Leaf Group Ltd.
Q3 2014 Earnings Call Transcript

Published: 11 Nov 2014

[Operator:]

Good day, everyone. And welcome to the Demand Media Fiscal Third Quarter 2014 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. David Glaubke. Please go ahead, sir.

[David Glaubke:]

Thank you, operator. And good afternoon, everyone. On behalf of Demand Media, welcome to our third quarter 2014 conference call. You can find our related release, along with supplemental materials, posted on our Investor Relations section of our corporate website located at ir.demandmedia.com. On the call with me today are Sean Moriarty, our Chief Executive Officer and Mel Tang, our Chief Financial Officer. Following the Safe Harbor statement that I will make, Sean will update you on our business. Mel will then provide details on our third quarter financial performance and key operating metrics. Following the prepared remarks, we will open up the lines for Q&A. Before we get started, we need to make the following Safe Harbor statement. We'd like to remind everyone that during today's conference call, management will make certain forward-looking statements, which are subject to various risks and uncertainties that could cause actual results to differ materially from our current expectations discussed in such forward-looking statements. In particular, comments about our anticipated future revenue, earnings, operating expenses, operating metrics and growth rates, as well as statements regarding our business strategy and objectives, plans, intentions, operating outlook and planned investments are considered forward-looking statements. Factors that could cause actual results to differ materially from anticipated results are detailed in our press release furnished to the SEC. I'd like to point out that during this call we will discuss certain non-GAAP financial measures while talking about the company's financial and operating performance, including adjusted EBITDA, adjusted EPS and free cash flow. A reconciliation of these non-GAAP financial measures to their most directly comparable GAAP measures can be found in the tables included at the end of our press release. Lastly, before we begin, I'd like to remind everyone that today's conference call is being recorded and it is also available via webcast on the Internet through the Investor Relations section of our corporate website. A replay will be available on our website. And with that, I'll now turn the call over to Sean Moriarty, our CEO.

[Sean Moriarty:]

Thank you, David. Good afternoon and thank you for joining the call today. This is my first earnings call with you and I've been looking forward to sharing my observations from my first three months at Demand Media. I'll spend some time talking about our priorities as we build the company. A little background for those I haven’t met. I have almost two decades of experience in consumer Internet businesses, including serving as the CEO of Ticketmaster and most recently CEO of Saatchi Art. I couldn’t be more excited to bring operating experience to Demand Media, a company with brands and audiences in the large and growing passion categories. As I mentioned I am very new to the business. I have spent my time here digging in meeting with people and learning as much as I can as quickly as possible. Demand Media is a top 25 consolidated desktop web property in the US, and eHow is the 34 most trafficked web domain. As such, we are well positioned in categories people care deeply about. Demand Media holds a top 10 position across seven categories, including eHow ranking number two in home Home & Garden, and number three in Personal Finance. CRACKED holds a number position in the humor category, as part of the CollegeHumor/Cracked Network, while LIVESTRONG is number five in Health and Wellness. Society6 and Saatchi Art together have a community of more than 250,000 artist and designers across the globe. This is a great place for us to be. We have a foothold in growing global categories that people are passionate about and we are building robust platforms that allow creators to reach these audiences. It’s exciting to see the quality of content that our community of writers and photographers are capable of creating. We must ensure that our brands are high quality destinations, where consumers trust that the information they are getting is authentic and accurate and where creators can connect with people who care deeply about their work. As we execute across our businesses, our top corporate priority is making eHow into the great product we know it can be and should be. We are well underway with this push for quality and will remove $1.8 million underperforming articles in Q4, focused again on high quality rather than breadth for breadth sake. By the end of 2014, we anticipate more than 50.000 articles will be substantially improved by rewrites made rich with great visuals. Furthermore, as we strive to create the best experience we can we have removed two ad units with the third unit to be removed completely by January 1st. While we anticipate negative revenue impact from these renewals, we know it’s the right thing to do to create a valuable and sustainable property. Looking to Q4 and beyond, we will continue to make strides at eHow by investing in mobile, expanding distribution and diversifying traffic sources and greatly improving content quality. As we've talked about on previous calls, LIVESTRONG and CRACKED have seen improvements with this push to ever higher quality over the last couple of quarters. In Q3, LIVESTRONG focused on community engagement, the mobile experience with enhancements to the MyPlate app the redesign of the mobile home page. Because of the work we've done on community, we've added an average of 120,000 new registered users per month in Q3 surpassing 1 million mark for the year. CRACKED continues its commitment to high quality content with the release of its most popular web series to date entitled Starship Icarus and continues to product updates to mobile and native advertising and is enhancing community features. Newer to demand's portfolio, our Saatchi Art and Society6 market place commerce sites with passionate artists and designers creating high quality original artwork and designs. On Saatchi Art we have more than 50,000 artists from over 75 countries and we have sold art works to collectors in 80 countries. With over $1 billion in marketplace inventory consisting of more than 400,000 unique works, art collectors can find an extraordinary selection among our highly curated collections. At Society6, we have more than 600,000 members on the platform with more than 1.7 million images that can be printed on-demand across a myriad of physical products. iPhone cases showed strong sales this quarter with a 60% increase from iPhone 5 cases in 2012. For both Society6 and Saatchi Art, we have seen steady growth in memberships, artists and artwork up loads. As we execute our mission to empower artists and to provide expertly curated environment, and an unparalleled selection of original work and design products, Saatchi Art and Society6 are leading the way with new products and programs to grow the market for art and design online. Today we have some key announcements regarding leadership. Our CFO, Mel Tang is leaving Demand Media by the end of the year. He will continue consulting through a system to transition the company's finance function through March 2015. Mel has served the company very well for eight years and we wish him the very best as he pursues other opportunities. We're pleased to welcome Brian Pike as our new Chief Technology Officer who comes to us from Rubicon Projects. I've had the pleasure of working with Brian when we were both at Ticketmaster and Citysearch. He is a high impact leader and will drive our engineering efforts across our brands. We've also expanded the role of Julie Campistron, EVP Media to oversee eHow and content solutions in addition to her oversight of Pluck and Demand Studio. Julie is been doing great work for Demand Media over the years and I have been very impressed with her leadership, focus and commitment to win. I couldn't be happier that she will be leading the charge to execute our vision for eHow. On the Marketplace side, Scott Boecker, who came to Demand Media from Saatchi Art is now our EVP and GM of Marketplaces. He is working closely with both Society6 and Saatchi Art as our teams work together on platform development, best practices for artist communities and driving brand awareness. Finally, we've elevated Daniel Weinrot into the position of General Counsel. As Senior Vice President of Legal, Daniel led much of our corporate work over the past several quarters, including the Rightside spin off and acquisition of Saatchi Art. As we built out our leadership team, we will make sure that our people have the resources, direction and support to build a business we're proud of. With strong strategic leadership, inspired product development and sharp focus on operational excellence we will build indispensable platforms for creators to reach passionate audiences and simultaneously build leading consumer brands in extremely valuable lifestyle categories. I'll now hand the call over to Mel to discuss our financial results.

[Mel Tang:]

Thank you, Sean. Q3 was a busy quarter for us. As you know, we successfully completed spin off of Rightside on August 1st, which is now trading on the NASDAQ under the ticker NAME. We also completed the divestitures of CoveritLive and Creativebug for $20 million in aggregate consideration, of which approximately $14 million of cash was received in Q3. Also in the quarter, we acquired Saatchi Art and have been focused on integrating this unique art marketplace. And as Sean mentioned, we are aggressively moving forward with the right investments, particularly on eHow Content Solutions and our Marketplace's businesses to return the company to sustained growth. Before I discuss our financial results, I wanted to highlight our new reporting framework for the standalone Demand Media business. Going forward, we will be disclosing revenue and key metrics for two service offerings; Content Media and Marketplaces. Our Content & Media service offering is comprised of advertising, subscription and other revenue generated on or by our online properties such as on eHow, Livestrong.com and CRACKED. Content & Media will also include advertising, content licensing and content sales revenue from our Content Solutions business. Key drivers for Content & Media business are visits and RPV or revenue per thousand visits. Our Marketplaces service offering is comprised of revenue from our artist marketplaces, Society6 and Saatchi Art. Marketplace's revenue includes both product revenue from the sale of products, primarily on S6, as well as service revenue from commissions on sale of original artwork on Saatchi Art. Key drivers for this business are number of transactions and average revenue per transaction. Now let's discuss in detail our third quarter results. Please note that on a reported income statement the partial quarter contribution from Rightside prior to spin is netted into discontinued operations line, so all the other line items are presented on a standalone basis. Our 930 balance sheet will also be representative of standalone Demand Media, but our cash flow statement will contain cash flow items relating to Rightside prior to spend. I will highlight these as appropriate in my commentary. Onto our results, total revenue was $41.3 million, down 19% year-over-year, driven by the cumulative impact of traffic declines to key properties in particular eHow and are shipped away from direct display advertising. This was partially offset by Society6 revenue growth. Adjusted EBITDA was $8.1 million, primarily reflecting the impact of traffic declines on higher margin revenue, as well as a mix shift to lower margin Marketplaces revenue. Free cash flow were $3.1 million, reflecting lower adjusted EBITDA and negative working capital from Rightside, partially offset by lower fixed asset CapEx, and lower investment in intangibles. As I mentioned, we will be breaking out our revenue for Content & Media and Marketplaces businesses. First, in our Content & Media business, year-over-year Q3 revenue decreased 26% to $33.6 million comprised of the following. Visits of 1.1 billion, up 20% driven by mobile visit growth across all of our online properties, as well as desktop visit growth across our international properties Livestrong.com and Content Solutions Partner properties. This growth more than offset declines in desktop visits to eHow and CRACKED. RPV or revenue per thousand visits of $31.91, down 38% year-over-year, primarily due to lower ad monetization yields, some of which, which resulted from our strategic reduction in higher yielding direct sold display advertising, as well as a mix shift to lower monetizing visits from mobile and international users. Next in our Marketplaces business, Marketplaces revenue was up 38% year-over-year to $7.7 million, reflecting an increase of 38% and the number of transactions to 143,000, driven by new product introductions and the increased conversion of visits to purchases on Society6 and average revenue per transaction of $54.18, which was consistent with the same period last year. Turning to consolidated operating expenses, Q3 GAAP operating expenses were $281 million, which includes non-cash goodwill impairment charge of $232 million that we recorded due to a combination of factors, including revenue declines from lower traffic and monetization yields to certain Content & Media websites that led to a revision of future cash flow expectations coupled with the company's market capitalization remaining at a level significantly below the book value of its net assets for a sustained period. Excluding depreciation, amortization stock-based comp and goodwill impairment charges total operating expenses were $33.7 million, down year-over-year on an absolute dollar basis, but up eight percentage points as percentage of revenue driven by higher product costs related to Society6 sales coupled with lower overall revenue. However, all of our other operating expense items were lower year-over-year on an absolute basis and up only two percentage points as a percentage of revenue. Specifically, slightly lower service costs due to lower ad serving and decreased new content expenses partially offset by an increase in content renovation costs. Lower sales and marketing expense due to our strategic decision to transition away from direct display advertising sales, as well as a reduction in marketing activities, lower product development expense due to reduced headcount as we streamline some of our operations and lower G&A expenses, primarily due to decreased legal, personnel and random facilities related expenses, which takes us to Q3 cash flows. GAAP cash flow from operations was $1.3 million reflecting lower adjusted EBITDA, payments related to spin off and realignment activities, Rightside working capital outflows and the timing of other working capital payments. Free cash flow, defined again as GAAP cash flow from operations excluding spin off and realignment payments, less capital expenditures and investment intangibles was $3.1 million in the quarter. However, we estimate that our standalone free cash flow was approximately $5 million, as approximately $2 million of cash outflows were related to Rightside working capital and CapEx. A Brief update on our balance sheet and liquidity, at September 30th we had $113.2 million of cash and equivalents and $73.8 million of term loan under our credit facility. As such our balance sheet remains healthy with $39.5 million in net cash today. As Sean mentioned, our top priority is returning eHow to growth and we are aggressively moving forward with our plan. Through Q3 we have invested $1.1 million in content renovation costs and expect approximately another $1 million in Q4 and $2 million to $4 million in the first half of next year. In addition to these up front costs related to auditing a substantial portion of our content library, we are also making changes to improve the user experience, such as taking down a large portion of content that are not up to our current standards and removing three ad units to make our pages less cluttered and more user-friendly. These changes are expected to have a negative impact on revenues and adjusted EBITDA of approximately $15 million on an annualized basis. In addition to the investment on eHow, we will also be investing in our Content Solutions and Marketplaces businesses. As Sean discussed, we believe there is a tremendous opportunity to build upon or unique assets to pursue very large and growing markets. We expect to reinvest all the growth from these businesses in order to extend our market reach and continue building the necessary infrastructure for scale. As a result, our revenue and adjusted EBITDA will be lower over the next several quarters. We are confident that we have adequate liquidity from our balance sheet to fund the investments necessary to deliver long-term revenue growth and margin expansion. Before we move to Q&A, we announced today that I will be leaving Demand Media at the end of the year to pursue another opportunity. It's been an incredible experience for me personally and professionally and I wanted to thank everyone with whom I've had the privilege of working alongside over the past eight years. I'll be working closely with Sean and team over the next few months to ensure a smooth transition. Operator, please open the line for Q&A at this time.

[Operator:]

Absolutely. (Operator Instructions) And your first question will come from Brian Fitzgerald with Jefferies.

[Unidentified Analyst:]

Hey, guys. Thanks. This is Sachin [ph] sitting in for Brian. A couple of questions. The first is, when you think about the opportunity for growth in Content & Media revenue, where do you think you had the biggest opportunity today? And then the second is, can you just sort of parse for us, I mean, the pricing impact seems rather large, down 38% year-over-year, and I know some of that is deliberate move to programmatic advertising. But can you just sort of parse for us maybe by property where the kind of the biggest impacts are on a pricing basis? Thanks.

[Sean Moriarty:]

Hey, it’s Sean Moriarty. I'll take the first question, and I'll have Mel take a second. There is no question in our mind that getting eHow back on a path to growth is the single largest opportunity within media. We’re talking about a business that spans really large categories. We have significant position from an audience perspective and we focus on product quality and content quality you know, we expect to see those results you know pan out over the course of the next nine to 12 months, and doing that well should bear meaningful fruit.

[Mel Tang:]

On your second question about pricing. What we've seen in the last quarter or maybe a little bit longer is just sustained declines in CPC trends. You know, both to eHow and Livestrong not necessarily inconsistent with what we're seeing or what's been reported by other players out there. But if you look at visits or you know the mobile mix is growing which has lower CPM associated with it and then also on desktop we're seeing compression on the pricing line as well. So you know, when you ask about the impact of pricing, it really is coming from you know what we are seeing as just lower CPCs out there, not inconsistent with what others have been reporting.

[Unidentified Analyst:]

Okay. Thanks a lot.

[Operator:]

And moving on next we will hear from Sameet Sinha with B. Riley.

[Sameet Sinha:]

Yes. Thank you very much. Sean, I guess a question to start off with you. Your background has been in e-commerce and transactions and now you are the leader of a company which has a Content & Media apart from the Marketplaces business. How do you see these two business units kind of work together? What are the sort of synergies that we should expect and in terms of your marketplaces experience, do you see any of that being transferable to the Content & Media side and then I have a couple of follow up questions.

[Sean Moriarty:]

Sure. Well, you know so I guess I'm you know known for my time at Ticketmaster, but before that going back several years, I actually started an Internet business on the content side with Citysearch. So in some ways, I am actually back to my roots in both Content and Commerce here at Demand Media. You know, I would say that, what unites our businesses, whether it's on the Marketplace side of the business or the Content & Media side of the business, is that we are building platforms for communities with creators to reach passionate audiences. And so, while modernization methodology is different, i.e. if you are a content creator looking to reach audience in a vertical you know – most popular mode of modernization is clearly ad supported, whereas, if you are a painter on Saatchi Art looking to reach a large audience, the monetization opportunity for you is to sell the physical good. But again, the common threat it runs through all of these businesses is our ability to create platforms for these creators to reach audiences that they would otherwise be unable to on their own, and if we do that very well then kind of the natural course of monetization should be what drives the business and allows us to be successful from a commercial perspective.

[Sameet Sinha:]

Okay. Thank you. Now in terms of the ad units that you were removing from your pages, can you talk about that in more detail, what is your own ad units or these are third party ad units. And also in terms of adding more ad units while you have you know, pursue your path to programmatic, what should we be expecting over the course of the next few quarters?

[Sean Moriarty:]

So, let me take the first part of that and I'll let Mel get into the particulars. We know that, if you are overly dense with respect to ads, it comes at the expense of the user. And on a go forward basis, we are going to ensure that we're building great product experiences for consumers. Number one, it's the right thing to do. And, number two, we know that sites that have ad density that's too high, not only are they offending audiences in near term, you are penalized with respect to where you show up in search indexes as well. And so it is the right thing do and clearly kind of overly dense ad treatments cost you substantially in the long-term.

[Mel Tang:]

Yeah. And in regards to the ad units, I think these are ad units that the users certainly won't miss. In line ad unit is one that we took down in this quarter. We're also taking down the – sometimes you see the related content ad units at the bottom, which sometimes are hit or miss. We felt that was detracting from the user experience and there is another kind of 160 ad unit that cluttered our modules a little bit. So those are the three that we're looking at that detract from that user experience and makes for, you know, something that is not up to where we want that site to be.

[Sameet Sinha:]

Right. So, where do you – I mean, from looking out from here Sean, how should we think about, so you're removing a few ad units, you are pursuing a programmatic – the growth in the programmatic direction you know, as your brand advertising is going. So what are some of the advertising ad units or initiatives, native advertising that you will be pursuing, if you could talk about that that would be helpful?

[Sean Moriarty:]

Sure. I do want to take you back to what really is job one for eHow which is quality. Because without quality you know all of the optimization and innovation around advertising is frankly not worth the effort. And if we focus that corpus of content and make sure that consumers are getting great articles and audience comes back to eHow again and again because it's being satisfied, we will be able to build a strong and growing business off the back of that. So I think that's the most important thing. From a standpoint of advertising innovation and revenue models, there is no question, one of the great things for me to learn coming in was really our capacity to produce really high quality content and you know, with the content solutions for third party brands I think there are significant opportunity. And I also think over time you'll see us play around with different models beyond advertising. If we have high quality content that's highly appealing to people we think that there is a premium product that's perhaps subscription [ph] based. All of that though is down the road and is after we've established a basis of quality where we can look at it, we're proud of it and we know that it stands out and it’s differentiated from the competition with eHow. It's got to be about quality first.

[Sameet Sinha:]

Right. My final question, I mean, on the same lines in terms of improving the quality of the content you also spoke about traffic diversification in your prepared remarks. How do you think these two kind of dovetail with each other? I mean, with improved quality content, reduced ad units, is there a certain proxy that we can use about how traffic will improve? Do you have any sort of initial data points on some of the cleaning activity that you have done or maybe you could even go back to LIVESTRONG and give us some examples?

[Sean Moriarty:]

Yes, I think LIVESTRONG is, I think by far the best leading indicator, just given all the work that has gone into it. And as we mentioned last quarter, we saw a good step up in late Q2 that has continues to sustain. And then we're seeing you know better consumer engagements from user registrations and that sort of thing. And so I think the best thing to track overtime again is, obviously kind of visits on a macro level, but internally we are looking at a number of different community type that, everything from time on-site, to user interactions, to where people are clicking. But you know ultimately what we want do is, ensure that no matter how people get there, you know, we are sort of at the top of mind, when you get to the site and when they get to that site, it's the best quality out there.

[Sameet Sinha:]

Great. Thank you very much.

[Operator:]

And from Needham we'll hear from Laura Martin.

[Mel Tang:]

Hey, Laura.

[Laura Martin:]

Can you hear me okay, Mel?

[Mel Tang:]

I can. How are you?

[Laura Martin:]

Very good. Hi, Sean. Hi, Mel. I got a bunch of questions. Mel I am sorry to see you go, I've got to say that. I want to talk about free cash flow first. So when I look at the cash flow statement which I understand includes right media, the cash flow went from like $18 million to $1.3 million. And if I think about Mel the shift to the $5 million of cash flow for you guys standalone this year, is that like $10 million to $15 million below last year's third quarter that cash flow - free cash flow number?

[Mel Tang:]

It is. And as I think the other thing you should look at as well is you know, if you look at the EBITDA movement, right, year-over-year, that cash flow from ops, which I think is the number that you are quoting. You tend to follow that and when you look at free cash flow, the only judgment that we make is for, kind of, spin costs, which were fairly spin cash costs, which were fairly heavy this quarter.

[Laura Martin:]

And so that just sort of leads me to my question for Sean, which is we're going through this sort of dramatic strategic shift, and I'm wondering about the relative margins between like a Studio6 stuff that we’re shifting towards and margins at eHow, which were quite high and LIVESTRONG. Do you feel that the normalized margins for the businesses we're moving towards are as high or higher than the businesses we’re leaving behind?

[Sean Moriarty:]

I think, so if you look at the Marketplace businesses, these are businesses that are very early, but should have good solid, kind of, consistent with Marketplace commerce businesses at scale as they grow into themselves over time, right. And so that’s we're relatively early in the life cycle. They're both early, but growing nicely. And so I think the margins there are healthy and category consistent. If you compare it to Media businesses at scale, you'll see higher EBITDA margins, I guess, in the purest form for maybe the companies with the biggest and best scale. I would say on a blended basis, if you are looking at, kind of, overall health of the business, I feel very good about the fact that we can operate leading content properties that have good healthy media EBITDA margins and we have a substantial forward opportunity in art and design with good solid market place margins. So I feel very good about that.

[Mel Tang:]

The only thing I would follow up with on, I think you mentioned these businesses we're leaving behind, I don't think that that's probably the right way to characterize it. If anything, we're putting a lot of time and effort and resources into ensuring that these content media businesses get back to where they were and that will obviously get margins back up. But I wouldn't characterize anything that we're doing here as leaving them behind.

[Laura Martin:]

Okay. Let's just build on that with of course my next question which is this $230 million Mel that you just wrote off, I am presuming what that is, is that's the amortized or capitalized I should say eHow content that we now think is sort of valueless and that's why we're writing it off because we had…

[Mel Tang:]

No. No, no, I want to make this distinction very clear. There was no asset impairment. This was a goodwill impairment. And so the background for that is this quarter after we spun was the first time we had a stock market cap that correlated with the standalone business. And so unlike prior quarters even right before the spin where you see some volatility and even in the market getting back to net book value here at stay below our net book value on a sustained basis. So you know when that happens you compare your fair market value against our net assets. And in fact, when you look at the content assets and the ongoing cash flow attributed to this content library that basically implies that your goodwill gets written off. So you know, it is not an asset write off and it’s not a write down of the content library. In fact, it really is just kind of a realignment against market cap and our net book value.

[Laura Martin:]

That's very helpful. And then last question for Sean, video and mobile. So it feels to me like sort of the text internet and basically the desktop is sort of dead and the future is with video and with mobile, specifically smartphones actually. So I'm really interested in how you think about the dovetailing of the sort of art and design strategy into how that sort of dovetails with your video and mobile strategies?

[Sean Moriarty:]

Yeah, so a great question. We're certainly moving into a world which is not just characterized by you know mobile ubiquity, but richer interactions. And you know we have an awful lot of work do to be fair on both the mobile side and the video side. I can –certainly if you look at eHow you know that is, when you think about do it yourself content, the more complex and physical, for example a task is, the more likely you can be useful serving the user with very rich video. So it's early, you know. I am three months in. But we're going to be fully flushing out that video strategy in a much deeper mobile strategy you know over the course of the next couple of quarters. But I would go back to this fundamental bed rock of quality that we have to have which is a wonderful video strategy with you know our core text based content that's not up to snuff is not a foundation that we should be building on. So it is essential that that core content we're providing not only for eHow, but every one of our businesses is at a very high standard. This is not about kind of breadth or for breadth sake. It's about really useful content that fundamentally makes a difference to user in the sustainable long-term.

[Laura Martin:]

Thank you, guys. Very helpful.

[Sean Moriarty:]

Thanks, Laura.

[Operator:]

(Operator Instructions) Moving on, we will hear from Doug Arthur with Evercore ISI.

[Doug Arthur:]

Yes, thanks a lot. Mel, I kind of cut out when you were going through the impact of some of the culling that you’ve been doing. I think you mention a figure. Did you say revenue decline of $15 million and over what period was that, could you just clarify that?

[Mel Tang:]

Yes, sure. So when Sean mentioned that we're taking down $1.8 million articles, as well as removing some of the ad clutter on eHow, that is a annualized impact to revenue and, of course, that flows down to margin of about $15 million.

[Doug Arthur:]

Okay. And then…

[Mel Tang:]

Take down…

[Doug Arthur:]

I’m sorry. Take down, in which quarter?

[Mel Tang:]

This quarter. And, of course, that gives no benefit to any potential improvements as a result of those take down, which obviously is the goal.

[Doug Arthur:]

And in terms of RPV, I mean, it's been chunking down at a pretty fast rate as you mentioned, the mobile obviously that's been sense [inaudible] broad range of where that might bottom, or is that as the mixed shifts it's hard to tell?

[Mel Tang:]

I think with the mixed shift it definitely is little bit hard to tell, and you hope to see more CPC start to pick up and converge a little bit better, because we also are seeing, as well as others I think compression on the desktop CPC side. So those two things are really driving down our effective CPMs, the mixed shift notwithstanding.

[Doug Arthur:]

Okay, great. Thank you.

[Operator:]

And next we'll hear from Sameet Sinha. [B. Riley]

[Sameet Sinha:]

Yes. A couple of follow-up questions. Now, in terms of the way you're reporting now, do you – will you be providing a sense of trending statement as to new sort of ways you want us to model your revenues transaction growth RPV data of that sort? And secondly, do you have a sense of where free cash flow would end up for the fourth quarter or for the full year 2014?

[Sean Moriarty:]

So on the trending schedule, you know, we've been posting supplementals up to our IR sites. We have respun those supplementals in this format back through Q1 of 2013, so that should allow people some insight into trending and modeling. As for free cash flow guidance for the whole year, I think we don't necessarily give guidance on the full year and it's clouded a little bit by the inclusion of Rightside for basically seven months out of this year. So, it makes it a little bit harder to go back and break out all those cash flows. One proxy you might be able to use is just to look at our consolidated filing less the Form 10 and their recent queue as a proxy. But it's quite difficult I think for us to go back and necessarily parse out all the different cash flows for the year.

[Sameet Sinha:]

Okay. Thank you.

[Operator:]

At this time, there are no other questions in the queue. I'll turn it over to management for any additional or concluding remarks.

[Sean Moriarty:]

I just want to thank everybody for the call and we'll keep you informed as we make progress.

[David Glaubke:]

Thank you very much. We'll see you next quarter.

[Operator:]

And ladies and gentlemen, that does conclude today’s presentation. We do thank everyone for your participation.