RetailMeNot Inc. Earnings: The Good, the Bad, and the Downright Disappointing

RetailMeNot stock was down by about 5% as of 12:45 p.m. Tuesday, as investors reacted with negativity to the company's earnings report for the fourth quarter of 2014. While both sales and earnings came in ahead of expectations, forward guidance was a big disappointment. Let's take a look at the latest announcement from RetailMeNot and the main takeaways for investors.

The context: Blame it on Google and mobileRetailMeNot stock is down by almost 60% over the last year, the same goes for competitor Coupons.com , which has fallen by more than 52% from its highs of the last 12 months. In fact, Coupons.com stock was down about 25% as of 12:45 p.m Tuesday after the company on Monday released dismal financial performance for the December-ended quarter.

Both online coupon companies are taking a big hit since Google updated its search algorithm in May of last year, hurting organic search traffic for RetailMeNot and Coupons.com.

Also, while the mobile boom is generating big opportunities for traffic growth, monetization is much lower in mobile. RetailMeNot and Coupons.com are generating lots of mobile visits, but those users are not buying with the same intensity, so revenues per user are declining.

Good financial performanceRetailMeNot's revenues grew 11% to $87.4 million, the figure was better than the $86.1 million expected on average by Wall Street analysts. Mobile revenues increased by a strong 90% year over year, representing 25% of total sales during the quarter. International markets, on the other hand, underperformed during the period, growing by 7% and accounting for 20% of total sales.

Source: RetailMeNot.

Management kept costs under control during the quarter, so adjusted EBITDA margin was a healthy 41% of sales, an increase versus an adjusted EBITDA margin of 39% of revenues in the fourth quarter of 2013. Cash flows were also quite strong; the company reported a year over year increase of 94.7% in operating cash flows, reaching $61.4 million during the last quarter.

GAAP earnings per share came in at $0.26, while adjusted earnings per share were $0.43. The figure came in ahead of expectations, since Wall Street was on average forecasting $0.32 in earnings per share for the quarter.

Wall Street was already expecting a considerable deceleration in growth during the quarter, so the bar was quite low. Still, that doesn't change the fact that the company did better than expected on both sales and earnings during the last quarter.

Source: RetailMeNot

Bad monetization trends Mobile web visits grew by a strong 74% year over year to 97.2 million, while monthly mobile unique visits jumped by a vigorous 78% to 21.2 million. RetailMeNot ended the quarter with a total of 35.1 million email subscribers; this represents a big increase of 105% versus the fourth quarter in 2013.

RetailMeNot had a total of 226.2 million visits during the last quarter, an annual increase of 22.8% versus 184.1 million visits in the fourth quarter of 2013. When it comes to traffic, the company seems to be doing a decent job in terms of working through its difficulties.

On the other hand, monetization was down sharply during the quarter. Net revenues per user fell to $0.39 versus $0.43 in the fourth quarter of 2013, and this is dragging considerably on growth.

Disappointing guidanceForward guidance was a big disappointment, and the biggest negative in the report. Management expects revenues during the first quarter of 2015 to be in the range of $57 million to $60 million, this represents a year-over-year decline of 5% at the mid-point. Adjusted EBITDA margin is forecast to be at 26% of revenues, a considerable decline versus 35% of sales in the first quarter of 2014.

For the full year 2015, management is expecting a 6% increase in revenues at the midpoint, while adjusted EBITDA margin is forecast at 34% of revenues versus 35% of revenues during full year 2014. Declining monetization in mobile and increased investments in areas such as sales organization and mobile-focused initiatives are the main factors behind this poor guidance.

In a separate press release, management announced a $100 million stock repurchase program. This could be indicating that management is optimistic about the future, believing the stock is undervalued at current prices. However, this will hardly be enough to compensate investors for the bad news regarding sales prospects in the coming quarters.

RetailMeNot is a company in transition, and it looks like its efforts to jump-start growth once again will require some patience from shareholders.

The article RetailMeNot Inc. Earnings: The Good, the Bad, and the Downright Disappointing originally appeared on Fool.com.

Andrs Cardenal owns shares of Google (A shares) and Google (C shares). The Motley Fool recommends Google (A shares), Google (C shares), and RetailMeNot. The Motley Fool owns shares of Google (A shares) and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.