ALLOY.COM POSTS QUARTERLY PROFIT ON CASH BASIS
Byline: Valerie Seckler
NEW YORK — A milestone was achieved in cyberspace Thursday: Teen commerce and community player Alloy Online joined the rarified ranks of publicly held dot-coms that have notched a quarterly profit on a cash basis.
After Wall Street’s closing bell, Alloy, based in nearby Silicon Alley, reported it earned $779,000, or 4 cents a share, for the fourth quarter ended Jan. 31, before charges for various non-cash, non-operating items, including $3.3 million for goodwill amortization; $85,000 in stock-based compensation and $4.2 million for losses on the sale of securities. Cash earnings topped the 2 cents a share analysts had expected. The bottom-line loss of $6.8 million, or 32 cents a share, was versus a loss of $4.4 million, or 30 cents, a year earlier.
Sales more than doubled, totalling $36.6 million, versus $14.9 million in the prior-year period.
“The hockey stick growth that a lot of dot-coms like us had experienced is behind us,” said Matthew Diamond, chairman and chief executive officer of Alloy Online Inc., in an interview from San Francisco earlier this week, where he was participating in an investor conference ahead of the fourth-quarter earnings report. “We’ve moved to stable- growth mode.”
In citing the hockey-stick phenomenon, Diamond was referring to the rapid runup in sales, after a sluggish start, that was experienced by so many fledgling e-tailers over the past few years — a dynamic that made it increasingly difficult to make reliable projections on which to build those businesses, whether in the realm of finance, logistics, or other operations.
Sales in the fourth quarter were up 51 percent over third-quarter sales of $28 million.
The difference for Alloy, of course, is that unlike many of its dot-com cousins, the teen-focused Internet destination has survived in the volatile virtual environment long enough to achieve a cash-based quarterly profit. But Diamond, 32, isn’t exactly kicking back into mellow mode. Quite the opposite.
“There’s more growth opportunity in the next six to 12 months, but if we don’t capitalize on it now, we’ll miss out,” Diamond said, in speaking of chances — both to build user traffic on alloy.com and to obtain fresh financing. “Managing the growth in an environment where competition has gotten thinner, but the number of users is continuing to expand, is job number one,” he added, when asked about the chief challenge currently facing Alloy Online, sounding most unlike the beleaguered ceo typically found at the helm of the many Web sites that have been buffeted and bruised while the dot-bombs drop around them.
To that end, Diamond noted, “We have to be more aggressive in looking at acquisition opportunities and looking for new media outlets. We are in talks over some smaller things,” he added, without specifying. “We’re not looking at anything that isn’t making money.”
While introduced more recently, the firm’s offline properties, including mail-order catalogs, books and magazines distributed by Alloy, under such names as Alloy Girl and Strength, have grown more rapidly than the Web destination at Alloy.com, which, Diamond said, was “fully developed” in August 1996. “Offline developed much faster than online,” Diamond related. “Over the past three or four years, the Web traffic has caught up.” Alloy launched its catalogs, along with its Web site, back in 1996; books were added through a deal with Penguin Putnam in November 1999, and magazines, distributed in schools through an agreement with Scholastic, became a part of the multimedia picture during the second half of 2000.
Indeed, Diamond, who brings a background in finance at GE and a Harvard M.B.A. to the dot-com he co-founded in January 1996, cited the firm’s multimedia platform as the foundation of the company’s first quarterly profit. And he forecast on Monday that the platform’s planks will be sturdy enough to enable Alloy to weigh-in with a full-year profit, again on a cash basis, for the fiscal year ending Jan. 31, 2002.
For the most recently completed fiscal year, Alloy saw its loss widen to $16.5 million on a cash basis from a loss of $13.9 million a year ago, while its net loss expanded to $29.7 million from $14.9 million. Sales for the 12 months more than doubled, tallying $76.7 million against $31 million.
Analysts estimated about $15 million of those 12-month sales stemmed from advertising, and $60 million of it from e-commerce. For the current fiscal year, they see Alloy’s revenue rising to roughly $30 million in ad sales and $110 million in e-commerce. According to Diamond, Procter & Gamble, Johnson & Johnson and Bristol-Myers Squibb are the company’s three biggest advertisers.
Prior to the earnings report, Alloy’s stock gave up 19 cents a share to close at $10 in Nasdaq trading Thursday. During the past 52 weeks, shares of Alloy have ranged as high as $20.25 and as low as $5.75.
Fresh figures from Web ratings agency Media Metrix show that, in February, Alloy.com was the fifth most popular site among teens visiting Net destinations where traffic is driven by users ages 12-17. That group accounted for 42.9 percent of Alloy.com’s visitors in February, or 329,000 people, for example, compared with PacSun.com, the e-tailer that topped the teen-share chart, with 45.6 percent of its visitors in February, or 93,000 users, falling into the 12 to 17-year-old range.