Full Press Release Details
for standing by. Welcome to the Atrinsic Third Quarter Financial
Results Conference Call. At this time, all parties are in a
listen-only mode. Following the presentation, instructions will be
given for the question and answer session. If you require assistance
at any time, please press star, followed by the zero. If you are
using speaker equipment, you will need to lift the handset before pressing the
now like to turn the conference over to your host, Mr. Landon
Barretto. Please go ahead, Landon.
compliance with SEC requirements, I must read the following
statement. Except for historical information, the matters discussed
in the conference call are forward-looking statements that are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those set forth in the forward-looking
statements. The factors that could cause results to differ materially
are included in the Company's filings with the Securities and Exchange
Commission. Forward-looking statements made during today's call are
only made as of the date of this conference call, and the Company undertakes no
obligation to publicly update such forward-looking statements to reflect
subsequent events or circumstances.
we have narrowed our focus and business into two primary units and separate
operations: the Atrinsic Interactive agency, and what will become Kazaa, a
digital entertainment subscription service.
expand on the agency first, as it's oftentimes overlooked within our overall
business. Atrinsic Interactive provides search engine optimization
and marketing, brand protection, and affiliate sales and distribution for our
client services and products. This group of talented personnel has
and continues to operate essentially separate and independent from all other
activities. Over the course of the past year, we have seen a change
in this landscape as well as our business. Prior to this year, too
much of our business was too heavily dependent on a very few select and limited
group of customers. Our services, skill sets, and personnel, while
providing what was considered best-in-class, was too limited in differentiation
and difficult to scale and expand. Over the course of the year, we
have taken great strides and invested in custom toolsets and developing a
platform with key vendors to better serve our customers in a very competitive
and ever-changing environment. These steps we have taken have allowed
us to better service our accounts as well as expand our margins, and we believe
it is becoming a much more sustainable and diversified business.
this has manifested results in lower revenues through 2010 as compared to 2009,
we have seen over the past few quarters a 20 to 30% increase in our gross
margins and a much more robust and meaningful offering of services to our
clients. We feel that the business is or will be in a position to
grow in 2011 with little or no increase in its required working capital to
sustain itself, its growth or its activities as we look to expand that side of
Kazaa, we are in the process of completing a restructuring to fully focus and
integrate the assets and activities with the extension of our agreement with
Brilliant Digital Entertainment. We provide marketing back end
support and billing services for Kazaa, and it is our expressed intent to
ultimately acquire those assets, IP and content licenses to own and operate what
is now known as the current Kazaa music service, all of which we have just
announced this past October.
also announced today our plans to move and consolidate all principal activities
and operations for the North American service to a single location here in New
York, which we are currently underway in implementing. As we speak,
we have already initiated many of these steps necessary and will look to have
most of the migration of personnel completed and in place by the end of this
year or within the current quarter, with some remaining activities to be
completed in the first quarter of next year. This consolidation, in
addition to significantly reducing our current operational costs globally by 30
to 50%, we believe will make us a much more efficient organization and allow us
to be more deliberate and rapid in our approach to North-to the North American
market as well as achieve higher proficiency and quality in our product
development, our product releases as well as our marketing
activities. In short, we'll be much closer to our customers, a much
leaner and nimble organization from which to build and compete in a rapidly
this transition, there obviously has been and will be an impact on performance
and growth. Specifically in Q3 as well as through the end of this
year, we have and will significantly reduce our customer acquisition activities
and the marketing of our current service. It should also be noted
that during the same period, we have limited our growth and revenues, and we
have increased our focus on the product and the manner in which the service is
delivered, and we have begun to focus more keenly on our customers' user
experience, how and where they get access to their music, and how they want
it. We believe we have and are making significant, if not tremendous,
gains in this area. We have had three significant releases in the
enhancements to our website and the service over this past summer from which we
have seen a very positive response from our customers and can be directly
measured by a decrease in our churns or customer cancellations and an overall
increase in customer retention. These are very encouraging and
welcomed and needed changes to our service in the manner in which we
traditionally approach the market and conduct our business. What we
have learned and begun to build over the course of the last year will enable us
to be in a position to aggressively grow entering into 2011.
been developing and planning a significant push into all things mobile, and
expect to be making significant releases and expansions into this rapidly
growing segment within the first quarter of 2011, specifically, mobile
applications and optimized browsers for all major mobile operating systems, such
as Android, Wind, RIM, Windows Mobile 7, and, yes, the iPhone and iPad, as well
as traditional WAP-supported devices. We recognize that the current
landscape in the music subscription business in the direct consumer digital
marketplace is extremely competitive and it's rapidly
changing. Customers are increasingly more educated, ever more
discerning, less forgiving about what they want, and where and how they get what
they get what they want. But herein lies our greatest opportunity in
a vastly emerging and exciting market and this is where we have begun to make
our investments and position ourselves to succeed.
we've experienced a lot of turnover and change in the course of the past 18
months. These changes have not come easy but have been
necessary. Since the beginning of the year, we have or will have
reduced our internal headcount from roughly 140 to a target of just over 60 by