RetailMeNot Reports Slide in First Quarter Profit -- Update

By Lisa Beilfuss 

Online coupon site RetailMeNot Inc. said Tuesday that first-quarter profit slid 33% as a decline in desktop transaction revenue offset a large increase in mobile transaction revenue.

Still, results came in ahead of the company's estimates.

The Austin-based company, which went public about two years ago, aggregates retailers' digital coupons, posts them on its website and smartphone application and then collects commissions from retailers based on purchases.

Analysts have suggested that RetailMeNot, which generally gets more than half its traffic from searches, has been affected by changes to Google Inc.'s algorithms. The impact from Google's search update that prioritizes mobile-optimized websites remains unclear in the near term, but it should be a catalyst for retailers to implement mobile-optimized sites, analysts at Wunderlich said in a note this week.

"We believe the latest Google mobile algorithm change could be a good thing long term. We think it encourages more retailers to optimize their often underdeveloped mobile commerce channels as more consumers use their mobile devices to shop," said spokesman Brian Hoyt. RetailMeNot is getting a greater share of a retailers' digital marketing spend, Mr. Hoyt added.

Over the quarter, mobile online transaction net revenue surged 137% to make up 9% of overall revenue. The increase follows a 90% jump in the previous quarter. Meanwhile, though, desktop online transaction revenue, which also includes tablets, fell 14% to $47.1 million. The company generated 78% of total sales from desktop transactions.

Total visits to the site rose 16% to 179.9 million while monthly mobile unique visitors totaled 18.4 million, up 55% from a year earlier. Both metrics slowed from higher rates of increase in the fourth quarter.

Revenue from international markets, representing nearly a quarter of overall sales, was flat at $13.7 million.

RetailMeNot reiterated its outlook for the year, saying it expects to report $275 million to $285 million in revenue, about 6% higher than in 2014. Adjusted Ebitda--earnings before interest, taxes, depreciation and amortization, a profitability measure that approximates for cash flow--will be between $92 million and $100 million, the company said.

But for the current quarter, RetailMeNot gave a downbeat forecast of $55 million to $58 million in revenue and $12 million to $14 million in Ebitda. Analysts were expecting $58.9 million in sales and $15.4 million in Ebitda.

In all for the first quarter, RetailMeNot said it earned $4.1 million, down from a year-earlier profit of $6.1 million. On a per-share basis, earnings fell to seven cents from 11 cents. Excluding certain items, like stock-based compensation expenses, per-share profit slipped to 20 cents from 23 cents. Adjusted Ebitda dropped 12.7% to $18.7 million.

Revenue declined 1.4% to $60.4 million.

The company had projected adjusted Ebitda of $14 million to $16 million. RetailMeNot had expected to report sales of $57 million to $60 million.

Analysts predicted 14 cents in earnings per share and $58.7 million in revenue.

Operating expenses rose 5.6% to $53.3 million.

Shares in the company, up about 22% this year, were inactive in premarket trading.

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