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AOL Swings To Profit In Q3 On Strong Ad Revenue, Tops Estimates

AOL Swings To Profit In Q3 On Strong Ad Revenue, Tops Estimates
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11/6/2012 9:08 AM ET

Web service company AOL, Inc. (AOL: Quote) Tuesday reported better-than-expected profit, a turn-around from the prior year third quarter, benefited mainly by strong growth in advertising revenues. The company said it is positioned for growth in 2013 and beyond.

Global advertising revenue grew 7 percent year-over-year to $340 million, reflecting continued double-digit growth in Third Party Network revenue, growth in Search and Contextual revenue for the first time in over 3 years and double-digit growth in international display revenue, partially offset by a decline in domestic display revenue.

Third Party Network revenue increased 18 percent, Search and contextual revenue grew 8 percent and international display revenues climbed 18 percent from a year earlier.

Meanwhile, Subscription revenues declined 10 percent to $173.5 million. According to the company, subscription trends continued to improve compared to a 22 percent decline in revenue last year. Monthly average churn was 1.8 percent, in comparison with 2.2 percent in monthly average churn in the year-ago quarter.

Tim Armstrong, chairman and CEO of the company stated, "We just reported the best relative revenue performance in seven years and the second consecutive quarter of year-over-year profit growth, exceeding our expectations. We have positioned AOL for growth in 2013 and beyond with consumer and advertiser demand growing for our premium content and innovative products, video, services and ad formats."

In the third quarter, net income attributable to the company was $20.8 million or $0.22 per share, compared to a loss of $2.6 million or $0.02 per share reported last year. On average, eight analysts polled by Thomson Reuters expected earnings of $0.17 per share for the quarter. Analysts' estimates typically exclude one-time items.

Total revenues for the quarter remained flat at $531.7 million, but came above analysts' estimate of $521.56 million.

The company's total restructuring costs dropped 94 percent to $0.4 million in the quarter.

AOL said it is positioned to reduce its outstanding shares by around 30 percent from its high, by the end of the year.

In August end, AOL had entered into a $600 million fixed-dollar collared accelerated stock repurchase agreement with Barclays Bank plc (BCS, BARC.L) and authorized a $5.15 per share special cash dividend. The moves were part of the company's final steps in returning about $1.1 billion to its shareholders in 2012.

After the sale of its more than 800 patents to Microsoft Corp. (MSFT) in a $1.056 billion cash deal in April, AOL is in the process of returning 100 percent of the cash to shareholders.

AOL closed Monday's regular trading at $35.81 on the NYSE. In the pre-market activity, the shares are up 3.04 percent.

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by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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