request-aol q3 2010 earnings presentation

8/8/2019 Request-AOL Q3 2010 Earnings Presentation

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Earnin s Summar

Presented to [Client]

,


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Noteworthy ItemsSince the end of Q2 2010, AOL remained active across all of its strategic areas of focus: relaunching AOL.com, Moviefone and Stylelistand forming strategic partnerships in Content, introducing a revolutionary new advertising format in Advertising, rapidly expanding Patchinto 133 new towns and relaunching Citys Best in Local, adding key talent in Consumer Applications and rolling out new products in PaidServices.

AOL continues to make tar eted ac uisitions and divest non-core assets. In late Se tember AOL ac uired 5 Minutes Ltd. TechCrunchInc. and Thing Labs, Inc., for $97.1 million and a further $23.1 million in compensation contingent on service to AOL over the next three

years. These acquisitions add significant talent, technology and editorial acumen to the Company. On October 29, 2010, AOL entered intoa definitive agreement to sell a portion of its campus in Dulles, Virginia for $144.5 million in cash.

AOL renewed and expanded its global partnership with Google for the provision of search services to AOL Properties. AOL and.

AOL continued its focus on managing costs and optimizing its product offerings. $62.3 million of the $109.5 million year-over-yeardecline in advertising revenue in Q3 2010 relates to the impact of these initiatives.

Domestic display advertising revenue fell year-over-year in Q3 2010, but increased sequentially for the second consecutive quarter.

Subscription declines reflect a 24% decline in subscribers year-over-year, while monthly average churn of 2.6% continues the trend of meaningful year-over-year churn reductions.

AOL significantly reduced costs in Q3 2010 as operating expenses declined $159.3 million year-over-year.

Net income rowth reflects the ains on the sales of AOLs investment in Ka ak and its IC o erations in 3 2010, the latter of which is

reflected in discontinued operations.

At September 30, 2010, AOL had $623.3 million of cash. Q3 2010 cash provided by continuing operations was $165.0 million, down 2.5%year-over-year, while Free Cash Flow was $130.8 million, up 4.4% year-over-year.

AOL announced the earl termination of its revolvin credit facilit iven its cash osition and ro ected cash flows. AOL never borrowed

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under this facility and did not pay any penalties for the early termination.


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Quarterly Breakdown Of Advertising RevenueY/Y % Chg. Q/Q % Chg.

Display -14% 0%Search & Contextual -28% -6%Third Party Network -41% 3%

$540$517

$487 $500$500

$600

$432 $407 $402

$459

$346

$400

( i n M i l l i o n s

) $297 $293

$200

$300

$100

$-Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10

Third Party Network Search & Contextual Display

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Advertising Revenue & Impacts of AOL Implemented Initiatives (1)

Q3 2010 Q3 2009 Change

Q3 2010Initiative

Impact

($ in millions)

Total Display 120.7$ 139.9$ -14% 7.4$ Display - Domestic 112.5 121.8 -8% 0.0 Display - International 8.2 18.1 -55% 7.4

Search and Contextual 99.2 138.3 -28% 8.0

AOL Properties 219.9 278.2 -21% 15.4Third Party Network 72.8 123.9 -41% 46.8Total Advertising Revenue 292.8$ 402.2$ -27% 62.3$

(1) AOL implemented initiatives relate to initiatives to wind down or shut down certain products and shut down or reduce operations internationally.

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Quarterly Adjusted OIBDA, Restructuring & Equity-Based Compensation

$395$382

$400$400

$450

$340

$263

$300

$350

( i n M i l l i o n s

)$242

$226

$193

$167 $158

$200

$250

$125

$58

$106

$50

$100

(1)

$10$4 $2 $2

$14 $10 $23 $11$0N/A $6 $8 $7 $6 $2 $3 $2 $10 $9 $8$-

Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10

Adjusted OIBDA Restructuring Costs Equity-Based Compensation

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(1)Operating income before depreciation and amortization excluding the impact of gains and losses on all disposals of assets and noncash asset impairments.Operating income before depreciation and amortization includes restructuring and equity based compensation. See page 11 or a reconciliation of Adjusted OIBDA to operating income.


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Access Subscribers and Churn Rate

3.5%

4.0%

8,500

2.5%

3.0%

6,500

7,500

C h

ur

( i n

t h o u s a n

d s

)

s

1.5%

2.0%

4,500

5,500

Subscribers Churn Rate

R a t e

S u b s c r i

b e r

1.0%3,500Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10

Q1'08 Q2'08 Q3'08 Q4'08 FY'08 Q1'09 Q2'09 Q3'09 Q4'09 FY'09 Q1'10 Q2'10 Q3'10Domestic AOL-brand access subscribers (in thousands) (1) 8,690 8,086 7,452 6,879 6,879 6,309 5,799 5,360 4,999 4,999 4,656 4,362 4,083Y/Y % Chan e -28% -26% -26% -26% -26% -27% -28% -28% -27% -27% -26% -25% -24%

(1) Domestic AOL-brand access subscribers include subscribers participating in introductory free-trial periods and subscribers that are paying no monthly fees or reduced monthl ees throu h member service and retention ro rams. Individuals who have re istered or our ree o erin s, includin subscribers who have

Q/Q % Change -7% -7% -8% -8% -8% -8% -8% -7% -7% -6% -6%Domest ic average mont hly subscrip tion revenue p er AOL-brand access subscriber (ARPU) $18.29 $17.99 $18.60 $18.64 $18.38 $18.48 $18.27 $18.54 $18.53 $18.46 $18.31 $18.10 $18.10Domestic AOL-brand access subscriber monthly average churn (2) 3.8% 3.4% 3.7% 3.5% 3.6% 3.7% 3.5% 3.3% 3.0% 3.4% 3.0% 2.6% 2.6%

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migrated from paid subscription plans, are not included in the AOL-brand access subscriber numbers presented above. The average monthly subscriptionrevenue per subscriber is calculated as average monthly subscription revenue divided by the average monthly subscribers for the applicable period.

(2) Churn represents the number of subscribers that terminate or cancel our services, factoring in new and reactivated subscribers. Monthly average churn is

calculated as the monthly average of terminations plus cancellations divided by the initial subscriber base plus any new registrations and reactivations for theapplicable period.


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Unique VisitorsQ3 2010 Q3 2009 % Change

Unique Visitors (in millions) (1)

Domes tic average monthly unique vis itors to AOL Properties (Media Metrix 360) 106 NA NADomestic avera e monthl uni ue visitors to AOL Pro erties Panel-onl methodolo 102 -3%

Domestic average monthly unique visitors to AOL Media (Media Metrix 360)(2)

81 NA NADomestic average monthly unique visitors to AOL Media (Panel-only methodology) (2) 72 74 -3%

Domestic average monthly unique visitors to AOL Advertising Network (3) 183 180 2%

(1) In 2009, Media Metrix announced the availability of an alternate methodology (currently referred to as panel-centric unified or Media Metrix 360) toestimate unique visitors, in order to provide a more accurate count of a websites audience, and has continued to refine this methodology. We adopted this. ,

unique visitor numbers based on Media Metrix 360 will not be comparable to the estimates under the previous methodology. For comparison purposes,domestic unique visitors to AOL Properties and AOL Media are reported under both the Media Metrix 360 and panel-only methodology for the third quarter of 2010.

(2) AOL Media represents a subset of AOL Properties and excludes Mail, Instant Messaging, Search, Ventures and Local & Mapping.

(3) We also utilize unique visitors to evaluate the reach of our total advertising network, which includes both AOL Properties and the Third Party Network.

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request-aol q3 2010 earnings presentation

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