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AOL earning numbers are out, and it’s an earnings beat for Tim Armstrong and company.Ad revenue was up 8% on a year over year basis, to $317.7 million.
Overall revenue was down 6% on year over year basis, as the dial-up business shrank by 22% to $192 million.
While the ad revenue growth looks decent, Sara Livingston pointed out on Twitter that AOL’s owned and operated properties only saw ad revenue grow by 1% year over year.
Another worrisome trend, despite adding the Huffington Post to its stable of properties, the company’s uniques were flat on a year over year basis.
One more thing: Peter Kafka at All Things D says on Twitter after listening to the earnings call, “Net out HuffPo, TechCrunch, etc. and AOL domestic display is up 4%, down from 6% last quarter.”
A look at the key numbers:
- Revenue of $531.7 million versus Wall Street expectations of $525.3 million
- Operating loss from continued operations is $0.02 a share versus expectations of a $0.07 loss
- 107 million monthly uniques on average, versus 106 million the year prior
- AOL spent $130 million buying back shares. (It bought 9.7 million shares at an average price of $13.39 a share.)
Here’s a breakdown of the revenue, note the weakness in AOL properties:
Here’s a breakdown of earnings from Evercore Partners’ Ken Sena:
Solid Revenue Beat: Total revenues declined by 5.6% to $532 million, 4.4% better than our $509 million estimate (- 9.6% y/y) on stronger than expected third-party ad networking, Access, and, to a lesser extent, search revenues. Branded display revenues of $137 million, up 13%, was slightly better than our 12% growth expectation, but more or less inline.
Higher 3P ad networking driven in part by M&A. 3P revenues increased 31.7% to $95.9, or 10% ahead of our $87.4 million expectation. Recently acquired 5Min and GoViral contributed $12.1 million. On an organic basis (x-acq), 3P revenues increased 15% y/y with Ad.com, its leading property, increasing 12% y/y.
Access also better than expected . Access revenues decreased 21.6% y/y to $192 million, ahead of our negative 25.9% expectation. However, subscription revenue declines reflect a 15% and 3% decline in domestic Access subscribers and monthly ARPU, respectively. The reason for the decline in ARPU was that the company upgraded several non-Access subscribers to include Access in their product package, slowing subscriber deceleration but accelerating ARPU decline. We note that on an organic basis, subscribers declined 20% vs. the 15% reported, given the bundle change.
Search revenue declined 14.2% y/y to $85.1 million, modestly ahead of our negative 16.2% expectation. 85% of this decline was due to fewer domestic queries, the majority of which related to declines in Access subscribers, and the remainder due to fewer international queries. Revenue per search (RPS) remained flat y/y, based on what we can tell.
Display revenues were more or less in-line , as branded display revenues increased just 13.2% to $137 million, 1 percentage point above our 12% growth expectation. Growth was attributed to yield management on premium display advertising and increased sellable premium inventory on The Huffington Post, TechCrunch, and other properties. However, engagement still appears to be an issue with unique visitors to AOL properties increasing just 0.5% y/y to 107 million despite recent acquisitions and platform investments.
Solid margin performance on lower than expected SG&A. In-line cost of revenue along with better SG&A expense (18% vs. 22%) resulted in a 7.2% adjusted operating income margin versus the 3.0% expected. The lower SG&A was due to the company’s reduction in headcount as well as centralized marketing and corporate communications. As a result, adjusted OIBDA of $87.2 million (or 16.4% of revs) was 35% above our $64.3 million expectation (street: $67 million). Adjusted EPS of $0.21 beat our $0.09 forecast ($0.08 for the Street).