InfoSpace shares fell almost a third in value during extended trading yesterday after the Bellevue company warned investors that sales and...
InfoSpace shares fell almost a third in value during extended trading yesterday after the Bellevue company warned investors that sales and profit would drop later this year because it lost a large contract and expected slimmer profits in its mobile-phone business.
The stock dropped $10.84 in after-hours trading to close at $23.95, or well below the company’s lowest closing price in regular trading hours during the past year. It closed yesterday’s regular session — before the earnings report — at $34.79, up $1.54.
Despite the gloomy forecast, the Bellevue company reported strong results in the second quarter. Net income increased 20 percent to $16.3 million compared with $13.5 million a year ago. Sales jumped 52.8 percent to $83.2 million from $54.4 million.
“InfoSpace delivered revenue within our expectations and strong bottom-line results,” Chief Executive Jim Voelker said. “However, given current trends, we anticipate revenues to decline in the third quarter and to grow in the fourth.”
Most Read Stories
- Seattle’s March for Science draws thousands on Earth Day — including a Nobel Prize winner WATCH
- Car brings down power lines, causing I-5 shutdown and outages in North Seattle
- Recipe: Bacon-Wrapped Corn on the Cob with Charred Lime Crema
- Boeing issues new layoff notices to 429 workers in Washington state
- Police say robbery suspect was killed by Seattle officers’ gunfire WATCH
In the third quarter, the company expects a profit of up to $7.5 million on as much as $80 million in sales.
For the full year, the company lowered its expectations, saying profit would be as much as $47 million on revenue of up to $340 million. That’s down from its previous forecast, which projected profit at $75 million on sales as high as $395 million.
In a conference call with analysts yesterday, Voelker said the company lost a contract in which InfoSpace drove traffic to Verizon’s online Yellow Pages listing, SuperPages.com. Although Verizon will continue with a pay-for-performance model, the subscription loss will translate to a $9 million decline in revenue for the second half of this year, Voelker said.
“We are clearly not pleased about this, but we will try to change this into a positive,” said David Rostov, InfoSpace chief financial officer. “It gives us some product flexibility, not to say we aren’t very disappointed. We were very surprised by this and we will work hard to replace it.”
Also affecting the company was a new pattern emerging in the mobile division. As consumers switch ringtone preferences from basic tones to true songs, InfoSpace margins have lowered.
To combat these trends, Voelker said the company will invest in new products and services. Much of this investment will come in hiring new talent. Voelker expects the fourth quarter to fare better as cellphone customers upgrade handsets during the holidays and download more content.
“Our mobile performance is affected by a number of variables, including retail trends in music and handset sales, promotions,” he said. “At this time, we lack sufficient historical data to clearly weigh these factors, which in a nascent industry limits our visibility, and that is reflected in our guidance.”
Tricia Duryee: 206-464-3283 or firstname.lastname@example.org
|Dollar figures in thousands, except per share; parentheses denote losses.|