SALE Retailmenot - Series 1

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 5, 2015

 

 

RETAILMENOT, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware		001-36005		26-0159761
(State or other jurisdiction of incorporation)		(Commission File Number)		(I.R.S Employer Identification No.)

301 Congress Avenue, Suite 700

Austin, Texas 78701

(Address of principal executive offices, including zip code)

(512) 777-2970

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

---

Item 2.02.

Results of Operations and Financial Condition.

On May 5, 2015, RetailMeNot, Inc. (the “Company”) issued an earnings release reporting its preliminary results of operations and posted financial information and commentary from G. Cotter Cunningham, its Chief Executive Officer, and Louis J. Agnese, III, its interim Chief Financial Officer, on its investor website, www.investor.retailmenot.com, each for the fiscal quarter ended March 31, 2015. A copy of the earnings release and financial information and commentary is furnished herewith as Exhibit 99.1 and 99.2, respectively.

The information furnished in this Current Report under this Item 2.02 and the exhibits attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

 

Item 9.01.

Financial Statements and Exhibits

 

(d)

Exhibits

 

Exhibit No.		Description
99.1		Earnings Release
99.2		Management Commentary

---

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

				RETAILMENOT, INC.
Date: May 5, 2015				/s/ Louis J. Agnese, III
				Louis J. Agnese, III Interim Chief Financial Officer and Secretary

---

EXHIBIT INDEX

 

Exhibit No.		Description
99.1		Earnings Release
99.2		Management Commentary

Exhibit 99.1

RetailMeNot Announces First Quarter 2015 Financial Results

 

•

Mobile Online Transaction Net Revenues grew 137% over the prior year period

 

•

Advertising + In-Store Net Revenues grew 100% over the prior year period

 

•

GAAP EPS of $0.07; non-GAAP EPS of $0.20

 

•

Adjusted EBITDA of $18.7 million; EBITDA margins of 31%

AUSTIN, Texas, May 5, 2015 — RetailMeNot, Inc. (NASDAQ:SALE), the operator of the world’s largest marketplace for digital offers, today announced its financial results for the first quarter ended March 31, 2015.

First Quarter Financial Results Highlights and Key Operating Metrics

(All comparisons are made to the first quarter of 2014 unless otherwise noted)

 

•

Total net revenues declined 1% to $60.4 million.

 

•

Mobile online transaction net revenues increased 137% to $5.6 million, representing 9% of total net revenues.

 

•

Advertising + in-store net revenues increased 100% to $7.7 million, representing 13% of total net revenues.

 

•

Desktop online transaction net revenues, which includes desktop and tablet, declined 14%, to $47.1 million, representing 78% of total net revenues.

 

•

Net revenues from international markets were flat, totaling $13.7 million, representing 23% of total net revenues.

 

•

GAAP net income was $4.1 million, reflecting a decrease of 33%, compared to $6.1 million.

 

•

Non-GAAP net income was $10.8 million, reflecting a decrease of 15%, compared to $12.6 million.

 

•

EPS was $0.07 per share, based on 55.0 million fully-diluted, weighted-average shares outstanding.

 

•

Non-GAAP EPS was $0.20 per share, based on 55.0 million fully-diluted, weighted-average shares outstanding.

 

•

Adjusted EBITDA was $18.7 million, down 13% and representing 31% of total net revenues.

 

•

Total visits grew 16% to 179.9 million.

 

•

Monthly mobile unique visitors grew 55% totaling 18.4 million.

“We made solid progress this quarter in executing on our plans to further monetize our fast growing mobile audience,” said Cotter Cunningham, CEO & Founder, RetailMeNot, Inc. “In 2015, we continue to focus on innovating and investing in our highest growth areas such as in-store and mobile, increasing our audience of consumers coming directly to our marketplace, investing in a strong sales organization to deepen our relationships with retailers and looking for ways to help more consumers save money across the growing omni-channel landscape.”

---

Business Outlook

Second Quarter 2015

 

•

Total net revenues are expected to be in the range of $55.0 to $58.0 million, or a decline of 5% at the mid-point.

 

•

Adjusted EBITDA is expected to be in the range of $12.0 to $14.0 million, or adjusted EBITDA margins of 23% at the mid-point.

Full Year 2015

The company is reiterating guidance for the year:

 

•

Total net revenues are expected to be in the range of $275 to $285 million, or growth of 6% at the mid-point.

 

•

Adjusted EBITDA is expected to be in the range of $92 to $100 million, or adjusted EBITDA margins of 34% at the mid-point.

The above statements are based on current expectations and actual results may differ materially as explained in “Forward-looking Statements” below. Information about RetailMeNot’s use of non-GAAP financial measures is provided below under the caption “Use of Non-GAAP Financial Measures”.

Quarterly Conference Call

RetailMeNot will host a webcast to discuss its first quarter 2015 financial results and business outlook today at 7:00 a.m Central Time (8:00 a.m. Eastern Time).

A live webcast of the conference call can be accessed within the investor relations section of the RetailMeNot website at http://investor.retailmenot.com/events.cfm?Year=. This webcast will contain forward-looking statements and other material information regarding the company’s financial and operating results. Additionally, in advance of the conference call, RetailMeNot will post first quarter 2015 Management Commentary that can be accessed at http://investor.retailmenot.com.

Following completion of the call, a recorded replay of the webcast will be available on the website at http://investor.retailmenot.com. A replay of the call will be available beginning at 10:30 a.m. Central Time on May 5, 2015 through May 12, 2015 at 10:59 p.m. Central Time. To listen to the telephone replay, call (855) 859-2056 within the US, or (404) 537-3406 if calling internationally. Access Code 22584279.

---

About RetailMeNot, Inc.

RetailMeNot, Inc. (http://www.retailmenot.com/corp/) operates the world’s largest marketplace for digital offers. The company enables consumers across the globe to find hundreds of thousands of digital offers for their favorite retailers and brands. During the 12 months ended March 31, 2015, RetailMeNot, Inc. experienced over 720 million visits its websites, and during the three months ended March 31, 2015, monthly mobile unique visitors totaled 18.4 million. In 2014, RetailMeNot, Inc. estimates $4.4 billion in paid retailer sales were attributable to consumer traffic from digital offers in its marketplace. The RetailMeNot, Inc. portfolio includes RetailMeNot.com, the largest digital offer marketplace in the United States; RetailMeNot.ca in Canada; VoucherCodes.co.uk, the largest digital offers marketplace in the United Kingdom; Deals.com in Germany; Actiepagina.nl, a leading digital offers site in the Netherlands; Bons-de-Reduction.com and Ma-Reduc.com, leading digital offers sites in France; Poulpeo.com, a leading digital offers site with cash back in France; andDeals2Buy.com, a digital offers site in North America. RetailMeNot, Inc. is listed on the NASDAQ stock exchange under the ticker symbol “SALE.” Investors interested in learning more about the company can visit http://investor.retailmenot.com.

Key Operating Metrics

Visits. RetailMeNot defines a visit as a group of interactions that take place on one of RetailMeNot’s websites from computers, smartphones, tablets or other mobile devices within a given time frame as measured by Google Analytics, a product that provides digital marketing intelligence. A single visit can contain multiple page views, events, social interactions and e-commerce transactions. A single visitor can open multiple visits. Visits can occur on the same day, or over several days, weeks or months. As soon as one visit ends, there is then an opportunity to start a new visit. A visit ends either through the passage of time or a campaign change, with a campaign generally meaning arrival via search engine, referring site or campaign-tagged information. A visit ends through passage of time either after 30 minutes of inactivity or at midnight Pacific Time. A visit ends through a campaign change if a visitor arrives via one campaign or source, leaves the site, and then returns via another campaign or source. Visits for the period do not include interactions through our mobile applications.

Monthly Mobile Unique Visitors. This amount represents the average number of monthly mobile unique visitors for a three month period ending March 31, 2015. RetailMeNot counts each of the following as a monthly mobile unique visitor: (i) the first time a specific mobile device accesses one of our mobile applications during a calendar month, and (ii) the first time a specific mobile device accesses one of our mobile websites using a specific web browser during a calendar month. If a mobile device accesses more than one of our mobile websites or mobile applications in a single calendar month, the first access to each such mobile website or mobile application is counted as a monthly mobile unique visitor as they are tracked separately for each mobile domain. We measure monthly mobile unique visitors with a combination of internal data sources and Google Analytics data.

---

Use of Non-GAAP Financial Measures

To provide investors with additional information regarding our financial results, this press release includes references to Adjusted EBITDA, non-GAAP net income and non-GAAP net income per share, all of which are non-GAAP financial measures. For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures, see the tables provided in this release below.

RetailMeNot defines adjusted EBITDA as net income plus depreciation, amortization of intangible assets, stock-based compensation expense, third-party acquisition-related costs, other non-cash operating expenses (including compensation arrangements entered into in connection with acquisitions), net interest expense, other non-operating income or expense (including net foreign exchange gains and losses) and income taxes.

RetailMeNot discloses adjusted EBITDA because it is a key measure used by RetailMeNot and its board of directors to understand and evaluate RetailMeNot’s financial and operating performance, establish budgets and operational goals and as an element in determining executive compensation. RetailMeNot believes it also facilitates period-to-period comparisons of operations that could otherwise be masked by the effect of the expenses that RetailMeNot excludes in this non-GAAP financial measure and facilitates comparisons with other peer companies, many of which use similar non-GAAP financial measures to supplement their GAAP results.

Our presentation of non-GAAP net income and non-GAAP net income per share excludes the impact of amortization of purchased intangible assets, stock-based compensation expense, third party acquisition-related costs, other non-cash operating expenses (including compensation arrangements entered into in connection with acquisitions) and income taxes, net of the tax effect of the adjustments above. These measures are not key metrics used by RetailMeNot or its board of directors to measure financial or operating performance or otherwise manage the business. However, RetailMeNot provides non-GAAP net income and non-GAAP net income per share as supplemental information for investors, as they facilitate period-to-period comparisons of operations that could otherwise be masked by the effect of the expenses that RetailMeNot excludes in these non-GAAP financial measures and facilitates comparisons with other peer companies, many of which use similar non-GAAP financial measures to supplement their GAAP results.

Adjusted EBITDA, non-GAAP net income and non-GAAP net income per share have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of RetailMeNot’s results as reported under GAAP. Because of these limitations, you should consider Adjusted EBITDA, non-GAAP net income and non-GAAP net income per share alongside other financial performance measures, including various cash flow metrics, net income and RetailMeNot’s other GAAP results.

---

Forward-looking Statements

This release contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, included herein regarding RetailMeNot’s strategy, future operations, future financial position, future net revenues, projected costs, prospects, plans and objectives of management are forward-looking statements. The words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would” and similar expressions (or the negative of these terms) are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements include, among other things, statements about management’s estimates regarding future net revenues and financial performance, visits, monthly mobile unique visitors, e-mail subscribers, other consumer engagement metrics and other statements about management’s beliefs, intentions or goals. RetailMeNot may not actually achieve the expectations disclosed in the forward-looking statements, and you should not place undue reliance on RetailMeNot’s forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause actual results or events to differ materially from the expectations disclosed in the forward-looking statements, including, but not limited to, (1) RetailMeNot’s ability to attract visitors to its websites from search engines; (2) RetailMeNot’s ability to monetize digital offers available through its mobile solutions; (3) RetailMeNot’s ability to attract and retain paid retailers and maintain its relationships with performance marketing networks; (4) risks related to RetailMeNot’s ability to manage its growth, including accurately planning and forecasting its financial results; (5) RetailMeNot’s ability to obtain and maintain digital offer content and maintain the positive perception of its brand; (6) the competitive environment for RetailMeNot’s business; (7) changes in consumer sentiment regarding RetailMeNot’s use of cookies; (8) RetailMeNot’s need to manage regulatory, tax and litigation risks, including regulations imposing sales tax on e-commerce or m-commerce; (9) RetailMeNot’s ability to protect consumer data and its intellectual property; (10) RetailMeNot’s ability to manage international business uncertainties; (11) the impact and integration of recent and future acquisitions; and (12) other risks and potential factors that could affect RetailMeNot’s business and financial results identified in RetailMeNot’s filings with the Securities and Exchange Commission (the “SEC”), including its annual report on Form 10-K filed with the SEC on February 25, 2015. Additional information will also be set forth in RetailMeNot’s future quarterly reports on Form 10-Q, annual reports on Form 10-K and other filings that RetailMeNot makes with the SEC. RetailMeNot does not intend or undertake any duty to release publicly any updates or revisions to any forward-looking statements contained herein.

Investor Contact

Michael Magaro

RetailMeNot, Inc.

mmagaro@rmn.com

(512) 777-2899

Media Contact

Brian Hoyt

RetailMeNot, Inc.

bhoyt@rmn.com

(512) 777-2957

— RMNSALE-F –

---

RetailMeNot, Inc.

Condensed Consolidated Statements of Operations

(Unaudited, in thousands, except per share data)

 

		Three Months Ended March 31,
		2015				2014
Net revenues		$	60,384			$	61,270
Costs and expenses:
Cost of net revenues (1)			5,346				4,430
Product development (1)			13,320				10,706
Sales and marketing (1)			21,641				21,172
General and administrative (1)			9,570				9,347
Amortization of purchased intangible assets			2,626				3,443
Other operating expenses			765				1,348
Total costs and expenses			53,268				50,446
Income from operations			7,116				10,824
Other income (expense):
Interest expense, net			(421	)			(531	)
Other income (expense), net			(243	)			28
Income before income taxes			6,452				10,321
Provision for income taxes			(2,393	)			(4,246	)
Net income			4,059				6,075
Preferred stock dividends on participating preferred stock			—				—
Total undistributed earnings (loss)			4,059				6,075
Undistributed earnings allocated to participating preferred stock			—				—
Net income (loss) attributable to common stockholders			4,059				6,075
Net income (loss) per share attributable to common stockholders:
Basic		$	0.08			$	0.11
Diluted		$	0.07			$	0.11
Weighted average number of shares used in computing net income (loss) per share:
Basic			54,029				53,149
Diluted			55,035				55,562

RetailMeNot, Inc.

Condensed Consolidated Statements of Operations (continued)

(Unaudited, in thousands)

 

		Three Months Ended March 31,
		2015				2014
(1) Includes stock-based compensation as follows:
Cost of net revenues		$	589			$	341
Product development			2,259				1,324
Sales and marketing			1,422				1,238
General and administrative			2,543				2,111
Total		$	6,813			$	5,014

---

RetailMeNot, Inc.

Reconciliation of Adjusted EBITDA

(Unaudited, in thousands)

 

		Three Months Ended March 31,
		2015				2014
Net income		$	4,059			$	6,075
Depreciation and amortization			3,926				4,204
Stock-based compensation expense			6,813				5,014
Third party acquisition-related costs			55				—
Other operating expenses			765				1,348
Interest expense, net			421				531
Other income (expense), net			243				(28	)
Provision for income taxes			2,393				4,246
Adjusted EBITDA		$	18,675			$	21,390

RetailMeNot, Inc.

Reconciliation of Non-GAAP Net Income and Non-GAAP Diluted EPS

(Unaudited, in thousands, except per share data)

 

		Three Months Ended March 31,
		2015				2014
GAAP Income before income taxes			6,452				10,321
GAAP provision for income taxes			(2,393	)			(4,246	)
GAAP Net income		$	4,059			$	6,075
Non-GAAP adjustments to net income:
Amortization of purchased intangibles			2,626				3,443
Stock-based compensation expense			6,813				5,014
Third party acquisition-related costs			55				—
Other operating expenses			765				1,348
Less: Tax effect of adjustments above			(3,544	)			(3,263	)
Total non-GAAP net income		$	10,774			$	12,617
Diluted net income per share
GAAP		$	0.07			$	0.11
Non-GAAP		$	0.20			$	0.23
Shares used in non-GAAP diluted EPS calculation:
Weighed-average shares outstanding used in calculating GAAP diluted EPS			55,035				55,562
Additional dilutive securities for non-GAAP diluted EPS			—				—
Weighted-average shares from assumed conversion of preferred stock prior to IPO			—				—
Weighted-average shares outstanding used in calculating non-GAAP diluted EPS			55,035				55,562
Reconciliation of non-GAAP effective tax rate:
GAAP Effective tax rate			37.1	%			41.1	%
Tax effect of non-GAAP adjustments to net income			-1.6	%			-3.8	%
Non-GAAP effective tax rate			35.5	%			37.3	%

---

RetailMeNot, Inc.

Condensed Consolidated Balance Sheets

(Unaudited, in thousands)

 

		As of March 31,				As of December 31,
		2015				2014
Assets
Current assets:
Cash and cash equivalents		$	280,315			$	244,482
Accounts receivable, net			45,521				69,603
Prepaids and other current assets, net			14,244				14,930
Total current assets			340,080				329,015
Property and equipment, net			17,903				16,949
Intangible assets, net			67,247				70,819
Goodwill			174,628				176,927
Other assets, net			4,885				5,394
Total assets		$	604,743			$	599,104
Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable		$	4,655			$	5,482
Accrued compensation and benefits			6,327				12,138
Accrued expenses and other current liabilities			8,389				6,110
Income taxes payable			3,016				9,032
Current maturities of long term debt			10,000				10,000
Total current liabilities			32,387				42,762
Derivatives liability			—				—
Deferred tax liability—noncurrent			4,991				3,404
Long term debt			70,000				40,000
Other noncurrent liabilities			8,008				8,183
Total liabilities			115,386				94,349
Stockholders’ equity (deficit):
Common stock			53				54
Additional paid-in capital			500,896				517,421
Accumulated other comprehensive loss			(4,873	)			(1,942	)
Accumulated deficit			(6,719	)			(10,778	)
Total stockholders’ equity (deficit)			489,357				504,755
Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)		$	604,743			$	599,104

---

RetailMeNot, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)

 

		Three Months Ended March 31,
		2015				2014
Cash flows from operating activities:
Net income		$	4,059			$	6,075
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization expense			3,926				4,204
Stock based compensation expense			6,813				5,014
Excess income tax benefit from stock-based compensation and other			(755	)			(8,314	)
Deferred income tax expense (benefit)			1,698				(4	)
Non-cash interest expense			102				97
Amortization of deferred compensation			768				1,347
Other non-cash (gains) losses, net			1,038				55
Provision for doubtful accounts receivable			(252	)			375
Changes in operating assets and liabilities:
Accounts receivable, net			23,142				15,567
Prepaid expenses and other current assets, net			(843	)			(987	)
Accounts payable			376				(1,977	)
Accrued expenses and other current liabilities			(10,084	)			(3,975	)
Other noncurrent assets and liabilities			634				830
Net cash provided by (used in) operating activities		$	30,622				18,307
Cash flows from investing activities:
Payments for acquisition of businesses, net of acquired cash			—				—
Purchase of other assets			(2	)			—
Purchase of property and equipment			(2,332	)			(2,393	)
Net cash used in investing activities			(2,334	)			(2,393	)
Cash flows from financing activities:
Proceeds from notes payable, net of issuance costs			29,950				—
Payments on notes payable			—				(1,750	)
Payments of preferred stock dividends			—				—
Proceeds from public offerings, net of offering costs			—				(64	)
Excess income tax benefit from stock-based compensation and other			755				8,314
Payments of principal on capital lease arrangements			(3	)			(3	)
Payments for repurchase of common stock			(24,473	)			(6	)
Proceeds from issuance of common stock, net of shares withheld for taxes			2,393				8,139
Net cash provided by (used in) financing activities			8,622				14,630
Effect of exchange rate changes on cash			(1,077	)			41
Change in cash and cash equivalents			35,833				30,585
Cash and cash equivalents, beginning of period			244,482				165,881
Cash and cash equivalents, end of period		$	280,315			$	196,466

Exhibit 99.2

 

Management Commentary

First Quarter 2015 Results

The RetailMeNot, Inc. (“RetailMeNot”) earnings call will begin on May 5, 2015 at 7:00am central time (8:00am eastern time) and will include prepared commentary followed by a Q&A session. This “Management Commentary” is being posted to provide investors and analysts with additional detail in advance of the quarterly earnings call and will not be read on the call.

To access the live broadcast of the brief remarks and Q&A session, please visit the Investor Relations section of RetailMeNot’s website at http://investor.retailmenot.com. A complete reconciliation between GAAP and non-GAAP financial measures can be found in our earnings release at http://investor.retailmenot.com.

Also, please note that comments on growth rates below refer to year-over-year changes unless otherwise indicated.

Strategy and Market Outlook

RetailMeNot operates the world’s largest marketplace for digital offers. We are a leading innovator in connecting retailers with the right shoppers anytime, anywhere to increase consumer engagement and drive sales. Our mission is to combine the power of technology and community to deliver savings to the world.

We provide consumers in our markets with hundreds of thousands of discounts and deals from retailers and brands and we offer our retailers an “always on,” scalable platform that enables them to connect with shoppers across channels and devices.

 

1

---

•

Combined, our marketplace has over 600,000 digital offers from over 70,000 retailers and brands, including offers from approximately 90 of the Top 100 Internet Retailers as ranked by Internet Retailer Magazine.

 

•

The sources of content across our marketplace continue to make the RetailMeNot experience unique. Today, approximately 60% of our offers are user-generated content, retailer exclusives to RetailMeNot as well as offers sourced by our staff.

 

•

At the end of Q1, with over 720 million visits from consumers over the trailing twelve month period, we have a wealth of information on the types of offers that resonate with consumers across multiple categories. This information results in insights and best practices we are able to pass along to our paid retailers. We believe delivering innovation and marketing insights has helped our paid retailers drive new customer acquisition and sales growth.

First Quarter Financial Highlights

 

•

Total net revenues were $60.4 million, a decline of 1%.

 

•

Mobile online transaction net revenues were $5.6 million, up 137%.

 

•

Advertising and in-store net revenues were $ million, up 100%.

 

•

Desktop online transaction net revenues were $47.1 million, down 14%.

 

•

First quarter international net revenues were flat at $13.7 million, and represented 23% of total net revenues.

 

•

GAAP net income was $4.1 million, reflecting a decline of 33%; non-GAAP net income was $10.8 million, reflecting a decline of 15%.

 

•

EPS was $0.07 per share and non-GAAP EPS of $0.20 per share, based on 55.0 million fully-diluted, weighted-average shares outstanding.

 

•

Adjusted EBITDA was $18.7 million and represented 31% of total net revenues.

 

2

---

First Quarter Consumer Engagement Overview

Large and growing audience delivered via our integrated channels.

 

•

Total visits in the quarter were 179.9 million, up 16%. Our traffic growth was driven by visitors to our mobile websites, as we continue to see consumer preference shift from desktop to mobile.

 

•

Mobile visits in the quarter were 70.7 million, up 111%, representing 39% of total visits in the quarter.

 

•

Monthly mobile unique visitors in the quarter totaled 18.4 million, up 55%.

 

•

As of March 31, 2015, worldwide subscribers to our emails increased to 35.9 million, up 76%.

Focus on strong content quality and improving consumer experience.

 

•

Content quality remains a priority. We had 24% growth in the number of exclusive offers and believe our content and high quality user experience continues to attract a large audience of consumers to RetailMeNot. For example:

 

•

We have improved the effectiveness of our push notifications via enhanced targeting logic. The open rate on our push notifications is up 105%.

 

•

Enhancements to the onboarding process have increased the number of users who “opt-in” to receive push notifications and login to our mobile apps.

 

•

Early personalization efforts on email and the RetailMeNot App cover flow are underway. While historically, all of our users have seen the same content in the same order, tests in the first quarter are making headway in providing consumers with an individual experience on these platforms.

Commitment to retailer satisfaction is driving results.

 

•

Our Retailer & Brand Solutions Team concentrates on our largest paid retailers and brands, which represent the majority of our total net revenues. This team is structured with single retailer account ownership, organized by vertical expertise and account size. We made strong hiring progress on this team in the quarter, bringing on approximately 50% of our target positions, including nearly all of our senior hires. We are excited by the talent that has joined the Retailer & Brand Solutions Team and believe the team’s structure will allow us to develop more strategic relationships with our paid retailers and brands. In addition, we are expanding the number of retailers on which this team concentrates in order to grow our net revenues from previously unmanaged paid retailers.

 

3

---

•

Although early, retailers’ and brands’ response to our strategic relationship model approach is exciting. We are now having more strategic discussions, and those discussions have resulted in the rollout of longer term, comprehensive digital marketing packages.

 

•

Delivering compelling value to retailers also remains a focus, and we continue to compile attribution studies – across both in-store and online, and work closely with our retailers and brand partners alongside third-party attribution vendors to demonstrate RetailMeNot’s ability to deliver return-on-investment. For example:

 

•

We recently completed a study with a third-party attribution firm to help a large multi-category retailer better quantify and measure in-store traffic to determine incrementality for in-store offers. For the testing period, RetailMeNot ran an offer to determine how many shoppers were driven into the retailer’s physical store location as a result of viewing our content. The analysis of the campaign concluded that:

 

•

The offer was viewed 3 million times on the RetailMeNot App across multiple in app placements;

 

•

Over 27 thousand unique visitors entered a store location after viewing the offer on the RetailMeNot App; and

 

•

Of those visitors, 49% were unlikely to have entered the store otherwise (without having seen the offer).

 

•

While we are primarily paid commissions based on retailer online sales to our visitors, our services and monetization approaches vary based on a retailer’s or brand’s objectives and can include ad placements in our desktop and mobile channels, in-store promotions, email and seasonal campaigns or push notifications. The flexibility we are able to offer our paid retailers in constructing our relationship and solutions has been a strong selling point and is viewed as a key competitive differentiator for retailers.

Increased engagement through our in-store platform and mobile apps.

 

•

Our first quarter represented a strong showing for in-store and advertising net revenues. In total, net revenues from advertising plus in-store were $7.7 million, resulting in growth of 100% versus a year ago.

 

4

---

•

We continue to pursue an “always on” strategy across our retailer and brand partnerships.

Overall, RetailMeNot saw a strong first quarter. We believe shopping is a “multi-channel journey” spanning online, mobile and in-store touch-points. Throughout the year, we will continue to innovate on new products, offer types and features to enhance our ability to deliver the best, most relevant offers to consumers while providing retailers and brands with more compelling solutions to reach consumers on their path to purchase. We feel we are off to a solid start to the year and feel great about the focus and performance of our teams across the globe.

First Quarter Financial Review

 

•

Net revenues during the first quarter were $60.4 million, down 1%.

 

•

First quarter international net revenues were flat at $13.7 million, and represented 23% of total net revenues.

 

•

GAAP net income was $4.1 million, reflecting a decline of 33%; non-GAAP net income was $10.8 million, reflecting a decline of 15%.

 

•

EPS was $0.07 per share and non-GAAP EPS was $0.20 per share, each based on 55.0 million fully-diluted, weighted-average shares outstanding.

 

•

Adjusted EBITDA was $18.7 million and represented 31% of total net revenues.

In total, commissions paid to us as a result of consumer purchases made online using our marketplace represented approximately 87% of our net revenues in the quarter, with the balance coming from our advertising and in-store and solutions.

Gross margins were strong at 91%, and cost of net revenues was 9%, consistent with our expectations and slightly up from the prior year. Cost of net revenues consists of direct and indirect costs incurred to generate net revenues. These are primarily costs related to technology services for content delivery and the employee costs for managing content operations and technology infrastructure.

 

5

---

Operating Expenses

During our first quarter, we continued to invest in key long-term growth initiatives such as consumer acquisition and product innovation and development, while delivering adjusted EBITDA of $18.7 million, and adjusted EBITDA margins of 31%.

Product development expense for the quarter was $13.3 million, or 22% of net revenues, up from $10.7 million, or 18% last year. Product development expense consists primarily of personnel, stock-based compensation and other related costs attributed to product management and software engineering teams, and third-party contractors. The increase in spend reflects the expansion of our engineering teams, and technology related investments to enhance our content quality, user experience, mobile solutions and data and analytics capabilities. This increase is partially offset by the capitalization of $1.5 million in internal costs related primarily to infrastructure and product initiatives focused on personalization and content delivery.

Sales and marketing expense for the quarter was $21.6 million, or 36% of net revenues, compared to $21.2 million, or 35% last year. Sales and marketing expense consists primarily of personnel and stock-based compensation costs across our Retailer & Brand Solutions, marketing, SEO and business intelligence employees, as well as online and other advertising and media expenditures, paid search and other marketing expenses.

General and administrative expense for the quarter was $9.6 million, or 16% of net revenues, compared to $9.3 million, or 15% of net revenues. General and administrative expense consists primarily of the personnel, stock-based compensation and related costs of our general corporate functions, which will vary from quarter to quarter. Growth in general and administrative expense primarily reflects investments in people, business infrastructure and professional costs associated with managing our increased scale and public company compliance requirements.

Our total global employee base exiting the quarter was 558. We plan to continue to invest in our talent to help drive our growth initiatives.

 

6

---

Other Expenses

Depreciation and amortization expense for the quarter was $3.9 million, compared to $4.2 million and stock-based compensation expense was $6.8 million, compared to $5.0 million in the prior year. Higher stock-based compensation was due to the expansion of our employee base and a greater mix of equity-based awards granted to employees toward restricted stock units to enhance our ability to attract and retain key talent.

Income from Operations

Income from operations for the quarter was $7.1 million, or 12% of net revenues, compared to $10.8 million, and 18% of net revenues last year.

Provision for Income Taxes

The provision for income taxes for the quarter was $2.4 million, reflecting an effective tax rate of 37.1%, compared to a provision for income taxes of $4.2 million and an effective tax rate of 41.1% last year. As a reminder, during Q1 of 2014, we implemented our global corporate structure. For 2014, this change increased our effective tax rate due to the tax costs incurred to implement the structure.

Net Income

GAAP net income was $4.1 million for the quarter, reflecting a decrease of 33%, compared to $6.1 million last year.

Non-GAAP net income was $10.8 million, reflecting a decrease of 15%, compared to $12.6 million last year.

Earnings per Share (EPS)

EPS for the quarter was $0.07 per share, based on 55.0 million fully-diluted, weighted-average shares outstanding.

Non-GAAP EPS was $0.20 per share, based on 55.0 million fully-diluted, weighted-average shares outstanding.

 

7

---

Liquidity and Capital Resources

Cash flow from operations during the quarter was $30.6 million and we ended the first quarter with $280.3 million of cash and equivalents.

Capital expenditures for the quarter were $2.3 million, primarily reflecting investments in facilities, domains and technology licenses.

Share Repurchase Program

During the first quarter, we purchased approximately 1.4 million shares at an average price of $17.52 for a total of approximately $24.5 million. Our share purchases were funded by borrowing under our revolving credit facility.

(Our updated outlook and financial guidance is provided in our earnings release and will be discussed on the earnings call)

 

 

Non-GAAP Financial Measures

To provide investors with additional information regarding our financial results, this document includes references to Adjusted EBITDA, non-GAAP net income and non-GAAP net income per share, all of which are non-GAAP financial measures. For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures, see the tables provided in RetailMeNot’s earnings release dated May 05, 2015.

RetailMeNot defines adjusted EBITDA as net income plus depreciation, amortization of intangible assets, stock-based compensation expense, third-party acquisition-related costs, other non-cash operating expenses (including compensation arrangements entered into in connection with acquisitions), net interest expense, other non-operating income or expense (including net foreign exchange gains and losses) and income taxes.

RetailMeNot discloses adjusted EBITDA because it is a key measure used by RetailMeNot and its board of directors to understand and evaluate RetailMeNot’s financial and operating performance, establish budgets and operational goals and as an element in determining executive compensation. RetailMeNot believes adjusted EBITDA also facilitates period-to-period comparisons of operations that could otherwise be masked by the effect of the expenses that RetailMeNot excludes in this non-GAAP financial measure and facilitates comparisons with other peer companies, many of which use similar non-GAAP financial measures to supplement their GAAP results.

 

8

---

Our presentation of non-GAAP net income and non-GAAP net income per share excludes the impact of amortization of purchased intangible assets, stock-based compensation expense, third party acquisition-related costs, other non-cash operating expenses (including compensation arrangements entered into in connection with acquisitions) and income taxes, net of the tax effect of the adjustments above. These measures are not key metrics used by RetailMeNot or its board of directors to measure financial or operating performance or otherwise manage the business. However, RetailMeNot provides non-GAAP net income and non-GAAP net income per share as supplemental information for investors, as they facilitate period-to-period comparisons of operations that could otherwise be masked by the effect of the expenses that RetailMeNot excludes in these non-GAAP financial measures and facilitates comparisons with other peer companies, many of which use similar non-GAAP financial measures to supplement their GAAP results.

Adjusted EBITDA, non-GAAP net income and non-GAAP net income per share have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of RetailMeNot’s results as reported under GAAP. Because of these limitations, you should consider Adjusted EBITDA, non-GAAP net income and non-GAAP net income per share alongside other financial performance measures, including various cash flow metrics, net income and RetailMeNot’s other GAAP results.

Forward-looking Statements

This document contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, included herein regarding RetailMeNot’s strategy, future operations, future financial position, future net revenues, projected costs, prospects, plans and objectives of management are forward-looking statements. The words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would” and similar expressions (or the negative of these terms) are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements include, among other things, statements about management’s estimates regarding future net revenues and financial performance, visits, monthly mobile unique visitors, e-mail subscribers, other consumer metrics and other statements about management’s beliefs, intentions or goals. RetailMeNot may not actually achieve the expectations disclosed in the forward-looking statements, and you should not place undue reliance on RetailMeNot’s forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause actual results or events to differ materially from the expectations disclosed in the forward-looking statements, including, but not limited to, (1) RetailMeNot’s ability to attract visitors to its websites from search engines; (2) RetailMeNot’s ability to monetize digital offers available through its mobile solutions; (3) RetailMeNot’s ability to attract and retain paid retailers and maintain its relationships with performance marketing networks; (4) risks related to RetailMeNot’s ability to manage its growth, including accurately planning and forecasting its financial results; (5) RetailMeNot’s ability to obtain and maintain digital offer content and maintain the positive perception of its brand; (6) the competitive environment for RetailMeNot’s business; (7) changes in consumer sentiment regarding RetailMeNot’s use of cookies; (8) RetailMeNot’s need to manage regulatory, tax and litigation risks, including regulations imposing sales tax on e-commerce or m-commerce; (9) RetailMeNot’s ability to protect consumer data and its intellectual property; (10) RetailMeNot’s ability to manage international business uncertainties; (11) the

 

9

---

impact and integration of recent and future acquisitions; and (12) other risks and potential factors that could affect RetailMeNot’s business and financial results identified in RetailMeNot’s filings with the Securities and Exchange Commission (the “SEC”), including its annual report on Form 10-K filed with the SEC on February 25, 2015. Additional information will also be set forth in RetailMeNot’s future quarterly reports on Form 10-Q, annual reports on Form 10-K and other filings that RetailMeNot makes with the SEC. RetailMeNot does not intend or undertake any duty to release publicly any updates or revisions to any forward-looking statements contained herein.

 

10