After the close yesterday, Millennial Media (MM) reported its first quarterly results as a public company. A couple of interesting cross currents make this report much more compelling than most quarterly results.
First, Millennial Media had a very successful IPO that led to an initial pop of nearly 100%. Since that initial day back at the end of March, the stock has plunged all the way back to the original IPO price. This drop further highlights how investors in the after market typically get burned. Our initial report highlighted how the stock was overpriced back then.
Second, the company is now the largest independent public mobile ad network in the market. As so, the results will be scrutinized as to the health of the sector in general. Plus the recent news regarding the inability of Facebook (FB) to monetize mobile traffic will derive some focus.
Q112 Earnings Results
The company reported strong Q112 revenue growth of 53% and guided to 2013 revenue growth of roughly 70%. The earnings were somewhat convoluted with charges and share conversions typical of an IPO. See below results from the earnings report:
- Total Revenue: For the first quarter of 2012, total revenue was $32.9 million, a 53% year-over-year increase from total revenue of $21.5 million for the first quarter of 2011.
- Gross Margin: For the first quarter of 2012, gross margin improved to 39.5%, compared to 36.9% for the first quarter of 2011.
- Net Loss: For the first quarter of 2012, net loss was $(4.0) million, compared to $(23,000) for the first quarter of 2011.
- Adjusted EBITDA: For the first quarter of 2012, adjusted EBITDA was $(2.4) million, compared to $0.2 million for the first quarter of 2011.
- Net Loss per Share: For the first quarter of 2012, Pro forma net loss per share for the first quarter of 2012 was $(0.05).
- Other Business Metrics: As of March 31, 2012, we had 300 million monthly unique users worldwide, including approximately 140 million unique users in the United States alone. More than 30,000 apps were enabled by their developers to operate on our platform as of March 31, 2012.
- Outlook: Based on information as of May 14, 2012, we expect total revenue for the second quarter of 2012 to be in the range of $37 million to $38 million and adjusted EBITDA, which excludes stock-based compensation, to be between $(3.2) million and $(3.5) million. For the full year 2012, we expect revenue to be in the range of $173 million to $176 million and adjusted EBITDA, which excludes stock-based compensation, to be between $(3.0) million and $(4.0) million.
After Hours Action
The stock initially sold off over 11% as news outlets such as the one from Investor's Business Daily reported the results missed estimates. This is egregious considering the one analyst skews the estimates by using numbers suggesting 200% revenue growth in 2012.
The CEO immediately made it known that the one outlier analyst had baseless numbers and had never contacted the company. He claimed that the results easily beat all four syndicated analyst estimates.
The general tone of the call remained bullish for the mobile ad sector. The company saw strong growth from tablets including the iPad and Galaxy. Naturally more tablet traffic helps reduce the main issue of screen space seen with smartphones and impacting to Facebook.
The Millennial report highlights the issues with IPO stocks. The complex prospectus, one time IPO costs, and additional accounting staff for going public make the initial quarterly results difficult to forecast.
It also highlights the on going issue with a market focused on how a company performs compared to analyst estimates and not compared to last years results or the valuation of the stock. Did anybody really buy this stock due to the one analyst estimate of $301M for 2012?
Even though Millennial forecast huge growth for 2102 and the stock is down 50% from the highs, it still sold off 11% in after hours. This might provide a good entry point now that investor expectations have been accurately set by the company.
Velti (VELT) is another compelling stock in the sector that likewise has been hit. The company reports after the close on Tuesday so any new investors should review the report first.
Disclosure: I am long VELT.
Additional disclosure: Please consult your investment advisor before making any investment decisions.