Today, 9:55 AM
- Believing restructuring efforts and an industry shift towards programmatic (automated) ad buys are pressuring near-term sales, Goldman's Debra Schwartz has downgraded AOL to Sell ahead of Friday's Q1 report, and cut her target by $6 to $38.
- Schwartz also notes a "monetization gap" exists between AOL's mobile and PC traffic - about half of the company's Q4 traffic came from mobile - and thinks AOL's ad ops could underperform long-term as firms such as Facebook expand their off-platform ad offerings.
- The downgrade comes after Yahoo, Yelp, and LinkedIn reported soft Q1 sales that were blamed in part on programmatic. AOL has been investing heavily in its programmatic ad tech offerings - the company's ONE platform, which aims to provide an integrated programmatic ad-buying solution across various media channels and data sources, launched last month.
- Last year: Programmatic ads pose challenge for Web publishers
Wed, Feb. 11, 12:14 PM
- "I would expect domestic display revenue to decline in high single digits in the first half of the year," CFO Karen Dykstra stated on the Q4 CC.
- The remarks come after AOL reported display ad sales for AOL properties fell 6% Y/Y in Q4, and U.S. PC visitors to AOL sites fell 11%. Yahoo's display ad ops are also having a rough time amid an industry shift towards mobile ad sales, programmatic (automated) ad buys, and native ad formats such as sponsored stories.
- Dykstra promises AOL's salesforce restructuring (first reported last month) will boost ad sales in 2H15, and moreso in 2016.
- Shares have fallen to their lowest levels since October.
- Q4 results, details
Wed, Feb. 11, 9:29 AM
- AOL's display ad sales for its own properties fell 6% Y/Y in Q4 to $171.5M, worse than Q3's flat growth and driving the Q4 revenue miss. The loss of disposed/shuttered brands such as Patch had a $12M revenue impact vs. $10M in Q3.
- Contributing to the display weakness: Average U.S. monthly PC visitors to AOL properties fell 1% Q/Q and 11% Y/Y to 107M. Mobile growth apparently wasn't able to offset.
- AOL properties search revenue was healthier, rising 6% to $108.2M (3% growth in Q3). 3rd-party properties revenue rose 16% to $259.9M thanks to the Adap.tv video ad unit and programmatic ad sales growth. Other revenue (service/platform fees) grew 48% to $22.6M. Across business segments, programmatic revenue grew 250% in 2014.
- Subscription (dial-up ISP) revenue fell 5% (same as Q3) to $148.1M. U.S. subscribers fell 3% Q/Q and 11% Y/Y to 2.22M. ARPU was $21.18, down slightly from Q3's $21.35 but up from $20.01 a year ago.
- Free cash flow was $85.8M, +42% Y/Y and exceeding adjusted net income of $75.8M. Cost of revenue rose 6% Y/Y to $526.2M (compares with 5% revenue growth), and G&A spend fell 3% to $82.1M.
- Q4 results, PR
Wed, Feb. 11, 9:13 AM
Wed, Jan. 28, 10:43 AM
- Citing rising competition, Wells Fargo has downgraded AOL to Market Perform ahead of its Feb. 11 Q4 report.
- The downgrade comes on a week that has seen Re/code report AOL is likely shuttering gaming site Joystiq and carrying out a major restructuring of its ad sales teams. The latter is said to be driven by the online ad market's ongoing shift towards programmatic (automated) ad buys; programmatic now accounts for 40% of AOL's ad business.
Mon, Jan. 12, 12:19 PM
- Though it likes AOL's improving asset portfolio, Cowen is less fond of the company's valuation at current levels, and is thus downgrading to Market Perform.
- Shares remain above where they traded before Bloomberg reported last week Verizon had approached AOL about a possible acquisition or JV. Both Verizon and AOL dismissed the M&A talk, but didn't comment about the reported JV discussions.
- AOL currently goes for 19x 2015E EPS, and 1.4x 2015E sales. The 2015 revenue growth consensus is at 7.6%.
Thu, Jan. 8, 11:39 AM
- Though Marissa Mayer (NASDAQ:YHOO) is reportedly uninterested in a deal and Tim Armstrong (NYSE:AOL) has dismissed the M&A speculation swirling around his company, activist Starboard Value is once more reiterating its call for a Yahoo/AOL merger.
- Starboard argues a merger would yield cost synergies of $1B-$1.5B/year, help Yahoo carry out "a tax-efficient separation" of its Alibaba/Yahoo Japan stakes, and create "a strong growth platform given AOL's progress in mobile and video advertising."
- The firm also says it's "increasingly concerned" about reports stating Yahoo is thinking of making a big media acquisition with its Alibaba IPO proceeds. In addition, it's not happy with speculation Yahoo is "considering a cash-rich split-off as a structure to separate its non-core minority equity interests," rather than "a spin-off structure or other available alternatives to unlock the full value of the stakes in Alibaba and Yahoo Japan."
- Yahoo has said it will offer more details about its plans to tax-efficiently monetize its remaining Alibaba stake during its Q4 earnings CC (set for Jan. 27).
- Both Yahoo and AOL are rallying. The Nasdaq is up 1.7%.
Oct. 27, 2014, 5:40 PM
Oct. 22, 2014, 10:22 AM
Oct. 20, 2014, 4:04 PM
- Though Starboard Value has called on Yahoo to merge with AOL (AOL +3.1%), there are "no explicit talks about a deal with Yahoo," says CEO Tim Armstrong. As it is, Re/code has reported more than once Marissa Mayer isn't a fan of an AOL/Yahoo deal.
- Armstrong also declares the online ad market is going to see a major shakeup, with future solutions for marketers either completely programmatic (automated) or custom-made. "Everything in the middle is going to die."
- AOL has been betting big on programmatic growth; the company claims over 1/3 of its ad sales now come from programmatic offerings. Last month, AOL expanded its partnership with ad giant Publicis to cover programmatic video and linear TV ads.
Sep. 26, 2014, 12:21 PM
- In an open letter, activist investor Starboard Value says it's "a significant shareholder" in Yahoo (YHOO +3.9%), and calls for the company to "explore a strategic combination with AOL (AOL +6.1%)."
- Starboard also wants Yahoo to "[unlock] the substantial value" in its Alibaba and Yahoo Japan stakes in a tax-efficient manner (could be easier said than done), cut losses in its display ad/content ops by $250M-$500M through cost cuts, and put an end to its "aggressive" M&A strategy.
- The firm estimates a $17.67/share "value gap" exists between Yahoo's trading price and its sum-of-the-parts valuation, something it attributes to tax worries and concerns about how Yahoo will spend any Alibaba/Yahoo Japan proceeds (previous).
- It thinks an AOL deal "could offer synergies of up to $1 billion by significantly reducing the cost overlaps in [Yahoo and AOL's] Display advertising businesses as well as synergies in corporate overhead." Starboard also believes an AOL merger could lower Yahoo's Alibaba/Yahoo Japan tax bill.
- Josh Brown argued last week Yahoo is now a prime target for activists. Starboard once waged a failed proxy battle against AOL.
- Yahoo and AOL have both spiked in response to Starboard's letter.
Sep. 18, 2014, 3:12 PM
Aug. 6, 2014, 12:16 PM
- After dropping 1% Y/Y in Q1, AOL's search revenue rose 6% in Q2 to $98.9M. Display ad sales on AOL properties fell 1% to $144.1M, a smaller drop than Q1's 3%. 3rd-party platform revenue (boosted by last year's Adap.tv acquisition) rose 60% to $194.3M, better than Q1's 55%.
- Subscription (dial-up ISP) revenue fell 7% to $155.1M after dropping 10% in Q1. U.S. subscribers fell 3% Q/Q and 9% Y/Y to 2.34M, but ARPU rose 7% Q/Q and 4% Y/Y to $20.86. Churn was 1.6%.
- Average monthly unique visitors to AOL properties rose 18% to 171M, even as average monthly PC visitors fell 7% to 108M. Display ad sales on AOL properties were hurt by the loss of $15M in revenue from Patch and other "shuttered or de-emphasized brands;" they would've been up 9% otherwise.
- $59M was spent on buybacks at an average price of $36.84, and a new $150M buyback has been authorized. Free cash flow grew 53% to $87.5M.
- Q2 results, PR
Aug. 6, 2014, 9:14 AM
May. 9, 2014, 12:07 PM
- Chairman/CEO Tim Armstrong discloses he bought 55.6K AOL (AOL +2.9%) shares yesterday at a price of $36.08.
- Armstrong's purchase came after AOL shares fell nearly 21% on Wednesday due to an EPS miss and weak display/search ad numbers.
- There has been ongoing speculation that Yahoo will make a bid for AOL with some of its Alibaba IPO proceeds. Aside from providing Yahoo with a slew of content and ad network/tech assets, AOL has ~$1.25B in capital loss carry-forwards (they start to expire in 2015) that could lower Yahoo's tax bill.
May. 7, 2014, 12:48 PM
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