DALLAS, TX -- (Marketwire) -- 08/09/12 -- DG® (NASDAQ: DGIT), the world's leading ad management and distribution platform, today reported financial results for the second quarter of 2012. Consolidated revenue for the three months ended June 30, 2012 increased 42% to $96.3 million, compared to $67.9 million in the same period of 2011. DG's second quarter income from continuing operations was $0.5 million, or $0.02 per diluted share, compared to $10.5 million, or $0.38 per diluted share, in the year earlier period. Second quarter Adjusted EBITDA was $30.4 million, compared to $31.2 million in the second quarter of 2011.
"The second quarter performance delivered mixed results across our business with the television segment showing continued growth in HD penetration, increasing to 26% during the quarter, while our online segment endured weakness mainly due to market softness in EMEA," said Neil Nguyen, CEO and President of DG. "What I am excited about is the accelerating adoption we are seeing from leading agencies and advertisers for a more cross channel approach to their campaigns through a DG relationship."
Second quarter financial highlights include:
- DG generated consolidated revenue in the quarter of $96.3 million, an increase of 42% over the same period a year ago.
- The television segment generated revenue of $61.6 million, a decrease of 2% from the year earlier period. HD advertising revenue increased 19% to $37.1 million from the year earlier period.
- The online segment generated revenue of $34.7 million, an increase of 577% from the year earlier period, primarily due to DG's acquisitions of MediaMind and EyeWonder during the 3rd quarter of 2011.
- DG's second quarter operating income included $2.7 million of acquisition and integration related expenses.
- As of June 30, 2012, DG reported $57.0 million of cash and short-term investments and reported $456.0 million outstanding under its long-term credit facility.
Second Quarter 2012 Financial Results Webcast
The Company's second quarter conference call will be broadcast live on the Internet at 5:00 p.m. ET on August 9, 2012. The webcast is open to the general public and all interested parties may access the live webcast on the Internet at the Company's web site at www.dgit.com. Please allow 15 minutes to register and download or install any necessary software.
Acquisitions / Dispositions / Discontinued Operations
The Company has completed several acquisitions that have impacted the comparability of the operating results presented. The results of operations for each of the following entities have been included in the Company's results since the acquisition date.
- MIJO Corporation ("MIJO") on April 1, 2011 (included in television segment)
- MediaMind Technologies, Inc. ("MediaMind") on July 26, 2011 (included in online segment)
- EyeWonder LLC, a Delaware LLC, and the equity interests of Chors GmbH, a German LLC (collectively, "EyeWonder") on September 1, 2011 (included in online segment)
- Peer 39, Inc. ("Peer 39") on April 30, 2012 (included in online segment)
We sold the net assets of our Springbox unit effective June 1, 2012 for estimated proceeds of $0.9 million, resulting in an after tax loss of $0.6 million. Results of our Springbox unit have been included in discontinued operations for both 2012 and 2011.
Non-GAAP Financial Measure
In addition to providing financial measurements based on generally accepted accounting principles in the United States of America (GAAP), the Company has historically provided additional financial measures that are not prepared in accordance with GAAP (non-GAAP). Legislative and regulatory changes discourage the use of and emphasis on non-GAAP financial measures and require companies to explain why non-GAAP financial measures are relevant to management and investors. We believe that the inclusion of Adjusted EBITDA as a non-GAAP financial measure in this press release helps investors to gain a meaningful understanding of our past performance and future prospects, consistent with how management measures and forecasts our performance, especially when comparing such results to previous periods or forecasts. Our management uses Adjusted EBITDA as a non-GAAP financial measure, in addition to GAAP financial measures, as the basis for measuring our core operating performance and comparing such performance to that of prior periods and to the performance of our competitors.
We use Adjusted EBITDA to measure the operating performance of our segments. This measure also is used by management in its financial and operational decision-making. There are limitations associated with reliance on any non-GAAP financial measures because they are specific to our operations and financial performance, which makes comparisons with other companies' financial results more challenging. By providing both GAAP and non-GAAP financial measures, we believe that investors are able to compare our GAAP results to those of other companies while also gaining a better understanding of our operating performance as evaluated by management.
The Company considers Adjusted EBITDA to be an important indicator of the overall performance of the Company because it eliminates the effects of events that are non-cash, or are not expected to recur as they are not part of our ongoing operations.
The Company defines "Adjusted EBITDA" as income from operations, before depreciation and amortization, share-based compensation, acquisition and integration expenses, and restructuring / impairment charges and benefits. The Company considers Adjusted EBITDA to be an important indicator of the Company's operational strength and performance and a good measure of the Company's historical operating trends.
Adjusted EBITDA eliminates items that are either not part of our core operations, such as acquisition and integration expenses or do not require a cash outlay, such as share-based compensation and impairment charges. Adjusted EBITDA also excludes depreciation and amortization expense, which is based on the Company's estimate of the useful life of tangible and intangible assets. These estimates could vary from actual performance of the asset, are based on historical costs, and may not be indicative of current or future capital expenditures.
Adjusted EBITDA should be considered in addition to, not as a substitute for, the Company's operating income, as well as other measures of financial performance reported in accordance with GAAP.
Reconciliation of Non-GAAP Financial Measures
In accordance with the requirements of Regulation G issued by the Securities and Exchange Commission, the Company is presenting the most directly comparable GAAP financial measure and reconciling the non-GAAP financial measure to the comparable GAAP measure.
About DG
DG connects over 11,000 global advertisers and agencies with their targeted audiences through an expansive network of over 6,000 television broadcast stations and over 11,500 web publishers in 75 countries. The Company's television division utilizes best-in-class network and content management technologies, creative and production resources, digital asset management and syndication services that enable advertisers and agencies to work faster, smarter and more competitively. The Company's online division, MediaMind, allows marketers to benefit from optimized management of online advertising campaigns while maximizing data driven advertising. For more information, visit www.DGit.com.
Forward-Looking Statements
This release contains forward-looking statements relating to the Company. These forward-looking statements involve risks and uncertainties, which could cause actual results to differ materially from those projected. Such risks and uncertainties include, among other things;
- our ability to further identify, develop and achieve commercial success for new products;
- delays in product development;
- the development of competing distribution and online services and products, and the pricing of competing services and products;
- our ability to protect our proprietary technologies;
- the shift of advertising spending by our customers to online and non-traditional media from television and radio;
- the demand for High Definition (HD) ad delivery by our customers;
- integrating MediaMind and other acquisitions with our operations, systems, personnel and technologies;
- our ability to successfully transition customers from our previous online acquisitions to our MediaMind digital platform for ad delivery;
- operating in a variety of foreign jurisdictions;
- fluctuations in currency exchange rates;
- adaption to new, changing, and competitive technologies;
- potential impairment of our goodwill and other long-lived assets;
and other risks relating to DG's business which are set forth in the Company's filings with the Securities and Exchange Commission. DG assumes no obligation to publicly update or revise any forward-looking statements.
Digital Generation, Inc.
Unaudited Consolidated Statements of Operations
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
2012 2011 2012 2011
--------- --------- --------- ---------
Revenues $ 96,336 $ 67,852 $ 189,185 $ 131,362
Cost of revenues 34,839 22,935 67,336 44,449
Sales and marketing 14,704 3,522 28,135 6,225
Research and development 5,713 2,673 11,845 5,345
General and administrative 10,658 7,563 21,882 14,609
--------- --------- --------- ---------
Operating expenses, excluding
depreciation and amortization,
share-based compensation and
acquisition and integration
expenses 65,914 36,693 129,198 70,628
--------- --------- --------- ---------
Adjusted EBITDA 30,422 31,159 59,987 60,734
Depreciation and amortization 13,632 7,534 26,861 14,384
Share-based compensation 4,906 1,916 9,377 3,210
Acquisition and integration
expenses 2,707 3,195 4,177 3,205
--------- --------- --------- ---------
Operating income 9,177 18,514 19,572 39,935
Interest expense 7,838 183 15,931 232
Other expense (income), net 364 (14) 354 (122)
--------- --------- --------- ---------
Interest expense and other, net 8,202 169 16,285 110
--------- --------- --------- ---------
Income before income taxes from
continuing operations 975 18,345 3,287 39,825
Provision for income taxes 457 7,847 1,490 16,439
--------- --------- --------- ---------
Income from continuing
operations 518 10,498 1,797 23,386
Loss from discontinued
operations (789) (285) (1,080) (494)
--------- -------- --------- ---------
Net income (loss) $ (271) $ 10,213 $ 717 $ 22,892
========= ========= ========= =========
Basic earnings (loss) per share:
Continuing operations $ 0.02 $ 0.38 $ 0.07 $ 0.84
Discontinued operations (0.03) (0.01) (0.04) (0.01)
--------- --------- --------- ---------
Total $ (0.01) $ 0.37 $ 0.03 $ 0.83
========= ========= ========= =========
Diluted earnings (loss) per
share:
Continuing operations $ 0.02 $ 0.38 $ 0.07 $ 0.83
Discontinued operations (0.03) (0.01) (0.04) (0.01)
--------- --------- --------- ---------
Total $ (0.01) $ 0.37 $ 0.03 $ 0.82
========= ========= ========= =========
Weighted average common shares
outstanding:
Basic 27,458 27,421 27,334 27,606
Diluted 27,458 27,752 27,452 27,921
Digital Generation, Inc.
Unaudited Consolidated Statements of Cash Flows
(In thousands)
Six Months Ended
June 30,
------------------
2012 2011
-------- --------
Cash flows from operating activities:
Net income $ 717 $ 22,892
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation of property and equipment 12,156 7,504
Amortization of intangibles 14,705 7,268
Deferred income taxes (2,806) 801
Provision for accounts receivable losses 1,503 927
Share-based compensation 9,377 3,210
Loss on sale of Springbox unit 1,000 --
Other 423 --
Changes in operating assets and liabilities:
Accounts receivable 6,243 10,813
Other assets 2,995 (4,604)
Accounts payable and other liabilities (15,435) 2,862
Deferred revenue (579) 473
-------- --------
Net cash provided by operating activities 30,299 52,146
-------- --------
Cash flows from investing activities:
Purchases of property and equipment (13,815) (3,030)
Capitalized costs of developing software (6,274) (3,206)
Acquisitions, net of cash acquired (8,594) (43,800)
Long-term investment (1,017) --
Proceeds from sale of short-term investments 10,390 --
Other 1,037 29
-------- --------
Net cash used in investing activities (18,273) (50,007)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock, net of costs 127 257
Purchases of treasury stock -- (16,571)
Repayments of capital leases (266) (199)
Repayments of long-term debt (27,450) --
-------- --------
Net cash used in financing activities (27,589) (16,513)
-------- --------
Effect of exchange rate changes on cash and cash
equivalents 16 136
-------- --------
Net decrease in cash and cash equivalents (15,547) (14,238)
Cash and cash equivalents at beginning of year 72,575 73,409
-------- --------
Cash and cash equivalents at end of period $ 57,028 $ 59,171
======== ========
Supplemental disclosures of cash flow information:
Cash paid for interest $ 14,195 $ 92
Cash (received) paid for income taxes $ (1,112) $ 16,618
Non-cash component of purchase price to acquire a
business $ 5,645 $ --
Landlord lease incentives $ 5,599 $ --
Digital Generation, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
June 30, December 31,
2012 2011
------------ ------------
Unaudited
Cash and short-term investments $ 57,028 $ 82,965
Accounts receivable, net 92,981 100,719
Property and equipment, net 68,324 54,159
Goodwill 583,695 580,229
Deferred income taxes 11,603 4,796
Intangibles, net 193,614 201,405
Other 32,293 33,204
Assets of discontinued operations -- 766
------------ ------------
Total assets $ 1,039,538 $ 1,058,243
============ ============
Accounts payable and accrued liabilities $ 40,503 $ 48,234
Deferred revenue 1,971 2,474
Deferred income taxes 7,125 9,477
Debt 456,002 483,033
Other 12,951 7,239
------------ ------------
Total liabilities 518,552 550,457
Total stockholders' equity 520,986 507,786
------------ ------------
Total liabilities and stockholders' equity $ 1,039,538 $ 1,058,243
============ ============
For more information contact:
Omar Choucair
Chief Financial Officer
DG
972/581-2000
JoAnn Horne
Market Street Partners
415/445-3233
