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Edited Transcript of CRCM earnings conference call or presentation 3-May-17 12:00pm GMT

Thomson Reuters StreetEvents

Q1 2017 Care.com Inc Earnings Call

Waltham Aug 12, 2017 (Thomson StreetEvents) -- Edited Transcript of Care.com Inc earnings conference call or presentation Wednesday, May 3, 2017 at 12:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Denise Garcia

ICR, LLC - MD

* Michael Echenberg

Care.com, Inc. - CFO and EVP

* Sheila Lirio Marcelo

Care.com, Inc. - Founder, Chairwoman, CEO and President

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Conference Call Participants

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* Blake Thomas Harper

Loop Capital Markets LLC, Research Division - Analyst

* Christian Kerrigan Rice

Needham & Company, LLC, Research Division - Senior Analyst of Internet and Digital Media

* Darren Paul Aftahi

Roth Capital Partners, LLC, Research Division - Senior Research Analyst

* Jason Michael Kreyer

Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst

* Neeraj S. Kookada

JP Morgan Chase & Co, Research Division - Analyst

* Ryan Chusid Goodman

BofA Merrill Lynch, Research Division - Research Analyst

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Presentation

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Operator [1]

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Greetings, and welcome to the Care.com First Quarter 2017 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Ms. Denise Garcia, Investor Relations for Care.com. Thank you. You may begin.

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Denise Garcia, ICR, LLC - MD [2]

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Thank you. Good morning, and welcome to Care.com's financial results call for the first quarter ended April 1, 2017. During the course of this conference call, we will discuss our business outlook and make other forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These may include, among other things, projected financial results or operating metrics, anticipated business and marketing investments and strategies and expected results of those investments and strategies, anticipated future products or services, anticipated market demand or opportunities for our products and services and other forward-looking topics. Such statements are only predictions based on management's current expectations. Actual results or events could differ materially from those projections due to a number of risks and uncertainties, including those set forth in the press release we issued today as well as those more fully described in our filings with the Securities and Exchange Commission.

In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our views change. Therefore, you should not rely on these forward-looking statements as representing our views as of any date subsequent to today.

We will also be referring to non-GAAP measures on this call, including adjusted EBITDA, which we refer to as EBITDA, throughout this presentation. This measure represents pretax net income or loss from continuing operations, excluding the accretion of preferred stock dividends, less depreciation and amortization as well as certain other unusual expenses and noncash adjustments, such as stock-based comp, M&A and restructuring costs.

We also refer to non-GAAP EPS, which represents net income or loss, less certain unusual or noncash expenses, such as stock-based comp, M&A and restructuring costs. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles. Reconciliations to the most directly comparable GAAP financial measures are provided in the tables in the press release and Form 10-Q filed today.

We will also be referring to profitability on this call. When we refer to profitability, we're referring to it on an adjusted EBITDA basis, unless otherwise noted. Today's call is available via webcast and a telephone replay will be available for 2 weeks following the conclusion of the call. To access the press release, supplemental and financial information or the webcast replay, please consult the IR section of Care.com.

With that, let me turn the call over to Sheila Lirio Marcelo, Founder, Chairwoman and CEO of Care.com.

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Sheila Lirio Marcelo, Care.com, Inc. - Founder, Chairwoman, CEO and President [3]

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Thank you, Denise. Good morning, and thank you to everyone for joining us. On today's call, I will walk you through our financial highlights for the first quarter and then I will provide an update on our core businesses. Michael will then follow with more detail on our financial performance in the first quarter and provide guidance for Q2 and the full year. Then we will open the call up to your questions.

We're off to a strong start to 2017 with first quarter revenue in EBITDA ahead of our expectations, healthy cash generation and solid gains in membership. Thus, we are raising our guidance for the year on revenue, EBITDA and ending cash.

For the first quarter, total revenue was $43.4 million, exceeding our guidance and growing 10% versus the first quarter of 2016.

Q1 EBITDA of $3.1 million also exceeded our guidance driven by flow-through from the revenue beat and the timing of certain expenses, as Michael will describe later. The first quarter marks our sixth straight quarter of profitable growth. And as our Q1 results indicate, we're making progress toward our long-term EBITDA margin target of 20% to 25%.

During the quarter, we continued to achieve leverage across all areas of our business, while focusing on initiatives that drive long-term growth.

I'll now review our first quarter activities across our core businesses and initiatives starting with Care@Work. As we noted last quarter, we continue to scale the Care@Work business, which as a reminder is our enterprise-focused B2B offering. We're confident in our ability to do this as we continue to garner high revenue renewal rates of 100% plus and increase both the breadth and depth of our service across multiple industries.

Renewing clients in Q1 included Akamai Technologies, Under Armour and the Dana-Farber Cancer Institute. New clients included Procter & Gamble, Boston Scientific and Swiss Re. Our Net Promoter Score for our Care@Work backup care offering remained high at 71% in Q1 of 2017. This was driven by our innovative mobile product experience along with our HR dashboard in the support of our customer service team. As such, we remain focused on our goal of driving accelerated bookings growth in 2017 and increased revenue growth in 2018. We saw bookings growth of 46% in Q1 versus Q1 2016 and continue to expect it to be north of 70% for the full year. Care@Work revenue growth in Q1 was 38% versus prior.

Moving on to our US Consumer business. We saw Q1 revenue of $35.2 million, up 10% versus the first quarter of 2016, which exceeded our expectation. The key contributor was faster than expected growth versus prior and paying families as well as ARPU growth, which Michael will describe later.

As of the end of Q1, paying families were up 6.6% versus prior, an improvement of over 4 percentage points relative to year-end 2016 and exceeded our guidance by 2.6 percentage points. This was driven by our investments in organic growth and longer-term package testing combined with our progress in mobile optimization. Our priority in 2017 is to continue with our testing and learning to further strengthen our subscription offering for the long term.

Now moving into sales and marketing, which we continue to leverage as we focus on unpaid organic traffic growth and ongoing optimization of our paid channels. As a percentage of revenue, sales and marketing was 44% in Q1, a 6 percentage point decrease versus the first quarter of 2016.

One of the key contributors to further sales and marketing leverage is the increase in overall organic traffic, driven by our ongoing investments in community and content. In Q1, we saw 58% year-over-year growth in organic search traffic, which combines low-intent and high-intent traffic.

In addition, we continue to optimize across all paid channels with ongoing efficiency gains in TV and SEM. And learnings from 2016 helped us spend more efficiently in certain test channels including Hulu, Pinterest and YouTube. We expect to see additional moderate gains in S&M leverage in 2017, relative to 2016, thereby further improving the overall profitability of our business, which Michael will discuss later.

With the progress we've seen in our efforts in organic growth, package testing and mobile optimization, we're investing more in our product experience. Over the past 9 months, we've been developing plans for what we're calling Care 3.0, an entirely new end-to-end mobile first experience, that focuses not only on improving our matching experience, but also in providing services to our members beyond the match, or what we refer to in the past as the pre-match and post-match experiences.

In Q2, we're focused on updating the interactive design of our mobile products to make them easier to use as well as improving our matching algorithm and messaging platform. And in the second half of this year, we plan to geographically test new family and provider mobile experiences in child care. With these initiatives, we're excited not only about the longer-term opportunity to continue to grow the top of our funnel and member conversion, but also about extending member LTV.

Given the ongoing testing that we have planned, we anticipate limited incremental paying families' growth for the remainder of the year. Touching briefly now on the home pay, part of our US Consumer business. We saw paying families increase from 19,000 at the end of 2016 to 22,000 at the end of Q1 on the back of a strong tax season.

As a reminder, last quarter, we announced a collaboration with Intuit to migrate its subscribers to HomePay as it wound down its household payroll and tax service. That migration is largely complete now with some final signing and onboarding of clients expected in Q2.

In summary, we're off to a strong start to the year, as we continue to focus on initiatives that drive long-term sustainable growth. We're excited about our future and are on track with our expectations to expand our margin in 2017 and continue to grow profitably, driving toward our long-term EBITDA margin target of 20% to 25%, which we believe will increase shareholder value while we further strengthen what is today the largest two-sided network for finding and managing family care in the home.

In addition, we have the highest unaided brand awareness among families seeking child care help at 8x our nearest competitor. This clear market leadership position gives us a significant advantage as we go after the 46 million households in our addressable market in the U.S. alone.

Now I'll turn the call over to Michael before we open it up to questions.

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Michael Echenberg, Care.com, Inc. - CFO and EVP [4]

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Thank you, Sheila. I'll now provide more color on our results, starting with revenue, which was $43.4 million in the first quarter, an increase of 10% versus Q1 2016 revenue of $39.3 million and which exceeded the high-end of our guidance range.

The US Consumer business grew 10% versus prior to $35.2 million for the quarter compared to $32.1 million in the first quarter of last year. Within that, US Matching increased 7% from $25.4 million in Q1 of 2016 to $27.2 million this year.

As Sheila noted, we benefited from faster-than-expected growth in paying families. While we found some winners in Q1 in mobile enrollment and organic and thereby exceeded our guidance for paying families growth, our plan is to continue to carve out traffic to test iteratively as Sheila laid out. This maps to our current expectation that paying families growth will remain in the high single digits for the remainder of this year.

Payments revenue increased 19% versus prior from $6.8 million in Q1 of '16 to $8 million this quarter, helped by a strong tax season and by the new Intuit customers that migrated over in the back half of last year.

ARPU growth also contributed in the quarter. It grew 4% versus prior to $41.45 from $39.75 in Q1 of 2016. While this helped Q1, we continue to expect ARPU for the full year to be roughly flat to last year, given 2 offsetting dynamics, which we described.

Value-added services like background checks pushed ARPU up while an ongoing mix shift to longer-term packages pushes ARPU down. As we have discussed, this mix shift adds to retention and thereby increases LTV.

Our other businesses, which include International, Care@Work and Marketplace, grew 14% to $8.2 million for the quarter compared to $7.2 million in the same period last year. Care@Work continues as a source of strength with revenue growth versus prior of 38% and bookings growth versus prior of 46%.

As a reminder, as Care@Work continues to grow quickly, there is a lumpiness to its trajectory common to businesses at its stage.

Now onto EBITDA. Q1 marked our sixth consecutive quarter of EBITDA profitability. And we remain committed to driving shareholder value through sustained profitable growth. For Q1, EBITDA was $3.1 million and margin increased by about 3 percentage points to 7% versus the prior year quarter.

Note that the EBITDA beat relative to our guidance was driven mainly by flow-through from the revenue beat and by expense timing changes with ongoing cost management efforts also playing a role.

Net income attributable to common stockholders for the first quarter was $0.3 million as compared to $6.8 million in Q1 of 2016. As a reminder, we're cycling here against the benefit of the Citrus Lane settlement in Q1 of 2016.

Before I discuss EPS, I'll provide color on our continued cost discipline. First, sales and marketing. In the quarter, we reduced sales and marketing as a percent of revenue by 6 percentage points from 50% in Q1 2016 to 44% in Q1 2017. We also increased leverage on the G&A line. As a percent of revenue G&A fell about 1 percentage point versus prior to 19%.

R&D increased year-over-year as we continue to invest in innovation at the core childcare consumer experience, notably through Care 3.0, as Sheila described. Q1 gross margin was 80%, down about 180 basis points from Q1 of 2016.

The primary driver was faster growth relative to the rest of the company in Care@Work. Care@Work gross margin is structurally lower than overall Care.com's. That said, we're starting to see margin benefit here from higher prices and the operational improvements we're making to drive down Care@Work variable unit costs. The other factor affecting total company gross margin in Q1 was the 30% fee that goes to Apple for subscriptions purchased through the iOS app. As a reminder, we turned on in app conversion in Q1 of 2016.

As a general matter, while we expect to continue to evolve our business model beyond the matching subscription fees we charge families, we will remain thoughtful in managing our cost structure to limit the impact on gross margin. As an example, we're leveraging technology to streamline in the vetting of jobs and profiles.

Moving now to EPS. For the quarter, GAAP EPS from continuing operations was positive a penny, up from negative $0.03 in the first quarter of 2016. Non-GAAP EPS was positive $0.07 as compared to our guidance of $0.02 to $0.03. This performance relative to guidance was driven primarily by flow-through from EBITDA.

Regarding cash and short-term investments. We ended the quarter with a balance of $81.3 million, up from $76.1 million at the end of Q4 2016. This healthy increase came mainly from the $3.1 million of EBITDA with changes in working capital and stock option exercises making up the rest.

Turning now to guidance, starting with revenue. We are raising full year 2017 revenue guidance to $171 million to $173 million with growth at the midpoint of 8% versus 2016 apples-to-apples that is excluding 2016's 53rd week. For the second quarter, we're guiding revenue to $41 million to $41.5 million.

Now EBITDA. We're raising full year adjusted EBITDA guidance to $19.5 million to $21.5 million. Given the increase in guidance in both the top and bottom lines, full year EBITDA margin at the midpoint remains unchanged at 12%, up from 8% in 2016. The midpoint represents full year EBITDA growth of 63% versus 2016 apples-to-apples.

We expect to continue on our trajectory of sustained profitability and expanding EBITDA margins as we focus investment dollars on core initiatives and manage the pace of expenses everywhere else. With respect to the shape of the year on EBITDA, we're expecting lower margins earlier in the year given typical seasonality and the timing of the product investments that we've discussed.

For Q2, we're guiding to $1.25 million to $1.75 million. Note that the shape of Q2 versus Q1 is driven in large part by the change in timing of certain expenses.

Note also that the benefit to Q1 of our ongoing cost management efforts affords us the opportunity to invest a little more in the critical long-term growth initiatives that Sheila described as the year progresses.

For full year non-GAAP EPS, we're guiding to $0.35 to $0.38, up $0.02 at each end versus our previous guidance. This is based on an expectation of a bit more than $37 million weighted average diluted shares outstanding for the year, consistent with the increase in full year EBITDA guidance.

For the second quarter, we're guiding to non-GAAP EPS of between $0.01 and $0.02 with an expectation of about $37 million weighted average diluted shares outstanding.

Now briefly on FX. For the balance of 2017, we're expecting the euro to average $1.06 and the pound to average $1.23. 5% in either direction for both represents about $0.5 million of revenue, $100,000 of adjusted EBITDA and roughly $0.02 of non-GAAP EPS.

As a reminder, the non-GAAP EPS sensitivity here includes the impact of revaluing balance sheet items denominated in foreign currencies.

Finally, onto cash. We're raising our expectation for cash and short-term investments at the end of 2017 to $97 million. This represents an increase of about $21 million relative to the $76 million at the end of 2016.

Now to wrap up before opening up to questions. We're off to a solid start to the year with a focus on strategic initiatives to drive long-term profitable growth. We remain focused on these initiatives, including developing the next-generation Care.com consumer offering to capture ever more of our larger market opportunity. We're entering Q2 with momentum as we close a better-than-expected Q1. With that, I'll open the call to your questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question today comes from Jason Kreyer of Craig-Hallum.

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Jason Michael Kreyer, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [2]

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Wondering if you can give any updates on the transactional business. I know you had that in geographic beta testing in Q1 and then just wondering if you have any thoughts coming out of that. And then, also, if you're wrapping that into this Care 3.0 rollout or if that will be maintained separately?

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Sheila Lirio Marcelo, Care.com, Inc. - Founder, Chairwoman, CEO and President [3]

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Jason, you're absolutely right that -- as we've discussed in our prepared remarks, we've been very focused on the development of Care 3.0 and that is that end-to-end mobile experience that includes both the pre-match and post-match experiences of which we expect transactions to be a complete component of that.

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Jason Michael Kreyer, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [4]

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Okay. On the different tools that you rolled out last year for caregiver monetization and I know you gave some color on the benefits from the tax season and the benefits from the Intuit integration there. But just wondering if there's anything you can point to following the benefits enrollment and the tax season ending. On what you saw from utilization across caregivers?

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Sheila Lirio Marcelo, Care.com, Inc. - Founder, Chairwoman, CEO and President [5]

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Continues to be positive. We continue to invest in overall provider experience and continuing to do that especially in the second half. And we're happy to share more as we gain more learnings around those investments.

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Jason Michael Kreyer, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [6]

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Okay. Last one from me. Michael, you referenced expense timing changes. Is that all related to the rollout of Care 3.0 or is there something else baked into that?

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Michael Echenberg, Care.com, Inc. - CFO and EVP [7]

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Certainly, Care 3.0 is an element of it. As you think about the boundary between Q1 and Q2, there are a lot of expenses that line up snug against that boundary. And there were places where the right decision for the business was for those dollars to come in Q2 rather than Q1. And so it's Care 3.0, but other expenses as well.

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Operator [8]

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Our next question comes from Darren Aftahi of Roth Capital Partners.

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Darren Paul Aftahi, Roth Capital Partners, LLC, Research Division - Senior Research Analyst [9]

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Just two if I may. Can you give us kind of an update on performance with your enterprise sales team and just given kind of your cash balance continues to grow, is there any plans for incremental investment there or other places? And then just the effectiveness on your pay channel sort of TV versus other, it sounds like you're definitely skewing towards SEM, but also some social channels, any update there would be helpful.

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Sheila Lirio Marcelo, Care.com, Inc. - Founder, Chairwoman, CEO and President [10]

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Darren, let me start with the paid channel question. Yes, we're continuing to see optimization that we're doing on TV and SEM. So we're funneling more dollars to scale other digital channels like Pinterest, YouTube and Hulu, which we've shared in our prepared remarks. So continuing to constantly focus on our 3x ROI around our pay channels. Now let me turn it over to Michael on the Care@Work question.

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Michael Echenberg, Care.com, Inc. - CFO and EVP [11]

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Yes, with respect to Care@Work, as we've described part of the story over the course of the last 12 to 18 months was adding new salespeople going from the mid-single digits to the very low, call it, double digits of salespeople. And so over the course of this year, we're seeing the new salespeople ramp. And that's really at the heart of the dynamic, whereby you're seeing faster growth right now in bookings than in revenue. Typically, a new enterprise salesperson takes about 9 months to ramp. And we're not seeing anything different so far from this latest crop. And then related to your other question with respect to cash. Yes, we're very pleased with the cash generation of the business. And it does afford us flexibility as we look ahead. We don't have any specific plans to share. We're focused laser-like on our product development roadmap right now.

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Darren Paul Aftahi, Roth Capital Partners, LLC, Research Division - Senior Research Analyst [12]

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And just lastly as a follow up on your sales force commentary. Has sales cycle, sort of conversation towards relative to bookings, has that shortened maybe in the last 6 to 9 months?

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Michael Echenberg, Care.com, Inc. - CFO and EVP [13]

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I wouldn't say it's shortened especially. The overwhelming dynamic right now is, it's the fastest-growing part of our business. And with the addition of new salespeople, you see some daylight between bookings growth and revenue growth. But with respect to the dynamics around any 1 deal, I’d say the characteristics remain broadly the same.

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Operator [14]

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The next question comes from Doug Anmuth of JP Morgan.

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Neeraj S. Kookada, JP Morgan Chase & Co, Research Division - Analyst [15]

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This is Neeraj, on for Doug. So just wanted to touch base on the B2B and International business. It looks like the growth has moderated a bit this quarter? Could you give any color here and will this be like the growth levels to expect in the future?

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Michael Echenberg, Care.com, Inc. - CFO and EVP [16]

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I would say, with respect to the growth of those businesses, I've just been characterizing Care@Work. I guess, I would want just for reference in addition to the substantive point around the ramping business and the relationship between bookings growth and revenue growth, I would just remind folks that when you look at Q1 versus Q4, it's important to take into account that Q4 had an extra week given the 53 weeks of 2016. And so when you look at the delta versus prior of certain business units, in particular in Q1 versus Q4, you see that dynamic at work. And so with respect to Care@Work, I feel like that question is answered. With respect to International, the International consumer business is subject to a lot of the same dynamics as the US Consumer business. And as Sheila has described, we take advantage of the portfolio of markets that we have to test and learn and port winners across national boundaries. And we expect to continue to do that as we move forward.

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Operator [17]

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Your next question is from Kerry Rice of Needham.

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Christian Kerrigan Rice, Needham & Company, LLC, Research Division - Senior Analyst of Internet and Digital Media [18]

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My first question is on around mobile. Figuring around the matching business, I think that you mentioned that mobile enrollment was better-than-expected that helped push up the number of paying families. Can you talk a little bit about, number one, maybe how much of the traffic is mobile today. And two, I know in the past the monetization on mobile has been below what you have historically seen on desktop. Can you maybe update us on that? And then, one final question for Michael. Sales and marketing came down about 6%, you highlighted. I think it's about 44% for the quarter. Where do we think that, I don't remember what your long-term goal was or if you have disclosed that, but any color on where do you think that ultimately heads to say a 25% kind of sales and marketing business or any color there would be great.

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Sheila Lirio Marcelo, Care.com, Inc. - Founder, Chairwoman, CEO and President [19]

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Thanks, Kerry. On the mobile enrollment question first, well mobile today is about 70% of our traffic and continues to increase. And we are really doubling down as part of Care 3.0 of investing even more around a mobile-first experience end-to-end. And specifically a focus on childcare for the second half of this year. And we have seen in Q1 end-to-end, even with the testing that we did last year, improvements in the mobile enrollment flow as well as organic growth. And that includes both low intent and high intent, but as organic continues to grow and our efforts there around low intent traffic, we're constantly having to still improve up mobile. And at the same time, we are planning to take some of our traffic in the second half and do geographical testing to find other winners, specifically as we redesign and reimagine the experience. So that's part of the reason we believe beyond the 6.6% of end-of-period paying families, we think about a percentage -- 1 or 2 percentage points for the year in terms of our expectation, as we continue to focus on the long-term of the right product that we need to build for our members. Turning over to Michael on sales and marketing.

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Michael Echenberg, Care.com, Inc. - CFO and EVP [20]

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Yes, just to pick up briefly on what Sheila just said. So when she refers to 1 or 2 percentage points, what we have in mind is that being up plus 6.6% or plus 7% versus prior in paying families at the end of Q1, that's the metric that we expect to remain in the high single digits across the rest of the year. With respect to sales and marketing leverage, I would say, yes, obviously that has been an important feature of the gains that we've been making in EBITDA margin. With respect to 2017, as we mentioned in the prepared remarks, we would expect for the full year, there to be some benefits, some of that gain from 8% margins in 2016 to 12% at the midpoint of the guidance in 2017 is a function of leverage gains on the sales and marketing line. With respect to 2017, I will point out that some of what we refer to as the investment dollars related to Care 3.0 happened to hit the sales and marketing line. And so that is in there having an influence relative to what leverage might otherwise be. When we think about the shape of the P&L beyond 2017, we obviously haven't provided guidance beyond 2017, nor do we plan to in the near term. We have said that our long-term target range for EBITDA margin is 20% to 25%. We have said that we expect sales and marketing leverage to play a role in helping us to get there. And that maps to the long-term plans that Sheila has described around the impact of organic, the impact of generally of product improvements that will help us enlarge the top of the funnel and improve conversion. So without giving you a specific long-term sales and marketing as a percent of revenue figure, I think that helps you with some color.

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Operator [21]

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The next question is from Blake Harper of Loop Capital.

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Blake Thomas Harper, Loop Capital Markets LLC, Research Division - Analyst [22]

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I had a question about Care@Work. I wanted to understand what was driving more of the revenue there. Was it some better sign-ups on a per employee basis or was it some more of the kind of engagement with the assisted search product that you have. I just was trying to understand if more of it was some higher sign-ups or more kind of engagement from your customer base.

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Michael Echenberg, Care.com, Inc. - CFO and EVP [23]

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Yes, we haven't at this stage gone sort of deeply granular with respect to all of the drivers in that business, I'll say parenthetically that as we move forward, we expect to begin to provide more color. I will say that generally the drivers altogether are looking good. So the growth is in part a function of signing up new clients, it's in part a function of renewals that often come with a broadening and deepening of the relationship. Broadening meaning, more services and deepening meaning more pools of employees. And then with respect to the sort of price realization within a client that appears to be moving in a good direction as well.

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Sheila Lirio Marcelo, Care.com, Inc. - Founder, Chairwoman, CEO and President [24]

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And Blake, a couple of things to add there, as we shared in the prepared remarks. That's also driven -- I mean, it's driving the 100% revenue renewal rate, high 71% Net Promoter Score. And it just continues to be a good employee experience that we're very focused on and that involves the tools that we've launched over the past year as well as good customer service in servicing our employees.

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Operator [25]

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The next question comes from Justin Post of Bank of America Merrill Lynch.

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Ryan Chusid Goodman, BofA Merrill Lynch, Research Division - Research Analyst [26]

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This is Ryan Goodman. A question on mobile and the Apple fee, again. You had mentioned that 70% of traffic right now is coming from mobile. I'm not sure what data you can give. But is there any color you can give on the actual revenue exposure right now to mobile or just overall exposure to what's going to the Apple fee right now? And is that primarily just consumer matching, or is there any of the other segments? And then as Care 3.0 comes on later in the year, does that mean the transaction-based businesses are also going to be exposed to the Apple fee?

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Sheila Lirio Marcelo, Care.com, Inc. - Founder, Chairwoman, CEO and President [27]

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So on the first question with regards to mobile. A majority of it is really from mobile web rather than iOS. IOS and the app is still in the single-digits, Ryan. So in terms of overall revenue exposure, it's less. It certainly does impact gross margin, especially with that 30% tax, but it's still primarily through mobile web. But we're still continuing to be positive and bullish with improving engagement and experience through iOS and Android. So we're going to continue to invest in that as part of Care 3.0. And specifically, when it comes to a transaction fee and experience, that doesn't have the 30% tax, and you're probably aware of that. So as we continue to experiment on transactional fees through native app, we'll obviously gain additional learnings that we'll share with all of you. But it's mainly subscription that is tax today.

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Ryan Chusid Goodman, BofA Merrill Lynch, Research Division - Research Analyst [28]

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Okay. Great. And then just 1 follow-up on the payment business, both really strong user growth and ARPU growth. Can -- you had mentioned seasonality just with tax season as well as the Intuit transition. Can you help partial out the relative contribution of the 2, because I was a little surprised more on the ARPU upside, I would've thought there was some impact from the Intuit pricing, and it seems like you guys managed to work through that fairly well. Can you just help explain what happened there?

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Michael Echenberg, Care.com, Inc. - CFO and EVP [29]

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Look, I would say, at a high level, ARPU for that business has some seasonality to it. During tax filing, there are fees that move in 1 direction, you are right. Within that the impact of the Intuit folks at their lower price point is moving in the other direction. But I’d expect generally to see normalization and when we talk, just to map back to the prepared remarks, when we talk generally about ARPU over the course of the year being flat to prior, we're talking about that at the level of US Consumer, which combines U.S. Matching and Payments.

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Operator [30]

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There are no further questions at this time. So this will conclude today's teleconference. You may disconnect your lines. Thank you for your participation.