AOL Q1 Results Top Estimates

(RTTNews) - Web services company AOL, Inc. (AOL) reported Friday a profit for the first quarter that declined 25 percent from last year, despite revenue growth, hurt by higher traffic acquisition costs. However, both adjusted earnings per share and quarterly revenues topped analysts' expectations.

Global advertising revenue grew 12 percent, while subscription revenues declined 6 percent. The company noted that cost of revenues increased $34 million year-over-year, driven by a $46 million increase in traffic acquisition costs or TAC associated with the growth of profitable search and Third Party Properties revenue. Excluding TAC, costs of revenues declined year-over-year.

One key metric for Internet companies like AOL is TAC, which are the payments made by Internet search companies to affiliates and online firms that direct consumer and business traffic to their websites. An increase in TAC indicates cost pressures on profitability.

"AOL grew its consumer base strongly and saw continued strength in video, mobile and programmatic advertising, while we also updated the structure and capabilities of the company," Chairman and CEO Tim Armstrong said.

New York-based AOL, spun off from Time Warner, Inc. (TWX) in December 2009, reported net income attributable to AOL of $7 million or $0.09 per share for the first quarter, down from $9.3 million or $0.11 per share in the prior-year quarter.

Excluding items, adjusted net income for the quarter was $27.7 million or $0.34 per share, compared to $29.5 million or $0.35 per share in the year-ago quarter.

On average, 16 analysts polled by Thomson Reuters expected the company to report earnings of $0.32 per share for the quarter. Analysts' estimates typically exclude one-time items.

Total revenue for the quarter increased 7 percent to $625.1 million from $583.30 million in the same quarter last year, and topped eighteen Wall Street analysts' consensus estimate of $594.57 million. Revenue grew 9 percent on a constant currency basis.

Among AOL's reportable segments, brand group revenue increased 8 percent to $193 million, while membership group revenues declined 7 percent to $183 million from last year. AOL platforms revenue improved 21 percent to $280 million from a year ago.

Global advertising and other revenues for the quarter rose 12 percent to $483.5 million, with AOL properties search revenues rising 19 percent, and third-party network platform revenue growing 18 percent, while AOL properties display revenues decreased 4 percent from last year.

Domestic average monthly multi-platform unique visitors to AOL properties improved 12 percent to 190 million, while domestic average monthly desktop unique visitors to AOL properties declined 6 percent to 107 million from a year ago.

AOL noted that it's multi-platform user growth was the fastest among the top 5 Internet properties.

Meanwhile, subscription revenues for the quarter declined 6 percent to $141.6 million, with a 1.4 percent domestic AOL-brand access subscriber monthly average churn compared to 1.5 percent last year.

Domestic AOL-brand access subscribers declined 11 percent to 2.16 million from a year ago. Meanwhile, average monthly subscription revenue per AOL subscriber or ARPU advanced 7 percent to $20.83 from last year, primarily reflecting pricing increases and subscribers migrating or reactivating to higher-priced plans with more features and services.

"AOL continues to grow in strength and we are on a mission to scale the first Media Technology company of the internet and mobile age," Armstrong added.

AOL closed Thursday's regular trading session at $39.39, down $0.14 on a volume of 1.47 million shares. In the past 52-week period, the stock has been trading in a range of $33.20 to $49.86.