(FWHT) finds what investors don't like (4Q04 earnings)

Feb.24.05 | About: MIVA Inc. (MIVA)

Search firm (ticker: FWHT) announced Q4 results that matched the consensus EPS estimate but missed the consensus revenue estimate. FWHT also provided guidance below consensus revenue and earnings estimates for 2005. The stock got swiped by 23% in subsequent trading. Details and comments:

Q4 Results
(all percentage changes and comparisons are year on year, unless stated otherwise)

  • Revenue up 179% to $59 million (including acquisitions), versus consensus of $63 million.
  • Organic revenue growth was 14%.
  • FWHT claimed that it eliminated traffic that would have generated over $70,000 of pay-per-click revenue per day due to its low quality. The company is positioning itself as a guarantor of traffic quality to merchants.
  • Paid click-throughs were 251 million, up 12% from 224 million in Q3.
  • Espotting, the European contextual advertising business that FindWhat acquired in July '04, contributed $29 million of revenu, up only $1 million from Q3.
  • Espotting EBITDA margin was 14.5%.
  • EBITDA of $11.5 million up 94%.
  • GAAP-basis EPS was $0.16 excluding charges and tax benefit, in-line with consensus of $0.16.
  • Balance sheet: cash and equivalents at end-quarter were $54 million.

Q1 Guidance

  • Revenue of $55 - $59 million versus consensus of $63 million.
  • GAAP-basis EPS  $0.08 - $0.11 versus consensus of $0.20.
  • EBITDA of $8 - $10 million.

Full Year 2005 Guidance

  • Revenue of $250 - $270 million, versus current consensus of $277 million.
  • GAAP-basis EPS of $0.53 - $0.69 (mid-point $0.61) versus consensus of $0.81.
  • EBITDA of $45 - $54 million.

Quick comment:

  • Valuation: With the stock down to $10.40 in late trading and FWHT's new guidance of 2005 GAAP EPS of $0.61 (mid-point of the range), the stock is now trading at a forward P/E of 17 (assuming the accuracy of the company's guidance).
  • Espotting's sequential revenue growth ($28 million in Q3 grew to $29 million in Q4) was pallid compared to Google's 28% sequential growth for its "partner network" (which includes both the AdSense contextual ad business and pay-per-click ads for other companies' search).

FWHT chart below; it doesn't show the after-earnings swoon.