InfoSpace (INSP)

Q1 2011 Earnings Call

April 27, 2011 5:00 pm ET


David Binder - Chief Financial Officer and Treasurer

Stacy Ybarra - Director of Corporate Communications

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William Ruckelshaus - Acting Chief Executive Officer, President, Director, Chairman of Audit Committee and Chairman of Nominating & Governance Committee


James Cakmak - Sidoti & Company, LLC

Eric Martinuzzi - Craig-Hallum Capital Group LLC

Clayton Moran - The Benchmark Company, LLC

Richard Tullo - Albert Fried & Company, LLC


Question-and-Answer Session

William Ruckelshaus

Well, it's hard to be. I mean -- and I don't know whether we've had this conversation before. I think the hurdle is really going to be, and traditionally, in any way you'd look at an acquisition, how are we going to be get -- are we going to be creating value in acquiring this business. And there's a lot of assumptions that go into that. First and foremost, what you pay for the business, but also what your plans are, to what degree you can leverage, what you're currently doing with the addition of new people or new technology, so there's a lot that goes into that thought process. And so in one circumstance, we may find that we're perfectly willing to pay up to a certain level. And then another, because it doesn't have certain attributes, we're just not. And so it's very circumstantial. And I would say that the frothiness of the market, while on one hand you say, the attractive opportunities that would make sense for InfoSpace would appear to be shrinking in number, we're still seeing a number of things that we think are viable and could be interesting for us. So I think your comments are well taken and it's not loss on us.


And the last question that you have this time is Rich Tullo. [Operator Instructions] Richard Tullo from Albert Fried & Company.

Richard Tullo - Albert Fried & Company, LLC

What is the future for Mercantila? Is it still an asset that InfoSpace plans to build upon? Is it going to die a silent death here? Or do you plan on selling it?

William Ruckelshaus

So the plan of record and this is no different from what we've now said, I think a couple of quarters running, is that we like the business. It's not where we would like it to be from a profitability standpoint. We think that equation, as it relates to their model, in part has to do with scale, but also in part has to do with automation, bringing technology to bear that some manual processes, just getting better site-level visibility on the purchase funnel and what's going on, and matching that up against the customer acquisition effort. All of that is benefiting, we believe, in the first half of this year from investment. And so part of the results you're seeing in the past couple of quarters reflect that investment in terms of the dollars spent in helping us get better instrumentation. It is our expectation that in Q2, and really onward into Q3, we'll start to see the payoff from those investments. And as you might imagine as is the case with any business that we're going to own. We're going to measure. And we're going to assess the performance. And if it's not meeting our expectations, we're going to reevaluate. And so I think it'd be too early at this point for me to sort of make any predictions other than to say we're still optimistic that these investments will pay off.

Richard Tullo - Albert Fried & Company, LLC

Fair enough. Does the state income tax situation at Amazon influence this business to the same degree or will influence Amazon? And or -- did you see any higher degree of competition from liquidations at Wal-Mart during the quarter given that there was some anecdotal evidence that Wal-Mart was liquidating some online merchandise?

David Binder

Those are very great questions. This is David, Rich. On the second front, Wal-Mart is a competitor. We do feel like we go up against them on a number of products. And we have seen, as we do in some quarters, other than just the most recent ones that, that will put some pricing pressure on our categories. And we really rely on the breadth of what we offer and intelligent pricing to counter that. But they are our competitor and they're someone that we deal with. On the sales tax expense, I think, we're a lot like the other online retailers where appropriate, we'd like to have the advantage of a lack of Nexus in the market. We're very cautious about what that means and we're very diligent in assuring that if we have Nexus, we're appropriately collecting and paying taxes. So we're no different than any other online retailer in that area, where it's a benefit, but we're diligent and cautious about it.

Richard Tullo - Albert Fried & Company, LLC

Okay. And just want to follow-up on Make The Web Better, margins were a little bit better than I expected given the level of revenue. Would you say that, that's because Make The Web Better is declining at a slower rate or is that operational improvements throughout the rest of the business?

David Binder

You know Make The Web Better has something to do with it but we also had a good sequential reduction in operating expenses and a continued focus on efficiency in our core expenses. So Make The Web Better was a piece of it but it is an overall cost management and focused on spending that has good ROI metrics.

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