AOL Reports 13% Revenue Growth and 19%
Adjusted OIBDA Growth in Q4Global Advertising Revenue Grows
23% Fueled by Pricing GrowthAOL Delivers
6th Consecutive Quarter of Unique Visitor
GrowthAOL Networks Grows Revenue 50%, Fueled by Video, Mobile
and ProgrammaticBrand Group Grows Revenue 4% and Tripled Adjusted
OIBDARecord Low Churn of 1.3% Mitigates Membership Group Revenue
DeclineAOL Margins Expand by More Than 100 Basis Points
AOL Inc. (NYSE:AOL) released fourth quarter 2013 results
today.
“2013 was AOL’s most successful year in the last decade, and we
accomplished our goal of industry level growth at scale for AOL,”
said Tim Armstrong, AOL Chairman and CEO. “AOL’s exceptionally
talented team continues to execute against our strategy and our
results show meaningful progress in the most important areas of
media and technology. AOL plans to invest in our market leading
strategies in 2014, while we continue to grow the company.”
Summary Results In millions (except per share
amounts)
Q4 2013
Q4 2012 Change FY 2013
FY 2012 Change Revenue Advertising $
507.0 $ 410.6 23 % $ 1,613.4 $ 1,418.5 14 % Global Display 181.7
169.8 7 % 610.2 575.4 6 % Global Search 101.7 103.6
-2 % 388.5 371.5 5 % AOL Properties 283.4 273.4 4 %
998.7 946.9 5 % Third Party Network 223.6 137.2 63 % 614.7 471.6 30
% Subscription 156.7 174.2 -10 % 650.1 705.3 -8 % Other 15.3
14.7 4 % 56.4 67.9 -17 % Total revenues $
679.0 $ 599.5 13 % $ 2,319.9 $ 2,191.7 6 % Adjusted
operating income before depreciation and amortization (Adjusted
OIBDA) (1) $ 147.3 $ 123.3 19 % $ 480.7 $ 412.6 17 %
Operating income $ 71.8 $ 68.2 5 % $ 190.3 $ 1,201.9 -84 %
Net income attributable to AOL Inc. $ 36.0 $ 35.7 1 % $ 92.4 $
1,048.4 -91 % Diluted EPS $ 0.43 $ 0.41 5 % $ 1.13 $ 11.21
-90 % Cash provided by operating activities $ 90.0 $ 76.7 17
% $ 318.9 $ 365.6 -13 % Free Cash Flow (1) $ 60.4
$ 46.3 30 % $ 192.1 $ 245.1 -22
%
(1)
See Page 9 for a reconciliation of
Adjusted OIBDA and Free Cash Flow to the GAAP financial measures we
consider most comparable.
Q4 Consolidated AOL Revenue Trends:
- Q4 total revenue grew 13%
year-over-year, driven by global advertising revenue growth.
- Global advertising revenue grew 23%
year-over-year reflecting:
- 63% growth in Third Party Network
revenue driven by growth in the sale of premium formats across
AOL’s programmatic platform and by the inclusion of revenue from
Adap.tv. Third Party Network Revenue grew 20% excluding
Adap.tv.
- 7% growth in global display revenue
driven by improved pricing related to growth in the sale of premium
formats across AOL’s properties.
- 2% decline in global search revenue
driven primarily by fewer search queries resulting from a decline
in domestic AOL subscribers.
- Subscription revenue declined 10%
year-over-year and domestic AOL subscriber monthly average churn
was 1.3% in Q4 2013 compared to a 10% decline year-over-year in
subscription revenue and 1.8% monthly average churn in Q4
2012.
Q4 Consolidated AOL Profitability Trends:
- Operating income, net income and
diluted EPS were negatively impacted by a pre-tax restructuring
charge of $13.2 million, largely related to a reduction in
personnel, including Patch.
- Adjusted OIBDA grew 19% year-over-year,
driven by total revenue growth and a 25% decline in general and
administrative expenses, partially offset by a 17% growth in costs
of revenue expenses.
- Cost of revenues increased $70.5
million year-over-year, reflecting a $67.4 million increase in
total Traffic Acquisition Costs (TAC). TAC increases were driven by
the inclusion of Adap.tv, growth in Third Party Network revenue and
growth in our search marketing related efforts. Increased expenses
associated with Adap.tv offset approximately $11 million of special
(expense) items from Q4 2012 that did not reoccur in Q4 2013.
- General and administrative expenses
declined $27.6 million in Q4 2013 year-over-year, due to a decline
in marketing costs primarily related to AOL’s continued cost
reduction efforts, and a decline in legal and consulting fees.
AOL Asset, Cash & Cash Flow Trends:
- AOL had $207.3 million of cash and
equivalents at December 31, 2013. Q4 cash provided by operating
activities and Free Cash Flow were $90.0 million and $60.4 million,
up 17% and 30% year-over-year, respectively.
- AOL repurchased 0.9 million shares of
common stock at an average price of $34.60 in Q4 2013, or
approximately $32.6 million in aggregate. In 2013, AOL repurchased
3.9 million shares at an average price of $34.75, or approximately
$135 million in aggregate. AOL has approximately $115 million left
in its current share repurchase authorization.
- On December 31, 2013, AOL entered into
an agreement to contribute Patch into a new joint venture which
will be operated and majority owned by Hale Global. In connection
with the transaction, AOL incurred $5.8 million in restructuring
charges in Q4 2013. The transaction closed on January 29,
2014.
- On January 23, 2014, AOL acquired
Gravity, a premier personalization technology and publisher
solutions business, for approximately $82 million in cash. An
additional approximately $8 million of consideration will be
deferred and paid over a two-year service period for certain
Gravity employees. As part of the transaction, AOL will acquire
approximately $12 million of net operating losses, which is
expected to result in a future cash tax benefit to AOL of
approximately $5 million.
DISCUSSION OF SEGMENT RESULTS
Q4'13 Q4'12
Change (In millions)
Revenue
Brand Group 222.0 213.2 4 % Membership Group 209.3 230.8 -9
% AOL Networks 275.0 183.5 50 % Corporate & Other 0.0 0.3 -100
% Intersegment eliminations (27.3 )
(28.3 ) 4 %
Total Revenue $ 679.0
$ 599.5
13 % Adjusted OIBDA Brand
Group 35.6 8.8 305 % Membership Group 145.9 158.7 -8 % AOL Networks
5.9 6.4 -8 % Corporate & Other (40.1 )
(50.6 )
21 %
Total Adjusted OIBDA $ 147.3
$ 123.3
19 %
Brand Group
Brand Group revenue growth reflects continued growth in global
display. Brand Group display revenue grew 6% globally driven by
improved pricing as a result of growth in premium format
impressions. Brand Group search revenue was flat
year-over-year.
Brand Group Adjusted OIBDA improved significantly versus the
prior year period, primarily due to the growth in display revenue
discussed above as well as a reduction in personnel, primarily at
Patch, and lower marketing costs. Lower year-over-year Brand Group
operating expenses were partially offset by growth in TAC
associated with AOL’s search marketing-related efforts.
Membership Group
Membership Group revenue declines reflect a 10% decline in
subscription revenue driven by 10% fewer domestic AOL subscribers
year-over-year. Membership Group revenue declines were partially
offset by a 28% year-over-year reduction in churn rate to 1.3% and
by 4% year-over-year growth in domestic average monthly
subscription revenue per AOL subscriber (ARPU). Reduced churn and
ARPU growth continues to reflect the benefits of AOL’s retention
program and the impact of a price rationalization program. The
decrease in Membership Group revenue year-over-year was also
impacted by a decrease in search revenue of 7% due to fewer search
queries resulting from a decline in domestic AOL subscribers.
Membership Group Adjusted OIBDA declines primarily reflect the
decline in subscription revenue discussed above, partially offset
by a decline in costs associated with the decline in
subscribers.
AOL Networks
AOL Networks revenue increased 50% year-over-year, driven by
significant growth in Third Party Network revenue which includes
Adap.tv. Excluding Adap.tv, Third Party Network revenue grew
approximately 20% year-over-year, driven by growth in the sale of
premium formats across AOL’s programmatic platform. AOL Networks’
year-over-year revenue comparison was negatively impacted by the
divestiture of StudioNow in Q1 2013. StudioNow contributed $1.4
million in revenue to AOL Networks in Q4 2012.
AOL Networks Adjusted OIBDA declined $0.5 million year-over-year
driven by increased investments in our programmatic platforms and
premium formats.
Corporate & Other
Corporate & Other Adjusted OIBDA improved significantly
year-over-year, primarily driven by declines in marketing costs as
a result of AOL’s broader cost reduction efforts, and a decline in
legal costs.
Tax
AOL had Q4 2013 pre-tax income of $70.8 million and income tax
expense of $35.3 million, resulting in an effective tax rate of
49.9%. This compares to an effective tax rate of 47.2% for Q4 2012.
The effective tax rate for Q4 2013 differed from the statutory U.S.
federal income tax rate of 35.0% primarily due to the impact of
foreign losses that did not produce a tax benefit. The effective
tax rate for Q4 2012 differed from the statutory U.S. federal
income tax rate due to the impact of foreign losses that did not
produce a tax benefit and the impact of changes in state tax rates
and apportionment on AOL’s deferred tax assets.
Cash Flow
Q4 2013 cash provided by operating activities was $90.0 million,
while Free Cash Flow was $60.4 million, both up year-over-year
primarily due to growth in Adjusted OIBDA, partially offset by
timing of working capital.
CONSOLIDATED OPERATING METRICS
Q4 2013 Q4 2012 Y/Y
Change Q3 2013 Q/Q Change
Subscriber Information Domestic AOL
subscribers (in thousands) (1) 2,501 2,794 -10 % 2,508 0 % ARPU (1)
$ 20.01 $ 19.27 4 % $ 20.15 -1 % Domestic AOL subscriber monthly
average churn (2) 1.3 % 1.8 % -28 % 1.4 % -7 % Unique
Visitors (in millions) (3) Domestic average monthly unique
visitors to AOL Properties 120 113 6 % 115 4 % Domestic
average monthly unique visitors to AOL Advertising Network 207 187
11 % 196 5 %
(1)
Domestic AOL subscribers include
subscribers participating in introductory free-trial periods and
subscribers that are paying no monthly fees or reduced monthly fees
through member service and retention programs. Individuals who are
only registered for our free offerings, including subscribers who
have migrated from paid subscription plans, are not included in the
AOL subscriber numbers presented above. Additionally, only those
individuals whose subscription includes AOL-brand dial-up access
service are included in the AOL subscriber numbers above. ARPU is
calculated as domestic average monthly subscription revenue per AOL
subscriber.
(2)
Churn represents the percentage of AOL
subscribers that are either terminated or cancel our services,
factoring in new and reactivated subscribers. Monthly average churn
is calculated as the monthly average number of terminations plus
cancellations divided by the initial AOL subscriber base plus any
new registrations and reactivations for the applicable period.
(3)
See “Unique Visitor Metrics” on page 10 of
this press release.
Webcast and Conference Call Information
AOL Inc. will host a conference call to discuss fourth quarter
2013 financial results on Thursday, February 6, 2014, at 8:00 am
ET. To access the call, parties in the United States and Canada
should call toll-free (800) 237.9752 and other international
parties should call (617) 847.8706. Additionally, a live webcast of
the conference call, together with supplemental financial
information, can be accessed through the Company's Investor
Relations website at http://ir.aol.com. In addition,
an archive of the webcast can be accessed through the link above
for one year following the conference call, and an audio replay of
the call will be available for two weeks following the conference
call by calling (888) 286.8010 and other international parties
should call (617) 801.6888. The access code for the replay is
64912086.
FINANCIAL STATEMENTS
AOL Inc. Consolidated Statements of Operations
(In millions, except per share amounts)
Three Months Ended December 31, Years Ended
December 31, 2013 2012 2013
2012 (unaudited) (unaudited) (unaudited) Revenues:
Advertising $ 507.0 $ 410.6 $ 1,613.4 $ 1,418.5 Subscription 156.7
174.2 650.1 705.3 Other 15.3 14.7
56.4 67.9 Total revenues 679.0 599.5
2,319.9 2,191.7 Costs of revenues 494.6 424.1 1,706.2 1,587.2
General and administrative 84.4 112.0 322.0 413.2 Amortization of
intangible assets 15.4 9.6 45.1 38.2 Restructuring costs 13.2 2.4
41.3 10.1 Goodwill impairment charge – – 17.5 – Income from
licensing of intellectual property – – – (96.0 ) (Gain) loss on
disposal of assets, net (0.4 ) (16.8 ) (2.5 )
(962.9 ) Operating income 71.8 68.2 190.3 1,201.9 Other
income (loss), net (1.0 ) (1.1 ) (6.6 )
8.2 Income from operations before income taxes 70.8 67.1
183.7 1,210.1 Income tax provision 35.3 31.7
93.1 162.4 Net income $ 35.5 $
35.4 $ 90.6 $ 1,047.7 Net (income) loss attributable to
noncontrolling interests 0.5 0.3
1.8 0.7 Net income attributable to AOL Inc. $
36.0 $ 35.7 $ 92.4 $ 1,048.4 Per
share information attributable to AOL Inc. common stockholders:
Basic net income per common share $ 0.46 $ 0.43
$ 1.19 $ 11.51 Diluted net income per
common share $ 0.43 $ 0.41 $ 1.13 $ 11.21
Shares used in computing basic income per common
share 78.9 83.7 77.6
91.1 Shares used in computing diluted income
per common share 83.5 88.1 82.0
93.5 Cash dividends paid per common
share $ - $ 5.15 $ - $ 5.15
Depreciation expense by function: Costs of
revenues $ 28.9 $ 30.3 $ 119.0 $ 126.5 General and administrative
2.6 2.8 9.9 12.2
Total depreciation expense
$ 31.5 $ 33.1 $ 128.9 $ 138.7
Equity-based compensation by function: Costs of revenues $ 10.4 $
5.3 $ 29.2 $ 18.9 General and administrative 5.2
5.9 17.8 20.6 Total
equity-based compensation $ 15.6 $ 11.2 $ 47.0
$ 39.5 Traffic Acquisition Costs (included in
costs of revenues) $ 171.5 $ 104.1 $ 479.4 $
356.9 Third Party Network Traffic Acquisition Costs $
144.9 $ 85.6 $ 393.8 $ 306.7
AOL Inc. Consolidated Balance
Sheets (In millions, except per share amounts)
December 31, December 31, 2013
2012 Assets (unaudited) Current assets: Cash
and equivalents $ 207.3 $ 466.6 Accounts receivable, net of
allowances of $8.3 and $6.6, respectively 491.0 351.9 Prepaid
expenses and other current assets 34.1 28.5 Deferred income taxes,
net 30.7 40.6 Total current assets
763.1 887.6 Property and equipment, net 467.9 478.3 Goodwill
1,361.7 1,084.1 Intangible assets, net 208.4 133.2 Long-term
deferred income taxes, net 110.6 148.8 Other long-term assets
71.7 65.3 Total assets $ 2,983.4
$ 2,797.3
Liabilities, Redeemable Noncontrolling Interest
and Equity Current liabilities: Accounts payable $ 101.0 $ 76.1
Accrued compensation and benefits 127.0 151.4 Accrued expenses and
other current liabilities 197.3 175.3 Deferred revenue 67.2 57.8
Current portion of obligations under capital leases 55.5
49.6
Total current liabilities
548.0 510.2 Long-term portion of obligations under capital leases
56.2 56.3 Long-term deferred income taxes 4.4 5.8 Other long-term
liabilities 97.6 73.8 Total liabilities
706.2 646.1 Redeemable
noncontrolling interest 9.7 13.4 Equity:
Common stock, $0.01 par value, 114.1
million shares issued and 79.2 million sharesoutstanding as of
December 31, 2013 and 110.1 million shares issued and 76.6million
shares outstanding as of December 31, 2012
1.1 1.1 Additional paid-in capital 3,592.7 3,457.5 Accumulated
other comprehensive income (loss), net (290.4 ) (294.1 )
Accumulated deficit (93.6 ) (188.0 )
Treasury stock, at cost, 34.9 million
shares as of December 31, 2013 and33.5 million shares as of
December 31, 2012
(942.9 ) (838.4 ) Total stockholders' equity 2,266.9
2,138.1 Noncontrolling interest 0.6 (0.3 )
Total equity 2,267.5 2,137.8 Total
liabilities, redeemable noncontrolling interest and equity $
2,983.4 $ 2,797.3
AOL Inc.
Consolidated Statements of Cash Flows (In millions)
Years Ended December 31, 2013
2012 (unaudited)
Operating Activities Net
income $ 90.6 $ 1,047.7 Adjustments for non-cash and non-operating
items: Depreciation and amortization 174.0 176.9 Asset impairments
and write-offs 30.6 6.1 (Gain) loss on step acquisitions and
disposal of assets, net (1.5 ) (975.5 ) Equity-based compensation
47.0 39.5 Deferred income taxes 51.5 124.1 Other non-cash
adjustments 4.4 (2.6 ) Changes in operating assets and liabilities,
net of acquisitions Receivables (104.5 ) (33.4 ) Accrued expenses
21.7 4.6 Deferred revenue 7.9 (12.7 ) Other balance sheet changes
(2.8 ) (9.1 )
Cash provided by
operating activities 318.9 365.6
Investing Activities Investments and acquisitions,
net of cash acquired (337.9 ) (32.0 ) Proceeds from disposal of
assets, net 1.5 952.3 Capital expenditures and product development
costs (65.7 ) (64.9 )
Cash (used)
provided by investing activities (402.1 )
855.4 Financing Activities Repurchase
of common stock (134.8 ) (698.7 ) Principal payments on capital
leases (61.1 ) (55.6 ) Tax withholdings related to net share
settlements of restricted stock units (16.5 ) (7.6 ) Proceeds from
exercise of stock options 35.3 35.2 Cash dividends paid - (434.4 )
Cash dividend equivalent payments on restricted stock units (4.4 )
- Other financing activities 6.1 0.3
Cash used by financing activities (175.4 )
(1,160.8 ) Effect of exchange rate changes on
cash and equivalents (0.7 ) (1.1 ) (Decrease)
increase in cash and equivalents (259.3 ) 59.1 Cash and
equivalents at beginning of period 466.6 407.5
Cash and equivalents at end of period $
207.3 $
466.6
SUPPLEMENTAL INFORMATION – UNAUDITED
Items impacting comparability: The following table
represents certain items that impacted the comparability of net
income attributable to AOL Inc. for the three months and years
ended December 31, 2013 and 2012 (In millions, except per share
amounts):
Three Months EndedDecember
31,
Year EndedDecember 31,
2013 2012 2013 2012
Restructuring costs $ (13.2 ) $ (2.4 ) $ (41.3 ) $ (10.1 )
Equity-based compensation expense (15.6 ) (11.2 ) (47.0 ) (39.5 )
Asset impairments and write-offs (0.2 ) (3.1 ) (30.6 ) (6.1 ) Gain
(loss) on disposal of assets, net (1) 0.4 17.6 2.5 964.2 Costs
related to proxy contest – (0.1 ) – (8.9 ) Costs related to patent
sale and return of proceeds to shareholders – (7.1 ) – (15.7 )
Income from licensing of intellectual property – – – 96.0 Tax,
legal and other settlements – (1.0 ) – (8.6 ) Acquisition-related
costs (2) – (5.1 ) – (5.1 ) Gain on consolidation of Ad.com Japan
(3) – – – 10.8
Pre-tax impact (28.6 ) (12.4 ) (116.4 )
977.0 Income tax impact (4) 11.3
2.1 38.1 (48.2 ) After-tax
impact of items impacting comparability of net income $ (17.3 ) $
(10.3 ) $ (78.3 ) $ 928.8 Impact per basic common
share $ (0.22 ) $ (0.12 ) $ (1.01 ) $ 10.20 Impact
per diluted common share $ (0.21 ) $ (0.12 ) $ (0.95 ) $ 9.93
Effective tax rate (5) 39.4 % 39.2 % 39.4 % 39.2 %
(1) Gain on disposal of assets for the three months ended
December 31, 2012 relates primarily to the release of a VAT
indemnification liability reserve associated with the sales of our
German and UK access businesses in 2006 and 2007. The statute of
limitations on this indemnification expired on December 31, 2012.
For the year ended December 31, 2012, gain on disposal of assets
also includes the gain on the sale of the patents of $946.1 million
in the second quarter of 2012. (2) Acquisition-related costs for
the three months and year ended December 31, 2012 includes
approximately $4.7 million related to a bonus paid to employees of
an acquired company and accounted for as compensation expense. (3)
During the three months ended March 31, 2012, AOL purchased an
additional interest in a joint venture, Ad.com Japan, and gained
control of the board and day-to-day operations of the joint
venture. As a result, beginning in February 2012, AOL consolidated
the results of Ad.com Japan and upon closing of the transaction,
AOL recorded a noncash gain of approximately $10.8 million related
to our pre-existing investment in Ad.com Japan. (4) Income tax
impact is calculated by applying the normalized effective tax rate
to deductible items. The income tax impacts for certain items such
as gain (loss) on disposal of assets and gain on consolidation of
Ad.com Japan are calculated by using the actual tax expense for the
transactions. The goodwill impairment charge of $17.5 million
recorded in the third quarter of 2013 is not deductible for income
tax purposes. (5) For the three months and year ended December 31,
2013, the effective tax rate was calculated based on AOL's 2013
normalized annual effective tax rate. The effective tax rate for
the three months and year ended December 31, 2012 was calculated
based upon AOL's 2012 normalized annual effective tax rate.
AOL Inc.
Reconciliation of Adjusted OIBDA to Operating Income and Free
Cash Flow to Cash Provided by Operating Activities (In
millions) Three Months Ended
December 31, Years Ended December 31, 2013
2012 2013 2012 Operating income $ 71.8
$ 68.2 $ 190.3 $ 1,201.9 Add: Depreciation 31.5 33.1 128.9
138.7 Add: Amortization of intangible assets 15.4 9.6 45.1
38.2 Add: Restructuring costs 13.2 2.4 41.3 10.1 Add:
Equity-based compensation 15.6 11.2 47.0 39.5 Add: Asset
impairments and write-offs 0.2 3.1 30.6 6.1 Add:
Losses/(gains) on disposal of assets, net (0.4 ) (17.6 ) (2.5 )
(964.2 ) Add: Special items (1) - 13.3 - (57.7 )
Adjusted
OIBDA $ 147.3 $ 123.3 $ 480.7 $ 412.6
Cash provided by operating activities $ 90.0 $
76.7 $ 318.9 $ 365.6 Less: Capital expenditures and product
development costs 13.0 15.9 65.7 64.9 Less: Principal
payments on capital leases 16.6 14.5 61.1 55.6
Free Cash Flow $ 60.4
$ 46.3 $ 192.1 $ 245.1 (1)
Special items for the three months ended December 31, 2012 include
costs related to the patent sale of $7.1 million (including a
year-end employee bonus as a result of the patent transaction) and
acquisition-related costs of $5.1 million. Special items for the
year ended December 31, 2012 also include patent licensing income
of $96.0 million and additional costs related to the patent sale of
$8.6 million, as well as proxy contest costs of $8.9 million and
the Virginia tax settlement of $7.6 million.
Note Regarding Non-GAAP Financial Measures
This press release and its attachments include the financial
measures Adjusted OIBDA and Free Cash Flow, both of which are
defined as non-GAAP financial measures by the Securities and
Exchange Commission (SEC). These measures may be different than
similarly-titled non-GAAP financial measures used by other
companies. The presentation of this financial information is not
intended to be considered in isolation or as a substitute for the
financial information prepared and presented in accordance with
generally accepted accounting principles (GAAP). Explanations of
our non-GAAP financial measures are as follows:
Adjusted OIBDA. We define Adjusted OIBDA as
operating income before depreciation and amortization excluding the
impact of restructuring costs, non-cash equity-based compensation,
gains and losses on all disposals of assets, noncash asset
impairments and write-offs and special items. We consider Adjusted
OIBDA to be a useful metric for management and investors to
evaluate and compare the ongoing operating performance of our
business on a consistent basis across reporting periods, as it
eliminates the effect of noncash items such as depreciation of
tangible assets, amortization of intangible assets that were
primarily recognized in business combinations, asset impairments
and write-offs, as well as the effect of restructurings, gains and
losses on asset sales and special items, which we do not believe
are indicative of our core operating performance. We exclude the
impacts of equity-based compensation to allow us to be more closely
aligned with the industry and analyst community. A limitation of
this measure, however, is that it does not reflect the periodic
costs of certain capitalized tangible and intangible assets used in
generating revenues in our business or the current or future
expected cash expenditures for restructuring costs. The Adjusted
OIBDA measure also does not include equity-based compensation,
which is and will remain a key element of our overall long-term
compensation package. Moreover, the Adjusted OIBDA measures do not
reflect gains and losses on asset sales, impairment charges and
write-offs related to goodwill, intangible assets and fixed assets
or special items which impact our operating performance. We
evaluate the investments in such tangible and intangible assets
through other financial measures, such as capital expenditure
budgets, investment spending levels and return on capital.
Free Cash Flow. We define Free Cash Flow as cash provided
by operating activities, less capital expenditures, product
development costs and principal payments on capital leases. We
consider Free Cash Flow to be a liquidity measure that provides
useful information to management and investors about the amount of
cash generated by the business that, after capital expenditures,
capitalized product development costs and principal payments on
capital leases, can be used for strategic opportunities, including
investing in our business, making strategic acquisitions, and
strengthening the balance sheet. Analysis of Free Cash Flow also
facilitates management's comparisons of our operating results to
competitors' operating results. A limitation on the use of this
metric is that Free Cash Flow does not represent the total increase
or decrease in cash for the period because it excludes certain
non-operating cash flows.
Unique Visitor Metrics
We utilize unique visitor numbers to evaluate the performance of
AOL Properties. In addition, we utilize unique visitor numbers to
evaluate the reach of the AOL Advertising Network, which includes
both AOL Properties and the Third Party Network. Unique visitor
numbers provide an indication of our consumer reach. Although our
consumer reach does not correlate directly to advertising revenue,
we believe that our ability to broadly reach diverse demographic
and geographic audiences is attractive to brand advertisers seeking
to promote their brands to a variety of consumers without having to
partner with multiple content providers. The source for our unique
visitor information is a third party (comScore Media Metrix, or
“Media Metrix”).
Cautionary Statement Concerning Forward-Looking
Statements
This press release and our conference call at 8:00 a.m. Eastern
Time today may contain “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995
regarding business strategies, market potential, future financial
and operational performance and other matters. Words such as
“anticipates,” “estimates,” “expects,” “projects,” “forecasts,”
“intends,” “plans,” “will,” “believes” and words and terms of
similar substance used in connection with any discussion of future
operating or financial performance identify forward-looking
statements. These forward-looking statements are based on
management’s current expectations and beliefs about future events.
As with any projection or forecast, they are inherently susceptible
to uncertainty and changes in circumstances. Except as required by
law, we are under no obligation to, and expressly disclaim any
obligation to, update or alter any forward-looking statements
whether as a result of such changes, new information, subsequent
events or otherwise. Various factors could adversely affect our
operations, business or financial results in the future and cause
our actual results to differ materially from those contained in the
forward-looking statements, including those factors discussed in
detail in the “Risk Factors” sections contained in our Annual
Report on Form 10-K for the year ended December 31, 2012 (the
“Annual Report”) and in our Quarterly Report on Form 10-Q for the
quarter ended September 30, 2013 (the “Quarterly Report”), filed
with the Securities and Exchange Commission. In addition, we
operate a web services company in a highly competitive, rapidly
changing and consumer- and technology-driven industry. This
industry is affected by government regulation, economic, strategic,
political and social conditions, consumer response to new and
existing products and services, technological developments and,
particularly in view of new technologies, the continued ability to
protect intellectual property rights. Our actual results could
differ materially from management’s expectations because of changes
in such factors. Achieving our business and financial objectives,
including improved financial results and maintenance of a strong
balance sheet and liquidity position, could be adversely affected
by the factors discussed or referenced under the “Risk Factors”
sections contained in the Annual Report and Quarterly Report as
well as, among other things: 1) changes in our plans, strategies
and intentions; 2) stock price volatility; 3) future borrowing and
restrictive covenants under the new revolving credit facility; 4)
the impact of significant acquisitions, dispositions and other
similar transactions; 5) our ability to attract and retain key
employees; 6) any negative unintended consequences of cost
reductions, restructuring actions or similar efforts, including
with respect to any associated savings, charges or other amounts;
7) adoption of new products and services; 8) our ability to attract
and retain unique visitors to our properties; 9) asset impairments;
and 10) the impact of “cyber-attacks.”
About AOL
AOL Inc. (NYSE:AOL) is a brand company, committed to
continuously innovating, growing, and investing in brands and
experiences that inform, entertain, and connect the world. The home
of a world-class collection of premium brands, AOL creates original
content that engages audiences on a local and global scale. We help
marketers connect with these audiences through effective and
engaging digital advertising solutions.
From time to time, we post information about AOL on our investor
relations website (http://ir.aol.com) and our official corporate
blog (http://blog.aol.com).
AOL Investor RelationsEoin Ryan,
212-206-5025Eoin.Ryan@teamaol.comorAOL Corporate
CommunicationsPeter Land,
212-206-5009Peter.Land@teamaol.com