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AOL Delivers Strongest Revenue Growth In A Decade

Stocks in this article: AOL

Tax

AOL had Q4 2013 pre-tax income of $70.8 million and income tax expense of $35.3 million, resulting in an effective tax rate of 49.9%. This compares to an effective tax rate of 47.2% for Q4 2012. The effective tax rate for Q4 2013 differed from the statutory U.S. federal income tax rate of 35.0% primarily due to the impact of foreign losses that did not produce a tax benefit. The effective tax rate for Q4 2012 differed from the statutory U.S. federal income tax rate due to the impact of foreign losses that did not produce a tax benefit and the impact of changes in state tax rates and apportionment on AOL’s deferred tax assets.

Cash Flow

Q4 2013 cash provided by operating activities was $90.0 million, while Free Cash Flow was $60.4 million, both up year-over-year primarily due to growth in Adjusted OIBDA, partially offset by timing of working capital.

 

CONSOLIDATED OPERATING METRICS

                   
Q4 2013   Q4 2012   Y/Y Change   Q3 2013   Q/Q Change
       
Subscriber Information
Domestic AOL subscribers (in thousands) (1) 2,501 2,794 -10 % 2,508 0 %
ARPU (1) $ 20.01 $ 19.27 4 % $ 20.15 -1 %
Domestic AOL subscriber monthly average churn (2) 1.3 % 1.8 % -28 % 1.4 % -7 %
 
Unique Visitors (in millions) (3)
 
Domestic average monthly unique visitors to AOL Properties 120 113 6 % 115 4 %
 
Domestic average monthly unique visitors to AOL Advertising Network 207 187 11 % 196 5 %
 
 

(1)

Domestic AOL subscribers include subscribers participating in introductory free-trial periods and subscribers that are paying no monthly fees or reduced monthly fees through member service and retention programs. Individuals who are only registered for our free offerings, including subscribers who have migrated from paid subscription plans, are not included in the AOL subscriber numbers presented above. Additionally, only those individuals whose subscription includes AOL-brand dial-up access service are included in the AOL subscriber numbers above. ARPU is calculated as domestic average monthly subscription revenue per AOL subscriber.

(2)

Churn represents the percentage of AOL subscribers that are either terminated or cancel our services, factoring in new and reactivated subscribers. Monthly average churn is calculated as the monthly average number of terminations plus cancellations divided by the initial AOL subscriber base plus any new registrations and reactivations for the applicable period.

(3)

See “Unique Visitor Metrics” on page 10 of this press release.

 

Webcast and Conference Call Information

AOL Inc. will host a conference call to discuss fourth quarter 2013 financial results on Thursday, February 6, 2014, at 8:00 am ET. To access the call, parties in the United States and Canada should call toll-free (800) 237.9752 and other international parties should call (617) 847.8706. Additionally, a live webcast of the conference call, together with supplemental financial information, can be accessed through the Company's Investor Relations website at http://ir.aol.com . In addition, an archive of the webcast can be accessed through the link above for one year following the conference call, and an audio replay of the call will be available for two weeks following the conference call by calling (888) 286.8010 and other international parties should call (617) 801.6888. The access code for the replay is 64912086.

FINANCIAL STATEMENTS

 
AOL Inc.
Consolidated Statements of Operations
(In millions, except per share amounts)
       
Three Months Ended December 31, Years Ended December 31,
2013   2012   2013   2012
(unaudited) (unaudited) (unaudited)
Revenues:
Advertising $ 507.0 $ 410.6 $ 1,613.4 $ 1,418.5
Subscription 156.7 174.2 650.1 705.3
Other   15.3     14.7     56.4     67.9  
Total revenues 679.0 599.5 2,319.9 2,191.7
Costs of revenues 494.6 424.1 1,706.2 1,587.2
General and administrative 84.4 112.0 322.0 413.2
Amortization of intangible assets 15.4 9.6 45.1 38.2
Restructuring costs 13.2 2.4 41.3 10.1
Goodwill impairment charge 17.5
Income from licensing of intellectual property (96.0 )
(Gain) loss on disposal of assets, net   (0.4 )   (16.8 )   (2.5 )   (962.9 )
Operating income 71.8 68.2 190.3 1,201.9
Other income (loss), net   (1.0 )   (1.1 )   (6.6 )   8.2  
Income from operations before income taxes 70.8 67.1 183.7 1,210.1
Income tax provision   35.3     31.7     93.1     162.4  
Net income $ 35.5 $ 35.4 $ 90.6 $ 1,047.7
Net (income) loss attributable to noncontrolling interests   0.5     0.3     1.8     0.7  
Net income attributable to AOL Inc. $ 36.0   $ 35.7   $ 92.4   $ 1,048.4  
 
Per share information attributable to AOL Inc. common stockholders:
 
Basic net income per common share $ 0.46   $ 0.43   $ 1.19   $ 11.51  
 
Diluted net income per common share $ 0.43   $ 0.41   $ 1.13   $ 11.21  
 
Shares used in computing basic income per common share   78.9     83.7     77.6     91.1  
 
Shares used in computing diluted income per common share   83.5     88.1     82.0     93.5  
 
Cash dividends paid per common share $ -   $ 5.15   $ -   $ 5.15  
                         
Depreciation expense by function:
Costs of revenues $ 28.9 $ 30.3 $ 119.0 $ 126.5
General and administrative   2.6     2.8     9.9     12.2  

Total depreciation expense

$ 31.5   $ 33.1   $ 128.9   $ 138.7  
 
Equity-based compensation by function:
Costs of revenues $ 10.4 $ 5.3 $ 29.2 $ 18.9
General and administrative   5.2     5.9     17.8     20.6  
Total equity-based compensation $ 15.6   $ 11.2   $ 47.0   $ 39.5  
 
 
Traffic Acquisition Costs (included in costs of revenues) $ 171.5   $ 104.1   $ 479.4   $ 356.9  
 
Third Party Network Traffic Acquisition Costs $ 144.9   $ 85.6   $ 393.8   $ 306.7  
                         
 
AOL Inc.
Consolidated Balance Sheets
(In millions, except per share amounts)
 
  December 31,   December 31,
2013 2012
Assets (unaudited)
 
Current assets:
Cash and equivalents $ 207.3 $ 466.6
Accounts receivable, net of allowances of $8.3 and $6.6, respectively 491.0 351.9
Prepaid expenses and other current assets 34.1 28.5
Deferred income taxes, net   30.7     40.6  
Total current assets 763.1 887.6
Property and equipment, net 467.9 478.3
Goodwill 1,361.7 1,084.1
Intangible assets, net 208.4 133.2
Long-term deferred income taxes, net 110.6 148.8
Other long-term assets   71.7     65.3  
Total assets $ 2,983.4   $ 2,797.3  
Liabilities, Redeemable Noncontrolling Interest and Equity
Current liabilities:
Accounts payable $ 101.0 $ 76.1
Accrued compensation and benefits 127.0 151.4
Accrued expenses and other current liabilities 197.3 175.3
Deferred revenue 67.2 57.8
Current portion of obligations under capital leases   55.5     49.6  

Total current liabilities

548.0 510.2
Long-term portion of obligations under capital leases 56.2 56.3
Long-term deferred income taxes 4.4 5.8
Other long-term liabilities   97.6     73.8  
Total liabilities   706.2     646.1  
 
Redeemable noncontrolling interest 9.7 13.4
 
Equity:
 

Common stock, $0.01 par value, 114.1 million shares issued and 79.2 million sharesoutstanding as of December 31, 2013 and 110.1 million shares issued and 76.6million shares outstanding as of December 31, 2012

1.1 1.1
Additional paid-in capital 3,592.7 3,457.5
Accumulated other comprehensive income (loss), net (290.4 ) (294.1 )
Accumulated deficit (93.6 ) (188.0 )

Treasury stock, at cost, 34.9 million shares as of December 31, 2013 and33.5 million shares as of December 31, 2012

  (942.9 )   (838.4 )
Total stockholders' equity 2,266.9 2,138.1
Noncontrolling interest   0.6     (0.3 )
Total equity   2,267.5     2,137.8  
Total liabilities, redeemable noncontrolling interest and equity $ 2,983.4   $ 2,797.3  
 
 
AOL Inc.
Consolidated Statements of Cash Flows
(In millions)
 
Years Ended December 31,
2013   2012
(unaudited)
Operating Activities
 
Net income $ 90.6 $ 1,047.7
Adjustments for non-cash and non-operating items:
Depreciation and amortization 174.0 176.9
Asset impairments and write-offs 30.6 6.1
(Gain) loss on step acquisitions and disposal of assets, net (1.5 ) (975.5 )
Equity-based compensation 47.0 39.5
Deferred income taxes 51.5 124.1
Other non-cash adjustments 4.4 (2.6 )
Changes in operating assets and liabilities, net of acquisitions
Receivables (104.5 ) (33.4 )
Accrued expenses 21.7 4.6
Deferred revenue 7.9 (12.7 )
Other balance sheet changes (2.8 ) (9.1 )
       
Cash provided by operating activities 318.9 365.6
 
Investing Activities
 
Investments and acquisitions, net of cash acquired (337.9 ) (32.0 )
Proceeds from disposal of assets, net 1.5 952.3
Capital expenditures and product development costs (65.7 ) (64.9 )
       
Cash (used) provided by investing activities (402.1 ) 855.4
 
Financing Activities
 
Repurchase of common stock (134.8 ) (698.7 )
Principal payments on capital leases (61.1 ) (55.6 )
Tax withholdings related to net share settlements of restricted stock units (16.5 ) (7.6 )
Proceeds from exercise of stock options 35.3 35.2
Cash dividends paid - (434.4 )
Cash dividend equivalent payments on restricted stock units (4.4 ) -
Other financing activities 6.1 0.3
       
Cash used by financing activities (175.4 ) (1,160.8 )
 
Effect of exchange rate changes on cash and equivalents   (0.7 )   (1.1 )
 
(Decrease) increase in cash and equivalents (259.3 ) 59.1
 
Cash and equivalents at beginning of period   466.6     407.5  
 
Cash and equivalents at end of period $ 207.3   $ 466.6  
 

SUPPLEMENTAL INFORMATION – UNAUDITED

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