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Local Corporation Reports Fourth Quarter And Fiscal 2012 Financial Results

Stocks in this article: LOCM

An explanation of the company’s use of non-GAAP financial measures, including the limitations of such measures relative to GAAP measures, is included below and reconciliation between GAAP and non-GAAP measures, where appropriate, is included in the financial tables attached to this release.

Fourth Quarter Results Highlights :

“We had previously reported fourth quarter revenue below initial forecasts, due to revenue per click declines from our main ad partner coupled with fourth quarter ad policy changes. We have been adapting to these policy changes and based on our continued results, we are reiterating our prior guidance for 2013,” added Ken Cragun, Local Corporation chief financial officer.

     

SUMMARY RESULTS

(in thousands, except per share amounts)

 
Q4 2012   Q3 2012   Q4 2011

Consumer Properties:

Owned & Operated

$ 12,450 $ 18,340 $ 17,536
Network 7,636 4,961 5,065
Business Solutions   812     1,470     2,697  
Revenue $ 20,898   $ 24,771   $ 25,298  
 
Adjusted Net Income (Loss)* $ (924 ) $ 36 $ 768
Less interest and other income (expense), net (100 ) (131 ) (101 )
Less (provision) benefit for income taxes 9 (22 ) (71 )
Less non-cash depreciation, amortization and

stock compensation

(2,295 ) (3,466 ) (3,432 )
Plus gain on revaluation of warrants 30 65 150
Less net loss from discontinued operations (201 ) (140 ) (557 )
Less LEC reserve (1,407 ) - -
Plus gain on sale of Rovion 1,458 - -
Less Spreebird impairment charge (4,100 ) - -
Less severance charges   (361 )   (144 )   (563 )
GAAP net loss $ (7,891 ) $ (3,802 ) $ (3,806 )
 
Diluted Adjusted Net Income (Loss) per share * $ (0.04 ) $ 0.00 $ 0.03
Diluted GAAP net loss per share $ (0.36 ) $ (0.17 ) $ (0.17 )

 

Diluted weighted average shares used for Adjusted Net Income (Loss) per share 22,131 22,245 22,179
Diluted weighted average shares used for GAAP net loss per share 22,131 22,092 22,076
 
Cash $ 3,696 $ 3,706 $ 10,394
 

Prior period balances have been reclassified to conform to current period reporting

 

* See detailed reconciliation of GAAP to non-GAAP measures in the financial tables attached to this release.

 

Revenue – Fourth quarter 2012 revenue of $20.9 million represents a decrease of 16 percent over third quarter 2012 revenue of $24.8 million and a 17 percent decrease over fourth quarter 2011 revenues of $25.3 million.

• GAAP Net Income (Loss) – Fourth quarter 2012 GAAP Net Loss was $7.9 million, or ($0.36) per diluted share, compared to a third quarter 2012 GAAP Net Loss of $3.8 million, or ($0.17) per diluted share. The fourth quarter GAAP net loss included an impairment charge of $4.1 million, as well as a reserve of $1.4 million for the long-term LEC receivable. Also included in the fourth quarter GAAP net loss is a gain on the sale of Rovion’s assets of $1.5 million.

Adjusted Net Income (Loss) – Fourth quarter 2012 Adjusted Net Loss was $924,000, or ($0.04) per diluted share, as compared to third quarter 2012 Adjusted Net Income of $36,000, or $0.00 per diluted share.

• Cash – The company’s cash balance was $3.7 million as of Dec. 31, 2012, unchanged from the Sept. 30, 2012, cash balance. During the fourth quarter 2012, the company had negative cash flow from operations offset by cash proceeds from the sale of Rovion’s assets and an additional draw on the line of credit.

• Debt – On Dec. 31, 2012, the company had borrowings of $10.0 million outstanding under its Square One Bank line of credit.

Fourth Quarter 2012 Operating Highlights :

Record Organic and Mobile Traffic – Overall traffic on the site and network was 100 million monthly unique visitors (MUVs) in the fourth quarter 2012, slightly down from third quarter 2012 traffic and up 7 percent from the year ago period. Organic traffic on the site and network was a record 45 million MUVs in the fourth quarter 2012, up 15 percent from the third quarter 2012 and up 51 percent from the year ago period. Organic traffic is defined as all non-SEM sourced traffic. Overall mobile traffic was 25 million MUVs in the fourth quarter 2012, slightly up from the third quarter 2012 and up 220 percent from a year ago period.

Spreebird Impairment Charge – The fourth quarter impairment charge of $4.1 million for Spreebird is the result of a further decline in the market value of peer companies coupled with lower projections for this business line, due to the company’s decision to exit its direct sales efforts of its Launch by Local product of which Spreebird was a planned component. The current impairment charge recorded is management’s best estimate at this time and the final Spreebird impairment charge will be disclosed in the company’s 2012 Annual Report on Form 10-K.

Local Exchange Carrier (“LEC”) reserve – During the fourth quarter, the company recorded an additional $1.4 million reserve relating to its long-term LEC receivable. An additional reserve was recorded, due to the cessation of billing by the LEC’s and the longer-term nature of the receivable.

Consumer Properties:

Owned & Operated (O&O):

Revenue – Fourth quarter 2012 total revenue related to the O&O business unit was $12.5 million, down 29 percent from fourth quarter 2011 O&O revenue of $17.5 million and down 32 percent from third quarter 2012 O&O revenue of $18.3 million. This decline was primarily due to ad policy changes and reduced revenues per click from a major partner.

Monetization of Traffic – Revenue per thousand visitors (RKV) for fourth quarter 2012 was $230, down 17 percent from third quarter 2012 RKV of $276 and down 31 percent from fourth quarter 2011 RKV of $332.

Network:

Revenue – Fourth quarter 2012 total revenue related to the Network business unit was $7.6 million, up 52 percent from the $5.1 million Network revenue recorded in the fourth quarter 2011 and $5.0 million recorded in the third quarter 2012.

Network Sites – The Network business unit ended the fourth quarter 2012 with over 1,200 regional media sites.

Business Solutions:

Revenue – Fourth quarter 2012 revenue was $812,000, down 70 percent from fourth quarter 2011 revenue of $2.7 million and down 46 percent from third quarter 2012 revenue of $1.5 million. The reduction was primarily due to the previously disclosed phasing out of legacy subscription customers.

Digital Media Enrollments – The company ended the fourth quarter 2012 with approximately 950 Launch by Local subscribers. The company also has over 10,000 additional subscribers via its self-service, network and channel partners.

Recent News Highlights:

2012 Technology Fast 500™ – The company was a Deloitte Technology Fast 500™ company for the third consecutive year, in the technology, media, telecommunications, life sciences and clean technology companies category in North America.

Pay-Per-Call patent granted – On Nov. 6, 2012, the company was granted a patent which covers a pay-per-call Enhanced Directory Assistance (EDA) method or system. The patent describes an EDA method and/or system whereby pay-per-call advertiser listings are provided to consumers in response to directory assistance inquiries. The company believes this patent may cover an instrumental system and method for monetizing specific types of local searches by consumers on mobile devices. The company continues to develop its patent prosecution and monetization strategy.

Launch of vertical sites – During the fourth quarter, the company launched the first in a series of industry-specific, content driven websites designed to further extend its reach and engagement with local consumers and businesses.

Web domain name patent – On Dec. 12, 2012, the company was granted a patent which covers a method and system for the bulk acquisition and development of multiple web domain names.

Launch of U.K. version of flagship search site – In January 2013, the company launched the U.K. version of its flagship search site. The new U.K. site allows consumers to find local businesses, products and services in the United Kingdom.

Appointment of new board member – In January 2013, the company announced the appointment of Frederick G. Thiel to its board of directors. Thiel brings over 25 years of senior level strategic management experience in the software, media, Internet and technology industries.

Record fourth quarter organic and mobile traffic - The company reached record organic traffic of 45 million MUVs and record mobile traffic of 25 million MUVs during the fourth quarter.

Company renews and extends $12 million credit facility - The company renewed its $12 million credit facility with Square 1 Bank under substantially similar terms. The maturity date of the facility was extended to Feb. 3, 2015.

Fiscal 2013 Financial Guidance:

Revenue - The company expects 2013 revenue of between $93 million and $95 million, which at the mid-point, is an increase of 12 percent, over the fourth quarter 2012 exit run rate.

Adjusted Net Income – Adjusted Net Income for 2013 is expected to be at least $5 million, which would result in approximately $1 million in debt-free cash flow. The company defines debt-free cash flow as cash provided by operating activities, less capital expenditures.

Projected 2013 Adjusted Net Income Factors:

  • Interest Expense of $400,000
  • Income Tax Provision of $200,000
  • Depreciation Expense of $4.5 million
  • Amortization Expense of $1.3 million
  • Stock Compensation Expense of $3.8 million
  • Severance Charges of $500,000
  • Warrant Revaluation Expense and Other items are undeterminable, but may be significant non-cash gains or losses**

** The valuation of the warrant liability is based in large part on the underlying price and volatility of our common stock during the period. 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 we do report GAAP results.

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