Quepasa (AMEX: QPSA) is growing again, but take last night's growth metrics with a grain of salt.
After all, it's easy to get excited when you see revenue soaring 240% for the quarter. How can one not get pumped after reading that registered users have soared from 27.3 million to 78.1 million over the past year?
When the upticks are this meaty, it's easy to dismiss that the $5.5 million net loss is nearly as large as the $6.3 million in reported revenue during the period.
Quepasa is growing, but let's dig a little deeper. Most of the growth is fueled by its acquisition of the substantially larger parent company of social discovery website operator myYearbook in early November. Perhaps not surprisingly, the company's earnings release emphasizes the combined metrics when it benefits the company and then switches to reported results when that's its better side.
Last night's press release claims that the two companies would have combined for $36.8 million in revenue in 2011, but does that come anywhere close to the reported 240% top-line surge in the reported results for the fourth quarter? No. Not even close. The earnings release doesn't divulge the combined results for 2010, but fishing out last summer's press release indicates that the combined companies generated $33.6 million in revenue through the four quarters ending in March. Suddenly the growth seems far more modest.
If we want the 2010 figure, the summertime press release has myYearbook at $23.7 million in revenue for the year. We know that Quepasa rang up $6.1 million, so it adds up to $29.8 million. The end result is that revenue climbed 24% for the combined companies in 2011.
That's certainly not too shabby. Given the dramatic plunges in revenue and monthly active users at Quepasa alone in its last quarter, we're clearly looking at a company where myYearbook is driving the performance now.
As for the registered users surging, the combined companies had 70.9 million registered users at the end of March. Winding up at 78.1 million nine months later for the incremental metric is solid, but not the blowout growth suggested in last night's release.
You're a good company, Quepasa. Make it a little easier to compare things on an orange-to-orange basis.
After all, investors do have more choices these days if they want to buy into the social networking space. Over the past year alone we've had a few relevant IPOs.
- Jive Software (Nasdaq: JIVE) -- a provider of social networking software for companies -- went public two months ago.
- BazaarVoice (NYSE: BV) -- specializing in social commerce -- went public last week.
- LinkedIn (Nasdaq: LNKD) -- the most prominent social networking website after Facebook -- was one of last year's more successful IPOs.
- Renren (Nasdaq: RENN) -- China's leading social networking site operator -- is trading for well below last May's IPO price.
Buying Quepasa for its popular myYearbook trophy wife isn't a bad idea, but investors will have to do a little digging over the next four quarters to see through the non-organic growth.
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