What: Shares of RetailMeNot (SALE) rose as much as 28.3% early Tuesday, then settled to trade up 18% as of 11:30 a.m. after the digital offers marketplace announced better-than-expected third-quarter results.
So what: Quarterly revenue fell 7% year over year to $52.4 million, driven by a 91% increase from in-store and advertising revenue to $11.8 million and a 55% increase in mobile online revenue to $4.9 million. Those results were held back, however, by a 24% decline in RetailMeNot's core desktop online transaction segment (including tablet sales) to $35.8 million.
Meanwhile, that translated to GAAP net income of $0.3 million (down from $2.5 million in the same year-ago period). On an adjusted basis, net income fell to $6.3 million (down from $9.1 million), or $0.12 per diluted share. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) fell 29.3% year over year to $11.8 million.
These declines might not sound encouraging, but analysts, on average, were only anticipating adjusted earnings of $0.04 per share on revenue of $48.6 million.
Now what: For the current quarter, RetailMeNot expects revenue of $74 million to $76 million, down around 14% at the midpoint of the range, and adjusted EBITDA of $25 million to $27 million. Again, analysts had expected Q4 revenue near the bottom end of the former range.
Finally, RetailMeNot raised its guidance for the full year, and now expects 2015 revenue of $240 million to $242 million, down 9% over 2014 at the midpoint and compared to its previous outlook for 2015 revenue of $231 million to $239 million. Full-year adjusted EBITDA is now expected to be $66 million to $68 million, up from RetailMeNot's previous guidance of $56 million to $64 million.
All things considered, I'm personally still not intrigued enough to dive in given RetailMeNot's outsized -- albeit decreasing -- reliance on the declining desktop segment, which still comprises nearly 70% of total sales. But today's report is an encouraging step in the right direction for mobile and in-store/ad revenue, and it's hard to blame investors for taking a step back in, with shares still down nearly 30% year to date in 2015. For now, however, I prefer to continue watching from the sidelines until I have a better idea of how sustainable RetailMeNot's progress is over the long term for these key growth drivers.
