DG FastChannel(TM) Third Quarter Consolidated Revenues Increase 34% to $25.1 Million.- Third Quarter Net Income and Diluted Net Income Per Share Rise to Record Levels of $2.1 Million and $0.12, Respectively - - EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become Rises 71% to $7.8 Million - - 2008 Revenue and EBITDA Financial Targets Reaffirmed - DALLAS -- DG FastChannel[TM], Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : DGIT), a leading provider of digital media services to the advertising, entertainment and broadcast industries, today reported financial results for the third quarter ended September 30, 2007. Third Quarter Highlights * Consolidated revenue of $25.1 million compared to $18.8 million in the same period of 2006. The Company's consolidated revenue for the quarter ended September 30, 2007 includes approximately six weeks of results from Point.360's ads distribution operations and approximately one month of results from GTN GTN gestational trophoblastic neoplasia. , Inc.'s ads distribution business ("GTN"). * EBITDA (earnings before interest, taxes, depreciation and amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
* Net income of $2.1 million, or $0.12 per diluted share, compared with net loss of $4.5 million, or a loss of $0.35 per diluted share in the 2006 third quarter. In the 2006 third quarter DG FastChannel recorded a non-cash pre-tax charge of $5.1 million (with no corresponding tax benefit, or $0.40 per diluted share) to reduce carrying the value of its investment in Verance Corporation convertible preferred stock Convertible Preferred Stock Preferred stock that includes an option for the holder to convert the preferred shares into a fixed number of common shares, usually anytime after a predetermined date. Also known as "convertible preferred shares". . * Closed a new $85 million credit facility with BMO BMO Bank of Montreal (Canada) BMO Before Market Open BMO Biometrics Management Office BMO Ballistic Missile Office BMO British Mathematical Olympiad BMO Balkan Mathematical Olympiad BMO Business Management Office Capital Markets as administrative agent. The new facility, comprised of a five year, $40 million senior secured revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility and $45 million term loan, replaced DG FastChannel's prior $35 million credit facility. * Completed the sale of certain intellectual property assets for $2.5 million in July 2007 pursuant to its strategy to divest To deprive or take away. Divest is usually used in reference to the relinquishment of authority, power, property, or title. If, for example, an individual is disinherited, he or she is divested of the right to inherit money. non-core assets, resulting in an after tax gain of approximately $0.4 million (included in discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. ). * As of September 30, 2007, reflecting the completion of the acquisition of the ads distribution operations of Point.360 and GTN, DG FastChannel had $17.9 million in cash and $53.9 million of debt or net debt of approximately $36 million. Scott K. Ginsburg, Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of DG FastChannel commented on the results, "The third quarter was strategically and financially productive for DG FastChannel as we completed two significant transactions and generated record third quarter operating results. With increasing video traffic, continued client adoption of new service products and the benefit of significant merger cost synergies Cost Synergy In the context of mergers, cost synergy is the savings in operating costs expected after two companies, who compliment each other's strengths, join. Notes: The savings in operating costs usually come in the form of laying off employees. , we are well positioned to deliver solid growth from our business model in the fourth quarter and throughout 2008. "DG FastChannel's third quarter operating results demonstrate operating efficiencies and year-over-year margin improvements through the elimination of duplicative real estate, personnel, telco and other costs, while the Company's revenues are in line with earlier guidance. Year-over-year third quarter revenue rose 34% to $25.1 million, with a corresponding 71% increase in EBITDA to $7.8 million. EBITDA margins rose in the third quarter to 31% from 24% in the same period last year. "During the quarter the Company solidified so·lid·i·fy v. so·lid·i·fied, so·lid·i·fy·ing, so·lid·i·fies v.tr. 1. To make solid, compact, or hard. 2. To make strong or united. v.intr. its capital structure through an expanded $85 million credit facility. At the end of the third quarter, the company's net debt stood at $36 million. Continuing cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses , combined with an enhanced bank facility, provide significant flexibility to permit further long-term growth. "During the quarter we completed the acquisition of Point.360's ads distribution operations, and this transaction is proving to be an excellent strategic and financial complement to DG FastChannel's business. We have been active in integrating our extensive customer service network with Point.360's Los Angeles Los Angeles (lôs ăn`jələs, lŏs, ăn`jəlēz'), city (1990 pop. 3,485,398), seat of Los Angeles co., S Calif.; inc. 1850. , Chicago, San Francisco San Francisco (săn frănsĭs`kō), city (1990 pop. 723,959), coextensive with San Francisco co., W Calif., on the tip of a peninsula between the Pacific Ocean and San Francisco Bay, which are connected by the strait known as the Golden , Dallas and New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of offices. It is our goal to improve operational efficiencies throughout the enterprise and bring next-generation solutions to our customers, including delivery through the company's electronic digital network. "Finally, we closed on the acquisition of GTN's ads distribution operations. Consistent with our mission to super-serve the automotive client sector, the GTN operations enhance the DG FastChannel platform with a state-of-the-art sales and operational facility. The new Detroit office broadens our digital asset management competencies and provides access to an in-house physical storage facility and related systems. "Given the third quarter progress and solid financial results, we are squarely meeting our targeted financial and operating goals. Taken altogether, we enjoyed a very good quarter." HD Update and Business Outlook Mr. Ginsburg continued, "DG FastChannel's focus on industry innovation and a disciplined approach to expansion have created a strong foundation for current and future growth. Our ongoing investments in technology and physical plants bring important value to customers as we demonstrate the effectiveness of Standard Definition (SD) and High Definition (HD) electronic distribution. As a result, content providers are benefiting from the speed, reliability and accountability of digital media deliveries sent through the DG FastChannel networks. Management is focused on further investing in the company's technology platform and building 'extreme' electronic distribution channels for HD advertising, news and syndication content. "Looking to next year and beyond, HD digital content distribution will pick up additional momentum. The imminent opportunities created by the mandate from Congress and FCC (1) (Federal Communications Commission, Washington, DC, www.fcc.gov) The U.S. government agency that regulates interstate and international communications including wire, cable, radio, TV and satellite. The FCC was created under the U.S. for broadcasters to move to the HDTV (High Definition TV) A set of digital television (DTV) standards that offer the highest resolution and sharpest picture. Although some HDTV sets are available in standard (rather square) screen sizes, the overwhelming majority of sets are wide screen, which eliminates broadcast standard will support significant long-term revenue growth. With the continued investment in our HD capacities, DG FastChannel is well positioned to process significant additional electronic video deliveries. Our capabilities to send HD advertising, syndication and news content through the company's electronic networks are evolving, and we are now realizing substantial customer commitment to distribute their HD content in 2008 and beyond. "Our customer base which includes thousands of the nation's most prominent agencies, advertisers and brands, as well as leading long-form news and entertainment content, is benefiting from DG FastChannel's significant capital investments in 'next-generation' digital technology. During the third quarter, Two and One Half Men started distribution in HD using the Pathfire network solution set. More opportunities for HD distribution of advertising, news and syndication will follow in the ensuing en·sue intr.v. en·sued, en·su·ing, en·sues 1. To follow as a consequence or result. See Synonyms at follow. 2. To take place subsequently. months." Technology "Bringing next-generation products and services to the market through keenly focused investment in research and development have brought efficiencies to DG FastChannel clients. We have committed to the development of digital asset management solutions with heightened levels of accountability and capabilities to capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. the many distribution channels now available for digital content. Video advertising on computer screens and mobile devices is the fastest growing advertising segment according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. eMarketer and other industry sources, and DG FastChannel's commitment to bring 'digital convergence' and integrated marketing solutions to the advertising community is being met through our strategic partnership with Viewpoint Corporation. "We are garnering encouraging industry response to our products that allow advertisers and agencies to re-purpose their valuable broadcast video assets. With our order management and digital asset management solutions working together with Viewpoint's capabilities to serve rich media ads across the Internet, we have a very robust product. These rich media ads are engaging, interactive and visually stunning. "We also are leveraging our leadership in traditional advertising delivery with the migration of content to cell phones, smart phones, PDAs and other portable, mobile devices. As we move forward as a company, we will be able to expand our relationships with advertisers and advertising agencies to distribute digital content to many exciting media outlets." Integration and Operational Synergies "Building enterprise value is a product of organic revenue growth, operational streamlining and cost synergies, and we have focused on these three basic principles as we have acquired a number of highly complementary businesses. DG FastChannel has integrated the acquired companies quickly and efficiently. Our long-term track record highlights our success with this strategy, and there are good prospects for continued financial benefits in the coming quarters. "Third quarter 2007 EBITDA margins reflect only a portion of the cost synergies to be realized as there is a delay between the time when we take action to reduce costs and the time at which they are reflected in our operating results. Reflecting integration and consolidation initiatives from the Pathfire, Point.360 and GTN transactions, the Company now expects to achieve total operating savings, on an annual run rate basis, at the high end of our previously stated range of approximately $6 to $8 million. "So far, the Company has taken action on approximately $6.3 million of cost savings, and we expect more will be acted upon during the next two quarters. The full impact of the $6 to $8 million in cost savings is expected to be fully incorporated into our reported financial results by the end of second quarter 2008. As a result, margins are expected to expand and will benefit our operating results in future periods." Pro Forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma Financial Guidance "Reflecting the company's strong third quarter results and completion of the acquisition of Pathfire and Point.360 and GTN's ads distribution operations, DG FastChannel's annual revenue and EBITDA on a pro forma basis -- assuming all entities acquired in 2007 were combined with DG FastChannel as of January 1, 2007 and reflecting our current estimates of expense synergies -- are as follows:
($ in millions) > > >
> > >
> > > 2007
2008
> > >
Revenue > $ > > 110 - $113
$
122 - $126
> > >
EBITDA > $ > > 37 - $39
$
41 - $44
Mr. Ginsburg concluded, "The fourth quarter is off to a good start, and assuming the marketplace continues to function at normal levels, we reaffirm re·af·firm tr.v. re·af·firmed, re·af·firm·ing, re·af·firms To affirm or assert again. re our commitment to fulfilling our 2008 financial targets. We expect to create additional value for our shareholders through the combination of strategic initiatives, technological innovation, HD advertising, and the realization of operational and cost synergies." Restatement Restatement A revision in a company's earlier financial statements. Notes: The need for restating financial figures can result from fraud, misrepresentation, or a simple clerical error. of Second Quarter 2007 Form 10-Q Form 10-Q See 10-Q. In the second quarter of 2007, the Company recognized a non-cash gain of approximately $0.9 million relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the effective settlement of a dispute between one of our subsidiaries and Pathfire in connection with our purchase of Pathfire in June 2007. This accounting recognition was determined, in part, based upon the Company's interpretation of Emerging Issues Task Force 04-01 ("EITF EITF Emerging Issues Task Force EITF Edinburgh International Television Festival EITF Europe International Taekwon-Do Federation 04-01"). Upon subsequent review and analysis by the Company, the audit committee and the Company's new independent accountants, it was determined that the purchase accounting guidance in EITF 04-01 should have been applied differently. Consequently, the Company will restate re·state tr.v. re·stat·ed, re·stat·ing, re·states To state again or in a new form. See Synonyms at repeat. re·state its second quarter 2007 Form 10-Q to remove the non-cash $0.9 million gain, which was recorded in other income, the related tax effect and record an adjustment to reduce goodwill on the balance sheet. Below is certain operating statement operating statement See income statement. data as previously reported, and as restated. [TABLE OMITTED] Third Quarter 2007 Financial Results Webcast The Company's third quarter conference call will be broadcast live on the Internet at 8:00 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy on Monday, November 12, 2007. 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.dgfastchannel.com. Please allow 15 minutes to register and download or install any necessary software. Non-GAAP Reconciliation and EBITDA Definition EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Although EBITDA is not a measure of performance or liquidity calculated in accordance with generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ), the Company believes this Non-GAAP financial measure provides meaningful supplemental information regarding our performance and liquidity. However, investors should not consider these measures in isolation or as substitutes for operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. , cash flows from operating activities or any other measure for determining the Company's operating performance or liquidity that is calculated in accordance with GAAP. In addition, because EBITDA is not calculated in accordance with generally accepted accounting principles, it may not necessarily be comparable to similarly titled measures employed by other companies. A reconciliation of the EBITDA figures is presented in the accompanying consolidated statements of operations included herein. About DG FastChannel, Inc. DG FastChannel (DGIT: Nasdaq) is the leading provider of next generation workflow solutions, digital media technology and delivery services to America's most esteemed brands. The Company's delivery network reaches over 21,000 television and radio stations, cable and TV networks, cable outlets and newspapers. DG FastChannel's service and proprietary product set are integrated to provide content providers, including brands and commercial production entities, news organizations, syndicated programmers, and video news release producers and broadcasters end-to-end digital solutions that maximize efficiency while reducing costs. DG FastChannel's advanced capabilities include online delivery of high-definition (HD) content, re-purposing of broadcast video for the Internet, management of digital assets, and ubiquitous satellite and Internet reach resulting in the industry's highest levels of reliability, speed and quality. For more information visit www.dgfastchannel.com. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This release contains forward-looking statements relating to the Company, including the expansion of its digital distribution network, the demand among certain clients for digital audio and video delivery services and its expectations of operations of the recently acquired Point.360 advertising distribution operations, GTN, and its strategic alliance with Viewpoint Corporation. These forward-looking statements involve risks and uncertainties, which could cause actual results to differ materially from those projected. These and other risks relating to DG FastChannel's business are set forth in the Company's filings with the Securities and Exchange Commission. DG FastChannel assumes no obligation to publicly update or revise any forward-looking statements. (Financial Tables Follow) [TABLE OMITTED] [TABLE OMITTED] |
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