Despite a major acquisition that's sending revenue surging higher, floral and gifting giant FTD Companies (FTD) has seen its stock drop by more than 20% this year. Integrating the new Provide Commerce business has been a challenge, and FTD's overall business has proven highly dependent on the timing of just a handful of major gift-giving holidays.
Image source: FTD Companies.
The company posted third-quarter results on Nov. 4 that didn't do much to change that big-picture narrative.
Here's how FTD's headline results stacked up against the prior-year period:
FTD's results: The raw numbers
|
Q3 2015 Actuals |
Q3 2014 Actuals |
Growth (YOY) | |
|---|---|---|---|
|
Revenue |
$189 million |
$125 million |
51% |
|
Net Income |
-$17 million |
$5 million |
N/A |
|
EPS |
-$0.57 |
$0.24 |
N/A |
Source: FTD's financial filings.
What happened with FTD this quarter?
Overall sales growth came mostly from tacking on FTD's 2014 acquisition of Provide Commerce. But its three other operating segments also contributed to the business growth. Here are the main highlights from the quarter:
- Provide Commerce segment: Sales dropped 9% on a double-digit decrease in order volume. Average order value rose slightly and net loss improved to $6 million from last year's $9 million loss.
- Consumer segment: Sales improved by 9% to $60 million as average order value ticked higher by 2% to $74. Profit rose to $6 million, or 10% of revenue.
- Floral segment: Sales rose by 1% and operating income fell slightly. The division posted a hefty gain in average revenue per floral network member, but profitability still slipped. Operating margin fell to 27% of sales from 29% in the year-ago period.
- International segment: Sales rose 3% on a 2% improvement on average order value, which made up for a slight decline in order volume. Profitability ticked lower, to 9.7% of sales.
What management had to say
"During this non-holiday quarter, we focused our efforts on delivering against our integration plans and continuing the improvements in operational and financial disciplines in our Provide Commerce segment," said CEO Robert Apatoff. The fiscal third quarter is FTD's only one without a major gifting holiday, which makes sales growth tougher to come by. But management believes they still made progress at strengthening the business. "Despite some revenue headwinds, our third quarter profitability exceeded our expectations," Apatoff said.
As for sales gains, the company is encouraged by early results from its entry into the wedding and anniversary category. Revenue was up 16% in that tiny but growing segment. And management has big plans for its Gifts.com website. "Our vision is for gifts.com to become the social site for browsing and shopping, making it the trusted go-to-place for customers to find the perfect ready gifts for any occasion," Apatoff said in a conference call with investors.
Looking forward
Executives affirmed their full-year sales outlook that calls for a revenue decline of as much as 4%. And they are optimistic about their long-term growth opportunities.
But because of its heavy focus on just a few holidays like Valentine's Day, they also believe the Provide Commerce business is likely to be a drag on overall results next year, just as it was in this quarter. "We intend to grow the everyday business for Provide Commerce, which has been historically focused on key holiday periods," Chief Financial Officer Becky Sheehan said. "However, the implementation of these initiatives will take time and will likely take much if not all of 2016 to achieve."
