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Local Corporation Reports Second Quarter 2012 Financial Results

Second Quarter 2012 Operating Highlights :

Record Overall and Organic Traffic – Overall traffic on the site and network was a record 100.8 million monthly unique visitors (MUVs) in the second quarter 2012, up 7.7% from first quarter 2012 and up 21.6% from the year ago period. Organic traffic on the site and network was a record 38.6 million MUVs in the second quarter 2012, up 11.6% from the first quarter 2012 and up 25.3% from the year ago period. Organic traffic is defined as all non-SEM sourced traffic. Overall mobile traffic was 19.2 million MUVs in the second quarter 2012, up 60.0% from the first quarter 2012.

Asset and Liabilities Held for Sale – The company is currently exploring the divestiture of its Rovion business and the related assets and liabilities are now being classified as assets held for sale. As a result, the revenue and results of operations are excluded from net income (loss) from continuing operations in all periods presented.

Impairment Charge – During the second quarter of 2012, the company performed an impairment valuation of Spreebird goodwill and other intangible assets, resulting in a non-cash impairment charge of $6.5 million for the second quarter 2012. The indicators of impairment were primarily lower-than-expected revenue growth and the material decrease in the market capitalization of comparable public companies.

Consumer Properties:

Owned & Operated (O&O):

Revenue – Second quarter 2012 total revenue related to the O&O business unit was $20.5 million, up 116% from second quarter 2011 O&O revenue of $9.5 million and up 14% from first quarter 2012 O&O revenue of $18.0 million.

Monetization of Traffic – Revenue per thousand visitors (RKV) for second quarter 2012 was $299, up 54% from second quarter 2011 RKV of $194 and up 5% from first quarter 2012 RKV of $285.

Network:

• Revenue – Second quarter 2012 total revenue related to the Network business unit was $4.1 million, up 11% from the second quarter 2011 Network revenue of $3.7 million and down 2% from first quarter 2012 Network revenue of $4.2 million.

Network Sites – The Network business unit ended the second quarter 2012 with more than 1,200 regional media sites utilizing Local Corporation’s white label business directory solution.

Business Solutions:

Revenue – Second quarter 2012 revenue was $2.5 million, up 9% from second quarter 2011 revenue of $2.3 million and down 11% from first quarter 2012 revenue of $2.8 million.

Digital Media Enrollments – The company ended the second quarter 2012 with more than 800 direct subscribers for its Exact Match suite of digital media services.

Legacy Small and Medium-Sized Businesses (SMBs) – The company ended the second quarter 2012 with approximately 16,000 legacy subscribers. The company expects to cease billing all legacy subscribers by the end of 2012, as will be fully discussed in its Form 10-Q to be filed later today.

Recent News Highlights:

Local Corporation Granted U.S. Patent  During the second quarter, the company was granted a patent that covers a system for geographical web search indexing. Issued on May 8, 2012, the patent describes a geographical web search system that retrieves an initial webpage and geolocates related webpages to the first geocoded webpage.

Record Organic and Mobile Traffic During the second quarter, the company announced that it had reached record organic and mobile traffic in May 2012. Organic traffic of 14.1 million monthly MUV’s grew 51% from the year ago period. Mobile traffic reached 6.5 million MUVs in May 2012, up over 368% from the year ago period.

Channel Sales – The company is testing two channel sales opportunities in two distinct markets to sell select features of its SMB product suite. To date, the initial tests have resulted in the sale of over 400 units. We expect increased sales volume via these new channels through year end.

Third Quarter 2012 Financial Guidance :

Revenue The company expects third quarter 2012 revenue to be approximately $24.5 million, which will be an increase of over 18% compared to the year ago period.

Adjusted Net Income – Adjusted Net Income for the third quarter 2012 is expected to be approximately breakeven, or $0.00 per diluted share, assuming diluted weighted average shares of 22.5 million.

Projected third quarter 2012 Adjusted Net Income (Loss) Factors:

  • Interest Expense of $100,000
  • Tax Provision Expense of $50,000
  • Depreciation Expense of $1.0 million
  • Amortization Expense of $800,000
  • Stock Compensation Expense of $1.0 million
  • Net loss from Rovion assets held for sale of $300,000
  • Warrant Revaluation Expense and Other Non-Recurring items are undeterminable*

Fiscal 2012 Financial Guidance:

Revenue - The company expects 2012 revenue to be approximately $106 million, which will be an increase of over 35% compared to 2011 revenues.

Adjusted Net Income – Adjusted Net Income for 2012 is expected to be approximately $2.2 million, or $0.10 per diluted share, assuming diluted weighted average shares of 23.0 million, taking into account the dilutive effect of stock options and warrants.

Projected 2012 Adjusted Net Income Factors:

  • Interest Expense of $400,000
  • Income Tax Provision of $150,000
  • Depreciation Expense of $3.9 million
  • Amortization Expense of $3.5 million
  • Stock Compensation Expense of $3.4 million
  • Impairment Charge of $6.5 million
  • Non-recurring Charges of $609,000
  • Net loss from Rovion assets held for sale of $900,000
  • Warrant Revaluation Expense and Other Non-Recurring items are undeterminable*

* The valuation of the warrant liability is based in large part on the underlying price and volatility of our common stock during the quarter. Since we cannot predict this, we cannot project the non-cash gain or loss in connection with these warrants, and therefore cannot reasonably project our GAAP net income (loss). We therefore cannot provide GAAP guidance, but do report GAAP results.

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