Zipcar Management Discusses Q2 2012 Results - Earnings Call Transcript

Zipcar (ZIP)

Q2 2012 Earnings Call

August 02, 2012 4:30 pm ET


Jonathan Schaffer - Managing Director

Scott W. Griffith - Chairman and Chief Executive Officer

Edward G. Goldfinger - Chief Financial Officer, Principal Accounting Officer, Vice President, Assistant Secretary and Treasurer


Mark W. Strouse - JP Morgan Chase & Co, Research Division

Steven E. Kent - Goldman Sachs Group Inc., Research Division

Adam Jonas - Morgan Stanley, Research Division

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

John M. Healy - Northcoast Research

Kevin Kopelman - Cowen and Company, LLC, Research Division

Kerry K. Rice - Needham & Company, LLC, Research Division

Christopher Agnew - MKM Partners LLC, Research Division



Greetings, and welcome to the Zipcar 2012 Second Quarter Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jonathan Schaffer of The Blueshirt Group. Thank you. Mr. Schaffer, you may begin.

Jonathan Schaffer

Thank you, operator. I'd like to welcome everyone this afternoon's call to discuss Zipcar's 2012 Second Quarter Financial Results. On today's call from management are Scott Griffith, Chairman and Chief Executive Officer; and Ed Goldfinger, Chief Financial Officer. After management's prepared remarks, we'll open the call up to questions.

Before we begin, I would like to remind everyone that during the course of this conference call, management may make forward-looking statements which are subject to various risks and uncertainties that could cause actual results to differ materially from our current expectations. A detailed discussion of such risks and uncertainties is contained in our filings with the Securities and Exchange Commission, which are available on the SEC's website.

Forward-looking statements made during this conference call speak only as of today's date, and the company undertakes no obligation to update them to reflect subsequent events or circumstances. 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. We refer to adjusted EBITDA as a key bottom line measure of our performance.

There is a full reconciliation of the U.S. GAAP net loss to adjusted EBITDA on our press release, which can be found on the Investor Relations section of our website. Unless noted otherwise, all comparisons are versus the prior-year period. This conference call is also being broadcast on the internet and is available through the Investor Relations section of Zipcar's website.

So with these formalities out of the way, I'd now like to turn the call over to Scott Griffith. Scott, you may begin.

Scott W. Griffith

Thanks, Jonathan. Good afternoon, and thanks to everyone for joining us on today's call. Throughout the second quarter, we continued to expand our market leadership position within the car sharing category and the broader mobility services sector. We posted a solid double-digit increase in revenue while expanding our margins and growing into new geographies.

Driving these gains is a compelling value proposition that continues to resonate with our more than 730,000 members globally. Zipcar represents a convenient and affordable alternative to car ownership in dense urban areas where costs are high and personal cars sit idle more than 90% of the time. We also provide effective mobility solutions for small and medium-sized businesses, government agencies and university communities, all of which are rapidly increasing their adoption of the car sharing model to meet their transportation needs with sensible, cost efficient alternatives.

With a clear leadership position, a loyal membership base and continued technology and services innovation, we remain energized and excited to stay at the forefront of car sharing and mobility services. In a few minutes, I'll outline how we envision leveraging our brand, technology and network advantages in the future.

First, turning to highlights for the quarter. Total membership grew 21% from the prior year to 731,000. Revenue increased 15% year-on-year to $70.8 million. Adjusted EBITDA grew 47% versus last year to $3.4 million, and our net loss was $422,000, an improvement from a loss of $5.6 million in the second quarter of last year.

Our adjusted EBITDA and U.S. GAAP net loss for the quarter were both within the range of the guidance we gave. However, while we reported solid double-digit gains in our top line performance, revenue growth was below our expectations due primarily to lower-than-expected new member additions during the quarter. We also saw slower-than-anticipated growth in the U.K., which is our second largest market.

Lower-than-anticipated new member additions in the period reflected softer returns on our marketing programs, most notably, around our first test of broadcast media launched in March. The campaign, which included both streaming and terrestrial radio, did not meet the objectives we established. For the remainder of 2012, we've eliminated radio from our marketing mix. We expect this change to drive down CPAs from the levels we incurred in the second quarter. We're also taking aggressive steps to reignite growth in new members for the coming quarters, and we have a number of new member acquisition initiatives in place.

First, we're amping up our referral program by making it easier for our newest numbers to refer Zipcar to their personal network. Second, we're opening up new partnership channels. Third, we're enhancing our social media efforts. Fourth, we're implementing enhanced online media tracking and attribution technology. And fifth, we're working to improve our process as related to performance management of our online display media campaigns.

In addition to steps to improve returns on our marketing dollars, we're also evaluating ways to broaden our appeal by reducing barriers to trial and making initial access easier and more affordable. I'll touch on this initiative additionally in a few minutes.

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