Zulily (NASDAQ:ZU) Posts Stunningly Good Fourth Quarter

Technology Stocks News 18

Zulily (NASDAQ:ZU) needed to deliver upside to consensus projections in the fourth quarter, and the magnitude of the top- and bottom-line beat was more than adequate.. The doubling of the active customer base year-to-year is encouraging, and the leverage on marketing spending highlights that there is still significant untapped demand. Flow-through to profitability on higher revenues was exceptional; adjusted EBITDA were double consensus estimates. The superior financial characteristics of the model are exemplified by the tripling of free cash flow year to year.

The outlook for 2014 integrates the outperformance from the fourth quarter, and we believe there is further upside potential to these revised projections. The product offering connects with the consumer for impulse and gift giving, whereas competitors are search oriented and commodities based, with price and speed of delivery the central focus.

Zulily reported fourth-quarter adjusted EBITDA of $17.8 million, roughly $9 million higher than consensus, driven by better-than-expected top-line results. Total revenues increased 100% year to year, to $257.0 million, significantly better than the consensus of $225.3 million. The revenue upside was driven by a higher average active customer count, which came in 220,000 higher than estimates, and revenue per customer of $81 was also better than the $76 estimate.

The better revenue led to higher gross profit, which was $7 million higher than forecasts. Most impressive, the company leveraged marketing expenses by 200 basis points (to 6.6% of sales). The company also saw 80 basis points of leverage on the SG&A line, which came in 140 basis points better than expectations.

Zulily expects 2014 revenue to be in the range of $1.10 billion to $1.15 billion (58% to 65% growth) versus the current consensus projection of $1.11 billion. Adjusted EBITDA are expected to be in the range of $45.0 million to $55.0 million versus the current consensus forecast of $46.8 million. Embedded in this outlook is relatively flat gross margins and marketing expenses of a little more than 8% of sales.

 

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