Definitive Additional Materials - Investor Presentation Normalization Initiated Increasing Barriers Value Proposition Sales Leads Only Commodity Vendor Product Roadmap Expands Client

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0001193125-12-235571.txt : 201205160001193125-12-235571.hdr.sgml : 2012051620120516061800ACCESSION NUMBER:0001193125-12-235571CONFORMED SUBMISSION TYPE:DEFA14APUBLIC DOCUMENT COUNT:37FILED AS OF DATE:20120516DATE AS OF CHANGE:20120516EFFECTIVENESS DATE:20120516

FILER:

COMPANY DATA:COMPANY CONFORMED NAME:ONVIA INCCENTRAL INDEX KEY:0001100917STANDARD INDUSTRIAL CLASSIFICATION:SERVICES-BUSINESS SERVICES, NEC [7389]IRS NUMBER:911859172STATE OF INCORPORATION:DEFISCAL YEAR END:1231

FILING VALUES:FORM TYPE:DEFA14ASEC ACT:1934 ActSEC FILE NUMBER:001-35164FILM NUMBER:12847245

BUSINESS ADDRESS:STREET 1:509 OLIVE WAY, SUITE 400CITY:SEATTLESTATE:WAZIP:98101BUSINESS PHONE:206-373-9404

MAIL ADDRESS:STREET 1:509 OLIVE WAY, SUITE 400CITY:SEATTLESTATE:WAZIP:98101

FORMER COMPANY:FORMER CONFORMED NAME:ONVIA COM INCDATE OF NAME CHANGE:19991213

DEFA14A1d353944ddefa14a.htmDEFINITIVE ADDITIONAL MATERIALS - INVESTOR PRESENTATION

Definitive Additional Materials - Investor Presentation

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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ONVIA, INC.INVESTOR PRESENTATIONMAY 15, 2012*********

TABLE OF CONTENTSSafe HarborProxy Communication StatementStrategic Review ProcessInvestment Case for Turnaround PlanAppendix: Business Summary

FORWARD LOOKINGSTATEMENTS This presentation may contain, in addition to historical information,forward-looking statements as defined in the Private Securities Litigation Reform Act of1995. Words such as "believe," "demonstrate," "expect," "estimate," "anticipate," "should" and "likely" and similar expressions identify forward-looking statements. In addition, statements that arenot historical should also be considered forward-looking statements. Forward-lookingstatements contained in this presentation may relate to, but are not limited to, statementsregarding Onvias future results of operations, the progress to be made by Onvias turnaround plan, the future financial impact of Onvias new business model, future options for Onvia to maximize value forstockholders, Onvias future product offerings, and Onvias ability to use its netoperating losses to offset future taxable net income. Such forward-looking statements are based on current expectations that involve a number of known and unknown risks, uncertainties and otherfactors, which may cause actual events to be materially different from those expressed orimplied by such forward-looking statements. The following factors, among others,could cause actual results to differ materially from those described in the forward-looking statements: Onvia's "targeted accounts" strategy may fail to increase contract value of new customers; identifying partners todistribute Onvia's content may be slower than expected; client adoption of Onvia's enterprisesolutions may be slower than expected; Onvia's market driven product development process mayfail to improve sales penetration and client retention rates; and Onvia's technology may fail to handle the increased demands on its infrastructure caused by increasing network traffic and the volume ofaggregated data. Additional information on factors that may impact theseforward-looking statements can be found in the "Business," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors"sections, as applicable, in Onvia's Annual Report on Form 10-K for the year December 31,2011 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2012. Although Onvia believes that the expectations reflected in the forward-looking statements are reasonable, you should not rely upon forward-looking statements as predictions of future events. Onvia cannot guarantee thatfuture results, levels of activity, performanc or events and circumstances reflected in theforward-looking statement will be achieved or occur. The information contained in thispresentation is as of the date indicated. Onvia assumes no obligation (and expressly disclaims anysuch obligation) to update any forward-looking statements contained in this presentation as aresult of new information, future events or developments, or otherwise. 3

PROXY COMMUNICATIONSSTATEMENT This presentation may be deemed to be solicitation material inrespect of the solicitation of proxies from stockholders in connection withthe 2012 Annual Meeting of Stockholders. Onvia, Inc. (Onvia) andits directors and certain executive officers are deemed participantsinthesolicitationofproxiesfromstockholdersinconnectionwiththe2012 Annual Meeting of Stockholders to be held on May 31, 2012 (the 2012 AnnualMeeting). Onvia filed a definitive proxy statement and WHITE proxycard with the Securities and Exchange Commission (the SEC) onApril 16, 2012 relating to the 2012 Annual Meeting, and has mailed thedefinitive proxy statement and WHITE proxy card to its security holders.Information regarding the interests of such participants are included in the definitive proxy statement. WE URGE INVESTORS TO READ THE DEFINITIVE PROXY STATEMENT (INCLUDING ANY SUPPLEMENTS THERETO) AND ANY OTHER RELEVANT DOCUMENTS THAT ONVIA WILL FILE WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Stockholders will be able to obtain, free of charge, copies of the Definitive ProxyStatement and any other documents filed by Onvia with the SEC in connectionwith the 2012 Annual Meeting at the SECs website at http://www.sec.govand Onvias website at http://www.onvia.com.

STRATEGIC REVIEWPROCESS ********

SUMMARY OF STRATEGIC REVIEWPROCESS Focus on maximizing stockholder valueMultiple reviews conducted with the assistance of financial and legaladvisors -Jan through May 2011 and again in Jan through March 2012-Engaged independent advisors, GCA Savvian LLC, to assess alternativesBroad range of alternatives considered-Execution of current strategy Sale toSTG Initiate competitive sale process Unanimousconclusion of entire Board to continue execution of current strategy-Consistent with the recommendation of financial advisors-Executionofturnaroundplanshouldsupportsubstantiallyhighervaluationand increase shareholder value-CurrentSTGopportunityconsideredopportunisticandwouldconstituteafire sale

STRATEGIC REVIEW PROCESSRESULTS PROS +

Execution of new business strategy should support a higher valuation

Significant progress already made in 2011 against strategic plan

Provides adequate time to execute refocused business strategy

Key management team in place for less than 18 months

Key metrics are beginning to reflect improving business fundamentals

Protects $73MM in net operating loss carryforwards to offset future taxable net incomeCONS -

Execution risk

The difficulty in attracting interest from the public capital markets due to Onvias market capitalization and the nature of its industry

The limited float of Onvias capital stockPROS +

Eliminates execution risk

Lock in slight premium to current marketCONS -

One stockholder captures all the incremental value at expense of all other stockholders

$73MM in net operating loss carryforwards available to offset future taxable net income would be impaired

STGs latest offer does not provide a reasonable starting point for negotiationsPROS +

Eliminates execution risk

May increase shareholder value vs. current STG offer

Sales process would provide Board with a market checkof STG offerCONS -

Executive team will be focused on sale process; likely to affect operating results

No other bidders have emerged

$73MM in net operating loss carryforwards available to offset future taxable net income would be impaired

Sale of Onvia would not allow the current stockholders to participate in any potential upside of Onvias business

The chilling effect on potential buyers caused by STGs proxy contest against Onvia

8PRESERVATION OF NOLS IS IN BEST INTERESTS OF ALL STOCKHOLDERSCompany has $73MM in net operating losses (NOLs) to offset future taxable net income -NOLS expire beginning 2021 through 2031 a long-term assetIRS rules limit the use of NOLs if there is an ownership change (greater than 50% increase involving 5% shareholders) over a three-year rolling period. This is different than achange-in-control for other legal purposes.Tax Benefit Preservation Plan enacted in March 2011 to protect this long-term, significant asset from being impaired due to such ownership changesBoard of Directors retains sole discretion to exempt any stockholder from the penalties imposed by the Rights Plan-All new 5% positions and >1% changes for existing 5% shareholders

BOARD OF DIRECTORSInsiders own ~8% of the Company (more with stock options)-Directors have been buying stock in the market Board is paid primarily in stock options (total cash compensation $20-$30k annually depending on responsibility). -Focus is realizing value not collecting feesIndependent Board with significant, relevant experience-Two Directors recommended by large stockholders-Former senior executives at major information companies (Lexis, Experian, Harte Hanks, Ziff Davis)

INVESTMENT CASE FORTURNAROUND PLAN ********

KEY POINTSDeveloping a high value added, proprietary database Significant progress made against turnaround plan, operating risks mitigatedContinual value creation for clients and stockholdersRisks are manageableExecution of turnaround plan will maximize stockholder valueOnvia Board and stockholder interests are aligned

DEVELOPING A HIGH VALUEADDED PROPRIETARY DATABASE

Database and decision analytics company

Proprietary content

Significant barriers to entry

Must havesolutions

Pricing power based on value delivered

Strong customer loyalty/ retention

Best in class consultative selling organization

Exceptional domain knowledge

Profitable, sustainable growth

Highly predictable financial performance

Strong operating leverage

Potential for 30% EBITDA margins

95% of EBITDA converts to net income

Generates free cash flow

Significant investment in infrastructure in 2008-2010

No federal income taxes

Compelling options to maximize stockholder value in the next few years:

Sale: go private with strategic or financial buyer

Sale: public buyer

Stay public: build scale with acquisitions and organic growth

SIGNIFICANT PROGRESS MADE,OPERATING RISKS MITIGATEDOnvia AttributesJanuary 2011March 2012CultureInsularCustomer-CentricTarget MarketPoorly DefinedLow Lifetime ValueNew client ACVC -$3,900Targeted Accounts High Lifetime ValueNew Client ACVC nearly doubled to $6,800Business ModelTransactional Growth without ProfitSolution-BasedMonetize Added ValueSales ProcessLack of Repeatable Process SMB is Disciplined and EffectiveImposing Same Process on EnterpriseDatabase PlatformDifficult to UseOnvia 5 Launched 2/12Database StrategyNo Value-AddData Not NormalizedLow Barrier to EntryAdding Enhanced, Differentiated ContentData Normalization InitiatedIncreasing BarriersValue PropositionSales Leads OnlyCommodity VendorProduct Roadmap Expands Client ValueBecoming a High Value Business PartnerFinancial ResultsEBITDA -$1.8MMNet Loss ($805k)EBTIDA -$3.8MMNet Income $1.6MM13

CONTINUAL VALUE CREATIONFOR CLIENTS AND STOCKHOLDERS14

RISKS ARE MANAGEABLEExecution RiskMagnitudeMitigation StrategyContent ExpansionLowCore CompetencyTaxonomyLowHired Skillset in 2011Data NormalizationMediumUsing Third Party ToolsDevelop Decision AnalyticsMediumContent Capture 2012Third Party ApplicationsSell AnalyticsLowMarket Validation CompleteSolution Selling Successful in H2 2011Delay in Execution of StrategyMediumLeverage Third Party Tools

EXECUTION OF TURNAROUNDPLAN WILL MAXIMIZE STOCKHOLDER VALUEMoving to a Business Model with Higher Stockholder Value-Higher valuations for Database vs. Lead Generation companies-Scalable business model with significant operating leverageValue Creation at Each Stage of Turnaround Plan-Continued increases in EBITDA, Cash and Net Income in each year of turnaroundLeverage Significant Technology Investment from 2008-2010 with Right Strategy, Leadership, Organization and Culture

EXECUTION OF TURNAROUNDPLAN WILL MAXIMIZE STOCKHOLDER VALUEMarket Validation for Product Roadmap-Doubled ACVC in 2011Management Team Has Proven It Can Execute Successfully in 18 Months-Defined Strategy and Product Roadmap-Aligned Organization to Execute Strategy-Institutionalized Customer-Centric Culture-Redefined Market-Moved from Transactional to Solutions Selling-Executed Phase One of Roadmap (Onvia 5)-Began to Normalize Data (Public Sector Agencies)Board of Directors In Alignment with Stockholders

ONVIA BOARD AND STOCKHOLDER INTERESTS ARE ALIGNEDOur Board, consistent with its fiduciary duties, remains receptive to any option that would maximize value for ALL our stockholders but believesthatanysaleofOnvianowwouldlikelybeafiresalethat would deprive our stockholders of the opportunity to share in the future growth and profitability of Onvia

Appendix IBUSINESS SUMMARY********Appendix I

TABLE OF CONTENTSBusiness OverviewProductsFinancial ResultsBoard of DirectorsCorporate Governance

$23million revenue provider of solutions that connects businesses to governmentagency buyers, primarily within the highly decentralized state and localgovernment marketplace Focusedonaverytargetedmarketofcompanieswithastrategic,long-term interest in the public sectorStrong business intelligence for actionable sales and marketing activities, expanding into data and analytics for enterprise-wide strategic planningSolutions are organized around targeted industries-Architecture, Engineering, Construction-IT Telecom -Operations and Transportation Business Information ServicesONVIA OVERVIEW21

OnviaDatabase Annual subscriptionCategorized 89,000 government agencies, 275,000 company profiles, & 700,000 government personnel Applications within the Onvia DatabaseProject CenterIncluded in core database subscriptionIdentify and qualify projects for specific goods and servicesRefine target markets and identify new markets/buyersIdentify and monitor potential competitorsEvaluate awards for pricing informationCURRENT PRODUCTS22

Applications within the Onvia Database (cont)Agency CenterIncluded in core database subscriptionProvides insight into buying patterns, projects and competition at the government agency levelSpending Forecast CenterAnnual subscription (additional to base price)Database of capital improvement plans, budget documents Used for strategic planning, such as demand forecasting, resource allocation CURRENT PRODUCTS23

OnviaGuide -Annual subscription -Dailysalesleadsfromrealtimemarket eventsCustom Management Reports-Target upcoming contract renewals, identify agency buyers, and inform the proposal development process-Term contracts, contact lists, winning proposalsCURRENT PRODUCTS24

2011 RESULTSHIGHLIGHTS Revenue: Decreased 14% to $23.2MMAnnual Contract Value (ACV): Decreased 16% to $18.5MMGross margin: Stable at 85%Adjusted EBITDA: Increased 105% to $3.8MM vs. adjusted EBITDA of $1.8MMNet Income: Increased to $1.6MM vs. net loss of ($806k) in 2010Cash: $11.5MM or $1.36 per shareYear ended December 31, 2011 vs. 201025

26INCOME STATEMENTS(IN THOUSANDS)*2007 results include $2.7MM gain on impaired office lease**2010 results include $967k loss on impaired capitalized software costs2007*200820092010**2011Revenue20,928$ 21,142$ 25,637$ 26,992$ 23,163$ Growth %25%1%21%5%-14%Operating Expenses(18,475)(22,701)(23,968)(25,150)(19,394)EBITDA2,453(1,559)1,6691,8423,769EBITDA Margin12%-7%7%7%16%D&A, SBC(2,941)(2,248)(2,266)(2,736)(2,869)Interest Income (net)982433508837Income (Tax)/Benefit----616Net Income494$ (3,374)$ (547)$ (806)$ 1,553$ Margin2%NMNMNM7%Fiscal Years Ending December 31,

REVENUES Sequential Quarterly Growth Rates Stabilized in Q1 12

ADJUSTED EBITDARecord Adjusted EBITDA in 2011 despite declining revenues

29BALANCE SHEETS(IN THOUSANDS)Assets2009A2010A2011ACash and Equivalents14,279$ 10,883$ 11,527$ Current Assets2,9742,7652,355Fixed Assets1,2261,4191,275Internal Use Software6,6156,5876,175Total Assets25,094$ 21,654$ 21,332$ LiabilitiesCurrent Liabilities2,859$ 2,164$ 1,461$ Unearned Revenue11,54510,0108,488Deferred Rent920832714Total Liabilities15,32413,00510,663Stockholders Equity9,7708,64910,669Total Liab and SE25,094$ 21,654$ 21,332$ As of December 31,

ANNUAL CONTRACT VALUE PERCLIENT We are acquiring and retaining our most profitable clients

31BOARD OF DIRECTORSD. Van Skilling, ChairmanDirector since 2004 ServesasChairmanoftheBoardsinceNovember2010.HehasbeenPresidentofSkillingEnterprisessinceMarch1999.HeretiredinApril1999as ChairmanandCEOofExperianInformationSystemsInc., positionsheheldsinceExperianwasformedin1996.Previouslyhewasemployedby TRW,Inc.fortwenty-sevenyears,andwasExecutiveVicePresidentfrom1989to1996.HeisadirectorofTheAmericanBusinessBank,thenon-executiveChairmanofCoreLogic,Inc.andaformerdirectorofFirstAmericanCorporation,FirstAdvantageCorporation,TheLamsonandSessions Company and McData Corporation. Jeffrey C. Ballowe Director since 1999Compensation CommitteeBeforeleavingZiffDavisattheendof1997wherehewasPresidentoftheInteractiveMediaDivision,Mr.Balloweledthelaunchesoffive magazines,ZDNetontheWeb,ZDTV(becameTechTV),andtheinitialZD/SoftbankinvestmentsinYahoo!,Inc.Mr.Ballowehasservedonanumber ofpublicandprivatecompanyboardsbesidesOnvia,includingNBCi.Hecurrentlyservesontheboardoforadvisesanumberofcompaniesincluding Anvato, Inc., Iconology, Inc. and IncentAlign, Inc. James L. BrillDirector since 2004 Audit and Nominating and Governance CommitteesSinceJanuary1,2007,hehasservedasSeniorVicePresidentofFinanceandChiefFinancialOfficerofOnAssignment,Inc.,astaffingagencyfor science,informationtechnologyandhealthcareprofessionals.FromJuly1999toDecember2006,heservedasVicePresidentofFinanceandChief FinancialOfficerofDiagnosticProductsCorporation,amedicaldiagnosticsmanufacturer.FromAugust1998toJune1999,Mr.BrillservedasChief FinancialOfficerofJafraCosmeticsInternational,acosmeticsmanufacturer,andVicePresidentofFinanceandAdministrationandChiefFinancial Officer of Vertel Corporation from 1996 to 1998. Robert G. BrownDirector since 2004Audit and Compensation CommitteeServesastheleaddirectorsinceOctober2005.Mr.BrowniscurrentlyPresidentofBrightwoodAdvisors,aprivatecompanyprovidingbusiness consultingtotechnologycompaniesandinvestors.PriortoBrightwoodAdvisors,Mr.BrownwasGroupPresidentwithHarte-Hanks,aproviderof direct marketing services, and President and CEO of ZD Market Intelligence, adivision of Ziff Davis, Inc. Roger L. FeldmanDirector since 2004Audit and Nominating and Governance CommitteesPrincipal of West Creek Capital, an investment firm he co-founded in 1992.Prior to forming West Creek Capital, Mr. Feldman was an investment bankerand an attorney. Michael E.S. FrankelDirector since 2010Compensation and Nominating and Governance CommitteesCurrentlyservesasInterimCEOofHolaDoctor,acontentandadvertisingbusinessfocusedontheHispanichealthmarket.PreviouslyservedasSVP BusinessDevelopmentandM&AofLexisNexisGroup, aleadingglobalproviderofcontent-enabledworkflowsolutionsfrom2008-2011.Mr. FrankelpreviouslyservedasSVPCorporateDevelopmentandStrategyforInformationResourcesInc.,aproviderofenterprisemarketinformation solutionsandservices,from2005to2008,VPBusinessDevelopmentforGECapital,thefinancialservicesunitofGeneralElectric,from2003to2005, andVPCorporateDevelopmentforVeriSign,Inc.,aleadingproviderofonlinesecurity,from2000to2003.Mr.Frankelwasalsoaninvestmentbanker with Merrill Lynch and a corporate attorney with Skadden, Arps. Henry G. RinerDirector since 2010Was appointed President and Chief Executive Officer of Onvia effective October2010. Before joining Onvia, Mr. Riner was CEO of OSG Billing Services(OSG), a New Jersey-based company that provides web-based invoice and statement printing services since 2009. From 2006 to 2008, he served as CEO of CoAMS, Inc., a trade promotions management company, and CEO ofSourceLink, Inc. (SourceLink), a direct marketing services provider, from 1997 to 2005. Prior to SourceLink, Mr. Riner was CEO of UniversityMicrofilm (now known as ProQuest), the information and learning division ofBell and Howell Company, from 1994 until 1997.

CORPORATE GOVERNANCESix of seven current directors are independentSeparate Chairman and CEO positions with independent ChairmanAudit, Compensation, Governance and Nominating Committees comprised solely of independent directors and meet regularly in executive sessions without managementNo related-party transactions

HankRiner,President&CEO CameronWay,ChiefFinancialOfficer CONTACTSOnvia Headquarters509 Olive Way, Suite 400 Seattle, WA 98101Tel 206.282.5170 Fax 206.373.8961www.Onvia.com 33

AdjustedEBITDA:AdjustedEBITDAisnotafinancialmeasurecalculatedandpresentedin accordance with U.S. generally accepted accounting principles (GAAP)and should not be considered as an alternative to net income, operatingincome or any other financial measures so calculated and presented, nor asan alternative to cash flow from operating activities as a measure of thecompanys liquidity. Onvia defines Adjusted EBITDA as net income beforeinterest expense and other non-cash financing costs; taxes; depreciation;amortization; and non- cash stock-based compensation. Othercompanies (including the companys competitors) may define adjustedEBITDA differently. The company presents Adjusted EBITDA because it believes Adjusted EBITDA to be an important supplemental measure of performance that iscommonly used by securities analysts, investors and other interested partiesin the evaluation of companies in similar industries and size. Managementalso uses this information internally for forecasting and budgeting.It may not be indicative of the historical operating results of Onvia nor isit intended to bepredictiveofpotentialfutureresults.InvestorsshouldnotconsiderAdjustedEBITDAin isolation or as a substitute for analysis of results as reportedunder GAAP.GLOSSARY34

AnnualContractValue(ACV):ACVrepresentstheannualizedaggregaterevenuevalueofall subscription contracts as of the end of the quarter. ACVisdrivenbyAnnualContractValueperClient(ACVC)andthegrowthinthenumberof clients. Most of the companys revenues are generated from subscriptioncontracts, which are typically prepaid and have a minimum term of one year,with revenues recognized ratably over the term of the subscription. The company also receives revenues from multi-year content reseller licenses,management reports, document download services, and list rental services,which are not included in the calculation of ACV. ACV is not a financial measure calculated and presented in accordance with U.S.generally accepted accounting principles (GAAP) and should notbe considered as an alternative to revenue or any other financial measuresso calculated. Management uses this information as a basis for planning andforecasting core business activity for future periods and believes it is useful in understanding the results of its operations.GLOSSARY35

END PRESENTATION ********

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