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Local.com Reports Third Quarter 2010 Financial Results

^{Published on 2010-11-04 13:40:54 - Market Wire}
 

IRVINE, Calif.--([ BUSINESS WIRE ])--[ Local.com ] Corporation (NASDAQ: LOCM), a leading local search site and network, today reported its financial results for the third quarter of 2010.

"During the third quarter, we achieved over 20% Adjusted Net Income margins on revenue that was slightly below our record second quarter revenue. High-margin revenue from products on the newly acquired OCTANE360 platform contributed to the record bottom-line results"

aLocal.com invested heavily in our product suite this year and we are pleased with the initial results. Earlier this week, we debuted our all-new flagship website along with our new corporate branding. Our recent acquisition of OCTANE360 also represented a significant investment in our platform a" one that has already paid dividends in the form of record GAAP and Adjusted Net Income,a said Heath Clarke, Local.com chairman and CEO. aDuring the fourth quarter, we intend to focus on building out the various sales channels required to fully leverage our unique, proprietary product suite. These sales channels are forecasted to deliver revenue growth and margin expansion during 2011.a

Third Quarter Results Highlights:

a Revenuea" Third quarter 2010 revenue of $22.5 million represents an increase of 48% over third-quarter 2009 revenue of $15.1 million.

a Adjusted Net Incomea" Third-quarter 2010 Adjusted Net Income of $4.6 million or $0.27 per diluted share represents an increase of 249% over third quarter 2009 Adjusted Net Income of $1.3 million or $0.09 per diluted share.

Adjusted Net Income 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; and non-recurring items.

An explanation of the companya™s use of non-GAAP financial measures, including the limitations of such measures relative to GAAP measures is included below, and the reconciliation between GAAP and non-GAAP measures, where appropriate, is included in the financial tables attached to this release.

a GAAP Net Income a" Third-quarter 2010 GAAP net income was $3.7 million or $0.22 per diluted share, compared to third quarter 2009 GAAP net loss of $1.4 million or ($0.10) per diluted share. Third-quarter 2010 and 2009 GAAP net income included a gain (loss) on warrant revaluation of $1.8million and ($1.2) million or $0.11 and ($0.08) per diluted share, respectively.

a Cash a" On Sept. 30, 2010, the companya™s cash balance was $11.9 million. During the third quarter 2010, the company used $3.8 million in cash related to the OCTANE360 acquisition, $3.3million in cash for capital expenditures, including capitalized website development costs, and $1.2 million in cash to repurchase shares of its common stock. These cash expenditures were partially offset by $4.0 million of incremental borrowings on the line of credit and $1.0 million positive cash flow from operations.

a Debt a" On Sept. 30, 2010 the company had borrowings of $7.0 million outstanding under its $30 million revolving line of credit.

aDuring the third quarter, we achieved over 20% Adjusted Net Income margins on revenue that was slightly below our record second quarter revenue. High-margin revenue from products on the newly acquired OCTANE360 platform contributed to the record bottom-line results,a said Ken Cragun, Local.com interim chief financial officer. aOur third-quarter acquisition of OCTANE360, the launch of our redesigned Local.com website and the recent increases in the number of Network partners provide us with platforms that we expect will deliver long-term growth across our business.a

Third Quarter Operating and Recent Highlights:

a Named to Deloitte's 2010 Technology Fast 500a" a" In October 2010, the company announced that it was ranked in the Deloitte's 2010 Technology Fast 500a". This list includes the 500 fastest growing technology, media, telecommunications, life sciences and clean technology companies in North America.

a Number One in Directory Searcha" Compete.com ranked Local.com the highest traffic in the directory segment.

a Powering over 100,000 Local Websites a" In October 2010, the company announced that the OCTANE360 platform now powers over 100,000 local websites.

a Extended and Expanded SuperMedia Distribution Agreement a" In October 2010, the company announced that it had expanded its strategic relationship with SuperMedia LLC (Nasdaq: SPMD).

a Appointments to Management Team a" In October 2010, the company announced that Steven Schindler joined the company as vice president of marketing and that Ken Cragun, who previously served as the companya™s vice president of finance, had been named interim chief financial officer replacing Brenda Agius, who left the company for personal reasons.

Q3 2010 Owned & Operated (O&O):

a Revenue a" Total O&O revenue was $11.6 million, up 16% from Q3 2009 revenue of $10.0 million.

a Traffic a" Total O&O traffic was 50 million monthly unique visitors (MUVs), up 15% from Q3 2009 MUVs of 44 million.

a Organic Traffic a" O&O organic traffic was 5 million MUVs, flat from the year ago period. O&O organic traffic is defined as all non-SEM sourced traffic on owned and operated websites.

a Monetization of Traffica" Revenue per thousand visitors (RKV) was $266, approximately flat from Q3 2009.

Q3 2010 Network:

a Revenuea" Total Network revenue was $6.8 million, up 116% from Q3 2009 Network revenue of $3.2 million.

a Network Sites a" The company ended Q3 2010 with over 1,000 Network sites and over 80,000 domains under management, up from 743 Network sites in Q3 2009.

Sales & Advertiser Services:

a Revenue a" Total SAS revenue was $4.1 million, up 101% from Q3 2009 SAS revenue of $2.0million.

a Small Business Subscribers a" The company ended the third quarter of 2010 with over 60,000 small business subscribers, which included the purchase of approximately 9,000 subscribers at the end of the quarter.

Fourth Quarter 2010 Financial Guidance:

Revenue - The company expects fourth-quarter 2010 revenue to be between $22.0 million and $23.0 million.

Adjusted Net Income - Adjusted Net Income for Q4 2010 is expected to be between $3.4million and $3.7 million or between $0.20 and $0.21 per diluted share.

The Adjusted Net Income per share assumes a diluted weighted average share count of 17.5 million, taking into account the dilutive effect of stock options and warrants.

Projected Q4 2010 Adjusted Net Income Factors:

• Interest Expense of $70,000
• State Tax Provision Expense between $500,000 and $550,000*
• Depreciation Expense of $700,000
• Amortization Expense of $1.5 million
• Stock Compensation Expense of $750,000
• Warrant Revaluation Expense and Other Non-Recurring items are undeterminable**

Revised Fiscal 2010 Financial Guidance:

Revenuea" The company now expects fiscal year 2010 revenue to be between $86.0 million and $87.0 million, which at the midpoint, represents a 54% sequential increase over fiscal year 2009.

Adjusted Net Income - Adjusted Net Income for fiscal year 2010 is expected to be between $14.0million and $14.3 million or between $0.83 and $0.84 per diluted share.

The Adjusted Net Income per share assumes a diluted weighted average share count of 17.0 million, taking into account the dilutive effect of stock options and warrants.

Projected fiscal year 2010 Adjusted Net Income Factors:

• Interest Expense of $266,000
• State Tax Provision Expense between $580,000 and $600,000*
• Depreciation Expense of $1.5 million
• Amortization Expense of $5.7 million
• Stock Compensation Expense of $2.7 million
• Warrant Revaluation Expense and Other Non-Recurring items are undeterminable**

* The California Budget Bill was signed into law on Oct. 19, 2010 suspending utilization of net operating losses in the fiscal years 2010 and 2011. As the enactment date of this law is subsequent to Sept. 30, 2010, the effect of the tax law change has, therefore, not been recognized in the third-quarter 2010 financial statements. Management estimates that the companya™s tax provision for the first nine-months of the fiscal year 2010 and the estimated annual provision for the fiscal 2010 will increase by approximately $500,000 and $600,000, respectively.

** The valuation of the warrant liability is based in large part on the underlying price and volatility of our common stock during the quarter. 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. We, therefore, cannot provide GAAP guidance, but we do report GAAP results.

Conference Call Information:

Chairman and CEO Heath Clarke, President and COO Bruce Crair and Interim CFO Ken Cragun will host a conference call today at 4:30 p.m. ET to discuss the results and outlook. Investors and analysts can participate in the call by dialing 1-866-730-5771 or 1-857-350-1595, passcode #91551625. To listen to the webcast, or to view the press release, please visit the Investor Relations section of the Local.com 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 1-888-286-8010 or 1-617-801-6888, passcode #42617118. A replay of the webcast will be available for approximately 90 days at the company's website, starting approximately one hour after the completion of the call.

About Local.com^®

Local.com Corporation (NASDAQ: LOCM) owns and operates a leading local search site and network in the United States. The company uses patented and proprietary technologies to provide over 20 million consumers each month with relevant search results for local businesses, products and services on Local.com and over 1,000 partner sites. Local.com powers over 100,000 local websites, and tens of thousands of small business customers use [ Local.com ] products and services toreach consumers using a variety of subscription, performance and display advertising and website products. To advertise, or for more information visit: [ www.local.com ].

Forward Looking Statements

All statements other than statements of historical fact included in this document regarding our anticipated financial position, business strategy and plans and objectives of our management for future operations, are forward-looking statements. When used in this report, words such as aanticipate,a™ abelieve,a™ aestimate,a™ aplans,a™ aexpect,a™ aintend,a™ aprojects,a™ afeela™ and similar expressions and phrases, as they relate to Local.com or our management, identify 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 ability to monetize the Local.com domain, our ability to incorporate our local-search technologies, our ability to market the Local.com domain as a destination for consumers seeking local-search results, our ability to grow our business by enhancing our local-search services, including through businesses we acquire, 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, our ability to increase the number of businesses that purchase our subscription advertising and other business products, our ability to expand our advertiser and distribution networks, our ability to integrate and effectively utilize our acquisitionsa™ 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 Annual Report on Form 10-K, subsequent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K, 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 aAdjusted Net Incomea 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; and non-recurring items. Adjusted Net Income, as defined above, is not a measurement under GAAP. Adjusted Net Income 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 is set forth at the end of this press release.

Management believes that Adjusted Net Income provides useful information to investors about the companya™s performance because it eliminates the effects of period-to-period changes in income from interest on the companya™s cash and marketable securities, expense from the companya™s financing transactions and the costs associated with income tax expense, capital investments, stock-based compensation expense, warrant revaluation charges and non-recurring items which are not directly attributable to the underlying performance of the companya™s business operations. Management uses Adjusted Net Income in evaluating the overall performance of the companya™s business operations.

A limitation of non-GAAP Adjusted Net Income is that it excludes items that often have a material effect on the companya™s net income and earnings per common share calculated in accordance with GAAP. Therefore, management compensates for this limitation by using Adjusted Net Income in conjunction with net income (loss) and net income (loss) per share measures. The company believes that Adjusted Net Income provides investors with an additional tool for evaluating the companya™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 companya™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 or earnings per share.