Local Corporation (LOCM)

Q2 2012 Earnings Call

August 9, 2012; 05:00 pm ET


Heath Clarke - Chairman & Chief Executive Officer

Ken Cragun - Chief Financial Officer

Janine Zanelli - Investor Relations


Jon Hickman - Ladenburg

Ed Woo - Ascendiant Capital



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Good afternoon. My name is Sabrina and I will be your conference operator today. At this time I would like to welcome everyone to the second quarter financial results conference call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question-and-answer session. (Operator Instructions). Thank you.

I would now like to turn the conference over Janine Zanelli. Please go ahead ma’am.

Janine Zanelli

Welcome to Local Corporation’s second quarter 2012 conference call. With me are Local’s Chairman and CEO, Heath Clarke; and our Chief Financial Officer, Ken Cragun. Heath and Ken will discuss our second quarter 2012 results and updated guidance for the full year 2012. We’ll then open the lines for questions.

Today’s discussion includes forward-looking statements that are subject to risks and uncertainties that can cause actual results to differ materially from those expressed in the forward-looking statement. These risks and uncertainties will be outlined at the end of this conference call and are detailed in Local.com’s SEC filings. Any forward-looking statements are only made as of the date of this conference call and we undertake no obligation to update such statements to reflect subsequent events or circumstances.

We use non-GAAP financial measures in evaluating our financial performance. Please refer to the press release we issued today for how we define such non-GAAP measures and our reasons for using them, as well as a detailed review of our first quarter 2012 results, including the corresponding GAAP financial measures and a reconciliation of our non-GAAP to GAAP financial measures.

This conference call is publicly available via audio webcast through our website and a replay of the call will be available for the next 90 days.

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

Heath Clarke

Thanks Janine. We continue to make great progress exceeding prior guidance and increasing our adjusted net income guidance for the year. As I’ve mentioned in the past, we have a multi year approach to building traffic, technology and advertisers.

We’ve built a leading local search site and network. We did that by aggregating locally relevant data like business information, activities, events and more and publishing that data across a network of over 1,000 regional media sites. The major search engines index that content, which drives traffic into our ecosystem and we monetize that traffic with ads from our direct advertisers plus ads from various partners.

Our revenue model is surprisingly simple. Traffic times monetization equals revenue. To grow our business we need to grow traffic and increase monetization. Lets look at our momentum in each of these areas.

When it comes to traffic we consistently set new records. We achieved a major milestone in the second quarter reaching over 100 million monthly unique visitors or MUVs across our ecosystem, up nearly 22% against the year ago period. Organic traffic was a record 39 million MUVs in the second quarter, up over 25% from the year ago period and was nearly 40% of total traffic.

Mobile traffic results are up sharply reaching 19 million MUVs during the second quarter, up 60% from the first quarter and over 350% from the year ago period. We’ve grown our network from 700 sites to over 1,200 sites over the past few years and we expect that to continue into the future. We clearly have momentum on the traffic side of the equation.

Turning to monetization, we see great momentum here also. As many of you know we suffered monetization challenges about 18 months ago, which we addressed by contracting with a leading ad supplier a year ago. Largely due to this partnership, second quarter 2012 monetization was near record levels at $300 per 1,000 visitors, up nearly 72% from the year ago period.

Our visibility in the third quarter this year was limited as we didn’t have a full year’s worth of data from our current blend of ad partners and this blend drives the majority of our monetization. As a result of that we’re softer on revenue and margin guidance and we expect it to be for the third quarter, but we feel confident in our visibility post Labor Day. We fully expect to gain monetization momentum in our seasonally strong fourth quarter period.

Overall, momentum is strong in both traffic and monetization and to grow from here, we need to grow both traffic and monetization. Our long-term goals will get to 50% of our traffic organically and 50% of our revenue is from direct customers. Right now we are at about 40% organic traffic and we expect to end the year with a 25% direct revenues.

To grow organic traffic we need to do three things. First, grow the number of partners using our private label solutions; second, increase the traffic on each site by a better SEO and content syndication; and third, increase the number of products each partner uses. Today we have a single product reach partner.

We acquired Krillion in the second quarter last year and they will be powering our new product directory, which we expect to begin installing on our network starting in the fourth quarter. These instillations are forecasted to provide particularly high gross margin revenues to us.

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