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OpenTable (OPEN)

Q3 2012 Earnings Call

November 01, 2012 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

Paul Judd Bieber - BofA Merrill Lynch, Research Division

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

Andrew Ruud - Morgan Stanley, Research Division

James Cakmak – Telsey Advisory Group

Andrew D. Connor - Piper Jaffray Companies, Research Division

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

Presentation

Operator

Good afternoon, everyone, and welcome to the OpenTable Third 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 third quarter 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

Great. Thank you, Tiffany, and welcome to our conference call, everyone. Before I begin, I want to say that I hope those who have been affected by the hurricane are safe and on the path to recovery. We have a lot of our customers who have been negatively impacted by Hurricane Sandy, and we're working very hard to do whatever we can to help minimize the effect and get them back up and running as soon as possible.

Now let's review the third quarter results. OpenTable had a strong third quarter. Revenue for the quarter totaled $39.7 million, a 16% increase over last year. And in the third 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 27 million in the third quarter, a 26% increase over last year. And worth noting, approximately 32% of the seated diners in North America in the third quarter originated on a mobile device.

To add some additional context to our seated diner growth, during the third quarter, North America industry diner counts were essentially flat year-over-year.

Turning to our installed base of restaurants in North America, we exited the quarter with 18,975 restaurants, representing a 17% year-over-year increase. This total includes 16,642 restaurants using our core electronic reservation book product, or ERB, and 2,333 restaurants using our Connect product, which is designed primarily for walk-in restaurants that accept reservations.

In international, which includes the U.K., Germany and Japan, seated diners grew to 2.3 million in the third quarter, a 30% increase over last year.

Looking at our installed base of international restaurants, we exited the third quarter with 7,385 installed restaurants. This total includes 3,192 ERB restaurants and 4,193 Connect restaurants.

Now I'd like to provide you with a few updates on the business. We continue to see a significant shift to mobile, which we view as a long-term positive for a couple of reasons. First, our primary and fastest-growing source of revenue is reservation transactions, which monetized well in mobile devices. And second, mobile puts the OpenTable solution in the hands of diners wherever and whenever they're thinking about dining out.

To capitalize on this shift, we need to make sure that our products and consumer experience are optimized for virtually any platform and form factor. By accelerating our pace of development and continuously iterating the consumer experience, we believe we can make a positive impact on the growth of our user base and mobile conversion rates. We have a lot of work to do in this area, but we've made some great progress over the last few months.

Most recently, we launched an initiative that we view as a win-win-win for restaurants, diners and OpenTable. The new service provides our restaurant customers in the U.S., the U.K. and Canada with 3 mobile-friendly websites. The service is designed to help restaurants benefit from the growth of mobile by making it easy for diners to navigate and book reservations on restaurant websites using their smartphones. Only an estimated 10% of reservation-taking restaurants have mobile-optimized sites today, so we believe we can play an important role in improving the mobile experience.

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