Local.com Corporation Q1 2010 Earnings Call Transcript

Local.com Corporation Q1 2010 Earnings Call Transcript
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Local.com Corporation (LOCM)

Q1 2010 Earnings Call

April 22, 2010 4:30 pm ET

Executives

Ken Cragun – Vice President, Finance

Heath Clark – Chairman, Chief Executive Officer

Bruce Crair – President, Chief Operating Officer

Brenda Agius – Chief Financial Officer

Analysts

[Wayne Chan – Cannacord Adams]

Jeff Rath – Cannacord Adams

Richard Fetyk0 – Merriman Curran Ford & Co.

Presentation

Operator

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Welcome to the first quarter 2010 Local.com Corporation earnings conference call. (Operator Instructions) I would now like to turn the presentation over to your host for today’s conference, Mr. Ken Cragun Vice President of Finance.

Ken Cragun

Good afternoon. It is my pleasure to welcome you to Local.com’s first quarter 2010 financial results conference call. With me today are Local.com Chairman and CEO Heath Clark, President and Chief Operating Officer, Bruce Crair and our Chief Financial Officer Brenda Agius.

The executive team will discuss our financial results for the first quarter 2010 and our outlook for the second quarter and updated outlook for full year 2010. At the conclusion of their prepared remarks, we’ll open the lines for questions.

I’d like to bring everyone’s attention that today’s comments include forward-looking statements within the meaning of Section 21A of the Securities and Exchange Commission Act of 1934 as amended. These statements are subject to risks and uncertainties that may cause actual results and events to differ materially from those expressed in the forward-looking statements. These risks and uncertainties will be outlined at the end of this conference call and they’re also detailed in Local.com’s filings with the Securities and Exchange Commission. Forward-looking statements made during today’s call are made only as of the date of this conference call we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstance.

Before turning you over to Heath, it is important that I mention that we use non-GAAP financial measures in evaluating our financial performance. Specifically, the non-GAAP financial measure of adjusted net income or loss, please refer to the press release we issued today for how we define adjusted net income or loss and our reasons for using that non-GAAP measure, as well as a detailed review of our first quarter results including the corresponding GAAP financial measures and a reconciliation of our non-GAAP financial measures to GAAP financial measures.

To comply with the SEC’s guidance on fair and open disclosure, we have made this conference call publicly available via audio webcast through the investor relations section of our website and a replay of the conference call will be available for 90 days after the call.

Today’s call features shortened prepared remarks in order to spend more time on the question and answer segment of the call. I’d now like to turn the call over to our CEO, Heath Clark.

Heath Clark

Thank, Ken. We had another strong quarter with record revenue and adjusted net income and expanded margins. In order to spend more time in Q&A I won’t review the data in the press release. Instead, I’d like to review our growth strategies across the company.

As you may recall we have three business units; owned and operated, our proprietary sites and traffic, network, which is third party sites and traffic and sales and ad services which represents our direct customers plus ads from partners such as Yahoo and Super Media among others.

O&O represents all of our owned and operated websites. In the past we reported only on the local.com site traffic, but from this quarter on we’ll include traffic from all sites that Local.com owns and operates.

O&O represented about 58% of our total first quarter revenue, about the same percentage as last quarter, and up in real dollars. Our slight decline in organic traffic was due in part to the seasonality of our non-SEM traffic sources which is counter cyclical to our seasonally strong first quarter SEM based traffic.

Our number one O&O goal this year is to grow organic traffic and to do that we plan to add more content to the site. We want to create locations on the web where consumers have confidence that they’ll receive plenty of options to do business with local vendors and make buying decisions based on data organized more usefully than on other local sites.

We have many projects well underway at this time and we expect to launch a handful of verticals in the second half of this year that are intended to appeal to our core demographic of soccer moms. These new verticals are expected to drive increased organic traffic once they launch, and in the meantime, we’ll continue on dialing up our overall SEO efforts.

Moving now to the network, first quarter network revenue was 28% of total revenue, down slightly from the prior quarters 31%, but again up in real dollars. Since all our regional media network traffic is organic, we experienced some seasonality in traffic during the quarter.

Despite this seasonality our network business continues to grow based on our four-step growth strategy; first, add new sites; second, add new products to each site; third, add more traffic for product, and fourth, improve ad yield per visitor.

We continue to look at ways to expand our product suite and work on improving our SEO side. Although our traffic was down slightly on a local syndication network, we nonetheless increased ad yield per visitor during the quarter. Our local distribution network XML product continues to perform well.

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