Digital Impact Reports Strong Fiscal Q2 Results; Revenues Grow 32%, Gross Margin Hits 60%.Business Editors SAN MATEO San Mateo (săn mətā`ō), city (1990 pop. 85,486), San Mateo co., W Calif., on San Francisco Bay; inc. 1894. It is a commercial and retail center with some high-technology manufacturing. San Mateo, Spanish for St. , Calif.--(BUSINESS WIRE)--Oct. 24, 2002 Digital Impact, Inc. (Nasdaq:DIGI DIGI Digital DIGI Digital Input ), the premier provider of online direct marketing solutions for enterprises, today announced financial results for the fiscal second quarter ended September September: see month. 30, 2002. Digital Impact reported revenues of $11.1 million for the quarter ended September 30, 2002, a 32% increase over the same period last year and 6% higher than last quarter. Gross margin improved to 60%, compared to 50% for the same period last year and 59% last quarter. The GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). net loss for the quarter was $1.2 million, or $0.04 per share, an 82% improvement over the same period a year ago, and comparable to the quarter ended June June: see month. 30, 2002. This quarter's net loss includes non-cash, amortization charges for stock-based compensation and intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. totaling $326,000, which reduced earnings by approximately $0.01 per share. This compares to charges of $1.3 million, which reduced earnings by $0.05 per share for the same quarter last year and charges of $424,000 or $0.01 per share for the first fiscal quarter. Earnings before interest, tax, depreciation and amortization (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 ) was positive for the third consecutive quarter, totaling $664,000 compared to $516,000 for the first fiscal quarter and a loss of $3.9 million for the quarter ended September 30, 2001. The difference between EBITDA and the company's $1.2 million net loss is primarily attributed to the depreciation of hardware and the amortization of software and stock-based compensation. 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. for the quarter were $7.8 million, resulting in another quarter of positive 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 . This represents a 29% decline or $3.1 million, from the same quarter last year, and up 6% from the prior quarter. The company's cash position declined by $2.0 million, as $1.7 million positive cash flow from operations was offset by capital investments and a $1.2 million reduction in debt for the quarter ended September 30, 2002. The company ended the quarter with $25.2 million in cash, cash equivalents, 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 and restricted cash. "I am very proud of our team's effort to deliver strong revenues and 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. particularly given this tough economic climate. These results highlight the strength of our technologies and services in helping our clients drive business performance through superior email marketing. We are on our way towards achieving our target of being profitable by December December: see month. 2002," said William William, crown prince of Germany William or Frederick William, 1882–1951, crown prince of Germany, son of William II. In World War I he commanded (1914) an army on the Western Front and was nominal commander in the German attack Park, Chief Executive Officer. Outlook Digital Impact projects fiscal third quarter revenues will range from $12.0 million to $12.5 million and earnings per share will range from breakeven breakeven 1. The level of output or sales necessary to cover fixed expenses. Companies in industries that have high fixed costs and, consequently, high breakevens, such as automobile and steel manufacturing, are likely to exhibit large fluctuations to one cent per share. Fiscal Second Quarter 2003 Conference Call Digital Impact's conference call will be held at 1:30 p.m. PT. Those wishing to participate should call 212/896-6065 or access the call at www.digitalimpact.com at approximately 1:20 p.m. PT. A replay of the call will be available until October October: see month. 31, 2002 dialing 800/633-8284 and entering reservation #20937480 or at www.digitalimpact.com and on www.companyboardroom.com. About Digital Impact Digital Impact is the premier provider of online direct marketing solutions for enterprises, including market leaders such as Citibank CITIBANK First National City Bank , Dell Computer Corporation (company) Dell Computer Corporation - One of the biggest US manufacturers of IBM PC compatibles. "From notebooks to networks", their slogan says. http://us.dell.com. , MasterCard MasterCard Worldwide (NYSE: MA) is a mutinational corporation based in Purchase, NY in the United States. Throughout the world, its principal business is to process payments between the banks of merchants and the banks of purchasers that use its "Mastercard" branded debit- and and Hewlett-Packard. Digital Impact's solutions -- Strategy, Customer Acquisition and Customer Marketing -- enable corporations to create and deliver highly successful email marketing programs that drive revenue, influence behavior and deepen deep·en tr. & intr.v. deep·ened, deep·en·ing, deep·ens To make or become deep or deeper. deepen Verb to make or become deeper or more intense Verb 1. customer relationships. Digital Impact solutions provide deep customer insight and powerful execution through a combination of hosted web applications, messaging technology infrastructure and professional services (job) professional services - A department of a supplier providing consultancy and programming manpower for the supplier's products. . Digital Impact is a member of the TRUSTe Privacy Program and works only with companies that are advocates of strict consumer privacy guidelines guidelines, n.pl a set of standards, criteria, or specifications to be used or followed in the performance of certain tasks. . Digital Impact was founded in 1997 and currently has approximately 275 employees in its Silicon Valley, 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, 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 and London offices. The company is publicly traded on the Nasdaq Stock Market Nasdaq stock market The first electronic stock market listing over 5000 companies. The Nasdaq stock market comprises two separate markets, namely the Nasdaq National Market, which trades large, active securities and the Nasdaq Smallcap Market that trades emerging growth companies. under the ticker symbol Ticker Symbol An arrangement of characters (usually letters) representing a particular security listed on an exchange or otherwise traded publicly. When a company issues securities to the public marketplace, it selects an available ticker symbol for its securities which investors DIGI. Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Statement The statements contained in this press release that are not purely historical are 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. within the meaning of Section 21E of the Securities and Exchange Act of 1934, including statements regarding Digital Impact's expectations, beliefs, hopes, intentions, projections or strategies regarding the future. Such forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those projected. Such risks include, but are not limited to, the following: that due to possible conditions such as the loss of clients, the inability to collect fees for services performed, the reduction in campaign volume for existing clients, reduced demand for the company's services, price pressure from the company's competition and inability to adequately reduce expenses, the company's fiscal third quarter revenue projections and profitability projections may not be met. Further risks are detailed in Digital Impact's filings with the Securities and Exchange Commission, including its most recent Quarterly Report on Form 10-Q Form 10-Q See 10-Q. and its most recent Annual Report on 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. .
-- Digital Impact is a registered trademark of Digital Impact, Inc. All other brands or trademarks are the property of their respective owners.
-- Financial schedules attached.
DIGITAL IMPACT, INC.
Balance Sheets
(In thousands)
Unaudited
Sep 30, Mar 31,
2002 2002 Change
------- ------- -------
ASSETS:
Current assets:
Cash and cash equivalents $23,868 $23,937 $ (69)
Short-term investments 218 1,651 (1,433)
Accounts receivable, net 8,954 8,191 763
Prepaid expenses and other current
assets 1,422 1,504 (82)
------- ------- -------
Total current assets 34,462 35,283 (821)
------- ------- -------
Net property and equipment 10,770 9,484 1,286
Restricted cash 1,114 1,141 (27)
Intangible Assets 2,538 2,860 (322)
Other assets 751 865 (114)
------- ------- -------
Total assets $49,635 $49,633 $ 2
======= ======= =======
Sep 30, Mar 31,
2002 2002 Change
------- ------- -------
LIABILITIES & STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 3,894 $ 2,529 $ 1,365
Deferred revenues 1,590 829 761
Accrued liabilities 4,251 4,205 46
Current portion of capital lease
obligations 563 320 243
Current portion of long term debt 1,458 1,537 (79)
------- ------- -------
Total current liabilities 11,756 9,420 2,336
------- ------- -------
Capital lease obligations, less
current portion 93 73 20
Long term debt, less current portion 491 1,251 (760)
------- ------- -------
Total liabilities 12,340 10,744 1,596
Total stockholders' equity 37,295 38,889 (1,594)
------- ------- -------
Total liabilities and stockholders'
equity $49,635 $49,633 $ 2
======= ======= =======
DIGITAL IMPACT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts) (unaudited)
Three Months Ended Six Months
September 30, September 30,
-------------------- --------------------
2002 2001 2002 2001
-------- -------- -------- --------
Revenues $ 11,128 $ 8,420 $ 21,646 $ 18,426
Cost of revenues 4,502 4,212 8,855 8,772
-------- -------- -------- --------
Gross margin 6,626 4,208 12,791 9,654
Operating expenses:
Research and
development 1,943 2,871 3,718 6,401
Sales and marketing 3,743 4,389 7,007 8,904
General and
administrative 1,759 2,288 3,600 4,618
Stock-based
compensation 165 816 428 2,150
Amortization of
goodwill -- 375 -- 750
Amortization of
purchased
intangibles(B) 161 161 322 322
-------- -------- -------- --------
Total operating
expenses 7,771 10,900 15,075 23,145
-------- -------- -------- --------
Loss from operations (1,145) (6,692) (2,284) (13,491)
Other income and
(expense) (18) 141 (72) 325
-------- -------- -------- --------
Net loss $ (1,163) $ (6,551) $ (2,356) $(13,166)
======== ======== ======== ========
Net loss per common
share--basic and
diluted $ (0.04) $ (0.24) $ (0.08) $ (0.48)
======== ======== ======== ========
Shares used in net
loss per common
share calculation
-- basic and
diluted 29,990 27,610 29,830 27,340
======== ======== ======== ========
Pro forma net
loss(A) $ (837) $ (5,199) $ (1,606) $ (9,944)
======== ======== ======== ========
Pro forma net loss
per share--basic
and diluted(A) $ (0.03) $ (0.19) $ (0.05) $ (0.36)
======== ======== ======== ========
(A) Excludes charges for stock-based compensation, amortization of
goodwill and amortization of purchased intangibles
(B) Includes amortization of purchased technology, previously a
component of research and development, of $161 for the three
months ended September 30, 2001 and 2002 and $322 for the six
months ended September 30. 2001 and 2002
DIGITAL IMPACT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts) (unaudited)
Three Months Ended Six Months Ended
September 30, September 30,
-------------------- --------------------
2002 2001 2002 2001
-------- -------- -------- --------
Net loss $ (1,163) $ (6,551) $ (2,356) $(13,166)
Excluded for pro
forma net loss:
Stock-based
compensation 165 816 428 2,150
Amortization
of goodwill -- 375 -- 750
Amortization
of purchased
intangibles 161 161 322 322
-------- -------- -------- --------
Pro forma net
loss $ (837) $ (5,199) $ (1,606) $ (9,944)
Excluded for EBITDA
Other income and
(expense) 18 (141) 72 (325)
Depreciation 1,483 1,397 2,714 2,758
-------- -------- -------- --------
EBITDA $ 664 $ (3,943) $ 1,180 $ (7,511)
======== ======== ======== ========
EBITDA Definition: Earnings before other income and expense, taxes,
depreciation, amortization, stock-based compensation, impairment
charges, write-off of acquired in-process research and development and
fixed assets, and restructuring charges.
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