Sizmek Inc., a global open ad management company that delivers multiscreen campaigns, today reported financial results for the second quarter ended June 30, 2015. Revenues for the three months ended June 30, 2015 were $40.2 million compared to the same period of 2014, a decrease of 9%. On a constant currency basis, revenues were $43.0 million compared to $44.0 million the prior year when adjusted for the effect of changes in foreign currency. Core products, consisting of all products except rich media, grew 8% for the three months when adjusted for the effect of the change in foreign currencies, comprising 81% of the business for the second quarter.
Adjusted EBITDA for the three months ended June 30, 2015 decreased 57% to $2.9 million compared to Adjusted EBITDA for the same period of 2014, or a 48% decrease over the prior year when adjusted for the effects of changes in foreign currency.
“We anticipated that first half 2015 results would be challenged due largely to the repositioning of our global sales organization, exacerbated by foreign currency trends, which impacted revenues by $5.0 million or 6% of our growth for the six months,” said Neil Nguyen, CEO of Sizmek. “Looking toward to the balance of the year, we are gaining traction from the capital investments made in our technology platform, with a number of large global customer wins validating our value proposition. In addition the formal launch of our Data Hub and continued enhancements to our mobile programmatic platform will further distinguish Sizmek from the rest of the solutions in market. We believe pairing our leading global ad management platform with a robust mobile programmatic offering will drive growth in the second half of 2015 and beyond.”
The Company is updating its full year guidance to reflect the projected impact of $9-10 million of negative foreign currency; revenues are now expected to be $180-184 million, representing 5-8% growth over full year 2014, or 10-13% growth after giving effect to the negative impact in foreign currency changes.
Second quarter highlights include:
Completed acquisition of StrikeAd Mobile DSP and began the expansion of additional channels are on track for introduction in 2016.
Core products, including mobile, video, and data driven products, saw high growth despite the significant impact from foreign currency:
Mobile formats (or HTML5) revenues grew 99% from the second quarter of 2014, grew 100% on a year to date basis over prior year;
Data driven products, such as programmatic decisioning, viewability and verification revenue grew 17% from the second quarter of 2014, grew 24% on a year to date basis over prior year; and
In-stream video revenue increased 8% from the second quarter of 2014, grew 9% on a year to date basis over 2014. With exception of a single client shifting budgets, video would have grown over 30%.
- Mobile formats (or HTML5) revenues grew 99% from the second quarter of 2014, grew 100% on a year to date basis over prior year;
As anticipated, flash based rich media continues to trend out of the business, declining 35% from the second quarter of 2014, and 35% on a year to date basis.
- At June 30, 2015 the Company had $66.9 million of cash and cash equivalents on hand and has no long-term debt. Cash impact of the StrikeAd acquisition was $10.5 million in the second quarter of 2015.
2015 BUSINESS OUTLOOK
We are updating our guidance for the full year 2015 to take in to consideration the results of the first half and a projected $4-5M of negative foreign currency impact for the remainder of the year, as follows:
Revenues for 2015 are expected to end the full year between $180 million and $184 million.
- Adjusted EBITDA guidance for 2015 between $23 million to $25 million.
Second Quarter 2015 Financial Results Webcast
The Company’s second quarter financial results conference call will be broadcast live on the Internet at 5 p.m. ET on August 12, 2015. To access the conference call by telephone, interested parties may dial (855) 765-5680 and enter passcode 84232756. International callers may access the call by dialing (707) 294-1311. Please call five minutes in advance to ensure that you are connected. A replay will also be available for seven days following the call. To access the replay, interested parties may dial (855) 859-2056 and enter passcode 84232756. International callers may access the replay by dialing (404) 537-3406. Participants can access the webcast at www.sizmek.com/investor-relations. For the webcast, please allow 15 minutes to register and download any necessary software. Following the call’s completion, a replay will also be available on the Company’s website.
Basis of Presentation
Sizmek Inc. was formed in 2013 and operated as the online segment of DG until February 7, 2014. On February 7, 2014, pursuant to the Agreement and Plan of Merger, dated as of August 12, 2013, by and among Digital Generation, Inc. (DG), Extreme Reach, Inc., and a wholly-owned subsidiary of Extreme Reach, DG’s online business was spun off into Sizmek and the remainder of DG became a wholly-owned subsidiary of Extreme Reach. Accordingly, the accompanying financial statements reflect results up to February 7, 2014 on a carve-out basis and results subsequent to February 7, 2014 on a stand-alone basis.
The accompanying financial statements and schedules reflect the combined historical results of operations and cash flows of DG’s online business conducted through its online subsidiaries and an allocable portion of certain DG corporate expenses for periods up to February 7, 2014. These combined financial statements include expense allocations for (1) certain corporate functions historically provided by DG, including, but not limited to, finance, audit, legal, information technology, human resources, communications, compliance, and shared services; and (2) employee benefits and incentives and (3) share-based compensation. These expenses have been allocated to Sizmek on the basis of direct usage when identifiable, with the remainder allocated on a pro-rata basis of combined revenues, headcount or other measures of the Company and DG. Sizmek considers the basis on which the expenses have been allocated to be a reasonable reflection of the utilization of services provided to or the benefit received by the Company during the periods presented. The allocations may not, however, reflect the full expense we would have incurred as an independent, publicly traded company for the 2014 period presented. We benefited from sharing the corporate cost structure of DG rather than incurring such costs ourselves on a stand-alone basis. Actual costs that may have been incurred if we had been a stand-alone company for 2014 would depend on a number of factors, including the chosen organizational structure, what functions were outsourced or performed by employees and strategic decisions made in areas such as information technology and infrastructure. For comparison purposes, we have included a schedule reconciling 2014 results reflected on a combined basis with pro forma amounts which include the increased corporate overhead expenses expected on a stand-alone basis.
Non-GAAP Financial Measures
In addition to providing financial measurements based on generally accepted accounting principles in the United States of America (GAAP), the Company has historically provided additional financial measures that are not prepared in accordance with GAAP (non-GAAP). We believe that the inclusion of Adjusted EBITDA as a non-GAAP financial measure in this press release helps investors to gain a meaningful understanding of our past performance and future prospects, consistent with how management measures and forecasts our performance, especially when comparing such results to previous periods or forecasts. Our management uses Adjusted EBITDA as a non-GAAP financial measure, in addition to GAAP financial measures, as the basis for measuring our core operating performance and comparing such performance to that of prior periods and to the performance of our competitors.
We use Adjusted EBITDA to measure the operating performance of our business. This measure is used by management in its financial and operational decision-making. There are limitations associated with reliance on any non-GAAP financial measure because non-GAAP financial measures are specific to our operations and financial performance, which makes comparisons with other companies’ financial results more challenging. By providing both GAAP and non-GAAP financial measures, we believe that investors are able to compare our GAAP results to those of other companies while also gaining a better understanding of our operating performance as evaluated by management.
The Company considers Adjusted EBITDA to be an important indicator of the overall performance of the Company because it eliminates the effects of events that are non-cash, or are not expected to recur as they are not part of our ongoing operations.
The Company defines “Adjusted EBITDA” as income (loss) from operations, before depreciation and amortization, share-based compensation, merger, integration and other expenses, and restructuring / impairment charges and benefits. The Company considers Adjusted EBITDA to be an important indicator of the Company’s operational strength and performance and a good measure of the Company’s historical operating trends.
Adjusted EBITDA eliminates items that are either not part of our core operations, such as merger, integration and other expenses or do not require a cash outlay, such as share-based compensation and impairment charges. Adjusted EBITDA also excludes depreciation and amortization expense, which is based on the Company’s estimate of the useful life of tangible and intangible assets. These estimates could vary from actual performance of the asset, are based on historical costs, and may not be indicative of current or future capital expenditures.
Adjusted EBITDA should be considered in addition to, not as a substitute for, the Company’s operating income (loss), as well as other measures of financial performance reported in accordance with GAAP.
Reconciliation of Non-GAAP Financial Measures
In accordance with the requirements of Regulation G issued by the Securities and Exchange Commission, the Company is presenting the most directly comparable GAAP financial measure and reconciling the non-GAAP financial measure to the comparable GAAP measure.
Sizmek Inc. (NASDAQ:SZMK) fuels digital advertising campaigns for advertisers and agencies around the world with cutting-edge technology to engage audiences across any screen. For the last 15 years, the online business that is now Sizmek has proudly pioneered industry firsts in digital, including rich media, video and online targeted advertising across several channels. Sizmek’s open ad management stack, Sizmek MDX, delivers the most creative and impactful multiscreen digital campaigns, across mobile, display, rich media, video and social, all powered by an unrivaled data platform. With New York City as a center of operations, Sizmek connects approximately 17,000 advertisers and 3,500 agencies to audiences, serving more than 1.4 trillion impressions a year. Sizmek operates on the ground in approximately 60 countries with a team of approximately 900 employees. www.sizmek.com