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Q2 2010 Earnings Call

August 4, 2010 5:00 pm ET


Daryl Otte – CEO

Greg Barton – EVP, Business and Legal Affairs, General Counsel and Secretary

Richard Broitman – VP, Finance and Chief Accounting Officer


Randy Katz – JMP Securities

Mike Moskoff – MRM Capital

Don Dion – Dion Money Management

Jay Albany – Scully Capital


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Good day Ladies and Gentlemen. And welcome to the Second Quarter 2010 Earnings Conference Call. My name is Karis and I will be your coordinator for today. (Operator Instructions)

I would now like to turn this call over to your host for the day, Mr. Daryl Otte, Chief Executive Officer. Please precede sir.

Daryl Otte

Thanks, Karis. Hello, everyone. I’d like to welcome you to’s Second Quarter 2010 Earnings Call. I’m Daryl Otte, the company’s Chief Executive Officer.

With me today are Greg Barton, the company’s Executive Vice President of Business and Legal Affairs and General Counsel; and Rich Broitman, the company’s Vice President of Finance and Chief Accounting Officer.

Before we start, I’ll hand the call off to Greg to read our legal statement.

Greg Barton

Thanks Daryl. Welcome, everyone.

All statements made on this call other than statements of historical facts are deemed to be forward-looking statements, as that term is defined in the Private Securities Litigation Format in 1995.

Such forward-looking statements are subject to risks and uncertainties including those described in the company’s filings with the Securities and Exchange Commission that could cause actual results to differ materially from those reflected in the forward looking statements.

Although the company believes that the expectations reflected in the forward-looking statements are reasonable, the company cannot guarantee future results or occurrences. And the company disclaims any obligation to update these forward-looking statements, whether as a result of new information, future developments, or otherwise.

You may obtain copies of the company’s filings with the SEC at the Commission’s website,

. And additional information related to matters discussed today also will be set forth in the company’s quarterly report of Form 10Q for the second quarter of 2010, which we expect to file shortly.

And now, I’ll hand the call back to Daryl

Daryl Otte

Thanks, Greg. Just a quick note on the format of the call. As we noted on last quarter’s call, earlier this year we conducted a survey of some of our investors and analysts to help guide us in making improvements to the usefulness of this call.

The key suggestion was try to make this less scripted. And that instead of spending time at the beginning of the call reading from the earning’s release, we will instead assume everyone has read it. Thus, this call will have a brief overview of the announced results to discuss any further data we feel may add color to the earning’s release, and then of course take questions.

If anyone hasn’t had the chance to read the release, or has specific questions for us that are addressed in the release, please feel free to ask during the Q&A, and of course, we’ll answer.

First off, I’ll hit on an overview of the financial results. Revenue for ongoing businesses for the quarter was at 8% overall. With subscription services revenue up 9% and advertising revenue up 6%.

As a reminder, the revenue which we are excluding from this calculation is our former line. And the smaller licensing businesses within our premium services line, particularly licenses, the street rating enjoyed from the government, and dated settlement which expired last July, and are now divested [inaudible] in insurance rating service.

Subscription revenues are up 9% year-on-year to a seven quarter high putting us above the level the company had reached prior to the declines we experienced at the time of Lehman collapse back in the third quarter of 2008.

I want to highlight that this quarter’s revenue performance demonstrates how the bookings momentum we generated in recent quarters converts to revenue growth over time. You can look back over the last four quarters and see how revenue declined rates diminished as we posted improving bookings, then converted to revenue gains in the fourth quarter of last year and are now showing solidly positive improvements.

Ad revenues were up 6% year on year. This is a 37% increase sequentially as Q2 is generally our second largest quarter seasonally, with Q1 generally the weakest.

The year-on-year growth is lower than Q1, which as we noted at the time, benefit from a low bar set by the terrible conditions in Q1, 2009.

Growth this quarter marks our third straight quarter of year-on-year advertising growth, which was all preceded by poor quarters of contraction for the period through September, 2009.

Now done with the overview, let’s move onto some of the details reached in the lines of the business.

For the subscription business, the headline is largely improved revenue growth, but with bookings growing slower, but everything up in a down market.

The 9% year-on-year growth rate was gratifying given that Q2 of this year was a quarter in which the broad financial markets were challenged.

The S&P 500 dropped 12%. The flash crash happened on May 6


. And the European financial crisis dominated the headlines for weeks.

This is all in contrast to last year when markets were soaring. The S&P gaining for example, 15%. This performance is the power of the ballast provided by subscription revenue streams taking into action.

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