LodgeNet Interactive Corporation (LNET) Q1 2012 Results Earnings Call April 24, 2012 5:00 PM ET Executives Ann Parker – Director, Investor Relations Scott Petersen – Chairman and CEO Frank Elsenbast – Senior Vice President and CFO Analysts Peter Reed – Mast Capital Management John Koerber – Bennett Michael Demaray – Elevated Tom Grizzetti – Gotham Industries Chris Mittleman – Mittleman Brothers Presentation Operator
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Before we get started, I would like to remind you that some topics to be discussed today that do not relate to historical performance may include or constitute forward-looking statements within the meaning of the federal securities laws and are subject to risks, uncertainties and other factors that could cause actual results, performance or achievements of the company to be materially different from those expressed or implied by such forward-looking statements. Certain of the risk factors, which could affect the company, are set forth in the company’s 10-K and other filings.With that said, I’ll now turn the call over to Mr. Scott Petersen. Scott Petersen Thank you, Ann. Good afternoon, everyone. During the quarter we made continued progress on our strategic initiatives, which are focus on diversifying our revenues and expanding our business opportunities. Sometime the progress on these types of initiatives are not obvious on the face to financial statements. So I’d like to provide the following framework as you consider our first quarter performance. First, our topline revenue was up 12% versus last year. Our guidance for 2012 was anticipating reduction as room base was about 12% smaller and it was one year ago. On the per room basis revenue we generated for hospitality room was off about 1.5% for $0.32 per room per month as compared to last, which I think is a decent result overall given that guest entertainment had a challenges during the quarter, volume was off about 11%. I’d like to note that we don’t take this lightly and we have a proactive action plan underway to evaluate all aspects of these business and bolsters performance, and I will give you some more details on this in a few minutes. On a positive note, our strategic revenue diversification initiatives continue to deliver results. On a per room basis diversified revenues were up 10.8% over last year, so the bottom line is our efforts to broaden the services we are offering and the revenue we are generating is continuing to work well for the company, and is offsetting most of the challenges we are experiencing from our traditional revenue source.
In addition, we have several other positive development, which will bolster our results going forward. During the quarter we installed 17,000 high-definition rooms, almost 80 rooms we installed in 12 quarters, and are also a very positive top comparison to the 2900 rooms we installed just one year ago.In addition our room retention rate improved significantly during the quarter, guest entertainment rooms we are off about 30,000, rate some 50% better than quarterly run rate during the last half of 2011. This improvement is the direct results of several proactive measures we undertook, including a revised sales organization structure that we implemented at the beginning of this year to provide greater sales coverage, along with lower cost options and more flexible sale terms which are clearly attracted to our low revenue generating properties, but also while maintaining the economics of our model. At the same time, we had a terrific quarter with regard to our Envision and Mobile initiatives. The press release we issued yesterday highlighted that the number of rooms contracted for Envision, our new cloud connected interactive television platform increased 75% during the quarter. We now have nearly 75,000 rooms and over 225 properties contracted with this new very powerful platform. And perhaps even more importantly, we reported that of the 44.000 Envision rooms that have been installed, 40% of those hotels are subscribing to our Advanced Apps which are generating about $4 of firm contracted revenue per room per month for us. And such that apps are sold on in essence on a software as a service basis, the proper margin on this new incremental revenue is very attractive. And there is additional high margin revenue just adds on top of the revenue list we are already getting from our high-definition platform, so these two factors are combined to make a very meaningful engine of growth for our company, which will positively impact the results over the next several years.
Lastly, our Mobile Interactive platform not only successfully launched in the first, but we expanded its reach to cover more than 570,000 rooms by quarter’s end. So far we have been very pleased with the acceptance of our Mobile App by both consumers and hotel yours alike, where we have seen downloads of between 501,000 per day and of the consumers that have downloaded App we have been averaging over eight sessions per user during this two month period of time.Now we are still in the very early stages of developing what this App can really mean for consumers, hotels and our company, and we have many enhancements coming on the roadmap, and of course for this quarter, we are looking forward to the launch of some very attractive new functionality with the release of the Mobile Checkout App in an interactive programing guide. Read the rest of this transcript for free on seekingalpha.com