DG Reports Third Quarter 2012 Results
Third Quarter Revenue Increases 11% to $93.8 Million
Nov 08, 2012 (Marketwire via COMTEX) --DG® (NASDAQ: DGIT), the world's leading ad management and distribution platform, today reported financial results for the third quarter of 2012. Consolidated revenue for the three months ended September 30, 2012 increased 11% to $93.8 million, compared to $84.6 million in the same period of 2011. DG's third quarter loss from continuing operations, which includes a goodwill impairment charge related to the online segment of $208.2 million, was $219.7 million, or $7.96 per diluted share, compared to a loss of $2.7 million, or $0.10 per diluted share, in the year earlier period. Third quarter Adjusted EBITDA was $27.6 million, compared to $30.7 million in the third quarter of 2011. "In the short term, we saw improvement of the online business this quarter, continued increased shift towards HD in TV and greater opportunities to help our clients make the move to video across all screens," noted Neil Nguyen, President and CEO of Digital Generation. "It is clear from conversations with large advertisers that video convergence is a disruptive force that is now gaining acceptance and momentum with DG uniquely positioned to benefit. But it is also clear that we need to stay focused and execute with even more urgency to overcome current trends." In July 2012, we announced that our Board of Directors was undergoing a strategic review of the feasibility and relative merits of various financial strategies for the Company, which may include partnerships, strategic business model alternatives, a sale or other transaction. In connection therewith, we engaged Goldman Sachs to assist us in exploring strategic alternatives. The Board established a Special Committee composed of independent directors who are exercising the full power of the Board regarding, and are controlling, the Company's strategic alternatives process. The strategic review process underway by the Special Committee is continuing and we do not intend to disclose developments in this process until such time as the Board of Directors approves or has a transaction or transactions to recommend to stockholders, or otherwise deems further disclosure appropriate. Third quarter financial highlights include: Online Segment Goodwill Charge During the third quarter, the Company conducted a goodwill impairment test of our online reporting unit. We estimated the fair value of the online reporting unit using a weighting of fair values derived from an income approach and market approach. Upon estimating the fair value of the online unit's goodwill, we determined it was less than its carrying value. As a result, DG's third quarter operating results include a $208.2 million non-cash charge before income taxes related to the write-down of our online reporting unit's goodwill. Third Quarter 2012 Financial Results Webcast The Company's third quarter conference call will be broadcast live on the Internet at 5:00 p.m. ET on November 8, 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. 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; 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.
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