Live Ventures Inc (LIVE) 2008 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the First Quarter 2008 LiveDeal, Incorporated Earning Conference Call. My name is Shaquana and I will be your coordinator for today. At this time, all participants are in a listen only mode. We will facilitate a question and answer session towards the end of this conference.

(OPERATOR INSTRUCTIONS)

I would now like to turn the presentation over to your host for today's call, Mr. John Evans. Please proceed, sir.

Good afternoon, everybody. My name is John Evans. Thank you for your interest in LiveDeal. With me today are the Chief Executive Officer of LiveDeal, Mr. Daniel Coury, and John Raven, COO of LiveDeal. Gary Perschbacher could not make it on the call because he's been extremely ill, but John Raven and Dan and myself should be able to answer any questions. And, in addition most of our financial information has been published either in our press release or in our 10-Q that was filed yesterday.

Some of the discussions today will involve forward-looking statements, and I will now read to you the following warnings about reliance on forward-looking statements. During the course of this presentation we may discuss LiveDeal's business outlook, which contains forward-looking statements.

These particular forward-looking statements, and all other statements that may be made during the presentation that are not historical facts, are subject to a number of risks and uncertainties, and actual results may differ materially. Please refer to our periodic filings on Forms 10-K and 10-Q made with the SEC for more information on the risk factors that could cause actual results to differ.

Important factors that could cause actual results to differ materially from the Company's expectations include, but are not limited to those factors that are disclosed under the heading "Risk Factors" and elsewhere in the Company's documents filed from time to time with the United States Securities and Exchange Commission and other regulatory authorities.

Forward-looking statements made during today's call are made only as the date of this call, and the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events. This conference is being webcast and will be available on our website for replay following the call.

Now, let me turn it over to our Chief Executive Officer, Mr. Daniel Coury.

Thank you, everyone, for taking the time to listen to our conference call. This is an important investment year for LiveDeal, Inc. Fiscal '06 was the year of fixing the problems. Fiscal '07 was the year of putting the assets together. Fiscal '08 is the year of integrating those assets into a business model and spending to maximize value. Fiscal '09 is the year in which we will begin to see the substantial return of those assets, and we expect to earn at least $1.00 per share with those assets in fiscal '09.

First quarter '08 earnings profitable at $0.05 on a fully diluted basis, our EBITDA for the quarter was over $1 million or $0.16 per share. We have stated that we needed to invest in the Company to have the proper products and services to transform LiveDeal, Inc. into the local internet company that meets the needs of the local business, media partners and consumers. Expect this year we will continue to invest in the Company. We are starting to see the benefits of this.

Our Las Vegas sales each one of which represents the equivalent of five or more of our listing subscribers on a $1.00 basis are finally at $1.00 to 3 million -- excuse me, a $1 million to $3 million annual run rate with a small team. As we build the sales force to 80 total sales people by the end of calendar '08, we expect those sales to be in excess of $8 million for '09.

On a revenue basis, we did $7.1 million for the quarter, which was even with the fourth quarter of '07. John Raven will later talk about the seasonality and effects of the business climate. We continue to expand the products and traffic that will make this a first-in-class website for small and medium-size businesses to advertise on.

As revenue increases in the next quarters, our margins show grow as we leverage our platform. We also are increasing the number of products available to our small and medium-size customers, expanding beyond just the Yellow Page listing to expanded listings, CPC products and premium store listings. We will do this with a more profitable platform that should allow us to increase our EBITDA and net margins.

LiveDeal telemarketing capabilities in our Philippine call center are proven, and are highly regarded within our industry. We are now testing in this center utilizing a portion of our sales force to sale with payment by credit card only. LiveDeal's headquarters will be finished in 30 days, and are located on the east side of Las Vegas directly adjacent to McCarran International Airport. It is state-of-the-art, and will include a 96 seat call center, as well as the Company's executive offices.

This expanded telemarketing team now has the products targeted at vertical and geographic segments that make a compelling case for small business owners to advertise. The local Internet space is finally getting the attention it deserves, as more and more media companies realize that companies are willing to pay a premium to bring customers to their local Internet sites and local businesses.

In the CPC business alone, the average local click costs two to four times what a national click costs. Currently, some estimates show that 55% of SMEs spend money on advertising, and 43% of those spend online. These businesses are looking for multiple places to advertise to optimize their ad budgets, and we believe LiveDeal.com and YP.com represents a compelling value proposition for them.

We will become a trusted marketing partner for them that will keep them coming back and continued traffic. The key to executing this strategy will be to add content to the site and expand the presence of this content across the Internet. This will be accomplished in several different ways. We will partner with content providers that have thousands of small business listings that, as business assets, are being underutilized.

For example, one relationship would add specific substantial and growing vertical with the propriety content and over 100,000 listings in which we would market the listings and do a substantial revenue share. This would allow us to expand into selling a CPC product as well. We will announce this relationship when the terms of finalized.

In addition, we're working on partnerships that syndicate our content -- include our content on our site -- their content on our site. In addition, to philly.com, we are working on newspaper relationships that could total up to 200 newspapers, as well as other local media outlets.

Currently, we have co-brand partnership relationships like ShopAtHome, Juno, NetZero, HometownLocator, Infospace, Families, Discover Our Town, Classmates.com, Bluelight, [Arcamax], Hotels, and Stubhub.com. These content providers would benefit from our expertise is we help them fully monetize their customers.

In addition, we will work to increase the number of classified listings on our site by partnering with existing companies. It is a key element of our business plan that LiveDeal evolve to one of the Internet's largest aggregator of classified content. We will seek out partnerships that establish media brands in specific targeted local areas in order to provide our classified technology platform to power those publisher's classifieds and/or Yellow Page platform.

We will continue to build out compelling content in our strongest vertical markets; autos, real estate, jobs, and specifically, pets. Ultimately, the key to success for our business will be to create users out of visitors, consumers who become habitual visitors because of the utility and value of our online media -- that our online media provides.

We are working on partnerships to offer small businesses without web presence a turn-key and hassle-free basic web solution, to complement the marketing solutions our IYP and classifieds provide to them. These will include a web page, URL, e-mail capabilities, premium virtual store, and keyword advertising.

We will work with companies to create some cool and relevant gadgets and widgets for our site, gadgets and widgets that will not be found anywhere else on the Internet. These cutting edge tools will further enhance LiveDeal's stickiness. It is our goal to offer compelling products and services; optimize our sales structure and staffing; capitalize on technology and content partnerships with companies like Yahoo!, Idearc, Ingenio and others; improve user experience; grow our paid and organic traffic; and deliver ROI to our customers.

I'd like to now turn this meeting over to our COO, John Raven.

Thank you, Dan. Good day, everyone, and thank you for joining us. We have three items in this section of the agenda today. First, we will review sales operations during Q1. Second, we'll discuss our expansion and consolidation efforts in Nevada and finally, we'll discuss product development for the remainder of 2008 and into 2009.

The focus of the bottom half of 2007 was to consolidate and integrate the operations of two strategic accretive acquisitions. LiveDeal's innovative technology platform allows us our four principal marketing channels; directories, mobile services, classifieds, and advertising distribution networks. That being said, the major components then of our revenue model are business listings and Internet ad revenue.

I want to highlight three key metrics that indicate the value we have built-in for our shareholders. We achieved Internet growth of approximately 20% sequentially from the fourth quarter, and approximately 130% over last year. We maintained a strong and growing listing business through the end of fiscal 2007, which decreased acquisition costs by 40%. The average life of a customer increased sequentially from 25 to 27 months last quarter, and from 18 to 27 months when compared to last year.

Our many accomplishments indicate we are making progress on all fronts and gaining momentum. There are many initiatives and accomplishments behind our results, but our employees were the true driving force behind those results. Our progress has been the result of a dedicated and passionate workforce committed to the Company's success.

Now let's start with our listings business. As you know, this business accounts for the majority of our revenues, and it is a strong free cash flow business. However, similar to the rest of the industry we were fighting challenges in our Q1.

Our three most important challenges last quarter were; the seasonality of sales during the major holidays and access to key decision makers during that period; overall calendar year and market softness in general for Yellow Page type of sales; increased regulatory oversight and policy changes regarding third party telephone billing activity by two of the largest regional Bell operating carriers AT&T and Verizon, which account for approximately 80% of the market.

We sell highly localized Internet Yellow Page listings at entry mid and premium level price points, which have been treading at an average revenue per unit of $400 to $3,600 per year. At the entry level price point, the service is paid to us on a monthly subscription basis. At the premium level, we offer three metro level tiers priced between $5,000 to $6,000 per year on contracted terms.

Initially, we plan to pitch the multi-tiered premium products, the businesses in the top 12 U.S. metros. To be successful, we need to access to the key decision makers and to the billing footprint of AT&T and Verizon for our entry level tiered businesses.

First off, seasonality and overall market softening. Historically, telemarketed sales usually take a dip during the major holiday seasons in the months of November, December and early January. During this time of year we have less contact with the business owners since most are either on a vacation or have to contend with increased holiday customer service and business.

The other factor last quarter is business owner reactions to general cyclical economic events. Counterintuitively, business owners worried about the economic landscape and best less in marketing when just the opposite should occur.

As I mentioned earlier, last quarter, both AT&T and Verizon released new policies regarding third party billing activity. The crux of this policy change was an overall 50% reduction in the threshold allowed for complaints and an increase in overall monitoring of the regions we market to. Furthermore, the threshold itself is not based on a more realistic percentage of volume, but it is instead on a fixed figure overall.

With the additional constraints imposed on us by the telephone companies we have had to adapt by increasing scrutiny in overall quality of a sale to align with the new policy. The impact to our business last quarter was a deliberate but necessary decrease in sales volume, to ensure and preserve we continue to meet or exceed telephone billing requirements, and continue to bill our imbedded base at AT&T and Verizon.

Consequently, we remained flat on revenue and had to temporarily place on hold pending the reconfirmation of approximately 7,000 new sales in the quarter. Again, this is a temporary situation. We fully expect to resume normal sales volume next quarter.

While we have no intention of eliminating this billing technique in light of these recent policy changes as Dan mentioned, we have reconfigured our sales center in Manila to maximize sales production output.

To augment sales from this area we had designed a credit card billed campaign, and shifted about 25% of the offshore workforce to focus on closing sales utilizing this billing method. We fully expect our action plans to lift revenues in the near term by finding an optimum blend between the two billing methods to mitigate the impact of current market conditions.

To improve overall organizational effectiveness, eliminate redundancies, reduce costs and enhance the Company's overall competitive position, LiveDeal plans to centralize and expand its operation in Nevada. Last quarter, we successfully transition the Company's Mesa, Arizona customer service function to our Manila call center.

By the end of Q2 sometime in March the Company will complete its consolidation of its corporate and customer service administrative services, IT operations and other support functions in Henderson. This move will eliminate redundancies of staff and function. We are currently on plan and scheduled to operate fully from the new location on March 10th. You should expect a cost savings by late fiscal 2008.

You may recall last quarter, we had mentioned we had designed and were piloting a premium offering for the top 10% to 20% of our market, which was based on a proof of concept we had completed earlier in the year. We ran a large scale pilot between October and December 2007 to measure results and determine operational scale.

We'll continue to build out the premium segment of our listings business, which we estimate may lift revenue by $6 million to $10 million by 2009. As we continue to scale the premium segment of our business, we have made some internal management and organizational changes to increase our competitiveness.

We are beginning to see traction from these changes, and plan to execute our ramp up plan this quarter. This business model, which focuses on the sale of premium listings on the YP.com platform, will be the principal beneficiary of the transition to the new corporate headquarters.

Currently, the principal constraint to this business segment is a logistics one that derives from space constraints in our existing facility. The transition to our state-of-the-art facility will have a marked impact on top line revenue growth in the current fiscal year.

On the product development front we have said before LiveDeal.com is now powering the classifieds and Yellow Pages for a growing number of first tier websites like the Philadelphia Enquirer and all of the CBS websites. Our strategy is to continue to build such partnerships with leading publisher websites.

This allows us to create a local community that leverages great brands with our affiliate and market and add value. We believe that this will help us grow our brand and our web traffic to continue to make LiveDeal.com and YP.com the local marketplace of choice for consumers and businesses.

For companies, not only will they have a Yellow Page listing, but the opportunity to upload all of their products and inventory on our classifieds platform online. [The] consumer, they'll be able to find real time products, save time and effort, and see us more than just the Yellow Pages, but as a first of its kind hyper, local marketing solution for businesses and consumers.

LiveDeal offers industry-leading classified functionality as fraud protection, identity protection, listing enhancements, photos, community building, package pricing, premium stores, featured Yellow Page business listings and advanced local search capabilities. LiveDeal's technology also lets consumers search and browse for items in a particular city, state, zip code and sort by distance.

As a profitable strong classified and Yellow Pages company, LiveDeal will continue to invest in and provide the best possible user experience for local consumers and businesses. What matters to consumers and businesses is results at an affordable costs and we will provide that.

The Company has recently engaged with an award winning designer to enhance the user experience. In the near term, LiveDeal will focus the majority of its development efforts on search engine optimization to create the Internet point of presence and increase rankings with small to medium-size businesses, and the trifecta results from Google, Yahoo! and MSN.

When we interact with our business listing customers and prospects, we definitely know this economic stress on the part of the business in this market. To retain and attract profitable business customers, we plan to bolster our offer to the small to medium business with a unique bundle they frankly can't get anywhere else at that price at that price point. LiveDeal will continue to innovate and add value to customers and businesses.

Now, I'd like to turn the call back over to Dan Coury, the CEO.

Thank you, John. Okay, at this time, I'd like to open it up for questions. And so, if any of you do have a question this will be the time.

(OPERATOR INSTRUCTIONS)

At this time, there are no questions. I would now like to turn the call over to Mr. Dan Coury for closing remarks.

Well, thank you all very much for listening to our call. We really do appreciate it. Everyone at LiveDeal is very excited about the future and what we're doing and investing in the Company. You are going to see more communication in the future as we are beginning to grow, invest and then announce what we're doing. Thank you very much. I appreciate it.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect, and have a good day.