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Ancestry.com Inc. (NASDAQ:ACOM)

Q2 2012 Earnings Call

July 25, 2012, 05:00 p.m. ET

Executives

Aaron Felix – Senior Manager of IR

Timothy Sullivan – President, CEO & Director

Howard Hochhauser – COO & CFO

Analysts

Anil Gupta – Imperial Capital

Martin Pyykkonen – edge Securities

Mark Stephen Mahaney – Citigroup

Gene A. Munster – Piper Jaffray

Operator

Good day, everyone and welcome to the Ancestry.com Second Quarter 2012 Earnings Call. As a reminder, today’s conference call is being recorded.

At this time, I would like to turn the call over to Aaron Felix. Please go ahead.

Aaron Felix

Thank you. Before CEO Tim Sullivan begins the discussion, I would like to take care of a few housekeeping items. Along with our earnings release, we’ve posted on the company’s Investor Relations website an updated Investor Presentation, as well as a presentation related to our recently launched AncestryDNA product.

In our remarks today we will include statements that are considered forward-looking within the meaning of the securities laws. Forward-looking statements are based on management’s current knowledge and expectations and are subject to certain risks and uncertainties that may cause actual results to differ from the forward-looking statements. A detailed discussion of such risks and uncertainties is contained in our quarterly report on Form 10-Q for the quarter ended March 31, 2012. The company undertakes no obligation to update any forward-looking statements. We will also refer to certain non-GAAP measures, which in combination with GAAP results provide additional analytic tools to understand our operations. You can find a reconciliation of these non-GAAP measures to the GAAP results included in our press release. A reconciliation is also posted on the company’s Investor Relations website found at ir.ancestry.com. A rebroadcast of this call will be available on our website after 6 PM Mountain Time today.

And now, I’ll turn the call over to Tim.

Tim Sullivan

Thank you very much, Aaron. Let me start by saying that we are certainly pleased to have delivered another terrific quarter. Across almost every measure of our business, our second quarter exceeded our expectations and guidance ranges. And as we announced in the press release on July 2, we surpassed the 2 million subscriber mark in late June. This quarter’s 20% growth in net subscribers was driven by a very solid 12% growth in gross subscriber additions and a 3.4% monthly churn rate, the lowest rate of subscriber churn we’ve seen in nine quarters.

As Howard will address in a few minutes, there are some one-time dynamics in Q2 that especially benefited our churn, so we are not forecasting churn to be this low in the second half of 2012. But it is worth confirming that this directional reduction in churn is primarily the result of the pricing optimization work that we undertook in Q4 of last year when we modified our pricing and packaging to encourage new subscribers to opt for one of our longer term packages. Our goal then was to increase average lifetime value for new subscribers, while also reducing churn over the long term and not negatively impacting conversion rates.

So six months in, we’re happy to confirm that new subscriber behavior has tracked very closely to our modeled expectations for this change. Our average lifetime value for new subscribers is up about 10% from where it was with our old pricing and packaging and we have more subscribers in a longer-term subscription relationship with us now. In fact, as of June 30, only 27% of our total subscribers are currently in a month-to-month subscription, which is down from 33% at Q2 2011, and the lowest it has been since Q4 2009. In addition, subscribers who signed up to this new six-month package at the beginning of 2012 have started to come up for renewal. And while we have only limited data at this point, we do feel good about the renewal behavior that we’re seeing to date. So we’re definitely pleased that this strong second quarter has set us up for a solid second half of the year, which Howard will speak to shortly.

To briefly address the drivers of our strong subscriber growth in Q2, I would highlight a couple of items. First, we certainly benefited from the final weeks of NBC’s broadcast of Who Do You Think You Are? which this year ran a few weeks longer than in season two. Let me also make a couple of general comments about Who Do You Think You Are? as well as our perspective on possible future television integration opportunities. I assume that most of you know that NBC chose not to pick up the show for a fourth season. But I will say that we remain as committed as ever to finding, supporting and sponsoring high quality television programming that communicates the powerful emotions that come from making amazing family history discoveries. Last week’s Emmy nomination for Who Do You Think You Are? is clear evidence that family history can make great television. And we feel that there is still real interest in this kind of programming from both broadcasters and production entities. Without addressing any specific plans, our long term goal would be to continue to invest in television programming that celebrates family history, highlights our brand and contributes to profitable customer acquisition, so long as such a show has the right distribution and our overall economics of involvement makes sense to us.

I talked a lot on the last call about the impact also of the 1940 Census, and in particular our work in making this valuable data more engaging and useful for our subscribers. With images first released on Ancestry.com on April 2 and multiple states fully indexed and live on the site throughout the quarter, our 1940 rollout plans are very much on track. Specifically, I’m very excited to report that we’ve now completed our keying transcription for the 1940 Census and we’re looking forward to releasing all 50 states to Ancestry within the next few months.

Our decision to make the 1940 census free is proving to be a great way to attract new users to Ancestry and to highlight the completely unique and differentiated experience of our interacted image viewer and gridlines technology. One additional 1940 initiative that I’d like to highlight is our creation of individual person pages for everyone in the 1940 Census, pages designed to provide high quality SCO content for Google and other search engines. So far even before we have released all states for 1940, Google has indexed 36 million of our records from this census and we are already seeing a meaningful amount of natural search traffic driven to Ancestry by these 1940 person pages. Based partially on this initial success, we’re currently exploring how we might use other content collections to drive even more low cost traffic to Ancestry.

Last quarter we talked a little bit about our pre-launch AncestryDNA initiative. So I’m pleased today to be able to provide a more complete update on this exciting new project. Our DNA offering launched on May 3 and the early results have been very positive. Since launch, we have only offered our DNA service to existing subscribers and only on an invitation-only basis to those. We’re rolling our launch in this way for a couple of reasons. First, demand for this service is materially exceeding our current ability to fulfill supply. So we really wanted to reward our best and most loyal subscribers by giving them the first shot at this exciting new addition to their Ancestry.com experience. Second, it’s also the case that this cohort of subscribers have some of the largest, richest and best sourced family trees on Ancestry. And since our AncestryDNA experience seamlessly integrates family trees with genetic cousin matching, these are also the users that should have the best experience in this initial phase of our rollout. The third benefit of this invite-only strategy is we’re actually building up a pretty substantial backlog of interest from existing subscribers, former subscribers, non-subscribing registrants and even first-time visitors to Ancestry. At this point, our invite wait list continues to grow nicely, despite the fact that we have done very little marketing to date.

Next, since it’s unlikely that anyone on this call has been one of those early invitees and without actually seeing your result, it’s hard to get a sense of the experience. I want to spend a few minutes describing the AncestryDNA user experience. We’ve prepared a short slide deck that is posted to our site alongside the earnings related slides we prepare every quarter. I won’t walk through this slide by slide, but do encourage you all to have it open as I talk through it, or at least review it after the call.

So this experience starts with a customer buying the AncestryDNA kit and sending it back a sample of their DNA. We’re currently selling the kits to existing subscribers for $99 plus shipping. And as I noted, we are seeing very strong initial interest. When we get a customer’s DNA sample back, our lab processes this sample and sends us the raw data. We then run a series of algorithms to generate a predicted genetic ethnicity report. We currently can identify 20 global ethnicities, including multiple ethnicities within Europe, Asia and Africa, as well as European Jewish and Native American. We expect the quality, accuracy and specificity of this ethnicity report to increase over time as we incorporate a broader and broader set of reference samples and as our research further refines our algorithms.

In addition, by comparing a customer’s DNA with all the other samples in our database, we are able to identify distant cousins, most accurately fourth cousins or better, but also some cousin matches that are far more distant. If two customers have a tree on Ancestry, we can often find shared surnames, common birth locations, or in some cases even the most recent common ancestor that they share in their tree. Test takers can also communicate with these genetic cousins to continue to make even more discoveries about their common ancestors.

So to state the obvious, we expect the AncestryDNA consumer experience to benefit greatly from the clear network effects of this service. These network effects are arguably even more interesting than those within our core service, since as our DNA database grows, the number and quality of genetic cousin matches will increase at a non-linear rate and should provide an ever-improving experience for everyone in that database. We think AncestryDNA can make the existing Ancestry subscribers’ experience more valuable by helping them break through research roadblocks and by enhancing their ability to collaborate with even more distant cousins. But we also think AncestryDNA can emerge as an easy and effortless way for new users to get started making their first family history discoveries.

So it’s only two and a half months since we’ve launched and our DNA database is continuing to grow, and so far, we’re quite excited about what our first customers are learning. Customers have already found millions of distant cousins, including an average of nearly five fourth cousins and increasing number of third cousins. We see numerous instances of subscribers using these DNA hints to identify their most recent common ancestor dating back to the late 1700s. And much to our delight, they’re also communicating with their new found cousins.

So that’s a closer look at DNA, obviously we’re very excited about it. While it’s still very soon post-launch, the overall level of interest we’re seeing, as well as the new discoveries that we’re generating for our subscribers have provided some terrific initial validation of our vision for this product experience.

Lastly, I also want to provide a quick update on both our mobile and social initiatives. On the mobile front we continue to see good traction, both with respect to continued growth in app downloads, but also with respect to improvements and innovations we’re making to the mobile experience. We expect to launch an updated version of our iOS app shortly with a number of great UI improvements, but also a new in-app subscription flow, which will give mobile first users a better ability to subscribe to the full Ancestry experience.

We’re also continuing to make progress with our Facebook integration. And while the integration is still very much a beta release and the points on Ancestry, the points of integration on Ancestry are still subtle and limited as we continue to optimize the experience. Existing tree users can now quickly and easily add living family members to their trees. As we’ve said many times, adding this living family to our family trees is a foundational prerequisite to all that we want to do to enhance the sharing and the intra-family collaboration experience on Ancestry. You can demo this beta release of this experience by going to Ancestry.com/facebook, if you want to build a tree from scratch, in other words if you don’t have a tree on Ancestry, or if you do have a tree on Ancestry you can go to Ancestry.com/facebook app – Facebook “a-p-p” – if you want to try to add living people to your existing Ancestry.com family tree.

So to wrap it up, it was a great quarter for us really across the board and one that we feel really sets us up well for a strong second half of the year.

With that, thank you again for your time and I will turn it over to Howard.

Howard Hochhauser

Thank you, Tim. Excuse me. The second quarter came in very strong and as Tim suggested it puts us in a very good position to deliver great financial performance for 2012. Subscribers’ revenue and adjusted EBITDA growth all outperformed the high end of our expectations in the second quarter.

In addition, we hit two million subscribers this quarter, sooner than expected. As noted in the press release, total revenue came in at $119 million, up 18% from last year’s second quarter. Adjusted EBITDA of $43 million was up 12% and our adjusted EBITDA margin was approximately 37%. The stronger than expected subscriber growth was due to strong gross additions, which grew 12% year-on-year and solid retention rates.

Gross additions of 361,000 were a combined result of the benefit of additional Who Do You Think You Are? episodes in the quarter compared to the prior year and increased traffic from well-executed content campaigns like the rollout of the 1940 census. As a reminder, Who Do You Think You Are? in the U.S. aired five original episodes and three repeats in the quarter versus two episodes in Q2 of last year.

UK’s second quarter gross additions also outperformed expectations. For the quarter UK subscription revenue increased 13% year-on-year on a 12% increase in subs. This is a particularly strong performance resulting from the launch of key content collections and associated PR campaigns such as our Titanic collections for example, and ongoing use of new TV creative. Weather may have also helped us as the UK saw unseasonably cold temperatures in April, followed by a very wet June. Potential market distractions, such as the Queen’s Diamond Jubilee and the European Soccer Championships were less impactful than we had originally anticipated. Non-UK international revenue increased 22% on a 23% increase in subscribers. International markets generated approximately $27.5 million in sub revenue or 24% of our total revenue in the period.

Churn in the quarter was 3.4% compared to 4.6% in the year-ago quarter, a by-product of the pricing and package changes we made in Q4 2011. I’d note that the first half of 2012 enjoyed a churn honeymoon in that our new semi-annual subs were not up for renewal in the period. As such, we expect churn to normalize in Q3 and will likely increase 3.75% to 4.0% in the back half of the year.

As Tim noted, however, renewal rates to date have been very encouraging and this confirms our early assumption that the pricing changes are yielding increased LTV per sub. ARPU for the quarter was $18.84, consistent with the $18.88 reported for last year’s second quarter. We finished the quarter with 27% of our subs in a monthly package and 69% of our subs in six months or higher duration package. SAC came in lower than expected at $81, essentially flat year-over-year and down a bit sequentially. This again is driven off a better than expected gross additions in the quarter.

While on the topic of marketing spend, I’ll touch briefly on Who Do You Think You Are? Tim has provided you with an update on our current thinking about next steps, but I’ll frame some of the metrics around the show’s impact. We estimate that season 3 generated about 100,000 gross adds ads and consumed approximately 5% to 7% of our global marketing budget, depending upon which costs get attributed to the show.

The absence of that GSA driver exclusive of any replacement will certainly be a headwind in 2013. While it’s too early to say what that might look like, if you assume we to replace approximately half of the gross ads through our existing marketing channels as well as possible new channels of customer acquisition, we have a hole of about 50,000 gross adds, about 4% of our annual amount. And in the extreme case, it’s 8%. More importantly, regardless of how 2013 shapes up, it doesn’t at all change our long-term thinking about our long-term subscriber growth opportunity.

Turning to the balance sheet and free cash flow. In the quarter, we generated approximately $16.3 million in free cash flow, after CapEx of approximately $12.6 million. We invested approximately $7.5 million in content in the quarter, we are on pace to invest $24 million to $26 million for the full year. Our technology and facility CapEx is unchanged at approximately $21 million to $23 million for the full year, which as a reminder, includes about $6 million facilities-related upgrades, largely related to build up of our San Francisco and Dublin Offices. We did not repurchase any shares this last quarter. We have a Board authorization that expires in March 2013 and we evaluate the timing of market or purchases depending upon market circumstances and other factors.

As Tim mentioned, we released our DNA product in May. We feel confident in our investment given the initial reaction to the product. Our revenue for the quarter was about $1 million and our EBITDA loss was $2.6 million. That compares to our guidance estimate for Q2 of $2 million to $3 million.

Now turning to our pending acquisition of Archives.com. We are in the review process with the FTC and will update you once we have some specificity around the timing of closing. And as a reminder, our guidance, including all metrics, exclude any contribution from Archives.com.

To summarize, it was a great quarter and the business performed well ahead of our expectations at every level. The subscriber ramp we’ve seen so far this year positions us well financially for the second half, and we’re raising our outlook for the full year.

In the meantime, we’re executing well on content and marketing campaigns in -- and in our product development initiatives. The loss of NBC distribution for Who Do You Think You Are? certainly creates a subscriber growth headwind in 2013, but we are already down the path on future broadcast initiatives. We think the headwind is manageable over time and we remain confident in our potential to continue to penetrate the category and grow our business.

Before we open the floor to questions, I want to note that you heard a new Ancestry voice at the start of today’s call. That’s Aaron Felix, our new Senior Manager of Investor Relations. Aaron is a long time veteran of the Ancestry finance team, with both international and domestic experience. We’re excited to have him lead our IR efforts and he’s based here in Provo Utah.

So with that, let’s open the floor to questions.

Question-and-Answer Session

Operator

(Operator Instructions) And we will take our first question from Anil Gupta with Imperial Capital.

Anil Gupta – Imperial Capital

Thanks for taking the question. So, wanted to start off with just marketing expense. I think you guys have tested a variety of marketing efforts, whether it’s radio, different cable networks, et cetera. I wanted to see if you could provide an update as to how those tests have been proving out in terms of yield, do you think you’re able to more effectively reach your target demographic and do you have any update on your Chief Marketing Officer search?

Tim Sullivan

Sure. This is Tim, I’ll take that. I’d say we are testing pretty actively now on radio. I think it’s too early to definitively say it will become a sort of material part of our mix. But I think we are actually quite encouraged by some of the initial data that we’re getting from this test. So that’s one big channel. The other thing is I think we’ve just seen sort of this general executional improvement across all of our existing channels – television, display, search – I think we’ve really expanded our team very nicely and are doing really well at just continuing to find ways to improve efficiencies, little by little.

I’d say the CMO search is still underway, it’s an incredibly cool position, certainly has proven to be attractive to a lot of potential candidates. We’ve not pulled the trigger on that, don’t have timing on that. But I think the thing I would say is, the business is going very well and the team in place is managing marketing exceptionally well. So we’re in good place.

Anil Gupta – Imperial Capital

Thank you. And then two other quick ones. One is on the 5% to 7% of your global marketing spend that’s let’s associated with the television show, could you just give us a sense as to how you’re thinking about that going into 2013, is it likely that you’re going to reinvest a portion of that into some alternative marketing channels or is it kind of going to be an analysis to you guys whether you let that fall down to EBITDA, or how do we think about that?

Howard Hochhauser

Yeah, this is Howard. And just to size it, so our marketing spend this year roughly at external media dollars to be $110 million to $115 million. So of that $5 million to $7 million that was allocated towards the show, we’re going, as we always have, optimize on a monthly basis. So if that means put it into TV, put it into cable, put it into radio, or put it to display that’s what we’ll do. So we haven’t allocated it today. But as we go through the budget process, we’ll do what we do every quarter, which is optimize our media spend for sort of the highest ROI. We haven’t yet committed to anything, but as we go through the budget process of 2013, again, we’ll evaluate it and direct the capital to the channels of acquisition that make the most sense.

Anil Gupta – Imperial Capital

Okay, thanks. And then the last one, just a quick housekeeping question. I think you said your free cash flow is in the $16 million to $17 million range, your EBITDA was up 12%, but your free cash was down 23%. Your CapEx, I think Howard you said, was around $12 million. Could you just fill us in on the blanks there and how to reconcile to the free cash number?

Howard Hochhauser

Yeah. The big increase was in cash taxes, this year our cash taxes increased on a year-over-year basis. And the single biggest benefit last year was the exercise of options. So last year we sort of enjoyed. a – I don’t want to say tax holiday – but certainly enjoyed a big tax benefit from the exercise of options. That has since lapsed.

Anil Gupta – Imperial Capital

Thanks a lot.

Operator

And we will take our next question from Scott Devitt with Morgan Stanley.

Scott Devitt with Morgan Stanley

Hey, it’s Zach calling in for Scott. I’m just wondering, what, if you could talk about what gives you confidence that this six month cohort is going, is behaving differently than your six month cohort from 2010?

Tim Sullivan

Well, I would say the cohort from 2010 would be largely, I guess I wouldn’t say irrelevant, but not a great proxy for the cohort that, that’s in place, because that was real, those were six month packages embedded in a very different pricing and packaging configuration. I guess what gives us confidence is that we have the data. We have seen for six months package mix. We have been able to measure the retention rates clearly of our monthly subscribers, and as I mentioned, we’ve now gotten the first batch of six month subscribers that have come up for renewal and we’ve been able to measure those data. So, honestly that kind of completes the picture; what, we’ll always continue to allow those data mature and adjust our model and expectations for new data, but it’s pretty good confidence based on real data at this stage.

Scott Devitt with Morgan Stanley

And is there difference in, like the usage or interaction between this cohort and previous cohorts?

Tim Sullivan

Yeah, I don’t think I could speak to that. I couldn’t speak to that.

Scott Devitt with Morgan Stanley

Okay. Thank you.

Operator

(Operator Instructions) And we will take our next question from Martin Pyykkonen with Wedge Partners.

Martin Pyykkonen – Wedge Partners

Yeah. Thanks. Two questions if I could, the rollout of state by state on the 1940 census, you did half of the states out, they come in a little different fashion then I was maybe myself expecting at least. Have they been tied to local events, anniversary kinds of things, that maybe you just don’t see unless you’re living in the state and the remaining ones coming out this year. I know you didn’t want to give out, which states were coming first and dates and all, but I’m just wondering has there been a tactical rollout by events germane to that state?

And then secondly on the TV show, I just want to clarify, the Who Do You Think You Are? Is that owned by Shed Media and Lisa Kudrow’s company or some combination, and were you to go forward, would that show continue to be owned by them, or could you conceptually – without getting into numbers I’m sure you wouldn’t want to talk about right now – develop your own show that would have a similar theme, but you could actually own it? Just wondering if that’s part of your thinking of what you might do with TV going forward? Thanks.

Tim Sullivan

Right. So the first question, sorry what was the first question, oh yeah yeah, it was actually a good question, because in fact, yes, when we launched New York, which is was really the first big state, we had a really quite a wonderful localized PR and marketing program in New York. We also used the timing to announce another great deal with the New York State Archives. So we did some newspaper in New York, we did some New York specific PR, we had a big announcement around this other content collection.

We haven’t done that for every state we’ve rolled out. And I think at this stage, without sort of communicating too clearly our marketing plans, we think that the completion of the census and having all the states online, will be another bite of the apple, certainly another opportunity to get people excited nationally about their ability to, at no cost, dive into Ancestry and find a parent or grandparent.

I think on the show, again, I really wouldn’t want to comment, almost at all about what might be next for us in this world. Who Do You Think You Are? is owned by Shed, Shed Media. They have done a wonderful job with this show over the years. We’re incredibly proud to have been involved with it and involved in sort of an Emmy nominated series. But we continue to think about what all other options would be and there’s not much more that I think we could say about it at this point.

Martin Pyykkonen – Wedge Partners

Okay, thank you.

Operator

(Operator Instructions) We will take our next question from Mark Mahaney with Citigroup.

Mark Mahaney – Citigroup

In terms of the revenue contribution from DNA that’s included in the 2012 outlook?

Howard Hochhauser

Mark, the first part of your question cut off. Is the question, how much -- what’s the revenue numbers assumed in our full year revenue guidance?

Mark Mahaney – Citigroup

From DNA, yeah.

Howard Hochhauser

Yeah. We haven’t given out. It’s a relatively immaterial number. Our plan is to give it out on a reported basis as we progress through the year.

Mark Mahaney – Citigroup

And then could you talk about your thoughts on pricing? You’ve done a -- some fairly significant changes in subscription pricing over the last year and developed a fair amount of learnings from that. Do you feel like you’re in a – will it be constant ongoing. experimenting in terms of pricing or do you think your pricing structure is set for the foreseeable future?

Tim Sullivan

Yeah, I don’t, I’d say we do not anticipate any big changes to pricing in the immediate future, but I would say we absolutely want to be a permanent tester and optimizer, sort of all facets of the funnel experience. As we would talk in the past and I would reiterate that we can -- one of the things we continue to past in different places and so very, very small volumes is potentially how to integrate an even lower entry level price point into the main mix. That obviously has benefits as we roll subscription experience on to the mobile device. But I think that’s all really in the bucket of optimization. I think that there really is no strong thesis that we’re trying to test into, but we as, certainly as the product evolves and as it continues to improve and attract arguably a larger and larger segment of this, potentially huge market, we’re always going to want to make sure that we have the right pricing and packaging. So, nothing big in the near term, but yes, very much ongoing testing.

I’d say also we’ve really built up over the past six months, really a whole testing and optimization competence and team that really is just much, frankly more nimble at conceiving of different ways of changing not only pricing, but the homepage and the sign up flow, and I think we’re seeing some of that, some of the benefits from that optimization effort sort of flow through to overall aggregate performance.

Mark Mahaney – Citigroup

And one final question please on international. Could you talk about international ex-UK and ex-Australia. I know it’s a tiny part of the business, but is there anything interesting, notable that you’re seeing in subscriber trends outside of those markets? Thank you.

Howard Hochhauser

Yeah, well I think as you’ve said, ex-UK, Canada, Australia, I think it would actually be more of a content discussion and less of a subscriber growth discussion. As it happened, we told you folks a few months ago you that we signed Berlin, we’re actually starting to digitize images in Berlin now, and then subsequent to that Mines has signed with us and other archives following the lead of Berlin have started to sign on, so we’ve actually, I would say in a modest way, started to pick up speed in our acquisition effort in Germany. That’s probably the biggest development internationally.

Mark Mahaney – Citigroup

Okay. Thank you, Howard. Thank you, Tim.

Operator

And we will take our next question from Gene Munster with Piper Jaffray.

Gene Munster – Piper Jaffray

Hey, good afternoon. Ancestry has been a lot in the press lately, in that every week kind of have a different story out there in terms of the future equity structure. And is there anything that you can add Tim, about how we should think about some of these press reports?

Tim Sullivan

No, we read the newspapers also. We’ve seen them, I think we obviously we just never would be commenting on anything like that.

Gene Munster – Piper Jaffray

Okay, great. Thank you.

Operator

(Operator Instructions) And we will take our next question from Mitch Bartlett with Craig-Hallum Cap Group.

Mitch Bartlett – Craig-Hallum Cap Group

John for Mitch. Just a couple of questions on DNA. Wondering if you could talk about when you expect to launch the product to the general public?

Tim Sullivan

Great question. I think the answer is, I don’t -- I’m not able to give you all a date because I think we are still looking at our options on that ourselves. I mean, there is a lot of demand from existing subscribers. And so there is some strong impetus to want to try to satisfy as much of that demand as possible. I think, just to state the obvious, I mean right now our volume is at least at this stage constrained by fulfillment realities and not by demand. But I don’t think we -- even internally – we do not have a firm date yet as to when we will make this available broadly to non-subscribers.

Mitch Bartlett – Craig-Hallum Cap Group

Okay. And then maybe it’s too early, but do you expect pricing to, I mean, if demand is so strong, do you expect pricing to change when it gets introduced to the general public?

Tim Sullivan

Well, I think, again it’s too early to say. I think we’re very comfortable that we have a, like really great value at the current price point. And clearly the cost structure of a business like this is going to likely to continue to come down. But we think that $99 is a pretty sweet price point and really don’t have any plans to modify that pricing, at least plans at this point any time soon.

Mitch Bartlett – Craig-Hallum Cap Group

Okay, great. And just one last one. There isn’t any sort of plan right now for the ties in DNA with the subscription product, is there? It’s just that $99 offering. And if not, is that something that could, I know you talked a bit ago about testing different pricing structures. Is tying it with DNA something that could be introduced at some point?

Tim Sullivan

Well, let me say two things, right. If I understand the question, one. I think maybe this isn’t your question, but I’ll make a point that the DNA experience, it makes one subscription far more interesting and better and richer. I mean, it’s just another form of new discoveries and another form of content. So, one of the things we’ll be doing over the next six months or a year is actually trying to quantify and measure the impact on existing subscriber customer satisfaction and even their retention metrics to see whether, as our thesis would advance, that DNA will actually help both of those.

I think the real nut of your question is probably about how we might bundle or price these things together. And I don’t think I would provide a specific sense of that other than to say we definitely believe there’s an opportunity to do that. And it’s quite likely to be sort of part of that rollout as we make this service available to a broader and broader audience beyond just our existing subscriber base.

Mitch Bartlett – Craig-Hallum Cap Group

All right, that’s helpful. Thank you.

Operator

And we will take a follow-up question from Martin Pyykkonen with Wedge Partners.

Martin Pyykkonen – Wedge Partners

Yeah, thanks again. Follow up on the TV side, I know you don’t want to say a lot of detail, but know your tone of comments at different times, you sound like you still believe in the format. So I get two questions related to it. The NBC show as you had it, was that a pretty minimal investment from your part, obviously owned by Shed, but just on an ongoing basis, pretty minimal in terms of what you put into it? And secondly, as you look forward, regardless of whatever platform it might be, cable or broadcast or something else, are you entertaining or would you consider having more of an interest in terms of the investment side and equity participation with whoever another partner might be, or would you prefer to keep your investment pretty minimal?

Tim Sullivan

Yeah, look, I mean I think in terms of the magnitude of the investment, I think Howard covered that, right when he said it was about 5% to 7% of our media budget last year. So that’s not zero, but that’s pretty minimal. I think we’ve always said that the right kind of show, with the right kind of distribution and the right kind of economics can be great marketing for us. But none of it is “it must have marketing” and I think we would just be very careful, we would just be very disciplined in sort of evaluating various opportunities. I think with respect to structure and ownership and Who Do You Think You Are?, a different show, I just won’t go there. I think it’s just not appropriate for us to be talking generally about sort of the specific strategy that we might or might not want to pursue as we move forward.

Martin Pyykkonen – Wedge Partners

Okay. Thanks.

Operator

And that does conclude our question and answer session. I will turn the call over to Mr. Aaron Felix.

Aaron Felix

We would like to thank you for your participation on our call today. As a reminder, a replay of the call will be available on the company’s Investor Relations website. Again, thank you for your time and we look forward to speaking with you again next quarter.

Operator

Ladies and gentlemen, that does conclude today’s conference. We appreciate your participation.

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