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Executives

Ann Parker – Director, IR

Scott Petersen – Chairman and CEO

Frank Elsenbast – SVP and CFO

Analysts

David Kestenbaum – Morgan Joseph

Johan Green – JTL Capital

Michael Kupinski – Noble Financial

LodgeNet Interactive Corp. (OTC:LNET) Q3 2011 Earnings Call October 25, 2011 5:00 PM ET

Operator

Good day and welcome to the LodgeNet Interactive Q3, 2011 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer section and instructions will follow at that time.

(Operator Instructions)

As a reminder, this conference call is being recorded.

I would now like to introduce our host for today’s conference Ms. Ann Parker, Director of Investor Relations for LodgeNet Interactive. Ma’am, please go ahead.

Ann Parker

Thank you, operator. Good day everyone. I would like to thank all of you for taking the time today to listen to our third quarter 2010 conference call. You should have received copies of our earnings release, if not, please call me at 605-988-1000, we’ll make sure you do get a copy. Our speakers for today’s call will be Scott Petersen, Chairman and CEO of LodgeNet, and Frank Elsenbast, our Senior Vice President and CFO.

Scott and Frank will review our third quarter 2011 earnings and we’ll then welcome your questions and your comments. This call is being webcast live over the Internet through our company website www.lodgenet.com. We also have slides posted on our website which correspond today’s comments and they can found under the Investors Section.

Before we get started, I’d like to remind you that some topics to be discussed today that do not relate to historical performance may include or constitute forward-looking statements within the meaning of the federal securities laws and are subject to risks, uncertainties and other factors that could cause actual results, performance or achievements of the company to be materially different from those expressed or implied by such forward-looking statements. Certain of the risk factors which could affect the company are set forth in the company’s 10-K and other filings.

With that said, I’ll now turn the call over to Mr. Scott Petersen.

Scott Petersen

Thank you, Ann, and good afternoon everyone. In the third quarter, we continued to deliver solid financial results, all of which were in line with our quarterly guidance. Two metrics were of particular significance. First, we generated positive net income for the quarter based on our operating activities, and that’s a milestone result since the time of our strategic acquisitions in 2007.

During the 2002 to 2006 timeframe, I led the management team from deep losses to positive net income and with our acquisitions of On Command and StayOnLine at 2007 we signed up for a similar campaign. Over the past four years, we’ve gone from a quarterly loss of about $11.5 million in the third quarter of 2007 to positive net income over $600,000 today. And this third quarter result foreshadows future profitability and that’s on horizon because of the revenue growth we are generating from our many strategic initiatives as well as our more efficient operating cost structures.

Second and speaking of revenue growth, we delivered a number of landmark result with hospitality revenue per room turning positive as compared to last year and has furthered since the start of this economic recession. Strong Hollywood movie revenue really turned to headwinds as that we have been experiencing through the last several years for guest entertainment. Our VOD marketing initiatives are producing positive results for us and Hollywood also helped us during the quarter with more popular product like Bridesmaids.

And our strategy to diversify our revenue streams by selling more services and systems to our customers continues to pay off as revenue, excluding guest entertainment services was up 10% on a per room basis.

After Frank covers the details of our financial results during the quarter, I’ll give you some additional thoughts on how I believe our strategic growth initiatives are continuing to drive growth for our company.

Our high-definition interactive television platform continues to perform very well and our economic model, which now incorporates incremental revenues and cash flows from our new Envision Apps, continues to develop and further diversify our business. And during the quarter we made several announcements, which I’d like to review with you, but I believe place LodgeNet on a solid growth trajectory for the next several years.

So, Frank, please?

Frank Elsenbast

Thanks, Scott, and good afternoon. As Scott mentioned, our third quarter financial results achieved two milestones for the company with positive net income in revenue per room growth across our hospitality room base.

Our results were solidly within or at the high end of our Q3 guidance. I will review some of the key factors that contributed to these results and discuss our guidance for the final quarter of 2011.

On slide number three, revenue for the third quarter was $107 million, which was at the midpoint of our financial guidance. Revenue highlights for the quarter includes 17% revenue growth within our healthcare business as they continue to build their install base with the leading healthcare facilities around the country. Growth with our hospitality sector was led by system sales with 10% revenue growth and advertising which was up 8% versus prior year. In total, our diversified revenues grew 2.4% over the last year.

On slide number four is a more detailed breakdown of our revenue per room by service line. Total revenue per room of $21.84 was an increase of 1.3% over the last year. This improvement reverses the trend that we’ve experienced since the beginning of the economic slowdown. The improvement this quarter was driven by two continuing trends. First, the Guest Entertainment revenue per room decline continues to moderate. Or enhanced VOD 2.0 merchandising efforts, higher performance in our high-definition rooms and improved Hollywood content have all contributed to the stabilization of this metric.

And second, revenue in our diversified product lines continues to generate significant per room increases. Consolidated growth for these service lines was 10.4% for the quarter. This is the second consecutive quarter with double-digit sales growth with every business contributing positive growth. In Hotel Services, our second largest service line, it continues to deliver growth per room driven by higher TV programming revenues. System sales and related grew revenue 19.1% to $2.43 per room. The majority of these revenues are generated by sales of media systems and programming directly to the hotels along with the related network design and installation of those systems.

And advertising revenue per room increased 19% for the quarter as a growing number of advertisers and media companies realized the value that our various advertising platforms can deliver.

Our attractive room base allows advertisers the ability to target their message to an affluent business demographic. Additionally, media companies are buying carriage on our interactive, server-based ad systems to gain targeted distribution, build brand awareness and drive traffic to other media assets.

Our reporting engine, together with Nielsen, provides advertisers with detailed viewership and clickthrough data, which validates the effectiveness of their advertising and investment.

Slide five summarizes the continued strong performance we saw this quarter in our high definition room base. The trend here remains very consistent with over 60% higher revenue from our HD rooms. With the installation of nearly 9,000 rooms in the quarter, we now have interactive HD services available in 19% of our Guest Entertainment rooms. The cost to install these high-def rooms continues to decline, as we see reductions in component costs, and we generate other deficiencies in the installation process.

You can see on slide number six, that the cost per room declined to $135 per room this quarter, which is a decline of 40% over the past two years. In addition to driving more Guest Entertainment revenue, we benefit by equipping these rooms with our Envision technology, which enables hoteliers to access our growing library of apps. These apps deliver value added services to the hotels and drive important incremental cash flows for LodgeNet.

Our contracted backlog for HD Envision installs is increasing. We expect to install approximately 15,000 rooms in the fourth quarter. This would be the highest level of activity for the year and bring our total HD installations for 2011 to approximately 40,000 rooms.

Operating expenses for the quarter were down 11% and reflects our continued focus on reducing our cost structure. The savings versus last year are driven by several areas including the lower head count, reduced legal and professional fees, and lower repair and facility costs. With our current head count 9% below last year, we expect our operating costs to continue to run below last year. This ongoing focus on cost is critical for our company, as we strive to improve our profitability while also funding the investments in innovation and product development such as our Envision Apps, our mobile initiative and innovative advertising concepts.

Profitably for the quarter was strong with adjusted operating cash flow for the quarter at $27 million. This was the high point of our Q3 guidance of $24 million to $27 million, and represents a modest 3% decline in AOCF versus last year. Our operating margin for the quarter improved 80 basis points over last year to 25.3%. On slide number nine, you will see the trend for our trailing 12 months AOCF performance. Our average operating margins have been improving over the last four quarters, as we continue to deliver very high gross margins and aggressively reduce our operating expense burden.

As we move on to slide number 10, you will see that bottom-line profitability metrics for the quarter improved significantly. Operating income for the quarter jumps 31% versus last year to $8.9 million, in addition to the gross margin and OpEx reductions I just discussed, we have also seen a continued decline in our depreciation and amortization, which declined 15% versus last year. And as Scott mentioned in his opening comments, LodgeNet achieved positive earnings this quarter. Our net income available to common shareholders was $607,000 versus a loss of $3.1 million last year.

The improvement in operating income and reduced interest expense combined to more than offset the impact of the 6% top-line decline in sales. This was our first quarter with positive earnings since the On Command and StayOnLine acquisitions in 2007. This milestone reflects our efforts to control our cost structure and scrutinize our capital spending while still investing in strategic growth initiatives that will increase our earnings and drive shareholder value. While we still have considerable work to do, we believe the strategy is working.

Cash flow for the quarter is detailed on slide number 11. We generated $7.3 million of free cash flow during the quarter. If you adjust for working capital changes, free cash flow was $14.6 million versus $15.4 million last year with the remaining difference due to higher capital spending as we increased our upgrade activity during the current quarter.

On slide number 12 is an update on our current consolidated debt and company leverage. We ended the quarter with net debt of $348 million and a leverage ratio of 3.33. Our leverage ratio is down from 3.4 that we reported last year and significantly below the 3.72 leverage ratio of 2009. Over this time period, the company has reduced net debt by over $120 million. Our lowered level of debt provides the company with a solid financial foundation and the operational flexibility to aggressively invest with our hotel partners on strategic growth initiatives.

Looking forward to the fourth quarter, our guidance is detailed on slide number 13. We expect to see a continuation or modest improvement of many of the trends that impacted this quarter. For the top line, we are expecting revenues to be in the range of $100 million to $104 million. This would be a decline in total revenue of 3% to 7% versus 2010. This revenue projection assumes Guest Entertainment revenue per room is flat to down 5% versus last year. We are also expecting our diversified hospitality revenues to continue strong, double-digit revenue growth on a per room basis.

Adjusted operating cash flow is expected to be in the range of $22 million to $25 million and net loss available to common shareholders to be in the range of a loss of $0.20 per share to a loss of $0.08 per share. And as I mentioned earlier, we expect our HD Envision upgrades in the fourth quarter to be approximately 15,000 rooms.

With that, I will turn the call back to Scott.

Scott Petersen

Thanks, Frank. Before turning to your questions, I’d like to give you a couple of thoughts regarding the evolution of our strategic position within the markets we serve. Starting on slide 14, highlights some of the strategic areas we focused on during this quarter. In early October at Hyatt Regency at O’Hare Airport, which was the site of our first Envision installation, we held our fourth Annual Customer Technology Symposium.

We had an outstanding group of speakers and panelists which we focused on the general theme of connecting guests any screen, any time. We had the participation of cutting edge technology with companies such as Google, Nielsen, Intel Labs, Boxee, Orbitz and Cisco. We also had our best attendants from leading hotel companies and brands and had a very informative session with a panel of technology leaders from Hilton, Starwood, Omni, Sage Hospitality and White Lodging.

You will see in slide 15, we announced certain strategic initiatives at the conference. First, we unveiled our new four screen strategy with which we consists hotels to surround our guests with our marketing messages and communicate with our guests regardless of what device they might be using at that time. Within the hotel room, of course, the best display device is the big high definition television and our new Envision software platform not only presents them with the best entertainment, but also acts as a guest portal, total room service, make request for wake up or concierge services and to find out more about the hotel and the surrounding area.

Both our Envision PowerPortal through which hotels can create content wide once and publish to multiple devices. Hotels can push and provide property services to their guest smartphones, iPads and laptops. And the really interesting part is that their services or communications don’t need to stop at their door. For example, a guest could order a room service in the taxi on the way to the hotel to be delivered when they check in.

We have a very interesting video posted on our website, which better describes this four screen strategy from the point of view of the guest experience. So if you just go to our homepage and click on Bob, I think you will see what I mean.

On slide 16, shows that we made several other announcements regarding our new Envision platform, which is a powerful Internet connected interactive system and it’ll – how it will be enhancing the guest experience.

Our one very cool feature, which will be releasing late this quarter and it can also be pushed back into a large part of our installed base is our new LodgeNet Mobile App. This app, which can be downloaded to your iPhone, your Android phone or iPad will turn these devices into powerful remote controls for the in-room television.

You’ll be able to see what program is on TV, change channels and volume; you can watch movie trailers and even order your movie without touching the standard remote control. The LodgeNet Mobile App will also feature information about the hotel and the surrounding area. Now, we think guests and hoteliers are going to find great value in this app, which will drive greater usage and revenues from our systems and services.

We also announced in the conference that we have joined the consortium of leading companies that are bringing UltraViolet to the market. With ultraviolet, consumers will be able to store their digital content in a lock in the cloud and then access that content both at home and then on the go.

From our point of view, we believe ultraviolet holds at least a couple of significant opportunities. First, it will enable us to offer the consumer the opportunity to electronically purchase the movie they just watched in the hotel room for some yet undetermined additional fee.

This feature may well drive incremental viewership in the room and incremental revenue from the electronic sales through purchase. Second, our new Envision platform will enable guests to access their content from the cloud. And for some reasonable bandwidth access fee, guests can stream their ultraviolet content from their digital locker, like to the high-definition television in the room.

This will be a developing story for us over the next year, and I certainly look forward to keeping you posted on our progress.

On slide 17, you will see that we highlighted several recently conducted research studies I believe reinforce the value we bring to the hotel and to the consumer. For example, our own set-top box data reveals that our VOD service, from the point of view – if you consider all the guests that are purchasing the various VOD titles and characterize them as a TV channel, that largest VOD is the fifth most watched channel in hotels. That’s only at the main broadcast networks and a premium movie service.

We also mentioned that PricewaterhouseCoopers just put out a study on premium content consumption, and their study found that a majority of consumers rank faster access to content as the most appealing aspect of premium VOD. And as you know, our premium hotel VOD window is the earliest window after the box office.

And lastly, a recent study we commissioned show that two-thirds of all guests view hotels with an interactive television system as being superior, more innovative and modern than those that just have TV.

So we believe all of these studies reinforce the intrinsic, bottom line value that our interactive services represents to hotels and the affluent consumers that pass through their doors.

On slide 18, I’d like to pass some comments about the success we are experiencing with our new Envision software platform. This dynamic new platform connects our interactive, high definition media system to the Internet. With Envision, our goal is to enhance and deliver a great webcast experience, presenting travelers with the content and information they need for a productive and relaxing trip, whether it’s sourced from the Internet or accessed from our edge servers on the hotel property.

And we’ve designed Envision to also give hoteliers access to power of interactive television platform to drive their bottom line and overall brand experience. The system is now operating in over 5,000 rooms with representation within the Four Seasons, Hilton, Hyatt, Joie de Vivre, Kimpton and Starwood brands.

From a guest point of view, we are seeing 60% of the guests accessing the interactive system as a three-fold increase over our experience in our other high definition platform. We believe that means that guests are really appreciating the new dynamic Envision interface and the interactive information entertainment contained within the system.

From a hotel perspective, we’re approaching 20,000 total rooms under contract for the Envision software platform, and we believe Envision represents a win-win value proposition for both our hotel customers and our company. We are demonstrating that hotels can increase their revenues from driving in-room dining and outside amenities, and they can decrease our operating cost by using our evolving suite of applications. And in turn, we financially benefit from hotels paying us monthly subscription fees for the usage of those apps. You know this is basically a software-as-a-service business model.

Our basic package goes for about a dime a day, and drives about a 25% increase in the cash flow per room we generate on our standard high definition system. Right now the percentage of hotels subscribing to our Envision subscription-based apps and the average monthly subscription value are both exceeding our initial expectations.

Of the nearly 20,000 rooms under contract, over one-third of those rooms are subscribing to one or more apps, and the average monthly fee is above $3 per room per month. So we’re very pleased with this initial adoption rate and are looking forward to these Envision revenues becoming a very meaningful part of our business.

So with that operator, would you please explain the procedure for asking questions?

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) We have a question from the line of David Kestenbaum with Morgan Joseph. Please go ahead.

David Kestenbaum – Morgan Joseph

Okay. Thanks. Very good quarter and looks good too. Can you just talk about the decline in guest entertainment rooms? Have you finally worked through some of the change that were leaving your service or where could we see that heading in the future?

Scott Petersen

Yeah, David, this quarter there was a higher level of removals. Basically the bottom line is the rooms that are leaving the system, are generating around $7 of revenue per room per month. So that’s about 40% of our average revenue from a productivity standpoint. We do have one economy chain that made a decision in January to transition from the VOD and free-to-guest that we are providing to move in only to the free TV offerings and that picked up volume during this quarter.

There is a little bit more coming in the – actually another. I think it’s about – it’s 15,000 to 17,000, 18,000 rooms in fourth quarter. So in fourth, we’ll see somewhere probably in the neighborhood of what we saw in the third. I believe it’s going to be less than that, but we’re making very good progress in getting to the point now where you’re not going to see these. I don’t believe the same levels of room reductions going forward. Next year I would suspect to see a lot lower levels. But once again, they are rooms that are generating 40% less than an average room. So we are improving the qualitative base in this process.

David Kestenbaum – Morgan Joseph

Okay. And can you talk about working capital? You got a big gain in working capital in 2010. It’s hit your free cash flow this year. Can you just talk about where you see that going forward and what has been causing the main – the drivers and the changes?

Frank Elsenbast

Yeah, Dave. This is Frank. The main driver really was our accounts payable. Through the course of 2010, we did work with our key vendors and we extended the payment terms. We took our days payable outstanding probably up in excess of 100 days. And this year, we have been working that back down.

I think, year-to-date we are probably unfavorable on our working capital by over $13 million – $12 million to $13 million and I think we probably have one more quarter where you will see that swinging back. We’ve been trying to push that back into the system in a steady way throughout the year and I think that’s gone quite well and we should be done with our work by the end of this year.

David Kestenbaum – Morgan Joseph

Okay. And as you go forward, so is it going to be more on a break-even or you think you can cut deals again with your distribution partners to maybe do what you did in 2010?

Frank Elsenbast

Well, I think it would – there would be a lot less volatility going forward. If there is ever a situation where we needed significantly more cash to push through a large installation of high-def rooms, that is always going to be to a lever that we can work with our vendors on to generate some cash short-term, but certainly we want to maintain strong relationships with our vendors and we have reasonable commercial terms with them now when we get back to, sort of the standard terms, which we would be back to at the end of this year.

David Kestenbaum – Morgan Joseph

Okay. And then finally, has there may be any update with Marriott? Thanks.

Scott Petersen

The update on Marriott is we continue to serve many, many, many of their properties. We are installing our new Envision platform. Within the next 90 days, I think we’ll be in three or four different properties. So they are very, I would say, very interested in the platform and the services that we can deliver to them. Other than that it’s kind of business as usual.

David Kestenbaum – Morgan Joseph

Okay. Thank you

Scott Petersen

Thanks, David

Frank Elsenbast

Thanks, David

Operator

Thank you. (Operator Instructions) We have a question from the line and pardon if I mispronounced your name, of Johan Green with JTL Capital. Please go ahead.

Johan Green – JTL Capital

Hi, guys. So last – your press state the VOD 2.0 initiative was increasing the buy rates onto – for titles, but your guest pay revenue came in at the bottom of your guidance from last quarter, which was minus 1% to minus 6%, was in the minus 5% range. Can you explain that discrepancy?

Scott Petersen

We’re certainly within the range. We’re seeing nice improvements in the number of ticket and revenue being generated from the Hollywood titles. So that clearly is boosting our revenues. That increase, then of course blooded with the other titles we have within the system and came into that, in – around that 5% range. So it’s one of those where the quarter also, given the family travel during the summer months, we did see more, I would say, of the value titles being purchased. The 499 titles in the system, I think was removed into the – to more of the business months, which we saw when we first kicked off. I think you’re going to see stronger revenues, comparative revenues than we saw this quarter. However, I mean, this was the best comparable quarter we’ve seen for many quarters coming through this recession with lower occupancies. In hotels, they continue to be significantly below where they were in the 2007 and before.

But we are very pleased with the incremental browsing and the tickets been bought, that just makes – from our point of view, more people using a system makes it more relevant to the guests, more relevant to the hotel, and we are generating more revenue from that whole program.

Johan Green – JTL Capital

Sure. We’re trying to understand the extent to which the sort of ongoing spiraling down of guest pay revenue is associated with non-theatrical content. Is that a fair characterization that one of the things that’s going on is the MA or non-theatrical content is sort of spiraling down towards zero?

Scott Petersen

I don’t – wouldn’t characterize it as you just did. We did have positive revenue growth in the First-Run Movies during this quarter, that I would say that’s based on our marketing and merchandising efforts and a little bit of help from Bridesmaids that but – that would also mean that if you have the mature audience content continues to be on a negative year-over-year basis. I don’t think we’re seeing any significant change in trends than we’ve seen over the last several quarters. So I mean that’s if you look at the margin, it was a little bit off you know within our – on our margin slide, you would have seen, if there was conical spiraling, you would see a much, much lower margin within that space.

And I think remarkably what the team delivered actually a higher overall margin on higher revenue across all the product lines. So I think the businesses we’re keep diversifying, the mature audience content in some of the area that we’re working on quality of that content, and pricing strategies trying to maximize what we can within that space. But I think it’s a very much of a permanent offering within the hotel space. I don’t think it’s the buyer that’s necessarily out – certainly in the Internet type consumer. So overall, I think it’s the – the blend is all coming in. I think the numbers – that speak for themselves.

Johan Green – JTL Capital

So is – is there a guest pay number, sort of a monthly per room guest pay number that you think things are sort of trending toward in long-term? I mean, we have looked at negative comps here for several years. The comps are getting – the negativeness of the comps is definitely improving, but we are sort of trying to get a feed on kind of what we’re – what’s sort of the horizontal line we are sort of moving towards here. Do you have any, sort of sense of that or is it just kind of come as it does?

Scott Petersen

I think that’s something we are not going to put any data points out on. However as hotel access lift – if they continue to lift, consumer confidence also has another element to it that’s the – I don’t think the consumer psychology is overly wholesome at this time either.

So if you take those two external factors, if you got positive momentum there along with the market initiatives we have in place, I would – I – we are certainly working for overall positive increases going forward at some point in time, but really don’t want to put any hard data points out there on that specific topic.

Johan Green – JTL Capital

Thanks.

Operator

And our next question is from the line of Michael Kupinski with Noble Financial. Please go ahead.

Michael Kupinski – Noble Financial

Thank you and thanks for taking the question. I was just trying to flush out the strength in advertising and I was wondering, what were the driving factors for that?

Frank Elsenbast

Well, the significant driver in this quarter was an advertiser who partnered with us, and – came in and really launched a program with us to have customized content placed on our interactive servers in a variety of our hotels, they really started that program in the second half of this year or probably in the second quarter of this year. So there was one particular advertiser that came in and started a rather large program as well as our ongoing initiatives where we are selling ad insertion across about 330,000 rooms and direct response spots that run in our hotel rooms. So there is a number of programs that are running at all times, but I would say the – the increase versus prior year is that one particular advertiser who is doing it through the interactive server on site.

Michael Kupinski – Noble Financial

But is that – how long is that contract?

Frank Elsenbast

I think right now, it’s a multi-year contract.

Michael Kupinski – Noble Financial

It’s multi-year.

Scott Petersen

It would be just a one advertiser. There is others also on the interactive systems. I think it’s a nice blend, particularly was this one that probably made the difference but...

Michael Kupinski – Noble Financial

Right, right.

Scott Petersen

Seen some good, good response from variety of advertisers on that interactive platform.

Michael Kupinski – Noble Financial

It seems like – this seems like an undeveloped opportunity for you guys to expand a little bit. What are – what do you see as the opportunities for this category and maybe what type of metric should we look for in terms of advertising for guest or what – how would you – how would you characterize the opportunity?

Scott Petersen

Well, you know, the hotel networks, if you just focus on the 300 and some 1000 rooms that they deliver both satellite-delivered and also server-based com advertising that revenue has been between $1.5 and $2 of revenue per room, per month out of that sub base.

So our goal here is to expand the size of that base. If you just keep that – those same – those same data points and take it across 1 million rooms or 1.5 million rooms, the numbers get very meaningful for us. The great thing is, on the interactive platform, there is very little operating cost attached to it. The content’s pushed out for servers over the same satellites that we are pushing out our on-demand content. So it’s very profitable on the margin for us.

We are – this next year, we’ll also – kind of refining the interactive channels on this system. So as one of our marketing initiatives this year, going back to the base was what as we call, MOTO, it’s Menu-On-Turn-On. So the system comes up interactive, rather than just a kind of looping channel.

And we have some very distinct opportunities to put spots in a video on the window on that turn-on channel and have found some very interesting responses from advertisers for that. And then our – what we firstly called our promo channel that was just kind of trailers on the first channel up, we will be changing that to a branded channel with a reels channel which we have on our system this year, but we’ll kind of turn that into more of a channel that has distinct advertising opportunities throughout that content. So I think that gives us more opportunities to drive more revenue from these, kind of more TV-like spots, also on a very profitable basis.

So we are also looking at opportunities how can we expand the number of channels we are doing ad insertions in. Our current satellite platform has – each channels we do ad inserts in, we’re looking at strategies and how we can broaden that out to incorporate more channels and more – more ad opportunities. So I agree with your premise there. I mean, advertising is one of those areas where it is I think a very good opportunity for us. We’re trying to look at it how we do – make the best business out of it, keeping capital-intensivity to a minimum, at the same time, increasing – decreasing operating costs, all the kind of basics of business that we like to focus on.

So I think the next several years, I am looking forward to lot of growth there.

Michael Kupinski – Noble Financial

Okay, terrific. Thank you.

Operator

Thank you. (Operator Instructions).

Ann Parker

There do not seem to be anymore question. So we’d like to thank everyone again for joining us today. A reminder that replays of this call can be accessed over the next month via the Internet through our company website www.lodgenet.com. And the slides used during this webcast will also be archived on our website for your reference under the Investor section. If you have any difficulty downloading those slides, we’d be happy to send them on request. Thanks again everyone and have a good day.

Operator

Ladies and gentlemen, thank you for your participation in today’s conference. This does conclude the program and you may now disconnect. Everyone have a wonderful day.

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