q1 2015 aol earnings presentation

7/23/2019 Q1 2015 AOL Earnings Presentation

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FIRST QUARTER 2015

EARNINGS SUMMARY



AOL Q1 2015 HIGHLIGHTS

3

AOL’S MULTI-PLATFORM USER GROWTH FASTEST AMONG THE TOP 5 INTERNET

PROPERTIES

AOL’S GLOBAL ADVERTISING REVENUE GROWTH ACCELERATES

PROGRAMMATIC GROWS 80% AND SURGES TO 45% OF GLOBAL BRAND

ADVERTISING REVENUE

AOL STRONGLY GROWS VIDEO, MOBILE, PROGRAMMATIC AND NATIVE ADVERTISING

REVENUE

GLOBAL ADVERTISING PRICING GROWS MORE THAN 10%



4

Q1 2015 CONSOLIDATED RESULTS AT A GLANCE

AOL GROWS REVENUE WHILE INVESTING FOR GROWTH

• Please see page 17 for endnotes.

Summary Results ($ in millions except per share amounts)

Q1 2015 Q1 2014 Change

Revenues

Global Advertising and other $ 483.5 $ 433.4 12%

AOL Properties Display 130.5 136.0 ‐4%

AOL Properties Search 116.4 97.6 19%

Third Party Properties 231.6 194.7 19%

Other

5.0

5.1 ‐

2%Subscription 141.6 149.9 ‐6%

Total Revenues $ 625.1 $ 583.3 7%

Global advertising and other revenue net of TAC⁽¹⁾ $ 287.3 $ 282.9 2%

Adjusted OIBDA⁽²⁾ $ 104.1 $ 107.3 ‐3%

Operating income $ 23.9 $ 24.2 ‐1%

Net income attributable to AOL Inc. $ 7.0 $ 9.3 ‐25%

Diluted EPS $ 0.09 $ 0.11 ‐18%

Adjusted Diluted EPS ⁽³⁾ $ 0.34 $ 0.35 ‐3%

Cash provided by operating activities $ 55.7 $ 23.5 137%

Free Cash Flow ⁽⁴⁾ $ 13.4 $ (10.5) N/A



Segment Results

(In Millions)

Revenues Q1’13 Q2’13 Q3’13 Q4’13 FY 2013 Q1’14 Q2’14 Q3’14 Q4’14 FY2014 Q1’15

Brand Group $ 189.6 $ 190.3 $ 192.5 $ 222.0 $ 794.4 $ 178.8 $ 185.7 $ 187.3 $ 219.1 $ 770.9 $ 193.4

Membership

Group 211.5 213.8 204.5 209.3 839.1 196.3 203.8 196.7 194.8 791.6 182.6

AOL Platforms 160.9 160.4 188.7 275.0 785.0 230.8 247.1 271.9 330.6 1,080.4 279.8

Corporate

and Other 0.3 0.3 0.0 0.0 0.6 0.0 0.0 0.0 0.0 0.0 0.0

Intersegment

eliminations (24.0) (23.5) (24.4) (27.3) (99.2) (22.6) (29.8) (29.1) (34.2) (115.7) (30.7)

Total Revenues $ 538.3 $ 541.3 $ 561.3 $ 679.0 $ 2,319.9 $ 583.3 $ 606.8 $ 626.8 $ 710.3 $ 2,527.2 $ 625.1

Adjusted

OIBDA Q1’13 Q2’13 Q3’13 Q4’13 FY 2013 Q1’14 Q2’14 Q3’14 Q4’14 FY2014 Q1’15

Brand Group $ (4.9) $ (1.4) $ 10.9 $ 35.6 $ 40.2 $ 1.8 $ 13.1 $ 17.0 $ 36.5 $ 68.4 $ 12.9

Membership

Group 146.4 151.6 149.8 145.9 593.7 138.0 143.4 139.2 141.5 562.1 126.6

AOL Platforms (2.5) (11.3) (7.1) 5.9 (15.0) (3.5) (5.0) (0.6) 13.5 4.4 (9.8)

Corporate

and Other (33.7) (30.6) (33.8) (40.1) (138.2) (29.0) (30.0) (33.8) (34.8) (127.6) (25.6)

Total Adjusted

OIBDA $ 105.3 $ 108.3 $ 119.8 $ 147.3 $ 480.7 $ 107.3 $ 121.5 $ 121.8 $ 156.7 $ 507.3 $ 104.1

FINANCIAL RESULTS BY SEGMENT

AOL BEGAN 2015 WITH IMPROVEMENTS ACROSS ALL SEGMENTS



6

12% growth in advertising and other revenue

fueled accelerated total revenue growth in Q1 2015.

TOTAL REVENUE GROWTH ACCELERATES

DOUBLE-DIGIT AD REVENUE GROWTH PROPELS TOTAL REVENUE GROWTH

12%

‐6%

7%

‐30%

‐20%

‐10%

0%

10%

20%

30%

Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15

Y/Y Advertising and other revenue Y/Y Subscription revenue Y/Y Total revenue



7

PRICING GROWTH ON AOL & 3RD PARTY FUEL AD REVENUE GROWTH

PROGRAMMATIC REVENUE GROWS 80% AND REPRESENTS 45% OFGLOBAL BRAND ADVERTISING REVENUE

AOL sold 34% more of its owned and operated inventory through its programmatic platform

versus Q1 2014, fueling significant growth in pricing.

‐4%

19%

19%

12%

‐2%

‐80%

‐70%

‐60%

‐50%

‐40%

‐30%

‐20%

‐10%

0%

10%

20%

30%

40%

50%

60%

70%

Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15

AOL Properties Display Y/Y % Change AOL Properties Search Y/Y % Change Third Party Properties Y/Y % Change Total Advertising and Other Y/Y % Change Other Y/Y % Change



Churn & Subscriber Rate of Decline Average Revenue Per User (ARPU)

8

Subscription revenue trend improvements continue

with 7% year‐over‐year growth in ARPU and churn of 1.4%.

Q1’11 Q2’11 Q3’11 Q4’11 Q1’12 Q2’12 Q3’12 Q4’12 Q1’13 Q2’13 Q3’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14 Q1’15

Subscribers ⁽⁷⁾(in thousands)

3,621 3,433 3,452 3,272 3,115 3,031 2,893 2,794 2,662 2,583 2,508 2,501 2,422 2,338 2,274 2,217 2,156

AOL SUBSCRIBER TRENDS CONTINUE TO PROGRESS

CHURN RATE IMPROVES & ARPU GROWTH ACCELERATES Y/Y

A R P U

A R P U

Y / Y % C h a n g e

C h u r n R a t e

R a t e o f S u b D e c l i n e Y / Y


(⁶)

‐6%

‐4%‐2%

0%

2%

4%

6%

8%

10%

12%

14%

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

ARPU % Change

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

‐25%

‐20%

‐15%

‐10%

‐5%

0%

Subscriber Decline Churn⁽⁵⁾



9

$307

$235

$215

$195

$138$128

$29 $26

$0

$100

$200

$300

2009 2010 2011 2012 2013 2014 Q1’14 Q1’15

AOL has efficiently managed corporate expenses while investing in strategic areas of high growth.

Impact of “Corporate & Other” on Adjusted OIBDA (in millions)

AOL HAS A TRACK RECORD OF EXPENSE REDUCTION

AOL CONTINUES TO MANAGE EXPENSES, WHILE GROWING REVENUE



10

$107

$104

$95

$100

$105

$110

$115

Q1'14 Q1'15

AOL INVESTS IN STRATEGIC AREAS TO ACCELERATE GROWTH IN 2016

ADJUSTED OIBDA DECLINES REFLECT INCREASED INVESTMENTS

Adjusted OIBDA by Quarter (in millions) Adjusted OIBDA (in millions)

AOL is growing revenue, making strategic investments,

reducing corporate expenses and optimizing its structure for future growth.

$108

$80 $87

$133

$94 $95$101

$123

$105$108$120

$147

$107$122

$122

$157

$104includes

~$9M of

investment



11

106

78

0

20

40

60

80

100

120

December 2009 March 2015

C o m m o n S h a r e s O

u t s t a n d i n g ( I n M i l l i o n s )

SINCE SPIN AOL HAS REDUCED COMMON SHARES OUTSTANDING BY 27%

AOL repurchased approximately 0.1 million shares of common stock for approximately $4 million in Q1 2015.



12

EXPLANATION OF CONSOLIDATED REVENUE TO SEGMENTS

Hypothetical Only:

Below

represents

an

approximate

allocation

of

consolidated

revenue

to

AOL’s

reported

segments and is for illustrative purposes only.

BRAND

GROUP

AOL

PLATFORMS

MEMBERSHIP

GROUP ELIMINATIONS TOTAL

AOL PROPERTIES DISPLAY 70% 30% 20% (20%) 100%

AOL PROPERTIES SEARCH80% 1% 19% - 100%

THIRD PARTY PROPERTIES - 100% - - 100%

OTHER 80% - 20% - 100%

SUBSCRIPTION - - 100% - 100%



13

AOL

PLATFORMS

AOL

SEGMENTELIMINATIONS TOTAL

GROSS REVENUE $100 ------ ------ $100

INTERSEGMENT TAC < $70 > ------ $70 ------

INTERSEGMENT

REVENUE------ $70 < $70 > ------

NET REVENUE $30 $70 ------ $100

EXPLANATION OF INTERSEGMENT REVENUE & ELIMINATIONS

AOL inventory sold through AOL Platforms is recognized in AOL Platforms with a corresponding intersegment TAC charge.

Similarly, an amount equal to the TAC charge, reflecting the revenue net of the margin retained by AOL Platforms, is then

reflected as intersegment revenue in the segment where the inventory originated.

Hypothetical only:

For the example below, a Traffic Acquisition Cost (TAC) rate of 70% was chosen for illustrative purposes only.

This rate is not necessarily indicative of the actual TAC rate AOL Platforms offers to its partners.



14

U n i q u e V i s i t o r s ( i

n m i l l i o n s )

AOL UNIQUE VISITORS

AOL HAD THE FASTEST RATE OF MULTI-PLATFORM USER GROWTH AMONGTOP 5 INTERNET PROPERTIES IN Q1

AOL Multi‐Platform Unique Visitors⁽⁸⁾

AOL has successfully managed to consistently grow total cross‐screen usage.

+12% Y/Y

100

120

140

160

180

200

220



15

RECONCILIATION OF NON-GAAP MEASURES ⁹

in millions)Three months ended March 31,

2015 2014

Global advertising and other revenue net of TAC:

Global advertising and other revenue $ 483.5 $ 433.4

Less: Total TAC 196.2 150.5

Global advertising and other revenue net of TAC $ 287.3 $ 282.9

Adjusted OIBDA:

Operating income $ 23.9 $ 24.2

Add: Depreciation 32.8 33.4

Add: Amortization of intangible assets 17.3 15.2

Add: Restructuring costs 16.9 11.6

Add: Equity‐based compensation 13.0 13.0

Add: Asset

impairments

and

write

‐offs 1.2 10.4

Add: (Gain)/loss on disposals of assets, net (1.0) (0.5)

Adjusted OIBDA $ 104.1 $ 107.3




16

RECONCILIATION OF NON-GAAP MEASURES ⁹


($ in millions, except per share amounts)Three months ended March 31,

2015 2014

Adjusted Diluted EPS:

Net income attributable to AOL Inc. $ 7.0 $ 9.3

Add (less) items impacting comparability of net income:

Restructuring costs 16.9 11.6

Equity‐based compensation expense 13.0 13.0

Asset impairments and write‐offs 1.2 10.4

(Gain) loss on disposal of assets, net (1.0) (0.5)

Foreign currency transaction adjustments 3.6 0.7

Income tax impact of items above ⁽¹⁰⁾ (13.0) (15.0)

Adjusted Net Income (1) $ 27.7 $ 29.5

Shares used for diluted EPS 81.9 84.1

Adjusted Diluted EPS $ 0..34 $ 0.35

Marginal tax rate ⁽¹¹⁾ 40.1% 39.7%

Free Cash Flow:

Cash provided by continuing operations $ 55.7 $ 23.5

Less: Capital expenditures and product development costs 25.3 16.9

Less: Principal payments on capital leases 17.0 17.1

Free Cash Flow$

13.4

$

(10.5)

q1 2015 aol earnings presentation

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