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Third Quarter 2014 Highlights:
- Revenue increased 3.8 percent year-over-year due to the strong performance of the Small Business Services segment which grew 7.2 percent.
- Revenue from marketing solutions and other services increased 19.4 percent year-over-year and accounted for 24.8 percent of total revenue in the quarter.
- Gross margin was 63.7 percent of revenue, down from 64.3 percent in the third quarter of 2013. The decline was primarily driven by a higher services revenue mix and higher delivery and material costs.
- Selling, general and administrative (SG&A) expense increased 1.3 percent from last year primarily due to additional SG&A expense from acquisitions in the prior year and higher performance-based compensation. SG&A as a percent of revenue was well leveraged at 42.5 percent in the quarter and compared to 43.6 percent of revenue last year.
- Operating income decreased 3.8 percent year-over-year and includes a non-cash asset impairment charge in the third quarter of 2014 related to various intangible assets directly associated with the company's decision to reduce the revenue base of its search engine marketing and optimization business in order to improve its financial performance, as well as restructuring and transaction-related costs in both periods. Adjusted operating income, which excludes these items, increased 5.8 percent year-over-year from higher revenue per order and continued cost reductions partially offset by higher performance-based compensation.
- Diluted EPS decreased 4.3 percent year-over-year. Excluding the asset impairment charge in the third quarter of 2014 and restructuring and transaction-related costs in both periods, adjusted diluted EPS increased 7.3 percent year-over-year driven by stronger operating performance and lower shares outstanding, partially offset by a slightly higher effective tax rate.
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