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OpenTable (OPEN)

Q4 2012 Earnings Call

February 07, 2013 5:00 pm ET

Executives

Tiffany Fox - Communications Director

Matthew J. Roberts - Chief Executive Officer, President, Director and Member of Equity Incentive Committee

I. Duncan Robertson - Chief Financial Officer, Principal Accounting Officer and Secretary

Analysts

Aaron M. Kessler - Raymond James & Associates, Inc., Research Division

Stephen Ju - Crédit Suisse AG, Research Division

Andrew Ruud - Morgan Stanley, Research Division

Andrew D. Connor - Piper Jaffray Companies, Research Division

Kaizad Gotla - JP Morgan Chase & Co, Research Division

James Cakmak - Telsey Advisory Group LLC

Jason S. Helfstein - Oppenheimer & Co. Inc., Research Division

George I. Askew - Stifel, Nicolaus & Co., Inc., Research Division

Paul Judd Bieber - BofA Merrill Lynch, Research Division

George A. Kelly - Craig-Hallum Capital Group LLC, Research Division

Heath P. Terry - Goldman Sachs Group Inc., Research Division

Presentation

Operator

Good afternoon, everyone, and welcome to the OpenTable Fourth Quarter Earnings Results Conference Call. This call is being recorded. With us today from the company is President and Chief Executive Officer, Matt Roberts; Chief Financial Officer, Duncan Robertson; and the Senior Director of Corporate Communications, Tiffany Fox.

At this time, I would like to turn the call over to Tiffany. Please go ahead.

Tiffany Fox

Good afternoon. Thank you, and welcome to the OpenTable earnings conference call. Joining me today to talk about our fourth quarter and full year 2012 results are Matt Roberts, our President and CEO; and Duncan Robertson, our CFO.

Before we begin, I would like to take this opportunity to remind you that during the course of this conference call, management may make forward-looking statements, including guidance regarding our expectation of future financial performance, which are subject to various risks and uncertainties that could cause actual results to differ materially from our current expectations. A discussion of such risks and uncertainties is contained in our filings with the Securities and Exchange Commission, and we refer you to these filings.

Also, I would like to remind you that during the course of this conference call, we may discuss some non-GAAP measures in talking about the company's performance. Reconciliations to the most directly comparable GAAP financial measure are provided in the tables in the press release. This conference call is also being broadcast on the Internet and is available through the Investor Relations section of the OpenTable website.

And now, I'll turn it over to Matt.

Matthew J. Roberts

Thank you, Tiffany, and welcome, everyone, to our conference call. This afternoon, I'll provide you with a high-level overview of Q4 and full year 2012 performance, and then I'll turn it over to Duncan to walk you through the detailed financials.

OpenTable had a strong fourth quarter. Revenue for the quarter totaled $43 million, a 16% increase over last year. And in the fourth quarter, our adjusted EBITDA profit margin was 44% on a consolidated basis and 52% in our North America business.

Now let's take a look at our key metrics by geography. In North America, which includes the U.S., Canada and Mexico, seated diners grew to 30 million in the fourth quarter, a 21% increase over last year. And worth noting, in the fourth quarter, approximately 33% of seated diners in North America originated on a mobile device. To add some additional context to our seated diner growth, during the fourth quarter, North America industry diner counts were down of 0.5% year-over-year. As anticipated, Hurricane Sandy contributed to this decline.

Turning to our installed base of restaurants in North America, we exited the quarter with 19,801 restaurants, representing a 15% year-over-year increase. This total includes 17,206 restaurants using our core Electronic Reservation Book product or ERB and 2,595 restaurants using our Connect product, which is designed primarily for walk-in restaurants that accept reservations.

In our International segment, which includes the U.K., Germany and Japan, seated diners grew to 3 million in the fourth quarter, a 35% increase over last year. Looking at our installed base of international restaurants, we exited the fourth quarter with 7,716 installed restaurants. This total includes 3,287 ERB restaurants and 4,429 Connect restaurants.

Looking back at 2012, we made strong progress expanding our network of both restaurants and diners as evidenced by our North American market penetration. As a reminder, we estimate that our North America addressable market for ERB is 35,000 restaurants. Based on this addressable market, our ERB penetration grew from 44% at the end of 2011 to 49% at the end of 2012.

In addition, we believe that there are approximately 20,000 potential customers in North America for our Connect product, which was introduced in May of 2010. Based on this addressable market, our Connect penetration grew from 9% at the end of 2011 to 13% at the end of 2012. Based on this total addressable market of 55,000 reservation-taking restaurants, our penetration was 36% at the end of 2012.

Now let's turn to our seated diner penetration. For 2012, we estimate that the total number of diners seated through reservations in North America in both ERB and Connect target restaurants was approximately 740 million. Based on this addressable market, our seated diner penetration grew from 12% in 2011 to 15% in 2012.

In addition to providing our annual update on North America, for the first time, we're providing estimates of our addressable market and penetration for the U.K. We estimate that our U.K. addressable market for ERB is approximately 10,000 restaurants. And for Connect, we estimate that our U.K. addressable market is approximately 5,000 restaurants. Based on this addressable market of 15,000 reservation-taking restaurants, our penetration was 27% at the end of 2012.

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