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LiveDeal, Inc. Announces Fiscal 2009 First Quarter Financial Results

^{Published on 2009-02-18 08:33:03, Last Modified on 2009-02-18 08:37:37 - Market Wire}
 

LAS VEGAS--([ BUSINESS WIRE ])--LiveDeal, Inc. (NASDAQ: LIVE), which combines Internet classifieds, Internet Yellow Pages directory and local customer acquisition services for small businesses, announced today net income of approximately $887,000 for the first quarter of fiscal 2009, as compared to net income of $326,000 in the first quarter of fiscal 2008. Diluted net income per share in the first quarter of fiscal 2009 was $0.15, as compared to $0.05 per share in the first quarter of fiscal 2008. First quarter 2009 net income includes a gain of $3.8 million from the sale of the YP.com domain name, as well as $1.062 million in depreciation and amortization.

The Company will host a conference call to discuss its first quarter results on Monday, February 23, 2009 at 4:15 p.m. EST (1:15 p.m. PST). Dial-in information is provided below.

First Quarter 2009 Highlights

• Net revenues in first quarter of fiscal 2009 were $5.2 million, compared to $7.1 million in the first quarter of fiscal 2008.
• First quarter 2009 net income included a gain of $3.8 million from the Company's sale of the "[ www.yp.com ]" domain name.
• The Company experienced significant growth in its Premium Services line of business, with revenue of $700,000 in the first quarter of fiscal 2009. LiveDeal did not launch this line of business until after the end of the first quarter of fiscal 2008. The Company had about 1,100 Premium Services customers as of December 31, 2008, and since April 2008, the Premium Services customer base has been growing at a monthly rate of approximately 20%.
• Added key senior executives in technology, product development, marketing and SEM.
• Completely redesigned Company websites to better reflect LiveDeal's new business focus.
• Initiated development of extensive new backend services to drive expansion of the Company's Premium Services line of business, including new customer ROI profitability analysis and sophisticated SEM platforms to support deep integration of all aspects of the Company's sales and fulfillment operations.
• Continued to strengthen cash balances. As of December 31, 2008, the Company had cash on hand of $7.6 million, up from $4.6 million at the end of fiscal 2008.

Operating Highlights:

Net revenues for the first quarter of fiscal 2009 were $5.2 million, down from $7.1 million during the same period in fiscal 2008, but unchanged from the $5.2 million of revenues reported in the fourth quarter of fiscal 2008. Net income for the first quarter of fiscal 2009 was $887,000, or $0.15 per share, compared with net income of $326,000 in the first quarter of fiscal 2008 and a net loss of $277,000 in the fourth quarter of fiscal 2008.

LiveDeal's change in net revenues for the first quarter of fiscal 2009 reflects the continued shift in the Company's focus away from adding new customers in its basic directory business toward producing and selling a new suite of SMB Internet audience acquisition services, led by our LiveSites, LiveAdvisor and LiveClicks products. This line of business has grown from accounting for less than 1% of our revenues in the first quarter of fiscal 2008 to 14% of revenues in the first quarter of fiscal 2009. Currently, the Company has more than $1.5 million in deferred revenue, an increase from the $0.9 million reported in the fourth quarter of fiscal 2008, from these SMB suite sales. We anticipate that this deferred revenue will be realized over the course of fiscal 2009, as the customer contracts involved typically provide for a 12-month term.

"We are making solid steps toward focusing LiveDeal's business around considerable new opportunities we see in the local small business Internet advertising market," said Mike Edelhart, Chief Executive Officer of LiveDeal, Inc. "We have completely rebuilt the management team and have redeployed our assets toward new lines of business that we believe will deliver ROI-driven results for our customers."

"We believe that this new business approach will allow us to capture a larger part of the local Internet business opportunity as small and medium-sized businesses (SMBs) migrate from the traditional offline directory advertising to a more targeted, ROI-driven local Internet advertising," added Edelhart. "We have a strong balance sheet with $7.6 million cash on hand at the end of the quarter and an expanded suite of products that should continue to show promise in fiscal 2009."

Financial Highlights

Net revenues decreased in the first quarter of fiscal 2009 as compared to the first quarter of fiscal 2008 due primarily to a decrease of approximately $2.1 million in sales of our directory service products. Additionally, classified revenues decreased $500,000. These decreases reflect the winding down of our legacy products. However, both of these decreases were partially offset by an increase in our SEM business of approximately $700,000 as a result of expanded marketing efforts toward these products.

Cost of services increased in the first quarter of fiscal 2009 as compared to the first quarter of fiscal 2008. We experienced an increase in costs related to our directory services and classifieds of approximately $155,000, as well as increased costs related to our SEM business of approximately $449,000. The increase in costs surrounding the SEM business was consistent with our revenue growth in this product line. As a percentage of sales, costs associated with the directory business has increased due to increased inquiry fees and billing fees associated with an increasingly strict regulatory environment.

Gross margin decreased to 68.8% of net revenues in the first quarter of fiscal 2009 from 85.8% in the first quarter of fiscal 2008. Our current product mix is more heavily weighted towards sales of our LiveClicks and other related products, which currently have a lower gross margin than the historically higher margin directory services business line. We expect this shift in our product mix to continue, but expect the margins attributable to the LiveClicks and related products to improve as we improve our capabilities and efficiencies in that business line. Initial costs related to the sale and fulfillment of newer products are not deferred, while revenues are recognized over the life of the customer contract, typically 12 months.

General and administrative expenses increased in the first quarter of fiscal 2009 as compared to the first quarter of fiscal 2008 primarily due to the following:

• Increased compensation costs of approximately $581,000 primarily attributable to the hiring of additional sales force and technology personnel as part of the development of our Las Vegas operations, partially offset by reduced officers salaries and reduced stock-based compensation charges;
• Increased professional fees of approximately $174,000 related to legal expenses incurred in response to certain legal actions brought against us, fees incurred for Sarbanes-Oxley related consulting fees, and increased recruitment fees to hire key personnel in response to our change in strategic direction; and
• An increase of approximately $81,000 to depreciation and amortization expense relating to additional fixed assets related to the relocation of our corporate headquarters to Las Vegas and additional capitalized software development costs relating to new product offerings.

Sales and marketing expenses in the first quarter of fiscal 2009 as compared to the first quarter of fiscal 2008 decreased approximately $378,000 primarily due to the following:

• $171,000 of decreased online advertising as we focused our online advertising toward clicks and other traffic generating activities which are more cost effective than our previous online advertising efforts;
• $166,000 of decreased customer acquisition costs as we began transitioning away from marketing activities geared toward our directory services business; and
• a reduction of approximately $41,000 in branding and other marketing expenses.

We reported an operating loss of $2.5 million for the three months ended December 31, 2008, compared to operating income of $482,000 the three months ended December 31, 2007, as a result of the decreased gross profit and increased operating expenses described above.

During the first quarter of fiscal 2009, we entered into an agreement to sell our Internet domain name "[ www.yp.com ]" for a cash payment of $3.85 million. We reported a net gain from the sale of that asset of $3,805,778, which is reflected in other income.

Income tax expense for the first quarter of fiscal 2009 was $419,000, as compared to an income tax provision of $191,000 in the first quarter of fiscal 2008. This change in our income tax provision is due primarily to corresponding increases in our pre-tax income. In determining the tax expense, we estimate an effective tax rate based on estimates of expected income and utilization of deferred tax differences. Given an impairment charge expected to be incurred in the second quarter of fiscal 2009 (as discussed below), we expect to be in a loss position for the year ended September 30, 2009 and, therefore, have not applied our existing NOL carry forwards in the computation of our tax position for the quarter ended December 31, 2008.

LiveDeal had cash on hand of $7.6 million and $11.8 million of total working capital as of December 31, 2008. During the quarter, the company used cash in the amount of $281,000 in its operations. The Company has no long-term debt, and stockholders' equity was $37.0 million as of December 31, 2008, up from $36.4 million at the end of fiscal 2008.

Significant Events Since the End of the First Quarter of Fiscal 2009

• Gary Pershbacher left as the Company's Chief Financial Officer, effective January 9, 2009. He has been replaced by Rajeev Seshadri.
• John Raven resigned as the Company's President and Chief Operating Officer, effective February 15, 2009.
• The Company evaluated its intangible assets and goodwill in light of its increased strategic focus on Premium Sales offerings; the management restructuring that the Company announced on January 20, 2009; management's response to certain other developments that were disclosed in the Company's Form 10-K for fiscal 2008; and present economic conditions. As a result, the Company concluded that these assets were impaired. The Company expects to record impairment charges in the second quarter of fiscal 2009, which ends on March 31, 2009. Since this determination was made after December 31, 2008, the condensed consolidated financial statements as of that date do not include the effects of this impairment. Further analysis and finalization of any charge will not be completed until the end of the second quarter.

The extent of the impairment charges discussed above covers substantially all of the Company's goodwill acquired in our acquisition of LiveDeal, Inc., the business focus of which is online classified advertising; 247 Marketing, Inc., the business focus of which is providing telemarketing services based in the Philippines; and intangible assets related to our directory services business, including URLs, internally developed software, and other miscellaneous intangible assets.

The impact of these impairments on our results of operations for the quarter ending March 31, 2009 is expected to be a charge of approximately $11.7 million. Based on the number of shares of our common stock outstanding as of December 31, 2008, the impact of that charge on earnings per share is expected to be approximately $(1.94). These impacts are estimates only and are subject to change.

In addition to the impairments described above, we have revised the useful lives of certain assets that will result in the acceleration of depreciation and amortization in the aggregate amount of approximately $473,000 during the quarter ending March 31, 2009.

Conference Call Information

The Company will host a conference call to discuss its first quarter 2009 results and provide an update with respect to its business on Monday, February 23, 2009, at 4:15 p.m. EST (1:15 p.m. PST). Listeners can access the conference call by dialing 866-271-6130 and entering passcode 67212713. International callers can access the conference call by dialing 617-213-8894 and entering passcode 67212713. A replay will be available two hours after the call by dialing 888-286-8010, (or 617-801-6888 for international callers) and entering passcode 41973841.

To listen to the live webcast of the conference call, please visit the Investor Relations portion of our website at [ http://investor.livedeal.com ].

About LiveDeal, Inc.

LiveDeal, Inc. is a leader in the local online classifieds and Yellow Pages marketplace with millions of goods and services listed for sale in every city and zip code across the U.S. Through its online property, [ www.livedeal.com ], LiveDeal offers businesses and consumers a simple and affordable way of creating a web presence and marketing their products and services to local audiences. Buyers and sellers come together through LiveDeal's vast local marketplaces to find and list business services, merchandise, real estate, automobiles and pets. LiveDeal also provides local online marketing solutions for small- and medium-sized businesses. LiveDeal seeks to deliver local search engine marketing (SEM) through its LiveAdvisor™ and LiveClicks™ products that combine best-of-breed technology with a strong partnership model and an inside sales team to create an efficient platform local businesses need to create and optimize their Internet search advertising campaigns. Livedeal allows business to extend their marketing reach their relevant customers on the internet through partnerships with Google, Yahoo!, Miva, Looksmart, Superpages.com and others. LiveDeal, Inc. is headquartered in Las Vegas, Nevada. For more information, please visit [ www.livedeal.com ].

Forward-Looking and Cautionary Statements

This press release may include statements that constitute "forward-looking statements," which are often characterized by the terms "may," "believes," "projects," "expects," or "anticipates," and do not reflect historical facts. Forward-looking statements involve risks, uncertainties and other factors that may cause actual results, performance or achievements of Livedeal, Inc. and its subsidiaries to be materially different from those expressed or implied by such forward-looking statements. Forward-looking statements included in this press release include statements concerning the Company's: expectation that it will realize deferred revenue in fiscal 2009; that it will capture a larger share of the local Internet business; that our expanded suite of products will yield favorable results; that we will report a net loss in 2009; expectation, timing and amount of intangible asset and goodwill impairments and acceleration of deprecation and amortization expenses relating to certain assets.

Factors that may affect forward-looking statements and the Company's business generally include but are not limited to (i) the risk factors and cautionary statements made in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2008; (ii) other factors or statements described in the Company's other filings with the Securities and Exchange Commission; and (iii) other factors that Livedeal, Inc. is currently unable to identify or quantify, but may exist in the future.

Forward-looking statements speak only as of the date the statement was made. LiveDeal, Inc. does not undertake and specifically declines any obligation to update any forward-looking statements.