DG Systems Reports 2006 First Quarter Financial Results.DALLAS -- Digital Generation Systems, 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): --Turnaround Quarter Highlighted by Significant Quarterly Sequential 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 Gain --Second Consecutive Quarter of EBITDA Increases and Third Consecutive Quarterly Decline in 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. --FastChannel Network Merger Expected to Close May 31 Digital Generation Systems, Inc. ('DG Systems'), (NASDAQ: DGIT), the leading provider of digital media advertising services to the advertising and broadcast industries, today reported financial results for the first quarter ended March 31, 2006. First Quarter Highlights --Revenue of $14.3 million compared to $14.4 million in the 2005 fourth quarter and $15.7 million in the comparable period of 2005. --Operating expenses declined to $10.9 million compared to $11.7 million in the 2005 fourth quarter and $12.1 million in the comparable period of 2005. However, the 2005 first quarter results included a one-time, nonrecurring $0.5 million reduction of operating expenses related to the re-negotiation of an existing service agreement. This is DG's third consecutive quarter of operating expense Operating Expense The essential things that a company must purchase in order to maintain business. Notes: For example, the payment of employees wages are an operating expense. Also known as OPEX. declines. --Generated $3.5 million in EBITDA (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 $2.7 million in the 2005 fourth quarter and $3.6 million in the comparable period of 2005. This is DG's second consecutive quarter of EBITDA improvements. --Filed merger documents and amendments with the Securities and Exchange Commission related to DG's December 2005 agreement to merge with FastChannel Network, Inc., a provider of digital media distribution and intelligence services to the advertising and broadcast industries. --Closed a new $25 million, two year 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 with Wachovia Bank N.A., replacing the Company's prior $17 million senior credit facility. DG also executed a commitment letter for a $35 million credit facility (comprised of a $20 million five year term loan and a $15 million three 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 provide DG with the capacity 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' current debt and FastChannel Network's total outstanding debt. --FastChannel Network and DG have scheduled a meeting of stockholders on May 25 and May 26, 2006, respectively, to vote on the proposed merger. The closing of the proposed merger with FastChannel Network is expected to occur May 31, 2006. Commenting on the results, Scott K. Ginsburg, Chairman and Chief Executive Officer of DG Systems, stated, "First quarter results indicate that capital investments in 'next generation' digital technology and acquisitions of several competitors and complementary ventures are improving the Company's outlook. Significant customer gains, increased on-line video traffic, and initiatives to improve the customer experience have resulted in demonstrable de·mon·stra·ble adj. 1. Capable of being demonstrated or proved: demonstrable truths. 2. Obvious or apparent: demonstrable lies. and improving financial results. "Over the last two years we have carefully brought together DG, AGT-Broadcast, Media DVX DVX Digital Voice Exchange DVX Dvd Extended DVX Device Driver and Source TV into a cohesive cohesive, n the capability to cohere or stick together to form a mass. operating entity, and we plan to merge with FastChannel Network this quarter. In addition to our focus on expansion, we completed important technology upgrades that now distinguish our networks, business intelligence offerings and workflow solutions as benchmarks in the advertising services industry. We efficiently re-constructed our national presence in each of the major media centers with regional office consolidations. And, most importantly Adv. 1. most importantly - above and beyond all other consideration; "above all, you must be independent" above all, most especially , we right-sized our entire organization eliminating duplicative costs and functions. "DG Systems is squarely square·ly adv. 1. Mathematics At right angles: sawed the beam squarely. 2. In a square shape. 3. meeting customer expectations through the deployment of DGConnect(TM), our online order management system for advertisers and ad agencies; the integration of a business intelligence toolset which allows automatic watermarking and an airplay air·play n. The broadcasting of an audio or audiovisual recording on the air over radio or television. airplay Noun the broadcast performances of a record on radio verification service; and, the completion of our Universal Deployment initiative. In the last two years, the Years, The the seven decades of Eleanor Pargiter’s life. [Br. Lit.: Benét, 1109] See : Time new DG Spot Box, which accommodates both satellite and internet deliveries, has been deployed at almost 3,900 television, cable and network destinations. As a result of these improvements and upgrades, our video product is setting an industry standard with 87 percent of the traffic going online, an increase from 70 percent online just two years ago. Further online improvements are expected this year." The first quarter of 2006 represented DG's third consecutive quarter of operating expense reductions reflecting the company's planned integration of acquired entities through headcount reductions, office consolidations and eliminating duplicative functions. DG Systems' first quarter EBITDA of $3.5 million reflects the benefits of a broader customer base, expanded service offerings and operating efficiencies associated with our integration efforts. Interest expense for the 2006 first quarter was $0.5 million compared to 2005 first quarter interest expense of $0.4 million. The year-over-year increase in quarterly interest expense reflects higher borrowings related to acquisitions and capital investments. DG reported net income of $0.8 million, or $0.01 per share, compared with a net loss for the 2005 fourth quarter of $1.0 million, or ($0.01) per share. In the 2005 first quarter (which benefited from a one-time $0.5 million operating expense reduction), DG reported net income of $1.1 million, or $0.02 per share. At March 31, 2006, DG Systems had cash, cash equivalents and short-term investments of $4.0 million, total debt of $27.4 million and net debt of $23.4 million. Business Summary Mr. Ginsburg added, "First quarter 2006 results demonstrate a shift in overall operating efficiencies as technology initiatives undertaken by the Company have been implemented and integration initiatives related to the acquired businesses continue to be executed. With DG leading the industry's transition from physical tapes to digital media management, the higher percentage of electronic deliveries has impacted year over year revenue growth. Electronic deliveries do not result in surcharges for physical delivery of tapes - online video deliveries allow for operating and cost savings for both our customers and DG Systems - temporarily curtailing the top line improvements we desire. The digital transition, however, is almost complete, and we should resume organic revenue growth later this year. "Our continued investment in research and development distinguishes our approach to the digital media business, and has resulted in positive trends. DG's clients are happy with our investments in innovative technology that improves their customer experience. We have seen many of our long-term customers renew their commitments to DG Systems over the past few quarters. At the same time, new customer acquisitions are at their highest levels in the recent past. "During the 2006 first quarter, we reduced our operating expenses both on a year-over-year and quarterly sequential basis. We expect to realize a total of approximately $3 million in annual savings in 2006 due to the integrations and facility consolidations completed in 2005. In addition, 2006 operating results will benefit from the recent upgrade and expansion of our satellite network. This bandwidth upgrade is providing significantly expanded capacity to customers and will reduce annual satellite transmission costs by 20% or approximately $300,000 annually. "Margin improvements have been achieved during the first quarter, and we will seek additional margin improvements during the balance of this year. First quarter 2006 EBITDA margins of 24% were at their highest levels in over a year." Business Outlook Mr. Ginsburg continued, "The proposed merger with FastChannel Network, expected to be completed during the current quarter, will ensure DG's position as the premier provider of services to the advertising industry. The combined entity will service an outstanding list of advertisers, agencies, newspaper publishers and television and radio broadcasters. These customers will benefit from the industry's leading digital television, radio, and print media distribution capabilities; online business intelligence offerings that include the world's largest searchable database Refers to databases on the Web that are searchable by typing in a query. The term is quite redundant because all databases are searchable. In fact, that is one of their major features. of television advertisements A television advertisement, advert or commercial is a form of advertising in which goods, services, organizations, ideas, etc. are promoted via the medium of television. ; digital asset management tools for archiving and collaboration; digital and physical storage of media assets; and media intelligence offerings that include broadcast verification and discrepancy DISCREPANCY. A difference between one thing and another, between one writing and another; a variance. (q.v.) 2. Discrepancies are material and immaterial. reporting. "Revenue in 2006 will be driven by expanded sales and marketing efforts, as well as contributions from combining both DG's and FastChannel's digital delivery platforms into a unified offering. Once DG and FastChannel are combined, we anticipate greater potential for revenue growth and higher operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: . "With the FastChannel merger, we expand DG's reach into the print distribution business, broaden our product offerings, expand into new international markets and substantially improve our personnel. Opportunities related to the advertising industry's pending transition 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 will also improve the dynamics of our business model. DG Systems has an HD compliant network, and we expect additional on-line HD traffic to fuel growth for the combined entity. "The business combination also provides significant opportunities for 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 expect to achieve a range of $6 million to $9 million in savings during the first year of combined operations For the department of the British War Office during World War II, see . In the military, combined operations are operations conducted by forces of two or more allied nations acting together for the accomplishment of a single mission. See also
The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. after the merger to achieve the projected cost reductions. Having successfully acquired and integrated a number of companies into DG Systems over the past eight quarters, we have a solid game plan to turn the new entity into a vibrant business. "The merger of these two businesses is very much a win-win scenario," Mr. Ginsburg concluded. "As we move forward, the core organizing principles are to take very good care of our customers and to achieve significant growth for our stockholders." First Quarter 2006 Financial Results Web Cast The Company's first 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 today, May 12, 2006. The Web cast is open to the general public and all interested parties may access the live Web cast on the Internet through the Investor Relations Investor relations The process by which the corporation communicates with its investors. section of the Company's Web site at www.dgsystems.com. Please allow 15 minutes to register and download 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 (please refer to the reconciliation table at the end of this press release). 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 Systems' business are set forth in the Company's Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. filed with the Securities and Exchange Commission on March 28, 2006. DG Systems assumes no obligation to publicly update or revise any forward-looking statements. About DG Systems, Inc. DG Systems and its StarGuide and SourceTV divisions provide the standard in Digital Media Exchange services for the advertising and broadcast industries, featuring dependable satellite and Internet transmission technology and a suite of digital media asset management tools. DG Systems' extensive digital network reaches more than 5,000 advertisers and agencies, nearly 3,900 television, cable, and network broadcast destinations and over 10,000 radio stations with innovative delivery and management solutions for short-and long-form audio and video content. DG Systems is based in Irving, Texas Irving (pronounced 'er-ving') is a city located in the U.S. state of Texas within Dallas County. According to the 2000 U.S. Census, the city population was 191,615; the 2006 estimate was 201,927 according to the North Central Texas Council of Governments, and 196,084 according to , with offices located in New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. , Detroit, 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, Boca Raton Boca Raton (bō`kə rətōn`), city (1990 pop. 61,492), Palm Beach co., SE Fla., on the Atlantic; inc. 1925. Boca Raton is a popular resort and retirement community that experienced significant industrial development in the 1970s and 80s. and Louisville. More information can be found on the Company's Web site at www.dgsystems.com. In December, 2005, DG entered into a definitive agreement to merge with FastChannel Network, Inc., which, subject to shareholder approvals, is expected to close on May 31.
Digital Generation Systems, Inc.
Condensed Consolidated Statements of Income
(In thousands, except per share data)
Three Months Ended
March 31,
-------------------
2006 2005
---- ----
Revenues $14,345 $15,703
Operating expenses, excluding depreciation and
amortization 10,883 12,078
--------- ---------
EBITDA (1) 3,462 3,625
Depreciation & amortization 1,740 1,418
--------- ---------
Operating income $1,722 $2,207
Interest expense and other, net 510 392
--------- ---------
Income before income taxes 1,212 1,815
Provision for income taxes 461 690
--------- ---------
Net income $751 $1,125
========= =========
Basic net income per common share $0.01 $0.02
========= =========
Diluted net income per common share $0.01 $0.02
========= =========
Weighted average shares outstanding - Basic 74,219 72,726
========= =========
Weighted average shares outstanding - Diluted 74,223 72,924
========= =========
(1) The first quarter 2005 results reflect one-time $0.5 million
reduction of operating expenses related to the renegotiation of an
existing service agreement.
Digital Generation Systems, Inc.
Condensed Consolidated Balance Sheet
(In thousands)
March 31, December 31,
2006 2005
------------ ------------
Cash $4,000 $1,886
Accounts receivable 10,968 10,720
Inventories 1,492 1,548
Property and equipment 10,825 11,641
Investment in Verance Corporation 4,758 4,758
Goodwill 45,147 45,147
Deferred tax assets 17,739 18,200
Other 20,406 20,433
------------ ------------
TOTAL ASSETS $115,335 $114,333
============ ============
Accounts payable and accrued liabilities 6,271 8,406
Deferred revenue 660 1,188
Debt and capital leases 27,411 24,532
------------ ------------
TOTAL LIABILITIES 34,342 34,126
TOTAL STOCKHOLDERS' EQUITY 80,993 80,207
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $115,335 $114,333
============ ============
|
|
||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion