DG FastChannel Fourth Quarter Revenues from Continuing Operations Increase 67% to $21.7 Million.- 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 Core Ads Business Revenues Increase 12% - - Diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. Net Income Per Share From Continuing Operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the Rises to $0.24 - - Record Adjusted 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 of $7.1 Million vs. $2.3 Million - DALLAS -- DG FastChannel, 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), the leading provider of digital media delivery services to the advertising and broadcast industries, today reported financial results for the fourth quarter ended December 31, 2006. Fourth Quarter Highlights * Revenue from continuing operations of $21.7 million compared to $13.0 million in the comparable period of 2005 driven by both the merger with FastChannel and 12% year-over-year growth in pro forma revenues from continuing operations (formerly referred to as pro forma core Ads revenues). Revenue from continuing operations (formerly referred to as core Ads revenues) are derived from video, audio and print distribution, SourceEcreative and related services, and excludes the Company's StarGuide Digital Networks and CCS (1) (Common Channel Signaling) A communications system in which one channel is used for signaling and different channels are used for voice/data transmission. Signaling System 7 (SS7) is a CCS system, also known as CCS7. See SS7. divisions. * Generated $7.1 million in adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, restructuring, and impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charges) from continuing operations compared to $2.3 million in the comparable period of 2005. * Generated $3.1 million in net income from continuing operations, or $0.24 per diluted share, compared with a net loss from continuing operations of $0.8 million, or a $0.11 per diluted share loss in the fourth quarter ended December 31, 2005. * On December 19, 2006, DG FastChannel closed a public offering of 2,999,400 shares of its common stock (including the effect of the underwriters' purchase of an additional 443,400 shares to cover over-allotments). Net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). to the Company, after underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. discounts and commissions and expenses, were approximately $31.4 million. Reflecting the common stock offering, DG FastChannel has approximately 15.9 million common shares outstanding. * Reflecting the proceeds from the common stock offering, cash flows from operations and strategic investments in Point.360, DG FastChannel had $24.5 million in cash and $19.8 million of debt as of December 31, 2006 compared with $8.0 million of cash and $37.5 million of debt and capital leases as of September 30, 2006. 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 fourth quarter was a very productive period for DG FastChannel as we delivered outstanding operating results while also completing initiatives to position the Company for further long-term growth. Double digit Noun 1. double digit - a two-digit integer; from 10 to 99 integer, whole number - any of the natural numbers (positive or negative) or zero; "an integer is a number that is not a fraction" pro forma revenue growth in our core Ads business was the highlight of the fourth quarter with increases in the delivery of political, telecom, filmed entertainment and automotive spots, compared to last year. "DG FastChannel's transition to electronic deliveries, increased scale 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. drove significant EBITDA gains. We reported record quarterly adjusted EBITDA of $7.1 million demonstrating the significant operating leverage Operating Leverage A measurement of the degree to which a firm or project relies on fixed rather than variable costs. Notes: The higher the degree of operating leverage, the greater the potential danger from forecasting risk. in our business model. Diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of of $0.24 from continuing operations compare favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. to last year's diluted loss per share of ($0.11). "In the fourth quarter we raised $31.4 million in a share offering, which we deployed to restructure our balance sheet. Combined with operating cash flows Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. , the equity raise enabled us to end the period with a positive net cash position. Consistent with our stated objective to focus on our core Ads business, we classified the StarGuide and CCS divisions as discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. and we established a significant equity holding in Point.360. Altogether, these actions improved the balance sheet, total operating results and future opportunities for growth." Interest expense for the 2006 fourth quarter was $0.9 million compared to 2005 fourth quarter interest expense of $1.3 million which included approximately $0.7 million of refinancing Refinancing An extension and/or increase in amount of existing debt. costs. The Company had net cash of $4.6 million at the end of 2006 compared with net debt of $22.7 million at the end of 2005. Business Summary. Mr. Ginsburg stated, "The capital investments we have made in research and development together with the acquisitions of several competitors and strategic investments have positioned DG FastChannel very well for current and future periods. We expect upcoming periods to continue to benefit from our strong industry position, merger synergies and core competencies A core competency is something that a firm can do well and that meets the following three conditions specified by Hamel and Prahalad (1990):
During the past three years, we have transitioned our business model away from dub and ship methods to a predominantly electronic distribution model. At the same time, a consistent focus on customer acquisitions has been at the core of our strategy. Fourth quarter results indicate that the technology improvements and scaling have provided our company with a successful business model. And, what's even most impressive is that brands and advertisers are sharing the benefits that result from the speed, reliability and accountability of digital media deliveries sent through the DG FastChannel network. During the fourth quarter of 2006, 92 percent of our video traffic was delivered electronically, up from 84 percent a year ago, and 78 percent two years ago. As we look to the future, DG FastChannel's network is prepared to set the standard for HD electronic advertising distribution. The Federal Communications Commission Federal Communications Commission (FCC), independent executive agency of the U.S. government established in 1934 to regulate interstate and foreign communications in the public interest. and Congress have mandated the television industry to transform to 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 standards by February 2009. As HDTV takes hold, our digital advertising distribution and workflow solution sets should lead to increases in our electronic traffic and dramatic improvements in our financial results." Technology "Our focused approach to technology and next-generation solutions has brought DG FastChannel clients operational efficiencies and best-in-class workflow solutions for the advertising services vertical. Our ongoing investments in research and development are driving innovation and an expansion of our unparalleled digital media service offerings including three recently launched products: * AdGallery, DG FastChannel's proprietary digital asset management solution, allows advertisers to manage, vault and view their entire post-production ad content. AdGallery's powerful capabilities deliver total workflow integration, simple and advanced search options and automated digital storyboards while enabling users to stream previews of assets in multiple digital formats. * SpotCentral is our new and enhanced web-based order entry and management system. SpotCentral provides a feature-rich experience on an integrated distribution and digital asset management platform. SpotCentral employs an advanced user interface enabling media orders and traffic instructions to be delivered to TV and radio stations with ease of use from a computer screen located anywhere in the world. * SourceEcreative is the combination of DG FastChannel's Source TV and CreativeChannel web-based media search offerings. SourceEcreative is the largest worldwide database of TV commercial information with a catalog catalog, descriptive list, on cards or in a book, of the contents of a library. Assurbanipal's library at Nineveh was cataloged on shelves of slate. The first known subject catalog was compiled by Callimachus at the Alexandrian Library in the 3d cent. B.C. of over 400,000 spots, 16,000 companies and 80,000 industry professionals (spanning 64 countries). SourceEcreative clients include the top 100 advertising agencies and production companies in the US and Europe. Presently, over 30,000 unique worldwide users rely on DG FastChannel for their creative research. HD Advertising "DG FastChannel has led the industry in investing in the HD advertising opportunity. We are well positioned for growth in electronic video HD delivery in the midst Adv. 1. in the midst - the middle or central part or point; "in the midst of the forest"; "could he walk out in the midst of his piece?" midmost of increasing advertiser demand for HD capabilities. The percentage of spots being produced and distributed in HD continues to grow exponentially ex·po·nen·tial adj. 1. Of or relating to an exponent. 2. Mathematics a. Containing, involving, or expressed as an exponent. b. . Advertisers and advertising agencies are further expanding their HD advertising plans, and we expect a substantial number of our customers to transition their advertising to one of several HD formats during 2007. With the ramp up Ramp Up To increase a company's operations in anticipation of increased demand. Notes: A company might 'ramp up' operations if they just signed a contract creating substantially more demand for their product. See also: Demand, Economies of Scale of HD advertising, DG FastChannel is leading the industry in establishing consistent industry standards for the distribution of this digital content from creation to broadcaster, all on an electronic basis. Cost Containment cost containment, n the features of a dental benefits program or of the administration of the program designed to reduce or eliminate certain charges to the plan. "We are developing value for shareholders through continued success in bringing operational and cost synergies to DG FastChannel, and the record indicates that we have been productive on this initiative. Reflecting ongoing integration and consolidation initiatives, the Company expects to achieve total operating savings, on an annual run rate basis, of approximately $12 million as a result of the DG and FastChannel merger. To date, the Company has taken action on approximately $11 million of such cost savings and the full benefit of the $12 million in cost synergies related to the merger are expected to be fully incorporated into our reported financial results by the end of the second quarter in 2007. Strategic Initiatives "We continue to evaluate a number of potential acquisitions in our core area of business and other complementary domestic and international opportunities. "Video advertising is rapidly expanding to computer screens and mobile devices. In my judgment, we are well positioned, based on our leadership in traditional advertising delivery, to expand our service offerings and relationships with both advertisers and advertising agencies to distribute advertising to multiple platforms Refers to two or more operating environments, which typically include the CPU family and operating system. For example, if versions of a program run on Windows and the Macintosh, the software is said to support multiple platforms. including online destinations and mobile devices. "Consistent with our long-term strategy for growth, during the quarter DG FastChannel established a strategic equity interest in Point.360, which provides film, video, and audio post production, archival, duplication, and distribution services to entertainment and advertising industry clients. During the period ended December 31, 2006, DG FastChannel purchased approximately 1.4 million shares and we now control approximately 1.6 million shares, or approximately 16.2% of Point.360's outstanding shares. Discontinued Operations "We also are pursuing shareholder value through the disposition of the non-core StarGuide Digital Networks and CCS assets. Reflecting our previously announced intention 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, the Company re-classified its StarGuide and CCS divisions as assets held for sale and began reporting their operating results as discontinued operations in the three month and full year periods ended December 31, 2006 and December 31, 2005. Accordingly, approximately $590,000 of revenue generated by these discontinued operations in the fourth quarter of 2006 is excluded from the Company's total reported quarterly revenue of $21.7 million. In the fourth quarter of 2005 the discontinued operations generated revenue of approximately $1.4 million, which was excluded from the Company's total reported quarterly revenue of $13.0 million." 2007 First Quarter Preview For the three months ending March 31, 2007, DG FastChannel expects to report adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, restructuring, and impairment charges) of $5.8 million - $6.0 million, compared to $3.1 million of reported EBITDA for the same period last year. Fourth Quarter 2006 Financial Results Webcast The Company's fourth quarter conference call will be broadcast live on the Internet at 11:00 a.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT Monday, March 26, 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 Adjusted EBITDA Definition Adjusted EBITDA is defined as earnings before interest, taxes, impairment, restructuring, depreciation and amortization. Although adjusted 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'), the Company believes they may be useful to an investor in evaluating its performance. 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 GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). . In addition, because adjusted 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 adjusted EBITDA figures included herein can be made by deducting operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. , excluding depreciation and amortization from the Company's revenues. 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 relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the Company, including the expansion of its digital distribution network, and the demand among certain clients for digital audio and video delivery services. 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 Registration Statement on Form S-3/A filed with the Securities and Exchange Commission on December 4, 2006. DG FastChannel assumes no obligation to publicly update or revise any forward-looking statements. About DG FastChannel, Inc. DG FastChannel provides innovative, technology-based solutions to help advertisers and agencies work faster, smarter and more competitively. DG FastChannel delivers the standard in Digital Media services to the advertising, broadcast and publishing industries. The Company utilizes satellite and Internet transmission technologies and has deployed a suite of digital media intelligence and asset management tools designed specifically for the advertising industry, including creative and production resources, broadcast verification, and digital asset management. The Company has an online media distribution network used by more than 5,000 advertisers and agencies, and over 21,000 online radio, television, cable, network and print publishing destinations. For more information visit www.DGFastChannel.com.
[TABLE OMITTED]
(1) DG FastChannel recorded a $5,087 non-cash charge to impair its
investment in Verance in the quarter ended September 30, 2006.
$4,758 was recorded as a reduction in the fair value of its
long-term investment in the convertible preferred stock of Verance
Corporation, and $329 was recorded as amortization expense.
Excluding this charge the 2006 net loss of $649 would result in
adjusted net income of $3,341 and the reported diluted loss per
share of $0.06, would, on an adjusted basis, have been income per
diluted share of $0.32.
(2) All share and per share amounts presented herein reflect the
one-for-ten reverse stock split which was effected on May 30,
2006. The year-over-year increase in the number of weighted
average diluted shares outstanding reflects the issuance of 5.2
million shares of DG Systems' (now DG FastChannel) common stock to
former FastChannel Network, Inc. shareholders pursuant to the
merger and the weighted average effect of the issuance of 2.99
million shares in a secondary offering in December 2006.
[TABLE OMITTED]
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