Quepasa Corporation (NYSE Amex: QPSA) Investor Presentation May 2011


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Quepasa Corporation (NYSE Amex: QPSA) Investor Presentation May 2011

  1. 1. The Leading Online Social Network & Game Platform for the Latino Community<br />Investor Presentation<br />May 2011<br />
  2. 2. Important Cautions Regarding Forward Looking Statements<br />Certain statements in this presentation and responses to various questions may contain forward-looking statements. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects” and similar references to future periods. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you therefore against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements include changes in the public’s approach to social networking needs, competition, our ability to continue to enrich our website to attract users, unanticipated failure to reach our users, our users willingness to use the games and purchase enhancements, currency fluctuations, our ability to hedge risks, the development of payment systems outside of the U.S. and unanticipated factors which cause us not to collect our accounts receivable.<br />Further information on the Company’s risk factors is contained in its filings with the SEC, including the Prospectus dated February 15, 2011. Any forward-looking statement made by the Company in this presentation speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.<br />The contents of this presentation are copyright Quepasa Corporation 2010 & 2011. All rights reserved.<br />
  3. 3. Key Stats: QPSA (NYSE Amex)<br /> 72% Growth Sept-Apr 2011<br />1 Shares basic: as of 5/11/11 per 10-Q; Fully diluted: Co. Est. Sources: Capital IQ, & Yahoo! Finance<br />
  4. 4. What we do…<br />Leadingonline social network and game platform, focused on the Latino community<br />35.6M User base, growing at ~2M per month, fueled by one of the fastest growing web demographics (Latino/Lat. American)<br />Initiating monetizationphase – generated significant revenue growth in 2010<br />One of few known publicly traded social networks (other being RENN)<br />Undervalued on a $ per user basis when compared to other recent relevant social network transactions (i.e., Facebook, RenRen,Twitter)¹<br />¹Acquisition of Tuenti by Telefonica for $93MM (source: El Pais, 8/4/10), implying $14/user; Facebook valued at $125/user (source: Lou Kerner, Facebook $50 Billion Valuation; QPSA valued at $5.60/user (fully diluted as of 5/11/11)<br />
  5. 5. Social Media Landscape<br />74% of the world’s Internet users regularly visit a social networking/blogging site 1 <br />Facebook is the global leader: estimated 500M+ users 2 and $1B in revenue, driven primarily by advertising & promotions 3 <br />Social networks targeting specific verticals/geographies continue to emerge<br />Given their unique ability to message among connected users, social networks have become irresistible to marketers looking for more effective ways to deliver advertising & promotional messages<br />U.S. Monthly Time Spent on Most Heavily Used Internet Sectors (in millions of hours)* <br />*Source: Nielsen, Apr 2010<br />1The Nielsen Company, “Asia Pacific Social Media Trends,” July, 2010 <br />2 The Nielsen Company, “Social Networks/Blogs…”, June 15, 2010<br />3InsideFacebook.com, March 2, 2010.<br />
  6. 6. Brazil ranks top in social networking usage: <br /><ul><li>86% of Brazil Internet users regularly use social media sites (#1 worldwide) 1
  7. 7. 50% of Brazilian Internet users regularly post messages on social networks 2
  8. 8. Brazilian social network users on average have 231 friends and connections (#1 worldwide) 2</li></ul>Momentum in Quepasa’s Brazilian user base:<br /><ul><li>Brazil accounted for ~25% new users so far in 2011
  9. 9. Quepasa.com has been ranked the fastest growing social network in Brazil on a percentage basis 3
  10. 10. Mexico is 2nd largest source of growth</li></ul>Latin American Target Market<br />1 The Nielsen Company, “Social Networks/Blogs…”, 6-15-2010<br />2 Financial Times, 10-10-2010<br />3 Facebook Gold, Sept 2010<br />
  11. 11. Latin America Virtual Goods Economy<br />Social gaming showing strong momentum<br /><ul><li>Global social gaming market worth ~$1.5 billion in 2010; to climb 167% to ~$4 billion by 20151
  12. 12. In-game virtual goods revenue in Latin America expected to double from $336M to $624M by 20142
  13. 13. Latin American social game users over-index vs. other regions in online spend for virtual goods
  14. 14. Average Lifetime Value of loyal gamer: </li></ul> $300 in Latin America vs. $258 in North America 3 <br />Latin American Competitors<br /><ul><li> Vostu – Publisher
  15. 15. Mentez – Distributor/PaymentProcessing</li></ul>¹ Source<br />1Research and Markets, Jan 2011: The Future of Social Gaming2Superdata Research 20113 Source: Social Gold<br />
  16. 16. Unique Positioning<br />Quepasa combines the best of the social web in an <br />authentic Latino environment ...<br />Social Communication <br />Social Discovery<br />Social Gaming <br />… serving the US, Latin America and around the world<br />in English, Spanish and Portuguese.<br />
  17. 17. Strong User Growth & Site Activity<br /><ul><li>35.6Mtotal registered users
  18. 18. Added 6.4Mnew members in Q1-11
  19. 19. 51.2M unique visits in Q1-11, up 168 % on YOY basis
  20. 20. Currently adding ~70K+ new members/day
  21. 21. Page Views Per Returning Visit in April: 30.7 up 80% y-o-y and 25% m-o-m</li></ul>QPSA 9<br />
  22. 22. Quepasa.com’s Highly-Favorable Demographics<br />Strong Traction Across all Latin America<br />Relative Growth in Brazil <br />24%<br />15%<br />6%<br />55%<br />Brazil<br />Mexico <br />US<br />Mostly across the rest of Spanish speaking world<br />Source: Facebook Gold, September 2010<br />KEY DEMOGRAPHICS<br />60% Male<br />Age: 18-43 <br />
  23. 23. Quepasa Primary Revenue Sources<br />Advertisement<br />Micro Transactions <br /><ul><li> Distributed Social Media (DSM)
  24. 24. Performance based pricing
  25. 25. Leverage QP viral tools
  26. 26. Social game ad placement
  27. 27. Agency/Brand $
  28. 28. Social games on Quepasa.com
  29. 29. Publish on 3rd party platforms
  30. 30. User payments: ARPU</li></li></ul><li>Viral Advertising Revenue Model <br />Quepasa DSM is a proprietary cross-platform distributed social media advertising solution, i.e., across Facebook, Twitter, Myspace, others<br />Enables advertisers to target Latinos across major social networking sites by leveraging the user’s use of viral widgets, blogs and sharing tools to spread the brand message<br />Contest winners are selected by who most effectively shares ad content with friends and family across the web<br />Provides real-time ROI metrics at a low cost per impression<br />Viral Advertising Across Major Social Networks of the World Wide Web<br />Quepasa DSM Core Platform<br />Sharing across social web and via email <br />
  31. 31. Quepasa DSM Case Study:SEAT Exeo Automotive Launch<br />First DSM campaign sourced through Sony reseller channel generated record engagements across the social web<br />Summary Results<br />Total Engagements: 13,417,102<br />Sponsor: SEAT (Volkswagen subsidiary)<br />Duration: 6 Weeks <br />Campaign Dates: 1/21/11- 2/28/11<br />Total Views: 12,023,287<br />Total Shares: 1,363,341<br />Total Votes: 14,993<br />Total Comments: 14,033<br />Total Entries: 1,448<br />Engagement Ratio<br />1:9,265<br />Each entry generated on average 9,265 other engagements (views, votes, comments shares, etc.)<br />
  32. 32. New Quepasa DSM Reseller Agreements in Q4-2010<br />Grupo Expansión<br />Sony Pictures TV Ad Sales<br /><ul><li>A division of Time Inc. and largest Print/Digital Magazine Publisher in Mexico
  33. 33. Reaches 11M viewers/users monthly
  34. 34. First Quepasa DSM print-to-digital cross-platform expansion
  35. 35. Print/digital ad package provides print advertising linked to online promotions
  36. 36. Online promotions “Powered By Quepasa” iFrame ─ drives traffic to Quepasa DSM
  37. 37. 16 print properties & 7 Internet sites:
  38. 38. Premier ad sales company in Latin America
  39. 39. Ad base of >31M Latin American Households
  40. 40. First integrated, cross-media platformexpansion of Quepasa DSM
  41. 41. Cable TV/Internet ad package ─ broadcast-linked to online promotions
  42. 42. Online promotions “Powered By Quepasa” iFrame drives traffic to Quepasa DSM
  43. 43. 9 cable TV networks + on air & digital assets:</li></li></ul><li>Micro Transaction & Social Gaming Revenue Model <br /><ul><li>Quepasa to leverage Social Gaming’s proven ARPU model
  44. 44. 30% of installs become active users1
  45. 45. 1.5% become paying users1
  46. 46. Average ARPPU - $10/month1
  47. 47. Uniquely positioned to act as both a game platform and game distributor:
  48. 48. Monetization layers established in Brazil and Mexico via PlaySpan,PagSeguro, Tutudo and Mentez.
  49. 49. Acquired Brazil-based XtFtgames/TechFront
  50. 50. Published Wonderful Cityon Quepasa.com and Orkut so far, Facebook by month’s end.</li></ul>Proprietary Games <br />& 3rd Party IP<br />Quepasa.com<br />3RD PARTY PLATFORMS<br />PUBLISHER<br />DISTRIBUTOR<br />1Source: PagSeguro (UOL) – BrazilgamemonetizationonOrkut<br />ARPPU = Average Revenue Per Paying User<br />
  51. 51. XtFt Games/TechFrontAcqusition<br />Earn-Out Targets <br />Quepasa Games Team Will Earn 1/3 of 250,000 Shares Per Revenue Target Reached*<br />Acquired XtFt Games S/S XtFt Games, owner of TechFront Studios, based in Curitiba, Brazil.<br />Closed March 2011; renamed ‘Quepasa Games’<br />41 full-time, highly experienced game developers<br />Founded 2006, began developing social games for Google’s Orkut in 2010 in partnership with various international publishers. <br />Provides means to offer & monetize culturally relevant social games for Quepasa.com and other networks (Orkut, Facebook), and eventually to mobile users in Latin America<br /><ul><li>Currently publishing Wonderful Cityon Quepasa.com and Orkut, Facebook by end of May, two additional titles to follow in 2011.</li></ul>Net consideration: $3.7M¹ in Quepasa stock, plus potential earn out of up to 250K shares per revenue targets (see chart) ($300K transaction fee also paid)<br />*See Form 8-K/A filed with the SEC Jan 28, 2011 for complete earn out terms and stipulations<br />1 determined by Quepasa’s average closing price over a 10 day period.<br />
  52. 52. 2010 Financial Highlights Fiscal Year Ended Dec. 31, 2010<br /><ul><li>Revenues: $6.1M vs. $536K in 2009
  53. 53. EBITDA: totaled $26K in 2010 vs. loss in 2009 (See important discussion about EBITDA, a non-GAAP financial measure, and a reconciliation to GAAP in the appendix of this presentation)
  54. 54. Cash & equiv. Dec. 31, 2010: $13.5M, vs $1.0M in 2009
  55. 55. Signed DSM & website development contracts in 2010 totaling $7.3M ($5.7M recognized as GAAP revenue in 2010, remainder of $1.6M to recognize in 2011)
  56. 56. Generated 11.4M engagements across six DSM campaigns initiated in 2010; exceeded target engagement goals on all six campaigns
  57. 57. Added 19.6M Quepasa.com members in 2010, up 239% from 5.8M added in 2009</li></li></ul><li>2011 Financial Highlights For the First Quarter Ended March 31, 2011<br /><ul><li>1Q11 Revenues: $2.2M vs. $322K in 1Q10
  58. 58. Up nearly 600% year-over-year
  59. 59. Up 21% sequentially from $1.9M in 4Q10
  60. 60. GAAP EPS 1Q11: ($0.10) vs. ($0.21) in 1Q10
  61. 61. Sequential improvement from ($0.13) in 4Q10
  62. 62. EBITDA: a loss of $357k in 1Q11 vs. loss of $830k in 1Q10
  63. 63. Sequential improvement from a loss of $441k in 4Q10</li></ul>(See important discussion about EBITDA, a non-GAAP financial measure, and a reconciliation to GAAP in the appendix of this presentation)<br /><ul><li>Cash & Cash Equivalents: $12.3M at 3/31/11, vs. $13.5M at 12/31/10
  64. 64. Decline from 4Q10 primarily associated with cash usage associated with the acquisition of XtFt and its initial game development</li></li></ul><li>Comparative Per User Valuations<br />
  65. 65. Senior Management<br />
  66. 66. Key Take Aways<br />Quepasa is an online social network, focused on the Latino community<br />Large & fast-growing membership base fueled by one of the fastest growing web demographics (Latino/Latin American)<br />Only known publicly-traded social network<br />Undervalued compared to recent transactions¹<br />Monetization beginning via Quepasa DSM & Games<br />Strong management team: 50+ years combined experience in social network, web-based and technology businesses<br /> 72% Growth Sept-Apr 2011<br />¹Acquisition of Tuenti by Telefonica for $93MM (source: El Pais, 8/4/10), implying $14/user; Facebook valued at $125/user (source: Lou Kerner, Facebook $50 Billion Valuation; QPSA valued at $5.60/user (fully diluted as of 5/11/11)<br />
  67. 67. Contact Us<br />Company Contact<br />Brian Harvey, VP of Capital Markets and Investor Relations<br />Tel. 1-310-801-1719<br />brian.harvey@quepasacorp.com<br />
  68. 68. Appendix<br />
  69. 69. Quepasa Board of Directors<br />Board of Directors<br /><ul><li>John C. Abbott – CEO and Chairman of the Board
  70. 70. Alonso Ancira – Chairman of Altos Hornos de Mexico
  71. 71. Lars Batista – Head of Tech at EBX group, Director at IdeiasNet
  72. 72. Mal Jozoff – Former Chairman and CEO of Dial Corp
  73. 73. Ernesto Cruz – Former Managing Partner of Deloitte & Touche (Mexico)
  74. 74. Jill Syverson Stork – Professor of Spanish Lit at Wellesley College
  75. 75. Lionel Sosa – CEO of MATT.org, Founder of Sosa, Bromley, Aguilar & Associates</li></ul>Advisory Board<br /><ul><li>Keith Rabois – Paypal, YouTube, LinkedIn, Yelp, Slide, Square
  76. 76. Kevin Hartz – Paypal, Flixter, Xoom, Eventbrite
  77. 77. David Sacks – Paypal, Geni, Yammer
  78. 78. Michael Nicklas– Univision.com, IdeiasNet</li></li></ul><li>Growth Strategy Summary<br />Distributed Social Media provides diversification from traditional advertising driven models <br />Social gaming monetizes user base with a proven ARPU model in a rapidly growing market<br />Competing by adapting to a post-Facebook environment<br />Unique positioning <br />& differentiated branding continues to fuel growth<br />
  79. 79. Closed $13.1 Million Private Equity Offering on Dec. 21, 2010<br />Quepasa sold 1,753,329 shares of common stock at $7.50 per share for net proceeds of ~$12.6 million<br />Primary use of proceeds :<br />Expansion of social gaming platform (including through acquisitions)<br /> Facilitate continued development of gaming IP<br />Other general corporate purposes<br />Benefits:<br />Allows accelerated investment and growth within the social gaming market<br />Includes launching and monetizing culturally relevant social games within a Quepasa premium gaming channel<br />Publishing these games on alternative audience networks <br />
  80. 80. Interactive Marketing Spend<br />
  81. 81. About the Presentation of EBITDA<br />EBITDA is not a financial measure calculated and presented in accordance with U.S. generally accepted accounting principles (“GAAP”) and should not be considered as an alternative to net income, operating income or any other financial measures so calculated and presented, nor as an alternative to cash flow from operating activities as a measure of the company’s liquidity. Quepasa Corporation defines EBITDA as earnings (or loss) before interest expense, income taxes, depreciation and amortization, including amortization of non-cash stock-based compensation. Other companies (including the company’s competitors) may define EBITDA differently. Quepasa presents EBITDA because it believes it to be an important supplemental measure of performance that is commonly used by securities analysts, investors and other interested parties in the evaluation of companies in a similar industry. Management also uses this information internally for forecasting and budgeting. It may not be indicative of the historical operating results of Quepasa nor is it intended to be predictive of potential future results. Investors should not consider EBITDA in isolation or as a substitute for analysis of results as reported under GAAP. See “Reconciliation of GAAP Income (Loss) to EBITDA (Loss)” in the chart to the right for further information on this non-GAAP measure and reconciliation of GAAP Income (Loss) to EBITDA (Loss) for the periods indicated.<br />