Good day, ladies and gentlemen. And welcome to the Angie's List Third Quarter 2012 Earnings Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session with instructions to follow at that time. (Operator Instructions) As a reminder, today's call is being recorded. I’d now like to turn the conference over to your host for today, Ms. Allise Furlani. Ma'am you may begin.

Welcome to the Angie's List third quarter earnings call. As a reminder, today's discussion will include statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including predictions, expectations, estimates or other information that might be considered forward-looking. Throughout today's discussion, we'll present some important factors relating to our business, which may potentially affect these forward-looking statements. While these forward-looking statements represent our current judgment, these statements are also subject to risks and uncertainties that may cause actual results to differ materially from statements made today. As a result, we caution you against placing undue reliance on these forward-looking statements. And we encourage you to review our most recent public reports, including our 2011 annual report on Form 10-K for a complete discussion of these factors and other risks that may affect our future results or the market price of our stock. We are not obligating ourselves to revise the results or publicly release any revisions to these forward-looking statements in light of new information or future events. In addition, as we refer to earnings, we will also refer to adjusted EBITDA, which we define as earnings before interest, income taxes, depreciation, amortization and non-cash stock-based compensation. Adjusted EBITDA is a non-GAAP financial measure and you can find a reconciliation of adjusted EBITDA to the most directly comparable GAAP financial measure in our third quarter earnings release, which is posted on the Investor Relations section of our website. We believe that the use of adjusted EBITDA provides additional insight for investors to use in evaluation of ongoing operating results and trends. However, non-GAAP financial measures such as adjusted EBITDA should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP.

Thanks, Allise. And I’ll go ahead and make a few comments -- quick comments hopefully and then hand it over to Bob and Angie for details. We've had a very, very good quarter and as we are having a very good year. Now, we’re growing our two recurring revenue bases quickly and both are renewing very extremely well. Our best performance this year has been originating first year ad contracts and new advertisers. New advertising contracts are up 106% year-over-year. As a reminder, we pay higher commissions on this new revenue. We’re willing to do so because of its strong recurring characteristics. Ad dollars earned 80 points of incremental margin when they renew. In addition, our year-to-date contract renewal rates remains over 100%. These accelerated ad originations began about four quarters ago. Those additional contracts are now beginning to renew and produce additional margin. This dynamic is providing the funding foundation for our continued high growth. To say it another way, our revenue flywheel has grown bigger this year. As it ages, it will produce cash and fund future growth. The effects of this process will become increasingly clear in the next several quarters. We also continue to invest in our product technologies. We are improving on multiple fronts. This quarter we released new search logic, mobile applications and e-commerce tools. In addition, we entered into a formal agreement with Squire to develop integrated mobile commerce solutions for our service providers. Angie, let me turn it over to you.

Thanks, Bill. We had a strong Q3 in marketing which was expected based on our marketing success in Q2. We increased new member sales to a record high 341,522 on a year-over-year spend increase of 39%. This resulted in a CPA decreasing from $78 in Q3 of '11 to $76 in Q3 '12. As you recall, Q2 and Q3 are the peak spend quarters for us, but we typically gain efficiency in Q3 as we capitalize on the tail of that spend. In Q3, we continue to have successful adding the spend, by lowering the spend leading into the 4th of July weekend, Labor Day week and redeploying those dollars in more productive weeks. We also continue to see improvement in SCO. Finally, in New York City, our largest market, reached 100,000 paid households in Q3. In Q4, we expect marketing spend to be between $8.5 million and $9.5 million. This spend level is representative of the typical Q4 spend but is a bit more conservative due to the presidential election. Since Q4 is a seasonally slow quarter for us from a marketing standpoint, we didn’t see any reason to chase sales in a crowded advertising market between retail advertising for the holidays and the election. Turn it over to Bob.

Thank you, Bill and Angie and good afternoon, everyone. A quick reminder, my comments on growth rates refer to year-over-year changes unless I indicate otherwise. We delivered a solid third-quarter. Revenue increased 75% to $42 million with service provider revenue representing the largest component at 70% of total revenue. Year-to-date revenue also increased 75% to $109.6 million, reflecting our ability to monetize our growing membership base, service provider revenue grew 96% on a quarter and year-to-date basis. E-commerce revenue, which represents our storefront and big deal offerings are still in its early stages, but an exciting opportunity for us. Revenues were $3.8 million this quarter, up 97% over the prior year period and up 11% sequentially from $3.4 million last year -- last quarter. Looking at our expenses, we continue to invest in marketing, sales and technology. In spite of growth in these investments, we are beginning to realize overall operating expense leverage. During the fourth quarter, we'll be changing our compensation plan for our sales force to pay commission of cashes collected from our service providers. This change, once fully implemented will have a positive impact on our operating cash flows and will effectively allow us to self fund the future growth in new ad originations. To minimize the disruption to our sales force, we will be transitioning to the new compensation plan gradually over the next several quarters and we will be adopting a base salary, plus commission structure. Because of the base portion of compensation, we'll be recognized within the period paid, irrespective of revenue recognition. We will see higher selling expense as a percent of revenue in the near-term as we make this transition. As a result, we will be providing guidance on the selling expense going this transition period. We ended the quarter with $65.5…

(Operator Instructions) And our first question today comes from the line of Justin Post from Bank of America-Merrill Lynch. Your line is open. Please go ahead.

Hi. This is Paul Bieber for Justin, how are you? A couple quick questions. The outlook for marketing expense is lower than we expected and I think Angie commented on not chasing marketing in the fourth quarter because of the presidential election. Is this a one quarter phenomenon lower marketing expense or can we expect more marketing leverage in 2013? And then I was hoping that you could just provide a little bit more color on the lower cost per paid member in the quarter? How much of it was from efficient media, buying versus SEO and other initiatives?

Hi, Paul. Thanks for the question. So on the fourth quarter marketing expense, I mean, fourth quarter is typically a low marketing expense quarter for us. So if you recall our spend is typically on a bell curve. So we’re bringing the spend down as we typically do in the fourth quarter and maybe a little bit more than we normally would just because of the Presidential election. But we don't expect that trend to continue and in fact, we would expect marketing expense to step up next year.

I’ll also say the marketing expense will still be in increased, a meaningful increase over last year at this time. So it's not -- it's really taking some of the growth off of it in the fourth quarter just because of the -- it's a crowded media market right now.

And then your other question with regard to the efficiency we saw in Q3 on the CPA. And a lot -- it's a mix of things, so we had a really good second quarter, which we continue to get the tail of that spend in the third quarter. So that helps us as that higher spend level continues to effectively age through the summer. We also had -- continue to see some nice improvements in SEO and things are just -- continued to work really well in that bunch of dials turned and it continues to result in a nice CPA. I mean, it came out as we would have expected it to base on how the earlier season started for us.

And then just a quick follow-up, can you provide us with any details on the Squire partnership?

Very few at this point. We're simply -- we've entered into an agreement to build payment systems that are integrated in with sort of Angie's List mobile solutions for service providers. And so we’re very, very excited about this. We think they’re meaningful ways that we can cooperate together and we’re underway with that.

Hey, Bill, it is Justin Post here with Paul. I had one question about the service provider renewal rate. Could you talk about either revenues or just percentages, how that’s trending year-over-year? And what's your outlook for margins based on the huge build in first year of service provider ads this year? Thank you.

Hey, Bill, it is Justin Post here with Paul. I had one question about the service provider renewal rate. Could you talk about either revenues or just percentages, how that’s trending year-over-year? And what's your outlook for margins based on the huge build in first year of service provider ads this year? Thank you.

Okay. So our renewal rate -- service provider renewal rates have been trending up consistently this year. We’re having significantly better performance in renewal than we had last year -- from $1 service provider basis on. And I think as we gave a little bit, we pick up somewhere in the neighborhood of 80 full points of margin when first year contracts renew. And as I mentioned in my comments, we sort of steepened the trajectory of new ad sales starting in the fourth quarter of last year and those contracts are coming up for renewal. As they’re renewing, they become very high margin contracts. And that's just helps us in terms of operating leverage and in terms of funding the overall business.

Okay. And last one, are you seeing any competitor out there when you're out making ad sales on a local basis? And do you see Yelp out there and any other competitors we should be aware of that may or may not be having an influence in your ad sales?

Okay. And last one, are you seeing any competitor out there when you're out making ad sales on a local basis? And do you see Yelp out there and any other competitors we should be aware of that may or may not be having an influence in your ad sales?

We are really not. It's already -- it is a competitive market -- it's a mature marketplace. You have to remember this is a very, very mature marketplace. It's just that so, it's mature in terms of all of the old things that they used to buy. It's a very immature marketplace from the standpoint that those old tools are ineffective. And we’re bringing a much more targeted solution to our service company, much better customers. We are not running into -- we see other sort of what you might think of as direct competitors, but they are not displacing our sales. There is a lot of room in this market space and we continue to be impressed by the fact that our mature and best markets and our fastest-growing markets are some of the best and fastest growing markets of these sort of potential competitors. It just tells you how big the marketplace is and how transformative some of these -- and disruptive these tools are to the old systems.

Great. Thanks a lot, I appreciate it.

Great. Thanks a lot, I appreciate it.

Thank you. Our next question comes from the line of Jordan Rohan from Stifel Nicolaus. Your line is open. Please go ahead.

Thanks so much a follow-up to the questions from Justin and Paul. But service provider revenue overall 96% growth, obviously you're getting some price increases as your members didn't grow at that rate, so that's great. Originations growing 106%, can you break apart originations from renewals on some consistent basis or even just in this quarter? What percentage of the quarter was renewed business versus originations? And further, did I hear you correctly that there is an 80-point margin differential between essentially year one service provider revenue and year two? And if so, does year one service provider revenue have any positive contribution, or do we have to wait for the renewal business? Thank you.

Yeah. So the year one -- essentially year one net contribution is close to a push, roughly zero. But once we take into consideration, commissions and then all of the allocated service provider marketing and the overhead of that departments, it’s effectively a push. So there's a few points of margin in there. Then the margins increase very rapidly as we talked about, about 80 points of total margin increase. We’re not going to be providing a breakout of period one versus period two, plus information. We opted instead to provide some guidance, forward guidance on selling expense, and sort of provide this relative growth percentage. You can see that first period originations are growing faster and materially faster than renewals, even though renewals are growing pretty fast too. But from a weighted average standpoint, that's having an impact on the selling expense. We're going to provide some guidance around selling expense to assist people with that. And you will begin to see -- you can see in the last couple of quarters, some of the leverage beginning to accrue in selling expenses is a result of renewals, in spite of the fact that we're consuming some of that with originations.

Okay. One follow-up here. Maybe, I can just use my model to point to in for the cases. So, I want to make sure I’m, understanding this correctly. I have over 100 million in service provider revenues for 2012. Obviously, you guys were at $76 million through the third quarter, so that isn’t much of a surprise. So your statement that they renew at over 100% means that heading into next year, if I use the $100 million as a round number, I'm going to have more than $100 million that comes at a margin of 80% or something along those lines?

That is, I think a very accurate characterization of how the math works.

Okay. And in the past you’ve said that instead of just over 100%, you've given a number, I think pre-IPO and in the prospectus it was 117%. Is it significantly over 100%, when it renews? Is it greater than 117%, which was a publicly stated number?

Our renewal percentages have been consistent and at times better than consistent this year. So anything that we have stated remains true.

Okay. So if I use $100 million and consistent or better, would get me to something over $117 million that has an 80% contribution roughly? Plus whatever you write next year, add a push for originated business?

I don't hear anything in the logic there that we would need to correct.

All right. Thank you so much, guys and great quarter.

Thank you. Our next question comes from the line of Jason Helfstein from Oppenheimer & Company. Your line is open. Please go ahead.

Thank you. I apologize if this was already asked, because we had some multiple calls. So one of the questions that we continued to have from clients is just, the company hasn't ever really given a long-term outlook or kind of a budget for the business, and so how do we know when the company is done spending on marketing and can see the leverage? And you can give us clues like you did where the guidance suggest a deceleration in marketing. Are you guys considering providing some type of long-term outlook, so people can understand, at what point you can start to slow marketing spend and then people can see better leverage in the business? Thank you.

I guess, obviously as we get into next quarter and we're providing some insight into the 2013, we'd be talking about this quite a bit, so. But in the meantime and there is one thing, Jason, I think just to put a point of clarity on your comment, we're very unlikely to ever slow marketing. It’s really slow the growth of marketing just because the unit economics tell us to. We can't grow marketing forever, it's going to naturally -- at some point begin -- the rate of growth will slow. We’re not in the position now of providing guidance. We don’t know exactly when the unit economics will tell us to slow down. What we can tell you is you can see the leverage in the business beginning to accrue and ultimately, it will become pretty clear. Just the math will sort of provide, I think, detailed insight into when the model becomes self funding. So it’s not a matter of pulling the growth back, or even slowing the growth materially. It’s a matter of the internal cash flows funding the growth. And that distinction is important because all of the investment that we’ve made this year in both members, and in service providers translates into additional cash flow next year and in the following years to fund that growth. And that’s where the leverage comes from. We want to end up and our mature market cohort actually is a good -- it’s a good depiction of this. We want to end up with a business that is both high growth and high margin. And that’s what the outperformance that we’ve been experiencing since we’ve taken the company public is going to allow us to do. And I think those trends will become -- they are becoming increasingly apparent and will continue to do so over the course of the next couple of quarters.

Okay. So you feel like that. Basically, we should focus on rotation and they see the quarterly results play out like, if it goes to your plan you will start to see the leverage in the business and then this question becomes more mute over time.

There is very little question in my mind that that’s how it will play out.

Okay. Thank you.

Thank you. Our next question comes from the line of Peter Stabler from Wells Fargo Securities. Your line is open. Please go ahead.

Thanks. Good afternoon. Could you tell me, what percent of the selling expense is allocated towards service providers? Is that 100%?

Yeah. All of selling expense.

No. No. No. There is a little bit of member…

A tiny bit in there…

Yeah.

A share of members.

The vast majority is associated with service providers, but there is a small amount that is associated with those members that we sell directly, the call in here or very small.

Yeah.

Okay. Great. And then just one follow-up on the revenue per paid membership. We all have the expectation that’s going to come down due to mix shift and opening up new markets, and the younger markets contributing at a higher level. But looking out a little further, can you give us any color around, at what point do the older markets reach kind of equilibrium basis, or is there anything that you can tell us on what a natural stage should be?

I think…

I can put in another way. Your 2003 to 2007 cohort is still materially below your first cohort. And are those ever going to kind of meet each other? Presumably, they would.

Yeah. In terms of revenue, revenue per household or which metric?

Membership revenue per mem.

Yeah.

Membership revenue per member.

Yeah. Yeah, over time, I mean price points vary end markets. But we will see a convergence of the markets over time to relatively similar member price point. So they will converge together over time, but age of the market and overall size of the market have something to do with that. I mean, those are averages that kind of hide a lot of stuff in terms of per market pricing but as a long-term proposition they are going to converge.

Last question would be, are they were you thought they would be, or are there competitive issues out there that are leading you to kind of revise your expectations on membership rates?

No. Membership rates, like right now as the businesses -- as the markets mature, the network affect takes place, primarily on the service provider side. So to the extent, we have enough cash flow in those markets to keep the prices down, then we get this happy phenomenon of increasing the value of the network, and either maintaining or reducing member prices over time, so that we can optimize the total network. So it's not our goal to drive member prices up. It's our goal to drive total ARPU up. And as the markets mature, we're increasing the rate at which we monetize on the service provider side. And that in turn maximizes total revenue, because with lower prices you sell more household and then if you can offset the member ARPU with service provider ARPU. Your total ARPU was bigger. Your total revenue in the network is bigger. So we're very into it. It's nothing to do with the competitive pressure, it is with a revenue optimization strategy is why we keep those prices down. We have not pushed those prices as aggressively as we did back in the old days, because we’ve realized we can optimize the network better. I hope that's clear.

Thank you for the color.

Thank you. Our next question comes from the line of Lloyd Walmsley from Deutsche Bank. Your line is open. Please go ahead.

Thanks for taking the question. Can you comment on the impact of the commission payment timing changes, does that only impact cash flows? Does that also impact how you accrue those expenses in the income statement? And then it sounds like there is no change to the commission structure between year one versus renewals? Is that something you thought about doing at all to further even out the cash flow impact? And I’m just curious, how the sales force is reacting to those changes?

Yeah. So, I guess, so a couple of comments on that. This is primarily a balance sheet impact. You may notice or have noticed that our prepaid commission expense has grown considerably this last year. We not only pay high commissions on first year contracts, we do that very intentionally. We want to originate them to get them to the renewal period, and you can't have a renewal without an origination. But we also -- the payment terms on those are such that you are sort of front loading the commissions, and that's fine if you have a normalized rate of growth in new originations. We've had out-performance this year, and what that's done has caused the prepaid commission asset to increase and that's a working capital constraint. So, we're starting out with just trying to take the top off of that with the new hires. Whenever you hire a new rep, that's where you get the acute movement in the prepaid commission. So we're going to transition into this slowly and we are starting with just by taking the new reps and putting them on a pay-as-you-go commission structure. The commission itself, the expense will be the same but the cash will match up with the revenue. We expect that we will transition the old sales reps gradually over time. But the important thing is getting the new reps, just making sure that as we grow the sales force which we've done effectively this year. And as we are growing ad contracts that we are not consuming working capital, allows us to keep it funding neutral. There is a little bit of it, just because you move from a draw to a base plus bonus. It does have an income statement impact, but it's just the timing shift in the income statement. Part of the reason, we are providing forward guidance is to work through that. So that we can help you as we are making that transition. But this, so last year, correct me if I am wrong here. We added about $7 million of prepaid commissions X to the balance sheet. And in this coming year with the rate of growth that we've been experiencing, it would've been another $10 million and by making this change we can actually grow the ad sales force without growing that prepaid commission expense. And that's why we're making the change and we are doing in a gradual way. And really by just implementing it in the first stages with the new reps, mitigates the potential risk. So far the sales force has been reacting very positively to this actually.

And do you think, this is kind of the last or the only shift or would you think about perhaps shifting some of the commission in the renewal that might also kind of alleviate some of the cash needs of this and allow you to grow faster?

We would prefer. We will never say never, but we actually like the commission structure because once we begin to pay a tail, it starts to get expensive than we've got kind of a recurring expense. We're originating very effectively, and the long-term value of those originations is that -- the average life of that revenue right now is several years. And in that, when you look at it from that standpoint and you take a look at the origination cost, it's a highly accretive transaction. And our servicing costs are low, so we're going to resist as much as possible shifting into higher costs on renewal because our renewal activity is so strong. We would rather just have a situation where we have so many renewals that they are funding all of the new originations and some, and in fact we are very close to that.

Yeah. It makes sense. Thank you.

Thank you. Our next question comes from the line of Aaron Kessler from Raymond James. Your line is open. Please go ahead.

Yeah. Hi, guys. A couple of questions. First on the, if possible for Q3, is it possible to provide us with, maybe the new versus existing contract value is maybe how that compared to several quarters ago? Just trying to get a sense of, when we would see that leverage start to show up in the income statement? And second just maybe any updates on the e-commerce with the big deal. I know you are looking to make some changes to that, so just any changes there that were made in the quarter? And if you can update us on some user interface changes that you have made or looking to make over the next few quarters? Thanks.

Yeah. Sure. So let's see, taking those in order, we're not going to provide a specific breakout of those, but just very generally we've been increasing the new originations relative to the renewals. We've just been outperforming in that area. So, the mix has changed, more heavily to new originations. That will increase your selling expense, a standard volume and price variance. And we've had an increase in volume of the more expensive first year originations. The good news is those turn into renewals. And the outperformance started a year ago, so they are beginning to turn into renewals and I guess I would sort of take -- not take issue, but just point out but we are already seeing leverage in that expense line. So we are seeing leverage in that expense line in spite of the fact that we are over originating with new ads. And that is a very, very positive sign. It just implies that we are going to be able to -- we're going to have both margin growth and revenue growth. So, the trends are beginning to reveal themselves. And we think in the coming quarter they're going to begin to reveal themselves even more rapidly.

Got it. Any commentary on your e-commerce initiatives?

Yeah. So, to e-commerce we’ve made substantial changes in e-commerce in the second quarter. We basically said, if we're going to participate in e-commerce and we’re going to participate in the transaction then we are going to institute both rules and tools to ensure that we have very positive outcomes both for the members and service companies. And we tightened our criteria. We put in a significant underwriting metrics. We added toolsets. We added monitoring. We did all of those things starting in the middle of the second quarter and through the third quarter. It is a -- the quality of our revenue in that area is substantially better and it is on an improving trajectory and in spite of that we still had good growth this quarter. So, we add about $3.9 million of e-commerce revenue and that's with increasingly tight control and increasingly, I guess increase monitoring and enforcement on the part of Angie's List. I really like the dynamics in that business right now. It’s -- we're making material progress in monitoring and improving and enabling the consumption of these services and that's very exciting stuff for us. A bunch of our technology is devoted to all of those processes right now. From an interface standpoint, we dramatically improved search functionality and just the core business. We had multiple iterative releases of our mobile interface on both Android, we've got one either out or just about to be out in for iPhone. And then we've got a series of things that we’re working on with respect to the service provider, mobile application. The mobile tools that they will use to execute better transactions.

Great. Thank you. Good quarter.

Thank you. Our next question comes from the line of Michael Graham from Canaccord. Your line is open. Please go ahead.

Hi, thanks. Just going back to the service provider revenue, it’s growing a lot faster than the service provider account is. And you have this greater than 100% revenue renewal rate. I have to imagine that the actual service provider renewal rate is lower than 100%, maybe that’s wrong, but so that but that what that implies is when people come back they are spending more. And you may have addressed this a little bit in the last question. But can you just give us an idea is this average spend per service provider is going up ostensibly. What are some of the things that they are spending on that are -- that’s allowing that metric to go up and then I have one follow-up. Thanks.

Yeah. While, the averages across all of the markets can sort of -- it's a little difficult to speak in overall average terms if you really were to isolated out into kind of a static pool analysis you will see that we are seeing increases in per service provider contracts. The reason for that is twofold. One is that there are essentially, the territory that they are buying is increasing. So, if I am a plumber and I am in Los Angeles, even if I am just buying a single neighborhood in Los Angeles our penetration of that neighborhood is increasing. So the households that I can reach through advertise -- through Angie's List advertising are growing and they are growing rapidly and more pricing on a per household basis. So, that leads to a natural uplift. In addition to that, we're adding offerings to what they can purchase. So, we used to be a sort of a one trick pony with display coupon advertising. Now, we have a whole array of services that they can purchase, our E-commerce, our outbound big deal, our traditional ads, a number of these things. So we're developing deeper relationships with the service company and we're increasingly effective territory for them. We're also increasing the targeting, so if they decide they want to actually constrict the neighborhood that they are in. We can provide very, very tight lead management for that neighborhood as the penetration increases and we are able to drive better than one-to-one revenue against those households. All of those factors are working and frankly our price sophistication is going up. It’s one of the technology improvements that we've made sort of quietly this year is building our pricing algorithms per neighborhood, per service category effectively per household. That’s very powerful stuff across 500 categories and a whole lot of neighborhoods in the U.S.

Yeah. That makes sense. Are you doing anything to measure ROI for the service providers and -- or either gather an ROI from a survey or anything like that?

If we don't get the greatest vision into ROIs, because they don't have -- tend to have good vision into their ROI. That's a sweeping general, some of them are very sophisticated about their ROI's. Some of them are very unsophisticated about their ROIs. So, effectively what we are able to build as we are increasing visibility into the transactions through our e-commerce activities, we are able to provide to them evaluation tools for their ROI or for proxies for there ROI. So, we are beginning to extend our information systems about the transactions and push those out into the hands of the service companies that's a big deal for them. And obviously, the gross proxy is they are renewing a lot. So, the ROI’s must be pretty good.

Great. That makes sense too. Just one last quick one, could you give us any updated thoughts you might have on as the business is consuming cash, how low you'd be willing to see the cash balance go before you would feel a need to put it clamp down on growth?

Yes. We’re hoping we don't -- we in fact, not just hoping. We firmly believe we have all of the cash we need to grow at a very high rate to continue that rate. So, we have no need to clamp down on growth and we have no need to access additional capital. Much of that has to do with these factors that I have been describing, where we been outperforming in what we will call period one revenue both members and service companies and we've been improving the recurring characteristics for both of those. When you combine those two things you begin to accrue substantial internal margin and believe it or not, we start having trouble spending all that margin. So, we expect to be able to finance significant growth going forward. And we’ve got plenty of capital to do it. You asked a direct question about how much -- how -- what’s the cushion that we’ll maintain? We have Bob, our total liquidity right now is 80 on what’s…

It’s about $80 million.

$80 million.

Mine.

We would be very unlikely to ever let that number get below $60 million.

Okay. That’s very helpful. Thanks a lot.

Thank you. Our next question is from the line of Todd Van Fleet from First Analysis. Your line is open. Please go ahead.

Hi. Good afternoon, guys. Nice quarter. Just a couple of quick sits. Maybe first, Bob, did you give us the operating cash flow and CapEx figures for the quarter?

Sure. CapEx, which includes property and equipment and data acquisitions was $830,000 of the cash used for this quarter. And what was your other, I’m sorry, what was your other question?

The operating cash flow and then the total CapEx, so CapEx I guess, was…

Yeah.

830.

So, that cash used in operating activities was a negative $10.552 million.

Okay. And I am sorry one more, the contract value backlog?

Yes. Contract value backlog was $74.9 million.

Okay. Great. Thanks. A couple of fundamental questions then so, on the compensation program shift, I mean I imagine which you’re doing it to get to a cash flow breakeven position a bit sooner. Can you give us a sense as to how much you think you will be saving? What’s the benefit that you'll get from a cash flow standpoint over the course of the next 12 months, just kind of order of magnitude, is it, $5 million, $10 million?

Yeah. And in fact, let me to frame it for you. It's not so much that we're trying to get to cash flow positive faster by shifting the commission. And what we’re trying to do is make sure that, if we’re growing the ad base rapidly which that was sort of the unexpected pleasant surprise of this year, was we began to really sell ads effectively. And that's sort of the network affect. Well, we had expected that to happen, but we were still a little bit surprised when it did. And the sequence goes like this. In order to drive new ad originations to fill up the territory that you’re creating with new households. It takes bodies. You’ve got to hire people. And we've got an efficient sales model. We have an attractive sales model. So, we’re able to hire people. But when you do that and you’re increasing the scale you are funding them. And so you’re picking up these -- you’re effectively providing loans to the new sales reps and that's a working capital issue. So, if we do nothing else, it's just reducing the financing necessary for growth in that area, which then allows us to really scale. We can scale without having to worry about zero. We are going to have the cash around to scale. So, that's just a little bit of a nuance to the statement though, what's going on is with our increased scale, we think we're going to reduce the need for funding, that working capital funding for incremental sales by at least $10 million next year. But it is an incremental funding requirement. We just want to remove that constraint to growth.

Right. Right. No that makes sense. So, it's at least $10 million benefit you expect from a cash flow perspective, I mean the ship makes all the sense in the world. I was just curious as to quantifying the impact and it sounds like it's more than $10 million.

Yeah. If we had done it this year, so when we went back and look if we have had this come plan in place when we went through the addition to sales force this year, it would have saved us something like $7 million in cash and that's just a lot of cash. We've got things we can do with that.

Yeah. Yeah. Okay. And on the square relationship, it sounds like it's kind of a work in progress. Do you expect to kind of be going out full force with it sometime by the beginning of the year or is it going out, is it going on right now just curious?

We are working away on it right now. We don't have a release date yet. But this shouldn't take us all that long. We are making good progress. And yeah, we expect to have news, meaningful news before too long.

Okay. And then just on that points and square relationship so is their additional intelligence getting back to kind of the ROI question, is their additional intelligence that you expect to start getting from day one from that relationship that you can feedback to your service providers to demonstrate that ROI?

Yeah. I would say square is just a small piece. We are implementing a series of initiatives right now. And they are underway and we are accruing the data from that, to gain visibility into the transaction loop at every stage, at every incremental activity between our members and the service company. And we're building feedback mechanisms all along that transaction cycle. Now, payment is a big piece of that transaction cycle. But it is by no means the only piece. And we are already accruing information, monitoring, looking for signals on success or failure of activities, providing that feedback to the members, providing that feedback to the service companies and monitoring that feedback ourselves. So, square fits into a much -- the Squire relationship fits into a much bigger and more important activity set that's around deconstructing the local service transaction, measuring it, monitoring it, improving it and enforcing it.

That's great. Thanks, guys.

Thank you. Our next question comes from the line of Jeff Houston from Barrington Research. Your line is open. Please go ahead.

Hi. Thanks for taking my questions. I guess this one is for Angie, since its marketing related. What is the current marketing mix between TV, radio and online? And how do expect that to change going into 2013? And along those lines have you evaluated mobile advertising with companies such as Pandora?

So, we -- our mix is the vast majority is on television, it’s probably a little north of 70% of our advertising is on cable television then -- and then second is online and then we have a small percent that goes to radio and national print. I mean I don't see -- I don't foresee a material shift in how those dollars are allocated as we go into next year. I mean our philosophy is as long as we are seeing good marginal return within a channel we continue to invest in it until we don't. So, expect that kind of mix to continue on. We do, do some experiment on mobile advertising Pandora in particular we have done a test probably about a year ago. But it wasn't through -- it wasn't on mobile for them.

Okay. I take it that your return wasn't worth the investment at the time. But that's something that you could revisit in the future?

Correct.

Okay. All right. Thank you.

Sure.

Thank you. This concludes Angie's List conference call. You may all disconnect and have a wonderful day.