Sizmek Reports Third Quarter 2015 Results

• Core Business Revenues Grow 30% on foreign currency adjusted basis
• Mobile Revenues Increase over 300% fueled by HTML 5 adoption
• Acquisition of Dynamic Creative Solutions business will leverage platform investment  
  
  
  

AUSTIN, Texas, Nov. 12, 2015 (GLOBE NEWSWIRE) -- Sizmek Inc. (NASDAQ:SZMK), a global open ad management company that delivers multiscreen campaigns, today reported financial results for the third quarter ended September 30, 2015.  Revenues for the three months ended September 30, 2015 were $40.3 million compared to $39.5 million in the prior year.  On a constant currency basis, revenues grew 8% to $42.7 million when compared to the same period in the prior year and adjusted for the effect of changes in foreign currency. Core products, consisting of all products except rich media flash, grew 30% for the three months when adjusted for the effect of the change in foreign currencies, comprising 90% of the business for the third quarter.

Adjusted EBITDA for the three months ended September 30, 2015 was $0.1 million, or $0.4 million when adjusted for the effect of changes in foreign currency, compared to Adjusted EBITDA for the same period of 2014 of $4.5 million.

“We made progress in growing our global customer base, while increasing our programmatic revenues and expanding our product suite,” said Neil Nguyen, CEO and President of Sizmek.  “However, our investments this year into our new platform MDX NXT and the recently acquired mobile DSP is putting pressure on EBITDA. Yet, these capital investments are necessary as Sizmek continues to transform its platform and product offerings to establish itself as the leading independent advertising technology platform. As global advertisers seek an alternative to the publisher owned technology solutions, Sizmek’s open ad management platform is gaining traction.”

Third quarter highlights include:

• Core NAM product revenues grew 20% for the nine months ending September 30, 2015 when compared to the same period in the prior year;
• Mobile formats (or HTML5) revenues grew 303% from the third quarter of 2014, and grew 183% on a year to date basis over the prior year;
• In-stream video revenue increased 17% from the third quarter of 2014 and grew 16% on a year to date basis over 2014 on a constant currency basis;
• Flash based rich media’s decline accelerated to 59% when compared to the third quarter of 2014, up from second quarter’s year over year decline of 35% and now representing approximately 10% of total revenues in the third quarter;
• At September 30, 2015 the Company had $64.9 million of cash and cash equivalents on hand and has no long-term debt.   
  
  

Acquisition of Dynamic Creative Solutions Business

In a separate press release today, Sizmek announced that it has acquired the dynamic creative solutions business from Cofactor, a business unit within Tegna, Inc., for $20.0 million, consisting of $11.0 million in cash at closing and $9.0 million in cash to be paid in a year. As part of the transaction, Sizmek, Inc. will become the preferred ad management platform vendor to the Cofactor business unit.

Third Quarter 2015 Financial Results Webcast

The Company’s third quarter financial results conference call will be broadcast live on the Internet at 5 p.m. ET on November 12, 2015.  To access the conference call by telephone, interested parties may dial (855) 765-5680 and enter passcode 65790526.  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 65790526.  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.

About Sizmek

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 1,000 employees. www.sizmek.com

Cautionary Note Regarding Forward-Looking Statements

Statements in this release regarding our current expectations, estimates, outlook, guidance and projections about our operations, industry, financial condition, performance, results of operations, and liquidity constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements that are not statements of historical fact (including statements containing the words “believes,” “plans,” “anticipates,” “expects,” “estimates” and similar expressions) should also be considered forward-looking statements. There are a number of important factors that could cause actual results or events to differ materially from those indicated by such forward-looking statements, including: our ability to further identify, develop and achieve commercial success for new online video and mobile products; continued or accelerating decline in our rich-media business; delays in product offerings; the development and pricing of competing online services and products; consolidation of the digital industry and of digital advertising networks; slower than expected development of the digital advertising market; our ability to protect our proprietary technologies; identifying acquisition and disposition opportunities and integrating our acquisitions with our operations, systems, personnel and technologies; security threats to our computer networks; operating in a variety of foreign jurisdictions; fluctuations in currency exchange rates; adaption to new, changing, and competitive technologies; potential additional impairment of our goodwill and potential impairment of our other long-lived assets; our ability to achieve some or all of the expected benefits of the spin-off and merger transaction; and the other risks and uncertainties that affect our business, including those described in our filings with the Securities and Exchange Commission. In addition, any forward-looking statements represent our estimates only as of the date hereof and should not be relied upon as representing our estimates as of any subsequent date. We disclaim any intention or obligation to update the forward-looking statements to reflect subsequent events or circumstances or update the reasons that actual results could differ materially from those anticipated in the forward-looking statements, except as required by law.

Constant currency information is presented to provide a framework for assessing how the Company performed excluding the effect of foreign currency exchange rate fluctuations. To present this information, the Q3 2015 reported operating results for entities reporting in currencies other than the U.S. dollar are converted into U.S. dollars at the exchange rates in effect during Q3 2014.  Constant currency excludes the impact from the Company’s hedging program.