Stockholders
 Ancestry.com
Inc.
    48




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##### Table of Contents



.
   
 (c) Changes in Internal Control Over Financial Reporting
  
 Item 9B.
    
    Other Information
 None.
 
 PART III
 
 Item 10.
    
    Directors, Executive Officers and Corporate Governance
   49




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##### Table of Contents



http://www.ancestry.com
      
 Item 11.
    
    Executive Compensation
  
 Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
  Equity Compensation Plan Information
  CA
    
    
    B
    
    
    Number of Securities RemainingNumber of Securities to be
    
    
    Weighted Average
    
    
    Available for Future IssuanceIssued Upon exercise of
    
    
    Exercise Price of
    
    
    Under Equity CompensationOutstanding Options,
    
    
    Outstanding Options,
    
    
    Plans (Excluding SecuritiesPlan Category
    
    Warrants and Rights
    
    
    Warrants and Rights
    
    
    Reflected in Column A)Equity compensation plans approved by security holders
    
    
    7,792
    (1)
    
    $
    6.07
    
    
    
    2,738
    (2)Equity compensation plans not approved by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    7,792
    
    
    $
    6.07
    
    
    
    2,738
 
 (1)
    
    Consists of awards granted under the 2009 Stock
Incentive Plan, the Generations Holding, Inc. 2008
Stock Purchase and Option Plan, the MyFamily.com, Inc.
2004 Stock Plan, the MyFamily.com, Inc. Executive Stock
Plan and the MyFamily.com, Inc. 1998 Stock Plan.(2)
    
    The 2009 Stock Incentive Plan is subject to an
automatic annual increase on the first day of each
fiscal year beginning in 2010 and thereafter by a
number of shares of common stock equal to 4% of the
number of outstanding shares of common stock on the
last day of the immediately preceding fiscal year, or
such lesser number of shares of common stock prescribed
by the Board of Directors with respect to a particular
calendar year. It is also subject to increase by the
number of shares that cease to be subject to awards
under the other option and incentive plans (other than
by reason of exercise or settlement of the awards to
the extent they are exercised for or settled in vested
and non-forfeitable shares of common stock).
  50




---



##### Table of Contents



Item 13.
    
    Certain Relationships and Related Transactions and Director Independence
  
 Item 14.
    
    Principal Accountant Fees and Services
  
 PART IV
 
 Item 15.
    
    Exhibits and Financial Statement Schedules
              51




---



##### Table of Contents



Incorporated by ReferenceExhibit
    
    
    
    
    
    
    
    
    
    
    Exhibit
    
    
    FiledNumber
    
    Exhibit Description
    
    Form
    
    File No.
    
    Filing Date
    
    
    Number
    
    
    Herewith3.1
    
    
    Amended and Restated Certificate of Incorporation
    
    S-1/A
    
    333-160986
    
    Nov. 2, 2009
    
    
    3.23.2
    
    
    Amended and Restated Bylaws
    
    S-1/A
    
    333-160986
    
    Oct. 20, 2009
    
    
    3.24.1
    
    
    Form of Common Stock Certificate
    
    S-1/A
    
    333-160986
    
    Oct. 6, 2009
    
    
    4.14.2
    
    
    Registration Rights Agreement, dated December 5, 2007, by and among Generations
Holding, Inc., certain Spectrum Group Stockholders and certain Other
Stockholders.
    
    S-1/A
    
    333-160986
    
    Sept. 15, 2009
    
    
    10.144.3
    
    
    Amendment No. 1, dated October 28, 2010, to Registration Rights Agreement, by
and among Ancestry.com Inc. (formerly known as Generations Holding, Inc.),
certain Spectrum Group Stockholders and certain Other Stockholders, dated
December 5, 2007.
    
    10-Q
    
    001-34518
    
    Nov. 2, 2010
    
    
    4.24.4
    
    
    Registration Rights Agreement, dated October 20, 2010, by and among Century
Capital Partners II, L.P., Canopy Ventures I, L.P. and certain other
Stockholders of iArchives, Inc.
    
    10-Q
    
    001-34518
    
    Nov. 2, 2010
    
    
    4.110.1
    
    
    MyFamily.com, Inc. 1998 Stock Plan.
    
    S-1/A
    
    333-160986
    
    Sept. 15, 2009
    
    
    10.110.2
    
    
    MyFamily.com, Inc. 2004 Stock Plan.
    
    S-1/A
    
    333-160986
    
    Sept. 15, 2009
    
    
    10.210.3
    
    
    MyFamily.com, Inc. Executive Stock Plan.
    
    S-1/A
    
    333-160986
    
    Sept. 15, 2009
    
    
    10.310.4
    
    
    Generations Holding, Inc. 2008 Stock Purchase and Option Plan.
    
    S-1/A
    
    333-160986
    
    Sept. 15, 2009
    
    
    10.410.5
    
    
    Amendment No. 1 to Generations Holding, Inc. 2008 Stock Purchase and Option Plan.
    
    
    
    
    
    
    
    
    
    
    
    X10.6
    
    
    Ancestry.com Inc. 2009 Stock Incentive Plan.
    
    S-1/A
    
    333-160986
    
    Sept. 15, 2009
    
    
    10.510.7
    
    
    Amendment No. 1 to Ancestry.com Inc. 2009 Stock Incentive Plan.
    
    
    
    
    
    
    
    
    
    
    
    X
  52




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##### Table of Contents



Incorporated by ReferenceExhibit
    
    
    
    
    
    
    
    
    
    
    Exhibit
    
    
    FiledNumber
    
    Exhibit Description
    
    Form
    
    File No.
    
    Filing Date
    
    
    Number
    
    
    Herewith10.8
    
    
    MyFamily.com, Inc. 1998 Stock Plan Stock Option Agreement.
    
    S-1/A
    
    333-160986
    
    Sept. 15, 2009
    
    
    10.610.9
    
    
    MyFamily.com, Inc. 2004 Stock Plan Stock Option Agreement.
    
    S-1/A
    
    333-160986
    
    Sept. 15, 2009
    
    
    10.710.10
    
    
    MyFamily.com, Inc. Executive Stock Plan Stock Option Agreement.
    
    S-1/A
    
    333-160986
    
    Sept. 15, 2009
    
    
    10.810.11
    
    
    Generations Holding, Inc. 2008 Stock Purchase and Option Plan Stock Option
Agreement.
    
    S-1/A
    
    333-160986
    
    Sept. 15, 2009
    
    
    10.910.12
    
    
    Generations Holding, Inc. 2008 Stock Purchase and Option Plan Stock Option
Agreement for Non-U.S. Employees.
    
    S-1/A
    
    333-160986
    
    Sept. 15, 2009
    
    
    10.1010.13
    
    
    Ancestry.com Inc. Form of Grant Notice for 2009 Stock Incentive Plan 
Restricted Stock Units.
    
    10-Q
    
    001-34518
    
    May 7, 2010
    
    
    10.110.14
    
    
    Ancestry.com Inc. Form of Grant Notice for 2009 Stock Incentive Plan 
Restricted Stock.
    
    10-Q
    
    001-34518
    
    May 7, 2010
    
    
    10.210.15
    
    
    Ancestry.com Inc. Form of Grant Notice for 2009 Stock Incentive Plan 
Nonqualified Stock Option.
    
    S-1/A
    
    333-160986
    
    Sept. 15, 2009
    
    
    10.1210.16
    
    
    Ancestry.com Inc. Form of Grant Notice for 2009 Stock Incentive Plan 
Incentive Stock Options.
    
    S-1/A
    
    333-160986
    
    Sept. 15, 2009
    
    
    10.1310.17
    
    
    Ancestry.com Inc. Description of 2010 Performance Incentive Program.
    
    10-Q
    
    001-34518
    
    May 7, 2010
    
    
    10.310.18
    
    
    Stockholders Agreement, by and among Generations Holding, Inc., certain Spectrum
Group Stockholders and certain Other Stockholders, dated December 5, 2007.
    
    S-1/A
    
    333-160986
    
    Sept. 15, 2009
    
    
    10.1510.19
    
    
    Credit Agreement, dated as of September 9, 2010, among Ancestry.com Operations
Inc., certain domestic subsidiaries of Ancestry.com Operations Inc., Bank of
America, N.A. and certain other lender parties thereto.
    
    10-Q
    
    001-34518
    
    Nov. 2, 2010
    
    
    10.1
  53




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##### Table of Contents



Incorporated by ReferenceExhibit
    
    
    
    
    
    
    
    
    
    
    Exhibit
    
    
    FiledNumber
    
    Exhibit Description
    
    Form
    
    File No.
    
    Filing Date
    
    
    Number
    
    
    Herewith10.20
    
    
    Joinder Agreement, dated as of January 26, 2011, by and between iArchives, Inc.
and Bank of America, N.A.
    
    
    
    
    
    
    
    
    
    
    
    X10.21
    
    
    Form of Indemnification Agreement to be entered into with each director, the
CEO, CFO and the GC.
    
    S-1/A
    
    333-160986
    
    Oct. 20, 2009
    
    
    10.1910.22
    
    
    Employment Letter by and between Timothy Sullivan and Ancestry.com Inc., dated
July 20, 2009.
    
    S-1/A
    
    333-160986
    
    Sept. 15, 2009
    
    
    10.2010.23
    
    
    Amendment No. 1, dated July 22, 2010, to Offer Letter dated July 20, 2009,
between Timothy Sullivan and Ancestry.com Inc.
    
    10-Q
    
    001-34518
    
    Nov. 2, 2010
    
    
    10.310.24
    
    
    Employment Letter by and between Howard Hochhauser and Ancestry.com Inc., dated
July 20, 2009.
    
    S-1/A
    
    333-160986
    
    Sept. 15, 2009
    
    
    10.2110.25
    
    
    Amendment No. 1, dated July 22, 2010, to Offer Letter dated July 20, 2009,
between Howard Hochhauser and Ancestry.com Inc.
    
    10-Q
    
    001-34518
    
    Nov. 2, 2010
    
    
    10.410.26
    
    
    Employment Letter by and between Joshua Hanna and Ancestry.com Inc., dated July
20, 2009.
    
    S-1/A
    
    333-160986
    
    Sept. 15, 2009
    
    
    10.2210.27
    
    
    Employment Letter by and between Joshua Hanna and Ancestry.com Inc., dated July
22, 2010.
    
    10-Q
    
    001-34518
    
    Nov. 2, 2010
    
    
    10.210.28
    
    
    Employment Letter by and between David Rinn and Ancestry.com Inc., dated July
20, 2009.
    
    S-1/A
    
    333-160986
    
    Sept. 15, 2009
    
    
    10.2310.29
    
    
    Amendment No. 1, dated July 22, 2010, to Offer Letter dated July 20, 2009,
between David Rinn and Ancestry.com Inc.
    
    10-Q
    
    001-34518
    
    Nov. 2, 2010
    
    
    10.510.30
    
    
    Employment Letter by and between William Stern and Ancestry.com Inc., dated June
29, 2009.
    
    S-1/A
    
    333-160986
    
    Sept. 15, 2009
    
    
    10.2410.31
    
    
    Amendment No. 1, dated July 22, 2010, to Offer Letter dated June 29, 2009,
between William Stern and Ancestry.com Inc.
    
    10-Q
    
    001-34518
    
    Nov. 2, 2010
    
    
    10.6
  54




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##### Table of Contents



Incorporated by ReferenceExhibit
    
    
    
    
    
    
    
    
    
    
    Exhibit
    
    
    FiledNumber
    
    Exhibit Description
    
    Form
    
    File No.
    
    Filing Date
    
    
    Number
    
    
    Herewith10.32
    
    
    Employment Letter by and between Christopher Tracy and Ancestry.com Inc., dated
July 20, 2009.
    
    S-1/A
    
    333-160986
    
    Sept. 15, 2009
    
    
    10.2510.33
    
    
    Amendment No. 1, dated July 22, 2010, to Offer Letter dated July 20, 2009,
between Christopher Tracy and Ancestry.com Inc.
    
    10-Q
    
    001-34518
    
    Nov. 2, 2010
    
    
    10.710.34
    
    
    Employment Letter by and between Eric Shoup and Ancestry.com Inc., dated March
30, 2010.
    
    
    
    
    
    
    
    
    
    
    
    X10.35
    
    
    Amendment No. 1, dated July 22, 2010, to Offer Letter dated March 30, 2010,
between Eric Shoup and Ancestry.com Inc.
    
    
    
    
    
    
    
    
    
    
    
    X10.36
    
    
    Ancestry.com Inc. Form of Grant Notice for 2009 Stock Incentive Plan 
Nonqualified Stock Options for Non-Employee Directors.
    
    S-1/A
    
    333-160986
    
    Nov. 2, 2009
    
    
    10.2810.37
    
    
    Generations Holdings, Inc. 2008 Stock Purchase and Option Plan Stock Option
Agreement for non-employee Directors.
    
    S-1/A
    
    333-160986
    
    Nov. 2, 2009
    
    
    10.2921.1
    
    
    Subsidiaries of the Registrant
    
    
    
    
    
    
    
    
    
    
    
    X23.1
    
    
    Consent of Independent Registered Public Accounting Firm
    
    
    
    
    
    
    
    
    
    
    
    X31.1
    *
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
    
    
    
    
    
    
    
    
    
    
    
    X31.2
    *
    
    Certification of Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
    
    
    
    
    
    
    
    
    
    
    
    X32.1
    *
    
    Certifications of Chief Executive Officer and Chief Financial Officer Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
    
    
    
    
    
    
    
    
    
    
    
    X
 
 *
    
    These certifications are not deemed filed with the
SEC and are not to be incorporated by reference in any
filing we make under the Securities Act of 1933 or the
Securities Exchange Act of 1934, irrespective of any
general incorporation language in any filings.
    
    Indicates a management contract or compensatory plan
  55




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##### Table of Contents



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 PageReport of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets
    
    
    F-3Consolidated Statements of Income
    
    
    F-4Consolidated Statements of Stockholders Equity
    
    
    F-5Consolidated Statements of Cash Flows
    
    
    F-6Notes to Consolidated Financial Statements
    
    
    F-7
  F-1




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
           F-2




---



##### Table of Contents



ANCESTRY.COM INC.
 
 CONSOLIDATED BALANCE SHEETS
 (in thousands)
 December 31,2010
    
    
    2009ASSETSCurrent assets:Cash and cash equivalents
    
    $
    65,519
    
    
    $
    66,941Restricted cash
    
    
    2,476
    
    
    
    2,181Short-term investments
    
    
    
    
    
    
    33,331Accounts receivable, net of allowances of $406 and $472 at December 31, 2010 and 2009, respectively
    
    
    6,990
    
    
    
    5,860Income tax receivable
    
    
    8,094
    
    
    
    2,017Deferred income taxes
    
    
    3,873
    
    
    
    8,797Prepaid expenses and other current assets
    
    
    9,243
    
    
    
    5,380Total current assets
    
    
    96,195
    
    
    
    124,507Property and equipment, net
    
    
    21,252
    
    
    
    19,430Content database costs, net
    
    
    65,418
    
    
    
    49,650Intangible assets, net
    
    
    34,281
    
    
    
    41,484Goodwill
    
    
    303,374
    
    
    
    285,466Other assets
    
    
    1,666
    
    
    
    2,811Total assets
    
    $
    522,186
    
    
    $
    523,348LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    9,451
    
    
    $
    6,877Accrued expenses
    
    
    30,785
    
    
    
    18,850Escrow liability
    
    
    6,193
    
    
    
    1,763Deferred revenues
    
    
    89,301
    
    
    
    69,711Current portion of long-term debt
    
    
    
    
    
    
    28,416Total current liabilities
    
    
    135,730
    
    
    
    125,617Long-term debt, less current portion
    
    
    
    
    
    
    71,609Deferred income taxes
    
    
    20,571
    
    
    
    30,117Other long-term liabilities
    
    
    2,018
    
    
    
    1,115Total liabilities
    
    
    158,319
    
    
    
    228,458Commitments and contingenciesStockholders equity:Preferred stock, $0.001 par value; 5,000 shares authorized; no shares issued and outstanding
    
    
    
    
    
    
    Common stock, $0.001 par value; 175,000 shares authorized; 45,179 and 42,416 shares issued and
outstanding at December 31, 2010 and 2009, respectively
    
    
    45
    
    
    
    42Additional paid-in capital
    
    
    328,957
    
    
    
    272,513Accumulated other comprehensive income (loss)
    
    
    643
    
    
    
    (41
    )Retained earnings
    
    
    34,222
    
    
    
    22,376Total stockholders equity
    
    
    363,867
    
    
    
    294,890Total liabilities and stockholders equity
    
    $
    522,186
    
    
    $
    523,348
   F-3




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##### Table of Contents



ANCESTRY.COM INC.
 
 CONSOLIDATED STATEMENTS OF INCOME
 (in thousands, except per share data)
 Year Ended December 31,2010
    
    
    2009
    
    
    2008Revenues:Subscription revenues
    
    $
    281,670
    
    
    $
    207,707
    
    
    $
    181,391Product and other revenues
    
    
    19,261
    
    
    
    17,195
    
    
    
    16,200Total revenues
    
    
    300,931
    
    
    
    224,902
    
    
    
    197,591Costs of revenues:Cost of subscription revenues
    
    
    46,409
    
    
    
    40,183
    
    
    
    38,187Cost of product and other revenues
    
    
    5,698
    
    
    
    6,140
    
    
    
    5,427Total cost of revenues
    
    
    52,107
    
    
    
    46,323
    
    
    
    43,614Gross profit
    
    
    248,824
    
    
    
    178,579
    
    
    
    153,977Operating expenses:Technology and development
    
    
    42,296
    
    
    
    36,236
    
    
    
    33,206Marketing and advertising
    
    
    94,573
    
    
    
    61,625
    
    
    
    52,341General and administrative
    
    
    35,390
    
    
    
    32,540
    
    
    
    28,931Amortization of acquired intangible assets
    
    
    15,959
    
    
    
    16,217
    
    
    
    23,779Total operating expenses
    
    
    188,218
    
    
    
    146,618
    
    
    
    138,257Income from operations
    
    
    60,606
    
    
    
    31,961
    
    
    
    15,720Other income (expense):Interest expense
    
    
    (5,083
    )
    
    
    (6,139
    )
    
    
    (12,355
    )Interest income
    
    
    386
    
    
    
    792
    
    
    
    872Other income (expense), net
    
    
    439
    
    
    
    21
    
    
    
    (8
    )Income before income taxes
    
    
    56,348
    
    
    
    26,635
    
    
    
    4,229Income tax expense
    
    
    (19,503
    )
    
    
    (5,340
    )
    
    
    (1,845
    )Net income
    
    $
    36,845
    
    
    $
    21,295
    
    
    $
    2,384Net income per common shareBasic
    
    $
    0.85
    
    
    $
    0.55
    
    
    $
    0.06Diluted
    
    $
    0.76
    
    
    $
    0.51
    
    
    $
    0.06Weighted average common shares outstandingBasic
    
    
    43,592
    
    
    
    38,930
    
    
    
    38,113Diluted
    
    
    48,722
    
    
    
    41,533
    
    
    
    38,529
   F-4




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##### Table of Contents



ANCESTRY.COM INC.
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 (in thousands)
 Accumulated
    
    
    RetainedAdditional
    
    
    Other
    
    
    Earnings
    
    
    TotalCommon Stock
    
    
    Paid-In
    
    
    Comprehensive
    
    
    (Accumulated
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Income (Loss)
    
    
    Deficit)
    
    
    EquityBalance as of January 1, 2008
    
    
    38,045
    
    
    $
    38
    
    
    $
    213,646
    
    
    $
    1
    
    
    $
    (1,303
    )
    
    $
    212,382Exercise of stock options, net
    
    
    195
    
    
    
    
    
    
    
    654
    
    
    
    
    
    
    
    
    
    
    
    654Write-off of deferred tax asset
    
    
    
    
    
    
    
    
    
    
    (36
    )
    
    
    
    
    
    
    
    
    
    
    (36
    )Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    4,634
    
    
    
    
    
    
    
    
    
    
    
    4,634Stock option adjustments affecting goodwill
    
    
    
    
    
    
    
    
    
    
    239
    
    
    
    
    
    
    
    
    
    
    
    239Repurchase of common stock and stock awards
    
    
    (23
    )
    
    
    
    
    
    
    (468
    )
    
    
    
    
    
    
    
    
    
    
    (468
    )Comprehensive income:Unrealized loss on short-term investments,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,384
    
    
    
    2,384Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,383Balance as of December 31, 2008
    
    
    38,217
    
    
    $
    38
    
    
    $
    218,669
    
    
    $
    
    
    
    $
    1,081
    
    
    $
    219,788Exercise of stock options, net
    
    
    143
    
    
    
    
    
    
    
    620
    
    
    
    
    
    
    
    
    
    
    
    620Issuance of common stock, net of costs
    
    
    4,074
    
    
    
    4
    
    
    
    47,754
    
    
    
    
    
    
    
    
    
    
    
    47,758Income tax benefit from stock option exercises
    
    
    
    
    
    
    
    
    
    
    45
    
    
    
    
    
    
    
    
    
    
    
    45Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    5,525
    
    
    
    
    
    
    
    
    
    
    
    5,525Repurchase of common stock
    
    
    (18
    )
    
    
    
    
    
    
    (100
    )
    
    
    
    
    
    
    
    
    
    
    (100
    )Comprehensive income:Unrealized loss on short-term investments,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (41
    )
    
    
    
    
    
    
    (41
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,295
    
    
    
    21,295Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,254Balance as of December 31, 2009
    
    
    42,416
    
    
    $
    42
    
    
    $
    272,513
    
    
    $
    (41
    )
    
    $
    22,376
    
    
    $
    294,890Exercise of stock options, net
    
    
    2,750
    
    
    
    3
    
    
    
    13,501
    
    
    
    
    
    
    
    
    
    
    
    13,504Issuance of common stock for business
acquisition, net of costs
    
    
    1,022
    
    
    
    1
    
    
    
    24,530
    
    
    
    
    
    
    
    
    
    
    
    24,531Income tax benefit from stock option exercises
    
    
    
    
    
    
    
    
    
    
    13,336
    
    
    
    
    
    
    
    
    
    
    
    13,336Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    5,077
    
    
    
    
    
    
    
    
    
    
    
    5,077Repurchase of common stock
    
    
    (1,009
    )
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    (24,999
    )
    
    
    (25,000
    )Comprehensive income:Unrealized gain on short-term investments,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41
    
    
    
    
    
    
    
    41Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    643
    
    
    
    
    
    
    
    643Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,845
    
    
    
    36,845Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37,529Balance as of December 31, 2010
    
    
    45,179
    
    
    $
    45
    
    
    $
    328,957
    
    
    $
    643
    
    
    $
    34,222
    
    
    $
    363,867
   F-5




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##### Table of Contents



ANCESTRY.COM INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 Year Ended December 31,2010
    
    
    2009
    
    
    2008Operating activities:Net income
    
    $
    36,845
    
    
    $
    21,295
    
    
    $
    2,384Adjustments to reconcile net income to net cash provided by operating activities:Depreciation
    
    
    11,773
    
    
    
    10,936
    
    
    
    10,732Amortization of content
    
    
    7,579
    
    
    
    6,997
    
    
    
    6,267Amortization of intangible assets
    
    
    15,947
    
    
    
    16,217
    
    
    
    23,779Amortization of deferred financing costs
    
    
    2,438
    
    
    
    862
    
    
    
    871Impairment of content databases
    
    
    
    
    
    
    
    
    
    
    1,475Deferred income taxes
    
    
    975
    
    
    
    (4,763
    )
    
    
    1,653Stock-based compensation expense
    
    
    5,069
    
    
    
    5,474
    
    
    
    4,672Changes in operating assets and liabilities, net of effects of business acquisitions:Accounts receivable
    
    
    (419
    )
    
    
    (705
    )
    
    
    (389
    )Restricted cash
    
    
    (69
    )
    
    
    472
    
    
    
    2,643Other assets
    
    
    128
    
    
    
    (1,012
    )
    
    
    (1,732
    )Income tax receivable
    
    
    (6,077
    )
    
    
    1,072
    
    
    
    93Accounts payable and accrued expenses
    
    
    26,822
    
    
    
    1,410
    
    
    
    (1,004
    )Excess tax benefits from stock-based compensation
    
    
    (12,948
    )
    
    
    (45
    )
    
    
    Deferred revenues
    
    
    17,132
    
    
    
    8,533
    
    
    
    4,448Other long-term liabilities
    
    
    746
    
    
    
    861
    
    
    
    (647
    )Net cash provided by operating activities
    
    
    105,941
    
    
    
    67,604
    
    
    
    55,245Investing activities:Capitalization of content database costs
    
    
    (13,874
    )
    
    
    (9,398
    )
    
    
    (8,965
    )Purchases of property and equipment
    
    
    (12,968
    )
    
    
    (13,362
    )
    
    
    (11,621
    )Acquisitions of businesses, net of cash acquired
    
    
    (14,631
    )
    
    
    
    
    
    
    Purchases of short-term investments
    
    
    (7,193
    )
    
    
    (33,372
    )
    
    
    Proceeds from sale and maturity of short-term investments
    
    
    40,565
    
    
    
    
    
    
    
    362Net cash used in investing activities
    
    
    (8,101
    )
    
    
    (56,132
    )
    
    
    (20,224
    )Financing activities:Proceeds from exercise of stock options
    
    
    13,504
    
    
    
    620
    
    
    
    654Proceeds from issuance of common stock
    
    
    
    
    
    
    47,758
    
    
    
    Principal payments on debt
    
    
    (100,025
    )
    
    
    (32,975
    )
    
    
    (7,000
    )Deferred financing costs from issuance of credit facility
    
    
    (733
    )
    
    
    
    
    
    
    Excess tax benefits from stock-based compensation
    
    
    12,948
    
    
    
    45
    
    
    
    Repurchase of common stock
    
    
    (25,000
    )
    
    
    (100
    )
    
    
    (468
    )Net cash provided by (used in) financing activities
    
    
    (99,306
    )
    
    
    15,348
    
    
    
    (6,814
    )Effect of changes in foreign currency exchange rates on cash and cash equivalents
    
    
    44
    
    
    
    
    
    
    
    Net increase (decrease) in cash and cash equivalents
    
    
    (1,422
    )
    
    
    26,820
    
    
    
    28,207Cash and cash equivalents at beginning of period
    
    
    66,941
    
    
    
    40,121
    
    
    
    11,914Cash and cash equivalents at end of period
    
    $
    65,519
    
    
    $
    66,941
    
    
    $
    40,121Supplemental disclosures of cash flow information:Cash paid for interest
    
    $
    2,645
    
    
    $
    7,740
    
    
    $
    10,068Cash paid for income taxes
    
    
    11,128
    
    
    
    11,472
    
    
    
    279Supplemental disclosures of non-cash investing and financing activities:Unrealized loss on short-term investments
    
    
    
    
    
    
    (41
    )
    
    
    Capitalization of stock-based compensation
    
    
    8
    
    
    
    5
    
    
    
    9Issuance of common stock for business acquisition
    
    
    24,568
    
    
    
    
    
    
    
    
   F-6




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##### Table of Contents



ANCESTRY.COM INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. NATURE OF OPERATIONS
  Basis of Presentation
   Use of Estimates
   Revenue Recognition and Cost of Revenues
      F-7




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##### Table of Contents



Year Ended December 31,2010
    
    
    2009
    
    
    2008Balance at beginning of period
    
    $
    472
    
    
    $
    394
    
    
    $
    270Provision
    
    
    1,576
    
    
    
    1,472
    
    
    
    1,531Write-offs
    
    
    (1,642
    )
    
    
    (1,394
    )
    
    
    (1,407
    )Balance at end of period
    
    $
    406
    
    
    $
    472
    
    
    $
    394
 Certain Risks and Concentrations
  Cash and Cash Equivalents
  Restricted Cash
  Short-Term Investments
  Accounts Receivable
   F-8




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##### Table of Contents



Property and Equipment
  Inventory
  Content Database Costs
  Software Development Costs
   Goodwill and Other Intangible Assets
    F-9




---



##### Table of Contents



Recoverability of Long-Lived Assets
  Income Taxes
   Foreign Currency
    Comprehensive Income (Loss)
  Stock-Based Compensation
   F-10




---



##### Table of Contents



External
Marketing and Advertising
  Research and Development
  Net Income per Common Share
   Year Ended December 31,2010
    
    
    2009
    
    
    2008Basic net income per common share:Net income
    
    $
    36,845
    
    
    $
    21,295
    
    
    $
    2,384Shares used in computation:Weighted-average common shares outstanding
    
    
    43,592
    
    
    
    38,930
    
    
    
    38,113Basic net income per common share
    
    $
    0.85
    
    
    $
    0.55
    
    
    $
    0.06Diluted net income per common share:Net income
    
    $
    36,845
    
    
    $
    21,295
    
    
    $
    2,384Shares used in computation:Weighted-average common shares outstanding
    
    
    43,592
    
    
    
    38,930
    
    
    
    38,113Dilutive stock-based awards
    
    
    5,130
    
    
    
    2,603
    
    
    
    416Weighted-average number of diluted common shares
    
    
    48,722
    
    
    
    41,533
    
    
    
    38,529Diluted net income per common share
    
    $
    0.76
    
    
    $
    0.51
    
    
    $
    0.06
 Variable Interest Entity
    F-11




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##### Table of Contents



Recent Accounting Pronouncements
    2. CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
  December 31,2010
    
    
    2009Cash
    
    $
    12,687
    
    
    $
    5,159Cash equivalents:Money market funds
    
    
    52,832
    
    
    
    61,782Total cash and cash equivalents
    
    $
    65,519
    
    
    $
    66,941Short-term investments:U.S. agency securities
    
    $
    
    
    
    $
    33,331
   3. BUSINESS ACQUISITIONS
    F-12




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##### Table of Contents



WeightedFair Value
    
    
    AverageAllocations
    
    
    Useful Lives(in thousands)
    
    
    (in years)Assets acquired:Cash and cash equivalents and restricted cash
    
    $
    711Other tangible assets
    
    
    1,644Deferred income taxes, net
    
    
    5,668Acquired intangible assets:Content database costs
    
    
    9,297
    
    
    
    10.0Subscriber relationships and contracts
    
    
    3,577
    
    
    
    4.1Core technology
    
    
    4,543
    
    
    
    3.3Trademarks and trade names
    
    
    280
    
    
    
    4.4Other intangible assets
    
    
    100
    
    
    
    1.0Goodwill
    
    
    18,072Total assets
    
    
    43,892Liabilities assumed:Deferred revenues
    
    
    (2,380
    )Other assumed liabilities
    
    
    (1,602
    )Total net assets acquired
    
    $
    39,910
   4. PROPERTY AND EQUIPMENT
  EstimatedUseful
    
    
    December 31,Lives
    
    
    2010
    
    
    2009Computer equipment
    
    3 years
    
    $
    40,672
    
    
    $
    29,657Purchased and internal use software
    
    3 years
    
    
    11,696
    
    
    
    9,993Furniture and fixtures
    
    3 years
    
    
    1,342
    
    
    
    1,092Leasehold improvements
    
    5 years
    
    
    1,055
    
    
    
    77154,765
    
    
    
    41,513Accumulated depreciation and amortization
    
    
    
    
    
    
    (33,513
    )
    
    
    (22,083
    )$
    21,252
    
    
    $
    19,430
  F-13




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##### Table of Contents



5. CONTENT DATABASE COSTS, INTANGIBLE ASSETS AND GOODWILL
  December 31,2010
    
    
    2009Content database costs
    
    $
    72,628
    
    
    $
    54,863Content database costs not yet placed in service
    
    
    14,093
    
    
    
    8,45586,721
    
    
    
    63,318Accumulated amortization
    
    
    (21,303
    )
    
    
    (13,668
    )Net content database costs
    
    $
    65,418
    
    
    $
    49,650
   December 31, 2010
    
    
    December 31, 2009Gross
    
    
    
    
    
    
    
    
    
    
    GrossCarrying
    
    
    Accumulated
    
    
    
    
    
    
    Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Net
    
    
    Amount
    
    
    Amortization
    
    
    NetSubscriber relationships and contracts
    
    $
    39,144
    
    
    $
    (26,965
    )
    
    $
    12,179
    
    
    $
    35,600
    
    
    $
    (21,333
    )
    
    $
    14,267Core technology
    
    
    26,265
    
    
    
    (17,052
    )
    
    
    9,213
    
    
    
    21,700
    
    
    
    (11,260
    )
    
    
    10,440Trademarks and trade names
    
    
    26,115
    
    
    
    (13,284
    )
    
    
    12,831
    
    
    
    25,700
    
    
    
    (8,924
    )
    
    
    16,776Other intangible assets
    
    
    120
    
    
    
    (62
    )
    
    
    58
    
    
    
    22
    
    
    
    (21
    )
    
    
    1Intangible assets
    
    $
    91,644
    
    
    $
    (57,363
    )
    
    $
    34,281
    
    
    $
    83,022
    
    
    $
    (41,538
    )
    
    $
    41,484
   Balance at December 31, 2009
    
    $
    285,466Goodwill acquired
    
    
    18,072Other goodwill adjustments
    
    
    (164
    )Balance at December 31, 2010
    
    $
    303,374
 6. LONG-TERM DEBT
    F-14




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##### Table of Contents



December 31,2010
    
    
    2009Term loan
    
    $
    
    
    
    $
    100,025Current portion of long-term debt
    
    
    
    
    
    
    (28,416
    )Long-term debt
    
    $
    
    
    
    $
    71,609
  F-15




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##### Table of Contents



7. STOCKHOLDERS EQUITY
 Common Stock
    Preferred Stock
  8. STOCK-BASED AWARDS
    F-16




---



##### Table of Contents



Stock Options
 1 48
 2010
    
    
    2009
    
    
    2008Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    Exercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    Price
    
    
    Shares
    
    
    PriceOutstanding at beginning of year
    
    
    10,373
    
    
    $
    5.29
    
    
    
    8,822
    
    
    $
    4.88
    
    
    
    5,712
    
    
    $
    4.42Granted
    
    
    417
    
    
    
    17.99
    
    
    
    1,899
    
    
    
    7.15
    
    
    
    4,188
    
    
    
    5.42Exercised
    
    
    (2,750
    )
    
    
    4.91
    
    
    
    (144
    )
    
    
    4.31
    
    
    
    (195
    )
    
    
    3.34Canceled
    
    
    (248
    )
    
    
    6.44
    
    
    
    (204
    )
    
    
    5.44
    
    
    
    (883
    )
    
    
    4.78Outstanding at end of year
    
    
    7,792
    
    
    
    6.07
    
    
    
    10,373
    
    
    
    5.29
    
    
    
    8,822
    
    
    
    4.88Exercisable at end of year
    
    
    5,297
    
    
    
    5.03
    
    
    
    6,298
    
    
    
    4.71
    
    
    
    3,997
    
    
    
    4.39Vested and expected to vest
    
    
    7,709
    
    
    
    6.03
    
    
    
    10,181
    
    
    
    5.26
    
    
    
    8,370
    
    
    
    4.86
  December 31,2010
    
    
    2009
    
    
    2008Expected volatility
    
    
    40
    %
    
    
    50
    %
    
    
    50
    %Expected term (in years)
    
    
    4.0
    
    
    
    4.2
    
    
    
    4.0Weighted average risk-free interest rate
    
    
    1.7
    %
    
    
    1.9
    %
    
    
    2.3
    %Weighted average fair value of the underlying common stock
    
    $
    17.99
    
    
    $
    7.15
    
    
    $
    5.42Expected dividends
    
    
    
    
    
    
    
    
    
    
    
   F-17




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##### Table of Contents



Restricted Stock Units
  WeightedAverageNumber of
    
    
    Grant DateUnits
    
    
    Fair ValueRestricted stock units outstanding at December 31, 2009
    
    
    
    
    
    $
    Granted
    
    
    686
    
    
    
    20.70Vested
    
    
    (1
    )
    
    
    22.38Forfeited
    
    
    (8
    )
    
    
    16.43Restricted stock units outstanding at December 31, 2010
    
    
    677
    
    
    
    20.75
  Summary of Stock-Based Compensation Expense
  Year-Ended December 31,2010
    
    
    2009
    
    
    2008Cost of subscription revenues
    
    $
    194
    
    
    $
    96
    
    
    $
    80Technology and development
    
    
    2,091
    
    
    
    1,631
    
    
    
    1,132Marketing and advertising
    
    
    673
    
    
    
    370
    
    
    
    254General and administrative
    
    
    2,111
    
    
    
    3,377
    
    
    
    3,206Total stock-based compensation expense
    
    $
    5,069
    
    
    $
    5,474
    
    
    $
    4,672
  9. EMPLOYEE BENEFIT PLANS
   F-18




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##### Table of Contents



10. INCOME TAXES
  Year Ended December 31,2010
    
    
    2009
    
    
    2008Income (loss) before income taxes:United States
    
    $
    57,253
    
    
    $
    26,374
    
    
    $
    4,336Foreign
    
    
    (905
    )
    
    
    261
    
    
    
    (107
    )$
    56,348
    
    
    $
    26,635
    
    
    $
    4,229
  Year Ended December 31,2010
    
    
    2009
    
    
    2008Current income tax:Federal
    
    $
    22,472
    
    
    $
    8,577
    
    
    $
    State
    
    
    1,048
    
    
    
    1,095
    
    
    
    3Foreign
    
    
    605
    
    
    
    476
    
    
    
    414Total
    
    
    24,125
    
    
    
    10,148
    
    
    
    417Deferred income tax:Federal
    
    
    (4,778
    )
    
    
    (4,086
    )
    
    
    1,238State
    
    
    (639
    )
    
    
    (722
    )
    
    
    190Foreign
    
    
    795
    
    
    
    
    
    
    
    Total
    
    
    (4,622
    )
    
    
    (4,808
    )
    
    
    1,428Provision for income taxes
    
    $
    19,503
    
    
    $
    5,340
    
    
    $
    1,845
  Year Ended December 31,2010
    
    
    2009
    
    
    2008Computed expected tax expense
    
    $
    19,722
    
    
    $
    9,322
    
    
    $
    1,480State income taxes, net of federal tax benefit
    
    
    1,173
    
    
    
    602
    
    
    
    199Foreign income taxes
    
    
    605
    
    
    
    385
    
    
    
    452Recognition of net operating loss carryforwards
    
    
    
    
    
    
    (5,168
    )
    
    
    Research and development tax credits
    
    
    (1,888
    )
    
    
    
    
    
    
    Acquisition costs
    
    
    
    
    
    
    
    
    
    
    (725
    )Other
    
    
    (109
    )
    
    
    199
    
    
    
    439Provision for income taxes
    
    $
    19,503
    
    
    $
    5,340
    
    
    $
    1,845
  F-19




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##### Table of Contents



December 31,2010
    
    
    2009Deferred tax assets:Deferred compensation
    
    $
    2,600
    
    
    $
    2,124Net operating loss carryforwards  U.S.
    
    
    10,740
    
    
    
    5,911Net operation loss carryforwards  Foreign
    
    
    954
    
    
    
    488Tax credits
    
    
    1,236
    
    
    
    Other accruals and reserves
    
    
    2,578
    
    
    
    1,472Valuation allowance
    
    
    (954
    )
    
    
    (488
    )Total gross deferred tax assets
    
    
    17,154
    
    
    
    9,507Deferred tax liabilities:Intangible assets
    
    
    (26,447
    )
    
    
    (26,300
    )Content in process
    
    
    (3,328
    )
    
    
    (2,161
    )Depreciation differences
    
    
    (4,077
    )
    
    
    (2,098
    )Other accruals and reserves
    
    
    
    
    
    
    (268
    )Total gross deferred tax liabilities
    
    
    (33,852
    )
    
    
    (30,827
    )Net deferred tax liability
    
    $
    (16,698
    )
    
    $
    (21,320
    )
     2010
    
    
    2009Gross unrecognized tax benefits at January 1,
    
    $
    563
    
    
    $
    543Decreases related to tax positions taken in prior years
    
    
    
    
    
    
    (543
    )Increases related to tax positions taken in prior years
    
    
    100Increases related to tax positions taken in current year
    
    
    250
    
    
    
    563Gross unrecognized tax benefits at December 31,
    
    $
    913
    
    
    $
    563
    F-20




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##### Table of Contents



11. FAIR VALUE MEASUREMENTS
       Fair Value Measurement at ReportingDate UsingSignificantQuoted Prices in
    
    
    Other
    
    
    SignificantBalance at
    
    
    Active Markets for
    
    
    Observable
    
    
    UnobservableDecember 31,
    
    
    Identical Assets
    
    
    Inputs
    
    
    Inputs2010
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Cash equivalents:Money market funds
    
    $
    52,832
    
    
    $
    52,832
    
    
    $
    
    
    
    $
    Total assets
    
    $
    52,832
    
    
    $
    52,832
    
    
    $
    
    
    
    $
    
  Fair Value Measurement at ReportingDate UsingSignificantQuoted Prices in
    
    
    Other
    
    
    SignificantBalance at
    
    
    Active Markets for
    
    
    Observable
    
    
    UnobservableDecember 31,
    
    
    Identical Assets
    
    
    Inputs
    
    
    Inputs2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Cash equivalents:Money market funds
    
    $
    61,782
    
    
    $
    61,782
    
    
    $
    
    
    
    $
    Short-term investments
    
    
    33,331
    
    
    
    33,331
    
    
    
    
    
    
    
    Interest rate cap
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    Total assets
    
    $
    95,114
    
    
    $
    95,113
    
    
    $
    1
    
    
    $
    
     F-21




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##### Table of Contents



12. COMMITMENTS AND CONTINGENCIES
   Years Ending December 31,2011
    
    $
    2,8032012
    
    
    2,4582013
    
    
    2,0642014
    
    
    2,0542015
    
    
    1,883Thereafter
    
    
    555Total minimum lease payments
    
    $
    11,817
     13. GEOGRAPHIC INFORMATION
   Year Ended December 31,2010
    
    
    2009
    
    
    2008United States
    
    $
    212,346
    
    
    $
    156,150
    
    
    $
    134,112United Kingdom
    
    
    40,929
    
    
    
    34,402
    
    
    
    33,223All other countries
    
    
    28,395
    
    
    
    17,155
    
    
    
    14,056Total subscription revenues
    
    $
    281,670
    
    
    $
    207,707
    
    
    $
    181,391
  F-22




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##### Table of Contents



SIGNATURES
   Ancestry.com Inc.By:
    /s/ Timothy SullivanTimothy SullivanPresident and Chief Executive Officer  Signature
    
    Title
    
    Date/s/ Timothy SullivanTimothy Sullivan
    
    President, Chief Executive Officer
and Director (Principal Executive
Officer)
    
    March 8, 2011/s/ Howard HochhauserHoward Hochhauser
    
    Chief Financial Officer (Principal
Financial and Accounting Officer)
    
    March 8, 2011/s/ Charles M. BoesenbergCharles M. Boesenberg
    
    Director
    
    March 8, 2011/s/ David GoldbergDavid Goldberg
    
    Director
    
    March 8, 2011/s/ Thomas LaytonThomas Layton
    
    Director
    
    March 8, 2011/s/ Elizabeth NelsonElizabeth Nelson
    
    Director
    
    March 8, 2011/s/ Victor ParkerVictor Parker
    
    Director
    
    March 8, 2011/s/ Michael SchroepferMichael Schroepfer
    
    Director
    
    March 8, 2011/s/ Benjamin SperoBenjamin Spero
    
    Director
    
    March 8, 2011




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##### Table of Contents



EXHIBIT INDEX
 Incorporated by ReferenceExhibit

    
    
    
    
    
    
    
    
    Exhibit
    
    FiledNumber

    Exhibit Description
    
    Form
    
    File No.
    
    Filing Date
    
    Number
    
    Herewith3.1
    

    Amended and Restated
Certificate of Incorporation
    
    S-1/A
    
    333-160986
    
    Nov. 2, 2009
    
    3.23.2
    

    Amended and Restated Bylaws
    
    S-1/A
    
    333-160986
    
    Oct. 20, 2009
    
    3.24.1
    

    Form of Common Stock
Certificate
    
    S-1/A
    
    333-160986
    
    Oct. 6, 2009
    
    4.14.2
    

    Registration Rights
Agreement, dated December 5,
2007, by and among
Generations Holding, Inc.,
certain Spectrum Group
Stockholders and certain
Other Stockholders.
    
    S-1/A
    
    333-160986
    
    Sept. 15, 2009
    
    10.144.3
    

    Amendment No. 1, dated
October 28, 2010, to
Registration Rights
Agreement, by and among
Ancestry.com Inc. (formerly
known as Generations Holding,
Inc.), certain Spectrum Group
Stockholders and certain
Other Stockholders, dated
December 5, 2007.
    
    10-Q
    
    001-34518
    
    Nov. 2, 2010
    
    4.24.4
    

    Registration Rights
Agreement, dated October 20,
2010, by and among Century
Capital Partners II, L.P.,
Canopy Ventures I, L.P. and
certain other Stockholders of
iArchives, Inc.
    
    10-Q
    
    001-34518
    
    Nov. 2, 2010
    
    4.110.1
    

    MyFamily.com, Inc. 1998 Stock
Plan.
    
    S-1/A
    
    333-160986
    
    Sept. 15, 2009
    
    10.110.2
    

    MyFamily.com, Inc. 2004 Stock
Plan.
    
    S-1/A
    
    333-160986
    
    Sept. 15, 2009
    
    10.210.3
    

    MyFamily.com, Inc. Executive
Stock Plan.
    
    S-1/A
    
    333-160986
    
    Sept. 15, 2009
    
    10.310.4
    

    Generations Holding, Inc.
2008 Stock Purchase and
Option Plan.
    
    S-1/A
    
    333-160986
    
    Sept. 15, 2009
    
    10.410.5
    

    Amendment No. 1 to
Generations Holding, Inc.
2008 Stock Purchase and
Option Plan.
    
    
    
    
    
    
    
    
    
    X10.6
    

    Ancestry.com Inc. 2009 Stock
Incentive Plan.
    
    S-1/A
    
    333-160986
    
    Sept. 15, 2009
    
    10.510.7
    

    Amendment No. 1 to
Ancestry.com Inc. 2009 Stock
Incentive Plan.
    
    
    
    
    
    
    
    
    
    X10.8
    

    MyFamily.com, Inc. 1998 Stock
Plan Stock Option Agreement.
    
    S-1/A
    
    333-160986
    
    Sept. 15, 2009
    
    10.6




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##### Table of Contents



Incorporated by ReferenceExhibit

    
    
    
    
    
    
    
    
    Exhibit
    
    FiledNumber
    
    Exhibit Description
    
    Form
    
    File No.
    
    Filing Date
    
    Number
    
    Herewith10.9
    

    MyFamily.com, Inc. 2004 Stock
Plan Stock Option Agreement.
    
    S-1/A
    
    333-160986
    
    Sept. 15, 2009
    
    10.710.10
    

    MyFamily.com, Inc. Executive
Stock Plan Stock Option
Agreement.
    
    S-1/A
    
    333-160986
    
    Sept. 15, 2009
    
    10.810.11
    

    Generations Holding, Inc.
2008 Stock Purchase and
Option Plan Stock Option
Agreement.
    
    S-1/A
    
    333-160986
    
    Sept. 15, 2009
    
    10.910.12
    

    Generations Holding, Inc.
2008 Stock Purchase and
Option Plan Stock Option
Agreement for Non-U.S.
Employees.
    
    S-1/A
    
    333-160986
    
    Sept. 15, 2009
    
    10.1010.13
    

    Ancestry.com Inc. Form of
Grant Notice for 2009 Stock
Incentive Plan  Restricted
Stock Units.
    
    10-Q
    
    001-34518
    
    May 7, 2010
    
    10.110.14
    

    Ancestry.com Inc. Form of
Grant Notice for 2009 Stock
Incentive Plan  Restricted
Stock.
    
    10-Q
    
    001-34518
    
    May 7, 2010
    
    10.210.15
    

    Ancestry.com Inc. Form of
Grant Notice for 2009 Stock
Incentive Plan 
Nonqualified Stock Option.
    
    S-1/A
    
    333-160986
    
    Sept. 15, 2009
    
    10.1210.16
    

    Ancestry.com Inc. Form of
Grant Notice for 2009 Stock
Incentive Plan  Incentive
Stock Options.
    
    S-1/A
    
    333-160986
    
    Sept. 15, 2009
    
    10.1310.17
    

    Ancestry.com Inc. Description
of 2010 Performance Incentive
Program.
    
    10-Q
    
    001-34518
    
    May 7, 2010
    
    10.310.18
    

    Stockholders Agreement, by
and among Generations
Holding, Inc., certain
Spectrum Group Stockholders
and certain Other
Stockholders, dated December
5, 2007.
    
    S-1/A
    
    333-160986
    
    Sept. 15, 2009
    
    10.1510.19
    

    Credit Agreement, dated as of
September 9, 2010, among
Ancestry.com Operations Inc.,
certain domestic subsidiaries
of Ancestry.com Operations
Inc., Bank of America, N.A.
and certain other lender
parties thereto.
    
    10-Q
    
    001-34518
    
    Nov. 2, 2010
    
    10.1




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##### Table of Contents



Incorporated by ReferenceExhibit
    
    
    
    
    
    
    
    
    
    Exhibit
    
    FiledNumber
    
     Exhibit Description
    
    Form
    
    File No.
    
    Filing Date
    
    Number
    
    Herewith10.20
    

    Joinder Agreement, dated as
of January 26, 2011, by and
between iArchives, Inc. and
Bank of America, N.A.
    
    
    
    
    
    
    
    
    
    X10.21
    

    Form of Indemnification
Agreement to be entered into
with each director, the CEO,
CFO and the GC.
    
    S-1/A
    
    333-160986
    
    Oct. 20, 2009
    
    10.1910.22
    

    Employment Letter by and
between Timothy Sullivan and
Ancestry.com Inc., dated July
20, 2009.
    
    S-1/A
    
    333-160986
    
    Sept. 15, 2009
    
    10.2010.23
    

    Amendment No. 1, dated July
22, 2010, to Offer Letter
dated July 20, 2009, between
Timothy Sullivan and
Ancestry.com Inc.
    
    10-Q
    
    001-34518
    
    Nov. 2, 2010
    
    10.310.24
    

    Employment Letter by and
between Howard Hochhauser and
Ancestry.com Inc., dated July
20, 2009.
    
    S-1/A
    
    333-160986
    
    Sept. 15, 2009
    
    10.2110.25
    

    Amendment No. 1, dated July
22, 2010, to Offer Letter
dated July 20, 2009, between
Howard Hochhauser and
Ancestry.com Inc.
    
    10-Q
    
    001-34518
    
    Nov. 2, 2010
    
    10.410.26
    

    Employment Letter by and
between Joshua Hanna and
Ancestry.com Inc., dated July
20, 2009.
    
    S-1/A
    
    333-160986
    
    Sept. 15, 2009
    
    10.2210.27
    

    Employment Letter by and
between Joshua Hanna and
Ancestry.com Inc., dated July
22, 2010.
    
    10-Q
    
    001-34518
    
    Nov. 2, 2010
    
    10.210.28
    

    Employment Letter by and
between David Rinn and
Ancestry.com Inc., dated July
20, 2009.
    
    S-1/A
    
    333-160986
    
    Sept. 15, 2009
    
    10.2310.29
    

    Amendment No. 1, dated July
22, 2010, to Offer Letter
dated July 20, 2009, between
David Rinn and Ancestry.com
Inc.
    
    10-Q
    
    001-34518
    
    Nov. 2, 2010
    
    10.510.30
    

    Employment Letter by and
between William Stern and
Ancestry.com Inc., dated June
29, 2009.
    
    S-1/A
    
    333-160986
    
    Sept. 15, 2009
    
    10.2410.31
    

    Amendment No. 1, dated July
22, 2010, to Offer Letter
dated June 29, 2009, between
William Stern and
Ancestry.com Inc.
    
    10-Q
    
    001-34518
    
    Nov. 2, 2010
    
    10.6




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##### Table of Contents



Incorporated by ReferenceExhibit
    
    
    
    
    
    
    
    
    
    Exhibit
    
    FiledNumber
    
    Exhibit Description
    
    Form
    
    File No.
    
    Filing Date
    
    Number
    
    Herewith10.32
    

    Employment Letter by and
between Christopher Tracy and
Ancestry.com Inc., dated July
20, 2009.
    
    S-1/A
    
    333-160986
    
    Sept. 15, 2009
    
    10.2510.33
    

    Amendment No. 1, dated July
22, 2010, to Offer Letter
dated July 20, 2009, between
Christopher Tracy and
Ancestry.com Inc.
    
    10-Q
    
    001-34518
    
    Nov. 2, 2010
    
    10.710.34
    

    Employment Letter by and
between Eric Shoup and
Ancestry.com Inc., dated
March 30, 2010.
    
    
    
    
    
    
    
    
    
    X10.35
    

    Amendment No. 1, dated July
22, 2010, to Offer Letter
dated March 30, 2010, between
Eric Shoup and Ancestry.com
Inc.
    
    
    
    
    
    
    
    
    
    X10.36
    

    Ancestry.com Inc. Form of
Grant Notice for 2009 Stock
Incentive Plan 
Nonqualified Stock Options
for Non-Employee Directors.
    
    S-1/A
    
    333-160986
    
    Nov. 2, 2009
    
    10.2810.37
    

    Generations Holdings, Inc.
2008 Stock Purchase and
Option Plan Stock Option
Agreement for non-employee
Directors.
    
    S-1/A
    
    333-160986
    
    Nov. 2, 2009
    
    10.2921.1
    

    Subsidiaries of the Registrant
    
    
    
    
    
    
    
    
    
    X23.1
    

    Consent of Independent
Registered Public Accounting
Firm
    
    
    
    
    
    
    
    
    
    X31.1
    *

    Certification of Chief
Executive Officer Pursuant to
Section 302 of the
Sarbanes-Oxley Act of 2002
    
    
    
    
    
    
    
    
    
    X31.2
    *

    Certification of Chief
Financial Officer Pursuant to
Section 302 of the
Sarbanes-Oxley Act of 2002
    
    
    
    
    
    
    
    
    
    X32.1
    *

    Certifications of Chief
Executive Officer and Chief
Financial Officer Pursuant to
Section 906 of the
Sarbanes-Oxley Act of 2002
    
    
    
    
    
    
    
    
    
    X
 
 *
    
    These certifications are not deemed filed with the SEC and are not to
be incorporated by reference in any filing we make under the
Securities Act of 1933 or the Securities Exchange Act of 1934,
irrespective of any general incorporation language in any filings.
    
    Indicates a management contract or compensatory plan