Rocket Fuel Shares Plummet 23% On Weak Outlook, But Q2 Results Top View

(RTTNews) - Shares of Rocket Fuel, Inc. (FUEL) plummeted more than 23 percent in extended trading on Tuesday after the digital advertising company trimmed its revenue guidance for the full-year 2014.

The company also reported a loss for the second quarter that widened from last year, despite strong double-digit revenue growth, reflecting sharply higher costs and operating expenses. However, adjusted loss per share came in narrower than analysts' expectations, and quarterly revenues topped their estimates. "Rocket Fuel's 70% revenue growth and 80% gross profit growth over the second quarter of last year demonstrate our ability to deliver the solutions that advertisers need to drive ROI and increase brand impact across channels. We continued to grow rapidly in our mobile business, with 31% of total revenue being from the mobile channel in the second quarter, up sequentially from 26% in the prior quarter," Chairman and CEO George John said in a statement.

California-based Rocket Fuel reported a net loss of $9.76 million for the second quarter, wider than $3.84 million in the prior-year quarter. However, loss per share narrowed to $0.28 from last year's $0.46, due to higher number of shares.

Excluding items, adjusted net loss for the quarter was $3.76 million or $0.11 per share, compared to $0.55 million or $0.07 per share in the year-ago quarter.

On average, nine analysts polled by Thomson Reuters expected the company to report a loss of $0.22 per share for the quarter. Analysts' estimates typically exclude special items.

Revenue for the quarter surged 70 percent to $92.64 million from $54.37 million in the same quarter last year, and topped nine Wall Street analysts' consensus estimate of $90.22 million.

Excluding media cost, adjusted revenue totaled $54.71 million, compared to $29.73 million last year.

Gross margin for the quarter improved 265 basis points to 49.4 percent from last year's 46.7 percent.

Total operating expenses for the quarter doubled to $54.36 million from $27.91 million in the year-ago quarter.

Active customer count for the quarter expanded to 1,444 from 784 in the year-ago quarter.

The company noted that advertiser commitments in the latter part of the second quarter for future advertising campaigns were lower than previous internal forecasts, despite its strong revenue growth in the first half of 2014.

Looking ahead to the third quarter, the company expects revenues in a range of $96.0 million to $100.0 million. Analysts expect the company to report revenues of $109.63 million for the quarter.

For fiscal 2014, Rocket Fuel trimmed its revenue guidance to a range of $403.0 million to $427.0 million from the prior forecast range of $420.0 million to $435.0 million. Street is currently looking for full-year 2014 revenues of $422.64 million.

Separately, Rocket Fuel agreed to acquire [x+1], Inc. in a cash and stock deal valued at about $230 million. Rocket Fuel will pay $100.0 million in cash and about 5.4 million shares of Rocket Fuel common stock as consideration.

"This combination brings together the leading Data Management Platform and the leading Artificial Intelligence-based Digital Advertising solution. We are strengthening our competitive position while significantly increasing our total addressable market and ability to deliver SaaS-based multi-channel solutions to advertising agencies and enterprise customers," John added.

The deal, which will accelerate Rocket Fuel's expansion into the digital marketing enterprise SaaS market, is expected to close by early in the fourth quarter of 2014.

FEYE closed Tuesday's regular trading session at $24.75, down $0.59 or 2.33% on a volume of 1.75 million shares. The stock plummeted a further $5.80 or 23.43% in after-hours trading.