The stock is down 24% in midday trading to its lowest point since October after the company reported weaker than expected Q1 sales for display and search ads and took several charges that startled investors. Net income at $9.3M was down 64.1% vs the period last year on revenues of $583.3M, +8.4%. The top line beat forecasts for $577.7M. But with a $12M restructuring charge and a $10M asset impairment charge tied to software development earnings came in at 11 cents a share, well below the 45 cents that analysts expected. The writedown included Patch, the ailing local news service it has contributed to a joint venture.
In addition to the major surprises, many investors were chilled by a 3% year-over-year drop in global display ads, which had improved in Q4, and 1% decline in global search. CEO Tim Armstrong looked on the bright side saying that this was the fifth consecutive quarter of growth in several metrics as AOL seeks to build sales for online video and — his favorite term — programmatic, or computer generated, ad sales. “AOL’s investment in global media and technology platforms is allowing AOL to compete on a global scale,” he says.
The stock is up pre-market as investors relish the encouraging news about AOL’s improving ad sales, and discount the earnings disappointment due to known factors. The company reported Q4 net income of $35.5M, basically flat with the previous year, on revenues of $679M, +13.3%. The revenue number was well ahead of the $655.8B that analysts expected. Earnings at 43 cents a share appeared to miss the Street’s target of 60 cents– although the company says it was a beat if you add back 21 cents for one-time costs. AOL took a $13.2M restructuring charge, mostly for layoffs at the Patch local news service which it recently off loaded. Traffic acquisition costs also rose with the inclusion of Adap.tv, which AOL bought in September. But overall ad sales improved 23% to $507M helped by a 63% gain, to $223.6M, in Third Party Network transactions. Global Display ads rose 7% to $181.7M but Global Search fell 2% to $101.7M. AOL remains weighed down by its declining Internet subscription business. Revenues there fell 10% to $156.7M as the number of domestic subscribers also fell 10% to 2.5M. all told, CEO Tim Armstrong says that 2013 was “AOL’s most successful year in the last decade” and it “plans to invest in our market leading strategies while we continue to grow the company.”
Optimists and pessimists will find evidence to justify their views of AOL in this morning’s earnings release. Net income attributable to AOL at $2.0M, is down 90.4% vs the period last year as the company took a $25.0M impairment charge on its beleaguered Patch local news web operation plus a $19M restructuring charge. But revenues at $561.3M are up 5.6%. The top line soundly beat expectations for $548.8M. Earnings per share were reported at 2 cents, but likely beat the Street’s prediction of 35 cents once you factor out one-time charges which the company says amounted to 53 cents. While there’s a lot of noise in the report, some of the fundamental numbers look OK. Global ad sales were up 13.5% to $386.0M helped by growth in sales from video. Display ads were +5% due to price increases while search was +3% which the company attributes to an increase in revenue per search. Per usual, AOL’s old Internet subscription service weighed down the results with revenues -7.5% to $204,5M as the number of domestic subscribers fell 13.3% to 2.5M. But there’s a silver lining here, too — last year subscription revenue fell 10%, which suggests the rate of decline is slowing. CEO Tim Armstrong says the numbers “highlight the strength of AOL’s strategy and the consistent execution of our team in delivering great consumer experiences and successful customer results.”
The revenue growth is modest, but it’s the second time in eight years that AOL has been able to boast that the gains from ad sales have outweighed the decline in its Internet subscription business. The company just reported Q1 net income of $25.6M, +21.9% vs the quarter last year, on revenues of $538.3M, +1.7%. Revenues beat analyst forecasts for $537.2M. But diluted earnings at 32 cents a share missed their target for 35 cents. AOL says that a 9% growth in global ad sales to $359.2M included an 8% increase in global display revenues — with domestic sales +6% — as well as a 10% pick up in third party network revenue and 9% rise in search revenue. The Brand Group — with online destinations including The Huffington Post, Patch and TechCrunch — saw a 14% pick up in sales to $189.6M while its cash flow loss was cut to $4.9M from $16.8M. About 112M different people visited AOL properties each month, up 3% from last year’s Q1 but -1% from the end of the year. The ad gains were somewhat offset by the Internet access business which ended the quarter with 2.7M domestic subscribers, -4.7% from the end of 2012. Revenues for that business fell 10% to $211.5M while adjusted cash flow fell 8% to $146.4M. Finally, the AOL Networks business services unit saw revenues increase 8% to $160.9M with an adjusted cash flow loss of … Read More »
UPDATE, 8:17 AM: AOL hit all the right buttons this morning. The stock’s up 15.9% on heavy volume in early trading.
PREVIOUS, 4:13 AM: Shares are up about 4.9% in pre-market trading following this morning’s earnings release which disclosed a 10% pop in global ad sales, including domestic and international display ads. It was a glass-half-full report: AOL generated $22.8M in net income in 4Q, down 65.6% from the period last year, on revenues of $576.8M, down 3.2%. Still, the revenue figure topped the nearly $573M that analysts expected. And earnings, at 23 cents a share, were well ahead of the 16 cents that the Street anticipated. Credit Suisse analyst John Blackledge calls the performance “still soft, but improving.” AOL is crowing about ad sales because that represents its future as subscription revenues from its old dial-up Internet service inevitably fall. (Subscription revenue dropped 18% in the quarter, which AOL says is the lowest rate of decline in five years.) The company says that it made progress in ad sales for its online videos, major brands, and in local ads mostly on its Patch network of community news sites. But traffic was flat compared to 3Q with visits to MapQuest and AIM declining as properties in the Huffington Post Media Group grew. “Our Q4 results highlight AOL’s ability to methodically improve our consumer offering and financial performance,” CEO Tim Armstrong says. “We continue to invest in AOL and will continue … Read More »
AOL this morning reported third-quarter revenue of $531.7 million, down 6% from a year ago but marking the lowest level of decline in five years. A loss of $2.6 million, or 2 cents a share, also beat Wall Street projections as the company saw year-over-year gains in global advertising revenue, which included a 28% boost in third-party ads and a 15% rise in display — it’s the second consecutive quarter of gains in global ad revenue. ”We continue to build strong consumer experiences as we execute our strategy to build the premium branded media company for the Internet,” CEO Tim Armstrong said in announcing the earnings this morning. “Our share repurchases underlie our belief in the value of AOL and our strategy.” Still, search and contextual ads fell 15% year-over-year and overall ad revenue at AOL properties only increased 1% to $221.8 million despite the additions of The Huffington Post and TechCrunch. Expect Armstrong to be asked during AOL’s call with analysts about those figures as well as rumors of a tie-up with Yahoo, a move he says would save the company $1 billion-$1.5 billion and shore up its ad message to agencies.
AOL shares are down about 11% in early trading and here’s why: Wall Street expected AOL to deliver a 4 cent-a-share profit for 2Q, and the company reported an 11 cent loss. The net loss, at $11.8M, looks better than the $1.1B loss in the same quarter last year. But the 2010 figure included a $1.4B goodwill impairment charge. This morning’s report shows that AOL generated $542.2M in revenues, down 8% from last year — but ahead of the $530.4M that analysts forecast. AOL says its big investments in hyperlocal news service Patch are largely responsible for the continuing losses. The operation serves 846 towns, 44 more than it had at the end of March; in March, AOL closed its $315M deal to acquire The Huffington Post. Revenues at AOL’s mostly dial-up Internet subscription business fell 23% to $201.3M. But the company cheered the 5% growth in ad revenue, to $319M. “AOL’s return to global advertising growth for the first time since 2008 reflects the hard work of our team and another meaningful step forward in the comeback of the AOL brand,” CEO Tim Armstrong said.