Last Updated Jun 5, 2009 10:40 AM EDT
It means the recession has arrived at the agency that brought us Gossip Girl and the Sisterhood of the Traveling Pants.
It also indicates that this sunny story in the WSJ back in February -- where the writer hailed Alloy as "an unlikely star," "the hottest teen-oriented property on the Web," and "savvy," -- was not as useful as it might have been. (To give the writer credit, she did mention the across-the-board decline in teen-girl brands and its Flip.com Conde Nast MySpace failure.)
The yield on Alloy's operating expenses -- a measure of how much revenue the agency's staff generates for every $1 spent on salaries and office costs -- declined to $1.57, down significantly. That means Alloy has not cut its costs to keep them in line with its declining revenues.
On Tuesday's conference call, management said they expected EBITDA to pick up in Q2, but not revenues. Analysts seemed a little confused by that guidance.
The company also claimed its results were hurt by upfront expenses it had to pay that would only generate revenues in Q2. That drew a smart question from one analyst, based on the longstanding notion that companies are supposed to match expenses to revenues within each quarter. (Not doing so is the type of rules violation that the SEC might be interested in.) CFO Joseph Frehe gave this explanation:
We had to expense them as they occured so they were period costs and couldn't be deferred.The sales breakdown by segment saw promotion revenues hold steady, media revenue declined 7 percent and placement was down 30 percent.
- See BNET's previous network efficiency ranking:
- Alloy Media + Marketing Details Top Execs' Cash Bonuses
- ValueClick Tops BNET's Network Efficiency Ranking; Interpublic Comes Last
- Valassis Tops BNET's Network Efficiency Ranking; Interpublic Comes Last
- Alloy, Aegis Top BNET's Network Efficiency Ranking; WPP Slips
- Alloy Beats WPP, IPG et al in Network Efficiency Ranking