Exhibit
99.1
|
Vertro,
Inc.
|
Press
Release
|
|
Peter
Corrao
|
|
|
President
& CEO
|
|
|
Peter.Corrao@vertro.com
|
|
|
(212)
231-2000
|
|
|
|
|
Vertro,
Inc. Announces Second Quarter 2009 Results
Improved
ALOT Metrics Achieved in Latter Part of the Second Quarter
NEW YORK, NY – August 12, 2009
– Vertro, Inc. (NASDAQ: VTRO), today reported financial results for the second
quarter ended June 30, 2009.
Summary
of Second Quarter 2009 Results from Continuing Operations:
|
·
|
Revenue
of $6.0 million in Q2 2009, compared to revenue of $6.2 million in Q1
2009;
|
|
·
|
Gross
margins of 93% in Q2 2009, comparable to the 93% gross margins in Q1
2009;
|
|
·
|
EBITDA
loss of $3.4 million in Q2 2009, which included $0.2 million non-cash
compensation expense, compared to an EBITDA loss of $2.7 million in Q1
2009. Q1 2009 EBITDA included $0.5 million non-cash compensation
expense;
|
|
·
|
Adjusted
EBITDA loss of $3.2 million in Q2 2009, compared to Adjusted EBITDA loss
of $2.3 million in Q1 2009; and
|
|
·
|
GAAP
net loss from continuing operations of $3.9 million or $(0.11) per basic
share in Q2 2009, compared to GAAP net loss from continuing operations of
$2.8 million or $(0.08) per basic share in Q1
2009.
|
“As
previously reported, we believe we started the second quarter with a lower
volume, less valuable user base as a result of the cuts in advertising spend we
made in the first quarter. Despite these issues, during the latter part of the
second quarter, we successfully grew our total user base, increased revenue per
thousand live users, increased the number of searches being conducted by our
users and reduced attrition rates across our core English speaking markets,”
commented Peter Corrao, Vertro’s President and Chief Executive
Officer.
“While
these metrics came too late to have a positive impact on our second quarter
numbers, we believe they provide the foundation for us to increase revenue and
decrease our EBITDA loss in the third quarter, and return the business to EBITDA
profitability in the fourth quarter and into 2010.”
Second
Quarter Results from Continuing Operations
Revenue
was $6.0 million in Q2 2009, compared to Q1 2009 revenue for continuing
operations of $6.2 million.
Gross
margins were 93% in Q2 2009, compared to 93% in Q1 2009. Gross margin excludes
advertising spend of $5.8 million in Q2 2009 and $4.3 million in Q1 2009, which
is included in consolidated operating expenses within the marketing, sales and
service category.
Total
operating expenses were $9.0 million in Q2 2009, compared to $8.5 million in Q1
2009. The operating expenses in Q2 2009 included $0.2 million of non-cash
compensation expense and accelerated recognition of $0.6 million of unamortized
loan expense relating to our line of credit with Bridge Bank, N.A. The operating
expenses in Q1 2009 included $0.5 million of non-cash compensation
expense.
EBITDA
was a loss of $3.4 million in Q2 2009, compared to an EBITDA loss of $2.7
million in Q1 2009. Q2 2009 EBITDA included $0.2 million non-cash compensation
expense. Q1 2009 EBITDA included $0.5 million non-cash compensation
expense.
Adjusted
EBITDA was a loss of $3.2 million in Q2 2009, compared to Adjusted EBITDA loss
of $2.3 million in Q1 2009. Q2 2009 Adjusted EBITDA loss excluded $0.2 million
in non-cash compensation expense. Q1 2009 Adjusted EBITDA loss excluded $0.5
million non-cash compensation expense.
GAAP net
loss from continuing operations of $3.9 million or $(0.11) per basic share in Q2
2009, compared to GAAP net loss from continuing operations of $2.8 million or
$(0.08) per basic share in Q1 2009.
Adjusted
net loss from continuing operations was $3.6 million or $(0.11) per diluted
share in Q2 2009, compared to Adjusted net loss from continuing operations of
$2.4 million or $(0.07) per diluted share in Q1 2009. Q2 2009 Adjusted net loss
excluded $0.2 million in non-cash compensation expense. Q1 2009 Adjusted net
loss excluded $0.5 million non-cash compensation expense.
Cash and
cash equivalents were $8.3 million at June 30, 2009, a decrease of $3.2 million
from March 31, 2009 cash of $11.6 million. The decrease was primarily a result
of the net loss in the quarter, including the increased advertising spend, as
well as certain anticipated one-time expenses.
As of
June 30, 2009, the Company had an active base of approximately 50 full time
employees, comparable with its active base of full time employees on March 31,
2009.
Quarterly
Metrics for Continuing Operations
|
|
|
Q1 2009
|
|
|
Q2 2009
|
|
|
Average
monthly search queries (1)
|
|
54.0
million
|
|
|
55.2
million
|
|
|
Gross
Margin (2)
|
|
93%
|
|
|
93%
|
|
|
Advertising
spend
|
|
$4.3
million
|
|
|
$5.8
million
|
|
|
ALOT
Toolbar live users (3)
|
|
3.3
million
|
|
|
4.1
million
|
|
|
Total
live toolbar users (4)
|
|
4.4
million
|
|
|
4.7
million
|
|
|
ALOT
Homepage unique users (5)
|
|
1.8
million
|
|
|
2.3
million
|
|
(1)
Source: internal statistics; monthly averages by all users across all products;
includes error search
(2)
Excludes advertising spend
(3)
Source: internal statistics; live users are defined as the number of unique
toolbar users in the last 15 days of each quarter
(4)
Source: internal statistics; includes ALOT Toolbar and users of Vertro’s legacy
toolbar brand
(5)
Source: SiteCatalyst; monthly averages
Management
Conference Call
Management
will participate in a conference call to discuss the full results for the
Company on August 12, 2009, at approximately 5:00 p.m. ET. The conference call
will be simulcast on the Internet at http://ir.vertro.com/events.cfm. A replay
of the conference call will be available on the investor relations area of
Vertro’s website at http://ir.vertro.com/events.cfm.
Vertro
believes that “Adjusted EBITDA”, “Adjusted net income/loss” and “Adjusted net
income/loss per share” provide meaningful measures for comparison of the
Company’s current and projected operating performance with its historical
results due to the significant changes in non-cash amortization that began in
2004 primarily due to certain intangible assets resulting from mergers and
acquisitions that have since been written off. Vertro defines Adjusted EBITDA as
EBITDA (earnings before interest, income taxes, depreciation and amortization)
plus non-cash compensation expense and plus or minus certain identified revenues
or expenses that are not expected to recur or be representative of future
ongoing operation of the business. Vertro uses Adjusted EBITDA as an internal
measure of its business and believes it is utilized as an important measure of
performance by the investment community. Vertro sets goals and awards bonuses in
part based on performance relative to Adjusted EBITDA. Vertro defines Adjusted
net income/loss as net income/loss plus amortization and non-cash compensation
expense, plus or minus certain identified revenues or expenses that are not
expected to recur or be representative of future ongoing operation of the
business, in each case including the tax effects (if any) of the adjustment.
Vertro believes the use of these measures does not lessen the importance of GAAP
measures.
About
Vertro, Inc.
Vertro,
Inc. (NASDAQ:VTRO) is a software and technology company that owns and operates
the ALOT product portfolio. ALOT's products are designed to 'Make the Internet
Easy' by enhancing the way consumers engage with content online. Through ALOT,
Internet users can discover best-of-the-web third party content and display that
content through customizable toolbar, homepage and desktop products. ALOT has
millions of live users across its product portfolio. Together these users
conduct high-volumes of type-in search queries, which are monetized through
third-party search and content agreements.
Source:
VTRO-E
Forward-looking
Statements
This
press release contains certain forward-looking statements that are based upon
current expectations and involve certain risks and uncertainties within the
meaning of the U.S. Private Securities Litigation Reform Act of 1995. Words or
expressions such as "anticipate", "plan," "will," "intend," "believe" or
"expect'" or variations of such words and similar expressions are intended to
identify such forward-looking statements. These forward-looking statements are
not guarantees of future performance and are subject to risks, uncertainties,
and other factors, some of which are beyond our control and difficult to predict
and could cause actual results to differ materially from those expressed or
forecasted in the forward-looking statements, including (1) our ability to
successfully execute upon our corporate strategies, (2) our ability to
distribute and monetize our international products at rates sufficient to meet
our expectations, (3) our ability to develop and successfully market new
products and services, and (4) the potential acceptance of new products in the
market. Additional key risks are described in Vertro's reports filed with the
U.S. Securities and Exchange Commission, including the Form 10-Q for Q2
2009.
Non-GAAP
Financial Measures
This
press release includes discussion of additional financial measures “Adjusted
EBITDA,” “Adjusted Net Loss,” “Adjusted Net Income,” “Adjusted Net Loss Per
Share” and “Adjusted Net Income Per Share,” which are not considered generally
accepted accounting principle (GAAP) measures by the Securities and Exchange
Commission, and may differ from non-GAAP financial measures used by other
companies. The presentation of this financial information is not intended to be
considered in isolation or as a substitute for the financial information
prepared and presented in accordance with GAAP. Vertro provides reconciliations
of these two financial measures to GAAP measures in its press releases regarding
actual financial results. A reconciliation of these financial measures to net
income/loss and net income/loss per share for the three months ended June 30,
2008 and 2009, included in this press release is set forth
below.
Vertro,
Inc.
Consolidated
Statements of Operations
(in
thousands, except per share data)
|
|
|
Three Months
|
|
|
Three Months
|
|
|
Six Months
|
|
|
Six Months
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
June 30, 2009
|
|
|
June 30, 2008
|
|
|
June 30, 2009
|
|
|
June 30, 2008
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
Revenues
|
|
$
|
6,002
|
|
|
$
|
10,303
|
|
|
$
|
12,236
|
|
|
$
|
22,373
|
|
|
Cost
of services
|
|
|
445
|
|
|
|
520
|
|
|
|
901
|
|
|
|
1,266
|
|
|
Gross
profit
|
|
|
5,557
|
|
|
|
9,783
|
|
|
|
11,335
|
|
|
|
21,107
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing,
sales, and service
|
|
|
6,143
|
|
|
|
7,600
|
|
|
|
10,896
|
|
|
|
15,771
|
|
|
General
and administrative
|
|
|
2,193
|
|
|
|
4,045
|
|
|
|
5,285
|
|
|
|
8,305
|
|
|
Product
development
|
|
|
633
|
|
|
|
994
|
|
|
|
1,331
|
|
|
|
1,842
|
|
|
Amortization
|
|
|
40
|
|
|
|
461
|
|
|
|
40
|
|
|
|
953
|
|
|
Restructuring
Charges
|
|
|
-
|
|
|
|
588
|
|
|
|
(15
|
)
|
|
|
551
|
|
|
Total
operating expenses
|
|
|
9,009
|
|
|
|
13,688
|
|
|
|
17,537
|
|
|
|
27,422
|
|
|
Loss
from operations
|
|
|
(3,452
|
)
|
|
|
(3,905
|
)
|
|
|
(6,202
|
)
|
|
|
(6,315
|
)
|
|
Interest
income, net
|
|
|
9
|
|
|
|
50
|
|
|
|
(72
|
)
|
|
|
153
|
|
|
Exchange
rate gain (loss)
|
|
|
(398
|
)
|
|
|
-
|
|
|
|
(398
|
)
|
|
|
-
|
|
|
Loss
before provision for income taxes
|
|
|
(3,841
|
)
|
|
|
(3,855
|
)
|
|
|
(6,672
|
)
|
|
|
(6,162
|
)
|
|
Income
tax expense
|
|
|
14
|
|
|
|
26
|
|
|
|
27
|
|
|
|
85
|
|
|
Loss
from continuing operations
|
|
$
|
(3,855
|
)
|
|
$
|
(3,881
|
)
|
|
$
|
(6,699
|
)
|
|
$
|
(6,247
|
)
|
|
Income/(loss)
from discontinued operations
|
|
$
|
491
|
|
|
$
|
(2,583
|
)
|
|
$
|
(4,667
|
)
|
|
$
|
(5,345
|
)
|
|
Gain
on sale of discontinued operations
|
|
|
213
|
|
|
|
-
|
|
|
|
7,139
|
|
|
|
-
|
|
|
Net
loss
|
|
$
|
(3,151
|
)
|
|
$
|
(6,464
|
)
|
|
$
|
(4,227
|
)
|
|
$
|
(11,592
|
)
|
|
Basic
earnings (loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$
|
(0.11
|
)
|
|
$
|
(0.12
|
)
|
|
$
|
(0.20
|
)
|
|
$
|
(0.19
|
)
|
|
Discontinued
operations
|
|
$
|
0.02
|
|
|
$
|
(0.08
|
)
|
|
$
|
0.07
|
|
|
$
|
(0.16
|
)
|
|
Diluted
earnings (loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$
|
(0.11
|
)
|
|
$
|
(0.12
|
)
|
|
$
|
(0.20
|
)
|
|
$
|
(0.19
|
)
|
|
Discontinued
operations
|
|
$
|
0.02
|
|
|
$
|
(0.08
|
)
|
|
$
|
0.07
|
|
|
$
|
(0.16
|
)
|
|
Weighted-average
number of common shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
33,707
|
|
|
|
32,600
|
|
|
|
33,453
|
|
|
|
32,603
|
|
|
Diluted
|
|
|
33,707
|
|
|
|
32,600
|
|
|
|
33,453
|
|
|
|
32,603
|
|
Vertro,
Inc.
Consolidated
Statements of Operations
(in
thousands, except per share data)
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
June 30, 2009
|
|
|
March 31, 2009
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
6,002
|
|
|
$
|
6,234
|
|
|
Cost
of services
|
|
|
445
|
|
|
|
456
|
|
|
Gross
profit
|
|
|
5,557
|
|
|
|
5,778
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
Marketing,
sales, and service
|
|
|
6,143
|
|
|
|
4,753
|
|
|
General
and administrative
|
|
|
2,193
|
|
|
|
3,077
|
|
|
Product
development
|
|
|
633
|
|
|
|
698
|
|
|
Amortization
|
|
|
40
|
|
|
|
-
|
|
|
Restructuring
Charges
|
|
|
-
|
|
|
|
-
|
|
|
Total
operating expenses
|
|
|
9,009
|
|
|
|
8,528
|
|
|
Loss
from operations
|
|
|
(3,452
|
)
|
|
|
(2,750
|
)
|
|
Interest
income, net
|
|
|
9
|
|
|
|
(82
|
)
|
|
Exchange
rate gain (loss)
|
|
|
(398
|
)
|
|
|
-
|
|
|
Loss
before provision for income taxes
|
|
|
(3,841
|
)
|
|
|
(2,832
|
)
|
|
Income
tax expense
|
|
|
14
|
|
|
|
14
|
|
|
Loss
from continuing operations
|
|
$
|
(3,855
|
)
|
|
$
|
(2,846
|
)
|
|
Income/(loss)
from discontinued operations
|
|
$
|
491
|
|
|
|
(5,158
|
)
|
|
Gain
on sale of discontinued operations
|
|
|
213
|
|
|
|
6,926
|
|
|
Net
loss
|
|
$
|
(3,151
|
)
|
|
$
|
(1,078
|
)
|
|
Basic
earnings (loss) per share
|
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$
|
(0.11
|
)
|
|
$
|
(0.08
|
)
|
|
Discontinued
operations
|
|
$
|
0.02
|
|
|
$
|
0.05
|
|
|
Diluted
earnings (loss) per share
|
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$
|
(0.11
|
)
|
|
$
|
(0.08
|
)
|
|
Discontinued
operations
|
|
$
|
0.02
|
|
|
$
|
0.05
|
|
|
Weighted-average
number of common shares outstanding
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
33,707
|
|
|
|
33,197
|
|
|
Diluted
|
|
|
33,707
|
|
|
|
33,197
|
|
Vertro,
Inc.
Reconciliations
to Consolidated Statements of Operations
(in
thousands, except per share data)
(unaudited)
|
|
|
Three Months
|
|
|
Three Months
|
|
|
Six Months
|
|
|
Six Months
|
|
|
Additional information:
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
June 30, 2009
|
|
|
June 30, 2008
|
|
|
June 30, 2009
|
|
|
June 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
$
|
(3,166
|
)
|
|
$
|
(2,236
|
)
|
|
$
|
(5,445
|
)
|
|
$
|
(3,413
|
)
|
|
Adjusted
net loss
|
|
$
|
(3,593
|
)
|
|
$
|
(2,354
|
)
|
|
$
|
(5,992
|
)
|
|
$
|
(3,659
|
)
|
|
Adjusted
net loss per share
|
|
$
|
(0.11
|
)
|
|
$
|
(0.07
|
)
|
|
$
|
(0.18
|
)
|
|
$
|
(0.11
|
)
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
Additional information:
|
|
Ended
|
|
|
Ended
|
|
|
|
|
June 30, 2009
|
|
|
March 31, 2009
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
$
|
(3,166
|
)
|
|
$
|
(2,264
|
)
|
|
Adjusted
net loss
|
|
$
|
(3,593
|
)
|
|
$
|
(2,386
|
)
|
|
Adjusted
net loss per share
|
|
$
|
(0.11
|
)
|
|
$
|
(0.07
|
)
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
Six Months
|
|
|
Six Months
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Reconciliation of Net Loss to Adjusted EBITDA
|
|
June 30, 2009
|
|
|
June 30, 2008
|
|
|
June 30, 2009
|
|
|
June 30, 2008
|
|
|
Loss
from continuing operations
|
|
$
|
(3,855
|
)
|
|
$
|
(3,881
|
)
|
|
$
|
(6,699
|
)
|
|
$
|
(6,247
|
)
|
|
Interest
income, net and exchange rate gain
|
|
|
389
|
|
|
|
(50
|
)
|
|
|
470
|
|
|
|
(153
|
)
|
|
Income
tax expense
|
|
|
14
|
|
|
|
26
|
|
|
|
27
|
|
|
|
85
|
|
|
Depreciation
|
|
|
24
|
|
|
|
142
|
|
|
|
50
|
|
|
|
314
|
|
|
Amortization
|
|
|
40
|
|
|
|
461
|
|
|
|
40
|
|
|
|
953
|
|
|
EBITDA
|
|
|
(3,388
|
)
|
|
|
(3,302
|
)
|
|
|
(6,112
|
)
|
|
|
(5,048
|
)
|
|
Restructuring
Charges
|
|
|
-
|
|
|
|
588
|
|
|
|
(15
|
)
|
|
|
551
|
|
|
Non
cash compensation charge
|
|
|
222
|
|
|
|
478
|
|
|
|
682
|
|
|
|
1,084
|
|
|
Adjusted
EBITDA
|
|
$
|
(3,166
|
)
|
|
$
|
(2,236
|
)
|
|
$
|
(5,445
|
)
|
|
$
|
(3,413
|
)
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Reconciliation of Net Loss to Adjusted EBITDA
|
|
June 30, 2009
|
|
|
March 31, 2009
|
|
|
Loss
from continuing operations
|
|
$
|
(3,855
|
)
|
|
$
|
(2,846
|
)
|
|
Interest
income, net and exchange rate (gain) loss
|
|
|
389
|
|
|
|
82
|
|
|
Income
tax expense
|
|
|
14
|
|
|
|
14
|
|
|
Depreciation
|
|
|
24
|
|
|
|
26
|
|
|
Amortization
|
|
|
40
|
|
|
|
-
|
|
|
EBITDA
|
|
|
(3,388
|
)
|
|
|
(2,724
|
)
|
|
Non
cash compensation charge
|
|
|
222
|
|
|
|
460
|
|
|
Restructuring
charges
|
|
|
-
|
|
|
|
-
|
|
|
Adjusted
EBITDA
|
|
$
|
(3,166
|
)
|
|
$
|
(2,264
|
)
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
Six Months
|
|
|
Six Months
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Reconciliation of Net Loss to Adjusted Net Income (Loss)
|
|
June 30, 2009
|
|
|
June 30, 2008
|
|
|
June 30, 2009
|
|
|
June 30, 2008
|
|
|
Loss
from continuing operations
|
|
$
|
(3,855
|
)
|
|
$
|
(3,881
|
)
|
|
$
|
(6,699
|
)
|
|
$
|
(6,247
|
)
|
|
Amortization
|
|
|
40
|
|
|
|
461
|
|
|
|
40
|
|
|
|
953
|
|
|
Restructuring
Charges
|
|
|
-
|
|
|
|
588
|
|
|
|
(15
|
)
|
|
|
551
|
|
|
Non
cash compensation charges
|
|
|
222
|
|
|
|
478
|
|
|
|
682
|
|
|
|
1,084
|
|
|
Adjusted
net income (loss)
|
|
$
|
(3,593
|
)
|
|
$
|
(2,354
|
)
|
|
$
|
(5,992
|
)
|
|
$
|
(3,659
|
)
|
|
Adjusted
net income (loss) per share
|
|
|
(0.11
|
)
|
|
|
(0.07
|
)
|
|
|
(0.18
|
)
|
|
|
(0.11
|
)
|
|
Shares
used in per share calculation - basic / diluted
|
|
|
33,707
|
|
|
|
32,600
|
|
|
|
33,453
|
|
|
|
32,603
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
June 30, 2009
|
|
|
March 31, 2009
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
of Net Loss to Adjusted Net Loss
|
|
|
|
|
|
|
|
Loss
from continuing operations
|
|
$
|
(3,855
|
)
|
|
$
|
(2,846
|
)
|
|
Amortization
|
|
|
40
|
|
|
|
-
|
|
|
Non
cash compensation charges
|
|
|
222
|
|
|
|
460
|
|
|
Restructuring
charges
|
|
|
-
|
|
|
|
-
|
|
|
Adjusted
net loss
|
|
$
|
(3,593
|
)
|
|
$
|
(2,386
|
)
|
|
Adjusted
net loss per share
|
|
$
|
(0.11
|
)
|
|
$
|
(0.07
|
)
|
|
Shares
used in per share calculation - basic
|
|
|
33,707
|
|
|
|
33,197
|
|
Vertro,
Inc.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(in
thousands, except par values)
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
Cash
and Cash Equivalents
|
|
$
|
8,316
|
|
|
$
|
6,699
|
|
|
Accounts
receivable, less allowances of $1,
81
5 and
$1,242
|
|
|
|
|
|
|
|
|
|
at
June 30, 2009 and December 31, 2008.
|
|
|
2,308
|
|
|
|
11,204
|
|
|
Deferred
tax assets
|
|
|
167
|
|
|
|
167
|
|
|
Income
tax receivable
|
|
|
5
|
|
|
|
247
|
|
|
Prepaid
expenses and other current assets
|
|
|
427
|
|
|
|
1,584
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
CURRENT ASSETS
|
|
|
11,223
|
|
|
|
19,901
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
193
|
|
|
|
4,975
|
|
|
Restricted
cash
|
|
|
550
|
|
|
|
2,000
|
|
|
Other
assets
|
|
|
530
|
|
|
|
703
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
12,496
|
|
|
$
|
27,579
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
4,750
|
|
|
$
|
6,609
|
|
|
Accrued
expenses
|
|
|
6,078
|
|
|
|
11,534
|
|
|
Current
portion of long-term debt
|
|
|
-
|
|
|
|
783
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
CURRENT LIABILITIES
|
|
|
10,828
|
|
|
|
18,926
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
tax liabilities long-term
|
|
|
167
|
|
|
|
167
|
|
|
Long-term
debt
|
|
|
-
|
|
|
|
4,595
|
|
|
Other
long-term liabilities
|
|
|
1,384
|
|
|
|
1,305
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
|
12,379
|
|
|
|
24,993
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
EQUITY
|
|
|
|
|
|
|
|
|
|
Preferred
stock, $.001 par value; authorized,
|
|
|
|
|
|
|
|
|
|
500
shares; none issued and outstanding
|
|
|
-
|
|
|
|
-
|
|
|
Common
stock, $.001 par value; authorized, 200,000
|
|
|
|
|
|
|
|
|
|
shares;
issued
35,513
and 34,480, respectively;
|
|
|
|
|
|
|
|
|
|
outstanding
33,757 and 32,731, respectively
|
|
|
35
|
|
|
|
34
|
|
|
Additional
paid-in capital
|
|
|
270,078
|
|
|
|
268,841
|
|
|
Treasury
stock; 1,756 and 1,749 shares at cost, respectively
|
|
|
(6,720
|
)
|
|
|
(6,719
|
)
|
|
Accumulated
other comprehensive income
|
|
|
12,914
|
|
|
|
12,393
|
|
|
Accumulated
Deficit
|
|
|
(276,190
|
)
|
|
|
(271,963
|
)
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
STOCKHOLDERS' EQUITY
|
|
|
117
|
|
|
|
2,586
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
$
|
12,496
|
|
|
$
|
27,579
|
|
VERTRO,
INC.
Q2
2009 Earnings Call Script
Alex
Vlasto
Thank you
and good afternoon. Welcome to Vertro’s second quarter 2009 financial results
conference call. Joining me on the call today are President and Chief Executive
Officer Peter Corrao, Chief Financial Officer, Mike Cutler and General Manager
and Senior Vice President, Rob Roe.
I’d like
to remind everyone that today’s comments include forward-looking
statements. These statements are subject to risks and uncertainties
that may cause actual results and events to differ materially from those
expressed in the forward-looking statements. These risks and
uncertainties will be outlined at the end of this conference call, and are also
detailed in Vertro’s filings with the Securities and Exchange
Commission.
To begin,
let’s review how we measure our financial performance. In addition to the
standard GAAP measurements, we utilize certain profitability based metrics to
evaluate our period to period and year-over-year performance. They are: Adjusted
EBITDA, Adjusted net income/loss and Adjusted net income/loss per
share.
We
believe that “Adjusted EBITDA”, “Adjusted net income/loss” and “Adjusted net
income/loss per share” provide meaningful measures for comparison of the
Company’s current and projected operating performance with its historical
results due to the significant changes in non-cash amortization that began in
2004 primarily due to certain intangible assets resulting from mergers and
acquisitions that have since been written off. Vertro defines Adjusted EBITDA as
EBITDA (earnings before interest, income taxes, depreciation, and amortization)
plus non-cash compensation expense and plus or minus certain identified revenues
or expenses that are not expected to recur or be representative of future
ongoing operation of the business. Vertro uses Adjusted EBITDA as an internal
measure of its business and believes it is utilized as an important measure of
performance by the investment community. Vertro sets goals and awards bonuses in
part based on performance relative to Adjusted EBITDA. Vertro defines Adjusted
net income/loss as net income/loss plus amortization and non-cash compensation
expense, plus or minus certain identified revenues or expenses that are not
expected to recur or be representative of future ongoing operation of the
business, in each case including the tax effects (if any) of the
adjustment. Vertro defines Adjusted net income/loss per share as the
Adjusted net income/loss, as previously described, divided by the average basic
or fully-diluted number of outstanding shares of Vertro common stock over the
reported period.
For a
detailed review of our second quarter 2009 results, including the corresponding
GAAP financial measures and a reconciliation of our non-GAAP financial measures
to GAAP financial measures, please refer to the press release we issued today,
and to our Form 10-Q for Q2 2009 filed with the Securities and Exchange
Commission.
To comply
with the SEC’s guidance on “fair and open disclosure,” we have made this
conference call publicly available via audio webcast through the investor
relations section of our website and a replay of the conference call will be
available for 90 days after the call. I’d now like to turn the call
over to our President and CEO, Peter Corrao. Peter?
Peter
Corrao
Good
afternoon and welcome to today’s call; we appreciate having you on the call with
us.
I want to
begin this afternoon by presenting four key points that we would like to
communicate about our overall business plan and particularly the comparison
between our first and second quarter 2009 results:
First,
our overall plan for 2009 was to first sell our MIVA Media business and to then
focus on building shareholder value by growing our ALOT product
portfolio.
Second,
as we have previously stated, our first quarter results were impacted by reduced
and inconsistent advertising spend that were caused by a need to manage our
balance sheet as we positioned ourselves for the sale of our Media business in
March. We believe that reducing advertising spend in the first
quarter correctly helped our balance sheet, but it hurt our influx of new ALOT
users that were needed to underpin second quarter performance.
Third,
because the revenue developed from our live users lags our advertising spend, we
entered the second quarter with a declining value of users combined with a need
to restore advertising spend for future growth. We believe we
executed our plan and the result is that we have rebuilt our user base which has
already paid off in increased revenue in the last month of the second quarter
and should give us the base we need to continue our progress in the third
quarter toward eventual profitability in the fourth quarter.
Fourth,
we believe the two most important factors in our future progress are the
execution of innovative product and marketing plans and the continued learning
and optimization of the relationship between advertising spend and revenue
growth. This second factor, which we call our advertising-revenue
algorithm, has already taught us a great deal through analysis and
experimentation. We have and will continue to experiment with
different target audiences, variations in product offering, new ideas for user
acquisition, and new approaches to analytics. We believe that optimization of
our algorithm will always be a mix of science and art and will be complicated by
ever changing pieces of the Internet and consumer equation. But, the
recognition of how much potential lies in better optimization of our model
underscores the value that we believe lies in Vertro’s business.
I’m now
going to move on to talk specifically about the second quarter.
Due to
the fluctuations in adverting spend I mentioned earlier, we expected net margins
to be negatively impacted in the second quarter. While we were affected by this
anticipated impact on net margin, our second quarter results of $6.0 million in
revenue and ($3.4) million in EBITDA were marginally ahead of our expectations.
This was due primarily to a range of improved metrics across our ALOT product
portfolio in the latter part of the second quarter, which I am now going to talk
about in detail.
To help
provide accurate quarter over quarter comparisons, certain metrics that I will
be presenting in this part of the call relate specifically to ALOT users in what
we refer to as ‘Region One’. This includes North America, Canada, the British
Isles and Australasia. As we recently announced, we increased our mix of non
Region One users over the second quarter, and while we’re excited by the
opportunities that these new markets present, the financial dynamics of
acquiring and monetizing these users are quite different from Region One, which
we believe would impact the accuracy of certain quarter over quarter
comparisons.
The first
area I want to focus on is RPMLU or revenue per thousand live users. On our last
call, we talked about the significant and unexpected decline we were
experiencing in RPMLU. While we continued to struggle with RPMLU in April and
part of May, I’m pleased to report that in the latter part of the second
quarter, after extensive product testing and optimization of our advertising
strategy, that we reversed this decline. As a result of our testing, we
concluded that our improvements in RPMLU can’t be attributed to one single
factor, but rather a combination of different catalysts, including:
|
-
|
Software
modifications we incorporated into our existing
products;
|
|
-
|
The
introduction of new marketing pages designed to encourage customization
and in turn prompt increased usage of our
products;
|
|
-
|
A
leveling out of our advertising spend after recent peaks and troughs,
which we believe has enabled us to get back to a position where we are
targeting only the highest value users across Region
One;
|
|
-
|
An
increase in revenue generating events - specifically searches and ad
clicks - being conducted by users across our product portfolio;
and
|
|
-
|
An
increase in revenue per click being delivered through our monetization
partner, possibly due to improving economic
conditions.
|
Put
simply, we believe that due to a combination of product and marketing
enhancements ALOT users in the latter part of the second quarter were searching
more and clicking on more ads and these factors, combined with higher revenue
generated through our monetization partner, resulted in a steady increase in
RPMLU.
Our 7 day
average RPMLU across Region One users increased 6% from the end of Q1 2009 to
the end of Q2 2009. Encouragingly, this growth has continued into the third
quarter - our 7 day average RPMLU on August 10, 2009 was 14 percent higher than
our 7 day average at the end of March 2009.
Based on
our current forecasts, we expect average Region One RPMLU in the third quarter
to be our highest quarterly average since the beginning of 2009.
One of
the factors contributing to our gains in RPMLU since the beginning of July was
increasing our monthly gross revenue sufficiently to qualify for a higher
revenue sharing rate from our primary monetization partner. Based on our current
forecasts, we hope to retain this higher rate for the remainder of 2009 and into
2010.
You’ll
remember from our last call that the unexpected decline in RPMLU we saw late in
Q1 and into early Q2 was a major concern, and we therefore believe that the
growth in RPMLU that started in the latter part of the second quarter is a
significant development for our business.
Overall,
we finished the second quarter with 4.7 million live toolbar users. 4.1 million
of these were ALOT users and the remainder were users of our legacy toolbar
product. The 4.7 million total at the end of Q2 2009 represented an increase of
8 percent from the 4.4 million live toolbar users we reported at the end of Q1
2009.
Our
homepage product also saw impressive growth over the second quarter. ALOT Home
attracted 2.7 million unique users in June 2009, an increase of more than 60
percent compared to the 1.6 million unique users who visited the site in March
2009.
Search
queries conducted by all of our users and across our entire product portfolio
increased steadily over the quarter from 52.6 million in April, to 54.5 million
in May and 58.4 million in June. The 58.4 million searches conducted by our
users in June represents an 8 percent increase compared to the 54.0 million
searches conducted by our users in March 2009.
Encouragingly,
the number of ad clicks that resulted from these searches increased by 10
percent from March to June 2009, a higher ratio than the increase in search
queries over the same period. We believe this is an important trend to report as
it’s from these ad clicks that we derive the majority of our
revenue.
Another
positive trend that we’ve seen over the second quarter and into the third is a
reduction in our attrition rate or, put another way, the number of users who
uninstall their ALOT products. Our one-day attrition rate for Region One ALOT
users improved significantly from Q1 2009 to Q2 2009. June in particular was a
record breaking month for us, with attrition rates the lowest we’ve seen since
launching the ALOT brand in 2007.
We
attribute these positive trends in attrition to a combination of more targeted
media buying and improvements we’ve made to our products. We believe we are now
more effective than we’ve ever been when it comes to integrating our advertising
copy with our marketing collateral and ultimately the product that our users
download and install.
From a
product perspective, we believe that continued vertical expansion and the
addition of customization to our products have both contributed to the
improvements that we’re seeing in attrition. We are now marketing 93 vertical
toolbars and 60 vertical homepages. We also continue to expand and refine our
library of vertically oriented buttons that users can add to their ALOT products
and have seen a significant increase in the number of users who are making use
of these customization features.
I
mentioned the expansion of ALOT outside Region One earlier in today’s call and
want to take a moment to update you on our progress. As we reported in a recent
press release we have had a good amount of success acquiring users across Asia.
We have developed a version of our toolbar product in simplified Chinese and
have also been marketing a variety of toolbars across other Asian markets
including India.
As we
anticipated, users in these markets are significantly less expensive to acquire
than users in Region One. As relatively new markets for us, we are still
evaluating the lifetime value we will derive from these users and, as a result,
we are expanding into these markets cautiously and with a close focus on
achieving a positive return on investment. If as we hope we can achieve positive
margins in these markets then we believe we can quickly expand our
distribution.
To give
our recent international growth some perspective, it is worth pointing out that
under 5 percent of our total adverting spend in the second quarter was used to
acquire users outside Region One and, over the same period, users outside region
one contributed under 5 percent of our total revenue. If the mix of these
international users and the revenue they contribute increase significantly over
the coming quarters, then it is likely we will start to break out our key
metrics by region to help give investors a clearer picture of company
performance.
I want to
move on now to briefly discuss our position regarding a reverse stock split. At
our Shareholder meeting on June 11, 2009, a resolution for a reverse stock split
was passed. Through this resolution the Board of Directors may implement a
reverse split of our common stock at a ratio of 1-for-10 at any time prior to
December 31, 2009.
As you’ll
be aware, on July 31, 2009 NASDAQ withdrew the temporary suspension it had in
place on the enforcement of its minimum $1.00 bid price requirement and market
value of publicly held share requirements. The Company has not received a NASDAQ
notice of noncompliance, however, if the Company does receive a notice of
noncompliance it will make a public announcement as required by NASDAQ
rules. Additionally, the Company’s shareholders have authorized the
Board to implement a reverse stock split prior to December 31,
2009. The Company intends to make a measured decision as to its
strategy regarding the NASDAQ continued listings requirements and will keep you
updated.
Before
handing over to Mike, I want to conclude by talking briefly about our business
outlook.
On our
last quarterly call, and against a backdrop of declining RPMLU, we predicted
that we would finish 2009 with approximately 5 million live toolbar users. With
our improved metrics in the latter part of Q2 and into Q3 we were able to
increase our user base more aggressively than we initially forecast and, as a
result, we now expect to end the year with more than 5 million live toolbar
users.
While we
are pleased to report this higher than expected growth in toolbar users, we
believe that the more important metric for investors and analysts to focus on is
the number of searches being conducted across our product portfolio. We believe
that search volumes provide a more accurate barometer of company performance for
two reasons. First, search data is gathered from across all of our products and
not just our toolbars, and second because searches, or more specifically the ad
clicks that follow, contribute the majority of our revenue today. As a reminder,
we saw searches increase by 8 percent from March 2009 to June 2009; in total our
users conducted over 58 million searches across our product portfolio in
June.
So, in
summary, we are encouraged by the improvements we have seen in our metrics
across ALOT in the latter part of the second quarter and into the third quarter.
RPMLU for our core Region One users has increased; our users are searching more
and clicking on more ads; and we’re generating increased revenue per click
through a combination of our higher revenue sharing rate and what would appear
to be modest improvements to the broader online advertising market.
While
these positive trends began too late in the second quarter to have a significant
impact on our revenue, we believe that we have now established a momentum that
will help drive improved performance in the second half of the year. We expect
to increase revenue and narrow our losses in the third quarter and continue to
predict EBITDA profitability in the fourth quarter.
With that
said, let me turn the call over to Mike, who will cover financial results.
Mike?
Mike
Cutler
Thank you
Peter and good afternoon everybody.
As Peter
mentioned, we have been encouraged by the positive metrics that we’ve seen
across our ALOT product portfolio in the latter part of Q2 and into Q3
2009.
Despite
these positive trends, we continued to suffer from softness in RPMLU during the
early part of the second quarter and believe that this, combined with the
continued effects of our cuts in advertising spend in the first quarter,
resulted in revenue declining from $6.2 million in Q1 2009 to $6.0 million in Q2
2009.
Over the
second quarter we increased adverting spend to $5.8 million, up from $4.3
million in Q1 2009. While this increase in advertising spend negatively impacted
net margins in the second quarter, we believe that it was a necessary step as we
focus on growing our user base and returning the business to EBITDA
profitability.
As Peter
mentioned in his introduction earlier, there is typically a delay between when
we spend our advertising dollars and when revenue is realized from the new users
who are acquired from that spend. We believe this revenue lag worked against us
in the second quarter due to the cuts in advertising spend made in the first
quarter; however importantly, we believe that this revenue lag should now start
to work in our favor due to our increased spend in the second quarter and the
sustained spending strategy we are forecasting for the remainder of
2009.
Operating
expenses for the second quarter were $9.0 million, compared to operating
expenses of $8.5 million in Q1 2009. Operating expenses in Q2 2009 included $0.2
million of non-cash compensation expense and accelerated recognition of $0.6
million of unamortized loan expense relating to our line of credit with Bridge
Bank. The operating expenses in Q1 2009 included $0.5 million of non-cash
compensation expense.
As a
smaller, more streamlined business, we have managed to achieve a range of
savings in our operating expense structure and we will continue to focus on
achieving additional savings in the third quarter and beyond. As a result of
these savings we expect to keep operating expenses, excluding advertising spend,
to below $1.0 million per month for the remainder of 2009.
Cash and
cash equivalents decreased from $11.6 million on March 31, 2009 to $8.3 million
on June 30, 2009. The decrease of $3.3 million was primarily as a result of loss
from operations, certain anticipated one-time expenses as well as the increases
in advertising spend that I described earlier. We expect our reported cash to
reach a low-point of between $5.0 million and $6.0 million, and expect our
mid-quarter cash balance to trough below this reported figure in early to mid Q4
2009.
EBITDA in
the second quarter was a loss of $3.4 million, compared to an EBITDA loss of
$2.7 million in Q1 2009. Q2 2009 EBITDA included $0.2 million non-cash
compensation expense. Q1 2009 EBITDA included $0.5 million non-cash compensation
expense.
Adjusted
EBITDA was a loss of $3.2 million in Q2 2009, compared to Adjusted EBITDA loss
of $2.3 million in Q1 2009. Q2 2009 Adjusted EBITDA loss excluded $0.2 million
in non-cash compensation expense. Q1 2009 Adjusted EBITDA loss excluded $0.5
million non-cash compensation expense.
As of
June 30 2009, the Company had an active base of approximately 50 employees,
comparable to the staff numbers we reported at the end of Q1 2009. We believe
that the tools we have in place for building and marketing our ALOT products,
mean that we can increase our user base and the verticals and markets in which
we operate without any significant increases in personnel. As a result, we
expect to maintain current staffing levels for the remainder of
2009.
Additionally,
we believe that the existing hardware infrastructure we have in place is
sufficient to support approximately double our current live user base, so we do
not believe any major capital expenditure will be required to facilitate our
short and mid-term growth plans for ALOT.
So, in
summary, we believe that in the second half of 2009 we will enjoy the positive
impacts of both our increased advertising spend and the improvements we’ve seen
in our ALOT metrics. We expect to increase revenue and reduce our EBITDA loss in
the third quarter of 2009 and continue to forecast EBITDA profitability in Q4
2009.
I will
now turn the call back to Peter for some concluding remarks. Peter?
Peter
Corrao:
Thanks
Mike. So, in summary our focus is to maintain and build on the positive metrics
that we’ve achieved across our ALOT product portfolio since the latter part of
the second quarter. We remain confident in our ability to return the business to
EBITDA profitability in the fourth quarter and I look forward to updating you
with our progress. With that, let me turn the call back to Alex for some
questions that have come in via email; Alex will then turn the call over to the
operator for our live Q&A session. Alex?
Alex
Vlasto:
Q & A
Session
This
conference call contained 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 “plan,” “will,”
“intend,” “anticipate,” “believe” or “expect,” or variations of such words and
similar expressions are intended to identify such forward-looking statements.
These statements are based on management’s current expectations and are subject
to uncertainty and changes in circumstances. Actual results may vary materially
from the expectations contained in the forward-looking statements. Key risks are
described in Vertro’s reports filed with the U.S. Securities and Exchange
Commission, including the Form 10-Q for Q2 2009. In addition, past performance
cannot be relied upon as a guide to future performance.
That
concludes our call today; thank you for listening.