Velti Posts Loss, Tepid Revenue Growth
Mobile marketing firm Velti on Tuesday reported a loss on higher operating costs in the fourth quarter as it continues to shift the focus of its business to strong mobile markets, including the U.S. and the U.K.
The company posted a quarterly loss of $5.2 million, or 8 cents per share. On an adjusted basis, it reported net income of $26 million, or 39 cents per share, compared with $37.3 million, or 59 cents a share a year ago. It had revenue growth of just 12% to $97.5 million in the fourth quarter, compared to a 67% gain in the prior three months.
Analysts, on average, had forecast an adjusted profit of 59 cents on revenue of $106 million. Velti first announced in November its plans to sell off assets in the Balkan countries and Greece to concentrate on customers in stronger regions, including the Americas and Western Europe.
The company suffered another setback when its stock tumbled 25% on Jan. 31 following a pair of analyst downgrades, including one from Wells Fargo. The bank noted that Velti’s “greater discipline on contract quality and geographical mix” were likely to impact both its top and bottom lines in the near term. Velti had previously been downgraded by Jeffries Group in November.
Velti executives on Tuesday affirmed their commitment to focusing on mature markets like the U.S. and Western Europe, as well as emerging areas, including China, India and Brazil for long-term growth. But in the short-term, the shift led revenue being at the low end of the company’s guidance for the quarter.
"Following the divestment announced in November, we continue to evaluate the customers and opportunities that we are pursuing in various geographies,” said CEO Alex Moukas, in a statement. “We decided not to pursue certain business opportunities with customers or potential customers that did not meet our more rigorous cash investment requirements.”
He emphasized that 2013 would be a transitional year for Velti as it scales back business in its original markets.
During the earnings conference call, Velti CFO Jeff Ross admitted the company would experience “very tight cash flow” during the first and second quarter, but told analysts the Velti would not need to raise additional capital to continue operating during its transition period.
Velti expects to reduce capital expenditures by more than 50% in connection with its pivot away from Eastern Europe, which it says will help improve cash flow.
Velti projected revenue in the first quarter in the range of $40 million to $44 million. Analysts had expected revenue of $62.7 million. In the fourth quarter, mobile marketing accounted for $82.2 million of revenues, and mobile advertising, $15.2 million. The earnings release cited work for clients in the fourth quarter including American Express, Discover, Subway, Outback Steakhouse and Academy.
But Moukas said in the conference call that a $27 million marketing deal Velti announced in September as its largest ever was now under review by a new marketing team, which he acknowledged could affect the size of the two-year contract. That client is believed to be T-Mobile USA, which appointed a new CMO in November.
Velti’s shares plummeted 27% in after-hours trading to $3.11 following its earnings release.