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LifeLock Announces 2012 Fourth Quarter And Year-End Results

We have included adjusted net income (loss), adjusted net income (loss) per share, and adjusted EBITDA in this press release because they are key measures used by us to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget, and to develop short- and long-term operational plans. In particular, the exclusion of certain expenses in calculating adjusted net income (loss) and adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business. Additionally, adjusted EBITDA is a key financial measure used in determining management’s incentive compensation.

We have included free cash flow in this press release because it typically presents a more conservative measure of cash flow as purchases of property and equipment are necessary components of ongoing operations. We believe that this non-GAAP financial measure is useful in evaluating our business because free cash flow reflects the cash surplus available to fund the expansion of our business after payment of capital expenditures relating to the necessary components of ongoing operations. We also believe that the use of free cash flow provides consistency and comparability with our past financial performance, facilitates period-to-period comparisons of operations, and also facilitates comparisons with other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results.

Although adjusted net income (loss), adjusted EBITDA, and free cash flow are frequently used by investors in their evaluations of companies, these non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. Because of these limitations, these non-GAAP financial measures should be considered alongside other financial performance measures.

We have not reconciled adjusted net income per share guidance to net income per share guidance or adjusted EBITDA guidance to net income guidance because we do not provide guidance for share-based compensation expense, provision for income taxes, interest income, interest expense, change in fair value of warrant liabilities, change in fair value of embedded derivatives, other income and expenses, depreciation expense or amortization of intangible assets, which are reconciling items between net income (loss) and adjusted net income and net income (loss) and adjusted EBITDA. As items that impact net income (loss) are out of our control and/or cannot be reasonably predicted, we are unable to provide such guidance. Accordingly, reconciliation to net income (loss) is not available without unreasonable effort. For a reconciliation of historical non-GAAP financial measures to the nearest comparable GAAP measures, see the reconciliation tables included in this press release.

Supplemental Financial Information
                 
LifeLock, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(Unaudited)
 

Three Months Ended December 31,

   

Twelve Months Ended December 31,

2012 2011 2012 2011
Revenue
Consumer revenue $ 70,775 $ 52,955 $ 254,678 $ 193,949
Enterprise revenue   8,041     -     21,750     -  
Total revenue 78,816 52,955 276,428 193,949
Cost of services   22,189     16,151     79,916     62,630  
Gross profit 56,627 36,804 196,512 131,319
Expenses:
Sales and marketing 31,558 21,025 122,989 91,217
Technology and development 8,607 4,382 29,543 17,749
General and administrative 8,795 4,397 24,629 17,510
Amortization of acquired intangible assets   1,967     -     6,258     -  
Total expenses   50,927     29,804     183,419     126,476  
Income from operations 5,700 7,000 13,093 4,843
Other income (expense):
Interest expense (1,538 ) (16 ) (3,677 ) (231 )
Interest income 24 1 30 8
Change in fair value of warrant liabilities - (4,534 ) 3,117 (8,658 )
Change in fair value of embedded derivative - - (2,785 ) -
Other   (2 )   (5 )   (5 )   (5 )
Total other income (expense)   (1,516 )   (4,554 )   (3,320 )   (8,886 )
Income (loss) before provision for income taxes 4,184 2,446 9,773 (4,043 )
Income tax (benefit) expense   104     118     (13,730 )   214  
Net income (loss) 4,080 2,328 23,503 (4,257 )
Accretion of convertible redeemable preferred stock (419 ) (2,922 ) (9,378 ) (18,926 )

Beneficial conversion feature on convertible  redeemable preferred stock

(2,452 ) - (2,452 ) -

Net income allocable to convertible redeemable  preferred stockholders

(55 ) - (5,504 ) -

Net income available (loss attributable) to common  stockholders

$ 1,154 $ (594 ) $ 6,169 $ (23,183 )
 

Net income available (loss attributable) per share to  common stockholders:

Basic $ 0.01 $ (0.03 ) $ 0.18 $ (1.24 )
Diluted $ 0.01 $ (0.03 ) $ 0.09 $ (1.24 )
Weighted-average common shares outstanding:
Basic 85,458 18,925 35,082 18,725
Diluted 90,839 18,925 62,191 18,725
 
LifeLock, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
         
December 31,
2012 2011
Assets
Current assets:
Cash and cash equivalents $ 134,197 $ 28,850
Restricted cash - 398
Trade and other receivables, net 7,560 1,446
Prepaid expenses and other current assets   5,753     5,637  
Total current assets 147,510 36,331
Property and equipment, net 9,701 4,049
Goodwill 129,428 -
Intangible assets, net 51,242 -
Other non-current assets   1,707     1,680  
Total assets $ 339,588   $ 42,060  
 
Liabilities, convertible redeemable preferred stock and stockholders’ equity (deficit)
Current liabilities:
Accounts payable $ 1,151 $ 4,084
Accrued expenses and other liabilities 27,329 18,300
Deferred revenue   90,877     70,020  
Total current liabilities 119,357 92,404
Other non-current liabilities 265 521
Preferred stock warrant liabilities   -     18,195  
Total liabilities 119,622 111,120
Commitments and contingencies
Convertible redeemable preferred stock - 145,207
Stockholders’ deficit:
Common stock 87 19
Additional paid-in capital 439,883 17,391
Accumulated deficit   (220,004 )   (231,677 )
Total stockholders’ equity (deficit )   219,966     (214,267 )
Total liabilities, convertible redeemable preferred stock and stockholders’ equity (deficit) $ 339,588   $ 42,060  
 
LifeLock, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
         

Twelve Months Ended December 31,

2012 2011
Operating activities
Net income (loss) $ 23,503 $ (4,257 )
Adjustment to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 10,427 3,740
Write-off of deferred financing costs from early payoff of debt 1,443 -
Share-based compensation 6,758 3,285
Provision for doubtful accounts 46 (28 )
Change in fair value of warrant liabilities (3,117 ) 8,658
Change in fair value of embedded derivative 2,785 -
Deferred income tax benefit (14,185 ) -
Other 5 5
Change in operating assets and liabilities:
Trade and other receivables (2,766 ) (1,067 )
Prepaid expenses and other current assets 1,334 (901 )
Other non-current assets (1,305 ) (287 )
Accounts payable (2,945 ) 1,677
Accrued expenses and other liabilities 5,913 542
Deferred revenue 20,782 13,440
Other non-current liabilities   (255 )   (463 )
Net cash provided by operating activities 48,423 24,344
 
Investing activities
Acquisition of ID Analytics, net of cash acquired (157,430 ) -
Acquisition of property and equipment (7,498 ) (2,031 )
Decrease in restricted cash   1,748     500  
Net cash used in investing activities (163,180 ) (1,531 )
 
Financing activities
Proceeds from:
Term loan 68,000 -
Initial public offering, net of offering costs 125,663 -
Issuance of convertible redeemable preferred stock, net of offering costs 102,165 -
Issuance of warrants 4,373 -
Stock option exercises 298 1,752
Payments for:
Term loan (68,000 ) -
Revolving line of credit - (13,010 )
Obligations under capital lease - (154 )
Distribution to Series E-1 Preferred Stock Holders on IPO (10,719 ) -
Debt issuance costs   (1,676 )   (132 )
 
Net cash provided by (used in) financing activities   220,104     (11,544 )
 
Net increase in cash and cash equivalents 105,347 11,269
Cash and cash equivalents at beginning of period   28,850     17,581  
 
Cash and cash equivalents at end of period $ 134,197   $ 28,850  
 
Share Based Compensation
(in thousands)
(Unaudited)
           

Three Months Ended December 31,

 

Twelve Months Ended December 31,

2012 2011 2012 2011
Cost of services $ 211 $ 75 $ 648 $ 309
Sales and marketing 341 207 1,053 655
Technology and development 503 223 1,711 783
General and administrative   1,709   418   3,346   1,538
Total share-based compensation expense $ 2,764 $ 923 $ 6,758 $ 3,285
 
Key Financial Metrics
(in thousands)
(Unaudited)
         

 

 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

2012 2011 2012 2011
Revenue
Consumer revenue $ 70,775 $ 52,955 $ 254,678 $ 193,949
Enterprise revenue   8,041   -   21,750   -
Total revenue 78,816 52,955 276,428 193,949
Adjusted net income 8,936 7,785 22,002 7,686
Adjusted EBITDA 11,404 8,927 30,278 11,868
Free cash flow 3,710 5,546 40,925 22,313
Key Operating Metrics
(in thousands, except percentages and per member data)
(Unaudited)
           

Three Months Ended December 31,

 

Twelve Months Ended December 31,

2012 2011 2012 2011
Cumulative ending members 2,480 2,075 2,480 2,075
Gross new members 198 206 762 704
Member retention rate 87.1 % 82.7 % 87.1 % 82.7 %
Average cost of acquisition per member $ 142 $ 103 $ 150 $ 130
Monthly average revenue per member $ 9.68 $ 8.67 $ 9.28 $ 8.54
Enterprise transactions 64,265 56,421 227,039 184,012
 
Reconciliation of Net Income (Loss) to Adjusted Net Income
(in thousands, except per share amounts)
(Unaudited)
                 

Three Months Ended December 31,

   

Twelve Months Ended December 31,

2012 2011 2012 2011
Net income (loss) $ 4,080 $ 2,328 $ 23,503 $ (4,257 )
Amortization of acquired intangible assets 1,967 - 6,258 -
Change in fair value of warrant liabilities - 4,534 (3,117 ) 8,658
Change in fair value of embedded derivative - - 2,785 -
Tax benefit from acquisition 125 - (14,185 ) -
Share-based compensation   2,764   923   6,758     3,285  

Adjusted net income

$ 8,936 $ 7,785 $ 22,002   $ 7,686  
 

Adjusted net income available per   share to common stockholders:

Non-GAAP Basic $ 0.10 $ 0.16 $ 0.33 $ 0.16
Non-GAAP Diluted $ 0.10 $ 0.15 $ 0.30 $ 0.15
Weighted average common shares outstanding:
Non-GAAP Basic 85,458 48,165 66,381 47,965
Non-GAAP Diluted 92,174 53,064 72,575 52,410
 
Reconciliation of Diluted Shares to Non-GAAP Diluted Shares
(in thousands)
(Unaudited)
                 

Three Months Ended December 31,

   

Twelve Months Ended December 31,

2012 2011 2012 2011
Diluted shares 90,839 18,925 62,191 18,725
Assumed preferred stock conversion 1,335 29,240 8,770 29,240
Dilutive securities excluded due to net loss - 4,899 3,586 4,445
Other dilutive equity awards excluded - - (1,972 ) -
Non-GAAP diluted shares 92,174 53,064 72,575   52,410
 
Reconciliation of Diluted EPS to Non-GAAP Diluted EPS
(Unaudited)
                 

Three Months Ended December 31,

   

Twelve Months Ended December 31,

2012 2011 2012 2011
GAAP diluted earnings (loss) per share $ 0.01 $ (0.03 ) $ 0.09 $ (1.24 )
Net income attributable to participating securities 0.03 0.06 0.25 0.36
Non-GAAP adjustments to net income 0.06 0.10 (0.02 ) 0.23
Non-GAAP adjustments to diluted shares   -   0.02     (0.02 )   0.80  
Non-GAAP diluted adjusted net income per share $ 0.10 $ 0.15   $ 0.30   $ 0.15  
 
Reconciliation of Net Income (Loss) to Adjusted EBITDA
(in thousands)
(Unaudited)
                 

Three Months Ended December 31,

   

Twelve Months Ended December 31,

2012 2011 2012 2011
Net income (loss) $ 4,080 $ 2,328 $ 23,503 $ (4,257 )
Depreciation and amortization 2,940 1,004 10,427 3,740
Interest expense 1,538 16 3,677 231
Interest income (24 ) (1 ) (30 ) (8 )
Change in fair value of warrant liabilities - 4,534 (3,117 ) 8,658
Change in fair value of embedded derivative - - 2,785 -
Other income and expense 2 5 5 5
Income tax (benefit) expense 104 118 (13,730 ) 214
Share-based compensation   2,764     923     6,758     3,285  
Adjusted EBITDA $ 11,404   $ 8,927   $ 30,278   $ 11,868  
 
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow
(in thousands)
(Unaudited)
                 

Three Months Ended December 31,

   

Twelve Months Ended December 31,

2012 2011 2012 2011
Net cash provided by operating activities $ 7,702 $ 6,103 $ 48,423 $ 24,344
Acquisitions of property and equipment   (3,992 )   (557 )   (7,498 )   (2,031 )
Free cash flow $ 3,710   $ 5,546   $ 40,925   $ 22,313  
 




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