Live Ventures Inc (LIVE) 2009 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the first-quarter LiveDeal Inc. conference call. My name is Demali, and I will be your operator for today. At this time all participants are in listen-only mode. We will be facilitating a question-and-answer session toward the end of today's conference. (OPERATOR INSTRUCTIONS). As a reminder, this conference is being recorded for replay purposes.

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

Good afternoon. I'm John Evans. Thanks for your interest in LiveDeal and thanks for coming on the call. With me today are the Chief Executive Officer of LiveDeal, Mike Edelhart; and Raj Seshadri, Chief Financial Officer.

Some of the questions of the discussion today will involve the forward-looking statements, and I will 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 this 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 of this date of this conference 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 CEO, Mike Edelhart.

Thanks, John, and thanks to everyone for taking time out to listen to our conference call today. Since the last conference call we have reevaluated parts of our assets, and we have taken steps, as we discussed in our recent press release, to finish the job of making our balance sheet and income statements more transparent for our investors. I am pleased now to discuss the first-quarter fiscal 2009 results and especially excited to discuss LiveDeal's ongoing transition towards new opportunities that I and the other Board members and the Company's management team see as substantial.

In the first fiscal quarter of 2009, net revenues were $5.2 million compared to $7.1 million in the first quarter of fiscal 2008. The first quarter 2009 net income of $887,000, $0.15 per share, included a gain of $3.8 million -- $3.85 million, actually -- from the Company's sale of the YP.com domain name. Raj will give more details on the financial performance of the Company during the first fiscal quarter of 2009, in a moment.

Q1 2009 represented another step forward in our Company's transition toward new lines of business as we have discussed before. During the quarter, the Company experienced significant growth in its direct sales line of business with revenue from direct sales on suites of products aimed at audience acquisition for small businesses, of about $700,000 in the quarter. LiveDeal did not launch this line of business until after the end of the first quarter of fiscal 2008, so this is up from zero in the comparable year.

From April 2008 to December 31, 2008, the Company acquired about 1100 customers from direct sales activity, and the direct sales customer base has been growing at a monthly rate of approximately 20% per month. We are providing these customers with a suite of Internet customer acquisition services, and these include website creation, website audience acquisition, search engine marketing and we recognize the revenue of these activities over the life of the customer contracts, which are generally one year in length. We collect about 18% of the value of that contract upfront from our customers, generally in the form of credit card transactions.

As a result, our net cash in from direct sales efforts during Q1 was over $400,000 versus zero in the first quarter of fiscal 2008. In addition, our deferred revenue from these direct sales activities was $1.5 million at the end of Q1 2009. If we factor in those contracts where we offer the customers an initial trial period, our deferred revenues from direct sales activities on a non-GAAP basis was $2.7 million. We are encouraged by the progress we are making in this new line of business and by the strength we see in its financial characteristics.

If you have looked at our website lately, you can see that we have completely redesigned it and the other company websites to better reflect LiveDeal's new business focus on this direct sales channel and the suite of Internet audience acquisition products for small businesses. Even more importantly for the growth of the Company moving forward, we have initiated development of extensive new back-end services to support aggressive expansion of the Company's direct sales line of business. These include new customer ROI profitability analysis reports so they can see how we are doing on their behalf, hugely extensible website creation capabilities and sophisticated SEM platforms.

In addition, we are building the infrastructure to support deep integration of all aspects of the Company's sales and fulfillment operations as we complete this technological buildout. Our growth in direct sales will be solid and steady, running at around 200 new customers and about 700,000, a little bit more, in new sales each month. And as our technological capabilities come online over the next few months, we will be able to accelerate those sales efforts. We're taking this approach because we went to scale in a way that is consistent with our ability to successfully fulfill our obligations for a growing base of customers.

In keeping with our change in focus and our transition since the last conference call, we have made some changes that are significant, many of which took place in Q1 2009 and a few that took place just after the end of the fiscal quarter. The Company has added new vice presidents of product, marketing, technology strategy and a director for the prime pedigree in the key area of search engine marketing. All these management changes come as part of LiveDeal's emerging strategy to deliver the most effective suite of Internet customer acquisition services to small businesses.

Our new VP of Product Management is Yishay Yovel, who joined the Company in October 2008. Yishay brings us over ten years of experience in Internet enterprise software product management. Yishay has recently led product strategy at Olive Software, he's a leader in digital publishing and archiving. Prior to Olive, he led product management for Illuminator, which is now part of EMC, and for the mobile Internet pioneer, BackWeb Technologies, as well as New Dimension Software, which is now part of BMC. In each of these cases, Yishay has been instrumental in defining customer-focused, innovative and successful software products, and that's what he is bringing to us.

Pamela Sziebert, who joined LiveDeal in November 2008, is the new VP of Marketing. Pamela brings 12 years experience in senior level marketing, strategic and operational management to the Company. She has built on that marketing and operational teams in the online marketing, advertising, e-commerce and technology spaces. She most recently led operations at PartnerWeekly, an affiliate network, in addition to leading marketing at Key3Media, which produces a major trade show; SeeBeyond and Fujitsu. At PartnerWeekly, Pam worked in a small-business-oriented Internet environment that gave her direct experience that applies to our emerging businesses.

Dean Heistad, LiveDeal's new VP of Technology Strategy, joined the Company in January, just after the end of the fiscal quarter. Dean has held technology leadership positions at Time Warner, where he helped launch the Business 2.0 magazine, and at Infoseek. In addition, he has been instrumental in leading technology revamps at AARP, Ology, Inc.; Fortune.com and AOL. He has extensive media, online, off-line advertising experience and his own-of-the-box solution strategies directly impact LiveDeal's ability to deliver an innovative suite of Internet customer acquisition services.

And finally, last but not least, Ruben Atchison has joined us as Director of Search Engine Marketing. He comes to LiveDeal -- he came to us in December 2008 after two years as the senior search engine marketing manager for MySpace, Fox Interactive, American Idol and the other Internet properties owned by Rupert Murdoch. Prior to that, Rubin handled search engine marketing for hundreds of small-business customers at Precision Play media. Since efficiency at search marketing is a key element of our strategy, Atchison's role on the team will be critical, and he is superbly well qualify to handle that on our behalf.

We are excited to have these key team members with the depth of experience that they bring, and we believe we now have core members of the team in place with the relevant experience in sales, product and marketing to lead our Company through the transition to a stronger business position as we have mapped out for 2009 and beyond.

Other changes -- Gary Perschbacher left the Company as Chief Financial Officer effective January 9, 2009, and he has been replaced by Rajeev Seshadri, who is here on the call with me today and was actually on our previous call as well. Raj was born and raised in India. He received his Bachelor's degree in engineering from the IIT in India in 1972, and then attended the University of Michigan, where he received an MBA, majoring in Finance and Strategic Marketing. Since his start as a research analyst at a Midwestern securities brokerage firm, he has been a chief executive officer and chief financial officer for companies, including a number in the Internet and technology space. He brings a wealth of experience to LiveDeal and an incisiveness on financial reporting that we sorely need, as you will hear in a moment.

We also wanted to report here that John Raven resigned as the Company's President and Chief Operating Officer, effective February 15, 2009. John's departure is more reflective of our transitioning away from our legacy directory business and John's personal desire to pursue entrepreneurial opportunities after six years with our Company. John has been a stalwart at LiveDeal through many changes, and he has been invaluable helping me and the other new managers get up to speed on the Company's history and operations. He led the Company's operations through several difficult periods and demonstrated significant leadership abilities. The Board and I wish him all the best in his future pursuits.

As I mentioned earlier, given the development of our strategy, the changes in the LEC marketplace, the local exchange marketplace where our traditional business lies, and the unprecedented turbulence we see in the broader business climate, in February 2009 Raj Seshadri felt it was incumbent upon him, under FASB guidelines, to evaluate LiveDeal's intangible assets and goodwill.

Based on that analysis, the Company concluded that these assets were impaired and announced in its recently filed 10-Q that it anticipates substantial write-down in the value of a number of these assets during the current quarter, Q2 of 2009. The Company expects to record impairment charges in the second quarter of fiscal 2009, which ends, obviously, March 31, 2009. Since this determination was made after December 31, 2008, the condensed consolidated financial statements as of that date don't include the effects of this impairment. A further analysis and finalization of any charge will not be completed until the end of the second quarter. But we wanted to bring it up now so that everyone was aware of the direction that we were taking.

The extent of the impairment charges discussed here -- this involves substantially all the Company's goodwill acquired in our acquisition of LiveDeal, Inc., the business focus of which is online classified advertising; 24/7 Marketing, the business focus of which is providing telemarketing services based in the Philippines; and intangible assets related to our traditional directory services business, including URLs, internally developed software and other miscellaneous intangible assets.

The impact of these impairment considerations on our results of operations for Q2, ended March 31, 2009, is expected to be a charge of approximately $11.7 million. Based on the number of shares of our common stock outstanding as of December 31, 2008, and the impact of that charge on earnings per share is expected to be approximately $1.94. These impacts are estimates only, though, and are subject to change.

In addition to the impairments just described, we have revised the useful lives of certain assets that were a result in the acceleration of depreciation and amortization and the aggregate amount of about $473,000 during Q2 of 2009.

Now, it's important to point out that we have been investing in the Company as we transition from the legacy business to our new business. Since the end of the fiscal quarter, we have entered into an agreement, for example, with the local Internet directory to transition some of our legacy customers over to them. For some time we have held exclusive marketing rights but not ownership over some of our LEC accounts. These have been referred to in the past as our turnkey accounts.

We sold our collection and management rights to about 10,000 of the most underperforming of these turnkey accounts to the directory company that had originated the accounts. We received about $955,000. This transaction will increase our current cash on hand to over $8 million, or over $1.20 per share.

Our remaining customer count in our traditional LEC and ACH channels is still over 39,000 accounts. We shall seek ways to monetize those as well. We think this is in the best interest of LiveDeal as we continue to turn our focus away from the lower-end directory product that the LEC channel represents toward the higher-end suite of audience acquisition services that the new direct sales line of businesses is supporting.

We expect that the revenues from the direct sales ROI-driven line of business should reach a level in fiscal 2009 where the direct costs of generating these revenues are covered. During the quarter just past, we also set in place the human capital required to develop the scalable back-end fulfillment that will be necessary to support this anticipated growth. And our direct sales customers will soon see improved customer services and ROI metrics that we believe will help differentiate our offerings as this new technology comes online.

Our LECs directory services and classifieds businesses are declining while the LEC directory services still continue to throw off positive cash flow. We can see this channel declining at a rate somewhat faster than our earlier expectation, and this business line has been the source of all of our legacy legal issues. We have reduced operating costs in the present quarter, Q2, at our Philippine subsidiary, which was acquired in 2007 specifically to support the LEC directory services business, and we shall continue to look at all avenues to recover our investment in this asset. We are re-examining our classified business as well, which has been a net consumer of cash during the quarter.

Overall, the simultaneous buildout of our direct sales business covered with the costs of running the classifieds and LEC directory services business at their historical level has led to our reporting significant operating loss of $2.5 million for the just past quarter. Despite this, though, our net cash consumed in operations during Q1 2009 was only $281,000.

So today, LiveDeal's focus is on being the best possible partner to small and medium-sized businesses to help them efficiently target online prospects, to generate quality leads and to continually optimize for them a process to deliver high-value marketing solutions. We feel that this approach will leverage our existing assets in the most value creating possible way and will provide us with paths of growth and profit stability and value creation on behalf of our investors.

And in our new line of business the average customer spend stands right now at a little over $3500 annually compared with just over $350 annually from our traditional business, and that number is rising. In addition, the cash collections from our premium direct sales channel are far more robust than in the LEC channel. We average around 18% of the first-year contract value collected as cash on the date of sale, where, by comparison, LEC collections can take weeks if not months and have significant step-downs built into them.

And so we remain enthusiastic about this direction and are looking forward to taking the next steps. Now I would like to turn it over to Raj to talk more about our financials.

Thank you, Mike. Net revenues for the first quarter of fiscal 2009 were $5.2 million, down from $7.1 million during the same period in fiscal 2008, but unchanged from the $5.2 million reported in the fourth quarter of fiscal 2008. Net income for the first quarter of fiscal 2009 was $887,000 or $0.15, as Mike mentioned, compared with net income of $326,000 in the first quarter of fiscal 2008, and a net loss of $277,000 in the fourth quarter of fiscal 2008.

LiveDeal's change in net revenues for the first quarter of fiscal 2009 reflects the continued shift in the Company's focus away from adding new customers in its basic directory business towards producing and selling a new suite of SMB Internet audience acquisition services led by our LiveSites, LiveAdvisor and LiveClicks products. It also reflects the termination of certain directory services contracts which were noted in our 10-K filing that reduced revenues in December as well as certain above-normal charge-backs in the directory services billings charge-backs and which are set by the billing entity outside of the Company's control.

The direct sales line of business has grown from accounting for less than 1% of our revenues in the first quarter of fiscal 2008 to about 14% of revenues in the first quarter of fiscal 2009. Again, as Mike has mentioned, the Company has more than $1.5 million in deferred revenue on a GAAP basis, an increase from the $0.9 million reported in the fourth quarter of fiscal 2009 from these SMB Suite sales.

If we add in the full deferred revenue from customers (inaudible) only extend shorter-term renewal options, that is, trial contracts, this deferred revenue would have been $2.7 million versus $1.7 million at the end of Q4 of last year. We anticipate that this deferred revenue will be realized over the course of fiscal 2009 as customer contracts typically provide for a 12-month term. Cost of services increased in the first quarter of fiscal 2009 as compared to the first quarter of fiscal 2008. We experienced an increase in costs related to our directory services and classifieds of approximately $155,000 as well as increased costs related to our SCM business of approximately $449,000. Increasing cost surrounding the SCM business was consistent with our revenue growth in this product line.

As a percentage of sales costs associated with the directory business has increased due to increased inquiry fees, [billing] fees associated with an increasingly strict regulatory environment. Gross margin decreased to 68.8% of net revenues in the first quarter of fiscal 2009 from 85.8% in the first quarter of fiscal 2008. Our current product mix is more heavily weighted towards sales of our LiveClicks and other related products, which currently have a lower gross margin than the historically higher margin directly servicing the business line. We expect the shift in our product mix to continue but expect margins attributable to the LiveClicks and related products to improve as we improve our capabilities and efficiencies in that business line.

Initial costs related to the sale and fulfillment of fewer products are not deferred, while revenues are recognized over the life of the customer contract, typically 12 months.

G&A expenses increased in the first quarter of fiscal 2009 as compared to the first quarter of fiscal 2008, primarily due to the following. First, increased compensation costs of approximately $581,000, primarily attributable to the hiring of additional sales force and technology personnel as part of the development of our Las Vegas operations, partially offset by reduced officers' salaries and reduced stock-based compensation charges.

Two, increased professional fees of approximately $174,000 related to legal expenses incurred in response to certain legal actions brought against us, fees incurred for Sarbanes-Oxley-related consulting fees and increased recruiting fees to hire key personnel in response to a change in strategic direction.

And, three, an increase of approximately $81,000 to depreciation and amortization expense relating to additional fixed assets, again relating to relocation of our corporate headquarters to Las Vegas and additional capitalized software development costs related to a new product offering.

Sales and marketing expenses in the first quarter of fiscal 2009 as compared to the first quarter of fiscal 2008 decreased approximately $378,000, primarily due to the following. First, $171,000 of decreased online advertising as we focused our online advertising towards clicks and other traffic-generating activities, which are more cost-effective than our previous online advertising efforts.

Two, $166,000 of decreased customer acquisition costs as we begin transitioning away from marketing activities geared towards our directory services business and a reduction of approximately $41,000 in branding and other marketing expenses.

We reported an operating loss of $2.5 million for the three months ended December 31, 2008, compared to an operating income of $482,000 for the three months ended December 31, 2007, as a result of the decreased gross profit and increased operating expenses described above. During the first quarter of fiscal 2009 we entered into an agreement to sell our Internet domain name, YP.com, for a cash payment of $3.85 million. We reported a net gain from the sale of that asset $3,805,778, which is reflected in other income.

Income tax expense for the first quarter of fiscal 2009 was $419,000 as compared to an income tax provision of $191,000 in the first quarter of fiscal 2008. This change in our income tax provision is primarily due to the corresponding increases in our pre-tax income. In determining the tax expense we estimate an effective tax rate based on estimates of expected income and utilization of deferred tax differences. Given an impairment charge expected to be incurred in the second quarter of fiscal 2009, as discussed below, on a non-cash basis we expect to be in a loss position for the year ended September 30, 2009. And therefore, we have not applied our existing NOL carryforwards in the computation of our tax position for the quarter ended December 31, 2008.

LiveDeal had cash on hand of $7.6 million and $11.8 million of total working capital as of December 31, 2008. During the quarter the Company used cash in the amount of $281,000 in its operation. The Company has no long-term debt, and stockholders equity was $37 million as of December 31, 2008, up from $36.4 million at the end of fiscal 2008.

Now I would like to turn the call back to Mike Edelhart.

Thanks, Raj. As you can see, Raj is bringing a level of insight and clarity to our financial reporting and analysis that will be key to managing our Company's transition going forward.

Clearly, Q1 2009 showed signs of the turbulence we see in our traditional LEC business. The quarter saw a shortfall in LEC revenues of $2 million from plan. This shortfall led directly to the operating loss for the quarter. With LEC revenue volatile alongside the channel's requirements for high fixed customer acquisition support and replacement costs, we believe we could get caught in a protracted scenario of unpredictable top-line and negative P&L performance.

In order to forcefully reduce the costs associated with the LEC channel, we must exit our obligations there, and that is what we began doing Q1 2009, and what we are accelerating today. This process isn't instant; we expect some continued challenges as we exit LEC and build our lines of business to profitability. But we lost $2.5 million on operations in Q1; we are likely to lose money from operations in Q2 as well. Though, as with Q1, we believe asset sales will offset operating losses for the quarter.

We expect operating results to trend toward profitability in the quarters ahead, and we believe we will achieve operating profitability by some point in Q4 of this year or possibly the quarter following. We are losing money because the revenue from LEC accounts has degraded faster than expected, and we believe it will take some time to eliminate the infrastructure costs associated with that lost income.

It is worth noting that, what we did lose $2.5 million from operations in Q1 of fiscal '09, we made $887,000 in net profits by translating non-strategic assets into cash. As you move through the transition, this pattern will likely continue. We have recently converted $955,000 of LEC accounts into cash this month, for example, and we believe the losses going forward will be reduced each quarter through a combination of increased revenue from the direct sales line of business reductions in costs as we lower cost of maintaining the services that were necessary for our traditional channel. We expect Q2 '09 to be operationally challenging. The instability of LEC will continue. However, we believe that Q2 will be a step forward from Q1 for these reasons.

First, revenue from our direct sales operation continue to grow as planned. With each month, the revenue from this line of business will be a larger percentage of overall revenue. As this channel grows, it brings greater revenue predictability, stronger margin performance and much improved cash performance.

We also see cost reductions related to our recent shifts. Q1 '09 included some $170,000 a month in costs related to the Philippines call center. The cost of the Philippines will be near that of Q1 in January of '09, but it will fall as each month of Q2 progresses.

The LEC business has a high fixed support cost structure. This is fine if account levels are stable or rising. As we are transitioning from adding these accounts, the cost associated with this transition has acted as a drag on our profitability. By monetizing the LEC customer base through a sale, we open space to reduce our fixed LEC cost.

That is beginning to happen now. By selling certain accounts, we eliminate our highest level of churn. As for cost containment elsewhere in the business, we are building into our technology capacity that allows us to expand direct sales faster than we expand headcount. As we move in this direction, the net margin for the direct sales channel will rise, and so will the contribution.

Finally, grandfathering best-of-breed old business accounts is on our path ahead. By retaining our highest closing accounts from our traditional business, with the support structures necessary to maintain them, we retain a predictable revenue stream that is nearly a pure contribution. By handling other select pockets of LEC in a similar fashion, we believe we can reduce the volatility on these accounts to acceptable levels and still keep revenue levels from them on our books as the direct business builds.

While profitability for the full year of fiscal 2009 is not something we have visibility into today, we do believe we will reach the point during this fiscal year when we have cleaned out all the dead wood, tightened down operations and moved our emerging business forward far enough to reach profitability. In addition, we believe this will be a sustainable profitability that comes with predictable growth, elements that were harder to depend upon from the Company's previous business approaches.

In short, we feel we are on target to transition LiveDeal to a much better market position and a much more stable, predictable and growth-oriented financial posture for ourselves, our customers and our investors.

And now, let me open it up for any questions.

(OPERATOR INSTRUCTIONS) Jon Hickman, MDB Capital.

Mike, did you just say that you sold some more LEC accounts?

We are only talking about one set of LEC accounts that we sold back earlier this month. That's the only transaction we are discussing at this time.

So there weren't two; there was just one?

There was just one.

There was a lot of information in what Raj had to say, but you continue to grow the Las Vegas or the LiveClicks business, the Las Vegas business, at -- I mean, that is continuing to grow at the same rate, even though it's getting bigger and bigger, the revenues are getting larger?

We have been holding the grow fairly steady over the last several months, largely so that we can let the new management team get in place and begin the deployment of the new technologies that will allow us to scale. We have much greater capacity in sales, but we are keeping it focused and not expanding until the infrastructure is in place and we have gone through some of these other transitional activities. But you will see it begin to accelerate as we start to come out of Q2.

So do you want to talk about what you're going to do with your cash?

Well, I think in the very near-term we will husband our -- that cash as we go through these next steps in the transition. As we come out of the transition, we feel that the business we have in direct sales is innately cash accretive and, as we demonstrate, that we can begin to accumulate cash, there are a number of things we might do with it in addition to supporting the business.

I think we will make those decisions downstream, when the time comes. In the near-term our focus is on transition, achieving profitability. And when we get past those points, we can put our heads up and think a little bit more strategically about the cash.

Bill Wolfenden, RS Investments.

I just wanted to make sure I heard you correctly. I believe you said that asset sales will offset the operating loss. So does that imply that, if you sold $950,000 worth of LEC accounts, that the operating loss this quarter will be less than $950,000?

I think that's a direction. As you know, we are taking a fairly large impairment charge.

Yes. I mean excluding the charge, obviously.

We're also going to increase some of our reserves going forward for the remaining LEC accounts. As Mike has mentioned to you, there is a fair amount of turbulence out there that we see, and it is something that we feel that we want to absolutely clean out our dead wood, so that, looking forward, as and when those assets are actually sold, we have actually covered our tracks.

So the short answer to that would be, it will offset, but I'm not sure that it would completely take away all the amounts that we might book.

And then, the LEC accounts that were sold -- can you give us an idea of what percentage of the accounts, the overall accounts, were sold?

We sold approximately the equivalent of 10,000 accounts and we have 39,000 accounts left, all told.

Remaining, so it was --

(multiple speakers) about 20%.

Okay, it's 20%. So should we assume that the remaining accounts are worth maybe $4 million-ish?

No. I think these were the most underperforming of our accounts, and so they were the lowest-value accounts.

So it's worth more than that?

Yes, we think it's worth more than that because of the performance of those accounts and because the particular transaction that we have completed was for accounts where we did not own the accounts, we owned marketing and collection rights to the accounts. And they were basically bought back by their initial owner. In the case of the 39,000 accounts that remain, in just about all the cases, we own those accounts.

So is there a market for those accounts? Is there -- logical buyers?

We believe there may be. We are not announcing anything here, but we believe there is interest in those accounts, and we will explore that interest.

So, just to clarify, the accounts that you sold was sort of more of an obvious sale because they actually weren't really even owned by you guys?

That's correct. We have, in our LEC universe, and Raj can go into this in more detail here or off-line, if you want. You can think of us as having three basic account types. One are accounts that we own, where they were created by our telesales efforts. We hold the ownership as well as the support obligations. The second are what we call turnkey accounts, accounts where we weren't the initial source of them, but we hold a contract. In most cases, those contracts have been for the life of the customer, to provide all the marketing support and collection services on behalf of those accounts. And we keep the bulk of their revenue but not all of it. And then the third are ACH accounts, accounts that don't clear through the LEC channel, but clear through the automatic clearinghouse channel. And those are pretty much entirely owned accounts as well.

Okay. And then, I think you said the Philippines is about $170,000 a month expense?

That's correct.

What are the plans for the Philippines facility?

Well, basically we are reducing the operations there to their, call it, I guess, core level. And we are going through that transition now, so there are certain inbound functions and other things where we will continue to maintain the activities there, but the outbound-related activities, which is where a lot of the cost is, will come down substantially.

And we'll then be essentially assessing the future of that asset. Raj, is there anything you want to add to that?

No, I think that's fine. It has been running full-steam through December, and it is something that we are not really using or have not been using in December. So we have decided to cut that back as much as we can.

Okay. And then, lastly, you had mentioned, as it related to the Telesold business, that you are still waiting for a, quote, new technologies that will allow them to scale. Can you just give us an idea of what you're talking about there?

Oh, sure. And not so much waiting for, but implementing. So it's important to remember that the entire management of the Company all came into the Company during Q1 of '09. I think, of the managers, the head of sales, Greg Taylor, and I were the only ones that actually worked at LiveDeal in September.

So they are coming onstream. Some of them are bringing projects with them. They are moving very fast and functioning very well, and we are deploying a lot of technology as we speak. So for example, a couple of months ago our customers would have to call in to find out how our campaigns were doing on their behalf. They can now get that information in an automated way from our system.

Our SEM campaigns were done using software, but software that took a lot of human interaction to manage. And our SEM platforms are being substantially upgraded. Our website production capability involved a sort of less than efficient handling of capturing of information, passing it to an outside vendor who developed the basic website, passing it back to the customer. All of that to the level of hundreds of thousands of websites can be done on an automated basis with software that's just coming online.

So, as those systems come in place, our capacity to support a much larger universe of customers without having to have a much larger universe of staff comes into play, and that's when we'll start accelerating in sales.

And as far as the expenses are concerned, was there a commensurate amount of departures from the management team as well during this time period, or have you had a net add, incremental add, to the expenses from (multiple speakers) --?

It's a great question. Obviously, the CFO was a swap. John Raven departing was the hub of a lot of the activity, so he has been replaced by a couple of folks. The companies had some anomalies, I guess I would call it, in its history. So, for example, this Company has never had a VP of marketing, nor has it ever had a VP of products. And those are key constituencies in the development maintenance of a business like ours and a business that's going to bring technology forward on the Internet. So those two positions are basically two that replaces one, if you want to view it that way, with John.

And we added a VP to Technology Strategy while we continue to have Ashok Agarwal as the VP of Engineering because we felt the technological challenges facing the Company, both internal systems, external systems, a great deal of movement going on at once, did actually require two different points of view, one somewhat longer term, more strategic, and one more operational and task oriented.

So the management group net, I guess went up by two, but the array of functions is, in our view, much more natural for the kind of thing we're doing now than it was before.

Since there are no further questions at this time, I would now like to turn the call over to John Evans for closing remarks.

Thank you very much for your interest on the call. This will be available for replay on our website, and if you have any questions you can call the Company, and Raj and Mike would be very happy to answer questions. I appreciate your participation in this call. And Mike, would you like to say any further things?

No just -- we appreciate your interest, appreciate your questions, are ready to talk about the business, answer questions with any of you at any time. Just give me a call through John or call me directly. I look forward to talking with you all.

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