Local Corporation Reports Fourth Quarter and Fiscal 2012 Financial Results
Local Corporation Reports Fourth Quarter and Fiscal 2012 Financial Results
"We are pleased to reiterate our prior guidance for 2013 revenue growth of about 12 percent above our fourth quarter 2012 exit run rate and anticipate first quarter 2013 revenues will exceed fourth quarter 2012 revenues. We expect to swing to Adjusted Net Income in the first quarter of 2013, followed by a return to positive cash flow from operations in the second quarter and steady cash flow growth through the remainder of the year projecting at least $5.0 million in Adjusted Net Income for 2013,**" said Heath Clarke, Local Corporation chairman and CEO. "We achieved record organic traffic levels during the fourth quarter, a strategic goal of the company. We believe there are many opportunities for growth and margin expansion and remain confident that we are well positioned with a powerful platform, great intellectual property and a team that has proven experience in navigating this rapidly changing, high-growth sector."
Full Year 2012 Results Highlights:
• Revenue - Record revenue of $97.8 million for the year ended Dec. 31, 2012, was a 25 percent increase over $78.3 million in 2011.
• GAAP Net Income (Loss) - GAAP Net Loss was $24.2 million, or ($1.10) per diluted share, for the year ended Dec. 31, 2012. This compares to a GAAP Net Loss of $14.6 million, or ($0.68) per diluted share, for the year ended Dec. 31, 2011.
• Adjusted Net Income (Loss) - Adjusted Net Loss was $553,000, or ($0.03) per diluted share, for the year ended Dec. 31, 2012. This compares to an Adjusted Net Loss of $1.7 million, or ($0.08) per diluted share, for the year ended Dec. 31, 2011.
Adjusted Net Income (Loss) is defined as net income (loss) excluding: provision for income taxes; interest and other income (expense), net; depreciation; amortization; stock-based compensation charges; gain or loss on warrant revaluation; net income (loss) from discontinued operations; gain on sale of Rovion; impairment charges; LEC receivables reserve; and severance charges.
An explanation of the company's use of non-GAAP financial measures, including the limitations of such measures relative to GAAP measures, is included below and reconciliation between GAAP and non-GAAP measures, where appropriate, is included in the financial tables attached to this release.
Fourth Quarter Results Highlights:
"We had previously reported fourth quarter revenue below initial forecasts, due to revenue per click declines from our main ad partner coupled with fourth quarter ad policy changes. We have been adapting to these policy changes and based on our continued results, we are reiterating our prior guidance for 2013," added Ken Cragun, Local Corporation chief financial officer.
(in thousands, except per share amounts)
|Q4 2012||Q3 2012||Q4 2011|
Owned & Operated
|Adjusted Net Income (Loss)*||$||(924||)||$||36||$||768|
|Less interest and other income (expense), net||(100||)||(131||)||(101||)|
|Less (provision) benefit for income taxes||9||(22||)||(71||)|
|Less non-cash depreciation, amortization and |
|Plus gain on revaluation of warrants||30||65||150|
|Less net loss from discontinued operations||(201||)||(140||)||(557||)|
|Less LEC reserve||(1,407||)||-||-|
|Plus gain on sale of Rovion||1,458||-||-|
|Less Spreebird impairment charge||(4,100||)||-||-|
|Less severance charges||(361||)||(144||)||(563||)|
|GAAP net loss||$||(7,891||)||$||(3,802||)||$||(3,806||)|
|Diluted Adjusted Net Income (Loss) per share *||$||(0.04||)||$||0.00||$||0.03|
|Diluted GAAP net loss per share||$||(0.36||)||$||(0.17||)||$||(0.17||)|
|Diluted weighted average shares used for Adjusted Net Income (Loss) per share||22,131||22,245||22,179|
|Diluted weighted average shares used for GAAP net loss per share||22,131||22,092||22,076|
Prior period balances have been reclassified to conform to current period reporting
* See detailed reconciliation of GAAP to non-GAAP measures in the financial tables attached to this release.
• Revenue - Fourth quarter 2012 revenue of $20.9 million represents a decrease of 16 percent over third quarter 2012 revenue of $24.8 million and a 17 percent decrease over fourth quarter 2011 revenues of $25.3 million.
• GAAP Net Income (Loss) - Fourth quarter 2012 GAAP Net Loss was $7.9 million, or ($0.36) per diluted share, compared to a third quarter 2012 GAAP Net Loss of $3.8 million, or ($0.17) per diluted share. The fourth quarter GAAP net loss included an impairment charge of $4.1 million, as well as a reserve of $1.4 million for the long-term LEC receivable. Also included in the fourth quarter GAAP net loss is a gain on the sale of Rovion's assets of $1.5 million.
• Adjusted Net Income (Loss) - Fourth quarter 2012 Adjusted Net Loss was $924,000, or ($0.04) per diluted share, as compared to third quarter 2012 Adjusted Net Income of $36,000, or $0.00 per diluted share.
• Cash - The company's cash balance was $3.7 million as of Dec. 31, 2012, unchanged from the Sept. 30, 2012, cash balance. During the fourth quarter 2012, the company had negative cash flow from operations offset by cash proceeds from the sale of Rovion's assets and an additional draw on the line of credit.
• Debt - On Dec. 31, 2012, the company had borrowings of $10.0 million outstanding under its Square One Bank line of credit.
Fourth Quarter 2012 Operating Highlights:
• Record Organic and Mobile Traffic - Overall traffic on the site and network was 100 million monthly unique visitors (MUVs) in the fourth quarter 2012, slightly down from third quarter 2012 traffic and up 7 percent from the year ago period. Organic traffic on the site and network was a record 45 million MUVs in the fourth quarter 2012, up 15 percent from the third quarter 2012 and up 51 percent from the year ago period. Organic traffic is defined as all non-SEM sourced traffic. Overall mobile traffic was 25 million MUVs in the fourth quarter 2012, slightly up from the third quarter 2012 and up 220 percent from a year ago period.
• Spreebird Impairment Charge - The fourth quarter impairment charge of $4.1 million for Spreebird is the result of a further decline in the market value of peer companies coupled with lower projections for this business line, due to the company's decision to exit its direct sales efforts of its Launch by Local product of which Spreebird was a planned component. The current impairment charge recorded is management's best estimate at this time and the final Spreebird impairment charge will be disclosed in the company's 2012 Annual Report on Form 10-K.
• Local Exchange Carrier ("LEC") reserve - During the fourth quarter, the company recorded an additional $1.4 million reserve relating to its long-term LEC receivable. An additional reserve was recorded, due to the cessation of billing by the LEC's and the longer-term nature of the receivable.
Owned & Operated (O&O):
• Revenue - Fourth quarter 2012 total revenue related to the O&O business unit was $12.5 million, down 29 percent from fourth quarter 2011 O&O revenue of $17.5 million and down 32 percent from third quarter 2012 O&O revenue of $18.3 million. This decline was primarily due to ad policy changes and reduced revenues per click from a major partner.
• Monetization of Traffic - Revenue per thousand visitors (RKV) for fourth quarter 2012 was $230, down 17 percent from third quarter 2012 RKV of $276 and down 31 percent from fourth quarter 2011 RKV of $332.
• Revenue - Fourth quarter 2012 total revenue related to the Network business unit was $7.6 million, up 52 percent from the $5.1 million Network revenue recorded in the fourth quarter 2011 and $5.0 million recorded in the third quarter 2012.
• Network Sites - The Network business unit ended the fourth quarter 2012 with over 1,200 regional media sites.
• Revenue - Fourth quarter 2012 revenue was $812,000, down 70 percent from fourth quarter 2011 revenue of $2.7 million and down 46 percent from third quarter 2012 revenue of $1.5 million. The reduction was primarily due to the previously disclosed phasing out of legacy subscription customers.
• Digital Media Enrollments - The company ended the fourth quarter 2012 with approximately 950 Launch by Local subscribers. The company also has over 10,000 additional subscribers via its self-service, network and channel partners.
Recent News Highlights:
• 2012 Technology Fast 500™ - The company was a Deloitte Technology Fast 500™ company for the third consecutive year, in the technology, media, telecommunications, life sciences and clean technology companies category in North America.
• Pay-Per-Call patent granted - On Nov. 6, 2012, the company was granted a patent which covers a pay-per-call Enhanced Directory Assistance (EDA) method or system. The patent describes an EDA method and/or system whereby pay-per-call advertiser listings are provided to consumers in response to directory assistance inquiries. The company believes this patent may cover an instrumental system and method for monetizing specific types of local searches by consumers on mobile devices. The company continues to develop its patent prosecution and monetization strategy.
• Launch of vertical sites - During the fourth quarter, the company launched the first in a series of industry-specific, content driven websites designed to further extend its reach and engagement with local consumers and businesses.
• Web domain name patent - On Dec. 12, 2012, the company was granted a patent which covers a method and system for the bulk acquisition and development of multiple web domain names.
• Launch of U.K. version of flagship search site - In January 2013, the company launched the U.K. version of its flagship search site. The new U.K. site allows consumers to find local businesses, products and services in the United Kingdom.
• Appointment of new board member - In January 2013, the company announced the appointment of Frederick G. Thiel to its board of directors. Thiel brings over 25 years of senior level strategic management experience in the software, media, Internet and technology industries.
• Record fourth quarter organic and mobile traffic - The company reached record organic traffic of 45 million MUVs and record mobile traffic of 25 million MUVs during the fourth quarter.
• Company renews and extends $12 million credit facility - The company renewed its $12 million credit facility with Square 1 Bank under substantially similar terms. The maturity date of the facility was extended to Feb. 3, 2015.
Fiscal 2013 Financial Guidance:
Revenue - The company expects 2013 revenue of between $93 million and $95 million, which at the mid-point, is an increase of 12 percent, over the fourth quarter 2012 exit run rate.
Adjusted Net Income - Adjusted Net Income for 2013 is expected to be at least $5 million, which would result in approximately $1 million in debt-free cash flow. The company defines debt-free cash flow as cash provided by operating activities, less capital expenditures.
Projected 2013 Adjusted Net Income Factors:
- Interest Expense of $400,000
- Income Tax Provision of $200,000
- Depreciation Expense of $4.5 million
- Amortization Expense of $1.3 million
- Stock Compensation Expense of $3.8 million
- Severance Charges of $500,000
- Warrant Revaluation Expense and Other items are undeterminable, but may be significant non-cash gains or losses**
** The valuation of the warrant liability is based in large part on the underlying price and volatility of our common stock during the period. Since we cannot predict this, we cannot project the non-cash gain or loss in connection with these warrants, and therefore, cannot reasonably project our GAAP net income (loss). We, therefore, cannot provide GAAP guidance, but we do report GAAP results.
As previously announced, the company will no longer provide quarterly guidance.
Conference Call Information:
Chairman and CEO Heath Clarke and CFO Ken Cragun will host a conference call today at 5 p.m. ET to discuss the results and outlook. Investors and analysts can participate in the call by dialing 1-877-454-9136 or 1-617-826-1724, passcode # 94830233. To listen to the webcast, or to view the press release, please visit the Investor Relations section of the Local Corporation website at: http://ir.local.com. Institutional investors can access the call via Thomson/CCBN's password-protected event management site, StreetEvents, at: www.streetevents.com.
The replay can be accessed for approximately one week starting at 7:30 p.m. ET the day of the call by dialing 1-800-585-8367 or 1-404-537-3406, passcode # 94830233. A replay of the webcast will be available for approximately 90 days on the company's website, starting approximately one hour after the completion of the call.
About Local Corporation
Local Corporation (NAS: LOCM) is a leading online local media company that connects brick-and-mortar businesses with over a million online and mobile consumers each day using a variety of innovative digital marketing products. To advertise, or for more information, visit: http://www.localcorporation.com.
Forward Looking Statements
This press release contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Words or expressions such as 'anticipate,' 'believe,' 'estimate,' 'plans,' 'expect,' 'intend,' 'project,' 'forecast,' 'potential,' 'feel' and similar expressions and phrases are intended to identify such forward-looking statements. Any forward-looking statements are based on the beliefs of our management as well as assumptions made by and information currently available to our management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors, including, but not limited to, our advertising partners paying less revenue per click and revenues to us for our search results, our ability to purchase advertising from third parties to drive users to our sites, including at a profit, our ability to adapt our business following the shifts in our monetization partners, our ability to monetize the Local.com domain, including at a profit, our ability to retain a monetization partner for the Local.com domain and other web properties under our management that allows us to operate profitably, our ability to develop, market and operate our local-search technologies, our ability to market the Local.com domain as a destination for consumers seeking local-search results, our ability to adapt to policy changes promulgated by our advertising partners and traffic acquisition partners, our ability to grow our business by enhancing our local-search services, including through businesses we acquire, the integration and future performance of our Spreebird business and our Krillion business, the possibility that the information and estimates used to predict anticipated revenues and expenses associated with the businesses we acquire are not accurate, difficulties executing integration strategies or achieving planned synergies, the possibility that integration costs and go-forward costs associated with the businesses we acquire will be higher than anticipated, the possibility of impairment of assets associated with the businesses we have acquired, our ability to successfully expand our sales channels for new and existing products and services, our ability to increase the number of businesses that purchase our advertising products, our ability to successfully bill our monthly subscription customers, our ability to expand our advertiser and distribution networks, our ability to integrate and effectively utilize our acquisitions' technologies, our ability to develop our products and sales, marketing, finance and administrative functions and successfully integrate our expanded infrastructure, as well as our dependence on major advertisers, competitive factors and pricing pressures, changes in legal and regulatory requirements, and general economic conditions. Any forward-looking statements reflect our current views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this paragraph. Unless otherwise stated, all site traffic and usage statistics are from third-party service providers engaged by the company.
Our most recent Annual Report on Form 10-K, subsequent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K and Form 8-K/A, and other Securities and Exchange Commission filings discuss the foregoing risks as well as other important risk factors that could contribute to such differences or otherwise affect our business, results of operations and financial condition. The forward-looking statements in this release speak only as of the date they are made. We undertake no obligation to revise or update publicly any forward-looking statement for any reason.
Non-GAAP Financial Measures
This press release includes the non-GAAP financial measure of "Adjusted Net Income" and "Adjusted Net Loss" which we define as net income (loss) excluding: provision for income taxes; interest and other income (expense), net; depreciation; amortization; stock based compensation charges; gain or loss on warrant revaluation; net income (loss) from discontinued operations; gain on sale of Rovion; impairment charges; LEC receivables reserve; and severance charges. Adjusted Net Income (Loss), as defined above, is not a measurement under GAAP. Adjusted Net Income (Loss) is reconciled to net income (loss) which we believe is the most comparable GAAP measure. A reconciliation of net income (loss) to Adjusted Net Income (Loss) is set forth at the end of this press release.
Management believes that Adjusted Net Income (Loss) provides useful information to investors about the company's performance because it eliminates the effects of period-to-period changes in income from interest on the company's cash and marketable securities, expense from the company's financing transactions and the costs associated with income tax expense, capital investments, stock-based compensation expense, LEC receivables reserve, warrant revaluation charges and severance charges which are not directly attributable to the underlying performance of the company's business operations. Management uses Adjusted Net Income (Loss) in evaluating the overall performance of the company's business operations.
A limitation of non-GAAP Adjusted Net Income (Loss) is that it excludes items that often have a material effect on the company's net income and earnings per common share calculated in accordance with GAAP. Therefore, management compensates for this limitation by using Adjusted Net Income (Loss) in conjunction with net income (loss) and net income (loss) per share measures. The company believes that Adjusted Net Income (Loss) provides investors with an additional tool for evaluating the company's core performance, which management uses in its own evaluation of overall performance, and as a base-line for assessing the future earnings potential of the company. While the GAAP results are more complete, the company prefers to allow investors to have this supplemental metric since, with reconciliation to GAAP; it may provide greater insight into the company's financial results. The non-GAAP measures should be viewed as a supplement to, and not as a substitute for, or superior to, GAAP net income (loss) or earnings (loss) per share.
CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
|December 31,||December 31,|
|Accounts receivable, net of allowances of $250 and $550, respectively||10,618||11,678|
|Prepaid expenses and other current assets||648||732|
|Assets held for sale||-||2,187|
|Total current assets||15,323||25,393|
|Property and equipment, net||6,769||8,018|
|Intangible assets, net||3,932||8,833|
|Long term note receivable||-||350|
|Long term receivable, net||1,585||1,778|
|LIABILITIES AND STOCKHOLDERS' EQUITY|
|Other accrued liabilities||1,315||2,422|
|Revolving line of credit||10,000||8,000|
|Liabilities held for sale||-||32|
|Total current liabilities||21,171||25,838|
|Deferred income taxes||302||265|
|Commitments and contingencies|
|Convertible preferred stock, $0.00001 par value; 10,000 shares authorized; none issued and outstanding for all periods presented||-||-|
|Common stock, $0.00001 par value; 65,000 shares authorized; 22,172 and 22,082 issued and outstanding, respectively||-||-|
|Additional paid-in capital||122,036||119,068|
|Total liabilities and stockholders' equity||$||49,907||$||75,811|
|CONSOLIDATED STATEMENTS OF OPERATIONS|
(in thousands, except per share data)
Three Months Ended