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Gruß, P.
Revenue up 48%, Record Adjusted Net Income of $4.6 Million
IRVINE, Calif.--(BUSINESS WIRE)-- Local.com Corporation (NASDAQ: LOCM), a leading local search site and network, today reported its financial results for the third quarter of 2010.
SUMMARY RESULTS
(in thousands, except per share amounts)
Q3 2010 Q2 2010 Q3 2009
Owned & Operated $ 11,576 $ 12,072 $ 9,953
Network 6,818 6,980 3,158
SAS 4,063 3,952 2,017
Revenue $ 22,457 $ 23,004 $ 15,128
Adjusted Net Income* $ 4,595 $ 3,451 $ 1,317
Plus interest and other income (expense), net (79 ) (61 ) (18 )
Less provision for income taxes — (122 ) —
Less non-cash depreciation, amortization and stock compensation
(2,597 ) (2,373 ) (1,511 )
Less gain (loss) on revaluation of warrants 1,830 335 (1,175 )
GAAP net income (loss) $ 3,749 $ 1,230 $ (1,387 )
Diluted Adjusted Net Income per share * $ 0.27 $ 0.20 $ 0.09
Diluted GAAP net income (loss) per share $ 0.22 $ 0.07 $ (0.10 )
Diluted weighted average shares used for Adjusted Net Income per share 17,202 17,342 14,796
Diluted weighted average shares used for GAAP net income (loss) per share 17,202 17,342 14,333
Cash $ 11,887 $ 15,049 $ 7,153
* See detailed reconciliation of GAAP to non-GAAP measures in the financial tables attached to this release.
“Local.com invested heavily in our product suite this year and we are pleased with the initial results. Earlier this week, we debuted our all-new flagship website along with our new corporate branding. Our recent acquisition of OCTANE360 also represented a significant investment in our platform – one that has already paid dividends in the form of record GAAP and Adjusted Net Income,” said Heath Clarke, Local.com chairman and CEO. “During the fourth quarter, we intend to focus on building out the various sales channels required to fully leverage our unique, proprietary product suite. These sales channels are forecasted to deliver revenue growth and margin expansion during 2011.”
Third Quarter Results Highlights:
• Revenue – Third quarter 2010 revenue of $22.5 million represents an increase of 48% over third-quarter 2009 revenue of $15.1 million.
• Adjusted Net Income – Third-quarter 2010 Adjusted Net Income of $4.6 million or $0.27 per diluted share represents an increase of 249% over third quarter 2009 Adjusted Net Income of $1.3 million or $0.09 per diluted share.
Adjusted Net Income is defined as net income (loss) excluding: provision for income taxes; interest and other income (expense), net; depreciation; amortization; stock-based compensation charges; gain or loss on warrant revaluation; and non-recurring items.
An explanation of the company’s use of non-GAAP financial measures, including the limitations of such measures relative to GAAP measures is included below, and the reconciliation between GAAP and non-GAAP measures, where appropriate, is included in the financial tables attached to this release.
• GAAP Net Income – Third-quarter 2010 GAAP net income was $3.7 million or $0.22 per diluted share, compared to third quarter 2009 GAAP net loss of $1.4 million or ($0.10) per diluted share. Third-quarter 2010 and 2009 GAAP net income included a gain (loss) on warrant revaluation of $1.8 million and ($1.2) million or $0.11 and ($0.08) per diluted share, respectively.
• Cash – On Sept. 30, 2010, the company’s cash balance was $11.9 million. During the third quarter 2010, the company used $3.8 million in cash related to the OCTANE360 acquisition, $3.3 million in cash for capital expenditures, including capitalized website development costs, and $1.2 million in cash to repurchase shares of its common stock. These cash expenditures were partially offset by $4.0 million of incremental borrowings on the line of credit and $1.0 million positive cash flow from operations.
• Debt – On Sept. 30, 2010 the company had borrowings of $7.0 million outstanding under its $30 million revolving line of credit.
“During the third quarter, we achieved over 20% Adjusted Net Income margins on revenue that was slightly below our record second quarter revenue. High-margin revenue from products on the newly acquired OCTANE360 platform contributed to the record bottom-line results,” said Ken Cragun, Local.com interim chief financial officer. “Our third-quarter acquisition of OCTANE360, the launch of our redesigned Local.com website and the recent increases in the number of Network partners provide us with platforms that we expect will deliver long-term growth across our business.”
Third Quarter Operating and Recent Highlights:
• Named to Deloitte's 2010 Technology Fast 500™ – In October 2010, the company announced that it was ranked in the Deloitte's 2010 Technology Fast 500™. This list includes the 500 fastest growing technology, media, telecommunications, life sciences and clean technology companies in North America.
• Number One in Directory Search – Compete.com ranked Local.com the highest traffic in the directory segment.
• Powering over 100,000 Local Websites – In October 2010, the company announced that the OCTANE360 platform now powers over 100,000 local websites.
• Extended and Expanded SuperMedia Distribution Agreement – In October 2010, the company announced that it had expanded its strategic relationship with SuperMedia LLC (Nasdaq: SPMD).
• Appointments to Management Team – In October 2010, the company announced that Steven Schindler joined the company as vice president of marketing and that Ken Cragun, who previously served as the company’s vice president of finance, had been named interim chief financial officer replacing Brenda Agius, who left the company for personal reasons.
Q3 2010 Owned & Operated (O&O):
• Revenue – Total O&O revenue was $11.6 million, up 16% from Q3 2009 revenue of $10.0 million.
• Traffic – Total O&O traffic was 50 million monthly unique visitors (MUVs), up 15% from Q3 2009 MUVs of 44 million.
• Organic Traffic – O&O organic traffic was 5 million MUVs, flat from the year ago period. O&O organic traffic is defined as all non-SEM sourced traffic on owned and operated websites.
• Monetization of Traffic – Revenue per thousand visitors (RKV) was $266, approximately flat from Q3 2009.
Q3 2010 Network:
• Revenue – Total Network revenue was $6.8 million, up 116% from Q3 2009 Network revenue of $3.2 million.
• Network Sites – The company ended Q3 2010 with over 1,000 Network sites and over 80,000 domains under management, up from 743 Network sites in Q3 2009.
Sales & Advertiser Services:
• Revenue – Total SAS revenue was $4.1 million, up 101% from Q3 2009 SAS revenue of $2.0 million.
• Small Business Subscribers – The company ended the third quarter of 2010 with over 60,000 small business subscribers, which included the purchase of approximately 9,000 subscribers at the end of the quarter.
Fourth Quarter 2010 Financial Guidance:
Revenue - The company expects fourth-quarter 2010 revenue to be between $22.0 million and $23.0 million.
Adjusted Net Income - Adjusted Net Income for Q4 2010 is expected to be between $3.4 million and $3.7 million or between $0.20 and $0.21 per diluted share.
The Adjusted Net Income per share assumes a diluted weighted average share count of 17.5 million, taking into account the dilutive effect of stock options and warrants.
Projected Q4 2010 Adjusted Net Income Factors:
Interest Expense of $70,000
State Tax Provision Expense between $500,000 and $550,000*
Depreciation Expense of $700,000
Amortization Expense of $1.5 million
Stock Compensation Expense of $750,000
Warrant Revaluation Expense and Other Non-Recurring items are undeterminable**
Revised Fiscal 2010 Financial Guidance:
Revenue – The company now expects fiscal year 2010 revenue to be between $86.0 million and $87.0 million, which at the midpoint, represents a 54% sequential increase over fiscal year 2009.
Adjusted Net Income - Adjusted Net Income for fiscal year 2010 is expected to be between $14.0 million and $14.3 million or between $0.83 and $0.84 per diluted share.
The Adjusted Net Income per share assumes a diluted weighted average share count of 17.0 million, taking into account the dilutive effect of stock options and warrants.
Projected fiscal year 2010 Adjusted Net Income Factors:
Interest Expense of $266,000
State Tax Provision Expense between $580,000 and $600,000*
Depreciation Expense of $1.5 million
Amortization Expense of $5.7 million
Stock Compensation Expense of $2.7 million
Warrant Revaluation Expense and Other Non-Recurring items are undeterminable**
* The California Budget Bill was signed into law on Oct. 19, 2010 suspending utilization of net operating losses in the fiscal years 2010 and 2011. As the enactment date of this law is subsequent to Sept. 30, 2010, the effect of the tax law change has, therefore, not been recognized in the third-quarter 2010 financial statements. Management estimates that the company’s tax provision for the first nine-months of the fiscal year 2010 and the estimated annual provision for the fiscal 2010 will increase by approximately $500,000 and $600,000, respectively.
** The valuation of the warrant liability is based in large part on the underlying price and volatility of our common stock during the quarter. Since we cannot predict this, we cannot project the non-cash gain or loss in connection with these warrants, and therefore, cannot reasonably project our GAAP net income. We, therefore, cannot provide GAAP guidance, but we do report GAAP results.
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