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Exhibit 99.1

Demand Media Reports Third Quarter 2015 Results

·

Demand Media Properties Reach Nearly 49 Million Unique Monthly Visitors in the US

·

Q3 Marketplaces Revenue Grows 63% Year-over-Year

·

Total Q3 Revenue of $28.5 Million

SANTA MONICA, CA – November 5, 2015 - Demand Media, Inc. (NYSE: DMD), a diversified Internet company comprised of several media and marketplace properties, today reported financial results for the third quarter ended September 30, 2015.

I am excited by the rapid growth of our marketplaces business during Q3, said Sean Moriarty, CEO of Demand Media. “As we move into 2016, our top priorities will be creating high-quality and authoritative content across all of our media properties, stabilizing the eHow business and maintaining accelerating growth in our marketplaces business.” 

 

 

 

Financial Summary

 

(In millions, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

September 30, 

 

    

2015

    

2014

Content & Media revenue

 

$

15.9

 

$

33.6

Marketplaces revenue

 

 

12.6

 

 

7.7

Total revenue

 

$

28.5

 

$

41.3

 

 

 

 

 

 

 

Adjusted EBITDA(1)

 

$

(3.6)

 

$

8.1

Net loss

 

$

(13.8)

 

$

(223.8)

Adjusted net loss(1)

 

$

(5.4)

 

$

(0.4)

 

 

 

 

 

 

 

EPS(2)

 

$

(0.69)

 

$

(11.69)

Adjusted EPS(1)(2)

 

$

(0.27)

 

$

(0.02)

 

 

 

 

 

 

 

Free cash flow(1)

 

$

(3.1)

 

$

6.5

 

 

 

 

 

 

 

 

(1)

These non-GAAP financial measures are described below and reconciled to their comparable GAAP measures in the accompanying tables.

(2)

Demand Media common stock share information and related per share amounts included in this earnings release and the accompanying tables have been adjusted retroactively for the 2014 periods to reflect the one-for-five reverse stock split of Demand Media common stock that was effected on August 1, 2014.

Q3 2015 Financial Summary:

Demand Media is comprised of two service offerings: Content & Media and Marketplaces.

We continue to make strides in improving our operational efficiency and strengthening our foundation,” said Rachel Glaser, Demand Media’s CFO. “In the third quarter, we completed several initiatives designed to improve the long-term profitability of our business, including realigning personnel and reducing headcount, consolidating offices, divesting non-core media properties and implementing enterprise wide platform upgrades.”

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For the third quarter of 2015:

·

Total revenue declined 31% year-over-year due to a 53% decline in Content & Media revenue partially offset by a 63% increase in Marketplaces revenue.

·

Content & Media revenue declined 53% year-over-year driven primarily by traffic declines to eHow and lower ad monetization yields.

·

Marketplaces revenue grew 63% year-over-year, driven primarily by new product introductions, increased conversion rates and traffic growth on Society6, as well as increased average revenue per transaction resulting from a shift towards higher priced items on Society6 and the acquisition of Saatchi Art in August 2014.

·

Adjusted EBITDA was $(3.6) million for the quarter, primarily reflecting the decline in higher margin advertising revenue in Content & Media, partially offset by growth in Marketplaces and managed reductions in operating expenses.

·

Cash and cash equivalents was $37.9 million at period end with no debt outstanding. 

Business Highlights:

·

On a consolidated basis, Demand Media ranked as the #64 US digital media property across desktop and mobile platforms in September 2015. Demand Media’s properties reached nearly 49 million unique visitors in the US, including nearly 28 million mobile visitors (source: September 2015 US comScore).

Content & Media:

·

Demand Media acquired LEAFtv, a modern lifestyle resource for women featuring high-quality, short form how-to videos in the categories of stylish  living, food and fashion. 

·

eHow has shifted its model to creating inspirational, high-quality DIY content through partnerships with top influencers and experts. During the third quarter, eHow introduced a single page mobile layout to help improve the user experience and initiated traffic exchange partnerships. eHow reached over 24 million unique visitors in the US in September 2015 across desktop and mobile platforms (source: September 2015 US comScore).

·

Livestrong.com launched its first seven Condition Centers in the third quarter. The Condition Centers are comprehensive article guides written by leading medical experts that are focused on highly searched medical conditions. Livestrong/eHow Health had nearly 24 million unique visitors in the US in September 2015 across desktop and mobile platforms (source: September 2015 US comScore).

·

Cracked Video continues to gain momentum with over 16 million views across YouTube and Facebook in September, including a record number of views on YouTube. The Cracked YouTube channel saw significant subscriber growth, with a 54% increase year-over-year. The CollegeHumor/Cracked Network ranked as the #1 Humor property in the US in September 2015, with more than 15 million unique visitors across desktop and mobile platforms (source: September 2015 US comScore). 

·

studioD, which provides integrated content marketing solutions for brands, agencies and publishers, launched its first influencer program with a major Consumer Packaged Goods

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(CPG) brand during the third quarter, and continued to expand its talent network and customer list with the addition of major brands, such as Kellogg’s.  

Marketplaces:

·

Society6 released two new products in the third quarter — laptop sleeves, which launched in time for Back to School shopping, and iPhone 6s cases, which were available for pre-sale on the day of the Apple announcement on September 9th. Society6 now has 25 products available for customization on the site, as well as a growing supply of artwork with over 2.5 million unique designs, up 53% year-over-year.

·

Saatchi Art focused on expanding its visibility by designing and producing its first catalog, which shipped to approximately 100,000 households in early October. Repeat buyers on Saatchi Art increased 25% year-over-year in the third quarter, demonstrating consumer satisfaction with the products and services delivered by Saatchi Art.  

Operating Metrics:

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

 

 

 

September 30, 

 

 

 

 

 

2015

 

2014

 

% Change

 

Content & Media Metrics:

 

 

 

    

 

 

    

 

    

Visits(1) (in thousands)

 

 

780,990

 

 

1,051,912

 

(26)

%

Revenue per Visit (RPV)(2)

 

$

20.33

 

$

31.91

 

(36)

%

 

 

 

 

 

 

 

 

 

 

Marketplaces Metrics:

 

 

 

 

 

 

 

 

 

Number of Transactions(3)

 

 

203,768

 

 

143,024

 

42

%

Average Revenue per Transaction(4)

 

$

61.95

 

$

54.18

 

14

%

 

(1)

Visits are defined as the total number of times users access the company’s content across (a) one of its owned and operated online properties and/or (b) one of its customers’ online properties, to the extent that the visited customer web pages are hosted by the company’s content services. In each case, breaks of access of at least 30 minutes constitute a unique visit.

(2)

RPV is defined as Content & Media revenue per one thousand visits.

(3)

Number of transactions is defined as the total number of successfully completed Marketplaces transactions during the applicable period.

(4)

Average revenue per transaction is calculated by dividing Marketplaces revenue for a period by the number of transactions in that period.  

Conference Call and Webcast Information

Demand Media will host a corresponding conference call and live webcast today at 4:30 p.m. Eastern time (1:30 p.m. Pacific time). To access the conference call, dial 888-510-1785 (US/CAN) or 719-325-2308 (International) and reference conference ID 1680340. To participate on the live call, analysts should dial-in at least 10 minutes prior to the commencement of the call. A live webcast also will be available on the Investor Relations section of Demand Media’s corporate website at http://ir.demandmedia.com and via replay beginning approximately two hours after the completion of the call. 

Use of Non-GAAP Financial Measures

To supplement its consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles in the United States of America (“GAAP”), Demand Media uses certain non-GAAP financial measures, as described below. These non-GAAP financial measures are presented to enhance the user’s overall understanding of Demand Media’s

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financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. The non-GAAP financial measures presented in this release are the primary measures used by the company’s management and board of directors to understand and evaluate the company’s financial performance and operating trends, including period-to-period comparisons, because they exclude certain expenses that management believes are not indicative of the company’s core operating results. Management also uses these measures to prepare and update the company’s short and long term financial and operational plans, including evaluating investment decisions, and in its discussions with investors, commercial bankers, securities analysts and other users of the company’s financial statements.

 

The use of non-GAAP financial measures has certain limitations because they do not reflect all items of income and expense, or cash flows, that affect the company’s operations. An additional limitation of non-GAAP financial measures is that they do not have standardized meanings, and therefore other companies, including peer companies, may use the same or similarly named measures but exclude different items or use different computations. Management compensates for these limitations by reconciling these non-GAAP financial measures to their most comparable GAAP financial measures in the tables captioned “Reconciliations of Non-GAAP Financial Measures” included at the end of this release. Investors and others are encouraged to review the company’s financial information in its entirety and not rely on a single financial measure.

 

The company defines Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) as net income (loss) less income (loss) from discontinued operations, net of taxes, excluding net interest expense, income tax expense (benefit), and certain other non-cash or non-recurring items impacting net income (loss) from time to time, principally comprised of depreciation and amortization and stock-based compensation. Management believes that the exclusion of certain expenses in calculating Adjusted EBITDA provides a useful measure for period-to-period comparisons of the company’s underlying recurring revenue and operating costs that is focused more closely on the current costs necessary to utilize previously acquired long-lived assets and reflects the company’s ongoing business in a manner that allows for meaningful analysis of trends. Management also believes that excluding certain non-cash charges can be useful because the amount of such expenses is the result of long-term investment decisions in previous periods rather than day-to-day operating decisions.

 

The company defines Adjusted Net Income (Loss) as net income (loss) less income (loss) from discontinued operations, net of taxes, before the effect of certain non-cash items and other items not directly related to the operation of the company’s ongoing business, principally comprised of stock-based compensation, amortization of intangible assets, acquisition and realignment costs and gains or losses on asset dispositions. Adjusted Net Income (Loss) is calculated using the application of a normalized effective tax rate. The company defines Adjusted Earnings Per Share (Adjusted EPS) as Adjusted Net Income (Loss) divided by the weighted average number of shares outstanding. Management believes that Adjusted Net Income (Loss) and Adjusted EPS provide investors with additional useful information to measure the company’s financial performance, particularly from period to period, because they exclude certain non-cash and other expenses that are not directly related to the operation of the company’s ongoing business.

 

The company defines Free Cash Flow as net cash provided by (used in) operating activities net of cash outflows from acquisition and realignment activities, capital expenditures to acquire property and equipment and purchases of intangible assets. Management believes that Free Cash Flow provides investors with useful information to measure operating liquidity because it reflects the company’s underlying cash flows from recurring operating activities after investing in capital assets and intangible assets. Free Cash Flow is used by management, and may also be useful for investors, to assess the company’s ability to generate cash flow for a variety of strategic

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opportunities, including reinvesting in the business, pursuing new business opportunities and potential acquisitions, paying dividends and repurchasing shares.

About Demand Media

 

Demand Media, Inc. (NYSE: DMD) is a diversified Internet company that builds platforms across its media (eHow, LIVESTRONG.com, Cracked and LEAFtv) and marketplace (Society6 and Saatchi Art) properties to enable communities of creators to reach passionate audiences in large and growing lifestyle categories. In addition, Demand Media’s branded content creation (studioD) and programmatic advertising (Demand360) offerings help advertisers find innovative ways to engage with their customers. For more information about Demand Media, visit www.demandmedia.com.

Cautionary Information Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. These forward-looking statements involve risks and uncertainties regarding the company’s future financial performance, and are based on current expectations, estimates and projections about the company’s industry, financial condition, operating performance and results of operations, including certain assumptions related thereto. Statements containing words such as guidance, may, believe, anticipate, expect, intend, plan, project, projections, business outlook, and estimate or similar expressions constitute forward-looking statements. Actual results may differ materially from the results predicted, and reported results should not be considered an indication of future performance. Potential risks and uncertainties that could affect the company’s operating and financial results are described in Demand Media’s annual report on Form 10-K for the fiscal year ending December 31, 2014 filed with the Securities and Exchange Commission (http://www.sec.gov) on March 16, 2015, as such risks and uncertainties are updated in Demand Media’s annual and quarterly reports on Form 10-K and Form 10-Q filed with the Securities and Exchange Commission, including, without limitation, information under the captions Risk Factors and Management's Discussion and Analysis of Financial Condition and Results of Operations. These risks and uncertainties include, among others: changes in the methodologies of internet search engines, including ongoing algorithmic changes made by Google, Bing and Yahoo!, as well as possible future changes, and the impact such changes may have on visits and driving search related traffic to the company’s owned & operated online properties and its customers’ online properties; the effects of shifting consumption of media content from desktop to mobile; the company’s dependence on material agreements with a specific business partner for a significant portion of its revenue; the fact that the company generates the majority of its revenue from advertising and the potential impact of a reduction in online advertising spending, a loss of advertisers, increased availability of ad blocking software, particularly on mobile devices, and/or lower advertising yields; the impact on revenue and expenses of changes being made to the company’s Content & Media properties that are intended to improve user experience and engagement; the company’s ability to successfully grow new lines of business such as online marketplaces and branded content creation; the impact of Demand Media’s separation into two smaller, less diversified public companies; the expectation that the separation transaction is tax-free; changes in amortization or depreciation expense due to a variety of factors; potential write downs, reserves against or impairment of assets including receivables, goodwill, intangibles (including media content) or other assets; and the company’s ability to retain key personnel. From time to time, the company may consider acquisitions or divestitures that, if consummated, could be material. Any forward-looking statements regarding financial metrics are based upon the assumption that no such acquisition or divestiture is consummated during the relevant periods. If an acquisition or divestiture were consummated, actual results could differ materially from any forward-looking statements. The company does not intend to revise or update the information set forth in this press release, except as required by law, and may not provide this type of information in the future.

 

# # #

(Tables Follow)

 

[

 

Investor and Media Contact:

 

Jeff Misthal 

SVP, Finance and Investor Relations

 

(310) 394-6400

 

IR@demandmedia.com 

 

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Demand Media, Inc. and Subsidiaries 

Unaudited Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended  September 30, 

 

Nine months ended September 30, 

 

2015

    

2014

    

2015

    

2014

Revenue:

 

 

 

 

 

 

 

 

 

 

 

Service revenue

$

16,755

 

$

33,712

 

$

60,047

 

$

108,373

Product revenue

 

11,750

 

 

7,603

 

 

31,436

 

 

21,075

Total revenue

 

28,505

 

 

41,315

 

 

91,483

 

 

129,448

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Service costs (exclusive of amortization of intangible assets shown separately below)(1)(2)

 

9,566

 

 

11,256

 

 

29,103

 

 

33,198

Product costs

 

7,638

 

 

5,506

 

 

21,240

 

 

15,507

Sales and marketing(1)(2)

 

5,424

 

 

4,699

 

 

14,797

 

 

15,422

Product development(1)(2)

 

6,520

 

 

7,050

 

 

18,923

 

 

21,221

General and administrative(1)(2)

 

9,883

 

 

12,464

 

 

30,200

 

 

36,868

Goodwill impairment charge

 

 —

 

 

232,270

 

 

 —

 

 

232,270

Amortization of intangible assets

 

3,441

 

 

7,388

 

 

15,377

 

 

25,203

Total operating expenses

 

42,472

 

 

280,633

 

 

129,640

 

 

379,689

Loss from operations

 

(13,967)

 

 

(239,318)

 

 

(38,157)

 

 

(250,241)

Interest income (expense), net

 

(3)

 

 

(627)

 

 

216

 

 

(2,331)

Other income, net

 

178

 

 

782

 

 

3,024

 

 

736

Loss from continuing operations before income taxes

 

(13,792)

 

 

(239,163)

 

 

(34,917)

 

 

(251,836)

Income tax (expense) benefit

 

(13)

 

 

16,631

 

 

(45)

 

 

13,917

Net loss from continuing operations

 

(13,805)

 

 

(222,532)

 

 

(34,962)

 

 

(237,919)

Net loss from discontinued operations(1)(2)

 

 —

 

 

(1,306)

 

 

 —

 

 

(11,208)

Net loss

$

(13,805)

 

$

(223,838)

 

$

(34,962)

 

$

(249,127)

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (Loss) per share - basic and diluted

 

 

 

 

 

 

 

 

 

 

 

Net loss from continuing operations

$

(0.69)

 

$

(11.62)

 

$

(1.76)

 

$

(12.90)

Net loss from discontinued operations

 

 —

 

 

(0.07)

 

 

 —

 

 

(0.60)

Net loss per share

$

(0.69)

 

$

(11.69)

 

$

(1.76)

 

$

(13.50)

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares - basic and diluted(3)

 

20,021

 

 

19,151

 

 

19,879

 

 

18,450

__________________

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Depreciation expense included in the above line items:

 

 

 

 

 

 

 

 

 

 

 

Service costs

$

2,041

 

$

1,559

 

$

4,663

 

$

5,123

Sales and marketing

 

15

 

 

37

 

 

52

 

 

115

Product development

 

47

 

 

135

 

 

154

 

 

382

General and administrative

 

1,611

 

 

1,112

 

 

4,118

 

 

3,628

Discontinued operations

 

 —

 

 

559

 

 

 —

 

 

4,662

Total depreciation

$

3,714

 

$

3,402

 

$

8,987

 

$

13,910

 

 

 

 

 

 

 

 

 

 

 

 

(2) Stock-based compensation included in the above line items:

 

 

 

 

 

 

 

 

 

 

 

Service costs

$

182

 

$

451

 

$

806

 

$

1,147

Sales and marketing

 

122

 

 

178

 

 

432

 

 

511

Product development

 

350

 

 

832

 

 

1,277

 

 

2,367

General and administrative

 

905

 

 

2,921

 

 

3,168

 

 

8,390

Discontinued operations

 

 —

 

 

351

 

 

 —

 

 

2,949

Total stock-based compensation

$

1,559

 

$

4,733

 

$

5,683

 

$

15,364

 

(3)Demand Media common stock share information and related per share amounts included in this earnings release and the accompanying tables have been adjusted retroactively for the 2014 periods to reflect the one-for-five reverse stock split of Demand Media common stock that was effected on August 1, 2014.

6


 

Demand Media, Inc. and Subsidiaries 

Unaudited Condensed Consolidated Balance Sheets

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

    

September 30, 

    

December 31, 

 

 

 

2015

 

2014

 

Assets

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

37,942

 

$

47,820

 

Accounts receivable, net

 

 

9,618

 

 

14,504

 

Prepaid expenses and other current assets

 

 

4,954

 

 

7,447

 

Total current assets

 

 

52,514

 

 

69,771

 

Property and equipment, net

 

 

15,516

 

 

22,836

 

Intangible assets, net

 

 

24,935

 

 

40,535

 

Goodwill

 

 

10,358

 

 

10,358

 

Other assets

 

 

1,205

 

 

6,055

 

Total assets

 

$

104,528

 

$

149,555

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Accounts payable

 

$

1,149

 

$

4,762

 

Accrued expenses and other current liabilities

 

 

12,765

 

 

24,225

 

Deferred revenue

 

 

2,978

 

 

3,569

 

Total current liabilities

 

 

16,892

 

 

32,556

 

Deferred tax liability

 

 

316

 

 

334

 

Other liabilities

 

 

1,704

 

 

1,823

 

Commitments and contingencies

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

Common stock

 

 

2

 

 

2

 

Additional paid-in capital

 

 

503,543

 

 

497,809

 

Accumulated other comprehensive loss

 

 

(74)

 

 

(76)

 

Treasury stock

 

 

(30,767)

 

 

(30,767)

 

Accumulated deficit

 

 

(387,088)

 

 

(352,126)

 

Total stockholders’ equity

 

 

85,616

 

 

114,842

 

Total liabilities and stockholders’ equity

 

$

104,528

 

$

149,555

 

 

7


 

Demand Media, Inc. and Subsidiaries 

Unaudited Condensed Consolidated Statements of Cash Flows

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended  September 30, 

 

Nine months ended September 30, 

 

 

    

2015

    

2014

    

2015

    

2014

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(13,805)

 

$

(223,838)

 

$

(34,962)

 

$

(249,127)

 

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

7,155

 

 

11,434

 

 

24,364

 

 

43,356

 

Deferred income taxes

 

 

 —

 

 

(18,226)

 

 

 —

 

 

(13,625)

 

Stock-based compensation

 

 

1,559

 

 

4,733

 

 

5,683

 

 

15,364

 

Goodwill impairment charge

 

 

 —

 

 

232,270

 

 

 —

 

 

232,270

 

Loss (Gain) on disposals

 

 

(197)

 

 

(795)

 

 

(3,105)

 

 

(795)

 

Loss (Gain) on other assets, net

 

 

 —

 

 

2

 

 

 —

 

 

(5,745)

 

Other

 

 

(275)

 

 

(191)

 

 

(76)

 

 

(1,638)

 

Change in operating assets and liabilities, net of effect of acquisition

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

352

 

 

2,511

 

 

4,712

 

 

7,402

 

Prepaid expenses and other current assets

 

 

944

 

 

(857)

 

 

550

 

 

(1,650)

 

Deferred registration costs

 

 

 —

 

 

81

 

 

 —

 

 

(8,876)

 

Deposits with registries

 

 

 —

 

 

(553)

 

 

 —

 

 

(259)

 

Other long-term assets

 

 

(8)

 

 

117

 

 

(140)

 

 

(557)

 

Accounts payable

 

 

286

 

 

(2,266)

 

 

(3,572)

 

 

(5,153)

 

Accrued expenses and other liabilities

 

 

536

 

 

(345)

 

 

(3,367)

 

 

(472)

 

Deferred revenue

 

 

313

 

 

572

 

 

164

 

 

12,296

 

Net cash (used in) provided by operating activities

 

 

(3,140)

 

 

4,649

 

 

(9,749)

 

 

22,791

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(1,004)

 

 

(1,687)

 

 

(3,590)

 

 

(7,597)

 

Purchases of intangible assets

 

 

(8)

 

 

(1,092)

 

 

(64)

 

 

(5,406)

 

Payments for gTLD applications

 

 

 —

 

 

(4,369)

 

 

 —

 

 

(15,829)

 

Proceeds from gTLD withdrawals, net

 

 

 —

 

 

 —

 

 

 —

 

 

6,105

 

Cash received from disposal of businesses and properties, net of cash disposed

 

 

935

 

 

13,696

 

 

4,766

 

 

13,696

 

Cash received from early repayment of promissory note

 

 

5,100

 

 

 —

 

 

5,100

 

 

 —

 

Cash received from disposition holdback

 

 

998

 

 

 —

 

 

998

 

 

 —

 

Cash paid for acquisitions, net of cash acquired

 

 

(58)

 

 

(2,240)

 

 

(58)

 

 

(2,240)

 

Restricted deposits

 

 

671

 

 

(1,700)

 

 

671

 

 

(1,700)

 

Other

 

 

(129)

 

 

(295)

 

 

76

 

 

996

 

Net cash (used in) provided by investing activities

 

 

6,505

 

 

2,313

 

 

7,899

 

 

(11,975)

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt repayments, net

 

 

 —

 

 

 —

 

 

 —

 

 

(22,500)

 

Proceeds from exercises of stock options and contributions to ESPP

 

 

(33)

 

 

91

 

 

215

 

 

343

 

Net taxes paid on RSUs and options exercised

 

 

(123)

 

 

(590)

 

 

(563)

 

 

(2,236)

 

Cash paid for acquisition holdback

 

 

(7,561)

 

 

(400)

 

 

(7,561)

 

 

(1,942)

 

Cash distribution related to spin-off

 

 

 —

 

 

(24,145)

 

 

 —

 

 

(24,145)

 

Other

 

 

(9)

 

 

(233)

 

 

(121)

 

 

(529)

 

Net cash used in financing activities

 

 

(7,726)

 

 

(25,277)

 

 

(8,030)

 

 

(51,009)

 

Effect of foreign currency on cash and cash equivalents

 

 

11

 

 

(42)

 

 

2

 

 

(87)

 

Change in cash and cash equivalents

 

 

(4,350)

 

 

(18,357)

 

 

(9,878)

 

 

(40,280)

 

Cash and cash equivalents, beginning of period

 

 

42,292

 

 

131,588

 

 

47,820

 

 

153,511

 

Cash and cash equivalents, end of period

 

$

37,942

 

$

113,231

 

$

37,942

 

$

113,231

 

 

8


 

Demand Media, Inc. and Subsidiaries 

Reconciliations of Non-GAAP Financial Measures

(In thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended  September 30, 

 

Nine months ended September 30, 

 

 

    

2015

    

2014

    

2015

    

2014

 

Adjusted EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(13,805)

 

$

(223,838)

 

$

(34,962)

 

$

(249,127)

 

Less: Loss from discontinued operations, net of taxes

 

 

 —

 

 

1,306

 

 

 —

 

 

11,208

 

Net loss from continuing operations

 

 

(13,805)

 

 

(222,532)

 

 

(34,962)

 

 

(237,919)

 

Add (deduct):

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense (benefit)

 

 

13

 

 

(16,631)

 

 

45

 

 

(13,917)

 

Interest and other (income) expense, net

 

 

(175)

 

 

(155)

 

 

(3,240)

 

 

1,595

 

Depreciation and amortization(1)

 

 

7,155

 

 

10,230

 

 

24,364

 

 

34,450

 

Stock-based compensation(2)

 

 

1,559

 

 

4,382

 

 

5,683

 

 

12,415

 

Goodwill impairment charge

 

 

 —

 

 

232,270

 

 

 —

 

 

232,270

 

Acquisition and realignment costs(3)

 

 

1,606

 

 

570

 

 

2,162

 

 

1,891

 

Adjusted EBITDA

 

$

(3,647)

 

$

8,134

 

$

(5,948)

 

$

30,785

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Free Cash Flow:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash (used in) provided by operating activities(4)

 

$

(3,140)

 

$

4,649

 

$

(9,749)

 

$

22,791

 

Purchases of property and equipment

 

 

(1,004)

 

 

(1,687)

 

 

(3,590)

 

 

(7,597)

 

Purchases of intangible assets

 

 

(8)

 

 

(1,092)

 

 

(64)

 

 

(5,406)

 

Acquisition and realignment cash flows(3)

 

 

1,011

 

 

4,618

 

 

2,618

 

 

8,501

 

Free Cash Flow

 

$

(3,141)

 

$

6,488

 

$

(10,785)

 

$

18,289

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Net Income (Loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(13,805)

 

$

(223,838)

 

$

(34,962)

 

$

(249,127)

 

Less: Loss from discontinued operations, net of taxes

 

 

 —

 

 

1,306

 

 

 —

 

 

11,208

 

Net loss from continuing operations

 

 

(13,805)

 

 

(222,532)

 

 

(34,962)

 

 

(237,919)

 

(a) Stock-based compensation(2)

 

 

1,559

 

 

4,382

 

 

5,683

 

 

12,415

 

(b) Amortization of acquisition related intangibles

 

 

1,516

 

 

2,097

 

 

4,917

 

 

8,915

 

(c) Accelerated depreciation related to restructuring

 

 

 —

 

 

 —

 

 

 —

 

 

147

 

(d) Content intangible assets removed from service(5)

 

 

 —

 

 

 —

 

 

3,092

 

 

 —

 

(e) Acquisition and realignment costs(3)

 

 

1,606

 

 

570

 

 

2,162

 

 

1,891

 

(f) Depreciation related to internally developed software(6)

 

 

624

 

 

 —

 

 

624

 

 

 —

 

(g) Gain on disposals(7)

 

 

(202)

 

 

(795)

 

 

(3,110)

 

 

(795)

 

(h) Goodwill impairment

 

 

 —

 

 

232,270

 

 

 —

 

 

232,270

 

Income tax effect of items (a) - (h) & application of 38% statutory income tax rate to pretax income

 

 

3,315

 

 

(16,388)

 

 

8,233

 

 

(15,060)

 

Adjusted Net Income (Loss)

 

$

(5,387)

 

$

(396)

 

$

(13,361)

 

$

1,864

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EPS

 

$

(0.27)

 

$

(0.02)

 

$

(0.67)

 

$

0.10

 

Shares used to calculate adjusted EPS(8)

 

 

20,021

 

 

19,151

 

 

19,879

 

 

18,867

 

 

(1) Represents depreciation expense of the company’s long-lived tangible assets and amortization expense of its finite-lived intangible assets, including amortization expense related to its investment in media content assets as included in the company’s GAAP results of operations.

(2) Represents the fair value of stock-based awards granted to employees, as included in the company’s GAAP results of operations.

(3) Represents such items, when applicable, as (a) legal, accounting and other professional fees directly attributable to acquisition or corporate realignment activities, (b) employee severance and other payments attributable to acquisition or corporate realignment activities, and (c) expenditures related to the separation of Demand Media into two distinct publicly traded companies.

(4) Net cash (used in) provided by operating activities for periods presented in 2014 includes cash flow related to discontinued operations as presented in the company’s periodic filings with the SEC.

(5Represents accelerated amortization expense resulting from the company’s decision to remove certain content assets from service.

(6Represents depreciation from the company’s evaluation of internally developed software as part of realignment activities and one-time write offs.

(7Represents the gain on sale from the disposition of certain online properties.

(8Demand Media common stock share information and related per share amounts included in this earnings release and the accompanying tables have been adjusted retroactively for the 2014 periods to reflect the one-for-five reverse stock split of Demand Media common stock that was effected on August 1, 2014. Shares used to calculate adjusted EPS are basic for the three months ended September 30, 2015 and 2014 and nine months ended September 30, 2015, and diluted for the nine months ended September 30, 2014.

9