Full Transcript of iVillage’s 3Q05 Conference Call — Prepared Remarks (IVIL)

Here’s the entire text of the prepared remarks from iVillage’s (ticker: IVIL) Q3 2005 conference call. The Q&A is here. We recognize that this transcript may contain inaccuracies - if you find any, please post a comment below and we’ll incorporate your corrections. And please note: this conference call transcript is a Seeking Alpha product, so feel free to link to it but reproduction is not permitted without the explicit permission of Seeking Alpha.

Executives:

Diane Smykowski, VP Finance
Doug McCormick, Chairman, CEO
Steve Elkes, CFO, EVP of Operations and Business Affairs

Analysts:

William Morrison, JMP Securities, Analyst
Youssef Squali, Jefferies & Co., Analyst
Jeetil Patel, Deutsche Bank, Analyst
Kit Spring, Stifel Nicolaus, Analyst
Jordan Rohan, RBC Capital Markets, Analyst
Richard Fetyko, Merriman Curhan Ford & Company, Analyst
Daniel Barrack, MLP Capital, Analyst

Presentation

Operator

Welcome to the iVillage Third Quarter 2005 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question and answer period.

Operator Instructions

I would now like to turn the call over to Diane Smykowski, Vice President of Finance.

Diane Smykowski, VP Finance

Thank you, Operator. Good afternoon, and thank you all for joining us today for iVillage's third quarter 2005 financial results conference call. I am Diane Smykowski, Vice President of Finance. With me today are Doug McCormick, Chairman and Chief Executive Officer; Steve Elkes, Chief Financial Officer and Executive Vice President of Operations and Business Affairs; and Jane Tollinger, Executive Vice President of Operations and Strategy.

Before I turn the call over to Doug to review the results for the third quarter, I would like remind you of the Safe Harbor provisions of the Private Securities Litigation Act of 1995. The statements made during this conference call, which are not historical facts, including future earnings guidance, are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. These risks are described in the Company's Form 10-K for the year ended December 31, 2004, as well as in other Securities and Exchange Commission filings.

The Company's presentation this afternoon is complementary to the related press release issued today announcing iVillage's financial results for the third quarter ended December 30, 2005, and certain other information. This press release was also included as an exhibit to a Form 8-K furnished today by the Company to the Securities and Exchange Commission prior to the commencement of this conference call.

Please refer to this Form 8-K, which is available on iVillage's Investor Relations website located at www.ivillage.com/investor for the financial and statistical information contained in today's presentation, together with any other information required by the SEC's Regulation G.

A replay and/or transcript of this conference call will also be available on the iVillage Investor Relations website beginning approximately one hour after the conclusion of this call.

Now I will turn the call over to Doug.

Doug McCormick, Chairman, Chief Executive Officer

Thanks Diane. Thank you for all joining us on this call. Today I'm very pleased to discuss with you iVillage's strong 2005 third quarter performance. As you know by now, we reported record revenues of $22.6 million in the quarter, with iVillage.com revenues increasing by about 80% when compared to the same quarter one year ago. We think these results reflect the strength of both our underlying business, as well as the exciting and rapidly growing online advertising market. This, combined with the solid iVillage brand and our dominance in the women's market, are the key growth drivers to our business.

We are pleased with comScore Media Metrix's October ratings which were released just today, showing iVillage's monthly unique at 15.6 million visitors. Our ranking grew from 49th to 39th most visited site on the Web.

We believe our quarterly performance shows that the initiatives we undertook during the first half of the year to build our brand and strengthen our product offering are taking hold. Our investments during the first two quarters, which included the relaunch of a more functional and user-friendly iVillage.com, and our expansion into the high CPM generating health verticals has proven to be an excellent game plan for success, creating record revenues during a traditionally challenging period.

Pharmaceutical advertisers are looking for models other than traditional media broadcast and print to connect with their most valuable customers. And iVillage is able to offer them a broad range of choices. Not only through the iVillage.com health offering, but also through the distribution model of Healthology, and the destination diagnostic model of Health Centers Online. This allows us three opportunities to capture revenue in this ever-growing and lucrative space. And in fact, some pharmaceutical companies do purchase all three entities from us.

In addition to health advertisers, we continue to add advertisers in other verticals as well. We're billing more dollars by writing bigger orders at higher CPMs, indicating the strong demand from both new and existing advertisers who are finding our editorial product and our interactive tools increasingly attractive for reaching our coveted audience.

Third quarter 2005 sponsorship and advertising on iVillage.com grew an impressive 132% over last year. And when factoring out our 2005 acquisitions, we still grew a very strong 44% when compared to the third quarter of 2004. Many of our existing advertisers opted to increase their spending, such as Procter & Gamble, for whom we're now running add programs for Crest, Tide, Dawn Direct, Clairol and Pantene. At the end of the quarter we also began to feature P&G video ads in the iVillage video environment.

In addition to Procter & Gamble, other blue-chip advertisers who made commitments during the third quarter of 2005 include Unilever, Johnson & Johnson, Kraft, General Mills, Quaker Oats, Kohl's, Amgen, Wendy's, General Motors, McDonald's and Target. Further, some advertisers have allocated nearly 100% of their six-figure plus online budgets to us. And we are proud that the strength of our brand continues to inspire this degree of advertiser confidence in iVillage.

Our year-over-year core page views saw a 9% increase, allowing for the discontinuation of some marketing alliances. During the third quarter of 2005 we delivered 367 million total average monthly page views. We are pleased with our substantial increases in billing during the third quarter, and while page views were more or less even with those during the prior year. We're also pleased with our comScore Media Metrix results for October, which as I said just released today show that we're now delivering 15.6 million unique visitors for the month of October.

This demonstrates the success we continue to enjoy at iVillage as a premium advertising environment with valuable inventory and a coveted audience that is where worth an higher than average CPM. We expect that increased traffic to our site, which already commands high CPMs, will contribute meaningfully to our financial results moving forward. And that is what we are focused on delivering.

On that front, we have identified various measures that we believe will add to user and page view growth for Q4 and beyond. We plan to employ an aggressive search engine optimization strategy, both paid and natural, while remaining focused on our top-notch editorial and multimedia content to attract users and leverage with advertisers. We also plan to relaunch some tools and editorial features, which we believe will increase the reach of the iVillage brand.

While our site redesign has resounded well with advertisers and users, we continue to work to make a few adjustments on the editorial and technology aspects of the site to be sure it conforms with the conventional search engines. This is an ongoing process that makes us stronger every day.

Also, due to the addition of Healthology and Health Centers Online, iVillage is strengthening its position as a leading provider of health information online. Our strategy is clear. iVillage is a top destination for women who are seeking health information for themselves and their families. Healthology, the number one physician sanctioned distributor of health information videos, while Health Centers Online is a diagnostic destination that answers users' questions, and helps them cope with everyday questions and conditions.

This quarter we added to our already robust health offering by launching several new conditioned specific sites, including those focused on diabetes and cancer. We believe our depth in the health vertical makes iVillage not only more relevant to our users who are looking for current health information, but also makes us more relevant to key pharmaceutical and wellness advertisers willing to pay a premium for our coveted audience.

In addition to the augmented health content, our multimedia video team has been very successful in executing on our strategy to develop and distribute original video features. As we have noted in the past, Healthology is a leading distributor of health videos. In the third quarter we actively continued to increase our video production, creating 20 consumer and professional videos.

Healthology continues to gain distribution on video sites earlier in the quarter. The Viacom Television Stations Group, which consists of 40 stations, announced it would be partnering with Healthology to provide our health content to Viacom TBS Station websites. This move shows exactly how in demand iVillage's health offering is. It also speaks volumes about our video and our multimedia capabilities.

Also, during the quarter we completed five audio shows, two multimedia features, and six original videos. We have recently completed substantial work on a new online vignette series featuring TV veteran, Dr. Bob Berkowitz. The program features experts in psychology and other fields, all focused on explaining men to women. We continue to update and upgrade the video experience on iVillage. And we're just a few weeks away from the launch of a new in page video player, which is designed to make video more convenient to view, and which we expect to increase video usage on iVillage.

Video is an extremely in demand medium and it sells at a premium. IVillage is at the forefront of this trend, and is focused on developing innovative content to suit video advertisers' needs. To further capitalize on this growing trend, we have created more visibility for video and multimedia on iVillage, through a new featured promo tout on iVillage's home page that features a daily video news story.

Another third quarter development which we plan to leverage to further expand our brands' reach is the search agreement that iVillage announced with Yahoo!, effective September 1 of this year. We are pleased to partner with Yahoo!, and believe that working together we will further enhance and customize both our users' and our advertisers' experience.

We are proud of our accomplishments during the third quarter, and believe that the Company is in an excellent position to finish 2005 on a strong note. We are already experiencing strong advertiser demand in the fourth quarter. And today we're maintaining our previous full year 2005 financial guidance on the EBITDA side.

Now I would like to ask Steve to provide you with more specifics on the numbers. Steve?

Steve Elkes, CFO, EVP of Operations and Business Affairs

Thanks Dough. Today we reported third quarter 2005 revenue of $22.6 million, approximately a 35% increase when compared to revenue of $16.7 million in the same period one year ago. Third quarter of 2005 iVillage.com revenue was up approximately 80% on a year-over-year basis. More importantly, iVillage.com sponsorship and advertising revenue grew approximately 132% for that period. Adjusting for acquisitions, third quarter 2005 iVillage.com revenue was up approximately 26% on a year-over-year basis, and iVillage.com's sponsorship and advertising through an impressive 44% year-over-year.

We feel this revenue growth translates into impressive EBITDA growth. Third quarter 2005 EBITDA of 4.2 million increased approximately 113% when compared to an EBITDA of $2 million for the third quarter of 2004. We reported third quarter 2005 net income of 2.2 million or $0.03 per share compared to net income of $1.1 million or $0.02 per share in the second quarter of 2004. We ended the third quarter of 2005 with $53.5 million in cash and cash equivalents.

I would like to provide a brief update on the acquisitions we made during the first half of year. The addition of Healthology and Health Centers Online has made iVillage a leading provider of health information online. Healthology is a leading distributor of health video. And Health Centers Online provides diagnostic information regarding every day health issues.

We're realizing the financial benefits of being a key space for lucrative pharmaceutical companies to advertise. Integration is progressing smoothly. And one recent advancement is that the Health Centers Online sales responsibilities have been consolidated into iVillage, thereby streamlining one of our key business functions.

Now I would like to go over the business outlook for 2005. For the fourth quarter of 2005 we're raising our revenue guidance, and currently expect to generate revenue between 26.1 million and $29.1 million. We anticipate reporting EBITDA between 11.1 million and $12.1 million for the fourth quarter of 2005. Additionally, we expect to report net income between 8.4 million and $9.4 million during the fourth quarter of 2005.

We continue to believe that the Company is well positioned for growth, and expect iVillage to continue to benefit from our strong sales efforts, quality brand and acquisitions. Today we're raising our fiscal '05 business outlook. We currently anticipate reporting revenue for 2005 of between $87 million and $90 million, an increase of approximately 30 to 35% in revenue as compared to 2004.

Our EBITDA outlook for 2005 remains 17 million to 18 million, an increase of about 119% as compared to 132% as compared to 2004. We also currently expect to deliver net income between 9 million and 10 million for the full year of 2005, more than triple that of 2004.

Now I will turn it back over to Doug to conclude.

Doug McCormick, Chairman, Chief Executive Officer

Thanks Steve. The second half of 2005 started off on a strong note. And we're very proud of our results, which we believe demonstrate the success of our investments in iVillage. Our site redesign and acquisitions have enhanced our product offerings, positioning iVillage as a valuable online property, delivering high-quality content to its user base, women, while delivering a targeted and highly desirable audience to its advertisers.

Furthermore, we continue to develop product offerings, in particular in the multimedia and video space, that advertisers are increasingly enthusiastic about. We remain focused on the drivers for growing traffic like search engine optimization, editorial enhancements, and original Mayfair Village video, all of which are poised to deliver enhanced value to our advertisers and incremental functionality to our users. We are pleased that our business is strong and keeps getting stronger. And that the product and the brand continue to play an important role in the Internet evolution for its users and advertisers, making iVillage "the Internet for women."

With that, Steve and I are now happy to take your questions.

Any questions?

Related:

• The Q&A from this call is here.
• All Internet Stock Blog articles on iVillage.
• A list of full conference call transcripts available on the Seeking Alpha Network.
• The complete list of Internet stocks (and links to articles about them) covered by The Internet Stock Blog.

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