PRIMEDIA Inc. (PRM)

Q2 2010 Earnings Call

August 05, 2010 10:00 am ET

Executives

Jeff Grossman - IR

Charles Stubbs - President, CEO

Kim Payne - CFO

Analyst

John Carlin - Gulf Stream Asset Management

Presentation

Operator

Welcome to the PRIMEDIA Inc. Second Quarter 2010 Earnings Conference Call. (Operator Instructions) I would now like to turn the conference over to Mr. Jeff Grossman PRIMEDIA's Investor Relations, contact. Please go ahead sir.

Jeff Grossman

Good morning and welcome to PRIMEDIA’s 2010 second quarter earning conference call. I am pleased to be joined by Charles Stubbs, our President and CEO and Kim Payne, our CFO, along with other members of senior management. As always, we refer you to the section of our earnings release entitled Forward-Looking Statements for important factors that apply to and qualify any forward-looking statements made on this conference call. In addition, any non-GAAP financial measures mentioned on this call are reconciled to GAAP in our earnings release. Let me now turn the call over to the Charles Stubbs.

Charles Stubbs

Hello everyone, and thank you for joining us on today’s call to discuss our company's second quarter 2010 results. First, I would like to update you about our positive progress in executive against our operational and strategic initiative. And our CFO, Kim Payne will follow with additional details on our financial performance. We are very pleased with significant progress we continue to make in transitioning our enterprise into the premier online source for consumers and advertisers in the rental space. There were a number of operational highlights over the quarter as we expanded our reach in consumer audience, enhanced our product offering, gained client count and increased lead for advertisers. We accomplished all of this while increasing the company's productivity and efficiency. Simply put, we continue to maintain our strategic focus by investing in our internet platform while reducing our cost structure to drive positive financial results.

During the quarter we succeed in reducing operating expenses by 19% and increasing adjusted EBITDA by over 22% year-over-year. Focusing on four key strategic objectives. Our first objective is to grow our consumer audience by strengthening our digital media offering. Throughout the second quarter, we continued to refine our network of websites by improving our overall performance and load time in increasing relevant quality content. As we expanded site content, increase search engine marketing expense and executed against our HCO strategy we also gain consumer traffic. Our focus in commitment to invest in our website, HCO and STM continues to bear fruit as our PRIMEDIA apartments rentals network of site continues to be ranked number one among its competitors averaging over 4 million unique visitors each month.

We also continue to lead the apartment industry in our efforts in mobile application with keynote of downloads exceeding 850,000. Enhancing the tools and information we provide to consumers has enabled us to grow our consumer audience and also to progress in our second objective which is to maximize the number of leads we provide to our advertiser client.

In the second quarter, our total number of leads increased by over 35% on year-over-year basis. And over 75% of the leads we provide to our client are now generated through our digital platforms. Our third objective is to grow our client count and revenue. In Apartment Guide, our largest business we have continued to grow our client count on both the year-over-year and sequential quarterly basis with the year-over-year increasing 7.6%. During the second quarter, revenue was impacted by negative economic market and competitive conditions.

However, we see some encouraging signs of stability in the apartment industry. For example, in uptick in effective rent level, and we believe we are well positioned to reap the benefits of a broader client base as economic and market conditions improve. Finally, we have made significant strides against our fourth objective, to improve our operating efficiency by permanently changing our cost structure.

Our on going cost cutting initiative is in part of our permanent streamlining of our organization and are evident in our strong adjusted EBITDA and adjusted EBITDA margins. In addition, our strong cash flow generation has allowed us to opportunistically reduce our financial leverage and pay healthy dividend. We repurchased $7.5 million of our outstanding term loan obligation at a discount during the second quarter.

Since December 31, 2008 we reduced our long-term debt by $32 million or 13% as at the end of the second quarter. In addition, today we announced the $0.07 per share quarterly dividend for the 11 consecutive quarter. During third quarter 2010, we will continue to focus on growing or consumer audience and client count while increasing the number of leads we provide to our clients. We remain committed to streamlining our cost structure and investing in opportunities to enhance long-term shareholder value. I will now turn the call over to Kim Payne.

Kim Payne

Thanks, Charles. I will now review our second quarter 2010 result. Our comparison unless specifically noted are to second quarter 2009. Total revenue was $58.6 million, a $6.6 million decrease, our apartment division representing approximately 93% of second quarter advertising revenue decline 6% to $48.8 million. Apartment Guide revenue declined by 6.3% due to a 13.6% decrease in revenue per community served. This is partially offset by 7.6% increase in apartment community served.

Revenue per community served was impacted primarily by pricing pressure, caused by negative economic market and competitive conditions. As we look at our markets geographically, the areas that have been hit hardest by the housing down turn are also the areas that have continue to drive most of our revenue declines including the West Coast in Florida. The majority of our markets are operating within an occupancy range of 90% to 96%.

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