AOL, Inc. (



Q2 2011 Earnings Call

August 9, 2011 8:00 AM ET


Eoin Ryan – Vice President, Investor Relations

Tim Armstrong – Chairman and CEO

Artie Minson – Chief Financial Officer


Brian Pitz – UBS

Rory Maher – Hudson Square Research

Ross Sandler – RBC

Mark Mahaney – Citigroup

Ken Sena – Evercore Partners

Sachin Khattar – Jefferies

Ingrid Chung – Goldman Sachs

Tom White – Macquarie

Clay Moran – Benchmark

John Blackledge – Credit Suisse

Sameet Sinha – B. Riley

David Joyce-Miller – Tabak & Co.


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Good day, ladies and gentlemen. And welcome to the AOL’s Second Quarter 2011 Earnings Conference Call. My name is [Chenille], and I’ll be your coordinator for today. At this time, all participants are in listen-only mode. Later, we will facilitate a question-and-answer session. As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to Mr. Eoin Ryan, Vice President of Investor Relations. Please proceed.

Eoin Ryan

Good morning. Thanks, Chenille, and everyone for joining us on our second quarter 2011 earnings call. You can find our Q2 earnings press release and accompanying slides and trending schedules on our website. On the call with me today is our Chairman and CEO, Tim Armstrong; and our CFO, Artie Minson. Tim and Artie will make some brief remarks on the quarter and our overall strategy and then we’ll open up the lines for Q&A.

But first I will remind you that during this call, we will discuss our outlook for future financial and operating performance, corporate strategy, marketing and product plans, technology improvements, cost initiatives, planned investments, as well as our expectations for the economy and online advertising in general.

These forward-looking statements typically are preceded by words such as we will, we expect, we believe, we anticipate or similar statements. These forward-looking statements are subject to risks and uncertainties, and our actual results could differ materially from the views expressed today. Reported results should not be indicative of future performance.

Some of these risks have been set forth in our quarterly report Form 10-Q for the three months ending June 30, 2011 and in our annual report Form 10-K for the year ended December 31, 2010 filed with the SEC. All information discussed in this conference call is as of today August 09, 2011, and we do not intend nor do we undertake any duty to update this information to reflect future events or circumstances.

We will also discuss certain non-GAAP financial measures including adjusted OIBDA and free cash flow. I’ll refer you to the press release on the Investor Relations section of our website for all comparable GAAP measures and full reconsolidations.

With that, I’ll turn it over to Tim.

Tim Armstrong

Yeah. Thanks Eoin. Good morning. And thanks for joining us on the Q2 AOL Call. AOL is singularly focused on becoming the next great media company for the digital age, being rich, engaging and easy to find content and experiences for consumers and best-in-class environment for advertisers.

Our focus on this call is put us on a growth path. We have cleaned up and simplified our operations. We are witnessing encouraging metrics in key growth areas and we are seeing the beginning of this manifest in our reported numbers. AOL is a healthier company today than it was a year ago.

In Q1, we grew display revenue for the first time in four years. The Q2 display revenue continued to grow and for the first time in three years, AOL grew global advertising revenue. These are important steps in the come back of AOL and demonstrate the tough work we have done to fix the company and it is having an impact. Revenue growth will precede profit growth and we have revenue growth on the move.

Q2 results were solid and here are a few highlights. As I mentioned, we grew global advertising – the global advertising business for the first time since 2008, being up 5% year-over-year and beating larger competitors in globe, especially in the U.S.

Our, Q2 was the first quarter of year-over-year growth since Q4 2009, continued a string of four consecutive quarters of sequential growth. We grew meaningful traffic against important areas our stated goals in the content business. The Huffington Post traffic surpassed The New York Times during the quarter and passes nearly $10 million monthly unique users.

In mobile, we’ve solid number four in U.S. traffic. We are up 60% year-on-year on mobile downloads. In Project Devil, the number of impressions sold grew over 100% and engagement matrix continued to improve. Consumers are spending almost four times as long on a page with Project Devil on it as compared to the industry averages and spending almost 2.5 times longer watching video.

Today we have on our sites 11 different Devil campaigns running, including premium brands like Coca-Cola, Procter & Gamble, Johnson & Johnson, Kraft Foods and many more.

In Video, we grew viewers and views by over 100% year-over-year. In local, we advanced patch in the 44 new accounts and have the math almost 10 million unique as I mentioned, the revenue here is small but it’s growing very quickly.

The Huffington Post Media Group, we launched 17 sites including a new in Canada and the U.K. We launched AOL B2B with AOL Energy, AOL Defense and AOL Government. In the consumer side area, we launched AOL Healthy Living, Huffington Post Canada and Huffington Post U.K., Huffington Post Women, Huffington Post Celebrity, Huffington Post Parent, Huffington Post BlackVoices. We’ve been very busy in the content business.

In the access business, the churn rate continued to moderate at 2.2% and we launched 13 new paid services during the quarter. We’ve also been able to gain significant talent. During Q2 we reduced our workforce in total by about 500 but added back 300 new employs and team members across content, advertising, product and technology, all into jobs that are based on AOL’s future.

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