eBay Inc (EBAY) 2005 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the Shopping.com first-quarter conference call. At this time, all participants are in a listen-only mode. Following today's presentation, instructions will be given for the question-and-answer session. (OPERATOR INSTRUCTIONS). As a reminder, this conference is being recorded today, Wednesday, April 27th of 2005. I would now like to turn the conference over to Ms. Lynn Brinton. Please go ahead, ma'am.

Good afternoon, and thank you for joining us today on Shopping.com's first-quarter 2005 earnings call. This call is also being broadcast over the Web and can be accessed from the Investor Relations section of the Company's Web site at www.Shopping.com.

With me on today's call are Dan Ciporin, Chairman and Chief Executive Officer of Shopping.com, Greg Santora, Chief Financial Officer, and Lorrie Norrington, who will join Shopping.com as President and CEO on June 1st.

We would like to remind you that during the course of this conference call, Shopping.com's management will make forward-looking statements, including predictions and estimates that involve a number of risks and uncertainties. Actual results may differ materially from any future performance suggested in the Company's forward-looking statements. We refer you to the Company's SEC filings, including its annual report on Form 10-K for important risk factors that could cause actual results to differ materially from those contained in any forward-looking statement. We expressly disclaim any obligation to update this forward-looking information. Throughout this call, Shopping.com will be referring to our GAAP financial results, as well as non-GAAP measures. These non-GAAP measures are not in accordance with or an alternative to GAAP financial measures and may be different from pro forma measures used by other companies. The Company has provided a clear reconciliation between GAAP net income, adjusted net income, and adjusted EBITDA with the financial statements attached to the earnings release.

A replay of this call will be available on the IR section of the Shopping.com Web site starting later this afternoon. And now, I'd like to turn the call over to Dan Ciporin.

Thanks, Lynn, and thanks to everyone joining us today on the call. The first quarter 2005 was one of strong financial results and significant operational progress for Shopping.com. The Company posted revenue of 28.9 million and net income of $3.9 million. This represents revenue growth of 38% and net income growth of 72% year over year. We are making strong progress against growth in the core business and growth in new channels by leveraging the power of our platform internationally and moving beyond consumer product goods. Unlocking the power of informed choice by creating one global hypermarket where consumers can quickly and easily find any product they want to buy with the widest range of options associated with it -- price, brand, merchant, etc., is the underpinning of our vision and the driver of our growth on a global basis.

As e-commerce continues to mature, consumer and merchant expectations evolve and remain key drivers of our growth. Consumers increasingly seek a more comprehensive, structured shopping experience that ensures informed purchase decisions. This is reflected in record traffic to the site this past quarter.

According to comScore, we've continued to lead the comparison shopping sector with nearly 24 million unique visitors in March, an increase of 30% year-over-year. And we remain a strong number three in e-commerce overall, behind eBay and Amazon.

While traffic is a leading indicator of consumer enthusiasm for this service, revenue per lead is one of the most important indicators of our value to merchants. As merchants seek greater accountability for and return on their marketing and customer acquisition investments, they turn to Shopping.com because of our industry-leading conversion to sale. This is reflected in strong growth in average revenue per lead this quarter.

One of the most meaningful ways we improve conversion to sale and enhance the user experience on Shopping.com is by productizing our categories. In this process, we combine our proprietary structuring technology with human intelligence to create the largest online global catalogue. This allows meaningful apples-to-apples product comparisons, customizable to each consumer's unique requirements with the same degree of intuitive, structured presentation critical to converting browsers into buyers.

During Q1, we made strong progress in this area as we productized more than 60 new categories, including shoes, fragrances, and musical instruments. As an example, we believe our shoe category is now the best shopping experience of its kind on the Web. It provides an unmatched level of shopping detail on everything from hot new products like the Nike Air Max sneaker to wedged sandals from Kate Spade.

It's important to remember that as we productize categories, the number of leads within that category typically decreases, but conversion to sale increases, making those leads much more valuable to our merchants. This was clearly the case for us with shoes. Leads have gone down, but the conversion rate of those leads has increased almost 30% after we productized the category.

In addition to productizing categories, we told you that we plan to leverage our differentiated platform beyond consumer product goods to services, such as mortgages and travel. We are excited about the extension from products to services and believe that it is a great example of how we will continue to expand our market opportunity. To this end, we have a great progress in mortgages and plan to beta launch within the next several weeks a comparison shopping service in this sector that provides a level of information and choice for consumers that is unprecedented. Even on a beta basis, we expect our differentiation to be cleared, based on our vision that the Internet and our proprietary platform in particular should offer consumers the greatest degree of flexibility and choice in making purchase decisions. At the time of our beta launch, shoppers will receive useful, detailed information on lenders in all 50 states without handing over any of the shopper's personal information.

We also remain on track to deliver the hotel portion of our travel offering by this summer. On last quarter's call, we described the ways that we intend to grow our business and I'm pleased to say that while posting very strong financial results in Q1, we also consistently delivered against our growth commitments.

I've already discussed category expansion and productization, and now I want to give you an update on international expansion. As previously mentioned, we view the global opportunity as vast for Shopping.com and capitalizing on the international opportunity is critical to the long-term growth of the Company. Our vision is one of a true global e-commerce market, providing a borderless uniform platform that connects buyers and sellers seamlessly. Now in our fifth year, we remain a leading comparison shopping site in the United Kingdom and continue to strengthen our offering in this critical market.

During Q1, we also delivered on our promise to quickly expand geographically with our launch of Shopping.com in France. In many ways, given the complexity of the European market in terms of merchants and consumers, the power of our comparison shopping platform becomes even more compelling. For the first time ever, true cross-border commerce is available to consumers and merchants in France, enabled by our global product catalogue, the accessibility and transparency of massive amounts of e-commerce data, and our intuitive, structured presentation of this information.

While our French service is still only a few weeks old, we are extremely encouraged by its initial traction. Traffic to the site is above plan. We already have signed nearly all of the top 50 merchants in France and interest in the service is very high.

Partnerships to extend the reach of our platform to both merchants and consumers have been important not only for their impact on critical metrics, but also for the implied validation of our vision and offering. Within weeks of launching our site in France, we were pleased to announce that AOL France chose Shopping.com to power their online shopping experience in that market. This means that more than 3.5 million AOL visitors have access to Shopping.com's global product catalogue through AOL France's member services and the AOL France site.

Based on our financial results and progress in growth initiatives, it's evident that Shopping.com is delivering on its commitments to merchants, consumers, and investors. I'll turn the call over to Greg to review our financials before discussing our guidance and taking your questions.

Thanks, Dan. We were very pleased with our financial results for the first quarter of 2005. Before I get into the numbers, I want to remind you about the seasonality of our business. Typically, our first quarter can be between 15 and 20% lower than the fourth quarter holiday shopping season. The second and third quarters usually remain fairly flat with the first quarter followed by a strong uptick during the fourth quarter. Due to this seasonality, it is more meaningful to measure our results on a year-over-year basis rather than sequentially. All comparisons I'll make today are on a year-over-year basis Q1 fiscal '04 against Q1 fiscal '05.

Total revenue for the first quarter was $28.9 million, up 38% over the prior-year quarter. Revenue growth for Q1 was driven by a 22% increase in paid lead referrals and a 16% increase in average revenue per lead. I'd like to remind you that we derived revenue from paid merchant leads, paid advertising leads and advertising. The value merchants associate with improvements in conversion-to-sale, translates into enhanced value for us through higher revenue per lead. This quarter, average revenue per merchant lead grew 28% over the first quarter of last year.

Sponsor listing revenue represented 45% of our total revenue for the quarter. Sponsored lead revenue is generated when we send the lead to one of our partners such as Google and we get a revenue share back from them for that referral.

Advertising revenue was approximately 6% of our total revenue. Our adjusted net income for the quarter was $4.4 million or fully diluted adjusted EPS of $0.14 per share. We are defining adjusted net income as GAAP net income adjusted to exclude stock-based compensation and amortization of intangibles.

Our adjusted EBITDA for the quarter was $4.8 million. Going forward, we plan to provide financial results and guidance on an adjusted net income rather than an adjusted EBITDA basis, as we believe this measure more accurately reflects our business.

GAAP net income grew 72% over last year. For the quarter, GAAP net income was $3.9 million or $0.12 per diluted share as compared to $2.2 million or $0.09 per diluted share reported in the first quarter of 2004. Weighted average shares outstanding for the first quarter for calculating fully diluted EPS was 31.6 million.

Now let's briefly provide some insights on our spending. Cost of revenue in the first quarter was $1.5 million compared to 1.1 million in the prior year. The increase was primarily due to increases in traffic as well as the number of SKUs on our site. R&D expense in the quarter was 3.1 million versus 2.5 million the first quarter of last year. The 24% increase is due to our continued efforts to improve the experience shopper's have on our site as well as our investment to support the launch of Shopping.com in France.

Sales and marketing expense in the first quarter was $16.7 million compared to $10.4 million the prior-year quarter. The increase was primarily attributable to a rise in our online marketing spend, which increased to $13.4 million from $8 million in the prior year. Part of this increase is attributable to the addition of Overture to our online marketing partners since Q1 of fiscal '04, which has increased the volume and efficiency of our overall marketing buys.

We also continued to improve our ability to generate positive ROI on these marketing investments. G&A expense in the quarter was $3.8 million versus 2.4 million in the prior first quarter. The increase in G&A for the quarter was driven by investments in finance and legal resources to build a public company infrastructure.

Stock-based compensation for the quarter was $400,000 versus $2 million in Q1 of last year. The decrease is primarily attributable to the decrease in variable stock charges, which is tied to price movements in our stock. Lastly, total cash and cash equivalents were $143 million at the close of the quarter or $4.83 cash per basic share, and we have no debt. Now, let me turn the call back to Dan.

Thanks, Greg. As we look ahead to Q2 and beyond, we are confident in our ability to execute and deliver on our growth initiatives and excited about the large market opportunity in front of us. You should expect us to continue to expand into new categories, to continue to add new geographies, and to continue to optimize our site for both an improved shopping experience, as well as continued increases in conversion to sale for our merchants.

Moving to our outlook, we currently expect revenue to range between 28 and $29 million and adjusted net income to range from 2.3 million to $2.8 million. This translates to adjusted earnings per share between $0.07 and $0.09. These expectations reflect the typical seasonality for our business as well as our ongoing investment in international and category expansion. We maintain our full-year 2005 guidance for revenues in the range of 125 to 132 million and adjusted EBITDA in the range of 24 to 26 million, which corresponds to 2005 adjusted net income in the range of 22 to $24 million or $0.66 to $0.72 on a diluted share basis.

As we announced earlier this month, I will be stepping away from my role as CEO and maintaining my role at the Company as Chairman of the Board on June 1st. On that date, Lorrie Norrington will join the Company as president and CEO. I am very proud of our many accomplishments during my tenure as CEO over the past 6.5 years, but particularly, our ability to attract a world-class executive like Lorrie to lead Shopping.com to its next phase of growth.

Lorrie has been a member of our Board of Directors since June of 2004. Most recently, she served as an Executive Vice President in Intuit's office of the CEO and oversaw tremendous growth for its QuickBooks and small-business groups. Prior to joining Intuit, she served in a variety of positions at General Electric from almost 20 years, including most recently as President and Chief Executive Officer of GE Fanuc Automation, a global manufacturing automation solutions business.

She is a focused, accomplished leader with a strong track record of scaling growth businesses. I believe that this transition will expand the resources of the Company while maintaining continuity among our senior management team. Lorrie, who already has strong working relationships with Greg, Iggy, and the entire senior management team, will manage the business day to day and I will focus primarily on a variety of strategic planning initiatives, working closely with Lorrie and the board.

Before we take your questions, I've asked Lorrie to join us today and say a few words from our London office where she is getting to know the team and our international operations. Lorrie?

Thinks, Dan. I couldn't be more excited about joining the Shopping.com team as the CEO. Shopping.com is emerging as a global e-commerce destination with strong business momentum, ongoing revenue, and profit growth, and continuing category and international expansion. Is a great honor to join the Company at a time when we look to capitalize and expand on our growth opportunity in e-commerce and I look forward to meeting the investment community in the months ahead.

Thanks, Lorrie. I'd like to take a moment to thank all of our employees for doing a terrific job this past quarter and I thank you for your attention today.

Iggy Fanlo, who was recently promoted to the position of President of Worldwide Field Operations, has joined us for Q&A, so now we'll be happy to take your questions. Operator?

Thank you, sir. (OPERATOR INSTRUCTIONS). Anthony Noto, Goldman Sachs.

Thank you very much. I was wondering, either Greg or Dan, if you could comment on either EBITDA or operating income on a segmented basis. If overall pro forma EBITDA was 4.8 million, how was that in the U.S. versus international? And then looking at sales and marketing, was up about 59% year-over-year and you may have commented on that on the call. I was bouncing back and forth between conference calls here. I was just wondering if you could give any granularity into that trend there. Do you expect the year-over-year increase in sales and marketing to be at that level?

And as you go into the second quarter, if I remember correctly, last year, the second quarter was negatively impacted from a drop in some traffic as it relates to natural search traffic to your site. Does that create somewhat of a easier, more efficient sales and marketing potential in the second quarter? Thanks.

Maybe, I can, Anthony, speak to the, at least a part of your question by talking a little bit about sales and marketing. First of all, on the variable portion of sales and marketing, as we continue to expand our category efforts as we continue to expand our international efforts, we're going to continue to expand the variable part of our sales and marketing costs. But you have to also remember relative to last year, we added a very significant partner, namely, Overture, to the mix and that obviously influences the year-to-year comparisons. But in terms of moving forward, we really see this business as one of scale, and we're -- and as a scale business when (ph) our (ph) margins and margin expansion starts to rise with scale. And there's enormous scale opportunities in this business, not only in the core business where e-commerce growth is moving at a 20% clip and we're certainly growing faster than that on the core, but also on the category expansion side, on the international side. And as we start to scale this business, we'll start to see increasing margin expansion, particularly in the fixed part of sales and marketing as well as the other part of our cost base, of which about 40 to 45%, we think, is fixed.

And you also have to remember, of course, that we've been adding a tremendous amount of investment in the business over the last year, building on our technology platform, building out the public company infrastructure we have, and adding, again, these categories and geographies to our service. Over time, we obviously expect these investments to create operating leverage and generate higher margins.

In terms of your question on EBITDA on a segment basis -- was that your second question, Anthony?

Yes.

Well, our intention is not to break out these segments for the time being. Although we are, as we've mentioned in the past, we anticipate spending 8 to 10 million for the full fiscal year to launch France and Germany. And our first-quarter results are right on track with those expectations of what we actually did invest in Q1 to launch France and start getting ready for the Germany launch later in the year.

Great. And my last question is just the comp versus last year, given the algorithm in traffic drop last year.

The algorithm in traffic that took place in Q2? Is that what he's asking?

Yes, I'm sorry, what's the question, Anthony, specifically?

Specifically, last year, your mix in traffic that would have come from natural search, vis-a-vis purchased search, I thought was negatively affected by the change in the algorithm at some of the free-research generating sites, which would create a greater efficiency this year versus last year. And I was just wondering if that was considered in the forward-looking outlook.

Well, we certainly have very strong traffic growth across the board. And I think we would expect to see continued strong traffic growth across the board. Obviously we don't comment on specific sources of traffic, but I think that our traffic growth is fully incorporated in the forecast we have going forward.

So we're using the current projections we have or the actuals we've seen over the last quarter and the first couple weeks of April to position ourselves or understand what Q2 looks like. We're not anticipating a similar event this Q2 that we experienced last year. So our forecast or our guidance is very consistent with what we're experiencing over the last 14, 15 weeks.

Great. Thank you very much.

Heath Terry, Credit Suisse First Boston.

Great. I was wondering if you could talk a little bit about the turns that you're seeing in the cost of bringing traffic to your site through the various online channels that you can use and to what degree you're anticipating using additional channels beyond online. I know you've used television in the past to bring customers to the site in the next couple of quarters and how you evaluate the cost side of that equation.

Sure. We're not really providing specific guidance around marketing mix, but what I can tell you is that our marketing efforts are really focused primarily on online. Obviously, some of that depends on category and particularly as we move into different category expansion efforts, you might see our marketing mix dollars and allocations change in various ways. But, certainly, the primary focus for us on marketing investment or really any investment is absolute dollar, positive dollar margin, and that certainly won't change.

The other thing I'd add to that, Heath, is although we're not going to discuss our plans on traditional forms of advertising, we have substantially increased our PR budget for the entire fiscal year to give us more branding or name recognition in the marketplace.

Great, thank you.

Mark Mahaney, American Technology Research.

Great. Two questions. First, the advertising revenue that you received, how lumpy is that likely to be and how much visibility do you have in that one line?

Well, obviously, it can be very lumpy depending on what advertisers want to do in their budgets in a given quarter. Generally, we have pretty good visibility because we have a lot of those deals in place early on in the quarter and it's just up to us to deliver the impressions over the remaining part of the quarter. So I would say we have pretty decent visibility about the numbers at least for the current quarter.

And on the German market launch, could you be more specific about when you would like to have that launch? And is there a partnership akin to AOL France that would be -- that you either already have or that would be very beneficial in that launch? Thank you.

On the German launch, we are really committing to and focused on having that launch up and running by the end of the year and we're very much on track for that. As far as partnerships are concerned, clearly, we think that our whole approach to structuring, cataloging, and synthesizing information for consumers around their purchase decisions, which results in very high conversion to sale, that that really plays very, very well internationally, particularly with the unified product catalogue we have that is global in nature. And we've already seen evidence of that in the AOL France partnership. We would anticipate that that evidence of the validation, really, of our model overseas is going to continue through partnerships and through growth of traffic really across the board organically and otherwise.

Thank you.

Richard Fetyko, Merriman Curhan Ford & Co.

Thanks, guys. Could you give us an idea out of the 1 million plus that you spent on international expansion in the quarter, how that sort of broke down between some of the line items on the cost side? Is the bulk of it in the sales and marketing and G&A?

Well, Richard, as we talked about when we talked about the 8 to 10 million, we said it was going to cross almost all the categories throughout the year. Early in the year, it would be more in sales and marketing infrastructure costs or the fixed costs -- hiring salespeople and business development people. As we move later in the year and the sites are actually up and running, we will start spending more variable marketing costs in our keyword purchases. But we've also had to build up infrastructure in R&D G&A, as well as our cost of revenues to support the additional traffic in SKUs for the French site.

Got it. And what about sort of quarter-by-quarter ramp-up in those expenses, how should we think about those? It seems to be more heavy, maybe, instead of the second and third quarters?

Well, what we really said last time and we're not going to say anything more than this is that probably 30 to 35, 40% of the costs is first half and the remainder is in the second half.

Got it. Thank you.

Mark May, Needham & Co.

Thanks a lot. Just wondering if you could help us on actually two questions. I'm wondering if you could help us understand a little bit why the average revenue per lead fell sequentially despite the targeted price increases that you had during the quarter? Just help us understand the dynamic there. And then secondly, really just a follow up on your answer to Heath's earlier question regarding off-line advertising and just the strategy. With the launch of mortgage, I think one of your big competitors in that space does do a decent amount of TV advertising. Do you have to approach that particular vertical differently? Thanks.

Let's start with the sequential drop in revenue -- average revenue per lead. So the issue there, obviously, is the seasonal price increase that we put in place for the holiday season was substantially larger than some of the price increases or permanent price increases we put in place in February, causing that slight sequential decline. Iggy, I don't know if you want to add anything to that.

No, I think that's exactly right. The seasonal was significantly higher than the secular increase in place February 1.

So it was right in line with our expectations. The second piece of your question is on maybe marketing differently for mortgages, was it?

Correct.

You're speaking specifically about others that might be advertising for their mortgage offering. Is that correct?

Yes, it seems like that they've put more emphasis on TV and other off-line mediums. And I'm wondering if you think that that's the right approach.

One of the attractions about the mortgage business and about several of the other businesses in the services category that we're looking at is that on a per-lead basis, you can generate higher pricing on that and that could potentially support more off-line advertising, more off-line marketing. Again, our focus is really going to be marketing investment as an absolute positive dollar margin contribution. And to the extent that we can get that in the mortgages area, we will. We really do think we have a very differentiated offering that we're going to be putting forth with our mortgages launched in the next several weeks, quite different than anything else out there. And we think that you'll have the ability to drill down -- to drill by attributes -- in the same fashion you do, for example, digital cameras, you'll be able to drill down by types of mortgages. And you'll be able to see not just the APRs, not just the percentage rates, but the actual monthly payments by type of mortgages, by type of offering that you're looking for, interest only and so forth. You'll be able to see the exact monthly payments that that would entail and be able to do comparisons on those and be able to go directly to the mortgage provider on that basis. So clearly as we launch that category, as we start to become more and more familiar with the dynamics of that, then the marketing mix that will apply to that could vary from just online.

And Iggy, you -- looking back, quarterly, since the beginning of '03, you guys have -- the spread between the average revenue per lead and the average marketing spend per lead has stayed pretty consistently around $0.20. Do you, in the mortgage business, do you think that there's an opportunity for that to go lower, higher, or it's roughly about the same?

You (ph) use (ph) it as an absolute number? We don't have direct experience for this, so I'd be loathe to make a direct prediction. But my supposition would be that the margin on that type of spread would probably stay fairly constant on a persistent basis (technical difficulty) on an absolute (technical difficulty). Given the fact that they are higher numbers, it would probably be slightly larger.

Excellent.

Thank you. (OPERATOR INSTRUCTIONS). Richard Fetyko. Mr. Fetyko? John McPeak (ph) with (technical difficulty) Partners.

Thank you. I was just hoping you guys, since you've reiterated your EBITDA guidance for the year, could give us the assumptions on how you're getting to your adjusted net income and EPS. Is there no tax rate? What's your expectation on interest income, because you are lower than the street numbers, and I'm just curious if you have a sense as to whether that's because the street EBITDA numbers are above your guidance? Or just tell me what the assumptions are there. And then I just have a quick follow-up.

Well, again, as part of our EBITDA guidance, we have said in our fact sheet that we expect depreciation to be 4.4 million of 4.8 interest; and other income between 2.9 and 3.3; and provision for income taxes to be somewhere between 100 and 200,000. So the way we look at it is we take GAAP net income. We add back stock-based compensation to get the EBITDA. We add back amortization of intangibles. We add back depreciation. We take out interest and other income and we add back any provision for income taxes. And the provision for income taxes is relatively small for some state tax and some tax associated with our transfer pricing. We still have significant NOLs, which we don't expect to be paying federal income taxes anytime soon.

Do you have a sense as to where the disconnect then, if your reiterating guidance is between your EPS guidance and what the Street has in their forecast?

I can't speak to what the Street has in their EPS forecast.

Okay. And then secondarily, you guys are investing a little more in the European expansion than you originally planned to. I got the sense that '06 was going to be a margin expansion year. Is that still the case at least directionally, given the fact that you are making these investments?

Well we see, particularly, being able to expand margins in our core business, in particular. Things like SG&A should grow substantially less than revenue growth. R&D should grow less than revenue growth. If we were to embark upon another major geographic expansion, it may limit the margin expansion somewhat, but we think those investments are going to be very vital to our long-term growth prospects. We don't have specific plans as yet as where we're going beyond France and Germany, so I can't specifically speak to those.

Yes, the other thing I would just mention is I believe you said something to the effect of our investment plans are higher than we had initially indicated. And I do want to say that's not the case. We had indicated 8 to 10 million at the beginning of the year and we anticipate that that number is in fact the number for the year. Just to be clear on that.

Okay. All right. Thank you.

Justin Baldoff (ph), Citadel Investment Group.

Good afternoon. A couple of questions. First, I'm just looking at the growth rate in paid leads and it looks like the growth rate accelerated slightly going from Q4 to Q1 on a year-over-year basis. I'm wondering if you could provide some color on what you think drive that, whether or not France provided a material contribution to that acceleration in the quarter. And then a second question, just on the reaction of advertisers to your February price increase, if you could just give us an update on whether or not you've seen any attrition from your advertiser base there, and I have one follow-up. Thanks.

Iggy, do you want to speak to that?

Sure. On the advertiser base question? Yes, Justin, we have seen nothing material from the February increase. We do see some seasonal fluctuations from time to time. But there has certainly been no material change in our advertiser base.

Okay.

And Justin, your first question was on the number of leads. Is that correct?

Correct. Yes, the change -- the slight acceleration in the growth rate of leads.

Well, again, I think that what we are seeing here is really a function of the fact that our productization in particular is taking hold; that we are getting increased revenue per lead; but we're also getting more traffic, and that is driving increased leads.

Just to speak, for example, to some of the effect on productization and then I'll try and answer your question more specifically. With respect to productization, that's a big margin and revenue driver for us and let me give you an example of how that process works over time. If you look last quarter at watches for example, we productized that category literally at the end of last quarter so the year-over-year comparisons are pretty clean. During that period of time, we did have the number of merchant leads go down initially. But revenue has since increase 80%; average CPC has increased and conversion to sales increased almost fourfold. So the fact is that we are just getting a lot more traffic than before, and that is translating into higher revenue per lead, as well as slight increases in the number of leads.

Got you. That's helpful. And then just the last question is on source of traffic. I know in the past, you provided some kind of general, high-level commentary on this. Can you just provide us maybe with an update on your sources of traffic, to the extent that you can comment?

Yes, we are really not commenting on specific sources of traffic. Obviously, we were very happy with the rate of growth in traffic overall, but we're not commenting on specific sources.

Okay. Fair enough. Thanks a lot.

I would now like to turn the conference over to management for any closing statements.

No, I'd just like to thank all of you for participating on the call today. And I would like to again welcome Lorrie to her new role as CEO of the Company starting June 1st, and look forward to speaking to you again in the next few months. Thank you.

Thank you. Ladies and gentlemen, this concludes the Shopping.com first-quarter conference call. If you would like to listen to a replay of today's conference call, please dial 303-590-3000 or 800-405-2236 with access code 11027709. Once again, if you would like to listen to a replay of today's conference call, you may dial in at 303-590-3000 or 800-405-2236 with access code 11027709. You may now disconnect and thank you for using AT&T Teleconferencing.