Published May 08, 2013
Shares of AOL (AOL) took a nosedive on Wednesday morning after the company missed top-line expectations as subscription revenue continued to fall.
Shares of AOL fell 10% in recent trade $37.54.
Revenue for the three months ended March 31 was $538.3 million, up 2% from $529.4 million a year ago, but below the Street’s view of $542.1 million.
The New York-based Internet and media conglomerate reported net income of $25.9 million, or 32 cents a share, up 23% from $21.1 million a year ago, or 22 cents. The quarterly EPS matched average analyst estimates in a Thomson Reuters poll.
Thomson Reuters earlier on Wednesday posted estimates of 33 cents a share and sales of $537.1 million, which would have put AOL at a beat on the top-line and miss on the bottom-line. However it has since issued a correction and updated those estimates to 32 cents and $542.1 million, respectively.
Partially to blame for the disappointing sales was the continued decline in subscription revenue. Sales in that area fell 9% year-over-year, which comes on top of a 15% decrease in the year-earlier period.
Costs of revenues also weighed on margins during the period, growing by $8.5 million due to a 21% increase in traffic acquisition costs, partially offset by a $13.4 million decline in personnel-related costs as AOL laid off hundreds in the spring of 2012.
One bright spot was a 9% improvement in advertising, with global display returning to growth after a decline in the 2012 period.
“Growth continues at AOL,” AOL Chief Executive Tim Armstrong said in a statement. “AOL’s strategy of being the first scaled media and technology company is clearly represented in our results today, and we will continue to aggressively drive the company toward near- and long-term growth.”