Subject: RetailMeNot (SALE)
Author: Buynholdisdead
Date: 05/25/2014
Sector: Services
Industry: Marketing Services
RetailMeNot (Sale) 2Q(08/04/2014) at 4:30 PM ET Closing Price $18.15 Stock went down $7.15 the day after the report
Price: $16.10
Dow 17,009.69
Nasdaq 4,475.62
SP500 1967.90
Oil $89.74
Nat Gas $4.04
Gold $1192.90
Silver $16.83
Copper $3.00
Corn $323.25
Wheat $485.75
Lean Hogs $93.02
Feeder Cattle $240.98
Coffee $210.30
Cotton $62.50
Lumber CME $349.20
Today the Price is $16.10 and the P/E is 41.3
**All Numbers YoY unless stipulated
**August 22nd, 2Q:2013 earnings highlights:
**2Q Revenues were $43.4 million up 44% from $30.1 million
**2Q Gross Profit were $40.5 million up 46% from $27.8 million
**2Q Gross Profit Margin 93%
**Product Development were 16% of Revenue
**Sales and marketing were 32% of Revenue
**SG&A were 17% of Revenue
**2Q Net Income was $5.1 million down from $5.4 million
**2Q Net margins were 12% down from 18%
**2Q Earnings per share were $(.68) up from $(.81) a share
**Diluted share count were 1.5 million up from 824,000
**Cash Flow for the last six months was $26.1 million up from $19.8 million
**Cash $114.9 million up from six months at $97.1 million
**Debt $16.7 million flat from six months
**Trading range between $26.12 to $33.65
** P/E range NA
**November 5th, 3Q:2013 earnings highlights:
**3Q Revenues were $47.4 million up 39% from $34.2 million
**3Q Gross Profit were $44.1 million up 39% from $31.7 million
**3Q Gross Profit Margin 93%
**Product Development were 17% of Revenue
**Sales and marketing were 33% of Revenue
**SG&A were 15% of Revenue
**3Q Net Income was $5.6 million down from $6.6 million
**3Q Net margins were 12% down from 19%
**3Q Earnings per share were $(.06) down from $.01 a share
**Diluted share count were 38.2 million up from 2.7 million
**Cash Flow for the quarter was 4.7 million down from $12.4 million
**Cash $136.4 million up QoQ from $114.9 million
**Debt $15 million down QoQ from $16.7 million
**Trading range between $29.58 to $39.50
** P/E range NA
**February 6th, 2014 4Q: earnings highlights:
**4Q Revenues were $78.5 million up 55% from $50.8 million
**4Q Gross Profit were $74.2 million up 54% from $48.2 million
**4Q Gross Profit Margin 95%
**TTM Revenues were $209.8 million up 45% from $144.7 million
**TTM Gross Profit were $196.8 million up 45% from $135.6 million
**TTM Gross Profit Margin 94%
**4Q Product Development were 12% of Revenue
**4Q Sales and marketing were 37% of Revenue
**4Q SG&A were 11% of Revenue
**4Q Net Income was $13.8 million up 79% from $7.7 million
**4Q Net margins were 18% up from 15%
**4Q Earnings per share were $.26 up from $.03 a share
**TTM Earnings per share were $.23 up from $.03
**TTM Net Income was $31.5 million up 21% from $26 million
**TTM Stock compensation was 2%
**Diluted share count were 53.4 million up from 2.9 million
**Cash Flow for the quarter was (5.8) million down 182% from $7 million
**TTM Cash Flow was $25 million down 36% from $39.2 million
**Cash $165.9 million up 22% QoQ from $136.4 million
**Debt $15 million flat QoQ from $15 million
**Trading range between $25.91 to $39.38
** P/E range 112.65 to 171.21
**Cash flow negative mostly because AR increased 116%
.
**May 5th, 2014 1Q: earnings highlights:
**1Q Revenues were $61.3 million up 51% from $40.6 million
**1Q Gross Profit were $56.9 million up 50% from $38 million
**1Q Gross Profit Margin 93%
**1Q Product Development were 17% of Revenue
**1Q Sales and marketing were 35% of Revenue
**1Q SG&A were 15% of Revenue
**1Q Net Income was $6.1 million down 13% from $7 million
**1Q Net margins were 10% down from 17%
**1Q Earnings per share were $.11 up from $.02 a share
**Diluted share count were 53.4 million up from 2.9 million
**Cash Flow for the quarter was 15.9 million down 18% from $19.3 million
**Stock Based Compensation is at 8% this quarter
**Cash $196.5 million up 18% QoQ from $165.9 million
**Debt $15 million flat QoQ from $15 million
**Trading range between $28.62 to $48.73
** P/E range NA
**Organic net revenues increased 47%.
Year
**Aug 4th, 2014 2Q: earnings highlights:
**2Q Revenues were $59.5 million up 37% from $43.4 million
**1Q Gross Profit were $54.9 million up 36% from $40.5 million
**1Q Gross Profit Margin 92%
**1Q Product Development were 22% of Revenue
**1Q Sales and marketing were 32% of Revenue
**1Q SG&A were 5% of Revenue
**1Q Net Income was $4.3 million down 16% from $5.1 million
**1Q Net margins were 7% down from 12%
**1Q Earnings per share were $.08 up from ($.68) a share
**TTM Earnings per share were $.39 up from (.62) per share
**Diluted share count were 55.4 million up from 53.4 million QoQ
**Cash Flow for the quarter was $17.1 million up 151% from $6.8 million
**Stock Based Compensation is at 11% this quarter
**Cash $213.9 million up 9% QoQ from $196.5 million
**Debt $13.3 million down QoQ from $15 million
**Trading range between $17.95 to $34.47
** P/E range 46 to 88.4
**Organic net revenues increased 34% YoY
Net Income statement
Revenue for the quarter was up 37% YoY and Gross Profit were up 36% YoY. Net Income was down 16% YoY and EPS was up. EPS YoY was $.39. So this was a mixed bag for the Income Statement because although Revenue was up Net Income was down. The earnings per share was up and YoY earnings per share was up.
Balance Sheet
The balance sheet improved for the quarter with Cash up 9% and debt down.
Cash Flow statement
The cash flow statement increased dramatically by 151% YoY. The one item that causes me concern was the 11% stock based compensation. This really makes me look twice at this company. If you are paying your people that high compensation, and saying that you need to in order to have the best. Well then they should perform like the best. If the company stumbles then the compensation should go down.
I want to thank SeekingAlpha for their transcripts
Conference Call
First of all I was completely wrong when I thought that Google changing their analytics would have minimal effect on Sale. The CEO, Cotter Cunningham said that it would have a 5% of projected revenues and the impact on the second half would be 8%. He also stated that every algorithm shift has a different impact and that they just have to work through them. I was mistaken, thinking that they had members on their team from google, that it would make them impervious. I should have realize that would be incorrect because they couldn’t plan on what changes would be made. He also stated that when the initial algorithm change was put in effect that it took them a month or so to get back two thirds to normal. It is slowly coming back but it is not growing back steadily it is in chunks.
Ok that is in the past so what are they going to do for the future. Well they are trying to move away from Google SEO. If Google is going to cause this kind of disruption in their business they are going to move away from it. The way they are doing that is with direct contact through the App and through emails. Also they are trying to create a direct relationship with their customer so that they will come directly to their site. So just how is that going? Their web traffic grew to 154 million visits, of which 35% came from mobile devices. They have experienced over 625 million visits during the last 12 months and have nearly 23 million e-mail subscribers, 18 million mobile downloads and in-store geo-location capabilities in the combination of nearly 15,000 malls, shopping areas and other venues.
Sales of the international part has been growing rapidly with 57% YoY growth and is now 23% of their total growth.
Conclusion:
So the Google SEO changes really hurt Sales growth. It took them awhile to adapt. The estimates were that they would get $.17 eps for the quarter and they actually only were able to hit $.11. So now their P/E is at 41.3 and they grew revenue for the quarter at 37%. They expect revenue to grow for the year at 27% so I don’t think that a P/E of 41.3 is really all that high for growth of 27%. That is their midpoint range and if they can get their brand going and can get emails, mobile, and web traffic going they can then stabilize their revenues if Google makes changes again, and they will. I have been trying out Sales app on my smart phone and realistically most of their coupons do not interest me. So I think they need to work hard on getting more retailers into their network. Their geo fencing is very nice because when I go into an area coupons instantly start popping up but if I am not looking for anything I general just ignore them. I do like the idea of the App though because this is one way for advertisers to reach their customers.
I just want to mention again their compensation of 11%. This really needs to come down because I have seen where these high compensation packages hurt shareholder returns. So if it stays that high I probably will be looking to exit.
Andy
Long Sale
2nd quarter estimate $.17 missed $.11
3rd quarter estimate $.13
4th quarter estimate $.33
Current year estimate $.85
2015 yearly estimate $1.17