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Net Loss Narrows

This entertainment holding misses expectations, but reported solid revenue growth in its key segments.
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Hollywood Media (HOLL) posted earnings after the close Wednesday. Shares were recently trading at $4.70, and we aren't taking any action in this note.

For the first quarter, the company reported an 18% year-over-year revenue increase to $23.5 million. Hollywood Media had a net loss of 8 cents a share in the first quarter vs. a 10-cent loss in the year-ago period. The Street was looking for a net loss of 5 cents a share on revenue of $26 million, though it is worth noting that only two analysts had published forecasts and therefore variations from the mean are not unusual or cause for concern. The company's net loss for the quarter before taxes, depreciation and amortization was $1.3 million, an improvement of $1.1 million from the year-ago period. Given Hollywood Media's practice of reporting segment revenue, here is a quick rundown of the revenue drivers in the period: -- Revenue in Hollywood Media's ticketing business came in at $18.45 million vs. $16.7 million in the year-ago period. Deferred ticketing revenue that can be recognized as revenue in future periods jumped an impressive 37% sequentially, which suggests strong results in the coming quarter. The ticketing business had net income of $903,000 vs. $412,000 in the year-ago period. -- Revenue in the data segment of $2.94 million was ahead of year-ago revenue of $2.43 million. The segment had $890,000 net profit vs. $489,000 in the year-ago period. Gross margins improved to 75% vs. 71% in the year-ago period. -- Internet advertising revenue came in at $2.28 million in the quarter vs. $788,000 in the year-ago period. This drove an improvement in the segment's net loss to $442,000 vs. a net loss of $621,000 in the year-ago period. The company didn't provide a break-even target date for this segment, but it did note that the first quarter is generally a weak quarter and that advertising trends remain rather favorable. In addition, the company noted that its recently launched Theater.com, which began selling theater tickets online in February for performances in London's West End, should continue to ramp up during the rest of the year. We believe this is a fairly significant product launch as London's West End has more theatergoers than New York City, and thus could drive strong Web traffic and ticket volume. Also, a Spanish version of MovieTickets.com was just launched, and the joint venture now has 77 theater chain partners, which is nearly twice the level it had at this time last year. Hollywood owns a 26.2% stake in MovieTickets.com, and we believe this is a valuable asset for the company that could drive strong profitability in future periods or be sold off for cash in excess of $2 per Hollywood Media share. We remain upbeat on Hollywood Media. The company is leveraged to growth in online e-commerce transactions with its leading Web properties, and is approaching profitability with growth in advertising revenue and Web traffic -- a good indicator of strong consumer interest. As a result, we maintain our One rating.

William Gabrielski is a research analyst at TheStreet.com.

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