FTD Companies (NASDAQ:FTD) posted fourth-quarter earnings results this evening. The announcement showed steady progress in its floral and gifting business. But management also hinted at a year of heavy spending ahead that will pressure profits in 2015.
Fourth-quarter sales ticked higher by 2% to reach $158 million. That result was just above the figure management had forecast back in November, and it also beat the prediction of Wall Street pros by $4 million.
As it did in the third quarter, FTD posted sales gains in each of its major business lines: consumer direct, florist network, and international. The consumer-direct business is easily the company's biggest, and that segment logged steady growth. Customers placed fewer floral and gifting orders as volume ticked lower by less than one percentage point.
But the slight volume dip was more than offset by an increase in order prices: The average order rose 4%, to $69.55. Yes, that's below the third quarter's record high average of $73 per order; but it still represents a hefty boost in spending from 2013's fourth quarter.
Meanwhile, FTD saw a tiny sales uptick of less than 1% in both its international and florist-network divisions.
"We are pleased with our performance in the fourth quarter, in which we had growth in revenues across all three segments of our business," CEO Robert Apatoff said in a press release announcing the results.
Balance sheet news and 2015 outlook
FTD ended the year with more cash on its books, but also with plenty of additional debt. Cash on hand doubled to $96 million as operating cash flow improved modestly. But the real contributor to cash balances was outstanding debt, which jumped to $340 million from $220 million a year ago. Shareholders can credit the $430 million price tag on FTD's Provide Commerce acquisition for that additional debt load.
Management also issued its initial outlook for 2015, and the sales forecast fit squarely with Wall Street's expectations. FTD sees revenue staying flat at $1.3 billion for the full year.
On the other hand, profitability should be under significant pressure as the company spends money on integrating the Provide Commerce business, and on investing in other growth initiatives. Capital expenditures are targeted at $25 million this year as compared to $7 million in 2014 and $11 million in 2013.
That extra spending will likely push adjusted profit margin down to 9% this year from 13% in 2014. The soft profit outlook could be the reason why the stock fell 4% immediately after FTD's earnings announcement.