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Digital Generation (DGIT)

Q1 2013 Earnings Call

May 07, 2013 5:00 pm ET

Executives

Craig E. Holmes - Chief Financial Officer and Principal Accounting Officer

Neil H. Nguyen - Chief Executive Officer, President, Director and Member of Executive Committee

Analysts

Darren Aftahi - Northland Capital Markets, Research Division

Richard Ingrassia - Roth Capital Partners, LLC, Research Division

Presentation

Operator

Good day, ladies and gentlemen and welcome to the First Quarter 2013 Digital Generation Inc. Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Craig Holmes, Chief Financial Officer. You may proceed, sir.

Craig E. Holmes

Well, thank you, operator. And good afternoon, everyone. And welcome to DG's first quarter 2013 earning call. As the operator mentioned, I am Craig Holmes. I actually joined the company as CFO in November of 2012. I know I have met many of you already and I look forward to meeting the rest of you soon. Also joining the call today is Neil Nguyen, our CEO and President.

Now the agenda for today's call includes commentary from Neil, followed by a discussion of the financial results by me and then Q&A.

So this afternoon, DG issued a press release announcing its first quarter 2013 financial results, which is available on the company's website. This call is being broadcast live over the Internet and the audio of the call will be available on the Investor Relations page of the company's website.

I'd like to remind everyone that the conference call will contain forward-looking statements that are not historical facts, but rather are based on the company's current expectations and beliefs. DG's actual results may differ materially from these forward-looking statements. Please refer to the company's SEC filings for detailed information about risks, uncertainties and contingencies. In addition, non-GAAP financial measures will be discussed during this call. Reconciliations to the most directly comparable GAAP financial measures are included in the table attached to the earnings release on the website. Now let me turn the call over to Neil.

Neil H. Nguyen

Thanks, Craig. Thank you, everyone, for joining us this afternoon. Our first quarter results demonstrated the progress of our online operations, reflecting a 10% growth year-over-year. DG's overall revenue for Q1 was $92 million flat compared to Q1 of 2012. Our online segment regionally performed exceptionally well, with North America growing over 20% year-over-year; Latin America, growing over 80% year-over-year; and APAC, coming in over 30% year-over-year. EMEA was down 12% and we continue to be impacted by the broader trends in the marketplace.

Our online growth was fueled by the growth in online video solutions and the continued adoption of our portfolio of data-driven products. Our TV business saw a decline year-over-year as expected, but continues to play a critical role in DG's positioning within overall video ecosystem. We made strides in expanding our TV global footprint and now have distribute TV advertising campaigns in France, United Kingdom, Italy, Spain and Germany.

We also amended our credit facility in the quarter, which Craig will discuss later in the call. As many of you have noticed, we launched a major re-branding of DG to reflect our new strategic approach to our clients, partners and the marketplace by incorporating all of our solutions under a single corporate umbrella and making it easier for our advertisers to take full advantage of our unique offering. Our product strategy focus around our video platform called VideoFusion, and our online campaign management platform called MediaMind.

Now let's take a closer look at the first quarter performance. I'm often asked how we compete and win against some of the largest players in online advertising. The keys to our differentiation are DG's neutral and independent position, the quality and global reach of our platform, our strong data analytics capabilities, and our video-centric approach to a multiscreen advertising ecosystem. These value propositions are resonating, especially with global brands and advertisers. DG recently announced a strategic partnership with Havas Media, a major global advertising holdings company, who chose to increase their business with DG to include a strategic partnership for digital and TV campaign optimization. Havas has committed to rationalizing their vendor network, which we have heard for many global firms. With key clients such as Nike, Citroen and KLM, we look to grow our multimillion dollar relationship with Havas to now include our TV and video offering on a global basis.

We had begun to see significant increase in the number of online video ads generated from the content on our TV platform. Major global CPG companies are now leveraging this one-stop process for managing and delivering their ad content. While we bring clear process improvement, it's really the overall campaign management capabilities that include a deep set of video analytics, interactive tool set and cross channel analytics that differentiate our offering.

One of the key milestones in Q1 was DG's first in-stream campaign on Hulu and withstanding our video ad serving network on a global basis. Online video also drove many of our new product introductions this quarter, including strengthening our mobile offering through a partnership with Celtra, which helped win additional business with a major global retail base. It speaks to our positioning of our open platform strategy that allows clients to access and work with some of the best ad technologies in the marketplace.

We also introduce video and activity, working with video ad factory, which again helps improve our multiscreen advertising offering.

Read the rest of this transcript for free on seekingalpha.com