Q3 2012 Earnings Call
October 24, 2012 5:00 p.m. EDT
Denise Garcia – ICR
Ron Frankel – President and CEO
Bill Stuart – CFO
Jason Helfstein – Oppenheimer
Edward Williams – BMO Capital Markets
[Gord Talpez] – Stifel Nicolaus
Leo Kulp – Citi
Nat Schindler – Bank of America Merrill Lynch
Good day, ladies and gentlemen, and welcome to the Synacor 2012 third quarter earnings call. [Operator Instructions].
I would now like to turn the call over to Denise Garcia. Please go ahead, ma'am.
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Before we begin, I'd like to take this opportunity to remind you that during the course of this call management will make forward-looking statements which are subject to various risks and uncertainties. Actual results may differ materially from the results predicted and reported results should not be considered as an indication of future performance. Further information on these and other factors that could affect the company’s financial results is included in filings it makes with the Securities and Exchange Commission from time to time, including the section entitled Risk Factors in the company’s most recent 10-Q filed with the SEC on May 15, 2012.
Also, I’d like to remind you that during the course of this conference call we will discuss non-GAAP measures in talking about the company’s performance. Reconciliation to the most directly comparable GAAP financial measures are provided in the tables in the press release.
This conference call is also being broadcast on the internet and is available through the Investor Relations section of the Synacor website.
And now, I’ll turn the call over to Ron Frankel, Synacor’s President and CEO.
Thanks, Denise, and welcome to today's conference call. I'm pleased to share our financial results and to provide an update on our business to our shareholders and the investment community.
I'm pleased we had another solid quarter. Our third quarter revenue grew 18% to $28.3 million from $24 million in the same period last year. Adjusted EBITDA was $2.2 million for the quarter compared to adjusted EBITDA of $2.5 million in the third quarter of 2011. Revenue from our display advertising business grew 59% over the same quarter last year, from $5.5 million to $8.8 million, and increased 7% from $8.2 million in the second quarter of 2012. We continue to make great strides in our direct advertising sales in the major verticals such as finance, autos, insurance and travel.
Search revenue was $14.5 million, a 10% increase from the same period last year, a 16% sequential decrease from Q2 2012 due to typical summertime search seasonality. Subscription-based revenue was $5.1 million, a decrease of 3% from the third quarter 2011 and a 6% sequential decrease, mainly due to non-recurring activity during both of the previous quarters.
Our revenue mix continues to diversify with display advertising revenue representing greater than 30% of our total revenue for the first time. Search represented 51% third quarter revenue, in part due to the impressive growth we experienced in display advertising combined with third quarter search seasonality. Seasonal trends aside, we anticipate our revenue mix to continue to diversify over time, and we're pleased with Synacor's most recent display advertising results.
Also we expect continued growth in our display advertising business as we make more of our inventory available to local resellers. In this regard, we expanded our partnership with Comcast Spotlight, which enables local marketers to efficiently reach multichannel video subscribers, both on television and online through one sales team. Under the agreement, Comcast Spotlight will have the ability to sell advertising inventory on Synacor-managed start pages in areas where Comcast Spotlight also sells local spot television advertising on behalf of television service providers.
We also announced a partnership with MTC Media. As part of the partnership, MTC Media will sell regional advertising inventory of Synacor's start pages, in conjunction with MTC's existing broad portfolio of multichannel operator web properties to ensure that advertisers can reach their customers easily and effectively.
On the customer front, we are kicking out the fourth quarter with a new launch announcement. On October 1, we launched the start page and email for dishNET, the broadband ISP service of DISH Networks. We are excited to have been chosen by DISH.
As a technology company, we are always innovating. As you know, we're at the cutting-edge of TV Everywhere authentication and Synacor is a leader in the market with nearly 40 pay TV operators utilizing our authentication technology to enable consumers to access content from providers such as HBO Go, Turner, Hulu and Fox. The 2012 Summer Olympics showcased the value consumers receive from their pay TV subscription and accelerated awareness of TV Everywhere to an all-time high. We expect this awareness and growing interest in TV Everywhere to spur consumer adoption, particularly as consumers increase the number of connected devices they use to access their content.