Attached files
file | filename |
---|---|
8-K - Vertro, Inc. | v210803_8-k.htm |
EX-99.1 - Vertro, Inc. | v210803_ex99-1.htm |
VERTRO,
INC.
Q4
Preannouncement
February
10, 2011
DENISE
GARCIA
Good
afternoon everyone and thank you for joining our call this afternoon. Joining me
on the call today are Vertro’s President and CEO Peter Corrao, CFO, Jim
Gallagher, and General Manager, 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 our filings with the SEC.
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 at www.vertro.com, and a
replay of this conference call will be available for 90 days.
Certain
of the alOt user metrics we’ll be discussing this afternoon are broken out by
‘Region One’ and ‘rest-of-world’ (ROW). As a reminder, Region One comprises
English speaking users in the U.S., Canada, U.K., Ireland, Australia and New
Zealand.
I’d now
like to turn the call over to President and CEO, Peter Corrao.
Peter?
PETER
CORRAO
Thanks
Denise, and good afternoon everyone; thanks for joining us.
My focus
this afternoon is to provide more detail on the non-financial metrics that we
released earlier today as well as our preliminary revenue results for Q4
2010. We’re releasing these numbers together after having conducted a
thorough analysis of our Q4 user data following the quarter close.
The
financial information and non-financial metrics that I’ll be discussing are
preliminary estimates only and the financial information is subject to final
audit by our independent auditors. We will be hosting a call to present our Q4
and full year 2010 results after the completion of our audit. We expect to host
this call in the first week of March and we’ll update investors with the exact
date when it is confirmed.
We
estimate Q4 2010 revenue of $9.6 million, an increase of approximately 20% over
Q4 2009 revenue of $8.0 million, and a sequential decrease of approximately 2%
from revenue of $9.8 million in Q3 2010.
We are
pleased to have achieved solid year-over-year revenue growth, however our
quarterly revenue performance was below our sequential growth target that we had
achieved throughout the year. Despite this, our estimates show we were able to
maintain our EBITDA and Adjusted EBITDA growth in Q4 2010, which I’ll discuss in
more detail after walking through our Q4 revenue analysis.
1
Based on
our analysis, we believe that the sequential decrease in Q4 revenue was the
result of two events. The first is an issue with a Region One bundle
distribution partner.
We’ve
developed a sophisticated lifetime value (LTV) model that we use to measure the
anticipated returns from users acquired through different distribution partners.
If, through this model. we see particular campaigns falling below our projected
margin targets, we optimize activity before deciding to reduce
spending. During Q4, we decreased spending with one of our Region One
bundle distribution partners.
During Q2
and Q3 2010, this bundle distribution partner delivered what we believed were
high margin Region One users, but during Q4 our LTV model revealed that the
value of users had decreased below our acceptable margin targets. We responded
by reducing the CPA, or cost we paid to acquire each user from this partner,
which in turn resulted in the partner delivering less users to us. This
ultimately caused a drop in users in Region One, and a loss of the revenue that
these users would have delivered during the quarter. As most of you know, we
generate a partial return on our customer acquisition spending in the quarter
the spending actually occurs.
We worked
hard to make up this reduction in Region One spending across other marketing
channels, however the nature of online marketing means that quickly ramping
spending typically has a negative impact on near-term margins, which we were
unwilling to incur and absorb.
We were
fortunate to be able to rely on our growing international user base to partially
offset the reductions in Region One revenue in Q4. While these ‘rest-of-world’
users typically deliver margins equal to or greater than Region One, the total
revenue we generate per user is generally lower than Region One. The net result
of this is that the rest-of-world users and revenue we added in Q4 were not
sufficient to fully offset the decline in users and revenue that we saw in
Region One.
To
address this issue, we have now refocused our customer acquisition team on
building our Region One user base. This includes continuing our vertical
expansion as well as testing new Region One distribution partners.
The
second issue we faced in Q4 was softer than expected revenue per search from our
monetization partners over the Holiday season. In Region One, we didn’t see the
seasonal lift we expected in Q4 2010. Added to this, the seasonal decline in
revenue per search that we saw in late December in Region One was more
pronounced than in previous years. Across many of our rest-of-world markets, we
saw a similar trend.
As part
of our ongoing strategy to optimize our revenue per search, we are currently
working with our monetization partners to test new implementations for our
search engine results pages. These tests include varying the number of ads that
we display to our users as well as testing new ad formats.
We
believe that through our analysis we have identified the two primary issues that
resulted in the sequential quarterly decrease in revenue in Q4. Further, we
believe we have now developed and are executing on strategies for addressing
these issues.
Before
opening the call for questions let me stress that we do not believe that the
sequential revenue decline which we experienced in Q4 is a long term issue for
our business, but rather it is a slight bump in the road. Even with the issues
we faced in Q4, we managed to deliver revenue growth of approximately 20% from
Q4 2009 to Q4 2010. For full year 2010, we expect revenue to increase
approximately 30% year-over-year, from $27.6 million in 2009 to approximately
$35.9 million in 2010.
2
As I
noted earlier in the call, one of the benefits of not being able to spend as
much on customer acquisition as we had planned in Q4 2010, is that we expect
more of our revenue to flow through to the bottom line. When we release our full
Q4 and 2010 results, we expect to report a sequential quarterly increase in both
EBITDA and Adjusted EBITDA.
We remain
excited by the prospects of our business and the potential for growth in both
Region One and rest-of-world. We are also proud of the expected year-over-year
improvements we have made in all of our key financial and non-financial metrics.
I look forward to presenting our full results to you in early March and to
provide an update on our strategy of returning to growth in Region One and
optimizing our search engine results pages.
With that
said, I’m happy to answer questions related to the events we experienced in Q4
and I’ve discussed on this call. As mentioned, we are planning our Q4
and full year 2010 call in early March. With that said, I’ll hand the call back
to Denise to start the Q&A session. Denise?
Q&A
SESSION
DENISE
GARCIA
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 its Annual Report on Form 10-K for 2009 and the Form 10-Qs
for Q1, Q2 and Q3 2010. In addition, past performance cannot be relied upon as a
guide to future performance.
That
concludes our call today; thank you for listening.
3