Inuvo Inc (INUV) 2003 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen and welcome to the FindWhat.com third-quarter conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Karen Yagnesak, Director of Marketing and Communications of FindWhat.com. Thank you, and you may begin.

Good afternoon. I would like to thank everyone for joining us, and welcome shareholders, securities analysts, and other listening today to announcements regarding FindWhat.com's thrid-quarter 2003 financial results. I would like to remind everyone that today's comments will include forward-looking statements. These statements are subject to risks and uncertainties that may cause actual results and events to differ materially. These risks and uncertainties will be discussed toward the end of this conference call, and are also detailed in FindWhat.com's filings with the Securities and Exchange Commission.

In addition, we will be discussing FindWhat.com's proposed merger with ESpotting Media, Inc. Assuming the merger moves forward, FindWhat.com and ESpotting Media will be filing a registration statement with the SEC, related to the merger with ESpotting. We urge you to read those materials, which will contain more details information about the merger as they become available. To comply with the SEC's guidelines and fair and open disclosure, we have made this conference call publicly available by webcast at www.vcall.com/clientpage.asp?id=84949. And a replay of this conference call will be available on our company website and at the same URL for 90 days after the call.

Speaking on today's conference call are Craig Pisaris-Henderson, Chairman and CEO; Brenda Agius, VP of Finance; and Phillip Thune, Chief Operating Officer and Chief Financial Officer. I would now like to turn the call over to Craig Pisaris-Henderson.

Thank you, Karen, and welcome to FindWhat.com's Q3 2003 conference call. Q3 was yet another record-setting quarter that was coupled with several announcements that further differentiate FindWhat.com as well as further define our strategy in our complex and dynamic industry. Here are a few highlights from the quarter -- Q3 marked the 16th consecutive quarter of increased revenues, with topline revenue increasing to 17.8 million, slightly ahead of expectations.

In Q3, we increased cash and short-term investments by approximately $24.4 million, including proceeds from our private placement of our common stock, bringing our cash position to $54 million, while maintaining our record of no long-term debt.

In Q3, we announced our intention to acquire privately-owned Miva Corporation, a leading supplier of e-commerce software and services for small and medium-sized businesses. Miva has relationships with more than 70,000 small and medium-sized businesses in the U.S.

We also announced our relationship with Mitsui, the largest company in Japan, and the 11th largest company in the world, representing a new initiative for the Japanese market that will be launched in the next few months. And finally, we announced that we are increasing our full year of diluted earnings per share, or EPS guidance to 50 cents -- up 2 cents from previous guidance.

As you can see, Q3 was a busy quarter for FindWhat.com. as we saw closure on several major initiatives that took advantage of our primary assets and refocused (ph) them to create additional revenue streams, and a diversified product offering. These accomplishments are the beginning steps of our strategy. In the coming quarters, we will begin to focus on additional opportunities that help to round out our e-commerce-centric product offering, specifically to small and medium-sized companies globally.

Before giving additional comments regarding our Q4 and 2004 strategy, I would like to take a moment to talk about our pending transaction with ESpotting. While there is no material information for me to provide outside of what has been stated in our press release, the management teams from both companies have been working vigorously to gain clarity on ESpotting's historical and projected financial performance, specifically ESPotting's profitability and the company's post-closing pro-forma financial expectations.

There has been much speculation in the marketplace as to whether the transaction will close. I will tell you that it is our intention to move forward with the management team of ESpotting to try to come to agreeable terms in a new deal. But, with that said, it is possible that we do not come to agreeable terms, and the transaction will be terminated. Either way, we will provide an update to the investment community as soon as practicable, with our expectation that we will have an update before the end of the year.

As we close 2003 and start to focus on our 2004 initiatives, the following can be expected from Findwhat.com. -- We will continue to focus on developing our primary business of providing paid listings to the mid-tier market sector; We will continue to enhance our analytical capabilities to further understand traffic patterns so we can continue to deliver a high ROI to our advertisers; We will continue to seek our beneficial products and services to offer our advertisers, to help them acquire and retain revenue-driving customers of their own; We intend on expanding to new and developing markets by finding the best local partners to match their country's specific expertise with our four-plus years of experience in the performance-based marketing sector; And finally, we will continue to keep an eye on our operating expenses as FindWhat.com becomes a more-sophisticated company. At this point, I will turn the call over to Brenda for a detailed overview of our financial statements. Brenda?

Thank you, Craig. I am pleased to report that FindWhat.com realized record revenue in Q3, 2003, of 17.8 million. This represents a 62 percent year-over-year increase from Q3, 2002's revenue of approximately 11 million. It also represents, as Craig mentioned, our 16th quarter of sequential revenue growth.

With regard to our operating margins, we saw a slight improvement in Q3 versus Q2. This is primarily due to a temporary pause in our rapid expansion plans. While we were focused on securing the Mitsui and the Miva initiatives in Q3, we added fewer team members to our overall employee base and we contributed less to our capitalized improvements than previously anticipated. We expect to be fully back in swing, adding to our overall infrastructure and team base during Q4. But more importantly, we plan to continue to follow a philosophy of operating efficiently without compromising our core business initiatives.

With revenue and operating margins out of the way, let's discuss pretax income and net income. Our third-quarter pretax income, which we believe is the best measurement of our company's overall performance, relative to prior quarters, increased sequentially for the 10th consecutive quarter to 4.6 million, or 20 cents per diluted share. This compares to pretax net income of 4.4 million, or 20 cents per diluted share in the second quarter of 2003, and pretax net income of 2.9 million, or 15 cents per diluted share for the third quarter of 2002.

In Q3, 2003, the company recognized a tax expense of 1.8 million, or 38 percent of its Q3, 2003 pretax income. This compares to Q2, 2003 tax expense of 1.7 million, also 38 percent of pretax income.

At 12 cents, the company's diluted earnings per share remained flat in Q3, 2003 versus Q2, 2003. This is the result of -- One, a higher average stock price during the quarter, increasing the dilutive effect of outstanding options and warrants. And two, our private placement in July, where the company issued 1 million shares of common stock to institutional investors.

As result, our diluted shares outstanding increased from 21.8 million shares in Q2, 2003 to 23.3 million shares in Q3, 2003. However, when compared to the prior year, Q3, 2003's diluted earnings per share increased by more than 34 percent from 9 cents in Q3, 2002 to 12 cents in Q3, 2003.

Before turning to our balance sheet, I would like to briefly discuss our year-to-date performance. Our year-to-date revenue for the nine months ending September 30th, 2003 was approximately 51 million. This represents a 74 percent increase over the same period last year. Our pretax income -- which again, we believe is the best measurement when comparing 2003 financial results to 2002 -- was approximately 13.3 million, or 80 percent higher than our pretax income for the nine months period ending September 30th, 2002 of 7.4 million.

With respect to our balance sheet, we believe our financial position, once again, has never been stronger. At September 30th, 2003 we had 54 million in cash and no long-term debt. Our cash position on September 30th includes 20 million in gross proceeds received from the private placement.

Finally, I would like to highlight the remainder of what we currently anticipate for 2003. And then Phillip can provide greater detail on the overall 2003 financial outlook.

Our 2003 revenue was estimated at 70 million, which represents a 64 percent increase over 2002's revenue of 42.8 million. Pretax income is estimated at 18.3 million, or 81 cents per diluted share, which represents a 65 percent increase over full-year 2002 pretax income of 11.1 million, or 58 cents per diluted share. And lastly, net income for 2003 is currently estimated at 11.3 million, or 50 cents per diluted share.

This concludes the Q3, 2003 financial highlights. I will now turn the call over to Phillip.

Brenda just provided our full-year 2003 expectations, and I want to spend some time on how FindWhat.com approaches projections and key metrics, as I believe our forward guidance is one of the primary reasons investors participate on our calls.

First, with respect to key metrics. We have discontinued the reporting of managed acts of advertiser accounts, paid click-throughs, and average revenue per-click-through. As our business continues to mature, and we pursue additional revenues trends (ph), we feel our historical key metrics are less indicative of the direction of our business than they have been in the past. For example, we believe that our relationship with Mitsui will lead to a successful paid listing service in Japan, eventually generating millions of paid click-throughs to Japanese advertisers. However, given the structure of our deal and the way we plan to account for revenue from the partnership, it would have a dramatic impact on our reported average revenue per click-through -- well within (ph) the reported figure, not because of anything to do with our historical managed advertiser base or those advertisers' value of our services, but simply because of the increased mix of lower revenue click-throughs from Japan.

As another example, assuming the completion of our announced acquisition of Miva, we would have relationships with almost 100,000 online businesses. Part of our strategy is to expand our relationships with both the tens of thousands of Miva merchants and the tens of thousands of managed advertisers that FindWhat.com has, making the reporting of just managed active advertiser accounts via FindWhat.com less indicative of our company's performance or prospects.

Let me be very clear. We are not discontinuing the reporting of our former key metrics because we fared poorly in Q3. As would be expected, given that our Q3, 2003 revenue was similar to what we generated in Q2, 2003. All three metrics in Q3 were within a few percentage points of where they were in Q2.

Next, a word about our projections. We have limited our guidance to full-year 2003 estimates, which currently assumes the closing of our proposed Miva acquisition late this year, although we do not believe that closing will have a material impact on our 2003 results. We have not provided 2004 guidance yet, because we have three different proposed transactions -- Miva, Mitsui and ESpotting, which we believe could impact 2004, although none of them are closed or launched, and we are waiting for clarity, especially with respect to ESpotting.

FindWhat.com and ESpotting management continue to work together actively on a review of ESpotting's historical financial results, including results through September 30th, 2003, which have yet to be finalized. Upon the completion of the review, FindWhat.com intends to engage in exploring new terms that could lead to a revised merger agreement. FindWhat.com currently believes that it will have an update on the transaction before the end of 2003; however, it remains possible that mutually-agreeable terms will not be reached, and that the merger may not be consummated. And in such an event, FindWhat.com would make an announcement as soon as practicable.

Turning back to our 2003 estimates, they reflect a rapidly-changing sector, where major announcements seem to occur monthly, if not weekly. When providing financial guidance, our approach has been consistent. We review everything that we know as of the date of our projections, including the status of current deals that we have, probably pending deals, and any new opportunities that are far enough along to allow us to estimate when and by how much they will impact operations. In the past, including in Q3, we have been fortunate enough to consistently find new sources of revenue, and to be more efficient in achieving our goals than we have projected.

We have maintained our 2003 revenue guidance, and raised our EPS guidance 50 cents, from 48 cents, previously. We hope to continue to execute at a very high level, and over-perform. But, at this time, we think the new 2003 guidance is reflective of all of the factors impacting our company and our industry. Now, let me turn it back to Craig.

Thank you Phillip. Again, I would like to thank all of you for attending our Q3 2003 conference call and take this opportunity to thank all of the FindWhat.com team members for their diligence and dedication, and for their continuing efforts to build FindWhat.com into one of the world's leading performance-based marketing companies.

At this point, we will turn the call over to the operator for the q-and-a session.

(OPERATOR INSTRUCTIONS). Jordan Rohan, SoundView Technology.

I have a couple of questions, guys. The first is -- when the FindWhat/ESpotting deal was announced, there was some guidance offered for FindWhat solo (ph) without Espotting -- revenues of 67.5 million, EBITDA of 17 million. Can we assume that still holds, even though you are not willing to make -- to issue guidance for the company as a whole, given that these other parts are -- have yet to stabilize or clarify?

Actually, Jordan, we have raised those numbers.

The 70 million?

Yes. That is correct. And 17 --- (inaudible)

Jordan, back then, our projections were finalized -- assumed that the ESpotting transaction did not close in 2003. We obviously operate under those same conclusions. So, while there is the potential that Miva and maybe Mitsui have a very slight impact in 2003 -- although, again, we don't believe it will be material -- the equivalent to those numbers that we put out back in June have now been updated to 70 million of revenue, about 18.3 million in pretax income, and now 50 cents in earnings per share.

Okay. Was there any guidance -- I thought that was for '04 that -- maybe I have it wrong. Was there any guidance offered at all for what would happen in '04 to FindWhat domestic?

No. We have not checked (ph) on '04 at this point.

Okay. Finally, we had a couple of percentage points as sequential growth quarter-over-quarter. If you look across the industry -- at lease commentary from Yahoo! on Overture's quarter and such -- it would suggest that they are up at least mid to high single digits. Can you comment on whether there is some extra seasonality that you are seeing. Is there any reason to believe that your price-per-click would actually increase in fourth quarter? Should we expect a down quarter in first quarter as well? Thanks.

Sure. Seasonally, Q3 -- or I should say cyclically -- Q3 is always our slowest quarter. We've pretty much given the guidance in the same way the last couple of years in regards to Q3. Q4 is a good quarter, typically, for everyone in the e-commerce industry. But, nonetheless, we put out our guidance and what we are projecting. On that, Phil stated we are no longer putting out price-per-click. It is just not indicative of the company we have.

When you look at how we recognize revenues -- specifically how we recognize clicks, in general from some of our private-label partners and new partners that we will bring on-board. It is just not a good metric for us to try to manage our business by. In fact, we are very aggressive in going after clicks regardless; as long as they are profitable clicks. We are very aggressive about going after revenue transactions on behalf of our advertisers, regardless of what the amount is. To that point, we just are not -- we will not take in business by (indiscernible) any longer. But we are expecting to see an uptick in Q4.

Okay. I will stop there. Thank you.

Youssef Squali, First Albany.

A few questions. First of all, on ESpotting -- Craig, is it fair to say that -- whether you guys just go ahead and do a deal or walk away? Or (indiscernible), you decide to go ahead and do a deal, it will be short-term accretive. Is that one of the things that you will continue to live (ph) by since historically that is what you said about acquisitions?

Number two -- historically, you guys have not broken out your (indiscernible) (technical difficulty) back into some numbers, I am coming out with (technical difficulty) basis points sequentially. I want a confirmation on that. It (indiscernible) directionally, if I a right. And I have one follow-up.

Sure. I will take the first one and I will leave the second one to Phillip.

In terms of the near-term accretive -- you know our philosophy, Youssef. But with that said, we have not completed the steps in the process that we are going through to wrap up September 30th numbers on forward (ph) ESpotting. So, with that said, we do not have deal terms on the table at this point. I can tell you that both management teams are working vigorously, as I stated earlier. And we are very -- as you know, we are very keen to making sure we do proper deals. In fact, if you look back at the previous deal structure that we did put out their public -- although we've had to retract some of the payments, it is still -- it had a very responsible structure in mind. And we believe that any deal terms that we put on the table with ESpotting or any deals that we come to the street with will be very responsible. But, in terms of saying you will absolutely be near-term accretive, it's hard for me to say at this point since we are not there yet.

Youssef, in terms of the revenue share percentage, it's been pretty consistent at roughly 50 percent in going-on five or six quarters now. That was, again, the case in Q3.

It's part of your sales and marketing. (indiscernible) at the line, it's up to about 59.5 percent of total revenue (indiscernible) last quarter. So that is kind of why I am assuming that overall, your sales -- your (indiscernible) at worst, in line with last quarter. So, the disparity should become higher (indiscernible).

As you mentioned, that figure is in there with all of our sales and marketing expense. And so, some of the moves we have made with respect to the sales force in prior quarters -- some of the corporate development activity -- that was obviously very active in Q3, although the expenses go into the sales and marketing line. And I think if you look at the percentage of revenue, that line has been -- that has actually increased the last two quarters, sequentially. Not just from Q2 to Q3. But again, that is not reflective of an increase in the revenue share percentage that we pay out.

I see. I guess you guys continue to state that it should stay within the 50 percent range. Is that still the case?

We try to give ourselves a little bit of room, going out in the future. There may be -- it creeps up a little bit. You know, I think, with respect to the full-year 2003 projections we put out -- it still -- we believe, roughly, going to end the year in the 50 percent range. I think, going further than that, we haven't really detailed projections. But, I think we would always like to leave ourselves a little bit of room for a slight increase.

Okay. Great. One last question on the concentration of revenue. Were there any 10 percenters. And, if not, (technical difficulty)

We actually had two distribution partners that accounted for more than 10 percent of revenue and it has sort of been bouncing back and forth between 1 and 2 over the last year-and-a-half or two years. And, no, Lycos -- while it continues to be a deal that we are very pleased with, it is not one of the two.

Okay. That is great. Nice quarter.

Richard Fetyko, Kaufman Brothers.

Talking about your employees and the number of employees that you have hired -- where would you like to be at the end of the year without Miva?

Hi Richard. Net, quarter-over-quarter, we increased on one employee. We ended the quarter at 161. But, by year end, we would like to be about 175 employees.

Okay. Also on your sales efforts, I know you have hired quite a few people in New York City, but also in Florida. Particularly in New York City, how has the penetration of the advertising agencies business come along so far?

I think we have done a good job there. Sam (indiscernible), our vice president of sales is based in New York. And he has, at the moment, four people with him up there focusing on -- not just on agencies, but certainly on larger advertisers in New York City and the Northeast.

We continue to be pleased with the efforts that they have made to try and get in front of as many agencies as possible. I think there's been a good reception of understanding that (indiscernible). These are third alternative, after Overture and Google, that -- I don't want to put us exactly in the must-by status; that is certainly the approach that we're taking -- it would be sort of silly to pass up the opportunity to expand your (indiscernible) campaign, given the volume of traffic that FindWhat.com now represents. But, overall, we have been pleased.

Would you say that that effort contributed a great deal in the quarter -- or in the fourth quarter projections that you have?

I think it is difficult to put an exact figure on it. I think the revenue that is attributed directly to those core individuals, as you can imagine, continues to ramp up from a very small base. Those people joined us throughout the second quarter. So, they really have only been there between 90 and 150 days. But again, that is an effort that is still in the beginning stages. And absolutely, we would hope that that continues to grow and to contribute more to our overall revenue mix.

Could you also elaborate a little bit on the seasonality in traffic that you saw in the fourth quarter? Was it in line with the historical -- historic seasonality that you saw? Was it worse -- a little less a severe, perhaps?

No, actually it was pretty much in line with what we have seen historically. We are now fortunate that we have several years of data with certain partners, and those partners will follow the same patterns that we have seen over the last two years. (inaudible) that we are looking at today -- a lot of them do have -- like I said, several years worth of data now. And even though we have some fairly-new distribution partners that have come on pretty strong in 2003, we are still seeing the same types of traffic patterns. In all, I would say it is pretty much in line with what we expected.

Any data that you have that would show year-over-year growth in traffic -- sort of organic. If there's anything that you can --?

Actually, Phil spoke on the topic of (indiscernible) growth in the past. And actually, I mean, we could speak to that, but I am not prepared to speak to that right at this second, which I apologize. But, in terms of what type of approach we're seeing from our (inaudible) year-over-year.

But, I can tell you that we have consistently seen partners grow with nice (indiscernible) -- Our top partners -- we've seen those partners -- the top 10 partners names changed. Not necessarily every single quarter, but definitely, let's say, every other quarter. They change a fair amount. Which indicates, number one, there is still a good amount of mid-tier partners that we're going after and bringing into the FindWhat.com network, and then helping them grow. But, nonetheless, we're still seeing growth from our distribution partner -- our distribution partner network. Like I said, I do not have any specifics on it in terms of percentage.

Okay. And the final question -- In your renegotiations of ESpotting, are you and can you take into consideration the changing competitive landscape in Europe? Or, is that not really the concern at all. This is simply just going over the (indiscernible) and the projection numbers for ESpotting? Has the European competitive landscape changed?

Yes, I think that's a good question. Actually, when you look at it a little differently, though. I guess a more-applicable question is -- has our opportunity, as we saw it several months ago, changed? And the answer to that is no. We do see a tremendous opportunity in very young markets in the European marketplace. And we see those opportunities just as large and just as clearly as we did several months ago. So, I would say that the primary focus here is just making sure that historical and moving-forward pro forma numbers are accurate. And we feel very comfortable at the moment on a go-forward basis.

Thank you.

Tom Underwood, Legg Mason.

A few questions. One, I was wondering if Applied Semantics is still in the system or if they have switched to a AtWords (ph). Number two -- I was wondering about the impact of the five-cent minimum on the side? And then finally, advertiser count -- while I understand how it could not be that relevant, going forward, during the third quarter, it probably still had some sort of relevance. And I was just wondering -- we saw a slight decline in the second quarter. Did that continue into the third? Or, has that stabilized?

Tom, with regards to Applied Semantics, we traditionally had a policy of not really commenting on any individual deal. I can tell you that what we talked about a couple of quarters ago, which we were authorized to talk about -- was that they were being acquired by Google. We anticipated that there was going to be a shifting of the level of traffic that we saw away from us. We weren't sure how quickly that was going to happen or if it was going to happen completely. But I think that the guidance that we provided back then has sort of come to fruition, in terms of the shift that we anticipated.

In terms of the five-cent increase -- it has had some interesting impact. I think it led to -- I guess we didn't total expect it to all happen at the very end of the timeframe. But, it did lead to a tremendous increase in the number of bids entered into our system. Like I said, a lot of that increase came literally on August 30th and August 31st. We had given people a fair amount of forewarning, and we thought that might spread out the impact. But, nonetheless, what we expected, which was that existing advertisers and some new advertisers would jump on the opportunity to be able to get sub-price (indiscernible) into our system and be grandfathered. That did come to pass. But, again, from a perspective of seeing an impact, the average (indiscernible) price (indiscernible) impacted. You know, reported revenue for click (ph), that kind of thing -- we have not seen that and we did not expect to see that. But, remember that this was a change that happened on September 1st. But really, the only bids within our system that were subject to being at 5 cents versus being lower, were bids that have come in in the last 29 or 30 days of the quarter. And we do think overall, or over time, that will have an impact. But we do not believe that it has had an impact to date. And we think it's going to take a while.

With respect to the number of advertisers -- again, I think part of getting away from the key metrics we have recorded in the past, is not to sort of talk about what happened in the third quarter. As I think you saw in the second quarter, those metrics were not necessarily indicative of the past of our revenue growth or our profit growth. And that began while we have sort of backed away.

Great. Thanks.

Eric Martinuzzi, Craig-Hallum Capital.

Thanks. Nice quarter, guys. My question has to do with the affiliate acquisition. (indiscernible) Is that an area that has appeal for you? Is that something that we could see (indiscernible) venturing down?

That is actually a good question. I think it was a good acquisition for Value Click, knowing what they are trying to build. Or having a pretty good idea of what kind of company they are trying to build. And obviously, it was very complementary to their B3 acquisition that they made, if I am not mistaken, last year.

But, in terms of how we're looking at taking next steps and offering additional products and services -- you know, I guess, once you speculate that that would be something we would look at, knowing that we have relationships, especially now with the Miva acquisition that should close this quarter. We have over (ph) 100,000 advertisers. So clearly, there would be an opportunity to build an affiliate marketing system if we chose to. I will say that it is not something that is high on our priority list right now. But, nonetheless, it could be something interesting -- something interesting to look at as we continue to move forward.

Okay. And there has been -- as far as the competitive offerings out there for what advertisers have on the broad match of keywords -- are you guys at all tinkering with an expanding broad match enhancement to your platform?

Yes, I cannot answer that specifically. I can tell you that we are looking at various opportunities that others in our sector have actually moved forward with either last year or, quite quickly, the year before. We chose not too; we didn't feel it was something we should do with our advertising database back then. I will say that we do have an internal committee that is convening quite often; that is looking at various opportunities that we can maximize, not only advertisers opportunities we get in front of qualified clients, but also revenue opportunities for FindWhat, as well.

You know, we really have a philosophy that if it doesn't benefit our advertisers, then we don't do it, regardless of the short-term revenue (indiscernible) that we may get. Or, quite frankly, even quasi-long-term (indiscernible). Because we know ultimately, if it doesn't -- if it is not measuring up on behalf of our advertisers, they will not continue to spend more and more money with it. So we do have a committee, as I mentioned, that is convening quite often; looking at various initiatives., And that is about as clear as a statement that I can make.

Okay. And lastly, with DSO -- you guys have always had the seller (ph) DSOs. DSO is a facet most people look at in trend rather than raw data. And I see, while it is only 16 days, it is up. Is that tied to a greater percentage of your business coming from (indiscernible) orders?

Actually, it is interesting. People do report our DSOs as 16 days. That is not how we measure our DSOs. We measure our DSOs -- really you have to break up the billable revenue versus the prepaid revenue. You certainly cannot measure your accounts receivable any days outstanding, based on pre-paid revenue. Although (technical difficulty) the amount of revenue that is coming through on the billable side, our days outstanding are actually 50, 52, which we also believe are seller days outstanding, if you just carve out what is related purely to the billable side. And that is outstanding, because we are increasing the number of agencies we are dealing with. So, we are pretty proud of that.

But, again, I would like to clarify the difference between the 16 days and what they really actually are. If you look at pure (ph) days outstanding based on billable.

Okay. That covers it for me. Thank you.

Stewart Barry, Delafield Hambrecht.

The two biggest product developments in search have been local search and contextual advertising. I would just like to know what you guys are doing to make a play with those product developments? Are your advertisers asking for those? Because Overture and Google -- since they announced recently that -- we know that Google has a (indiscernible) advertising product and Overture has a (indiscernible) advertising product, and I do believe E-find (ph) does, as well. What is your play there?

Okay. I will tell you what -- I'll take the contextual part first. It is something we've been doing for actually quite some time. Not to the sophistication level of what Overture and Google have brought to the market. In fact, Applied Semantics was a partner that we were working directly with in the contextual marketplace. And Google's -- a fair amount of Google's contextual offering has come from companies they have just recently acquired. But to the point, there are -- I don't want to over-emphasize it, but there are definitely more than just a few contextual technologies out there for FindWhat.com to partner with. In, fact I think it would be a good assumption for everyone to make that, even back in the Applied Semantics stage, that we were already partners with others. So, the answer to this very, very specifically -- yes, we are working in the contextual marketplace. Are we going after the high-profile deals? That is just not our business model. Most of what you're hearing about isn't new. What you are hearing about now are high-profile deals where there is a fair amount of negotiating back and forth for some of the larger players for big revenue deals. And the fact of the matter is, as I just stated, that is just not the way we do business. So, that is why you're hearing more and more about it and that is why it may seem that we don't have as big as of an offering. But, the fact of the matter is -- is that we have been in the marketplace for a while.

As for local, it is interesting. I happen to be very passionate about the local opportunity online. The problem is -- is that there aren't a lot of local offerings that really work. Right now, most searches are not local-centered, so to speak. And they are not geocentric to the point where you can say "this person is in St. Louis or this person is in Philadelphia." Unfortunately, the U.S. marketplace does not have technology -- at least not well-refined enough to say "this is a local product" that allows people to do -- (indiscernible) lookups. And without going through the technical details -- you cannot just figure out where someone is located based on their IP address, unless they tell you upfront and fill out a profile. So the point is -- is local is something we are incredibly interested in. But at this point -- and I'm sure many others are -- Because there is a huge local marketplace out there. And especially with services like doctors, lawyers, plumbers even -- that can just tap into the online world if we had a good local product. But, the fact of the matter is -- we have yet to see anything that truly works that well. Of the players that have focused their entire businesses on becoming a local solution, I'd say they're probably talking to everyone, including FindWhat.com, about opportunities, going forward. But, at this point, it has just been really hard for us to say "you know, this is such a big opportunity and it is so clear that we are willing to invest X amount of dollars." This just hasn't been proven out that some of the largest companies in the Internet world, quite frankly -- we're not going to throw money at until we can see a little more clearly what the real opportunities there.

Okay. Just one more question -- Has the nature of your lawsuit with Overture changed at all now that it has been acquired by Yahoo!? Can you just comment on that if there is a comment to be made?

I can say that we -- I guess the best way to answer that is -- at the lawsuit sort of continues on the path that it has been on. I think it is -- without trying to -- based on exactly what is going on with Yahoo! and Overture -- clearly have a lot of things on their mind in completing that merger, that acquisition. So, no, I think from our perspective of guidance and giving an update, we have to plan on it continuing just the way it has been. We sort of in the -- I'm not even sure how to characterize it -- but, I guess the long middle of a very long process. The expense assumption that we have provided in the past about the cost of continuing this with respect to our litigation team -- you know, that was sort of in-line in the quarter and we continue to expect that is going to be about the same, going forward. Again, our belief is that the earliest we could see a trial would be the second half of 2004. And again, the way these things work, there is a good chance that could be delayed.

Okay. Thanks a lot, guys.

Jordan Rohan, Soundview.

I'm trying to get into these numbers and, to tell you the truth, the last disclosure (ph) key business metrics kind of irks me a little bit. So, I'm going to try to ask the question a slightly different way to see if I can get an answer. There are obviously two ways to calculate revenues -- particularly for the domestic (indiscernible) price-per-click (indiscernible) of volume? The number of advertisers times 10 per advertiser. And with 2 percent sequential revenue growth, should I assume that every one of those metrics was between zero and 2 percent, and therefore each one of those metrics was up just a little bit this quarter? Or, are we in the situation where there is one of those metrics that is greater than 2 percent, and therefore something was negative in the quarter? Can you please address that?

Yes, again (multiple speakers) we decided not to move forward with those metrics, because there are just not indicative. I think it would be a very fair assumption, though, with the limited upside (ph). There was not a huge increase in topline revenue. So I think it would be a fair assumption that those metrics in general just did not move very much. I think it is a very good assumption, but nonetheless, in terms of getting specific, we are just not going to -- we're not going to do it at any angle (ph).

Okay. Any reason to not be specific on the number of advertisers? I just understand that logic at all.

A couple of reasons -- I would say (indiscernible) and Miva. We are anticipating closing the Miva transaction, literally this quarter. With that said, we are going to be in a situation where we are working with almost 100,000, advertisers. And some of those are coming from the Miva marketplace, which actually is a per-click type of initiative, as well. So, we start looking at -- how are we actually collecting our revenues from these advertisers? And it just did not make any sense to report where we had 100,000 advertisers and at the same time, part of them actually were on the per-click, part of them were on the software side and paying a monthly fee. So, we're just becoming a more-sophisticated company. You know, on one hand, I guess you could say the company is maturing with additional products and services. But at the end of the day, now matter how you look at it, we just noticed that this metric is just not indicative of how we do our business.

(indiscernible) and volume?

No, that is correct in.

A little more color there, Jordan -- Again, price-per-click is times volume is how you get the revenue. So, it's hard to say that those are not important. But, I think what we found in terms of evaluating whether it is the key metric or not -- is if price-per-click is influenced by saying -- are not directly associated with what people assume they are associated with. Again, I think people take the revenue for click (indiscernible) number as a proxy for how our bid prices are doing, or for how advertisers value our service -- are they valuing it at a higher price-per-click or a lower price ? And there's just a disassociation with that correlation to the point where we just don't think it is a useful metric? And I think as we plan out a lookout to some of the initiatives we have got -- and we have mentioned on this call, including Mitsui -- to continue to talk about click (indiscernible) and revenues of click (indiscernible) -- I think actually would give a distorted picture of what is really going on with the business.

And, again another point is that we do not manage -- and this might have been the clincher -- we do manage to a particular recorded revenue for click through. We absolutely manage to try and increase our bid prices and try and get the largest advertisers out there into our system, because they can really push up bid prices. (indiscernible) reported average revenue per-click-through was not reflecting those efforts.

Okay.

There are no further questions at this time. I will turn the conference back over to you for any closing comments.

Thank you. I'm now going to close this call with some required language about the forward-looking statements made during this call, within the meaning of section 27-A of the Securities Act of 1933 and section 21-E of the Securities Exchange Act of 1934. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may vary materially from the expectations contained in the forward-looking statements. The forward-looking statements herein include, without limitation, statements including addressing future financial and operating results; statements relating to the magnitude, timing, effect and any synergies that may result from the proposed merger; and statements concerning the outcome of any necessary regulatory and stockholder approvals required in connection with the proposed merger. In addition, past performance cannot be relied on as a guide to future performance.

The following factors, among others, could cause actual results to differ materially from those described in the forward-looking statements -- Potentially, the information and estimates used to predict anticipated revenues and expenses were not accurate; potentially, the demand for our services will not continue to increase; the risk that we will not be able to continue to enter into a new online marketing relationship to drive qualified traffic to our advertisers; risks associated with our ability to compete with competitors and increase competition for distribution partners; vertical and global economic risks, attended to our business; other economic business and competitive factors generally affecting our business; the risk that operation of our business model infringes upon intellectual privacy rights held by others; our reliance on distribution partners for revenue-generating traffic; (indiscernible) that our merger with ESpotting or acquisition of Miva will not be consummated; difficulties executing integration strategies or achieving planned synergies, after a merger with ESpotting or an acquisition of Miva; risks that the ESpotting and Miva transactions will be terminated, delayed, or not closed when expected; the failure of FindWhat.com and ESpotting to resolve issues relating to ESpotting's financial performance; and the various parties to agree to related amendments to the merger documents; FindWhat.com's and ESpotting's failure to retain clients, as a result of uncertainty regarding the merger agreements; difficulties executing integration strategies or achieving planned synergies in connection with the ESpotting and Miva transaction; the risk that the conditions (indiscernible) to the parties' obligations to close and those ESPotting and Miva agreements will not be satisfied, including the receipt of stockholder regulatory approvals; the risks that transaction costs relating to the ESpotting and Miva transactions will be higher than anticipated; the risks that the businesses of FindWhat.com and ESpotting will suffer as a result of uncertainty involving the merger; the risk that continuity of FindWhat.com's and ESpotting's operations will be disrupted if the merger does not close; and the risk that ESpotting will require more cash than anticipated before closing. Readers should also note that the forward-looking statements may be impacted by several additional factors, including the failure of FindWhat.com's existing infrastructure to adequately support Mitsui's paid listing service, the (indiscernible) successfully create and manage a paid listing that work in Japan; the risk that the development and implementation of the Japanese version of technology will be delayed or not completed when expected; risks that the developments, implementation, and integration cost will be higher than anticipated; the inability of Mitsui to leverage off of its existing client base of potential distribution partners; the failure of the paid-listing services markets developed in Japan, as envisioned by FindWhat.com; intense competition in the paid-listing services market in Japan; the potential that FindWhat.com and Mitsui will fail to agree on the management and growth of their relationship; and economic changes in the internet industry, generally.

More detailed information regarding other risks affecting FindWhat.com, are set forth in FindWhat.com's filings with the Securities and Exchange Commission, include the Amendment Number One to the annual report on Form 10-KSB for fiscal 2002, and the most recent quarterly reports on Form 10-Q. If any of these risk or uncertainties materializes, or any these assumptions prove incorrect, FindWhat.com's results could differ materially from the expectations expressed herein. FindWhat.com is under no obligation, and expressly disclaims any such obligations to update or alter the forward-looking statements, whether as a result of new information, future events, or otherwise.

We want you to know about some additional information and where to find it. FindWhat.com may be filing relevant documents concerning these (indiscernible) transactions with the Securities and Exchange Commission, including registration statements on form S4, containing a prospectus proxy statement. FindWhat.com urges investors to read these documents because they will contain important information. Investors will be able to obtain the prospectus proxy statement, if filed, and other documents that were filed by FindWhat.com with the Commission --free of charge at the commission's web site, WWW.SEC.gov, or by directing your request, after such filing is made, to FindWhat.com, at 5520 Summerlin Commons Boulevard, Suite 500, Fort Myers, Florida, 33907. Telephone -- 239-561-7245, attention Phillip Thune. FindWhat.com and its directors and executive officers may be deemed to be participants in a solicitation of (indiscernible) in connection with the proposed merger. Information about FindWhat.com directors and executive officers and the ownership of FindWhat.com voting securities is set forth in Amendment Number One to the annual report on form 10-KSB for FindWhat.com and was filed with the Commission on April 30, 2003. Additional information about the interest of those participants may be obtained from reading the definitive proxy statements regarding the proposed transaction when it becomes available.

That concludes our call for today. Thank you all for listening.

This concludes today's conference. Thank you for your participation.