Live Ventures Inc (LIVE) 2009 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the LiveDeal third quarter 2009 earnings conference call. My name is Michelle, and I will be your coordinator for today. At this time, all participants are in a listen-only mode.

We will be facilitating a question-and-answer session towards 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, everyone. I'm John Evans. Thank you for your interest in LiveDeal. With me today are the Chief Executive Officer of LiveDeal, Richard Sommer; and Rajeev Seshadri, the Chief Financial Officer. Some of questions on the discussion today will involve forward-looking statements. 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 the Forms 10-K and 10-Q made with the SEC for more information on the risk factors that could cause 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 only made as of the 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 on our Web site for replay following the call and at the end of the call we will give a replay number on this call. Now let me turn it over to Richard Sommer.

Thanks, John, and thanks to everyone for taking time to listen to our conference call today. Since the last conference call, we've had many changes at LiveDeal. I'm pleased to discuss the third quarter fiscal 2009 results, and especially excited to discuss LiveDeal's ongoing transition which new opportunities that I and the board members and the Company's management team see as substantial.

As you know, since the second quarter conference call, the Board of LiveDeal decided that the Company under the leadership of Mike Edelhart had moved substantially to correct certain operational aspects of the business and now needed management that had relevant small business marketing experience to provide the vision and operational know how to take full advantage of the multibillion dollar market for providing small and medium-sized businesses with real help to use the Internet to bring customers to their door.

According to a recent Borrell Associates report, the outlook for small business marketing remains a bright spot in the slowing advertising market. Approximately two-fifths of all small businesses still don't have a Web site.

The forecasted growth in search engine marketing by this sector is expected to grow by 39% over the next four years. LiveDeal's focus on search engine marketing reflects the growth SEM as a tool for ROI-driven customer acquisition by businesses and the use of search engines by consumers.

But LiveDeal's premium segment division that focuses on this market the Company has seen monthly sales growth over the past year. While we have had many strides towards fully realizing the opportunity we are not resting until this opportunity is maximized for all of our shareholders, our Company and our customer and our shareholders. The first order of business was to streamline the Company.

As we announced during the quarter, the Company has reduced head count and reduced expenses by 10% to 15% on a quarterly basis as expected to save $1.8 million over the next 12 months, or approximately $0.29 per share. Second, we have focused all of our staff on a program to grow sales and products substantially over the next 12 months. There is no single solution for small businesses as they migrate their dollars away from traditional print advertising to Internet customer acquisition.

We've found that as small businesses move up the Internet adoption curve they need ROI-driven products that will help them grow even as our advertising dollars grow in understanding the use of technology to improve their businesses. The new approach to customer engagement should provide us with a range of products and pricing to grow our customer base rapidly and keep our customers for a long time.

The small business customer that we are engaged know that they must spend their time growing and managing their businesses. They need an Internet partner who can provide the expertise and the products to help them use technology to improve their businesses. This is our new mission statement. Be the partner who helps small businesses use Internet and technology to bring them customers and grow their business.

Now this is not the first time I've done this, the small business local marketplace, reminds me of the space where the real estate market was approximately six years ago, where thousands of real estate brokers who wanted to use the Internet to grow their businesses and they needed the tools and expertise to do this. At Realtor.com and then, again, at Home Game, we were one of many sites, yet we broke through the cacophony of companies and became acknowledged as leaders of the space.

At LiveDeal we plan on doing the same thing. In order to do this we had to assemble a first rate team and a since of urgency. In the past 70 days since I arrived, we have done that, and we've brought together a team with years of Internet and technology experience to solve the problem. It even includes the addition Kevin Hall as Corporate Counsel, and the other staff members we will hopefully be announcing over the course of the next call.

The other major imperative is to do this and make a profit as well. A reduction in force was a start. But we have committed ourselves to growing sales and reducing our burn rate to become if not just cash flow break even, cash flow profitable. Over the next month and quarters, you will hear more about specific steps we are taking to, one, expand and enhance our products and services; two, package those services in a way that makes sense for small business; three, increase sales.

Our team is very excited by the opportunity to grow this business and we look forward to updating you in the future. I would like to turn the call over to Rajeev, our CFO, to discuss financial results for the quarter.

Thank you, Richard. For the third quarter of fiscal 2009 total revenue was $2.48 million compared to $5.43 million in the same quarter of fiscal 2008. Approximately $4.1 million of the decline in revenues was attributable to a reduction in LiveDeal's Yellow Pages directory services business which resulted in part from the sale of a large portion of the Company's customer list during the second quarter.

This decrease was partially offset by approximately $1.14 million in revenue from LiveDeal's premium segment Direct Sales business which provides Web-based customer acquisition services for small local businesses. The Company reported a net loss for the quarter of $2.1 million or net loss of $0.35 per fully diluted share. The loss included the net impact of approximately $420,000 in restructuring charges and expenses related to the separation of its former CEO.

Net revenues for the first nine months of fiscal 2009 decreased to $11 million from $17.9 million in the same period of last year for reasons similar to those stated above. The Company expects the percentage of its total revenues derived from its Direct Sales business to continue to increase as the Company emphasizes this premium segment which includes the LiveSites, LiveAdvisor and LiveClicks products over its legacy Yellow Pages directory services business.

The Company reported a net loss of $20.3 million for the first nine months of fiscal 2009, down from a net loss of $1.25 million for the same period in fiscal 2008. The net loss for the first nine moths of fiscal 2009 included a charge of $16.1 million for the impairment of goodwill and intangible assets related to its legacy Yellow Pages business and that was announced in the previous call regarding the Q2 results for fiscal 2009.

As of June 30, 2009, LiveDeal had cash on hand of $9.2 million and no long-term debt. I would like to turn the call back to Richard. Richard?

Thank you, Rajeev. I would now like to open the floor for questions.

(Operator Instructions) We will pause momentarily to compile a list of questions. (Operator Instructions) Gentlemen, you appear to have no questions at this time.

Okay. Well, I thank everybody for joining us.

Sorry, sir, you actually do have a question from the line of Jon Hickman. Please proceed.

Hey, Jon.

Hey, Richard, I had to join the call late. But I do have a couple of questions.

Sure.

I hope I don't make you repeat yourself. I will ask them, you can answer them any order you want. Could you tell me a little bit about what, how things are going with sales guys in Vegas and their production rate is like? I know it looked like last time we spoke it was kind of, flattened out a little bit.

So if you could update us on that. And then if you could maybe comment on what you are going to do with the last 25,000 of your [Click] customers?

I think the answer to the first question is, and it was in the first part of the point of what we discussed today. But the sales team has continued to grow, year-over-year growth, and we believe the sales team is extremely strong and we believe that's one area of the Company where by providing them with our new mission which means they are going to have additional tools and products we think that they can even be stronger in the future.

Okay. Did you provide any guidance earlier in the call?

No.

Okay. Then the second question?

Raj, do you want to answer the second question?

Yes. John, this is Raj. We have just around 20,000 customers for the legacy businesses. As you know, and not marketing or selling actively or adding to that, so the month-by-month there is some slow attrition that does pucker.

What we are finding is that the customers are actually being seasoned more and more. What the customer base that we have is very good in that both of the customers that are lasting with us the longest seems to be profound, but that's exactly the way it is.

And they are generating a pretty sizable cash flow. So at this point we have no particular plans that we are announcing, or no active sales or marketing plans on hand. But, of course, if there is something good we will always give it a consideration.

Could I ask a follow-up question there? Those customers were -- back in, a year ago, you had a site where they could list as a local search advertiser, nowadays you don't have that URL and you don't really have a site where they are listing. Where are these people showing up? I mean where are they getting traction from?

Jon, they are being shown in the LiveDeal.YellowPages.com. When the URL for YP.com was sold the entire directory was moved. So the directory is still available. That whole directory has actually been added to and listings are updated and so forth. So we have a ongoing maintenance program. And we are driving traffic to that as well.

So LiveDeal.YellowPages.com?

Correct.

Okay. Did you -- you didn't break out revenues from the (inaudible) versus Las Vegas did you?

Yes, there is, actually, the new Direct Sales business is about 27% of the overall business, so it's a pretty sizeable segment. So in the 10-Q we do have a section called "Segment Reporting" and we have broken out a lot of detail there.

Okay. I will look at the Q then. Thank you very much.

You're welcome, Jon.

And your next question comes from the line of [Gary Starner.] Please proceed.

Hey, Gary.

Hi. Good afternoon. Just a quick question, you referred in the press release to a change in the revenue recognition policy. I was just wondering if you could explain that in plain English?

Sure. Raj, you want to go ahead and do that?

Yes, actually it's somewhat minor but it brings us more tightly into GAAP practice. What it is, is no change in the P&L statement. When we have a contract, we recognize one-twelfth of the amount of the contract. In the balance sheet presentation, however, we are effectively netting out the deferred revenue and the accounts receivable as was reported in earlier presentation format.

What that does is it shows only those billings that are outstanding. So like with any normal company, when you bill a customer, if they have not yet paid or if you have not yet collected that, that is the only amount of the accounts receivable that is shown.

In the prior presentation, the full amount of the contract that had not yet been collected was shown and, of course, that was offset in the liability side by a deferred revenue component for the remainder of the contract where the revenue had not yet been recognized. So in effect it's been netted out. But this a clear match with the billing and GAAP practice.

Okay. So this only affects the balance sheet, it has no impact on the income statement?

Correct.

Thank you.

That concludes the question-and-answer session. I will now turn it back to Mr. John Evans for closing remarks.

Yes. Just wanted to say that the replay will be available two hours after this call at 888-286-8010. The pass code is 18105551. Let me turn the call over to Richard Sommer for concluding remarks. Thank you.

I want to thank everybody for the questions and thank everybody for listening to my first call with LiveDeal and I appreciate everyone doing so.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a great day