SOURCE: Onvia, Inc.

Onvia, Inc.

August 05, 2010 16:05 ET

Onvia Reports Second Quarter 2010 Results

Revenue Up 10% y/y to $6.8 Million; Annual Contract Value per Client Up 26%

SEATTLE, WA--(Marketwire - August 5, 2010) - Onvia, Inc. (NASDAQ: ONVI), a leading provider of comprehensive government business market intelligence, reported financial results for the second quarter ended June 30, 2010.

Q2 2010 Highlights

  • Revenue up 10% to $6.8 million vs. Q2 2009
  • Gross margin increased 15% over Q2 2009 to $5.8 million
  • Adjusted EBITDA loss of $189,000 vs. adjusted EBITDA of $301,000 in Q2 2009
  • Net loss of $1.1 million vs. net loss of $197,000 in Q2 2009
  • Adjusted EBITDA loss and net loss included $1.3 million in unusual charges
  • Annual Contract Value up 11% to $24.1 million vs. Q2 2009

Q2 2010 Operational Performance Summary

                                        Q2 10  Q1 10 Change%  Q2 09 Change%
                                       ------ ------ ------  ------ ------

Annual Contract Value (ACV) (in
 millions)                             $ 24.1 $ 24.4     -1% $ 21.7     11%
Total Clients                           7,500  7,800     -4%  8,500    -12%
High Value Clients (excluding
 entry-level Metro)                     7,200  7,500     -4%  8,000    -10%
Annual Contract Value per Client
 (ACVC)                                $3,225 $3,119      3% $2,567     26%
Quarterly Contract Value per Client
 (QCVC)                                $3,549 $3,259      9% $2,806     26%

Second Quarter Results
Revenue for the second quarter of 2010 decreased 2% to $6.8 million from $7.0 million in the previous quarter and increased 10% from $6.2 million in the same year-ago period.

Sequential quarter revenue decreased due to lower client retention rates, particularly with first-year clients that the company believes were testing the public sector as a potential market and did not renew. The year-over-year improvement in revenue was due primarily to improvement in Annual Contract Value (ACV). ACV represents the aggregate annual revenue value of the company's subscription contracts. ACV increased 11% to $24.1 million from $21.7 million in the same year-ago quarter, but decreased 1% from $24.4 million in the previous quarter (for more information about ACV, see "About Annual Contract Value (ACV) and Quarterly Contract Value per Client (QCVC)," below).

A significant driver of ACV is Annual Contract Value per Client (ACVC), which increased 3% to an average of $3,225 per client from the previous quarter and increased 26% from the second quarter of 2009. ACVC improved in the second quarter, in part by targeting higher value clients and because non-renewals were weighted toward smaller clients.

At the end of the second quarter, the company's total client base, excluding the entry-level metropolitan product, decreased 4% to 7,200 from 7,500 in the previous quarter, and decreased 10% from 8,000 in the same year-ago period. The sequential and year-over-year decrease in the customer base is primarily attributed to a decline in the company's client retention rates of first year, smaller clients.

Operating expenses in the second quarter of 2010 increased 16% to $6.9 million from $5.9 million in the previous quarter and increased 33% from $5.2 million in the same year-ago quarter. The increase is due, in part, to the non-cash write-off of capitalized software development costs related to Onvia's private sector data offering that totaled $967,000, and an aggregate of $363,000 for the company's chairman and CEO Mike Pickett's transition payment, executive search fees, and sales reorganization costs.

For the second quarter of 2010, net loss was $1.1 million versus net income of $17,000 in the previous quarter and a net loss of $197,000 in the second quarter of 2009.

Adjusted EBITDA loss (Earnings before Interest, Taxes, Depreciation and Amortization, including non-cash stock-based compensation) for the quarter was $189,000, compared to adjusted EBITDA of $693,000 in the previous quarter and $301,000 in the same year-ago period (for more information about Adjusted EBITDA, see "Use of Non-GAAP Financial Information" below).

Cash, cash equivalents and short-term investments totaled $13.0 million at June 30, 2010, compared to $13.3 million at March 31, 2010.

At the consent of its board of directors, the company withheld shares in lieu of cash to cover federal income taxes due upon Mr. Pickett's option exercises. The company disbursed $427,000 to cover the related tax obligation on Mr. Pickett's options exercised during the quarter.

Management Commentary
In 2009, enthusiasm for the American Recovery and Reinvestment Act (ARRA) encouraged a significant number of small companies to explore opportunities in the public sector. As a result, Onvia signed many new, predominantly smaller companies, which accelerated top line revenue growth. After the first year, these same small clients are renewing at lower than historical rates. Lower client retention rates have negatively impacted Onvia's results for the last three sequential quarters.

Government is going to increasingly rely on the private sector to fulfill more of its functions. In the second quarter of 2010, Onvia consolidated its existing suite of products to focus exclusively on the gBusiness sector, and will no longer position private sector data as a differentiator within its gBusiness solution. The company believes a targeted suite of products will enhance its ability to execute its gBusiness growth strategy.

In June 2010, Onvia launched its latest product, Spending Forecast Center, which provides insight into capital improvement plans by agencies within the top 366 metropolitan statistical areas in the United States. Spending Forecast Center provides valuable, early stage information on future capital spending used by larger corporations to execute their gBusiness strategies. Onvia has a second, up-market product release planned for the fourth quarter of 2010.

Onvia continues its search for a new chief executive officer to replace Mr. Pickett, who announced his retirement as the company's CEO effective at the end of 2010. Mr. Pickett will provide transitional leadership as needed through the end of this period. Onvia's search committee is evaluating both internal and external CEO candidates.

Conference Call
Onvia's Board of Directors has decided to suspend management conference calls while it conducts its CEO search. Therefore, Onvia has canceled its previously announced conference call scheduled for tomorrow, August 6 at 4:30 p.m. Eastern time. Please reference the company's Form 10-Q, which will be filed next week, for additional discussion and analysis on the second quarter 2010 results, or contact Liolios Group at 949-574-3860 or info@liolios.com for further information.

Use of Non-GAAP Financial Information
Adjusted EBITDA is not a financial measure calculated and presented in accordance with U.S. generally accepted accounting principles ("GAAP") and should not be considered as an alternative to net income, operating income or any other financial measures so calculated and presented, nor as an alternative to cash flow from operating activities as a measure of the company's liquidity. Onvia defines adjusted EBITDA as net income/(loss) before interest expense and other non-cash financing costs; taxes; depreciation; amortization; and non-cash stock-based compensation. Other companies (including the company's competitors) may define adjusted EBITDA differently. The company presents adjusted EBITDA because it believes adjusted EBITDA to be an important supplemental measure of performance that is commonly used by securities analysts, investors and other interested parties in the evaluation of companies in similar industries and size. Management also uses this information internally for forecasting and budgeting. It may not be indicative of the historical operating results of Onvia nor is it intended to be predictive of potential future results. Investors should not consider adjusted EBITDA in isolation or as a substitute for analysis of results as reported under GAAP. See "Reconciliation of GAAP Income (Loss) to Adjusted EBITDA (Loss)" below for further information on this non-GAAP measure and reconciliation of GAAP Income (Loss) to adjusted EBITDA (Loss) for the periods indicated.

                                Onvia, Inc.
      Reconciliation of GAAP Income (Loss) to Adjusted EBITDA (Loss)
                 (in thousands, except per share amounts)
                                (unaudited)


                                                   Three Months Ended
                                              ----------------------------
                                              June 30,  March 31, June 30,
                                                2010      2010      2009
                                              --------  --------  --------

GAAP net income (loss)                        $ (1,082) $     17  $   (197)

Reconciling items from GAAP to adjusted
 EBITDA (loss)
  Interest income, net                              55        16         8
  Taxes                                              -         -         -
  Depreciation and amortization                    775       689       388
  Amortization of stock-based compensation          63       (29)      102
                                              --------  --------  --------

Adjusted EBITDA (loss)                        $   (189) $    693  $    301
                                              ========  ========  ========

About Annual Contract Value (ACV) and Quarterly Contract Value per Client (QCVC)
The company also supplements its financial statements in this release and in its annual report on Form 10-K and quarterly reports on Form 10-Q with a calculation of Annual Contract Value (ACV), which represents the annualized aggregate revenue value of all subscription contracts as of the end of the quarter. ACV is driven by Annual Contract Value per Client (ACVC) and the number of clients. Most of the company's revenues are generated from subscription contracts, which are typically prepaid and have a minimum term of one year, with revenues recognized ratably over the term of the subscription. The company also receives revenues from multi-year content reseller licenses, management reports, document download services, and list rental services, which are not included in the calculation of ACV. ACV is not a financial measure calculated and presented in accordance with U.S. generally accepted accounting principles ("GAAP") and should not be considered as an alternative to revenue or any other financial measures so calculated. Management uses this information as a basis for planning and forecasting core business activity for future periods and believes it is useful in understanding the results of its operations. Quarterly Contract Value per Client (QCVC) is similar to ACVC, but represents the average annual contract value of all new and renewing client transactions signed during the quarter only. Management also uses QCVC as a basis for planning and forecasting, and believes it is useful in understanding core business trends.

Forward-Looking Statements
This release contains "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as "believe," "intend," "plan," "expect," and similar references to future periods. Examples of forward-looking statements include, but are not limited to, statements the company made regarding its 2010 new product launch plan and plan to increase penetration into the larger business segment. These statements are based on management's current expectations and beliefs and, because such statements relate to the future, are subject to risks and uncertainties that are difficult to predict. The company's actual results may differ materially from those contemplated by the forward-looking statements in this release and we caution you against relying on any of these forward-looking statements.

The following factors, among others, could cause actual results to differ materially from those described in the forward-looking statements: Onvia's investments in sales and marketing, technology infrastructure, product development and content collection and sourcing fail to improve sales penetration and client retention rates; Onvia's technology fails to handle the increased demands on its infrastructure caused by increasing network traffic and the volume of aggregated data; disruptions with Onvia's outsourcing relationships fail to decrease incremental expense and delays product delivery schedules; client adoption of new and higher valued products is slower than expected; and Onvia fails to increase the number of clients and/or Annual Contract Value. Additional information on factors that may impact these forward-looking statements can be found in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" sections in the company's 2009 Annual Report on Form 10-K and Quarterly Report on Form 10-Q for the quarter ended March 31, 2010.

Any forward-looking statement made by the company in this presentation is as of the date indicated. Factors or events that could cause the company's actual results to differ may emerge from time to time, and it is not possible for the company to predict all of them. The company assumes no obligation to update any forward-looking statements contained in this presentation as a result of new information or future events or developments, except as may be required by law.

About Onvia, Inc.
For more than a decade Onvia has been the leading provider of comprehensive government business market intelligence in the United States. Thousands of companies rely on Onvia's customized information services to grow sales opportunities, understand buyer and seller activities, and research markets. For information, call 1-800-331-2320 or visit www.onvia.com. To view Economic Recovery-funded projects tracked by Onvia, visit www.recovery.org.

                                Onvia, Inc.
            Condensed Consolidated Balance Sheets (Unaudited)

                                                    June 30,   December 31,
                                                      2010        2009
                                                  -----------  -----------
                                                        (Unaudited)
                                                    (In thousands, except
                                                        share data)
ASSETS

CURRENT ASSETS:
 Cash and cash equivalents                        $     5,312  $     1,647
 Short-term investments, available-for-sale             7,648       12,632
 Accounts receivable, net of allowance for
  doubtful accounts of $92 and $119                     1,504        1,687
 Prepaid expenses and other current assets,
  current portion                                         545          716
 Reimbursable tenant improvements                         147          147
 Security deposits, current portion                       135          135
                                                  -----------  -----------

    Total current assets                               15,291       16,964

LONG TERM ASSETS:
 Property and equipment, net of accumulated
  depreciation                                          1,536        1,226
 Security deposits, net of current portion                134          269
 Internal use software, net of accumulated
  amortization                                          6,264        6,615
 Prepaid expenses and other assets, net of
  current portion                                           9           20
                                                  -----------  -----------
    Total long term assets
                                                        7,943        8,130
                                                  -----------  -----------
TOTAL ASSETS
                                                  $    23,234  $    25,094
                                                  ===========  ===========
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
 Accounts payable                                 $     1,480  $     1,585
 Accrued expenses                                       1,060        1,268
 Obligations under capital leases                           -            6
 Unearned revenue, current portion                     10,966       11,275
 Deferred rent, current portion                            90           88
                                                  -----------  -----------
    Total current liabilities
                                                       13,596       14,222
LONG TERM LIABILITIES:
 Unearned revenue, net of current portion                 475          270
 Deferred rent, net of current portion                    787          832
                                                  -----------  -----------

    Total long term liabilities                         1,262        1,102
                                                  -----------  -----------

TOTAL LIABILITIES                                      14,858       15,324

STOCKHOLDERS' EQUITY:
 Preferred stock; $.0001 par value: 2,000,000
  shares authorized; no shares issued or
  outstanding                                               -            -
 Common stock; $.0001 par value: 11,000,000
  shares authorized; 8,424,626 and 8,283,296
  shares issued; and 8,424,600 and 8,283,270
  shares outstanding                                        1            1
 Treasury stock, at cost: 26 and 26 shares                  -            -
 Additional paid in capital                           352,279      352,615
 Accumulated other comprehensive income / (loss)            4           (3)
 Accumulated deficit                                 (343,908)    (342,843)
                                                  -----------  -----------

    Total stockholders' equity                          8,376        9,770
                                                  -----------  -----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY        $    23,234  $    25,094
                                                  ===========  ===========



                                Onvia, Inc.
              Condensed Consolidated Statements of Operations
        Three and Six Months Ended June 30, 2010 and June 30, 2009

                                          Three Months    Six Months Ended
                                         Ended June 30,       June 30,
                                        ----------------  ----------------
                                          2010     2009     2010     2009
                                        -------  -------  -------  -------
                                          (Unaudited)       (Unaudited)
                                          In thousands,     In thousands,
                                        except per share  except per share
                                              data              data

Revenue
  Subscription                          $ 5,881  $ 5,408  $11,906  $10,399
  Content license                           661      550    1,326    1,130
  Management information reports            209      194      427      456
  Other                                      90       64      169      117
                                        -------  -------  -------  -------

  Total revenue                           6,841    6,216   13,828   12,102

Cost of revenue                           1,090    1,228    2,154    2,453
                                        -------  -------  -------  -------

Gross margin                              5,751    4,988   11,674    9,649

Operating expenses:
 Sales and marketing                      3,685    3,237    7,467    6,717
 Technology and development                 885      664    1,785    1,398
 General and administrative               2,318    1,292    3,558    2,373
                                        -------  -------  -------  -------

     Total operating expenses             6,888    5,193   12,810   10,488
                                        -------  -------  -------  -------

Loss from operations                     (1,137)    (205)  (1,136)    (839)

Interest and other income, net               55        8       71       11

                                        -------  -------  -------  -------
Net loss                                $(1,082) $  (197) $(1,065) $  (828)
                                        =======  =======  =======  =======
 Unrealized gain / (loss) on
  available-for-sale securities               2       (1)       2       (1)

                                        -------  -------  -------  -------
Comprehensive loss                      $(1,080) $  (198) $(1,063) $  (829)
                                        =======  =======  =======  =======
Basic net loss per common share         $ (0.13) $ (0.02) $ (0.13) $ (0.10)
                                        =======  =======  =======  =======
Diluted net loss per common share       $ (0.13) $ (0.02) $ (0.13) $ (0.10)
                                        =======  =======  =======  =======
Basic weighted average shares
 outstanding                              8,375    8,262    8,330    8,255
                                        =======  =======  =======  =======
Diluted weighted average shares
 outstanding                              8,375    8,262    8,330    8,255
                                        =======  =======  =======  =======



                                Onvia, Inc.
              Condensed Consolidated Statements of Cash Flows
        Three and Six Months Ended June 30, 2010 and June 30, 2009

                                          Three Months    Six Months Ended
                                         Ended June 30,       June 30,
                                        ----------------  ----------------
                                          2010     2009     2010     2009
                                        -------  -------  -------  -------
                                          (Unaudited)       (Unaudited)
                                         (In thousands)    (In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net loss                               $(1,082) $  (197) $(1,065) $  (828)

 Adjustments to reconcile net loss to
  net cash provided by operating
  activities:
  Depreciation and amortization             775      388    1,464      782
  Loss on sale of property and
   equipment                                  -        -        -        -
  Loss on abandonment of assets             967        -      967        -
  Stock-based compensation                   63      102       34      217
  Change in operating assets and
   liabilities:
   Accounts receivable                      892      105      183      650
   Prepaid expenses and other assets         37     (129)     182      120
   Accounts payable                          72       66      (27)    (146)
   Accrued expenses                         150     (250)    (204)    (363)
   Unearned revenue                        (651)     839     (104)   1,782
   Deferred rent                            (23)     (16)     (43)     (29)
                                        -------  -------  -------  -------

  Net cash provided by operating
   activities                             1,200      908    1,387    2,185

CASH FLOWS FROM INVESTING ACTIVITIES:
 Additions to property and equipment       (356)     (74)    (668)    (101)
 Additions to internal use software        (782)    (465)  (1,794)  (1,395)
 Purchases of investments                (1,968)  (2,652)  (2,962)  (2,652)
 Maturities of investments                4,954        -    7,953        -
 Return of security deposits                  -        -      135      135
                                        -------  -------  -------  -------

 Net cash provided by / (used in)
  investing activities                    1,848   (3,191)   2,664   (4,013)

CASH FLOWS FROM FINANCING ACTIVITIES:

 Principal payments on capital lease
  obligations                                 -      (33)      (6)     (64)
 Proceeds from exercise of stock
  options                                    28       38       47       38

 Repurchase of common stock for minimum
  tax obligations on options exercise      (427)       -     (427)       -
                                        -------  -------  -------  -------

  Net cash (used in) / provided by
   financing activities                    (399)       5     (386)     (26)
                                        -------  -------  -------  -------

Net increase / (decrease) in cash and
 cash equivalents                         2,649   (2,278)   3,665   (1,854)

Cash and cash equivalents, beginning of
 period                                   2,663   13,467    1,647   13,043
                                        -------  -------  -------  -------

Cash and cash equivalents, end of
 period                                 $ 5,312  $11,189  $ 5,312  $11,189
                                        =======  =======  =======  =======

Contact Information

  • Company Contacts:
    Cameron Way
    Chief Financial Officer
    Tel 206-373-9034
    Email Contact

    Investor Relations:
    Scott Liolios or Matt Glover
    Liolios Group, Inc.
    Tel 949-574-3860
    Email Contact