- Achieves key mobile search and programmatic
product milestones
Local Corporation (NASDAQ:LOCM), a leading local search and
advertising technology company, reported the financial results for
its fourth quarter and fiscal year ended Dec. 31, 2014.
“Our final 2014 financial results were consistent with our
preliminary announcement,” said Fred Thiel, Local Corporation
chairman and CEO. “We were disappointed with our revenue. However,
the transformation we began in mid-year 2014 has already produced
several significant milestones in our initiatives to grow our
mobile search market share; to monetize our audience through
programmatic media buying; to attract advertisers by ensuring the
highest traffic quality; and to increase our audience across all
our platforms. We are excited about our progress and will continue
to invest in innovation to drive long-term profitable growth.”
Recent Highlights
- Mobile Search efforts resulted
in onboarding of additional nQuery™ users, including a top five
global carrier in early 2015. The company launched with multiple
carriers across 18 countries. nQuery will be exhibited at Mobile
World Congress, the largest global mobile industry event to be held
in early March 2015.
- Programmatic Media Buying
achieved two major operational milestones. The company built a
proprietary cross-platform data tracking tool and completed the
infrastructure platform to initiate real-time bidding, audience
extension and search retargeting on behalf of advertisers to
leverage valuable first party search intent data across all the
company’s platforms.
- Traffic Quality achieved 100%
nTegrity™ coverage of the Network syndication traffic effective
Jan. 1, 2015. To date, the nTegrity platform has already delivered
a substantial increase in traffic quality scores from advertising
partners.
- Audience Engagement improved for
newly launched category pages that increase the breadth and depth
of content and expand the Owned and Operated (O&O) user
experience.
Fourth Quarter Results: Dec. 31, 2014
compared to Sep. 30, 2014
Fourth quarter 2014 total revenue was $16.3 million. Network
revenue increased 21% to $7.8 million. However, this was more than
offset by O&O revenue, which decreased by $3.2 million to $8.5
million due to changes in traffic sources and editorial requests
from ad partners resulting in lower than anticipated traffic and
monetization. During the quarter, the company achieved higher
margins of 26%, which contributed positively to its bottom line,
due to the Network business’ focus on delivering more quality
clicks and the continued enforcement of publisher contract terms
and conditions associated with that strategy. For the fourth
quarter, the company realized a net loss of $35,000 and posted
Adjusted EBITDA* of $238,000, positive for the eighth consecutive
quarter.
* 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; accrued lease liability/asset; settlement
accrual; finance related charges; LEC reserve; and severance
charges. See detailed reconciliation of GAAP to non-GAAP measures
in the financial tables attached to this release.
Ken Cragun, Local Corporation CFO, stated, “We are focused on
monetizing our audience across all platforms. By expanding with new
channels and into new global markets, we are building more
consistent revenue streams. We believe we will hit our stride in
mid-2015 and begin to ramp up revenue in mid-year. As such, we
expect to exit the year with a higher revenue run rate and in a
better position to return value to shareholders.”
Fourth Quarter 2014 Metric
Review
Fourth quarter 2014 monthly unique visitors (MUV) were 59
million, compared to 66 million in the third quarter of 2014 and 80
million in the fourth quarter of 2013. O&O properties,
primarily driven by the company’s flagship site, Local.com,
delivered revenue per thousand visitors (RKV) of $186. RKV was $201
in the third quarter of 2014 and $178 in the fourth quarter of
2013.
Through Dec. 31, 2014, the MUV count has included visitors only
from O&O properties. Management intends to report expanded
visitor metrics for Network and mobile search going forward.
Full Year Results: Dec. 31, 2014
compared to Dec. 31, 2013
Full year 2014 total revenue was $83.1 million, compared to
$94.4 million the prior year. Network revenue was $39.0 million and
O&O revenue was $44.1 million. Net loss was $5.5 million, or
$0.24 per share, improving from $10.4 million, or $0.45 per share.
Adjusted EBITDA* was $2.4 million, or $0.10 per diluted share,
compared to $4.5 million, or $0.20 per diluted share.
Cash Balance
At Dec. 31, 2014, the company had cash of $2.4 million, compared
to $5.1 million at Dec. 31, 2013. During 2014, cash provided by
operations was $4.7 million. Also the company repaid $4.3 million
of debt and invested $3.5 million in product development.
2015 Financial Guidance
Financial guidance for 2015 remains consistent with that
provided on Jan. 12, 2015. Revenue is expected to be in the range
of $82 million to $86 million. Adjusted EBITDA is expected to be in
the range of $3 million to $4 million, or between $0.13 per diluted
share and $0.17 per diluted share, assuming diluted weighted
average shares of 24 million.
Projected 2015 Adjusted EBITDA Factors,
- Interest expense of $1.1 million
- Income tax provision of $100,000
- Depreciation expense of $4.5
million
- Amortization expense of $150,000
- Stock compensation expense of
$600,000
- Warrant and conversion option
revaluation expense items are undeterminable, but may be
significant non-cash gains or losses**
** The valuation of the warrant liability and the conversion
option liability is based in large part on the underlying price and
volatility of the company’s common stock during the period. Since
the company cannot predict this, the company cannot project the
non-cash gain or loss in connection with these warrants and the
conversion option, and therefore, cannot reasonably project its
GAAP net income (loss). Therefore, the company cannot provide GAAP
guidance, but does report GAAP results.
Subsequent to Quarter-end Receipt of
NASDAQ Notice of Bid Price Deficiency
On Feb. 25, 2015, the company received a deficiency letter from
The NASDAQ Stock Market LLC (“NASDAQ”) indicating that, based on
the company’s closing bid price for the last 30 consecutive
business days, the company does not comply with the minimum bid
price requirement of $1.00 per share, as set forth in NASDAQ
Listing Rule 5550(a)(2). The notification has no immediate
effect on the listing of the company’s common stock on The NASDAQ
Capital Market.
In accordance with NASDAQ Listing Rule 5810(c)(3)(A), the
company has a grace period of 180 calendar days, or until Aug. 24,
2015, to regain compliance with the minimum closing bid price
requirement for continued listing. In order to regain compliance,
the minimum closing bid price per share of the company’s common
stock must be at least $1.00 for a minimum of 10 consecutive
business days. In the event the company does not regain compliance
by August 24, 2015, the company may be afforded an additional
180-day compliance period, provided it demonstrates that it meets
all other applicable standards for initial listing on The NASDAQ
Capital Market (except the bid price requirement), and provides
written notice of its intention to cure the minimum bid price
deficiency during the second grace period, by effecting a reverse
stock split, if necessary. If the company fails to regain
compliance after the second grace period, the company’s stock will
be subject to delisting by NASDAQ.
The company is considering actions that it may take in response
to this notification in order to regain compliance with the
continued listing requirements.
Fourth Quarter 2014 Conference Call
Information
Chairman and CEO Fred Thiel and CFO Ken Cragun will host a
conference call and simultaneous webcast discuss these results:
Date: Friday, Feb. 27, 2015 Time: 7:30 a.m. PT (10:30 a.m.
ET) Listen via the internet: Local Corporation website at:
http://ir.local.com Access webcast replay: Available for at least
90 days on the company's website Participate via phone:
1-855-235-8301 or 1-315-625-6982, passcode # 77915525 Access phone
replay: 1-855-859-2056 or 1-404-537-3406, passcode # 77915525, for
up to 24 hours starting at 1 p.m. ET the day of the call
About Local Corporation
Local Corporation (NASDAQ:LOCM) is a leading local search
and advertising technology company that aggregates and curates the
most relevant and rich personalized content and presents it to
millions of consumers wherever and however they search for
information, while providing significant reach and value to the
company’s advertisers and partners. For more information,
visit: http://www.localcorporation.com or visit the company’s
flagship site: http://www.local.com.
Forward Looking
Statements
This press release contains 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 'anticipate,' 'believe,' 'estimate,' 'plans,'
'expect,' 'intend,' ‘project,’ ‘forecast,’ ‘potential,’ ‘feel’ and
similar expressions and phrases are intended to identify such
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 advertising partners paying less
revenue per click and revenues to us for our search results, our
ability to purchase advertising from third parties to drive users
to our sites and consumers to the sites of our advertisers,
including at a profit, our ability to retain a monetization partner
for the Local.com domain and other web properties under our
management that allows us to operate profitably, our ability to
develop, market and operate our local-search technologies and our
Krillion local shopping technologies, our ability to maintain and
grow the number of Network partner sites and the aggregate levels
of user traffic from such Network partner sites while also
maintaining the quality level of such traffic, our ability to
market the Local.com domain as a destination for consumers seeking
local-search results, our ability to adapt to policy and
technological changes promulgated by our advertising partners and
traffic acquisition partners, our ability to raise additional
capital to operate our business as needed and on terms that are
acceptable to us, if at all,, 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, the possibility of impairment of assets associated
with the businesses we have acquired, our ability to successfully
expand our sales channels for new and existing products and
services, our ability to increase the number of businesses that
purchase our advertising products, our ability to expand our
advertiser and distribution networks, our ability to integrate and
effectively utilize our acquisitions' 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, our
ability to successfully assert our intellectual property rights,
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 most recent Annual Report on Form 10-K, our 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
“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; accrued lease liability/asset; settlement
accrual; finance related charges; LEC reserve 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
at the end of this press release.
Management believes that Adjusted EBITDA provides useful
information to investors about the company’s performance because it
eliminates the effects of period-to-period changes in income from
interest on the company’s cash, expense from the company’s
financing transactions and the costs associated with income tax
expense, capital investments, stock-based compensation expense, net
income (loss) from discontinued operations, derivatives’
revaluation charges; accrued lease liability/asset; settlement
accrual; finance related charges; LEC reserve and severance charges
which are not directly attributable to the underlying performance
of the company’s business operations. Management uses Adjusted
EBITDA in evaluating the overall performance of the company’s
business operations.
A limitation of non-GAAP Adjusted EBITDA is that it excludes
items that often have a material effect on the company’s net income
(loss) 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 company’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
company’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 (loss) or earnings (loss) per share.
LOCAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
(Unaudited)
December 31, December 31, 2014
2013 ASSETS Current assets: Cash $
2,438 $ 5,069 Accounts receivable, net of allowances of $508 and
$533, respectively 8,426 17,298 Escrow receivable - 390 Prepaid
expenses and other current assets 449 957
Total current assets 11,313 23,714 Property
and equipment, net 5,650 6,073 Goodwill 19,281 19,281 Intangible
assets, net 1,752 2,439 Long-term receivable, net of allowances of
$3,431 and $3,431, respectively - - Deposits 72
72 Total assets $ 38,068 $ 51,579
LIABILITIES AND STOCKHOLDERS’ EQUITY Current
liabilities: Accounts payable $ 9,669 $ 12,786 Accrued compensation
940 1,462 Deferred rent 116 323 Warrant liability 156 537 Other
accrued liabilities 1,474 2,403 Revolving line of credit 4,883
7,342 Current portion of term loan - 1,500 Senior secured
convertible notes, net of discount of $383 4,630 - Deferred revenue
109 202 Total current
liabilities 21,977 26,555
Long-term portion of term loan - 375 Senior secured convertible
notes, net of discount of $1,533 - 4,017 Deferred income taxes
480 347 Total liabilities
22,457 31,294 Commitments,
contingencies and subsequent events Stockholders’ equity
(deficit): Convertible preferred stock, $0.00001 par value; 10,000
shares authorized; none issued and outstanding for all periods
presented - - Common stock, $0.00001 par value; 65,000 shares
authorized; issued and outstanding 23,294 and 23,038 at December
31, 2014 and 2013, respectively - - Additional paid-in capital
125,076 124,249 Accumulated deficit (109,465 )
(103,964 ) Stockholders’ equity 15,611
20,285 Total liabilities and stockholders’ equity $
38,068 $ 51,579
LOCAL CORPORATION
CONSOLIDATED STATEMENTS OF
OPERATIONS
(in thousands, except per share data)
(Unaudited)
3 Months ended December
31, Years ended December 31, 2014 2013
2014 2013 Revenue $ 16,285 $ 26,805 $ 83,120 $ 94,396
Operating Expenses: Cost of revenues 12,035 20,288 63,580
68,541 Sales and marketing 1,846 2,610 7,984 10,029 General and
administrative 2,078 3,948 10,708 13,633 Research and development
1,414 1,654 5,677 6,554 Amortization of intangibles 119 225 688 912
Income from settlement of patent licensing - -
(700) - Total operating expenses 17,492
28,725 87,937 99,669 Operating income (loss)
(1,207) (1,920) (4,817) (5,273) Interest and other income
(expense), net (537) (522) (2,183) (2,321) Change in fair value of
conversion option and warrant liability 1,031 871
918 1,100 Loss from continuing operations
before income taxes (713) (1,571) (6,082) (6,494) Provision
for income taxes 32 18 129 139
Net loss from continuing operations (745) (1,589) (6,211) (6,633)
Loss from discontinued operations (net of taxes) 710
(90) 710 (3,729) Net loss $ (35) $
(1,679) $ (5,501) $ (10,362) Per share data: Basic
net loss per share from continuing operations $ (0.03) $ (0.07) $
(0.27) $ (0.29) Basic net loss per share from discontinued
operations $ 0.03 $ (0.00) $ 0.03 $ (0.16) Basic net loss per share
$ (0.00) $ (0.07) $ (0.24) $ (0.45) Diluted net loss per
share from continuing operations $ (0.03) $ (0.07) $ (0.27) $
(0.29) Diluted net loss per share from discontinued operations $
0.03 $ (0.00) $ 0.03 $ (0.16) Diluted net loss per share $ (0.00) $
(0.07) $ (0.24) $ (0.45) Basic weighted average shares
outstanding 23,287 23,037 23,243 22,862 Diluted weighted average
shares outstanding 23,287 23,037 23,243 22,862
LOCAL CORPORATION
Supplemental Consolidated Statements of
Operations Information
Revenue Breakdown
(in thousands)
(Unaudited)
For the three months ended
December 31,
For the three months ended
September 30,
For the year ended
December 31,
2014 2013 2014
2014 2013 Owned & Operated $
8,446 $ 10,701 $ 11,673 $ 44,138 $ 43,880 Network 7,839 16,104
6,468 38,982 50,516 Revenue $
16,285 $ 26,805 $ 18,141 $ 83,120 $ 94,396 $ - $ - $ - $ -
LOCAL CORPORATION
Supplemental Consolidated Statements of
Operations Information
Stock-based Compensation Expense
*
(in thousands, except per share data)
(Unaudited)
Three Months ended December 31,
Years ended December 31,
2014 2013 2014 2013 Cost of
revenues $ 13 $ 19 $ 45 $ 104 Sales and marketing 16 60 92 392
General and administrative 87 105 562 892 Research and development
17 23 68 231 Total stock-based
compensation expense $ 133 $ 207 $ 767 $ 1,619 Net
stock-based compensation expense per share: Basic $ 0.01 $ 0.01 $
0.03 $ 0.07 Diluted $ 0.01 $ 0.01 $ 0.03 $ 0.07
* - Excludes impact of stock-based
compensation expense recognized in discontinued operations.
LOCAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(in thousands)
(Unaudited)
Years ended December 31, 2014
2013 Cash flows from operating activities: Net loss $
(5,501) $ (10,362) Adjustments to reconcile net loss to cash
provided by operating activities: Depreciation and amortization
4,572 5,077 Provision for doubtful accounts 855 2,330 Stock-based
compensation expense 767 1,638 Non-cash interest expense 1,150 649
Loss on exchange of warrants - 723 Change in fair value of
conversion option and warrant liability (918) (1,100) Deferred
income taxes 133 130 Impairment of goodwill and intangible assets -
3,051 Changes in operating assets and liabilities: Accounts
receivable 8,017 (7,078) Note receivable - 319 Long-term receivable
- (137) Prepaid expenses and other 508 51 Other non-current assets
- (14) Accounts payable and accrued liabilities (4,775) 5,927
Deferred revenue (93) (1) Net cash provided by operating activities
4,715 1,203 Cash flows from investing activities: Capital
expenditures (3,462) (3,580) Decrease in restricted cash - 42
Proceeds from escrow payout 390 - Net cash used in investing
activities (3,072) (3,538) Cash flows from financing activities:
Proceeds from the exercise of options 111 5 Proceeds from issuance
of senior secured convertible notes and warrants - 5,000 Proceeds
from the issuance of common stock - 20 Proceeds from revolving
credit facility, net (2,459) 342 Payment of term loan (1,875)
(1,125) Payment of financing related costs (51) (534) Net cash
(used in) provided by financing activities (4,274) 3,708 Net
(decrease) increase in cash (2,631) 1,373 Cash, beginning of year
5,069 3,696 Cash, end of year $ 2,438 $ 5,069 Supplemental
cash flow information: Interest paid $ 729 $ 626 Income taxes paid
$ 7 $ 7 Non-cash financing activities: Derivative
liabilities recorded in connection with the issuance of senior
secured convertible notes $ - $ 2,182
LOCAL CORPORATION
RECONCILIATION OF NET LOSS TO ADJUSTED
EBITDA
(in thousands, except per share
amounts)
(Unaudited)
Three Months Ended December 31, Three
months ended September 30, 2014 2013
2014 Net loss $ (35) $ (1,679) (1,308) Plus interest and
other income (expense), net 537 522 539 Plus provision for income
taxes 32 18 - Plus amortization of intangibles 119 225 119 Plus
depreciation 957 1,120 1,124 Plus stock-based compensation 133 207
218 Less revaluation of derivatives (1,030) (871) (285) Plus net
(income) loss from discontinued operations (710) 90 - Plus LEC
reserve - 1,721 - Plus severance charges 235 -
- Adjusted EBITDA $ 238 $ 1,353 $ 407 Diluted
Adjusted EBITDA per share $ 0.01 $ 0.06 $ 0.02 Diluted
weighted average shares 23,308 23,231 23,304
Year ended December 31, 2014
Year ended December 31, 2013
Net loss
$
(5,501)
$
(10,362)
Plus interest and other income (expense),
net
2,183
2,321
Plus provision for income taxes
129
139
Plus amortization of intangibles
687
912
Plus depreciation
3,885
3,896
Plus stock-based compensation
767
1,619
Less revaluation of derivatives
(918)
(1,100)
Plus net (income) loss from discontinued
operations
(710)
3,729
Plus settlement accrual
-
550
Plus accrual for lease
liability/(asset)
-
101
Plus finance related charges
-
236
Plus LEC reserve
-
1,721
Plus severance charges
1,841
771
Adjusted EBITDA
$
2,363
$
4,533
Diluted Adjusted EBITDA per share
$
0.10
$
0.20
Diluted weighted average shares
23,279
22,967
LOCAL CORPORATION
OPERATING HIGHLIGHTS
Monthly Unique Visitors (MUVs, millions)
For the three months ended December 31, For the three
months ended September 30, 2014 2013
2014 Overall traffic 59 80 66 Organic traffic
18 26 12 Mobile traffic 21 31 17 Revenue per thousand
visitors (RKV) $ 186 $ 178 $ 201
Investor Relations Contact:LHAKirsten Chapman,
415-433-3777local@lhai.comorMedia Relations Contact:Local
CorporationCameron Triebwasser,
949-789-5223ctriebwasser@local.com
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