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Mindbody's Earnings Sprint by Expectations; Company Ups Guidance

Mindbody (NASDAQ: MB) reported healthy third-quarter 2017 results after the market closed on Thursday. The provider of an online platform for wellness service providers posted revenue growth of 32%, while adjusted earnings per share came in at $0.01, compared to a loss of $0.09 in the year-ago period. 

Shares of Mindbody surged on Friday, closing the day out with a 15.2% gain. We can attribute the market's rally to both the top and bottom lines beating the company's guidance and Wall Street's expectations and to Mindbody raising its revenue and earnings outlook for the full year. The stock has soared 53.3% in 2017 through Friday, far outpacing the S&P 500's 17.2% total return.

Mindbody's results: The raw numbers

Metric

Q3 2017

Q3 2016

Year-Over-Year Change

Revenue

$46.6 million

$35.3 million

32%

Operating income

($3.8 million)

($5.4 million)

N/A

GAAP net income

($3.6 million)

($5.9 million)

N/A

Adjusted net income

$0.7 million

($3.5 million)

N/A

GAAP EPS

($0.08)

($0.15)

N/A

Adjusted EPS

$0.01 ($0.09)

N/A

Data source: Mindbody. GAAP = generally accepted accounting principles. EPS = earnings per share.

Both segments posted strong growth, with subscription and services revenue soaring 34% year over year to $28.3 million, and payments revenue jumping 32% to $17.8 million. (Total doesn't add up to $46.6 million because there's also a very small "other" category.)

Mindbody had guided for revenue in the range of $45.1 million to $46.1 million and an adjusted loss in the range of $0.05 to $0.03 per share. The company crushed its earnings outlook and also beat its revenue guidance. 

For additional context -- though long-term investors shouldn't pay too much attention to Wall Street's near-term estimates -- analysts were expecting Mindbody to post an adjusted loss of $0.04 per share on revenue of $45.6 million. So Mindbody raced by the earnings consensus and also beat on the top line.

Image source: Getty Images.

What happened with Mindbody in the quarter?

  • The number of wellness business subscribers (at the end of the period) increased 1% year over year to 59,028, with high-value subscribers increasing 8%.
  • Monthly average revenue per subscriber (ARPS) jumped 27% year over year to approximately $259. This also represents a sequential increase, as monthly ARPS was about $244 in the second quarter
  • Payments volume grew 23% year over year to $2.0 billion.

What management had to say

Here's what co-founder and CEO Rick Stollmeyer had to say in the press release about the quarter:

We had a great third quarter highlighted by the early success of our refined subscriber growth strategy. Our focus on adding the right customers that contribute significant wellness inventory to our platform is driving accelerated adoption of our consumer apps and the MINDBODY network.

CFO and COO Brett White added:

We delivered strong financial performance in the third quarter, generating year over year revenue growth of 32% and record gross margins. Additionally, due to the improving unit economics of our subscriber base and our continued financial discipline, we generated positive Non-GAAP net income for the first time.

Looking ahead

Mindbody turned in a great quarter. The company issued fourth-quarter guidance and raised its previously issued full-year 2017 guidance. The big boost was on the earnings end, thanks largely to the better-than-expected results in the third quarter. 

Period

Revenue Guidance

Projected Year-Over-Year Revenue Change

Adjusted EPS Guidance*

Projected Year-Over-Year Adjusted EPS Change

Q4 2017

$48.5 million to $49.5 million

 27% to 30%  

$0.0 to $0.02

N/A; a projected improvement from a loss of $0.04.

Full-year 2017

$181.4 million to $182.4 million (Previous: $179.5 million to $182.0 million) 

Approximately 31% at the midpoint. ($0.02) to $0.0 (Previous: ($0.11) to ($0.06))

N/A; a projected improvement from a loss of $0.35 in 2016.

Data source: Mindbody. *Mindbody provides guidance for adjusted earnings/loss and the weighted average shares outstanding in a period, from which an expected adjusted earnings/loss per share can be calculated.

Going into earnings, Wall Street was estimating that Mindbody would post a loss of $0.09 per share on revenue of $180.5 million in 2017. 

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Beth McKenna has no position in any of the stocks mentioned. The Motley Fool recommends Mindbody. The Motley Fool has a disclosure policy.