AOL Second-Quarter Loss Narrows, Ad Revenue Rises
UPDATED: The stock hits its lowest point since the separation from Time Warner as the Web company posted another loss and reported weakened recent momentum, but ad revenue increased for the first time since the second quarter of 2008.
NEW YORK - Online company AOL on Tuesday reported a narrowed second-quarter loss and its first advertising gain in years, but revenue continued to fall and management guided Wall Street to expect weaker full-year results due to a recent weakening of ad momentum.
AOL's stock fell to hit a new 52-week low of $10.31 and its lowest point since its separation from Time Warner before closing down 25.8 percent at $11.19.
AOL's loss of $11.8 million compared with a year-ago loss of $1.06 billion, which was driven by a $1.4 billion write-down and higher restructuring costs. But Wall Street had hoped for a quarterly profit in the latest period.
One factor dragging down the bottom line was an increase in so-called costs of revenue, which rose from $335 million to $403 million. That figure includes acquisitions-related costs, such as $10.2 million of increased incentive compensation expense associated with acquisitions such as that of the Huffington Post, and higher personnel costs as the company continues to invest in key initiatives.
AOL's revenue in the second quarter declined 8 percent to $542 million. Advertising revenue rose 4.7 percent though - its first improvement since the second quarter of 2008 - to $319 million with display advertising up 14 percent. Subscription revenue declined 23 percent.
AOL chairman and CEO Tim Armstrong on a conference call said profits will follow ad revenue, adding that "AOL is a healthier company today than a year ago." In a statement, he had earlier said: "AOL’s return to global advertising growth for the first time since 2008 reflects the hard work of our team and another meaningful step forward in the comeback of the AOL brand."
But management also told analysts on its call that advertising momentum weakened in June, guiding Wall Street lower on operating profitability.
The AOL Huffington Post Media Group, which AOL formed after acquiring the Huffington Post earlier this year, saw average monthly unique vistiors in the U.S. edge up 1 percent from 101 million in the year-ago period to 102 million. Armstrong once again called the integration of the acquisition "a big success."
Armstrong also once again vowed to make AOL a good investment, saying he wasn't happy with the company's languishing stock price, which recently hit a 52-week low amid a broad-based market sell-off. “AOL is singularly focused on becoming the next great media company for the digital age and we have positioned the company’s best people, technology and assets in front of some of the largest opportunities on the Internet,” Armstrong said.
After recent layoffs in India and elsewhere, AOL's staff is down to about 4,100, compared with more than 7,000 a few years ago, management said.
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