UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant
to Section 13 of 15(d)
of the Securities Exchange Act of 1934
May 19, 2014
Date
of Report (Date of earliest event reported)
LOCAL
CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware |
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001-34197 |
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33-0849123 |
(State or other jurisdiction
of incorporation) |
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(Commission
File Number) |
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(IRS Employer
Identification No.) |
7555 Irvine Center Drive
Irvine, California 92618
(Address of principal executive offices)
(949) 784-0800
(Registrants telephone number, including area code)
N/A
(Former name or
former address, if changed since last report)
Check the appropriate box below
if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the issuer under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 7.01 |
Regulation FD Disclosure. |
On May 19, 2014, Local Corporation (the Registrant) updated
its corporate presentation and posted it on the Registrants website available at ir.local.com. A copy of the presentation is attached as Exhibit 99.1.
The information in this Current Report on Form 8-K and accompanying exhibit is being furnished and shall not be deemed to be filed for the
purposes of Section 18 of the Securities Exchange Act of 1934 (the Exchange Act), or otherwise subject to the liabilities of such section, nor shall such information be deemed incorporated by reference in any filing under the
Securities Act of 1933 (the Securities Act) or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
The presentation materials contain a reference to non-GAAP financial information and include a reconciliation of those non-GAAP financial measures to the
comparable GAAP financial measures.
Item 9.01 |
Financial Statements and Exhibits. |
Exhibit 99.1 |
Local Corporation Corporate Overview dated 2Q2014. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
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LOCAL CORPORATION |
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Date: May 19, 2014 |
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By: |
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/s/ Kenneth S. Cragun |
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Kenneth S. Cragun |
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Chief Financial Officer and Secretary |
Exhibit Index
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Exhibit
Number |
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Description |
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Exhibit 99.1 |
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Local Corporation Corporate Overview dated 2Q2014. |
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Exhibit 99.1
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Local corporation Corporate Overview Q2 2014
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Forward looking statements Certain matters being discussed by Local Corporations management today include forward looking statements which are made pursuant to the Safe Harbor
provisions of section 21-E of the Securities Exchange Act of 1934. Investors are cautioned that statements which are not strictly historical statements, including statements concerning future expected financial performance, management objectives and
plans for future operations, our relationships with strategic or other partners, the release of new products or services or enhancements to existing products or services, our expectations regarding potential acquisitions and the future performance
of past acquisitions including our ability to realize expected synergies, trends in the market for our current or planned products or services, and market acceptance of our products or services, constitute forward looking statements. The forward
looking statements include, but are not limited to, any statements containing the words expect, anticipate, estimates, believes, should, could, may,
possibly, and similar expressions and the negatives thereof. These forward looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from the forward looking statements. Those
risks and uncertainties are detailed in the companys filings from time to time with the Securities and Exchange Commission. The information contained in the forward looking statements is provided as of the date of such oral statements and the
company disclaims any obligation to update such statements. Adjusted EBITDA 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 derivatives revaluation; net income (loss) from discontinued operations; LEC receivables reserve; finance-related charges; accrued lease liability/asset; severance charges; and an expense related to a settlement
accrual. Adjusted EBITDA, as defined above, is not a measurement under GAAP. Adjusted EBITDA is reconciled to net loss and loss per share, which we believe are the most comparable GAAP measures, at the end of this presentation. Management believes
that Adjusted EBITDA provides useful information to investors about the companys performance because it eliminates the effects of period-to-period changes in income from interest on the companys cash and marketable securities, expense
from the companys financing transactions and the costs associated with income tax expense, capital investments, stock-based compensation expense, warrant revaluation charges, and non-recurring charges which are not directly attributable to the
underlying performance of the companys business operations. Management uses Adjusted EBITDA in evaluating the overall performance of the companys business operations. A limitation of non-GAAP Adjusted EBITDA is that it excludes items
that often have a material effect on the companys net income and earnings per common share calculated in accordance with GAAP. Therefore, management compensates for this limitation by using Adjusted EBITDA in conjunction with GAAP net loss and
loss per share measures. The company believes that Adjusted EBITDA provides investors with an additional tool for evaluating the companys 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 (as noted above), it may provide greater
insight into the companys 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. Corporate Overview Q2 2014 2
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Who we are Founded/IPO 1999/2004 Ticker LOCM (NASDAQ) Revenue CAGR 31% from 2006 to 2013 Flagship Site Local.com Top US Site Recognition Deloitte Fast 500TM 4 years in a row
Headquarters Irvine, CA Employees ~90 Current financial momentum Investing for growth (Adjusted EBITDA) Shift from SMB to Enterprise *Estimate Our mission Making it easy for consumers to find and connect with the products and businesses they want
and need through our innovative technology and network of publisher partners. Corporate Overview Q2 2014 3
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Multiple avenues to value Structured for growth Reasons to invest: Strong profitable core business with strong base of consumers Growing partners and products Innovative Krillion shopping
data is catalyst for multi-screen expansion Untapped IP portfolio ready for monetization Shift in focus to Enterprise sales Improving financial performance on top and bottom line *Based on the top U.S. product retailers listed within Stores Top 100,
excluding grocery and restaurant retailers Corporate Overview Q2 2014 4
Convergence of content anywhere anytime, seamlessly across devices Unified online to offline consumer experience 80% of purchases occur within a 3-mile radius of home 52% of all sales
(online & offline) will begin on the internet 95% of smartphone users have searched for local information Source: Forrester, 2011 Corporate Overview Q2 2014 5
Discovery + data = value Innovative technology connecting consumers with products and services Owned & Operated sites & Network High-intent consumers across our properties provide
enormous behavioral insights Reaching consumers across all devices Corporate Overview Q2 2014 6
Leading partners in the industry Corporate Overview Q2 2014 7
Owned & Operated attracts high intent consumers Monetization from clicks on search ads and impressions on display ads 20 Million monthly unique visitors Ad types: Search Display Video
= Revenue source Corporate Overview Q2 2014 8
Search offers consistent, upward growth Online search Mobile search Source: eMarketer, 2014 Mobile and local are the fastest growing segments Mobile traffic represents 32% of our total
overall traffic Corporate Overview Q2 2014 9
Owned & Operated trends O&O MUV RKV (including mobile) Annual mobile traffic (UVs) Corporate Overview Q2 2014 10
Network grows with innovative ad formats Monetization from clicks, calls and impressions on search, pay-per-call and display ads Ad types: Display Search Pay-Per-Call Video = Revenue
source Corporate Overview Q2 2014 11
More ad dollars are shifting to online Newer ad formats drive growth Total online advertising Mobile display advertising Source: Borrell Associates, Inc. 2014 Source: eMarketer, 2014 60%
Increase In online advertising spend expected over the next 4 years Leading ad formats Video Native Mobile Rich interactive Online search Source: Borrell Associates, Inc. 2014 Source: eMarketer, 2014 Corporate Overview Q2 2014 12
Continued strong Network revenue growth Addition of new ad technology and partners Serving more than 3 Billion monthly impressions Network Revenue $4.2 $4.1 $5.0 $7.6 $8.3 $11.6 $14.5
$16.1 $14.8 Up 78% from Q1-2013 In the last seven quarters, Network revenue has Grown over 3.5x Corporate Overview Q2 2014 13
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Krillion is the shopping data standard Our vision: Create a new standard for retail shopping data that allows retailers and brand manufacturers to create new value added applications that
drive consumers to purchase both online and in-store, as well as gain further insights from consumer interactions within our data. Top priorities: 1 Distribution 2 Data acquisition & quality 3 Coverage 90% coverage of the top 100 U.S. retailers*
Over 120,000 national and regional retailer stores 3 million Localized products Location of retail stores in the Krillion database *Based on the top U.S. product retailers listed within Stores Top 100, excluding grocery and restaurant retailers
Corporate Overview Q2 2014 14
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Uniquely positioned to enable local shopping Offline retail influence Over $1 trillion in retail sales today are influenced by digital, and digital is projected to influence 50% of all
retail sales by the end of 2014. Source: Deloitte Digital, 2013 / MIT Our customer value proposition answers 3 key questions: Is it carried near me? Is it available in-store? How much does it cost? Over 80% of smartphone & tablet users conduct
local searches on their devices Focus on hours, directions & availability Corporate Overview Q2 2014 15
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Krillion addressable market U.S. retail industry ad spending (Billions) Source: eMarketer, March 2014 Digital ad spending by channel (Billions) Digital ad spending by objective (Billions)
Change in Marketing Spending Total market spending -4.7% Digital marketing spending 9.0% Traditional ad spending -4.7% Brand building 3.5% Customer relationship management 3.3% New product introductions 4.5% New service introductions 0.1% Marketing
(nonsales) hires -0.6% Integrating what we know about marketing 0.6% Developing knowledge about how to do marketing 0.7% Marketing training 0.1% Marketing research & intelligence 0.8% Marketing consulting services -0.6% Corporate Overview Q2
2014 16
Experiences powered by Krillion Krillions dynamic platform powers innovative solutions for retailers & brands across multiple channels Product search Solution Where-to-buy
solution Corporate Overview Q2 2014 17
Interactive ad content to consumers at precisely the time they need it Highly interactive Animation, rolling text and image carousels Location aware Nearest store, directions and ambient
data Integrates mobile features Maps, tap to call, and calendar reminders Localized content Store availability, offers and pricing 24% performed secondary localized actions after opening (vs. 2.9% industry benchmark) Corporate Overview Q2 2014 18
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Monetize IP portfolio Positive claim construction ruling The patent descriptions herein do not constitute the legal opinion or advice of the patent owner or their counsel. The reader is
encouraged to seek the advice of their own counsel regarding the scope of any domestic or foreign patents. Cascading Menu patenttrial scheduled for July 2014 Reviewing options to maximize value Pay-Per-Call patent portfolio Transferring patents into
dedicated IP holding subsidiary Structure provides most flexible solution to leverage value Consolidating Krillions assets (including patent) into own subsidiary Enables us to derive value from the technology, and better manage and measure
performance and contribution Corporate Overview Q2 2014 19
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Strong financial fundamentals Investing for growth Notable accomplishments: Ended Q1 with $3.7M in total cash Reached Q1 revenue of $26.2M and Adjusted EBITDA of $712,000 2014 guidance:
Revenue between $103M and $107M, and Adjusted EBITDA between $3M and $4M We now expect performance to be at the high end of the guidance range Note: See Appendix for reconciliation of Adjusted EBITDA to GAAP net income Corporate Overview Q2 2014 20
2014 financial targets by business segment
2014
Revenue
% of 2014 Revenue
Margin %
Network
55,000,000
51%
37%
Owned & Operated
52,000,000
49%
15%
$107,000,000
100%
26%
*All 2014 figures are estimates
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Improving financials
Evolving model remains
strong
Multiple growth drivers
Investing for growth
(Adjusted EBITDA)
Stabilize Execute GROW
*Estimate
Note: See reconciliation of Adjusted
EBITDA to GAAP net income at presentation end.
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1Q14 Balance Sheet & Cap. Table
Key Balance
Sheet Items (In Thousands)
3/31/2014
Cash
$3,711
Accounts Receivable
18,219
Total Assets
50,722
Total Debt
14,002
Total Liabilities
32,341
Stockholders Equity
17,669
Capitalization
(In Thousands)
3/31/2014
Common Stock
23,227
Convertible Debentures
2,488
Options (Weighted avg. strike 3.66)
3,855
Warrants (Weighted avg. strike 2.03)
766
RSUs
31
Fully Diluted
30,367
Additional Data:
I.As of March 31, 2014, $12
million credit facility with $9.6 million outstanding and $2 million available under the line of credit. Interest rate approximately 5%
II.Total authorized shares 65,000,000 common and 10,000,000 preferred
III.In April 2013, the company closed $5 million in convertible notes. Interest rate of 7%. Conversion price of $2.01. Included 746,000 of warrants with $2.01 exercise price.
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Executive leadership team
Fred Thiel
Chairman & CEO
25+ years experience
Board Member/Senior Advisor
to public and private technology companies, PE and VC firms Managing Partner, Triton Pacific Capital Partners Founder & Managing Partner, TechStarter Ventures CEO, GameSpy Industries CEO, Lantronix
Ken Cragun
CFO
25+ years experience
CFO, Modtech
SVP, MIVA
CFO, ImproveNet
CPA, Big 4 Experience
Scott Reinke
General Counsel
15 years experience
EVP and Gen. Counsel, Emerging Media Group, Inc. (TRAFFIQ, Inc.) EVP and Gen. Counsel, Market Maker Interactive, Inc. Associate Gen. Counsel and VP, MIVA
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Multiple avenues to value Structured for growth
Reasons to invest:
Strong profitable core business with strong base of consumers
Growing partners and products
Innovative Krillion
shopping data is catalyst for multi-screen expansion
Untapped IP portfolio ready for monetization
Shift in focus to Enterprise sales
Improving financial performance on top and bottom line
*Based on the top U.S. product retailers listed within Stores Top 100, excluding grocery and restaurant retailers
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Thank you
Fred Thiel
Chairman & CEO
fred@local.com
Local Corporation | 7555 Irvine
Center Drive | Irvine CA 92618 | 949.784.0800
www.localcorporation.com Ken Cragun CFO kcragun@local.com
Appendix
Market Cap/Sales Valuation
Company
Symbol
Price
Market Cap
(in millions)
2014E Sales
(in millions)
Market Cap/Sales
Blucora, Inc.
BCOR
$ 17.07
$ 720.9
$ 656.0
1.1
ReachLocal, Inc.
RLOC
$ 7.08
$ 198.9
$ 509.0
0.4
Angies List, Inc.
ANGI
$ 10.23
$ 597.9
$ 328.0
1.8
Marchex, Inc.
MCHX
$ 10.68
$ 392.7
$ 171.0
2.3
Autobytel, Inc.
ABTL
$ 11.04
$ 99.1
$ 115.0
0.9
Yelp, Inc.
YELP
$ 52.74
$ 3,700.0
$ 365.0
10.1
Travelzoo Inc.
TZOO
$ 17.48
$ 257.7
$ 163.0
1.6
XOXO Group Inc.
XOXO
$ 10.19
$ 252.0
$ 142.0
1.8
Demand Media
DMD
$ 4.12
$ 372.0
$ 92.0
4.0
Web.com Group
WWWW
$ 31.87
$ 1,600.0
$ 598.0
2.7
Average
2.7
Local Corporation
LOCM
$ 1.83
$ 42.5
$ 107.0
0.4
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Reconciliation: Adjusted EBITDA to GAAP Net Income
Description
FY-09
FY-10
FY-11
FY-12
FY-13
FY-14*
Adjusted EBITDA
$3,041
$13,775
$3,247
$777
$4,533
$4,000
Less interest and other income (expense),
net
(27)
(275)
(413)
(425)
(2,321)
(1,700)
Less provision for income taxes
(158)
(102)
(178)
(111)
(139)
(200)
Less amortization of intangibles
(2,524)
(5,734)
(4,864)
(3,611)
(912)
(900)
Less depreciation
(734)
(1,418)
(3,182)
(3,658)
(3,896)
(4,000)
Less stock-based compensation
(2,364)
(2,911)
(3,442)
(2,533)
(1,619)
(800)
Less LEC receivable reserve
-
-
-
(1,407)
-
-
Less net loss from discontinued operations
-
-
(6,899)
(14,250)
(3,729)
-
Plus gain on sale of Rovion
-
-
-
1,458
-
-
Plus revaluation of warrants
(2,981)
887
2,633
202
1,100
-
Less Geo-Tag settlement
-
-
-
-
(550)
-
Less non-recurring charges
(520)
-
(1,461)
(684)
(2,829)
(1,800)
GAAP Net income (loss)
$(6,267)
$4,222
$(14,559)
$(24,242)
$(10,362)
$(5,400)
*Estimate
Note: Since we cannot predict the valuation of the warrant liability and the conversion option liability, we cannot
reasonably project our GAAP net income (loss). We, therefore, cannot provide GAAP guidance, but we do report GAAP results. An explanation of the Companys use of Non-GAAP measures is set forth on Slide 30
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Use of non-GAAP measures
This document includes
the non-GAAP financial measure of Adjusted EBITDA 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 derivatives revaluation, net income (loss) from discontinued operations; gain on sale of Rovion; impairment charges; LEC receivables reserve; finance related charges; accrued lease liability/asset; and severance charges. Adjusted
EBITDA, as defined above, is not a measurement under GAAP. Adjusted EBITDA is reconciled to net income (loss) which we believe is the most comparable GAAP measure. A reconciliation of net income (loss) to Adjusted EBITDA is set forth within this
presentation.
Management believes that Adjusted EBITDA provides useful information to investors about the
companys performance because it eliminates the effects of period-to-period changes in income from interest on the companys cash and marketable securities, expense from the companys financing transactions and the costs associated
with income tax expense, capital investments, stock-based compensation expense, LEC receivables reserve, warrant revaluation charges; finance related charges; accrued lease liability; and severance charges which are not directly attributable to the
underlying performance of the companys business operations. Management uses Adjusted EBITDA in evaluating the overall performance of the companys business operations.
A limitation of non-GAAP Adjusted EBITDA is that it excludes items that often have a material effect on the companys
net income and earnings per common share calculated in accordance with GAAP. Therefore, management compensates for this limitation by using Adjusted EBITDA in conjunction with net income (loss) and net income (loss) per share measures. The company
believes that Adjusted EBITDA provides investors with an additional tool for evaluating the companys 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 companys 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.
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