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Digital Generation (DGIT)

Q2 2013 Earnings Call

August 08, 2013 8:30 am 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

Presentation

Operator

Good day, ladies and gentlemen and welcome to the Digital Generation, Inc. Q2 2013 Earnings Conference Call. My name is Catherine, and I will be your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would like to turn the call over to Mr. Craig Holmes, Chief Financial Officer. Please proceed, sir.

Craig E. Holmes

Thank you. Thank you, operator, and good morning, everyone, and welcome to our call to discuss our second quarter earnings. As the operator mentioned, I am Craig Holmes, the company's CFO and also joining the call today is Neil Nguyen, our CEO and President.

The agenda for today's call includes commentary from Neil regarding the quarter, followed by a discussion of the Q2 financial results from me, and then we'll take your questions. So on August 6, after the market closed, DG issued a press release, announcing the second quarter 2013 results. The results -- this release is available on the company's website, and this call is being broadcast live over the Internet and the audio portion of this call will be available on the Investor Relations page of the company's website. In addition, the company's 10-Q will be filed either later today or tomorrow.

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 more detailed information.

In addition, non-GAAP financial measures may be discussed during the call. Reconciliation to the most directly comparable GAAP measures are included in the table attached to the earnings release and on the website.

Now I'll turn the call over to Neil.

Neil H. Nguyen

Thanks, Craig, and thank you, everyone, for joining us this morning. First, let me apologize that we had to reschedule the call to this morning, but I had an unavoidable last-minute conflict, and I'm sorry for any confusion this may have caused. Our value proposition of being a global independent platform is resonating with customers worldwide, and we're optimistic about the traction we're achieving in the marketplace. DG's overall revenue for Q2 was $96.3 million, flat compared to Q2 of 2012. As expected, our results were negatively impacted by our TV revenues, yet we were able to deliver TV EBITDA margins that were at the high end of expectations even before a onetime benefit.

Looking more closely to our online operation, we achieved revenues of 19% growth year-over-year, reflecting significant progress in the North American region, where our efforts to gain business after the integration of the online assets are showing positive results. We also saw continued growth in APAC. LatAm was a bit softer than we expected. With respect to EMEA, after negatively impacting our results for the past year, EMEA's revenue were flat year-over-year. I am cautiously optimistic about our progress in Europe, but we continue to see challenges in certain markets within the EU. We saw strong global growth in our platform revenues, which supports our strategy of increasing the product mix we sell to our current and new customers. We are also seeing good traction with larger more established advertisers using our platform, including Volkswagen in Europe, RJ Palmer and Nestlé in the U.S., Nissan in Australia, are handful of examples. We continue to receive requests to service other external data sets within the DG MediaMind platform, reflecting that it is a true single source of all campaign management, analytics and insights. Our platform customers are particularly focused on our data products, which drives their campaign optimization and results. Our strategy is enabling other third party data providers into our platform, allows our clients to have a consolidated view of their campaign analytics.

Also this quarter, we will be pushing our multiscreen analyst swap [ph] into Beta in conjunction with our partnership with Nielsen, as well as other major global data providers. We're also going to be -- going to market with our video verification solution, which is a growing demand for digital marketers. These products releases are critical to providing cross-platform analytics. We're also encouraged by the growth of programmatic business. For those that are new to the ad tech lingo, programmatic is the automation of media buying through sophisticated algorithms that leverages real-time data and analytics. It's a significant trend in the industry, with the majority of agency CEOs believing traditional media will also be bought and sold in this manner in the years to come. This area of our business nearly doubled over the prior year as we benefited from the synergy of our data services, specifically Peer39, as well as the integration with the market-leading demand-side platforms.

We've also seen growing business interest on our platform ability to execute mobile campaigns as we continue to make the design and delivery of creative assets easier with the launch of our HTML factory. This is an enhancement to our existing creative tool sets that agencies use to build engaging ad formats across multiple screens. As you have heard me say many times, video continues to be core to our growth strategy. I'm pleased to say that we now have executed over 40 campaigns using our broadcast to online service, allowing our clients to seamlessly repurpose their TV spots for delivery and targeting of online audiences. This includes well-known advertisers such as Procter & Gamble, Unilever and Campbell's.

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