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8-K - CURRENT REPORT OF MATERIAL EVENTS OR CORPORATE CHANGES - Digital Generation, Inc.a13-18036_18k.htm

Exhibit 99.1

 

GRAPHIC

 

For more information contact:

 

JoAnn Horne

Market Street Partners

415/445-3233

 

DG REPORTS SECOND QUARTER 2013 RESULTS

 

·                  Q2 Financial results webcast moved to August 8 at 8:30 AM EST

 

·                  Online revenues increase 19%, Online Segment EBITDA grows 68%

 

Dallas, TX — August 6, 2013 — DG® (NASDAQ: DGIT), the world’s leading multiscreen ad management company, today reported financial results for the second quarter of 2013.

 

Consolidated revenues for the three months ended June 30, 2013 were unchanged at $96.3 million compared to the same period of 2012.  DG’s second quarter income from continuing operations was $2.6 million, or $0.09 per diluted share, compared to income from continuing operations of $0.5 million, or $0.02 per diluted share in the prior year period. Second quarter adjusted EBITDA was $31.1 million, compared to $30.4 million reported in the second quarter of 2012.

 

“We continue to make solid progress in our online business as demand builds for our digital campaign management platform,” said Neil Nguyen, CEO of DG. “The 19% increase in our online business this quarter reflects customers’ growing use of video, data driven campaign optimization and greater campaign insights through our new analytics tools.  It is clear to me that DG’s ongoing development is fully aligned with our customers in helping them reach, optimize, analyze and deliver their online campaigns around the globe.”

 

Second quarter highlights include:

 

·                  The Online Segment generated revenue of $41.3 million, an increase of 19% from the second quarter of 2012.

 

·                  Online Segment Adjusted EBITDA before corporate overhead margins improved to 24% from 17% in the second quarter of 2012.

 

·                  The Television Segment generated revenue of $55.0 million, a decrease of 11% from the second quarter of 2012.

 

·                  High Definition (HD) penetration for the quarter increased to 41% from 26% in the second quarter of 2012.

 

·                  TV Segment Adjusted EBITDA before corporate overhead includes an $800,000 credit for the reversal of an earnout related to the Match Point acquisition completed in 2010.

 

750 West John Carpenter Freeway

Suite 700

Irving, TX 75039

 

P 972.581.2000

F 972.581.2001

www.dgit.com

 



 

·                  Operating income included $1.0 million of acquisition, integration and other related expenses.

 

·                  Cash flow from operations increased by 67% to $50.7 million in the first half of 2013 from $30.3 million in the prior year period.

 

·                  The Company repaid $8.6 million of outstanding debt under its credit facility; resulting in $394.7 million outstanding.

 

·                  As of June 30, 2013, DG reported $56.0 million of cash.

 

Guidance

 

For 2013, the Company continues to expect the following:

 

·                  Total revenue for the full year 2013 is expected to be in the range of $370-$400 million.

 

·                  Adjusted EBITDA is expected to be in the range of $105-$125 million.

 

Second Quarter 2013 Financial Results Webcast

 

The Company will host a conference call and webcast at 8:30 ET on August 8, 2013.  Participants can access the webcast at www.DGIT.com. For the webcast, please allow 15 minutes to register and download any necessary software. Questions and answers will be taken only from participants on the conference call. Following the call’s completion, a replay will also be available for 30 days on the Company’s website.

 

Acquisitions / Discontinued Operations

 

The Company has completed two 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.

 

·                  Peer 39, Inc. (“Peer 39”) on April 30, 2012 (included in online segment)

·                  NCMG, Inc. (“North Country”) on July 31, 2012 (included in television 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 2012.

 

Non-GAAP Financial Measures

 

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). We believe that the inclusion of Adjusted EBITDA and Segment Adjusted EBITDA before corporate overhead as non-GAAP financial measures 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 and Segment

 



 

Adjusted EBITDA before corporate overhead as non-GAAP financial measures, 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 and Segment Adjusted EBITDA before corporate overhead to measure the operating performance of our business.  These measures are 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 (loss) from operations, before depreciation and amortization, share-based compensation, acquisition, integration and other 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, integration and other 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.

 

Segment Adjusted EBITDA before corporate overhead represents Adjusted EBITDA before corporate overhead on a segment by segment basis.

 

Adjusted EBITDA and Segment Adjusted EBITDA before corporate overhead 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 measures to the comparable GAAP measure.

 

About DG

 

DG (NASDAQ: DGIT) is the leading global multiscreen advertising management and distribution platform, fueling campaign management across TV, online, mobile and beyond. Through a combination of technology and services, DG empowers brands and advertisers to work faster, smarter and more competitively. Boasting the world’s largest hybrid satellite and Internet network for broadcast video delivery, the Company’s unparalleled campaign management encompasses multiscreen ad delivery, cross-channel research and analytics, and unified asset management.  The DG product portfolio consists of two overarching product lines for online and video campaign management: MediaMind and VideoFusion.

 



 

With New York as a center of operations, DG is a global company that connects over 14,000 advertisers and 7,400 agencies worldwide with their targeted audiences through an expansive network of over 50,000 media destinations across TV broadcast and digital advertising in about 78 countries, managing approximately ten percent of the world’s media assets. For more information, visit http://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 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;

·                  adaptation to new, changing, and competitive technologies;

·                  potential additional impairment of our goodwill and potential impairment of our 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.

 

(Financial Tables Follow)

 



 

Digital Generation, Inc.

Unaudited Consolidated Statements of Operations

(In thousands, except per share amounts)

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

Revenues

 

$

96,316

 

$

96,336

 

$

188,293

 

$

189,185

 

Cost of revenues

 

33,650

 

34,839

 

66,631

 

67,336

 

Research and development

 

5,122

 

5,713

 

10,030

 

11,845

 

Sales and marketing

 

17,464

 

14,704

 

34,715

 

28,135

 

General and administrative

 

9,020

 

10,658

 

17,443

 

21,882

 

Operating expenses, excluding depreciation and amortization, share-based compensation and acquisition, integration and other expenses

 

65,256

 

65,914

 

128,819

 

129,198

 

Adjusted EBITDA

 

31,060

 

30,422

 

59,474

 

59,987

 

Depreciation and amortization

 

13,731

 

13,632

 

28,735

 

26,861

 

Share-based compensation

 

3,207

 

4,906

 

6,425

 

9,377

 

Acquisition, integration and other expenses

 

1,025

 

2,707

 

3,687

 

4,177

 

Operating income

 

13,097

 

9,177

 

20,627

 

19,572

 

Other (income) expense, net

 

97

 

364

 

(77

)

354

 

Interest expense

 

8,435

 

7,838

 

17,396

 

15,931

 

Interest expense and other, net

 

8,532

 

8,202

 

17,319

 

16,285

 

Income before income taxes from continuing operations

 

4,565

 

975

 

3,308

 

3,287

 

Provision for income taxes

 

1,967

 

457

 

1,838

 

1,490

 

Income from continuing operations

 

2,598

 

518

 

1,470

 

1,797

 

Loss from discontinued operations, net of tax

 

 

(789

)

 

(1,080

)

Net income (loss)

 

$

2,598

 

$

(271

)

1,470

 

717

 

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per share:

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.09

 

$

0.02

 

$

0.05

 

$

0.07

 

Discontinued operations

 

 

(0.03

)

 

(0.04

)

Total

 

$

0.09

 

$

(0.01

)

$

0.05

 

$

0.03

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per share:

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.09

 

$

0.02

 

$

0.05

 

$

0.07

 

Discontinued operations

 

 

(0.03

)

 

(0.04

)

Total

 

$

0.09

 

$

(0.01

)

$

0.05

 

$

0.03

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

27,753

 

27,458

 

27,711

 

27,334

 

Diluted

 

27,985

 

27,458

 

27,984

 

27,452

 

 


 


 

Digital Generation, Inc.

Unaudited Segment Information

(In thousands)

 

 

 

Three Months Ended June 30, 2013

 

Three Months Ended June 30, 2012

 

 

 

Television

 

Online

 

Consolidated

 

Television

 

Online

 

Consolidated

 

Revenues

 

$

55,049

 

$

41,267

 

$

96,316

 

$

61,601

 

$

34,735

 

$

96,336

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment Adjusted EBITDA before corporate overhead

 

28,088

 

9,828

 

37,916

 

31,261

 

5,850

 

37,111

 

Less corporate overhead

 

 

 

 

 

(6,856

)

 

 

 

 

(6,689

)

Adjusted EBITDA

 

 

 

 

 

31,060

 

 

 

 

 

30,422

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

 

 

 

(13,731

)

 

 

 

 

(13,632

)

Share-based compensation

 

 

 

 

 

(3,207

)

 

 

 

 

(4,906

)

Acquisition, integration and other

 

 

 

 

 

(1,025

)

 

 

 

 

(2,707

)

Income from operations

 

 

 

 

 

$

13,097

 

 

 

 

 

$

9,177

 

 

 

 

Six Months Ended June 30, 2013

 

Six Months Ended June 30, 2012

 

 

 

Television

 

Online

 

Consolidated

 

Television

 

Online

 

Consolidated

 

Revenues

 

$

112,957

 

$

75,336

 

$

188,293

 

$

123,432

 

$

65,753

 

$

189,185

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment Adjusted EBITDA before corporate overhead

 

58,021

 

14,111

 

72,132

 

65,453

 

7,186

 

72,639

 

Less corporate overhead

 

 

 

 

 

(12,658

)

 

 

 

 

(12,652

)

Adjusted EBITDA

 

 

 

 

 

59,474

 

 

 

 

 

59,987

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

 

 

 

(28,735

)

 

 

 

 

(26,861

)

Share-based compensation

 

 

 

 

 

(6,425

)

 

 

 

 

(9,377

)

Acquisition, integration and other

 

 

 

 

 

(3,687

)

 

 

 

 

(4,177

)

Income from operations

 

 

 

 

 

$

20,627

 

 

 

 

 

$

19,572

 

 



 

Digital Generation, Inc.

Unaudited Consolidated Statements of Cash Flows

(In thousands)

 

 

 

Six Months Ended
June 30,

 

 

 

2013

 

2012

 

Cash flows from operating activities:

 

 

 

 

 

Net income

 

$

1,470

 

$

717

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation of property and equipment

 

13,724

 

12,156

 

Amortization of intangibles

 

15,011

 

14,705

 

Deferred income taxes

 

2,279

 

(2,806

)

Provision for accounts receivable losses

 

1,187

 

1,503

 

Share-based compensation

 

6,425

 

9,377

 

Loss on sale of Springbox unit

 

 

1,000

 

Other

 

746

 

423

 

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable

 

7,849

 

6,243

 

Other assets

 

3,967

 

2,995

 

Accounts payable and other liabilities

 

(2,230

)

(15,435

)

Deferred revenue

 

251

 

(579

)

Net cash provided by operating activities

 

50,679

 

30,299

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of property and equipment

 

(5,697

)

(13,815

)

Capitalized costs of developing software

 

(7,526

)

(6,274

)

Acquisitions, net of cash acquired

 

 

(8,594

)

Long-term investment

 

 

(1,017

)

Proceeds from sale of short-term investments

 

314

 

10,390

 

Other

 

1,117

 

1,037

 

Net cash used in investing activities

 

(11,792

)

(18,273

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Proceeds from issuance of common stock, net of costs

 

585

 

127

 

Payment of debt amendment costs

 

(2,635

)

 

Repayments of capital leases and other

 

(3,778

)

(266

)

Repayments of long-term debt

 

(59,800

)

(27,450

)

Net cash used in financing activities

 

(65,628

)

(27,589

)

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

(1,778

)

16

 

Net decrease in cash and cash equivalents

 

(28,519

)

(15,547

)

Cash and cash equivalents at beginning of year

 

84,520

 

72,575

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$

56,001

 

$

57,028

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

Cash paid for interest

 

$

14,231

 

$

14,195

 

Cash (received) paid for income taxes

 

$

(143

)

$

(1,112

)

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,

 

 

 

2013

 

2012

 

 

 

(unaudited)

 

 

 

Cash and short-term investments

 

$

56,001

 

$

84,834

 

Accounts receivable, net

 

88,229

 

97,583

 

Property and equipment, net

 

64,894

 

66,169

 

Goodwill

 

368,148

 

369,137

 

Intangibles, net

 

164,525

 

180,156

 

Other

 

37,635

 

39,332

 

Total assets

 

$

779,432

 

$

837,211

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

37,864

 

$

46,085

 

Deferred revenue

 

1,864

 

1,627

 

Deferred income taxes

 

30,445

 

28,065

 

Debt

 

394,743

 

453,918

 

Other

 

18,565

 

16,322

 

Total liabilities

 

483,481

 

546,017

 

Total stockholders’ equity

 

295,951

 

291,194

 

Total liabilities and stockholders’ equity

 

$

779,432

 

$

837,211