Local Corporation (NASDAQ:LOCM), a local search and advertising
technology company, reported the financial results for its first
quarter ended Mar. 31, 2015.
“As we move forward in 2015, we are focused on execution,” said
Local Corporation chairman and CEO Fred Thiel. “In the first
quarter, our revenue per thousand visitors held strong at $186;
however, our overall financial results were negatively impacted by
several challenges that carried over from the fourth quarter of
2014. We continued to address these issues and to rebuild our
traffic, but we have not progressed as quickly as we had hoped.
“Nonetheless, we have made operational progress and recently
signed important agreements across each line of business. Most
notably, a major monetization partner renewed our ad agreement for
another three years. In addition, we secured relationships with
additional mobile search channel partners, expanding our
distribution and entering the Asia-Pacific market.
“We also launched programmatic initiatives in partnership with
Rocket Fuel. With the programmatic infrastructure in place, we
began running campaigns for our advertisers to further monetize our
local search traffic. Based on early successes, we are beginning to
shift existing Network advertiser and publisher relationships to
programmatic exchanges. We believe this transition establishes
another platform for future growth and operational efficiency.
“We believe our overall product offerings and technology assets
are robust and valuable, but recognize the path to growth may be
longer than we would like. In light of recent interest, we have
engaged an investment banking advisor to explore strategic
alternatives that have the potential to generate increased value
for our shareholders.”
Recent Highlights
- Renewed an ad partnership with a major
monetization partner.
- Signed multiple carriers for nQuery
mobile search and added more international reseller partners. The
company now has reseller relationships in North and South America,
Europe and the Asia- Pacific region.
- Launched programmatic advertiser
campaigns and plans to syndicate first party search data through a
partnership with Rocket Fuel.
- Deployed nTegrity traffic quality tool
to quickly vet traffic sources, enabling improvement in the quality
of the Network feed business.
- Improved audience engagement with
category pages driving more than 10% of Owned & Operated
(O&O) traffic.
- Refinanced the convertible debt and
extended the maturity date.
First Quarter Results: Mar. 31, 2015
compared to Dec. 31, 2014
First quarter 2015 total revenue was $13.1 million. Network
revenue was $4.8 million, compared to $7.8 million in the fourth
quarter of 2014, due to softer performance of the feed business as
a result of increased traffic quality filtering and a related
decrease in overall traffic. O&O revenue was $8.3 million,
compared to $8.5 million in the fourth quarter of 2014, indicating
this line of business has begun to stabilize as the company
addressed the fourth quarter changes in traffic sources and
editorial requests from ad partners. At this revenue level, gross
margin was 12%, net loss was $4.6 million and Adjusted EBITDA* loss
was $2.2 million.
* 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; 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, “While we made
operational strides related to mobile search and programmatic media
buying, we now believe it will take longer than originally
anticipated to drive revenue growth from these new initiatives. We
are focused on expanding our margin and improving the bottom line,
and we lowered expenses again during the quarter.”
Cash Balance
At Mar. 31, 2015, the company had cash of $2.3 million, compared
to $2.4 million at Dec. 31, 2014. The net cash used for operations
was $1.8 million in the first quarter. In April 2015, the company
engaged Siemer & Associates to help accelerate and explore
strategic alternatives to have the ability to achieve its strategic
objectives and improve shareholder value.
On Mar. 9, 2015, the company entered into a Securities Purchase
Agreement relating to the sale and issuance of $9.3 million of
Senior Convertible Notes that extended its maturity dates. After
repayment the 2013 convertible notes of $6 million, including $1
million pre-payment premium and expenses, the net proceeds to the
company were approximately $3 million. Also in March 2015, the
company entered into a new $10 million secured accounts receivable
financing agreement that matures in April 2016, replacing its
existing credit facility with Square 1 Bank.
2015 Financial Guidance
In light of a number of factors, including the exploration of
strategic alternatives and the revenue growth taking longer than
expected, the company has withdrawn its guidance provided on
February 27, 2015.
First Quarter 2015 Metric
Review
First quarter 2015 unique visitors were 59 million, compared to
59 million in the fourth quarter of 2014. During the first quarter
of 2015, the average unique visitors per month for nQuery Mobile
Search reached 3 million, representing approximately 400,000 daily
search queries.
O&O properties, primarily driven by the company’s flagship
site, Local.com, delivered revenue per thousand visitors of $186,
stable compared to $186 in the fourth quarter of 2014.
First Quarter 2015 Conference Call
Information
Chairman and CEO Fred Thiel and CFO Ken Cragun will host a
conference call and simultaneous webcast to discuss these
results:
Date: Friday, May 15,
2015 Time: 8:00 a.m. PT (11:00 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 # 23678071 Access phone replay:
1-855-859-2056 or 1-404-537-3406, passcode # 23678071, for up to 24
hours starting at 8 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 ability to continue to fund our
current operations, our ability to raise additional capital to
operate our business as needed and on terms that are acceptable to
us, if at all, 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, 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; 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 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)
March 31, December 31,
2015 2014
ASSETS
Current assets: Cash $ 2,288 $ 2,438 Accounts receivable, net of
allowances of $589 and $508, respectively 7,400 8,426 Prepaid
expenses and other current assets 952 449
Total current assets 10,640 11,313 Property
and equipment, net 5,196 5,650 Goodwill 19,281 19,281 Intangible
assets, net 1,643 1,752 Long-term receivable, net of allowances of
$3,431 and $3,431, respectively - - Deposits 64
72 Total assets $ 36,824 $ 38,068
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities: Accounts payable $ 11,006 $ 9,669 Accrued
compensation 814 940 Deferred rent 63 116 Other accrued liabilities
1,044 1,474 Short-term portion of senior secured convertible notes
2,433 - Revolving line of credit 3,184 4,883 Deferred revenue
142 109
Total current liabilities
18,686 17,191 Senior secured
convertible notes, net of discount of $3,832 and $383 respectively
4,754 4,630 Warrant liability 1,752 156 Deferred income taxes
480 480 Total liabilities
25,672 22,457 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 23,306 and 23,294 at
March 31, 2015 and December 31, 2014, respectively
- - Additional paid-in capital 125,197 125,076 Accumulated deficit
(114,045 ) (109,465 ) Stockholders’ equity
11,152 15,611 Total liabilities
and stockholders’ equity $ 36,824 $ 38,068
LOCAL CORPORATION
CONSOLIDATED STATEMENTS OF
OPERATIONS
(in thousands, except per share data)
(Unaudited)
Three Months Ended
March 31,
2015
2014
Revenue $ 13,087 $ 26,180 Operating
Expenses: Cost of revenues 11,563 20,405 Sales and marketing 1,687
2,350 General and administrative 1,998 3,318 Research and
development 1,257 1,559 Amortization of intangibles 114
225 Total operating expenses
16,619 27,857 Operating loss (3,532 )
(1,677 ) Interest and other income (expense), net (3,616 )
(543 ) Change in fair value of derivative liabilities 2,568
(334 ) Loss before income taxes (4,580 )
(2,554 ) Provision for income taxes -
274 Net loss $ (4,580 ) $ (2,828 ) Per share
data: Basic net loss per share $ (0.20 ) $ (0.12 ) Diluted
net loss per share $ (0.20 ) $ (0.12 ) Basic weighted
average shares outstanding 23,305 23,225 Diluted weighted average
shares outstanding 23,305 23,225
LOCAL CORPORATION
Supplemental Consolidated Statements of
Operations Information
Revenue Breakdown
(in thousands)
(Unaudited)
For the three
For the three months ended
months ended
March 31,
December 31, 2015 2014 2014
Owned & Operated $ 8,279 $ 11,418 $ 8,446 Network 4,808
14,762 7,839 Revenue $ 13,087 $ 26,180 $ 16,285
LOCAL CORPORATION
Supplemental Consolidated Statements of
Operations Information
Stock-based Compensation Expense
*
(in thousands, except per share data)
(Unaudited)
Three Months ended
March 31,
2015 2014 Cost of revenues $ 9 $ 12
Sales and marketing 12 29 General and administrative 87 195
Research and development 17 17 Total
stock-based compensation expense $ 125 $ 253
LOCAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(in thousands)
(Unaudited)
Three Months Ended March 31, 2015
2014 Cash flows from operating activities: Net loss $ (4,580
) $ (2,828 ) Adjustments to reconcile net loss to cash used in
operating activities: Depreciation and amortization 1,041 1,104
Provision for doubtful accounts 115 150 Stock-based compensation
expense 125 253 Change in fair value of derivative liabilities
(2,568 ) 334 Non-cash interest expense 2,403 257 Deferred income
taxes - 274 Changes in operating assets and liabilities: Accounts
receivable 911 (1,071 ) Prepaid expenses and other (16 ) 256 Other
non-current assets 8 - Accounts payable and accrued liabilities 728
551 Deferred revenue 33 (7 ) Net cash used in
operating activities (1,800 ) (727 ) Cash flows from
investing activities: Capital expenditures (478 )
(940 ) Net cash used in investing activities (478 )
(940 )
Cash flows from financing activities:
Repayment of senior secured convertible notes (5,000 ) - Proceeds
from the issuance of senior secured convertible notes and warrants
9,318 - Proceeds from (payments of) revolving credit facility, net
(1,699 ) 2,225 Payment of term loan - (1,875 ) Payment of financing
related costs (491 ) (41 ) Net cash provided by
financing activities 2,128 309 Net
decrease in cash (150 ) (1,358 ) Cash, beginning of period
2,438 5,069 Cash, end of period $ 2,288
$ 3,711 Supplemental cash flow information: Interest
paid $ 140 $ 202 Income taxes paid $ -
Non-cash financing activities: Debt discount recorded in
connection with the issuance of senior secured convertible notes $
3,893 $ -
LOCAL CORPORATION
RECONCILIATION OF NET LOSS TO ADJUSTED
EBITDA
(in thousands, except per share
amounts)
(Unaudited)
3 Months ended 3 Months ended
3 Months ended March 31, 2015 March 31,
2014 December 31, 2014 Net loss $ (4,580 ) $ (2,828 ) $
(35 ) Plus interest and other income (expense), net 3,616 543 537
Plus provision for income taxes - 274 32 Plus amortization of
intangibles 114 225 119 Plus depreciation 926 879 957 Plus
stock-based compensation 125 253 133 Less revaluation of
derivatives (2,568 ) 334 (1,030 ) Plus net (income) loss from
discontinued operations - - (710 ) Plus severance charges
149 1,032 235 Adjusted
EBITDA $ (2,218 ) $ 712 $ 238 Diluted Adjusted
EBITDA per share $ (0.10 ) $ 0.03 $ 0.01
Diluted weighted average shares 23,305 23,254 23,308
LOCAL CORPORATION
OPERATING HIGHLIGHTS
For the three
For the three months ended
months ended
Monthly Unique Visitors (MUVs,
millions)
March 31,
December 31,
2015 2014 2014 Overall traffic 59
72 59 Organic traffic 20 17 18 Mobile traffic 23 23 21
Revenue per thousand visitors (RKV) $ 186 $ 189 $ 186
Investor Relations Contact:LHAKirsten Chapman,
415-433-3777local@lhai.comorMedia Relations Contact:Local
CorporationCameron Triebwasser,
949-789-5223ctriebwasser@local.com
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