Local.com Management Discusses Q3 2010 Results – Earnings Call Transcript

Local.com Corp. (

LOCM

)

Q3 2010 Earnings Call

November 4, 2010; 04:30 pm ET

Executives

Heath Clarke - Chairman and Chief Executive Officer

Ken Cragun - Interim Chief Financial Officer

Bruce Crair - President and Chief Operating Officer

David Castle - Associate Vice President

Analysts

Jeff Rath - Canaccord

Jon Hickman - MDB Capital

Corbin Woodhull - Merriman Capital

David SaoMarcos - Financial Advisers of America

Presentation

Operator

Compare to:
Previous Statements by LOCM
» Local.com Corporation Q2 2010 Earnings Call Transcript
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» Local.com Corporation Q3 2009 Earnings Conference Call

Good day, ladies and gentlemen, and welcome to the Third Quarter 2010 Local.com Corporation Earnings Conference Call. My name is Eric, and I'll be your operator for today. At this time, all participants are in a listen-only mode. (Operators Instructions) As a reminder this conference is being recorded for replay purposes.

And I'd like to turn the conference over to Mr. David Castle [ph] Associate Vice President. Please proceed.

David Castle

Thank you and good afternoon. It is my pleasure to welcome you to Local.com's third quarter 2010 financial results conference call. With me today, are Local.com's Chairman and CEO, Heath Clarke; President and Chief Operating Officer, Bruce Crair; and our Interim Chief Financial Officer, Ken Cragun.

The executive team will discuss our financial results for the third quarter 2010 and our outlook for the fourth quarter and fiscal year 2010. At the conclusion of their prepared remarks, we will open the lines for questions. I would like to bring to everyone's attention that today's comments include forward-looking statements within the meaning of Section 21-A of the Securities and Exchange 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 are also detailed in Local.com's filings with the Securities and Exchange Commission.

Forward-looking statements made during today's call are only made as of the date of this conference call and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

Before turning 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.

Please refer to the press release we issued today for how we define adjusted net income and the reasons for using that non-GAAP measure, as well as a detailed review of our third quarter results, including the corresponding GAAP financial measures and a reconciliation of our non-GAAP financial measures to GAAP financial measures.

To comply with SEC's guidance on fair and open disclosure, we have made this conference call publicly available via audio webcast. Through the Investor Relations sections of our website and a replay of this 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 questions-and-answers segment of the call.

I'd now like to turn the call over to our CEO, Heath Clarke.

Heath Clarke

Thanks David, before we start, I would like to welcome Ken Cragun, to his first call as our interim CFO, we’re glad to have him on the team. We believe our recent acquisition of OCTANE360 continues to be a game changer for Local.com. As we near our $100 million run rate Local.com is switching gears in order to take full advantage of the continuing competitive benefits of this acquisition.

We believe our business is approaching another inflection point due to the unique high margin products and services we now offer. Our market presence and technology is coupled with the extensive capabilities of the OCTANE platform have created a very new highly proprietary and extremely powerful technology foundation that we believe materially enhances our competitive position within the growing local search industry.

In turn, we expect this will provide us with the basis for sustained revenue and net income growth and margin expansion in 2011. Google recently introduced its Place Page local search enhancement, which we forecast to put increasing pressure on many directory publishers in the form of reduced free search traffic they receive from Google.

This could reduce the value proposition of that directory publishes and also their advertisers because they’ll basically have less traffic to offer their run advertisers. This competitive pressure is occurring at the same time, those advertisers are transitioning billions of dollars from print Yellow Pages to online search advertising.

In order to preserve their revenues, the directory industry must transition their advertiser spend from their print books for their own online ad products all other [Inaudible] in value. We believe Local.com’s new product suite allows the directory industry to do exactly that, we believe we have the right products in the right market, at the right time and this is driving the strong interest we are experiencing not only from directory publishers, but from regional media partners, search verticals and agencies.

As a result, we are heavily focused on leveraging our considerable technology assets as soon as possible. Our flagship Local.com property was relaunched yesterday and according to one industry expert it’s a radical improvement on our owned site. Our network business now has a record number of sites due to our entrance into the domain segment and the OCTANE360 transaction became accretive the whole two quarters ahead of scheduled, let’s speak into more detail.

O&O revenue was up 16% year-over-year and remained about half of our total third quarter revenue, O&O traffic was up about 15% over the year ago period and organic traffic and site monetization was about flat over the year ago period. Our goal for our O&O business is to increased organic traffic and we have two key strategies to achieve this.

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