DG Misses Top and Bottom Line Estimates in Q2 2012, Outlines Cost Containment Plan

Posted by Joe Zaller
Aug 13 2012

Video delivery and advertising management specialist Digital Generation (DG) reported that its revenue for the second quarter of 2012 was $96.3m, an increase of 42% versus the same period a year ago, and an increase of 4% versus the previous quarter.

Q2 income from continuing operations was $518,000, or $0.02 per share, down 95% versus last year, and down 62% versus last quarter. Adjusted EBITDA for the quarter was $30.4m, compared to $31.2 million in the second quarter of 2011, and $29.6m last quarter.

DG CEO Neil Nguyen attributed the lower than expected results to “substantial deceleration of business in Europe in the back half of the quarter as well as [foreign exchange] impact.”

The results were below a consensus of equity analysts who expecting revenue of $100.7m, and earnings of $0.09 share.  Investors did not like the news and sent the shares down 17% the day after the earnings were released.


On a segment basis:

  • Revenue from television was $61.8 million, or 63% of total revenue, decrease of 2% versus last year, and flat with last quarter.   HD advertising revenue was $37.1m, up 10% versus last year, and up 6% versus last quarter.


  • Online revenue was $34.7m, up 577% versus last year, and up 10.2% versus last quarter.  The increase in online revenue was primarily due to DG’s acquisitions of MediaMind and EyeWonder during the 3rd quarter of 2011


Based on these results, DG CFO Omar Choucair,said the company was initiating a cost containment program.   “Based on the first half performance, management has identified cost reduction initiatives, which will reduce the company’s operating expenses over the back half of the year,” said Choucair. “Management believes this program will reduce current annual run rate expenses by approximately $12m beginning in September. Note that cost cutting will not impact R&D, as management believes the ongoing investments in projects, including the converge TV, online platform, enhanced online analytics, in-stream video products and upgraded CRM systems, are critical to achieving the company’s cross-platform strategy.”

The company ended the quarter with $57.0m of cash and short-term investments had $456.0m outstanding under its long-term credit facility.



Related Content:

Press Release: DG Reports Second Quarter 2012 Results

Digital Generation Q2 2012 Earnings Call Transcript

Previous Quarter: HD and Online Drive Record Q1 2012 Revenue at DG


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