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DG FastChannel Inc. Reports Operating Results (10-Q)

August 09, 2012 | About:
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10qk

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DG FastChannel Inc. (DGIT) filed Quarterly Report for the period ended 2012-06-30.

Digital Generation Inc has a market cap of $282.1 million; its shares were traded at around $11.2 with a P/E ratio of 6.7 and P/S ratio of 0.9. Digital Generation Inc had an annual average earning growth of 9% over the past 10 years.

Highlight of Business Operations:

Cost of Revenues. For the three months ended June 30, 2012, cost of revenues increased $12.4 million, or 54%, as compared to the same period in the prior year. As a percentage of revenues, cost of revenues increased to 36.7% in 2012, as compared to 33.8% in 2011. Cost of revenues increased due to (i) including the 2011 acquisitions of MediaMind and EyeWonder and the 2012 acquisition of Peer 39 in our operating results ($11.6 million) and (ii) increases in personnel costs ($1.1 million). The increase in our cost of revenues percentage is principally due to lower pricing in our television segment.

Cost of Revenues. For the six months ended June 30, 2012, cost of revenues increased $23.9 million, or 54%, as compared to the same period in the prior year. As a percentage of revenues, cost of revenues increased to 36.2% in 2012, as compared to 33.8% in 2011. Cost of revenues increased principally due to (i) including the 2011 acquisitions of MediaMind and EyeWonder and the 2012 acquisition of Peer 39 in our operating results ($21.6 million) and (ii) including six months of MIJOs results in the 2012 period as compared to three months results in the 2011 period ($2.0 million). The increase in our cost of revenues percentage is due to (i) lower pricing in our television segment and (ii) an increase in online revenues as a percentage of total revenues as our online revenues currently have a higher cost of revenues percentage.

Revenues. For the three months ended June 30, 2012, revenues decreased $1.1 million, or 2%, as compared to the same period in the prior year. The decrease was principally due to a $7.4 million reduction in standard definition (SD) revenue, partially offset by increases in high definition (HD) revenue ($5.9 million) and political advertising revenue ($1.1 million). The reduction in SD revenue was due to (i) a decrease in the number of deliveries as more customers switched to HD deliveries, and (ii) lower pricing per delivery. HD revenue increased due to a rise in the number of deliveries, partially offset by lower pricing per delivery. We expect the percentage that HD deliveries bear to total deliveries will continue to increase. HD and SD pricing per delivery decreased principally due to the competitive environment and, with respect to HD, a higher percentage of electronic deliveries (97% in 2012 compared to 88% in 2011). Historically, electronic deliveries are priced lower than physical deliveries. Political advertising increased due to the 2012 national, state and local elections in the United States. We expect political advertising will increase in the next two quarters.

Adjusted EBITDA. For the three months ended June 30, 2012, adjusted EBITDA decreased $5.0 million as compared to the same period in the prior year. The decrease was due to lower revenues ($1.1 million) and higher professional fees ($2.6 million), personnel costs ($0.9 million) and facilities costs ($0.8 million). The increase in professional fees is partially attributable to higher legal costs ($1.2 million) and audit and tax fees ($0.6 million), a portion of which relates to our recent acquisitions. The increase in personnel costs is partially attributable to our recent expansion into European markets ($0.4 million).

Revenues. For the six months ended June 30, 2012, revenues increased $1.5 million, or 1%, as compared to the same period in the prior year. The increase was principally due to (i) recognizing six months of MIJOs operating results in the current year period versus three months in the prior year period ($5.8 million), (ii) higher HD revenues ($3.9 million, which excludes $5.2 million of MIJO HD revenue addressed above) and (iii) higher political advertising revenue ($1.6 million), partially offset by (iv) a $8.8 million reduction in SD revenue (which excludes $0.6 million of MIJO SD revenue addressed above). The reduction in SD revenue was due to (i) a decrease in the number of deliveries as more customers switched to HD deliveries, and (ii) lower pricing per delivery. HD revenue increased due to a rise in the number of deliveries, partially offset by lower pricing per delivery. We expect the percentage that HD deliveries bear to total deliveries will continue to increase. HD and SD pricing per delivery decreased principally due to the competitive environment and, with respect to HD, a higher percentage of electronic deliveries (96% in 2012 compared to 86% in 2011). Historically, electronic deliveries are priced lower than physical deliveries. Political advertising increased due to the 2012 national, state and local elections in the United States. We expect political advertising will increase in the next two quarters.

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