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RetailMeNot Ventures into Gift Card Business

Posted on Friday, Aug 12th 2016

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According to an eMarketer report published last year, the share of US companies using mobile coupons for marketing purposes is expected to increase from 32% in 2013 to 44.5% in 2016. That share is expected to grow to 48% in 2017, implying that nearly half of the US companies with more than 100 employees will distribute mobile coupons either through SMS, websites, apps, or emails. The report also estimates that the number of US adults who redeemed digital coupons grew 7.6% to 121.3 million in 2015.

RetailMeNot’s Financials

RetailMeNot (Nasdaq: SALE) saw second quarter revenues grow 21% to $64.3 million, ahead of the Street’s forecast of $62.5 million. Adjusted EPS of $0.10 was also ahead of the market’s projected earnings of $0.03 per share.

By segment, in-store and advertising net revenues grew 37% and accounted for 25% of total core net revenues. Gift card segment accounted for $10.7 million in revenues, driven by the acquisition of GiftCard Zen it made earlier this year.

Among operating metrics, mobile online transaction net revenue grew 18% to bring in 11% of total core net revenue in the quarter. Desktop online transaction net revenue fell 11% over the year. Total visits to the company’s websites were down 7% to 152 million. Mobile website visits accounted for 45% of total visits in the quarter. Mobile unique visitors for the quarter grew 2% over the year to 18.8 million.

For the current quarter, RetailMeNot forecast revenues of $61.5 million-$69.5 million with an adjusted EBITDA of $5-$9 million. It expects to end the current year with revenues of $275 million-$294 million and an adjusted EBITDA of $50-$61 million.

RetailMeNot’s Expanding Offerings

RetailMeNot continues to grow from a coupon only site to a single stop shop to offer consumers savings opportunities. As part of this focus, in April this year, it acquired GiftCard Zen. GiftCard Zen is a leader in the secondary gift card market that involves buying of gift cards from and selling to consumers and businesses at a discount on face value. GiftCard Zen was acquired for $22 million in cash and $11 million in deferred compensation based on milestone achievements.

RetailMeNot has been integrating GiftCard Zen’s discounted gift cards in its core savings solution. It is working to make primary and secondary gift cards natively available across all RetailMeNot platforms in the US, including the mobile app, which will help accelerate consumer demand. The company estimates that approximately $44 billion in unused, closed loop gift cards had accumulated in the United States between 2008 and 2014 and could have been made available for sale on the secondary gift card market.

Additionally, RetailMeNot is also responding to the searches for food and dining discounts. To cater to this demand, RetailMeNot has expanded into the food and dining content segment by launching a dedicated app experience on iOS. It is now working on releasing an Android version of the same experience.

RetailMeNot’s stock is trading at $11.18 with a market capitalization of $544.2 million. It touched a 52-week high of $11.46 in November last year. It has recovered significantly from the 52-week low of $5.52 it had fallen to in February this year. The stock price is still a far cry from its July 2013 list price of $21.00 each.

Photo Credit: Ann Marie Michaels /Flickr.com

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