LodgeNet Interactive CEO Discusses Q2 Results - Earnings Call Transcript

LodgeNet Interactive Corp. (LNET)

Q2 2012 Earnings Call

June 19, 2012 05:00 pm ET

Executives

Ann Parker - Director, Investor Relations

Phillip Spencer - Interim President & Chief Executive Officer

Frank Elsenbast - Senior Vice President and Chief Financial Officer

Analysts

Michael Kupinski – Noble Financial

David Rogers - Apollo Management

Peter Reed - Mast Capital Management

James Dawson - Bank of America

Presentation

Operator

Good day, ladies and gentlemen, and welcome to LodgeNet Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, this conference call may be recorded.

I would now like to turn the conference over to Ms. Ann Parker, Director of Investor Relations of LodgeNet Interactive. Ma'am, you may begin.

Ann Parker

Thank you, Operator. Good day, everyone. I'd like to thank all of you for taking the time today to listen to our second quarter 2012 conference call. You should have received copies of our earnings release. If not, please call me at 605-988-1000, and we'll make sure you do get a copy.

Our speakers for today's call will be Phillip Spencer, Interim CEO of LodgeNet Interactive Corporation, and Frank Elsenbast, our Senior Vice President and CFO. Phil and Frank will review our second quarter 2012 earnings, and we'll then welcome your questions and your comments.

This call is being webcast live over the Internet through our company website, www.lodgenet.com. We also have slides posted on our website, which correspond with today's comments and they can be found under the Investors section.

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 Phillip Spencer.

Phillip Spencer

Thank you, Ann. Thanks, everyone for joining the call today. I would just also like to take a quick minute. I want to thank our hotel and management companies that have joined the call today.

My actual first day with LodgeNet within Chicago, meeting with the Hyatt, and then couple of weeks later I was in Baltimore, high-tech, and I had the opportunity to meet senior executives from Marriot, IHG, Hilton, Loews, Starwood, all the major brands, but I just wanted to hook out and know to know that our number one priority is going to be serving your hotels and making sure your guests are happy, so I appreciate you guys jumping on the call.

The first slide. Just let me give you a quick kind of background on myself. I spent the last 20 years in my career working in private equity backed cable, telecom and technology companies. Most recently I served as President and CEO of Windjammer. Windjammer owned 143 cable companies across the United States, and ironically we actually competed with LodgeNet in most of these markets.

However, most of my work has been around building customer-centric organizations, addressing top line revenue growth issues and reversing customer churn. Clearly, those are three areas we need to work on here at LodgeNet.

What have I been doing for the last 45 days? Next slide. I have been working in the LodgeNet offices for the 45 days, conducting financial and operational reviews. I have also spent a lot of time talking to customers, employees, reviewing the organizational structuring, analyzing financials and most of my time has been really focused around here, why are we losing these rooms and why has guest entertainment revenue declined. Those have been the areas that I have spent the vast majority of my time over the last few weeks.

At this time, I am turning the call over to Frank, so he can step you through the financial results and then afterwards we are going to share our plan going forward. How we discuss these issues.

Frank Elsenbast

All right. Thanks, Phil. Our financial results for the second quarter did not meet our expectations. Room loss and challenging sales results in our Guest Entertainment business resulted in a 13% decline in revenue and AOCF for the quarter of $19.2 million.

The company did continue to make progress in certain strategic areas with over 15,000 high-def rooms added during the quarter, our mobile app room base expanded to over 600,000 rooms and app functionality increased with the introduction of Interactive Program Guide, and we continue to have a strong focus on controlling our cost structure with another quarter of year-on-year expense reductions.

Going forward, the company's primary objective is to address two issues that have the most immediate impact on our financial results. Reducing our room churn and improving the performance of our Guest Entertainment business.

I'll now walk through the financial results for the quarter and address the slides that we (Inaudible) this afternoon.

Starting on slide number five and six, we will look at our total revenue and revenue per room performance. In the second quarter, revenue was $92.8 million, a 13% decline versus prior year and below our expectations for the quarter. The decline in total revenue was driven primarily by 12% reduction in our room base versus last year and 1.5% decline in hospitality revenue per room.

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