DG FastChannel Reports Second Quarter EPS of $0.12; EBITDA Rises 107% to $4.3 Million; Records Significant Year-Over-Year Revenue, Operating Income, EBITDA and Net Income Gains; Merger Cost Synergies on Track to Meet High End of Range.DALLAS -- Electronic Online Video Distribution Hits 90% 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 distribution services to the advertising and broadcast industries, today reported financial results for the second quarter ended June 30, 2006. Second Quarter Highlights --Completed the merger with FastChannel Network, Inc. on May 31, 2006 to form DG FastChannel, Inc. The consolidated operating results presented herein include one month of operations of FastChannel Network, Inc. and the 1 for 10 reverse stock split effective on May 30, 2006. --Revenue of $16.3 million compared to $15.2 million in the comparable period of 2005. --Generated $4.3 million in 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 (earnings before interest, taxes, depreciation, amortization, restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). , 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) compared to $2.1 million in the comparable period of 2005. --Reduced 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. to $12.0 million from $13.0 million in the second quarter of 2005. --Recorded net income of $1.1 million, or $0.12 per 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. share, compared to a net loss of $0.4 million, or $0.05 per diluted share in the comparable period of 2005. --Cost synergies related to the merger with FastChannel Network, Inc. are on track for the Company to realize $9 million of cost savings, which is at the "high end" of the projected $6 to $9 million range. --Closed a new $35 million credit facility (comprised of a $20 million five year term loan and a $15 million two year revolver revolver: see small arms. revolver Pistol with a revolving cylinder that provides multishot action. Some early versions, known as pepperboxes, had several barrels, but as early as the 17th century pistols were being made with a revolving chamber to ) with Wachovia Bank N.A. to refinance Refinance 1. When a business or person revises their payment schedule for repaying debt. 2. Replacing an older loan with a new loan offering better terms. Notes: When a business refinances they typically extend the maturity date. DG Systems' debt and FastChannel Network's total outstanding debt at the time of the merger. 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, "Second quarter results confirm the financial benefits of the Company's strategy to constantly improve our technology platform and consolidate complementary businesses under one roof. The quarterly numbers show revenue gains, reduced operating expenses, and improved cash flow. The positive net earnings and significant EBITDA improvement highlight the Company's quarterly results. "DG FastChannel has emerged as the premier digital media services entity streamlining the advertising workflow The automatic routing of documents to the users responsible for working on them. Workflow is concerned with providing the information required to support each step of the business cycle. . Our customer base, leading edge product offerings, unmatched network footprint The amount of geographic space covered by an object. A computer footprint is the desk or floor surface it occupies. A satellite's footprint is the earth area covered by its downlink. See form factor. 1. and experienced client services team put the new business combination in a very good position. Significant operating efficiencies are being realized as technology upgrades are implemented and regional, state-of-the-art facilities are consolidated. We have evolved, after a number of strategic initiatives and technical improvements over the past two and one half years, into a more efficient business model." Interest expense for the 2006 second quarter was $0.6 million compared to 2005 second quarter interest expense of $0.8 million which included approximately $0.3 million of refinancing Refinancing An extension and/or increase in amount of existing debt. costs. DG FastChannel reported net income of $1.1 million, or $0.12 per diluted share, compared with a net loss of $0.4 million, or $0.05 per diluted share in the comparable period of 2005. At June 30, 2006, DG FastChannel had cash, cash equivalents and short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. investments of $6.3 million, total debt of $38.1 million, and net debt of approximately $31.8 million. Business Summary Mr. Ginsburg added, "The Company's employees, technologies, and physical plant have been significantly upgraded with the merger and, together with other corporate development programs, DG FastChannel is now focused on client service, customer retention and customer acquisition. "Our customer base, including thousands of the nation's most prominent agencies, advertisers and brands, is realizing significant financial and workflow benefits from the capital investments in 'next generation' digital technology we have developed and successfully deployed. The Company's Universal Deployment initiative, placing highly sophisticated Spotbox(TM) servers in TV stations, cable systems, and TV and Cable networks, is an example of the positive results we provide to our customers. The numbers speak for themselves: 90 percent of our video traffic was delivered electronically during this calendar quarter, an improvement from 82 percent just a year ago, and 65 percent two years ago. "Advertisers benefit from the speed, reliability and accountability of digital media deliveries sent through the DG FastChannel network. We have transitioned away from a model that relied heavily on dub and ship techniques and, as a result, we have changed how standard definition television advertising is delivered. We continue to aggressively expand our footprint with less than twenty destinations remaining to go on-line to complete the Universal Deployment initiative, at which time every relevant media outlet will be a part of the DG FastChannel network. During the quarter, for example, ESPN ESPN Entertainment and Sports Programming Network and its affiliated networks chose the Spotbox as the first electronic advertising platform to be deployed at their site. "As we look at distributing HD advertising on a massive basis to media outlets, our capabilities to send HD advertising through the Company's omnipresent om·ni·pres·ent adj. Present everywhere simultaneously. [Medieval Latin omnipres electronic network improve our business prospects. Many advertisers and advertising agencies are gearing up their HD advertising plans, and we expect a substantial number of our customers to distribute advertising in one of several HD formats in the near future. 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 will lead the effort to establish industry standards to distribute this digital content on an electronic basis." Business Outlook Mr. Ginsburg concluded, "Our continued investment in research and development distinguishes our approach to the digital media business and several positive business tends have validated val·i·date tr.v. val·i·dat·ed, val·i·dat·ing, val·i·dates 1. To declare or make legally valid. 2. To mark with an indication of official sanction. 3. this strategy. DG FastChannel clients are benefiting from our investments in innovative technologies, services and offerings that mirror the advertising workflow from creative research to media production to distribution for the video, audio and print mediums. In addition to bringing efficiency to every step of the process of creating and distributing advertising content, DG FastChannel is supporting its clients with media asset management and broadcast verification tools that bring new levels of accountability and 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>. changes in the advertising industry. "Getting ahead of the curve by developing workflow improvements for the advertising industry has been our focus, and the payoff to our shareholders hopefully will be realized as 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 era quickly approaches. DG FastChannel also has a firm commitment to make broadcast verification a bundled part of our services, and our efforts in this area also indicate some nice growth as these workflow improvements show traction Traction Definition Traction is the use of a pulling force to treat muscle and skeleton disorders. Purpose Traction is usually applied to the arms and legs, the neck, the backbone, or the pelvis. . "Consolidating assets is one of DG FastChannel's 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):
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. and we expect to realize further annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. cost savings. We now expect to achieve total operating savings, on an annual run rate, at the 'high end' of our previously stated range of $6 million to $9 million in annual operational synergies. On a rolling basis, these annualized cost savings position DG FastChannel to produce higher operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: and total returns greater than either company would have generated independently. "In conclusion, DG FastChannel has an ongoing commitment to innovation. We believe the beneficiaries of this corporate creed are our customers, employees and shareholders." Second Quarter 2006 Financial Results Web Cast The Company's second quarter conference call will be broadcast live on the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the 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 today, August 9, 2006. The Web cast is open to the general public and all interested parties may access the live Web cast on the Internet at the Company's Web site at www.DGFastChannel.com. Please allow 15 minutes to register and download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. or install any necessary software. Non-GAAP Reconciliation EBITDA is defined as 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.
As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. 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 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. 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 included herein can be made by deducting operating expenses, 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 Proxy filed with the Securities and Exchange Commission on April 27, 2006. DG Systems 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.dgsystems.com, www.fastchannel.com or www.DGFastChannel.com.
DG FastChannel, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
2006 2005 2006 2005
---- ---- ---- ----
Revenues $16,337 $15,157 $30,682 $30,860
Operating expenses, excluding
depreciation and amortization 11,994 13,054 22,877 25,132
-------- -------- -------- --------
EBITDA 4,343 2,103 7,805 5,728
Depreciation & amortization 1,959 1,581 3,700 3,000
Restructuring charge - 271 - 271
-------- -------- -------- --------
Operating income $ 2,384 $ 251 $ 4,105 $ 2,457
Interest expense and other, net 623 765 1,133 1,157
-------- -------- -------- --------
Income (loss) before income taxes 1,761 (514) 2,972 1,300
Provision (benefit) for income taxes 669 (164) 1,130 525
-------- -------- -------- --------
Net income (loss) $ 1,092 $ (350) $ 1,842 $ 775
======== ======== ======== ========
Basic net income (loss) per common
share $ 0.12 $ (0.05) $ 0.22 $ 0.11
======== ======== ======== ========
Diluted net income (loss) per
common share $ 0.12 $ (0.05) $ 0.22 $ 0.11
======== ======== ======== ========
Weighted average outstanding
shares - Basic (1) 9,138 7,395 8,285 7,334
======== ======== ======== ========
Weighted average outstanding
shares - Diluted (1) 9,141 7,395 8,286 7,348
======== ======== ======== ========
See Footnote (1) at end of release.
DG FastChannel, Inc.
Condensed Consolidated Balance Sheet
(In thousands)
June 30, March 31,
2006 2006
--------- ---------
Cash $ 6,293 $ 4,000
Accounts receivable 15,160 10,968
Inventories 1,715 1,492
Property and equipment 16,786 10,825
Investment in Verance Corporation 4,758 4,758
Goodwill 69,290 45,147
Deferred tax assets 17,069 17,739
Other 30,370 20,406
--------- ---------
TOTAL ASSETS $161,441 $115,335
========= =========
Accounts payable and accrued liabilities 12,226 6,271
Deferred revenue 1,302 660
Debt and capital leases 38,067 27,411
--------- ---------
TOTAL LIABILITIES 51,595 34,342
TOTAL STOCKHOLDERS' EQUITY (1) 109,846 80,993
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $161,441 $115,335
========= =========
(1) At June 30, 2006 DG FastChannel had approximately 9.1 million
weighted average diluted shares outstanding compared with 7.4
million weighted average diluted shares outstanding at June 30,
2005. The increase in the number of weighted average diluted
shares outstanding reflects the impact for one month of the second
quarter of 2006 of 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. DG FastChannel
has 12.6 million total common shares outstanding. All share and
per share amounts presented herein reflect the one-for-ten reverse
stock split which was effected on May 30, 2006.
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