AOL Swings to Second-Quarter Profit
UPDATED: The online firm, led by CEO Tim Armstrong, benefited from a patent sale and posted its lowest revenue drop in seven years as advertising rose 6 percent.
AOL on Wednesday said it swung to a second-quarter profit as advertising revenue increased and the company posted its lowest overall revenue decline in years.
The firm also returned to growth in adjusted operating income before depreciation and amortization for the first time in years.
The online company posted a profit of $970.8 million, compared with a loss of $11.8 million in the year-ago period. A big Microsoft patent sales deal added to the results in the latest period, but even excluding it, AOL exceeded Wall Street expectations. The $1 billion-plus patent sale amounted to a gain of $945.8 million in the quarter.
Adjusted OIBDA rose 120 percent year-over-year, and operating earnings turned positive after a year-ago loss. Both benefited from $96.0 million in income from licensing patents with Microsoft and were negatively impacted by $8.8 million of costs related to AOL's recent proxy contest against dissident shareholders, $7.6 million of expenses associated with a state tax settlement and $5.6 million of costs related to a patent sale. Excluding those items, adjusted OIBDA rose by $18 million.
Operating income was also positively impacted by the gain on the sale of the patents.
Revenue declined 2 percent to $531.1 million, marking the lowest revenue drop for the company in seven years. AOL said its advertising revenue increased 6 percent to $337.8 million. This marks the company's fifth consecutive quarter of ad growth.
"Today’s results represent a significant milestone for AOL as we returned to adjusted OIBDA growth for the first time in four years," said AOL chairman and CEO Tim Armstrong. "The strong results and consumer performance we announced today are clear signs our strategic and operating efforts are translating into significant financial progress."
On a conference call, he said those improvements are pushing AOL closer to returning to growth in revenue and profits. He also highlighted improving display ad trends.
After what Armstrong called "very public and distracting proxy contest," he said his team hopes to focus its energy during the second half of 2012 on new product launches and further and broader revenue improvements.