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TheStreet Open House

Demand Media Reports Fourth Quarter And Fiscal 2012 Results

Demand Media, Inc. (NYSE: DMD), a leading digital media and domain services company, today reported financial results for the fourth quarter and fiscal year ended December 31, 2012.

"We finished the year on a high note, posting record fourth quarter results and completing our fifth consecutive year of record revenue and Adjusted EBITDA," said Richard Rosenblatt, Chairman and CEO of Demand Media. "We improved content quality and diversified our distribution channels by successfully revamping our content platform in 2012, and are now prepared to significantly increase our content investments in 2013. In addition, we became a leader in the generic Top Level Domain opportunity, due to substantial investments we made in 2012. We plan to increase this investment ahead of the expected launch later this year."

Rosenblatt added: "As a result of these two different growth opportunities, we also announced today that our Board of Directors has authorized a plan to explore the separation of our business into two independent publicly-traded companies via a tax-free spin-off. If approved, the separation will facilitate better operational and strategic flexibility, enabling each business to focus on its distinct priorities and growth opportunities."

 
Financial Summary
In millions, except per share amounts
    Three months ended    

Year ended

December 31,

December 31,

2011     2012     Change 2011     2012     Change
Total Revenue $ 84.4 $ 103.1     22% $ 324.9 $ 380.6     17%
 
Content & Media Revenue ex-TAC (1) $ 49.9 $ 62.3 25% $ 193.0 $ 227.0 18%
Registrar Revenue 31.4   34.5   10% 119.4   134.2   12%
Total Revenue ex-TAC (1) $ 81.3   $ 96.8   19% $ 312.4   $ 361.1   16%
 
Income (loss) from Operations $ (4.8 ) $ 6.1 NA $ (13.1 ) $ 8.7 NA
Adjusted EBITDA (1) $ 23.7 $ 29.4 24% $ 86.0 $ 103.4 20%
Net income (loss) $ (6.4 ) $ 4.7 NA $ (18.5 ) $ 6.2 NA
Adjusted net income (1) $ 6.8 $

10.8

60% $ 21.9 $

34.3

57%
 
EPS - diluted $ (0.08 ) $ 0.05 NA $ (0.27 ) $ 0.07 NA
Adjusted EPS (1) $ 0.08 $ 0.12 50% $ 0.25 $ 0.39 56%
 
Cash Flow from Operations $ 27.2 $ 26.0 (4)% $ 85.3 $ 91.0 7%

Free Cash Flow (1)(2)

$ 18.3 $ 17.1 (7)% $ 19.5 $ 62.3 219%

 

 
(1) These non-GAAP financial measures are described below and reconciled to their comparable GAAP measures in the accompanying tables. Effective Q1 2012, the Company began reporting Adjusted EBITDA instead of Adjusted OIBDA.
Reconciliations for both measures are available on the investor relations section of the Company's website.
 
(2) In 2012, the Company invested $18.2 million in generic Top Level Domain ("gTLD") applications, which did not impact its recurring Free Cash Flow metric.

Q4 2012 Financial Summary:

  • Content & Media revenue ex-TAC grew 25% year-over-year, driven by 24% page view growth on the Company's owned & operated properties as well as 37% growth in network RPMs ex-TAC, reflecting higher revenue from network content partners.
  • Registrar revenue grew 10% year-over-year, driven by an increase in the number of domains on our platform, due primarily to growth from new partners.
  • Adjusted EBITDA increased 24% year-over-year, resulting in 110 basis points of margin expansion to 30.3% of Revenue ex-TAC. This improvement was driven by the growth in higher margin Content & Media revenue and operating leverage.

β€œIn 2012 we generated over $60 million of free cash flow, which more than funded our acquisition of Name.com and the repurchase of nearly $9 million of our common stock,” said Demand Media's CFO Mel Tang. "We plan to continue reinvesting our strong cash flows into long-term growth opportunities, such as our gTLD initiative as well as growing and diversifying our content offerings.”

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