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| file | filename |
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| EX-99.1 - EXHIBIT 99.1 - Answers CORP | exh99-1.htm |
| 8-K - FORM 8-K - Answers CORP | form8-k.htm |
Answers
Corporation
1st
Quarter 2010 Conference Call Script
8:30AM
EDT, May 3, 2010
Participants:
Robert S.
Rosenschein, Chairman and Chief Executive Officer
Steve
Steinberg, Chief Financial Officer
Bruce D.
Smith, Chief Strategic Officer
Bruce
Smith
Good
morning and welcome to our call. My name is Bruce Smith, Chief Strategic
Officer. Joining me are Bob Rosenschein, Chairman and CEO, who will present the
prepared remarks, and Steve Steinberg, CFO. This call is being webcast and will
be available for replay.
Before we
begin today, we would like to remind you that our prepared remarks contain
forward-looking statements and that management may make additional
forward-looking statements in response to questions. These statements are based
on current expectations, forecast assumptions, risks and uncertainties, and do
not guarantee future performance. The company claims the protection of the safe
harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. Important risks, among others, are our ability to
maintain or improve monetization rates, particularly in light of the current
challenging economic environment; drops in traffic caused primarily by search
engines algorithm changes; maintaining our relationship with Google,
Answers.com’s most important provider of ads and source of revenue, potential
claims that we are infringing the intellectual property rights of any third
party and many other risks, as disclosed from time to time in our SEC
filings.
We will
be discussing non-GAAP financial measures, including adjusted EBITDA and
adjusted operating expenses. We have provided a reconciliation of non-GAAP
financial measures, to the most directly comparable GAAP financial measure and a
list of reasons why we use non-GAAP financial measures, in today’s earnings
release posted on our corporate Website at: ir.answers.com.
Finally,
all information shared on this call is as of May 3, 2010, and we do not intend
and assume no obligation to update such information.
And with
that, I would like to turn the call over to Bob Rosenschein.
Bob
Rosenschein
Good
morning and welcome to our earnings call. I’d like to share with you where we
stand today and, more importantly, our plan and vision to strengthen Answers.com
in the exciting industry environment going forward.
First, Q1 financial
highlights.
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Revenue
came in at $5.73 million, a 21% improvement
year-over-year.
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Traffic
was up 41% year-over-year, to 11.7 million average daily page
views.
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Adjusted
EBITDA was $1.84 million, up 6% year-over-year, which equals a 32%
margin.
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GAAP
operating income was $1.23 million, up 12%
year-over-year.
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Our
cash and marketable securities rose to $24.4 million, largely due to $1.57
million in cash from operations.
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The
Q&A space has really heated up recently, and that spells excellent news for
Answers.com, because we moved into the space earlier than most and have amassed
considerable market advantages of scale: community size, database size—8¼ million answers, and
Google page rank. We are very well positioned to meet the competition and
continue to make Answers.com the best online Q&A resource for
consumers.
Our U.S.
audience size in March was 51.2 million unique visitors, ranking us #18 on the
comScore charts, right ahead of Craigslist and the Weather Channel. Globally,
our monthly unique visitors were 76 million, making Answers.com the 33rd
highest site worldwide.
International
remains one of our biggest opportunities. We spent close to $300 thousand in Q1
translating questions and answers into our four European languages, and ended
the quarter averaging a little over 50,000 page views per day combined from
these languages. We continue to see meaningful promise in these
efforts, though you should not expect material revenue contribution before
2011.
But these
milestones are not the only reasons we’re so excited. As impressive as our
comScore rank is, it only demonstrates significant revenue upside that we have
not yet tapped. Our
true opportunity lies in harnessing our position to extend user engagement and
add new traffic.
So what
is our strategy and
what are we going to do differently going forward to dominate the Q&A space
in a newly competitive environment?
The
answer to that question lies in four words: quality, mobile, social, and API.
The
biggest factor in satisfying users is simply the quality of our content, and I’m
going to return to this at length later. But first let me list the other areas
we are excited about...
First, mobile. It doesn’t take
a Steve Jobs to observe that mobile Web usage and apps are absolutely exploding.
According to AdMob, the number of monthly mobile ad requests is up over 600%
between September 2007 and September 2009. Facebook alone claims to have over
100 million monthly mobile users, and growing. The Apple iPhone dominates Mobile
Apps usage today, but smartphones based on Google Android are taking off very
fast, too.
Therefore,
I am very pleased to inform you that we are moving beyond desktop answers and
specifically that we
expect to release a Mobile Web version of Answers.com later this
month.
In
addition, specifically,
we expect to have an innovative Answers.com Mobile App, initially for iPhone,
around the end of the summer, beginning of the school year.
Though
mobile does not presently monetize as lucratively as the desktop, this is still
a fantastic opportunity to expand our user-base, our data-base, our brand, and
diversify to reduce dependence on search engines. We are in the
quick-information-on-demand business—Answers.com helps people feel smarter--and
increasingly, people may not be at their computers when they require an
answer.
Second, Social Media. The
other sea-change we are witnessing today is the shift of the Web towards social
networking and social media sites, mainly Facebook. Users are spending more and
more time connecting with and following their friends—discovering what their
friends find interesting instead of visiting
search engines like Google and portals like Yahoo! The social web does not diminish the importance
of Google and search so much as it adds new layers and opportunities for
consumers to discover content, people, and products that matter to
them.
This is a
considerable potential new source of visitors to Answers.com, over time. Specifically, we are very
pleased about our recent Twitter alpha release, and the coverage in TechCrunch.
Here’s how it works. You tweet
a question to @AnswersDotCom, and our system will analyze it and tweet
you back a message automatically if we have the
answer, and offer you the chance to post the question to our community, if we
don’t.
On the
Facebook front, we are already encouraging users to sign in to Answers.com using
their Facebook login ID. Specifically, we just
released our first connector to Facebook’s new Open Social. It will
allow users to mark pages on Answers.com that they like, and their Facebook
friends can see them, too. We plan to follow this with Recommendation and
Activity boxes and with increased integration of a user’s activities into his or
her Facebook newsfeeds.
Third, A.P.I. Let me spell out
the third element in our new strategy. Specifically, we have been
developing what’s called an Application Programmer’s Interface, or API. It
empowers 3rd-party
software developers to create their own applications connecting
to Answers.com, so that they can enhance, automate, mashup, and invent new user
functionality. And we will encourage developers and our community alike to
develop apps.
We are
creating an answers
platform which will ultimately supply unique value to our users and
partners.
We are
super-excited about the potential of mobile, social media, and the API to grow
our business over time, but let’s set expectations correctly for near-term
financial performance. We see 2010 as laying the firm groundwork for
contribution in 2011 and beyond.
Now
let’s switch gears and drill down into more detail on financial results for the
first quarter.
Overall
Answers.com revenues were $5.73 million—78% from WikiAnswers and 22% from
ReferenceAnswers. Overall average daily page views were 11.7 million, up 41%
year-over-year. WikiAnswers’ average daily page views were 9 million, up 69% year-over-year.
ReferenceAnswers traffic in Q1 2010 was up 7% year-over-year, if you
exclude the Google definition link traffic in Q1 2009. Our WikiAnswers
and ReferenceAnswers RPM in Q1 were $5.55 and $4.94, respectively.
Adjusted
operating expenses were $3.89 million in Q1, compared to $3.63 million in Q4, a
net increase of $260 thousand. The net increase resulted from many items that
rose or decreased, but I do want to point out that we spent close to $300,000 in
the first quarter translating our English-language Q&A into French, Italian,
German and Spanish, for purposes of seeding our four foreign-language versions,
which is $200,000 more than the previous quarter. This quarter, we have budgeted
roughly $100,000 for new translation. We view this spend as a longer-term
investment that will bear fruits in 2011.
Adjusted
EBITDA this quarter was $1.84 million. Our Adjusted EBITDA margin, 32%, remains
attractive. Q2 margins will be lower, but we generally plan to grow our expenses
carefully in 2010, including translations, with an eye towards maintaining
healthy margins.
Cash,
marketable securities and short-term investments as of March 31 were
approximately $24.4 million, approximately $1.4 million higher than at the end
of Q4. The net increase stems mostly from cash from operations of $1.57 million.
Our headcount rose from 86 to 90 during the quarter – 3 of the 4 new hires were
in Engineering to help us advance new product initiatives.
Based on
traffic trends in April, we believe that Q2 traffic will be moderately weaker
than Q1. RPM’s were also soft in April, down roughly 7% compared to Q1. We are addressing monetization with
new initiatives. Specifically we are currently
working on a wide right-rail display ad in our page design, which we expect will
augment our RPM’s when we launch it this summer. Also, specifically, we have added a
partner-powered video-answers page, with its own ads. Currently it is receiving
traffic only from ReferenceAnswers, but we anticipate driving traffic to it also
from WikiAnswers by the end of this month. We’re excited about this video
project, and we will continue to experiment and iterate our video
offering.
Now,
as promised, let’s return and hone in on our critical quality
initiatives...
The
WikiAnswers database of questions and answers continues to grow at a prodigious
rate. In fact, it isn't possible for our wonderful volunteers or paid staff to
keep up with the flood of content. This is actually typical of successful
user-generated content sites; it becomes both necessary and natural to
automatically enable the broader population of users, even the more casual ones,
to easily curate their own corner of our database.
Reputation
systems - or using numeric scores to determine the relative value of content or
of contributors - play a pivotal role in enabling our 4¾ -million-strong
registered users to help us achieve our primary database improvement
goal for this year: To increase the quality, not just the quantity, of
contributions on WikiAnswers. We are working on reputation systems to identify
and surface, via our own pages and SEO, the very best questions and answers. We
expect this focus will improve our search engine performance and, by extension,
our revenue. And though we already have a points-based reputation system for
users, we'll shift our focus by creating new karmas (people reputations) in
order to empower them automatically to curate the database items that matter to
them most, again building and contributing to overall database
quality.
This is a
fundamental shift - away from volume and toward quality.
In conclusion, short-term
challenges notwithstanding, having the 18th
biggest audience in the U.S., according to comScore, puts Answers.com in a
perfect position to exploit new avenues of growth. Particularly, we believe that
the new areas of reputation, social media and mobile, combined with the API
platform initiative and ongoing internationalization, will strengthen and propel
us to the next level of shareholder value. We could not be more excited about
Answers.com’s business potential over the coming quarters and
years.
With
that, thank you very much, and I’ll turn it over for any
questions...