Internet Brands, Inc. (INET)
Q4 2009 Earnings Call Transcript
February 18, 2010 at 1:30 pm PT

Executives

Robert N. Brisco - Chief Executive Officer
Scott A. Friedman - Chief Financial Officer
Laura Foster - Investor Relations

Analysts

Youssef Squali - Jefferies & Company
Mark May – Needham & Co
Jeff Rath – Canaccord Adams.

Presentation

Operator

Good day ladies and gentlemen. Thank you for standing by. Welcome to the Internet Brands fourth quarter and 2009 financial results conference call. During today''s presentation, all parties will be in a listen-only mode. Following the presentation the conference will be open for questions. (Operator Instructions) If you have a question, please press * followed by the 1 on your touchtone phone. Please press “*0” for operator assistance at any time. For participants using speaker equipment it maybe necessary to pick up your handset before making your selection. This conference is being recorded today, Thursday, February 18th, 2010. I would now like to turn the conference over to our host Ms Laura Foster, Head of Communications. Please go ahead, ma''am.

Laura Foster – Head of Communications

Thank you. Good afternoon, ladies and gentlemen and welcome to Internet Brands fourth quarter and full year 2009 conference call. By now everyone should have had access to the fourth quarter 2009 earnings release, which went out today at approximately 4:00 pm Eastern Time. If you have not received the release, it is available on the Investor Relations portion of Internet Brand’s website at www.internetbrands.com by clicking on the Investor tab. This call is being webcast and is available for replay.

Before we begin today, we would like to remind everyone that the prepared remarks contain forward-looking statements and management may make additional forward-looking statements in response to your questions. These statements do not guarantee future performance. Therefore undue reliance should not be placed upon them. We refer all of you to the risk factors contained in Internet Brands Form 10-K for the year ended December 31st, 2008 and Form 10-Q for zthe quarter ended September 30th, 2009 filed with the Securities and Exchange Commission for a more detailed discussion of the factors which could cause actual results to differ materially.

And with that, I would like to turn the call over to Bob Brisco.

Robert Brisco – Chief Executive Officer

Good afternoon and welcome. We are very pleased with our fourth quarter results and our early momentum in2010. In the fourth quarter our same store revenues were 13% higher than a year ago and our EBITDA was 20% higher with customarily strong performance in 2010. While it is early in the year we are guiding 2010 revenue growth of 12% to 18% and EBITDA growth of 15% to 20%. We consider our visibility very good at this point since a large majority of our revenues are recurrent. Our strong performance continues to be driven primarily by a combination of audience growth and monetization of that audience. There remain our hallmarks. First, we build large audiences. We build them organically and through acquisitions and high value verticals. Second, we monetize those audiences extremely well. I’m going to give you some important metrics about those audiences and our monetization. In Q4 our unique visitors increased 20% year-over-year to a monthly average of 50 million and the year has started well as we have served more than 56 million unique visitors in January.

Our organic growth initiatives are producing great results. In prior calls I had mentioned that we are accelerating our rate of contact creation, community webbing and website redesign. These efforts continue to accelerate. For sites where we have focused our organic acceleration programs we are seeing traffic and revenue growth in the range of 20% to 40% or more. As always more than 97% of our audience is from organic non-paid sources.

On the advertising side, we now serve more than 40,000 direct advertisers. This is another hallmark of our business. We are extremely diversified in our revenue mix across vertical markets, across types of revenue and across all sizes of advertising customers. Our 40,000 direct advertisers reflect the true diversity of the Internet landscape, with particular strength in small and medium sized business advertisers across all seven of our verticals. As you know our advertising booking business is almost entirely built on performance-based advertising and we continue to produce great results for advertisers in all categories and all sizes.

Turning now to licensing, vBulletin was a big contributor in the fourth quarter. Sales were very strong following the release of vBulletin 4.0 during the quarter and sales remained strong this year. Autodata also continues to perform strongly. We expect revenue growth from our licensing division to grow this year in total by 15% or more. We announced seven acquisitions in the fourth quarter, all in our Home and Health vertical. In home we acquired the leading gardening communities and two of the leading craft communities. In health we acquired a strong position in cosmetic dentistry and added to our positions in dermatology and in fertility. Looking ahead, we expect that acquisition activity will range between $4 million and $10 million per quarter depending on opportunities. We are very careful and disciplined as we acquire only properties that are immediately accretive and significantly so. And importantly, with our acquired properties we typically experience strong revenue and margin growth rates and we add them to our shared operating and technology platform.

Now I want to step back. It has been two years since our IPO. As everyone knows, those two years have been exceptionally difficult for both the advertising and the Auto markets. But we have grown EBITDA over those two years by more than 40%. This speaks to the power of our business model. We know how to build audiences and we know how to monetize those audiences. We will continue to do both of those things in 2010 to make that a very good year.

Now I’m going to turn it over to our CFO, Scott Friedman.

Scott A. Friedman - Chief Financial Officer