OpenTable Management Discusses Q2 2012 Results - Earnings Call Transcript

OpenTable (OPEN)

Q2 2012 Earnings Call

August 02, 2012 5:00 pm ET

Executives

Tiffany Fox - Communications Director

Matthew J. Roberts - Chief Executive Officer, President, Director and Member of Equity Incentive Committee

I. Duncan Robertson - Chief Financial Officer, Principal Accounting Officer and Secretary

Analysts

Rohit Kulkarni

Paul Judd Bieber - BofA Merrill Lynch, Research Division

Aaron M. Kessler - Raymond James & Associates, Inc., Research Division

Robert Coolbrith - ThinkEquity LLC, Research Division

James T. Dobson - The Benchmark Company, LLC, Research Division

Stephen Ju - Crédit Suisse AG, Research Division

Jason S. Helfstein - Oppenheimer & Co. Inc., Research Division

Heath P. Terry - Goldman Sachs Group Inc., Research Division

James Cakmak

Andrew D. Connor - Piper Jaffray Companies, Research Division

Kevin Allen - Barclays Capital, Research Division

Presentation

Operator

Good afternoon, everyone. And welcome to the OpenTable Second Quarter Earnings Results Conference Call. This call is being recorded. With us today from the company is President and Chief Executive Officer, Matt Roberts; Chief Financial Officer, Duncan Robertson; and the Senior Director of Corporate Communications, Tiffany Fox. At this time, I would like to turn the call over to Tiffany. Please go ahead.

Tiffany Fox

Good afternoon. Thank you, and welcome to the OpenTable Earnings Conference Call. Joining me today to talk about our second quarter results are Matt Roberts, our President and CEO; and Duncan Robertson, our CFO. Before we begin, I would like to take this opportunity to remind you that during the course of this conference call, management may make forward-looking statements, including guidance regarding our expectation of future financial performance, which are subject to various risks and uncertainties, that could cause actual results to differ materially from our current expectations. A discussion of such risks and uncertainties is contained in our filings with the Securities and Exchange Commission, and we refer you to these filings.

Also, I would like to remind you that during the course of this conference call, we may discuss some non-GAAP measures in talking about the company's performance. Reconciliations to the most directly comparable GAAP financial measures are provided in the tables in the press release. This conference call is also being broadcast on the Internet and is available through the Investor Relations section of the OpenTable website. And now I'll turn it over to Matt.

Matthew J. Roberts

Great. Thank you, Tiffany. And welcome everyone to our conference call. OpenTable had a strong second quarter. Revenue for the quarter totaled $39.6 million, a 15% increase over last year. And in the second quarter, our adjusted EBITDA profit margin was 44% on a consolidated basis, and 52% in our North America business.

Now let's take a look at our key metrics by geography. In North America, which includes the U.S., Canada and Mexico, seated diners grew to 28 million in the second quarter, a 26% increase over last year and worth noting, approximately 28% of the seated diners in North America in the second quarter originated on a mobile device, either smartphone or tablet, which compares to 25% in the prior quarter.

To add some additional context to our seated diner growth. During the second quarter, North America industry-diner counts were essentially flat year-over-year.

Turning to our installed base of restaurants in North America. We exited the quarter with 18,373 restaurants, representing an 18% year-over-year increase. This total includes 16,250 restaurants using our core Electronic Reservation Book product or ERB, and 2,123 restaurants using our Connect product, which is designed primarily for walk-in restaurants that accept reservations.

In international, which includes the U.K., Germany and Japan, seated diners grew to 2.2 million in the second quarter, a 39% increase over last year.

Looking at our installed base of international restaurants, we exited the second quarter with 6,664 installed restaurants. This total includes 3,052 ERB restaurants and 3,612 Connect restaurants. Prior to the relaunch of TopTable site, we targeted and successfully migrated the TopTable restaurants that accounted for more than 90% of the TopTable seated diners in the first quarter of 2012.

At the time of the TopTable relaunch in May of 2012, we proactively removed TopTable restaurants from our international installed restaurant base that had not migrated to OpenTable technology. This removal of restaurants from our installed base was an anticipated onetime event and reflects a group of restaurants that accounted for, in aggregate, less than 10% of TopTable seated diners in the first quarter of 2012.

As a comparison, we had 5,670 technology-enabled international restaurants at the end of the first quarter, so Q2 represents an 18% sequential increase of almost 1,000 restaurants.

Before I turn to a broader update on the business, I'd like to say how thrilled we are to have Joseph Essas onboard as our new Chief Technology Officer. As the former CTO of eHarmony and VP of Engineering at Yahoo!, Joseph was -- has deep experience in personalization, search and driving innovation, which make him well suited to help us find new ways to delight our customers and create value.

Now I'd like to provide you with a few updates and comments on trends in the business. The most significant trends is the major shift we are seeing toward mobile devices, specifically smartphones and tablets. The shift to mobile is a long-term positive for us. First, our primary and fastest-growing source of revenue is reservation transactions, which monetize well on mobile devices. Second, we believe that mobile is an ideal fit for our business as it enables us to put our solution in the hands of diners wherever and whenever they are thinking about dining out, which is often not when they're sitting in front of a computer.

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