LiveDeal, Inc (LVDL)

Q4 2007 Earnings Call

December 17, 2007 4:15 pm ET

Executives

John Evans - Investor Relations

Daniel L. Coury Sr.- Chief Executive Officer

Gary Perschbacher- Chief Financial Officer

John Raven - Chief Operating Officer

Analysts

Colin Gillis - Canaccord

Kenneth Smith – Lennox Equity Research

Peter Ceris – [Carula] Capital

Luigi Ravel – Sport USA

Bill Withington – RS Investments

Joe Jolson – JMP Asset Management

Presentation

Operator

Good afternoon, ladies and gentlemen, and welcome to the fourth quarter and fiscal year 2007 LiveDeal, Incorporated earnings conference call. (Operator Instructions) I would now like to turn your presentation over to your host for today’s call, Mr. John Evans. Please proceed, sir.

John Evans

Good afternoon, my name is John Evans. Thank you for your interest in LiveDeal, Inc. With me today arethe Chief Executive Officer of LiveDeal, Mr. Daniel L. Coury, Sr., John Raven, COO of LiveDeal; and Gary Perschbacher, CFO.

Some of the discussion today will involve forward-looking statements. I will now read to you the following warnings about reliance on forward-looking statements. During the course of this presentation we may discuss LiveDeal’s business outlook, which contains forward-looking statements. These particular forward-looking statements -- and all of the statements that may be made during the presentation – that are not historical facts are subject to a number of risks and uncertainties, and actual results may differ materially. Please refer to our periodic filings and Forms 10-K and 10-Q made with the SEC for more information on risk factors that could cause actual results to differ.

The important factors that could cause actual results to differ materially from the company’s expectations include, but are not limited to those factors which are disclosed under the heading “Risk Factors” and also arein the company’s documents filed from time to time with the United States Securities and Exchange Commission and other regulatory authorities.

Forward-looking statements made during today’s call are only made as of the day of this conference call, and the company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events.

This conference is being webcast and will be available on our website for replay following the call.

Now let me turn it over to Daniel Coury.

Daniel Coury

Thank you everyone for taking the time to listen to our conference call. This has been an important year for LiveDeal, Inc. We have made a lot of changes to the company since this time last year. We have united the web properties YP.com and LiveDeal.com, creating the first combined classified/Yellow Pages marketplace. This makes us a unique and important player inthe exciting and growing local Internet marketplace.

Full year 2007 earnings before write-offs was $0.52. After the one-time write-off, earnings were $0.37 per share. We hope to increase revenue and earnings per share every quarter this year and next. We have been buying back shares in the open market and the total year-to-date is over 60,000 shares at an average price of $3.80 per share. We are working through our board authorization to buy back $1 million worth at this point.

On a revenue basis, we did $7.1 million for the quarter, which represents an 18.9% increase over the third quarter of 2007. For the 12 months, total revenue was$26.4 million. We believe that we have successfully weathered the storm that started last year at this time and have made many positive changes this past year.

We continue to expand the products and traffic that will make this a first-class website for small to medium businesses to advertise on. We’re working on a model that includes revenue, more even margins and net income targets for our businesses to make it easier for you to analyze and track our progress inthe future. As revenue increases and the average revenue per customer grows, our margin should grow as we leverage our platform and costs for the larger group of customers.

We also are increasing the number of products available to our small to medium-size customers, expanding beyond just the Yellow Pages listing, expanded listings, CPC products and premium listings. We will do this with a more profitable platform that should allow us to increase our EBITDA and net income margins to bring them in line with other Internet companies.

LiveDeal’s telemarketing capabilities in our Philippines call center are proven and highly regarded within our industry. By February, our call center inLas Vegas, which focuses on LiveDeal’s premium SME marketing solutions, will be ramping up in anticipation of its move to LiveDeal’s new corporate headquarters.

LiveDeal’s headquarters, located inLas Vegas, Nevada, is state-of-the-art and will include a 96-seat call center as well as the company’s executive offices. This expanded telemarketing team now hasthe products targeted at vertical and geographic segments that make a compelling case for small business owners to advertise.

The local Internet space is finally getting the attention it deserves as more and more media companies realize that companies are willing to pay a premium to bring customers to their local Internet site and local businesses. Inthe CPC business alone, the average local click can cost two to four times what a national click costs. Currently, some estimates show that 55% of SMEs spend money on advertising and 43% of those spend online. These small and medium businesses are looking for multiple places to advertise to optimize their ad budget, and we believe LiveDeal.com represents a compelling value proposition for them.

As a trusted marketing partner for small and medium businesses, we will keep them coming back to us. Thekey to executing this strategy will be to add content to the site and expand the presence of this content across the Internet. This will be accomplished in several ways. We will target with content providers that have thousands of small business listings that, as a business asset, are being underutilized. These content providers will benefit from our expertise as we help them fully monetize their customers.

We will work to increase the number of classified listings at our site by targeting with existing companies in this key element of our business plan that LiveDeal evolves to one of the Internet’s aggregator of classified content. We will seek out partnerships with established media brands in specific targeted local areas in order to provide our classified technology platform to power these publisher classifieds and/or Yellow Pages platform.

We will continue to build out compelling content for our strongest vertical markets: autos, real estate, jobs and specifically, pets. Ultimately, thekey to success for our business will be to create users out of visitors. Consumers become habitual visitors because of the utility and value that our online media provides.

We are working on partnerships that offer small businesses without web presence a turn-key and hassle-free basic web solution to complement the marketing solutions that our IYP and classifieds provide to them. This will include a web page, URL, e-mail capabilities, premium virtual stores, and keyword advertising.

We’ll work with companies to create some cool and relevant gadgets and widgets for our site, gadgets and widgets that will not be found anywhere else on the Internet. These cutting edge tools will further enhance LiveDeal’s stickiness. It is our goal to: offer compelling products and services; optimize our sales structure and staffing; capitalize on technology and content partnerships with companies like Yahoo!, Idearc, Ingenio and others; improve user experience; grow our paid and organic traffic; and deliver ROI to our customers.

Rajesh is currently visiting our tech group inIndia and so could not be with us as a speaker on this call. He and his team continue to drive the technology needed to continue to drive the LiveDeal product roadmap. He will return to Santa Clara after the holidays.

I’d now like to turn the meeting over to John Raven, our COO.

John Raven

Thanks, Dan. As Dan talked about, we’ve been combining the operations of LiveDeal.com and YP.com into a combined classifieds and Yellow Pages platform. As we have said before, LiveDeal.com is now powering the classified and Yellow Pages to a growing number of first-tier websites like thePhiladelphia Inquirer and all of the CBS affiliates.

Our strategy is to continue to build such partnerships with leading publisher websites. This allows us to create a local community that leverages great brands with our ability to market and add value. We believe that this will help us grow our brand and our web traffic and continue to make LiveDeal.com and YP.com the local marketplace of choice for consumers and businesses.

For companies, not only will they have a Yellow Pages listing, but the opportunity to upload all their products on our classified platform online. For the consumer, they will be able to find real time products and save time and effort to see us as more than just Yellow Pages.

In addition, Yellow Pages innovative technology platform allows us to power our four principle marketing channels: directories, mobile services, classifieds and advertising distribution networks into a first of it’s kind hyper-local marketing solution for businesses and consumers. LiveDeal offers such industry leading classifieds functionality as fraud protection, identity protection, listing enhancements, photos, community building, package pricing, premium stores, featured Yellow Pages business listings and advanced local search capabilities.

LiveDeal technology also lets consumers search or browse for items in a particular city, state, or zip code and sort by distance. As a profitable, strong classifieds company, LiveDeal will continue to invest in and provide the best possible user experience to local consumers and businesses. What matters to consumers and businesses is results atan affordable cost, and we will provide that.

We have announced some of the new Web 2.0 features and functionality that we discussed on our last call. Inthe last quarter we had announced Feedback 2.0; this is the next generation of our feedback system. Consumers can search over 13.5 million local businesses such as restaurants, farmers, breeders, et cetera and rate their experience in a range from one to five. These feedback ratings will be propagated across and be visible to other consumers on the LiveDeal Yellow Pages and classifieds platforms.

Community Board 2.0 is a threaded forum allowing users to create topics and invite other community members to contribute by adding content. Over time, these forums will generate user-generated content around interesting topics and categories.

LiveDeal videos will enable businesses to upload videos of their stores and products in Yellow Pages and classified platforms. We’ve completed a unified Yellow Pages platform that will power both YP.com and LiveDeal’s Yellow Pages. In the next quarter we will add other features focused more around our mobile distribution platform.

To improve organizational effectiveness, eliminate redundancies, reduce costs and enhance the company’s overall competitive position, LiveDeal plans to complete next quarter the transition of the company’s Mesa, Arizona customer service function to its Manila call center and consolidate its corporate and customer service administrative services, IT operations and other support functions to its international headquarters in Las Vegas, Nevada. LiveDeal plans to implement a shared services concept throughout the company, thereby eliminating redundancies of staff and function. Benefits will begin to be realized in mid 2008 with a majority of savings to occur by late fiscal 2008.

The competitive advantage of this consolidation and moveare access to an experienced pool of outbound and IYP-specific salesforce; it positions LiveDeal’s offerings for further cost-selling and upselling to an existing customer. The salesforce in Las Vegas is better equipped to maximize ARPU on sales originated or upsold from the Las Vegas operation.

Live-Deal will continue to innovate and add value to consumers and businesses.

Now I’d like to turn the call over to Gary Perschbacher, our CFO.

Gary Perschbacher

Good afternoon. Net income for the 12 months ended September 30, 2007 was approximately $1.8 million versus approximately a net operating loss of $1.1 million in fiscal 2008. Earnings per share increased to $0.37 per share versus fiscal 2006 operating loss per share of $0.23. Net revenues for fiscal 2007 were $26.4 million as compared to $32 million for fiscal 2006. The decrease was primarily attributable to the Attorney General settlement which resulted inthe loss of approximately 15,000 customers.

Revenues declined inthe first three quarters of fiscal 2007 but have since increased inthe fourth quarter. Net revenues for the fourth quarter of fiscal 2007 was $7.1 million versus approximately $6.0 million in the third quarter of fiscal 2007.

Cost of services increased in fiscal 2007 as compared to fiscal 2006, due to an increase in the usage of web billing which hasa higher cost than other billing channels. We also incurred an approximate $377,000 charge to bad debt expense as one of our aggregators has filed for Chapter 11 protection.

Gross profit for fiscal 2007 was $22.1 million versus fiscal 2006 gross profit of $27.9 million. This decrease again was attributable to the higher cost of services and lower revenues. Gross margin percentages were 84% for fiscal 2007 and 87% for fiscal 2006.

Operating expenses totaled $18.8 million for fiscal 2007 as compared to $29.5 million for fiscal 2006. This represents a 36% decrease from fiscal 2006. The decrease is primarily due to decreases in compensation expense, customer service related expenses, settlement expenses, and a decrease in direct mail campaign related expenses. Again, most of this was attributable to the Attorney General settlement.

Partially offsetting the savings were increases in travel expenses which were related mostly to investor relation activities and increased amortization costs, the most significant of which were marketing and technology related intangible assets that were acquired through our recent acquisitions.

Operating income increased 313% from prior year. Income from operations in fiscal 2007 was $3.3 million versus an operating loss of $1.6 million in fiscal 2006. Again, the decrease is attributable to lower revenues offset by lower operating expenses.

Income tax provision for 2007 was $1.9 million as compared to an income tax benefit of $312,000 in fiscal 2006. This increase is primarily due to our change in pre-tax income. However, in fiscal 2007 we incurred an additional income tax expense of $500,000 due to booked tax difference and recognition of restricted stock awards as a portion of our restrictive stock grants vested at stock prices lowered than the stock price at inaudible] date, and thus the tax effect on the awards vesting were less than the carrying value of the related deferred tax assets.

LiveDeal had $5.7 million of cash on hand and $11.3 million of total working capital as of September 30, 2007. The company still has no long-term debt and shareholder equity grew to $37.7 million atthe end of fiscal 2007 as compared to $22.4 million in September. This increase was due to profitability and the issuance of shares for the LiveDeal acquisition.

Net cash provided by operations before the payment of $3 million Attorney General settlement was $4.8 million. After including the one-time settlement expense, net cash provided by operations decreased approximately $657,000 to $1.8 million for fiscal 2007 as compared to $2.4 million in fiscal 2006. Net cash used in investing activities totaled $2.2 million in fiscal 2007 and included net cash outflows of $4.1 million for the acquisition of LiveDeal and on-call subscriber management. LiveDeal had approximately $1.1million in expenditures for equipment, software and other intangibles and the company liquidated $3.1 million in certificates of deposit and other investments.

Net cash for financing activities was $310,000 and consisted primarily of repurchases of stock owned by dissenting shareholders in connection with the LiveDeal acquisition.

I’ll turn it back over to Dan Coury.

Dan Coury

Thank you, Gary.

As you can see, we had a very exciting 2007. We’re going to have an even more exciting 2008 as we became and become a solid player in the local Internet search market. At this time, I’d like to open it up to questions.

Question-and-Answer Session

Operator

Our first question comes from Colin Gillis – Canaccord.

Colin Gillis - Canaccord

Good afternoon, everyone. Gary, with all the strides that LiveDeal has made over the last year, a lot of other players are talking about setting up their own call centers and pursuing direct marketing to local businesses. Do you expect to see more competition coming forward in 2008?

Gary Perschenbacher

Yes, I expect there to be more competition. But there is one thing: that is very, very difficult to make a call center profitable and working. We’ve worked through some unbelievable testing and trials to get to the call center we have now. We are absolutely not worried about us getting our share. It’s a large market out there and we’re already set up to be able to do it.

John Raven

I’d like to add to that. Having a call center is not the only ingredient you need. There are several barriers to entry. One is the salesforce, the call center component. Then there’s the technology platform, then there’s the Internet component and being able to unify and monetize each of those into a business model such as ours is not an easy task, not to mention the types of agreements that you have to have in place in order to successfully execute on that type of business plan. Those areall going to be significant barriers to entry; we’ve got roughly five to ten years experience in several of those areas.

Colin Gillis - Canaccord

Great. Just looking atthe RKV, you’ve got a pretty healthy number going on there. Any color as to the direction of where that can go inthe next year or so?

Gary Perschbacher

Well, we are, right now atthe present time, putting together the model for that, but we are not giving any forward-looking statements. As you can see from where we are inthe past quarter, we have been making progress. One thing we have been saying publicly is that we will continue to be profitable while we invest into the structure and platform of this company going forward.

Colin Gillis - Canaccord

Got it. But in terms of the monetization levels, could you give us any color as to whether that can lift forward, or whether pricing pressure is going to cause that number to pull back?

Gary Perschbacher

I don’t see anything pulling us back.

Operator

Your next question comes from Kenneth Smith – Lennox Equity Research.

Kenneth Smith – Lennox Equity Research

Are these results audited or not? On your statement it says they are not, but I would assume they would be since they are year end. Can you answer that?

Gary Perschbacher

Please repeat that question?

Kenneth Smith – Lennox Equity Research

The financials that you report today, are they audited or not? On the report it says unauditied.

Gary Perschbacher

The attachment to the press release shows as unaudited because the 10-K has not been released. It should be released inthe next day or so.

Kenneth Smith – Lennox Equity Research

That’s the only thing missing then?

Gary Perschbacher

Yes. Because we changed auditors, we had two years from our prior auditor and they need to review theK and issue a report. I should have that later this afternoon.

Kenneth Smith – Lennox Equity Research

Okay. Can one of you reconcile the revenue you reported to the 81,000 Yellow Pages listings customers? When you dothe math, it comes out to about $1 million higher than the net revenue. Is that because this is really the gross revenue that makes up this monthly amount?

Daniel Coury

Right. We dothe ARPU, average revenue per unit, on a gross basis.

Operator

Your next question comes from Peter Ceris – [Carula] Capital.

Peter Ceris – [Carula] Capital

I ama little confused, so maybe you can help me get unconfused. First, just so I understand the numbers, I know you said that you are not giving guidance, but you said somewhere in there that the coming quarters would be better than the past quarters, or something like that? I just want to understand what you said about that, first.

Gary Perschbacher

Yes, what we plan on doing is continuing to be profitable while we invest inthe company, and we do not see a pulling back.

Peter Ceris – [Carula] Capital

So that means you expect higher profits, theoretically higher profits, inthe coming year than you had in this year? Is that what I heard, or am I misreading that?

Daniel Coury

No, you are not misreading that, but like I mentioned and spoke with you about, we are doing a lot of investing in our platform, going through 2008.

Peter Ceris – [Carula] Capital

So whatever big earnings bump you were going to get would be 2009, not 2008?

Daniel Coury

We are gearing everything so we can ramp up at the end of 2008 even more, with all of the investment that we are doing into 2008 into our platform, but we will stay absolutely profitable while we do that.

Peter Ceris – [Carula] Capital

There area lot of moving pieces here; there is what I call the original Yellow Pages business; there is the call center business and then there is the Live Deal business. Is there any way to figure out where the earnings are coming from and which is which? How do I look at that?

Daniel Coury

Let me help you with that. There is one company, which is LiveDeal.com, that hasthe YP.com URL also, so that as you are going to see inthe next coming quarter, you are going to see how this is becoming more and more blended together. Our marketing will be for taking care of the small and medium businesses. A lot of them now are asking for CPC, cost per click. Some of them want a complete spread of their entire products out there.

We are going to give the service, including the Yellow Pages ad, their mini webpage, so it is all one, which is services to the small businesses. We will be expanding on that. Now if you say, which one is going to draw more revenue than the other? It is sort of all together, because by offering this, as a company needs additional services, they are going to be coming back to us because of the service we gave them. So really, It is a service provider on the Internet for small and medium businesses.

Peter Ceris – [Carula] Capital

So should I be looking for higher numbers of customers/advertisers? Should I be looking for higher average monthly ticket per advertiser? What are the measures that I should be looking for? Because if I listen to you, with what you are investing and what you have got, looking atthe earnings now, if things work you should make a lot of money in 2009. Is that a reasonable view?

John Raven

That is a reasonable assumption. The components, to add to what Dan was talking about, it is really three areas. One is the monthly subscription base, which is currently averaging at about $30 a month per user. We plan to add to that, and we have exactly, by the way, 1.0 products per customer. We hope to expand that over the course of the business plan to a point where we have 2.5 to 3.0 products per customer, on average, so we are going to geta bump there.

The other bump we are shooting for is related to the RKV question earlier, the increased monetization. We are adding components such as traffic generation, a reselling of traffic and partnering with distribution, and then revenue shares with partner sites where we distribute our content with other large brands. Soall of those together, combined, should have an effect of lifting the revenue in multiple ways.

Peter Ceris – [Carula] Capital

But those areall ways of basically lifting the revenue per customer, per subscriber, whatever way you want to express that.

Daniel Coury

For a specific measurement, you should see over time an increase inthe average revenue per unit.

Peter Ceris – [Carula] Capital

Right. Will we be seeing, in your view, is there also a goal to see an increase in that 83,000 or in the number of businesses using the service?

Daniel Coury

You’ve got to understand, we are increasing the number of users of the service because of the classified platform also, and this is a number that is going to increase, in addition to others. We would like to seethe bottom line revenue grow, but we will be growing it in every area, specifically the classified area to bring more traffic and use to the site. In turn, there will be growth, most likely in every category. Now the percentage of that growth is something that we will be able to test and see as we move forward through ’08.

John Raven

Then to add to that, if you recall earlier inthe discussion, we had mentioned an increase in average listing price, so that is a specific metric you probably want to track over time. The customer ASP increase over 10% from third quarter of ’07 to 405 from 369 the year before on an annualized basis, so that is an example of a metric you could use to track over time.

Peter Ceris – [Carula] Capital

Is there any way to figure out – I mean, there areso many moving pieces here. My gut tells me you make a lot of money. I can’t figure out how to doan earnings model.

Gary Perschbacher

That’s what we are working on, as Dan mentioned.

Peter Ceris – [Carula] Capital

When do you think it will beat a point where some sort of semi-educated person like me could figure this out inan easy way?

Gary Perschbacher

Very soon. We are working on it, we would just like to make sure that we have the model tested and working before we give it out; but it won’t be long.

Operator

Your next question comes from Luigi Ravel – Sport USA.

Luigi Ravel – Sport USA

Great job, great quarter. What do you think is going to bethe savings incost on the lease term that you have, moving all of those facilities from one; closing up theMesa one and combining the new facility with the old one?

What percentage of lease, what are you going to pay on a monthly basis?

Daniel Coury

There area couple of ways we are going to be saving – we will save, straight off the bat. That is probably going to be anywhere from $30,000 to $80,000 per month. But that is not the real savings completely. Being closer to the true telemarketing-trained people that can dothe upsell, that is going to be very large in this transition.

Also, we are within an hour to an hour-and-a-half of our engineering in Santa Clara, so we have already had this going on, where people can come down for a day and work with our sales crew so that everything is working in unison together as a team, so this is working out very well because it is quick for a day trip. Soall the way around there are going to be some good savings that will help our profitability.

Luigi Ravel – Sport USA

I am very pleased that you mentioned you repurchased some shares, around $1 million worth of stock, that is very good news for me, I really appreciate that. Do you have, in the future, any other vision to purchase more shares with the cash that we do have?

Gary Perschbacher

We have been authorized by the board of directors to buy back $1 million worth. Whether they are going to authorize to do more is something that the board of directors will be discussing, but thank you very much on that.

Operator

Your next question comes from Bill Withington – RS Investments.

Bill Withington – RS Investments

What is fully diluted shares number?

Secondly, since we are almost done with the quarter, maybe without giving guidance, just current trends? Are things like the ARPU still trending in the right direction? Are you still tracking to your goal of adding a net 5,000 Yellow Pages customers per quarter?

Gary Perschbacher

In terms of shares outstanding it is roughly 4.7 million.

Bill Withington – RS Investments

That is the fully diluted number?

Gary Perschbacher

Right.

Bill Withington – RS Investments

What was the 6.7 million number?

Gary Perschbacher

We have a restricted stock program, unvested shares. You have to look atthe unvested amount as proceeds and you end up buying back those shares on the open market, that is why it is lower than the 6.7 million that is normally out there as outstanding shares.

Bill Withington – RS Investments

So the real number is 6.7 million?

Gary Perschbacher

Right. The real number is 6.7 million; with the buyback, we are going to be down around 6.6 million real soon. That is the trend of where it is at today. Everything else is progressing well. We are doing a large focus now, going forward, on our classifieds listings. We expect them to go up quite a bit. Whether the Yellow Pages goes up at exactly 5,000 or whether we have surges on that or less, we are not saying; but we are saying that this quarter I am feeling fine, let’s just put it that way. These numbers will be out soon. We are not including in some of that some of the numbers we are getting from our classifieds and so on. It is looking good.

Bill Withington – RS Investments

I heard a couple of different things on the call. One I heard we are going to continue to be profitable while we invest inthe company; that could mean that you earn a penny next year. Then another time I heard that you are going to earn more in ’08 than you earned in ’07, which would imply greater than $0.37 per share.

Which is it? You are going to be profitable and maybe only make a couple of pennies this year, or you are going to earn more than you earned in 2007?

Gary Perschbacher

We plan on investing a lot in this company, atthe same time staying profitable equal or in excess – probably in excess – of last year.

Bill Withington – RS Investments

Okay, so you are going to earn $0.37 or more in fiscal ’08.?

Gary Perschbacher

That’s the plan.

Bill Withington – RS Investments

Thank you.

Daniel Coury

Thank you all very much. We really do – do we have another question?

Operator

Yes, we have one more question inthe queue from the line of Joe Jolson – JMP Asset Management.

Joe Jolson – JMP Asset Management

I was a little confused with the last question as well. Did you say earlier that you thought that each quarter would be higher than the previous quarter?

Daniel Coury

Yes, revenues should continue to grow. Yes.

Joe Jolson – JMP Asset Management

That was for revenues, not necessarily for earnings?

Daniel Coury

That is correct. Gross revenues should continue to grow and we don’t plan on doing anything negative with our earnings, but we do plan on continuing to grow our revenues.

Joe Jolson – JMP Asset Management

Was $0.13 the operating number in the fourth quarter?

Gary Perschbacher

Would you repeat that question again, please?

Joe Jolson – JMP Asset Management

Well it says in the press release non-GAAP earnings were $0.13. I assume that bad debt reserve is non-recurring.

Gary Perschbacher

There were some expenses in there; for instance, there was $1 million for a direct mail campaign in October which obviously wasn’t carried forward inthe remainder of the year due to the Attorney General settlement. And then there was $377,000 charge for bad debt expense for the Chapter 11 filing of one of our aggregators.

Joe Jolson – JMP Asset Management

But just looking at $0.13 as the run rate, is that fair?

Gary Perschbacher

I am sorry, I am having a difficult time hearing you.

Joe Jolson – JMP Asset Management

$0.13 is the run rate?

Gary Perschbacher

Basically, yes.

Joe Jolson – JMP Asset Management

And you expect the top line to grow without anything crazy on the expense side. Wouldn’t the number to look at –

Gary Perschbacher

-- having to invest in our future, for 2009 and we are putting together a model as to what our expenditures are going to be. We don’t anticipate it dropping, but we are investing for 2009.

Joe Jolson – JMP Asset Management

I just want to be clear – when you say that you expect earnings to be higher than they were a year ago, are you talking about $0.37 or $0.52?

Gary Perschbacher

Higher than the $0.37.

Joe Jolson – JMP Asset Management

Okay, the difference between the two though are things like this bad debt reserve though, right?

Gary Perschbacher

Yes, that is correct. There was some in there and it will all come according to how much we invest inthe company and which of the verticals that we are beginning to market take off quicker than others. We know what is working, some we will be ramping up sooner than others. That is why we are not saying that it is going to be “how much” higher at this time as we put our model together for going forward, but we definitely plan on it being higher than last year.

Operator

We show no more audio questions.

Daniel Coury

Thank you all very much, I really do appreciate it. We look forward to talking to you again on our earnings call inthe next quarter. Thank you.

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