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ONVI > SEC Filings for ONVI > Form 10-Q on 14-Aug-2013All Recent SEC Filings

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Form 10-Q for ONVIA INC


Quarterly Report

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations


In addition to the historical information contained herein, the discussion and analysis in this report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding expected increases in clients, contracts and contract value, cash flow, profitability and stockholder value and expected stabilization of Annual Contract Value, or ACV. When used in this discussion, the words "believes," "anticipates," "may," "will," "should," "expects," "plans," "estimates," "predicts," "potential," "continue," "intends," "indicates" or the negative of these and similar expressions are intended to identify forward-looking statements, but the absence of these words does not necessarily mean that a statement is not a forward-looking statement. Forward-looking statements include, but are not limited to, statements about our plans, objectives, expectations, intentions, Onvia's future results of operations, the progress to be made by Onvia's transformation plan, the amount of cash and cash equivalents held by Onvia after the share repurchase, Onvia's future financial flexibility and future cash flows and Onvia's future product and content offerings. Such statements are based on current expectations that involve a number of known and unknown risks, uncertainties and other factors, which may cause actual events to be materially different from those expressed or implied by such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including the factors described under "Risk Factors," "Business," "Management's Discussion and Analysis of Financial Condition and Results of Operations," as applicable, in this report, in our 2012 Annual Report on Form 10-K for the year ended December 31, 2012 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2013. Onvia undertakes no obligation to publicly release any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of anticipated events, except as may be required by law. Readers are urged, however, to review the factors and risks described in reports Onvia files from time to time with the Securities and Exchange Commission. The following discussion should also be read in conjunction with the Consolidated Financial Statements and accompanying Notes thereto.

In this Report, the words "we," "our," "us," "Onvia," or the "Company" refer to Onvia, Inc. and its wholly- owned subsidiary.

Company Overview

Onvia is a leading provider of business information and research solutions that help companies plan, market and sell to government agencies throughout the United States (or U.S.). Onvia's business solutions provide clients online access to proprietary information about government procurement activity across local, state, and federal government agencies. The business intelligence derived from our solutions allows clients to identify and research new market opportunities, analyze market trends, and obtain valuable insights about their competitors and channel partners. We believe our business solutions provide clients with a distinct competitive advantage, increased revenue opportunities, and strategic insight into the public sector market.

The Company's procurement solutions include proprietary content and analytical tools that deliver essential insight and intelligence necessary to win more business with state, local and federal governments. Onvia targets a market of companies that have a long term strategic interest in the public sector, and for which the government market is a core part of their business. All three sales channels, Small and Medium Business (or SMB), Enterprise, and Content Licensing, focus on this market. We believe this model will produce higher margins, providing the flexibility to price products based upon the value that we create for clients, not based upon the cost of fulfillment.

We developed a three-year business transformation plan and product roadmap in 2011 to leverage the Company's investment in a rich public sector procurement database and execute on a strategy of transitioning the business from a low cost provider of government procurement information targeted at a large market of casual users to a high value and trusted partner to clients with a long-term strategic interest in the public sector. We achieved the first product milestone to execute this shift in business strategy in February 2012 with the launch of "Onvia 5," which improved the usability and "find-ability" features of the database. In July 2012, Onvia launched a new solution, Term Contract Center, to provide clients maximum visibility into over 150,000 recurring contracts. Term Contract Center helps clients identify which contracts to pursue, including the incumbent vendor and the price the agency has paid for the contract. In December 2012, we launched the first update to Spending Forecast Center with Project Previews, a data mining tool that helps clients focus on those future business opportunities from budgets and capital improvement plans where they have the greatest probability of winning. We believe all of these investments are changing Onvia's value proposition from an aggregator of public procurement documents to a robust, enhanced database of public procurement intelligence.

In 2012, we completed the first phase of the transformation plan evidenced by the stabilization of Annual Contract Value, or ACV, and subscription revenue and we are starting to leverage the foundation we have built over the last two years and grow the business. In 2013 we are executing four initiatives to grow subscription revenue and Adjusted EBITDA in 2013 compared to 2012. These four initiatives are:

Successfully expand the SMB acquisition sales team by 40%,

Maximize contract value growth within the SMB client base,

Strengthen the value of our database and continue to add solutions to help customers win more government business,

Develop and begin to execute a strategy for Enterprise sales that is scalable for 2014.

We continue to invest in new analytic tools in 2013 and 2014. In the first quarter of 2013 we launched Onvia 6 with a workflow user interface which is another step in improving the usability of our solutions. In the second quarter of 2013, we improved the content delivery process and clients now receive over 90% of their actionable content on the same day the content is captured from the original source. Our broad and deep coverage delivered in nearly real time we believe represents a strong competitive advantage for Onvia in the marketplace.

In the fourth quarter of 2013, we expect to launch Vendor Center, an analytical tool designed to help our customers evaluate competitors and channel partners in the public sector. This solution represents another important step in our strategy to move from lead distribution into public sector intelligence.

Onvia's solution includes access to the Onvia Database, Spending Forecast Center, Term Contract Center, and the Onvia Guide. These services are sometimes bundled with management information reports in multiple elements arrangements. Refer to the discussions below under "Products and Services" for a description of these products and services, and under "Critical Accounting Policies and Management Estimates??for a discussion of how sales price is allocated between the elements in a multiple elements arrangement and how revenue is recognized on each element. Subscriptions to the Onvia Database are typically prepaid, have a minimum term of one year and revenues are recognized ratably over the term of the subscription. Subscriptions are priced based upon the geographic range, nature of content purchased, and the number of users accessing the database.

Most of Onvia's revenues are generated from sales to companies that leverage our information for their own internal use, and to businesses that license our content for redistribution. Revenue from businesses who license our content for resale to their own clients is classified as Content License revenue. Content license contracts are generally multi-year arrangements and typically have higher annual contract values than our subscription-based services. Revenue from content license agreements is recognized over the term of the agreement.

Onvia was incorporated in January 2000 in the state of Delaware. Our principal corporate office is located in Seattle, Washington. Our securities trade on The NASDAQ Capital Market under the symbol ONVI.

Industry Background

Selling to the public sector is highly competitive and insight into this market is extremely valuable. The variety, volume and unstructured nature of public sector procurement information make it difficult for businesses to analyze, evaluate and target the market for their goods and services. The agency self- reporting process provides short term visibility into specific government contracting information and events, but does not provide businesses the value added business intelligence to strategically maximize their public sector business. There is a strong need for a strategic business partner that provides deep market intelligence as a key resource for decision making. This ideal partner will provide impactful insight that drives companies to select the right target market, allocate internal resources toward the most profitable segments, maximize public sector margins through intelligent pricing and develop strategic public sector relationships all with the long term objective of winning more government business.

The procurement capture process is complicated and comprised of multiple elements and information types. Businesses must evaluate a variety of different sources of procurement information and activities to understand their individual markets and to make strategic decisions. These data types include:

      Annual Budgets                      Bidders Lists
      Capital Improvement Plans           Bid Results
      Requests for Quotes                 Awards
      Requests for Proposals              Advance Notices
      Amendments                          Subcontractor Solicitations
      Term contracts                      Other trigger events, such as City
      Plan holders Lists                 Council Minutes

The aggregation of these public procurement events provides little value. This data must be normalized, enhanced, structured and classified to become business intelligence to help companies approach the public sector market strategically with the goal of winning more government business.

We have spent the last twenty four months building this structured and enhanced public procurement database. We believe the combination of this database and the new analytical tools we plan to release to the market during the next 24 months will position Onvia as the preferred business intelligence provider for those companies that have a strategic long term interest in the public sector market.

The Onvia Solution

Onvia's solution includes tools to access a database of proprietary public sector information which has been built over more than 11 years, and includes comprehensive, historical and real-time information on public sector activities unavailable elsewhere in the marketplace. Our solution provides access to information on over 5.0 million procurement-related records connected to over 400,000 companies from across approximately 86,000 procurement entities nationwide. Thousands of records are standardized, added, formatted and classified within our database each day.

Information related to each stage of the procurement cycle is linked together to provide a comprehensive view of each project including:

Advance Notices - alerts businesses of projects in the early stages of the development process, before the bid or request for proposal is released in its final form, or before final zoning and planning board approval;

Bids, Request for proposals, request for quotes, cancellations, and related amendments;

Plan holders and Bidders Lists - provides competitive intelligence by presenting a list of competitors that have acquired plans, specifications, bidding documents and/or proposals for specific projects in the active bid or proposal stage, and a list of competitors who submit bids for prime contracts with the owner of the project;

Bid Results and Awards Information - notifies businesses of awarded bids, providing information for use in their own sales and marketing activities;

Grants - supplies federal grant information critical to businesses tracking or applying for publicly-funded projects; and

Project Previews - proprietary summaries of future infrastructure and technology investments excerpted from a constantly updated library of capital improvement plans and agency budgets.

The database can be analyzed using many different search filters including:

Industry Vertical Level of Government

   State              Agency Function
   Publication Date   Set Aside Requirements
   Submittal Date     Awarded Contract Value
   Procurement Type

Our database includes many important data fields to further qualify opportunities as available, including:

Request for Proposal/Bid Information Agency Information

  o Document title and extract           o Agency name
  o Publication date                     o Agency function
  o Pre-bid meeting date                 o Agency bid number
  o Submittal date                       o Address
  o Product documents                    o Phone number
  o Contract term                        o Website link
  o NIGP code                             Buyer information
  o Plan price                           o Buyer name
   Planholders/Bidders lists            o Buyer address
  o Vendor name                          o Buyer email
  o Vendor address                       o Buyer phone number
  o Contact name and title               o Buyer fax number
  o Contact email
   Award Information
  o Awarded vendors
  o Contract value

Our government procurement solutions provide clients with the information necessary to make good business decisions. Through our end-to-end solutions, we provide market intelligence a business needs to design and manage a public sector strategy, build relationships with agency buyers and private sector contractors, and target more qualified revenue opportunities. The confluence of these activities should help clients create more winning proposals, increase close rates, increase contract size and, ultimately, increase public sector revenues.

Products and Services

Onvia's business solutions are tailored to the business objectives of each client, and support both strategic planning and sales and marketing activities. We offer our clients public sector business intelligence through specialized self-service analytical tools that help our clients aggregate, analyze, identify and quality, evaluate and influence historical, real-time, and future spending information within local, state, and federal government agencies across the United States. Over time, we expect to continue to enhance our existing information, marketing and analytic services and develop additional services that make use of our comprehensive database to meet the needs of our existing clients as well as potential new categories of clients. Our key offerings are described below.

Onvia Database is Onvia's flagship solution which provides rich search functionality on our proprietary analytics platform of local, state and federal government agency purchasing information. Our solution provides public sector business intelligence to customers across agencies, vendors, projects, and term contracts over a historical, real-time and future spending timeline.

Project Center provides our clients with a complete view of individual public sector procurement projects at each stage of the purchasing cycle. Project Center makes it easier for clients to identify and qualify opportunities to sell their goods and services into the public sector. Project Center is designed to help our clients:

Analyze purchasing trends to refine existing target markets and identify new geographic markets

Identify and qualify projects or purchases for specific goods and services nationwide

Identify and monitor potential competitors using plan holders lists and bidder lists

Identify potential subcontracting opportunities on major projects

Evaluate awards for pricing analyses

Identify and build relationships with the agency buyers of specific goods and services

Understand agency relationships with existing vendors

Build marketing lists of agency buyers and potential vendor partners

Obtain bid documents, plans and specification documents to qualify projects

Agency Center provides users with agencies' procurement histories, current projects, and spending forecasts in a single application. Agency Center helps businesses identify and qualify government agencies, agency buyers and procurement opportunities within their target markets. By developing agency relationships, users can identify government purchases that never go out to formal bid. Four out of five government purchases never go out to formal bid, because they fall below agencies' purchasing thresholds. Agency Center is included with standard access to the Onvia Online Database.

Spending Forecast Center provides insight into budgets and capital improvement plans of agencies within the top 366 Metropolitan Statistical Areas in the United States. Spending Forecast Center provides valuable, strategic information on future capital spending used by larger corporations to execute their public sector strategies. Most governmental bodies, such as departments of transportation, city and county governments, and boards of education publish a plan that maps out their major initiatives and forecasts spending over the next 3-6 years. These spending forecasts generally include the name of the initiative or type of expense, project timing, the funding source and the budget amount. Businesses can use spending forecasts to inform business development, evaluate and target markets, and for short to mid-term business planning. We collect plans from state, county and city government agencies, representing over 85% of all government spending. We add a powerful search tool that allows users to find plans based on keywords, as well as type of agency, location, spending focus, and other plan details. In December 2012, we launched the first update to Spending Forecast Center with Project Previews, which summarize individual projects extracted from the vast library of budgets and capital improvement plans. The project summaries are delivered directly to the end user, providing significant time savings to clients, enabling them to allocate resources to higher value activities.

Term Contract Center helps Onvia's clients take advantage of the growing trend by government agencies to make purchases using term contracts, or recurring contracts. We significantly increased our coverage and collection of term contracts and awards to provide clients with a single source they can rely on to grow revenues. Term Contract Center is designed to help clients identify and prioritize which contracts to pursue, including the competitor and partner information needed to qualify these opportunities.

Using Term Contract Center, our clients can:

Search over 150,000 active state and local term contracts to create a pipeline of upcoming renewal opportunities;

Analyze term-contract buying trends to identify the right agencies to build relationships with;

Track competitors by searching for vendors who currently hold these contracts; and

Locate potential teaming and subcontracting partners by accessing information about vendor representatives on term contracts and how to contact them.

The Onvia Guide provides clients with frequent information about procurement activity of agencies, industries and markets customized for each client. Clients receive their tailored Onvia Guide delivered to their inbox every day. Daily use of the Onvia Guide provides clients with next day notification of key events and updates within their public sector market. The Onvia Guide can be purchased separately or comes bundled with a subscription to the Onvia Online Database.

Management Reports provide our clients with customized management reports to help target upcoming contract renewals, identify agency buyers, and inform the proposal development process. These solutions include:

Contact Lists - Provide clients a comprehensive list of decision makers, agency procurement officers and zoning officials that can be used to develop relationships and identify potential business partners.

Winning Proposals Library - Compare and contrast winning proposals submitted by competing firms in order to gain competitive insights. Provides insight into how other companies position their qualifications and personnel, structure and format persuasive proposals, incorporate supporting materials, price goods and services, and differentiate themselves from their competitors.


Our mission is to deliver essential, actionable business intelligence that our clients rely upon to win more government business. We intend to achieve this mission by delivering exceptional solutions that offer our clients significant value in defining and targeting their public sector market, identifying current and future public sector business opportunities, intelligently pricing their products in the competitive public sector market, and developing strategic relationships and partners required of a successful public sector strategy. If we are able to effectively achieve this mission, we believe we should see increased retention rates and, ultimately, increased stockholder value. Key elements of our strategy include:

Target the right customer for Onvia, those companies with long term strategic interest in the public sector. We will focus our sales and marketing efforts on the prospects that fit the profile of our most valuable clients with highest contract value. During the last two years we have learned under the new business model, that companies with certain characteristics need the most services from Onvia, have the highest contract value and the highest client retention. We believe, these companies will also have the greatest need for the additional services we are planning in our future product roadmap. Using our own database we identify these companies that have a strategic, long-term interest in the public sector market based on the volume of their bidding activity and the geographical scope of their marketing program to the government. If we are effective in targeting these companies, we expect that retention rates and the long-term profitability of our clients will improve.

Our business solutions support the largest industry verticals, with a focus on the infrastructure verticals, which include:
o Architecture and Engineering

o Construction and Building Supplies

o Financial Services

o IT / Telecommunications

o Professional Services

o Operations and Maintenance Services

o Transportation

o Healthcare

o Water and Energy / Alternative Energy

Our marketing to our target market improved significantly in 2012. We re-launched our brand "as intelligence to win more government business" reflecting the future direction of our product roadmap. We revamped our lead generation program to the point where an increasing portion of SMB sales now come from marketing generated activities such as trade shows, webinars, email campaigns, and white papers.

Enhance our value proposition to our target customer: Historically, our clients have used Onvia for public sector sales leads notifications. While this will continue to be a major part of our value proposition, our product roadmap is built to transform Onvia into a technology enabled business intelligence provider that helps our clients win more government business. Our content and technology platform are key assets that can be leveraged to deliver additional, more strategic applications for our clients. These future applications include competitive analysis, channel partner selection and evaluation, market sizing, allocation of marketing spend, and pricing analyses. We utilize a Customer Advisory Board of ten of our largest clients to give us feedback on the strategic direction of our product roadmap. We also reach out to our clients with quarterly surveys, and obtain their feedback on strategic product prototypes before they are launched. By focusing on the right target market and by forming a closer connection with our clients, we believe we can deliver strategic products that offer our clients significant value in maximizing their business in the public sector market.

In 2012, we launched Onvia 5 which improved the customer experience and user navigation. In July 2012, we introduced Term Contract Center by publishing over 150,000 active term contracts. In December 2012, we launched the first update to Spending Forecast Center providing project previews, a data mining tool, to allow our customers greater "find-ability" in searching the vast library of budgets and capital improvement plans.

Equally important we continue to invest in our database to build the required foundation to launch several analytical solutions in 2013 and 2014. All of these investments have started to change our value proposition from an aggregator of public procurement documents to a robust, enhanced database of public procurement intelligence.

Use consultative selling as our "go to market" strategy: We market to a select group of companies that have a strategic, long term interest in the public sector. Our sales organization (SMB and Enterprise) is organized by industry and sub-vertical market. A central part of our value proposition is the knowledge our sales people have of their clients and the industries of their clients. We strive to become "trusted partners" in helping our clients secure more public sector business. We identify our clients' key business objectives, quantify and prioritize them, offer optimal solutions and finally measure our ability to deliver on these solutions during the course of the clients' subscription with us. Our strategy is to stay focused on these key objectives throughout our engagement with the client.

The consultative selling strategy is beginning to change our culture and our organization. We have become culturally more client-focused and organizationally more in alignment with the key business objectives of our clients. Every major investment (product, content, technology and marketing) is evaluated and prioritized against our clients' key objectives and our current and future value proposition in meeting and exceeding these objectives.

2013 Initiatives

In 2012 we stabilized the business, and we have identified four initiatives to . . .

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