SOURCE: Vertro, Inc.

Vertro, Inc.

November 04, 2010 16:03 ET

Vertro, Inc. Announces Third Quarter 2010 Results

Revenue From Continuing Operations Up 15% Quarter-Over-Quarter and 32% Year-Over-Year; $0.4 Million in GAAP Income and Adjusted EBITDA From Continuing Operations

NEW YORK, NY--(Marketwire - November 4, 2010) - Vertro, Inc. (NASDAQ: VTRO), today reported financial results for the third quarter ended September 30, 2010.

Summary of Third Quarter 2010 Results from Continuing Operations:

--  Revenue of $9.8 million in Q3 2010, compared to revenue of $8.5 million
    in Q2 2010;

--  Gross margins of 95% in Q3 2010, comparable to the 96% gross margins in
    Q2 2010;

--  GAAP income from continuing operations of $0.4 million or $0.05 per
    basic share in Q3 2010, compared to GAAP income from continuing
    operations of $0.2 million or $0.03 per basic share in Q2 2010. GAAP
    income in Q3 2010 included a non-recurring $0.2 million gain in
    deferred rent adjustments.

--  EBITDA for Q3 2010 of $0.4 million as compared to $0.2 million at Q2
    2010. Both Q2 and Q3 2010 EBITDA reflected $0.2 million in non-cash
    compensation expense, and Q3 2010 included a non-recurring $0.2 million
    gain in deferred rent adjustments.

--  Adjusted EBITDA of $0.4 million in Q3 2010, compared to Adjusted EBITDA
    of $0.5 million in Q2 2010. Q3 2010 Adjusted EBITDA excluded $0.2
    million in non-cash compensation expense and a non-recurring $0.2
    million gain in deferred rent adjustments.  Q2 2010 Adjusted EBITDA
    excluded $0.2 million in non-cash compensation expense and a $0.1
    million in severance expenses.

"Q3 was a good quarter for Vertro. We met our expectation of double digit sequential quarterly revenue growth, achieved strong user growth both in English speaking countries as well as international markets, posted our fourth consecutive quarter of EBITDA profitability, and added cash to our balance sheet," commented Peter Corrao, Vertro's President and CEO.

Third Quarter Results from Continuing Operations

Revenue was $9.8 million in Q3 2010, compared to Q2 2010 revenue from continuing operations of $8.5 million.

Gross margins were 95% in Q3 2010, compared to 96% in Q2 2010. Gross margin excludes customer acquisition costs of $6.7 million in Q3 2010 and $5.2 million in Q2 2010, which is included in consolidated operating expenses within the marketing and sales category.

Operating expenses were $8.9 million in Q3 2010, compared to $7.9 million in Q2 2010. The operating expenses in both Q2 and Q3 2010 included $0.2 million of non-cash compensation expense.

GAAP income from continuing operations of $0.4 million or $0.05 per basic and diluted share in Q3 2010, compared to GAAP income from continuing operations of $0.2 million or $0.03 per basic and diluted share in Q2 2010. GAAP income in Q3 2010 included a non-recurring $0.2 million gain in deferred rent adjustments.

Adjusted income from continuing operations was $0.4 million or $0.06 per basic share in Q3 2010, compared to Adjusted income from continuing operations of $0.5 million or $0.08 per basic and diluted share in Q2 2010. Q3 2010 Adjusted income from continuing operations excluded $0.2 million in non-cash compensation expense and a non-recurring $0.2 million gain in deferred rent adjustments.

EBITDA was $0.4 million in Q3 compared to $0.2 million in Q2. Both Q2 and Q3 2010 EBITDA reflected $0.2 million non-cash compensation expense, Q3 2010 included a non-recurring $0.2 million gain in deferred rent adjustments.

Adjusted EBITDA was $0.4 million in Q3 2010, compared to Adjusted EBITDA gain of $0.5 million in Q2 2010. Q3 2010 Adjusted EBITDA excluded $0.2 million in non-cash compensation expense and a non-recurring $0.2 million gain in deferred rent adjustments. Q2 2010 Adjusted EBITDA excluded $0.2 million in non-cash compensation expense and $0.1 million in severance expenses.

Cash and cash equivalents were $7.1 million at September 30, 2010, an increase of $1.2 million from the June 30, 2010 cash of $5.9 million. The increase was primarily a result of the increased revenue and net income in the quarter and the release of approximately $0.2 million of restricted cash.

As of September 30, 2010, the Company had 49 full time employees, which is compared to 46 full time employees as of June 30, 2010.

Selected quarterly metrics from continuing operations are available on Vertro's investor relations website at: http://ir.vertro.com/results.cfm

Management Conference Call

Management will participate in a conference call to discuss the full results for the Company on November 4, 2010, at approximately 4:30 p.m. ET. Details of the call for interested parties are as follows:

Date: Thursday, November 4, 2010
Time: 4:30 p.m. ET
Dial-in number: (877) 353-0044 / (970) 315-0525 (Intl.)
Live webcast: http://ir.vertro.com/events.cfm
Conference call replay: http://ir.vertro.com/events.cfm

In July 2010, Vertro announced a 1-for-5 reverse stock split. As a result, each holder of five outstanding shares of our common stock received one share of our common stock. Each stockholder holds approximately the same percentage of common stock outstanding after the Reverse Split as held immediately prior to the Reverse Split, subject to adjustment for fractional shares. All per share amounts reported in this earnings release are reflective of the 1-for-5 reverse stock split.

Vertro believes that "EBITDA," "Adjusted EBITDA," "Adjusted net income/loss" and "Adjusted net income/loss per share" provide meaningful measures for comparison of the Company's current and projected operating performance with its historical results due to the significant changes in non-cash amortization that began in 2004 primarily due to certain intangible assets resulting from mergers and acquisitions that have since been written off. Vertro defines Adjusted EBITDA as EBITDA (earnings before interest, income taxes, depreciation and amortization) plus non-cash compensation expense and plus or minus certain identified revenues or expenses that are not expected to recur or be representative of future ongoing operation of the business. Vertro uses EBITDA and Adjusted EBITDA as internal measures of its business and believes they are utilized as important measures of performance by the investment community. Vertro sets goals and awards bonuses in part based on performance relative to Adjusted EBITDA. Vertro defines Adjusted net income/loss as net income/loss plus amortization and non-cash compensation expense, plus or minus certain identified revenues or expenses that are not expected to recur or be representative of future ongoing operation of the business, in each case including the tax effects (if any) of the adjustment. Vertro believes the use of these measures does not lessen the importance of GAAP measures.

About Vertro, Inc.

Vertro, Inc. (NASDAQ: VTRO) is an Internet company that owns and operates the ALOT product portfolio. Through ALOT, consumers can discover apps which they can display through three specific products: ALOT Appbar, ALOT Toolbar and ALOT Home. These apps are developed in-house and by third party app developers and are designed to enhance the way people interact with content online. ALOT has millions of users across its products. Together these users conduct high-volumes of type-in-search queries, which are monetized through third-party search and content agreements.

Source: VTRO-E

Forward-looking Statements

This press release contains certain forward-looking statements that are based upon current expectations and involve certain risks and uncertainties within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Words or expressions such as "anticipate," "plan," "will," "intend," "believe" or "expect" or variations of such words and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including (1) our agreement with Google, which accounts for a significant portion of our revenue, has a two year term that expires on December 31, 2010; if we are unable to renew our agreement with Google, or we renew our agreement on less favorable terms, we will likely experience a decline in revenue and our business operations may be significantly harmed, (2) our ability to successfully execute upon our corporate strategies, (3) our ability to distribute and monetize our international products at rates sufficient to meet our expectations, (4) our ability to develop and successfully market new products and services, and (5) the potential acceptance of new products in the market. Additional key risks are described in Vertro's reports filed with the U.S. Securities and Exchange Commission, including the Form 10-Q for Q3 2010.

Non-GAAP Financial Measures

This press release includes discussion of additional financial measures "EBITDA," "Adjusted EBITDA," "Adjusted Net Loss," "Adjusted Net Income," "Adjusted Net Loss Per Share" and "Adjusted Net Income Per Share," which are not considered generally accepted accounting principle (GAAP) measures by the Securities and Exchange Commission, and may differ from non-GAAP financial measures used by other companies. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. Vertro provides reconciliations of these two financial measures to GAAP measures in its press releases regarding actual financial results. Reconciliations of net income/loss from continuing operations and net income/loss per share to these financial measures for the three month periods ended September 30, 2010 and 2009, and June 30, 2010, and for the nine month periods ended September 30, 2010 and 2009 are included in this press release as set forth below.


                               Vertro, Inc.
        Unaudited Condensed Consolidated Statements of Operations
                 (in thousands, except per share amounts)


                                 Three      Three      Nine        Nine
                                 Months     Months     Months      Months
                                 Ended      Ended      Ended       Ended
                               September  September  September   September
                               30, 2010   30, 2009   30, 2010    30, 2009
                               ---------  ---------  ----------  ---------
Revenues                       $   9,759  $   7,389  $   26,324  $  19,625
Cost of services                     505        479       1,374      1,380
                               ---------  ---------  ----------  ---------

Gross profit                       9,254      6,910      24,950     18,245

Operating expenses
  Marketing and sales              7,028      6,350      18,084     17,246
  General and administrative       1,459      1,595       4,698      6,880
  Product development                405        596       1,488      1,927
  Amortization                         -        106           -        146
  Restructuring charges                -          -           -        (15)
                               ---------  ---------  ----------  ---------
Total operating expenses           8,892      8,647      24,270     26,184
                               ---------  ---------  ----------  ---------

Income (loss) from operations        362     (1,737)        680     (7,939)
Foreign exchange rate gain
 (loss)                               (1)       (89)        118       (487)
Gain on sale of domain name            -          -         285          -
Other income (expense), net           20         (2)         29        (75)
                               ---------  ---------  ----------  ---------

Income (loss) before provision
 for income taxes                    381     (1,828)      1,112     (8,501)

Income tax expense                    13          -          55         27
                               ---------  ---------  ----------  ---------

Income (loss) from continuing
 operations                    $     368  $  (1,828) $    1,057  $  (8,528)

Income (loss) from
 discontinued operations       $       3  $   1,184  $      756  $  (3,483)

Gain on sale of discontinued
 operations                            -          -           -      7,139
                               ---------  ---------  ----------  ---------

Net income (loss)              $     371  $    (644) $    1,813  $  (4,872)
                               =========  =========  ==========  =========

Basic earnings (loss) per
 share
  Continuing operations        $    0.05  $   (0.28) $     0.15  $   (1.27)
                               =========  =========  ==========  =========
  Discontinued operations      $       -  $    0.18  $     0.11  $   (0.54)
                               =========  =========  ==========  =========

Diluted earnings (loss) per
 share
  Continuing operations        $    0.05  $   (0.28) $     0.15  $   (1.27)
                               =========  =========  ==========  =========
  Discontinued operations      $       -  $    0.18  $     0.11  $   (0.54)
                               =========  =========  ==========  =========

Weighted-average number of
 common shares outstanding
  Basic                            6,860      6,757       6,846      6,713
                               =========  =========  ==========  =========
  Diluted                          7,194      6,757       7,180      6,713
                               =========  =========  ==========  =========

* All per share amounts reported are reflective of the reverse stock split





                               Vertro, Inc.
        Unaudited Condensed Consolidated Statements of Operations
                 (in thousands, except per share amounts)


                                              Three Months   Three Months
                                                  Ended          Ended
                                              September 30,     June 30,
                                                  2010           2010
                                              -------------  -------------
Revenues                                      $       9,759  $       8,461
Cost of services                                        505            363
                                              -------------  -------------

Gross profit                                          9,254          8,098

Operating expenses
  Marketing and sales                                 7,028          5,608
  General and administrative                          1,459          1,802
  Product development                                   405            535
                                              -------------  -------------
Total operating expenses                              8,892          7,945
                                              -------------  -------------

Income from operations                                  362            153
Interest income, net                                     20             10
Exchange rate gain (loss)                                (1)            50
                                              -------------  -------------

Income before provision for income taxes                381            213

Income tax expense                                       13             17
                                              -------------  -------------

Income from continuing operations             $         368  $         196

Income (loss) from discontinued operations    $           3  $         (51)

                                              -------------  -------------

Net income                                    $         371  $         145
                                              =============  =============

Basic earnings (loss) per share
  Continuing operations                       $        0.05  $        0.03
                                              =============  =============
  Discontinued operations                     $        0.00  $       (0.01)
                                              =============  =============

Diluted earnings (loss) per share
  Continuing operations                       $        0.05  $        0.03
                                              =============  =============
  Discontinued operations                     $        0.00  $       (0.01)
                                              =============  =============

Weighted-average number of common shares
 outstanding
  Basic                                               6,860          6,846
                                              =============  =============
  Diluted                                             7,194          7,076
                                              =============  =============

* All per share amounts reported are reflective of the reverse stock split





                               Vertro, Inc.
    Reconciliations to Condensed Consolidated Statements of Operations
                  (in thousands, except per share data)
                                (Unaudited)



                                 Three      Three      Nine        Nine
                                 Months     Months     Months      Months
                                 Ended      Ended      Ended       Ended
                               September  September  September   September
 Additional information:       30, 2010   30, 2009   30, 2010    30, 2009
                               ---------  ---------  ----------  ---------

 Adjusted EBITDA                     401     (1,365)      1,291     (6,811)
                               =========  =========  ==========  =========
 Adjusted net income (loss)          389     (1,486)      1,343     (7,480)
                               =========  =========  ==========  =========
 Adjusted net income (loss)
  per share - basic            $    0.06  $   (0.22) $     0.20  $   (1.11)
                               =========  =========  ==========  =========

                                 Three      Three
                                 Months     Months
                                 Ended      Ended
                               September    June
 Additional information:       30, 2010   30, 2010
                               ---------  ---------

 Adjusted EBITDA                     401        503
                               =========  =========
 Adjusted net income                 389        532
                               =========  =========
 Adjusted net income per share
  - basic                      $    0.06  $    0.08
                               =========  =========

                                 Three      Three       Nine       Nine
                                 Months     Months      Months     Months
                                 Ended      Ended       Ended      Ended
                               September  September  September   September
                               30, 2010   30, 2009   30, 2010    30, 2009
                               ---------  ---------  ----------  ---------
 Reconciliation of Net Income
  to Adjusted EBITDA
 Income (Loss) from continuing
  operations                         368     (1,828)      1,057     (8,528)
 Interest (income) expense and
  exchange rate loss (gain)          (19)        91        (147)       562
 Income tax expense                   13          -          55         27
 Depreciation                         18         30          40         80
 Amortization                          -        106           -        146
                               ---------  ---------  ----------  ---------
 EBITDA                              380     (1,601)      1,005     (7,713)
 Gain on sale of domain name           -          -        (285)         -
 Restructuring charges                 -          -           -        (15)
 Rent                               (200)         -        (200)         -
 Severance                             -          -         118          -
 Non-cash compensation charges       221        236         653        917
                               ---------  ---------  ----------  ---------
 Adjusted EBITDA                     401     (1,365)      1,291     (6,811)
                               =========  =========  ==========  =========

                                 Three      Three
                                 Months     Months
                                 Ended      Ended
                               September    June
                               30, 2010   30, 2010
                               ---------  ---------
 Reconciliation of Net Income
   to Adjusted EBITDA
 Income from continuing
  operations                         368        196
 Interest (income) expense and
  exchange rate loss (gain)          (19)       (60)
 Income tax expense                   13         17
 Depreciation                         18         14
                               ---------  ---------
 EBITDA                              380        167
 Non-cash compensation charges       221        218
 Rent                               (200)         -
 Severance                             -        118
                               ---------  ---------
 Adjusted EBITDA                     401        503
                               =========  =========

                                Three      Three       Nine       Nine
                                Months     Months      Months     Months
                                Ended      Ended       Ended      Ended
                               September  September  September   September
                               30, 2010   30, 2009   30, 2010    30, 2009
                               ---------  ---------  ----------  ---------
 Reconciliation of Net Income
  (Loss) to Adjusted Net
  Income (Loss)
 Income (loss) from continuing
  operations                         368     (1,828)      1,057     (8,528)
 Gain on sale of domain name           -          -        (285)         -
 Amortization                          -        106           -        146
 Restructuring charges                 -          -           -        (15)
 Rent                               (200)         -        (200)         -
 Severance                             -          -         118          -
 Non-cash compensation charges       221        236         653        917
                               ---------  ---------  ----------  ---------
 Adjusted net income (loss)          389     (1,486)      1,343     (7,480)
                               =========  =========  ==========  =========
 Adjusted net income (loss)
  per share - basic            $    0.06  $   (0.22) $     0.20  $   (1.11)
 Adjusted net income (loss)
  per share - diluted          $    0.05  $   (0.22) $     0.19  $   (1.11)
 Shares used in per share
  calculation - basic              6,860      6,757       6,846      6,713
 Shares used in per share
  calculation - diluted            7,194      6,757       7,180      6,713

                                Three      Three
                                Months     Months
                                Ended      Ended
                               September   June
                               30, 2010   30, 2010
                               ---------  ---------
 Reconciliation of Net Income
  to Adjusted Net Income
 Income from continuing
  operations                         368        196
 Rent                               (200)         -
 Severance                             -        118
 Non-cash compensation charges       221        218

                               ---------  ---------
 Adjusted net income                 389        532
                               =========  =========
 Adjusted net Income per share
  - basic                      $    0.06  $    0.08
 Adjusted net Income per share
  - diluted                    $    0.05  $    0.08
 Shares used in per share
  calculation - basic              6,860      6,846
 Shares used in per share
  calculation - diluted            7,194      7,076

* All per share amounts reported are reflective of the reverse stock split





                               Vertro, Inc.
                  Condensed Consolidated Balance Sheets
                    (in thousands, except par values)


                                              September 30,  December 31,
       ASSETS                                     2010           2009
                                              -------------  -------------
                                               (Unaudited)

CURRENT ASSETS
  Cash and cash equivalents                   $       7,050  $       4,837
  Restricted cash                                        58              -
  Accounts receivable, less allowances of
   $21 and $679, respectively                         3,371          3,041
  Income tax receivable                                 338            695
  Prepaid expenses and other current assets             416            651
                                              -------------  -------------

       TOTAL CURRENT ASSETS                          11,233          9,224

Property and equipment, net                             383             71
Restricted cash                                           -            200
Other assets                                            330            517
                                              -------------  -------------

       TOTAL ASSETS                           $      11,946  $      10,012
                                              =============  =============

       LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Accounts payable                            $       4,016  $       4,706
  Accrued expenses                                    3,349          2,778
  Income tax payable                                     20            299
  Deferred revenue                                        -             25
                                              -------------  -------------

       TOTAL CURRENT LIABILITIES                      7,385          7,808

  Long-term liabilities                               1,102          1,365
                                              -------------  -------------

  TOTAL LIABILITIES                                   8,487          9,173
                                              -------------  -------------

STOCKHOLDERS' EQUITY
  Preferred stock, $.005 par value;
   authorized, 500 shares; none issued and
   outstanding                                            -              -
  Common stock, $.005 par value;
   authorized, 40,000 shares; issued 7,254
   and 7,128, respectively; outstanding
   6,860 and 6,770, respectively                         36             35
  Additional paid-in capital                        271,569        270,690
  Treasury stock, 394 and 358 shares at
   cost, respectively                                (6,795)        (6,722)
  Accumulated other comprehensive income             12,914         12,914
  Accumulated deficit                              (274,265)      (276,078)
                                              -------------  -------------

       TOTAL STOCKHOLDERS' EQUITY                     3,459            839
                                              -------------  -------------

       TOTAL LIABILITIES AND STOCKHOLDERS'
        EQUITY                                $      11,946  $      10,012
                                              =============  =============

 * All per share amounts reported are reflective of the reverse stock split

Contact Information

  • Alex Vlasto
    VP, Marketing & Communications
    646.253.0627
    Email Contact