Press Releases

August 6, 2014


Announces $150 Million Increase in Stock Repurchase Program


WESTLAKE VILLAGE, Calif.--(BUSINESS WIRE)--


Conversant, Inc. (NASDAQ: CNVR) today reported financial results for the


second quarter ended June 30, 2014.


"I am encouraged by our recent progress on integration initiatives and


key investments in the areas of product, sales and technology that


strengthen our foundation to drive stronger growth and will maximize our


longer-term value for clients, employees and shareholders," said
John


Giuliani, president and CEO of Conversant.


"We generated very strong cash flows in Q2 that we returned to


shareholders by repurchasing approximately four percent of our common


shares outstanding during the quarter," Giuliani added. "Today's


announcement of a $150 million increase in our stock repurchase program


underscores our confidence in our strategy and Conversant's future as a


leader in personalized digital marketing."














































































 



Q2 Results Summary



In millions, except percentages and per share amounts



 



Q2 2014



 



Q2 2013



 



% Change



 



Revenue



 



$



137.4




 



$



128.1




 



7



%



Adjusted EBITDA(1)




$



41.8




$



46.8




(11



)%



GAAP Net Income from Continuing Operations




$



17.0




$



6.0




182



%



Non-GAAP Net Income(1)




$



23.7




$



12.3




93



%



GAAP Net Income from Continuing Operations Per Diluted Common


Share




$



0.25




$



0.08




213



%



Non-GAAP Net Income Per Diluted Common Share(1)



 



$



0.35



 



$




0.16



 



119



%



 



(1) Adjusted EBITDA, Non-GAAP Net Income and Non-GAAP Net Income


Per Diluted Common Share are Non-GAAP measures and are described


below and reconciled to their most comparable GAAP measures.



 


Q2 2014 Financial Summary



  • Revenue was $137.4 million, an increase of 7% year-over-year.




  • Adjusted EBITDA was $41.8 million, a decrease of 11% year-over-year.


    The decrease reflects significant investments in people, products and


    technology to support future growth.




  • Non-GAAP net income per diluted common share was $0.35 and GAAP net


    income from continuing operations per diluted share was $0.25, up from


    $0.16 and $0.08, respectively, in the second quarter of 2013. Non-GAAP


    and GAAP net income per diluted share measures in Q2 2013 were


    negatively impacted by a non-cash impairment charge equivalent to


    approximately $0.18.



Recent Business Highlights



  • Conversant has strategically expanded its real-time bidding technology


    platform to include ad inventory from Conversant's thousands of direct


    publisher relationships in the Media segment, enabling its CRM client


    campaigns to access this high-quality source of display and mobile


    publisher inventory via real-time bidding.




  • The Company recently added significant new analytics capabilities to


    further leverage Conversant data sources companywide in creating


    custom audiences to maximize ad campaign performance.




  • The Company has integrated SET Media's video content consumption data,


    which greatly enhances Conversant's anonymous consumer profiles for


    audience targeting based on consumer interests.




  • Total bid requests (real-time bidding opportunities for individual


    advertising impressions) exceeded one trillion in June 2014,


    demonstrating Conversant's vast scale and media reach.




  • Internet Retailer named Conversant's CJ Affiliate the top


    affiliate marketing vendor in its "Top Tech 2014" book. Internet


    Retailer data indicated that 57 percent of the Internet Retailer


    500 advertisers on an affiliate network choose CJ Affiliate.




  • The Company has increased its headcount by approximately 9% since


    December 31, 2013 to accelerate its growth initiatives.



Cash Flows



  • Free cash flow for the six months ended June 30, 2014 was $88.7


    million, an increase of 21% year-over-year. (The Company defines free


    cash flow as net cash provided by operating activities less capital


    expenditures.)




  • Free cash flow for the trailing 12 month period ended June 30, 2014


    was $180.1 million.



Stock Repurchases



  • Conversant repurchased 2,556,000 common shares at an average cost of


    $24.39 during the second quarter ended June 30, 2014. For the trailing


    12 month period through June 30, 2014, Conversant has repurchased


    11,314,000 common shares.




  • The Company recently surpassed the milestone of more than $1 billion


    in total stock repurchases. Since the program's inception in 2001 and


    through June 30, 2014, Conversant has repurchased 84.3 million common


    shares at an average cost of approximately $12.00, a greater than 50%


    discount to Conversant's closing stock price on August 5, 2014.




  • In July 2014, the Company repurchased an additional 778,000 common


    shares and utilized its remaining stock repurchase authorization.


    Shortly thereafter, Conversant's Board of Directors approved a $150


    million increase in the stock repurchase program.



Balance Sheet



  • Cash and cash equivalents were $83.6 million and total debt was $65.0


    million as of June 30, 2014. Strong cash flow enabled Conversant to


    remain in a positive net cash position despite investing $62.4 million


    to repurchase shares during the second quarter.































































































 



Conversant Segment Financial Summary



In millions, except percentages



 



Q2 2014



 



Q2 2013



 



% Change




 



Affiliate Marketing Revenue




$



40.6





$



36.6





11



%



Media Revenue



 



96.7



 



 



91.5



 



 



6



%



Consolidated Revenue




$



137.4





$



128.1





7



%



 



Affiliate Marketing Income from Operations




$



24.8





$



22.6





10



%



Media Income from Operations



 



22.1



 



 



28.0



 



 



(21



)%



Total Segment Income from Operations




$



46.8





$



50.6





(7



)%













 


Q2 2014 Segment Results Summary



  • Affiliate marketing segment revenue was $40.6 million, an increase of


    11% year-over-year.




  • Media segment revenue was $96.7 million, an increase of 6%


    year-over-year.




  • The decrease in Media segment income from operations primarily


    reflects increased headcount, higher marketing expenses, and an


    approximately $2 million operating loss contribution from SET Media,


    the digital video technology company acquired in February 2014.



Q3 2014 Business Outlook


Conversant's financial guidance for the third quarter of 2014 is


presented in the following tables.








































 



 



 



Consolidated Financial Outlook



 



Q3 2014 Guidance



Revenue



 



$142 - $148 million



Adjusted EBITDA




$44 - $47 million



Mid-Point Adjusted EBITDA Margin




31.4%



Non-GAAP Net Income per Diluted Common Share




$0.37 - $0.39



Impact of stock-based compensation and amortization of intangibles,


net of tax




$(0.10)



GAAP Net Income from Continuing Operations per Diluted Common Share



 



$0.27 - $0.29



 



Segment Revenue Assumptions



 



Q3 2014 Guidance



Affiliate Marketing Segment Revenue




$40 - $41 million



Media Segment Revenue



 



$102 - $107 million





 


Additional Guidance Assumptions


Conversant's third quarter 2014 guidance assumes: stock-based


compensation of $5.8 million; amortization of intangible assets of $6.1


million ($2.5 million of which will be included in cost of revenue); net


interest and other expense of $0.5 million; a 40% effective tax rate;


and 66.0 million diluted shares outstanding.


Use of Non-GAAP Financial Measures


To provide investors with additional information regarding Conversant's


financial results, Conversant has disclosed in the tables below and


elsewhere in this press release Adjusted EBITDA and Non-GAAP Net Income


Per Diluted Common Share. Each of these Non-GAAP measures is defined


within the following section of this press release and reconciled to


their most comparable GAAP financial measure. Investors should not


consider these Non-GAAP measures in isolation or as a substitute for


GAAP financial measures. Conversant's definition of Adjusted EBITDA and


Non-GAAP Net Income Per Diluted Common Share may not necessarily be


directly comparable to similarly titled Non-GAAP measures employed by


other companies.


Q2 2014 Conference Call and Webcast Today at 4:30 p.m. Eastern Time


(1:30 p.m. Pacific Time)


Conversant management will host a conference call at 4:30 p.m. Eastern


Time (1:30 p.m. Pacific Time) today to discuss its financial and


operating results for the second quarter of 2014. A live webcast of the


conference call, along with a financial highlights presentation


containing supplemental information, will be available on Conversant's


investor relations website at http://ir.conversantmedia.com.


A replay of the webcast will be available through the same link


beginning approximately two hours after the completion of the live call.


To access the live conference call by telephone, interested parties


should dial 888-256-9154 (for domestic participants) or 913-312-0850


(for international participants) at least 10 minutes prior to the start


time and use conference ID 2825301. A telephonic replay of the


conference call will be available from 7:30 p.m. Eastern Time on August


6, 2014 until 7:30 p.m. Eastern Time on August 13, 2014. To access the


replay, interested parties should dial 888-203-1112 (for domestic


participants) and 719-457-0820 (for international participants) and the


conference ID 2825301.


About Conversant


Conversant, Inc. (NASDAQ: CNVR) is the leader in personalized digital


marketing. Conversant helps the world's biggest companies grow by


creating personalized experiences that deliver higher returns for brands


and greater satisfaction for people. We offer a fully integrated


personalization platform, personalized media programs and the world's


largest affiliate marketing network - all fueled by a deep understanding


of what motivates people to engage, connect and buy. For more


information, please visit www.conversantmedia.com.


Cautionary Information Regarding Forward-Looking Statements


This release contains forward-looking statements that involve risks


and uncertainties, including, but not limited to, the risk that market


demand for on-line advertising will not grow as rapidly as predicted,


and the risk that legislation and governmental regulation could


negatively impact the Company's performance. Actual results may differ


materially from the results predicted, and reported results should not


be considered an indication of future performance. Important factors


that could cause actual results to differ materially from those


expressed or implied in the forward-looking statements are detailed


under "Risk Factors" and elsewhere in filings with the Securities and


Exchange Commission made from time to time by Conversant, including, but


not limited to: its annual report on Form 10-K filed on March 3, 2014;


recent quarterly reports on Form 10-Q; and other current reports on Form


8-K.


The Business Outlook contained in this release is based on current


expectations. These statements are forward-looking, and actual results


may differ materially. These statements do not include the potential


impact of any mergers, acquisitions or other business combinations that


may be completed after the date of this release. Actual stock-based


compensation may differ from these estimates based on the timing and


amount of stock awards granted, the assumptions used in stock award


valuation and other factors. Actual income tax expense may differ from


these estimates based on tax planning, changes in tax accounting rules


and laws, and other factors.


Conversant undertakes no obligation to release publicly any revisions


to any forward-looking statements to reflect events or circumstances


after the date hereof or to reflect the occurrence of unanticipated


events.

























































































































































































































































































































































































































































































































 




 




CONVERSANT, INC.



CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS



(In thousands, except per share data)







 





Three Months




Six Months





Ended June 30,




Ended June 30,





2014



 



2013




2014



 



2013





(Unaudited)




(Unaudited)



Revenue




$



137,380





$



128,094





$



283,293





$



262,577




Cost of revenue




47,335



 




41,883



 




94,555



 




84,213



 



Gross profit




90,045





86,211





188,738





178,364




Operating expenses:















Sales and marketing (Note 1)




25,942





21,380





52,457





42,443




General and administrative (Note 1)




15,618





13,895





33,488





30,488




Technology (Note 1)




17,165





13,959





33,137





27,582





Amortization of intangible assets acquired in business combinations




3,606



 




3,549



 




8,144



 




7,100



 



Total operating expenses




62,331



 




52,783



 




127,226



 




107,613



 



Income from operations




27,714





33,428





61,512





70,751




Interest and other income (expense), net




528



 




(23,464



)




264



 




(23,870



)



Income before income taxes




28,242





9,964





61,776





46,881




Income tax expense




11,245



 




3,927



 




24,697



 




17,465



 



Net income from continuing operations




16,997





6,037





37,079





29,416




Net income from discontinued operations








3,552





155





6,456




Gain on sale, net of tax




669



 




2,286



 




34,895



 




2,286



 



Net income




$



17,666



 




$



11,875



 




$



72,129



 




$



38,158



 















 




Net income from continuing operations per common share - basic




$



0.26



 




$



0.08



 




$



0.56



 




$



0.39



 




Net income from continuing operations per common share - diluted




$



0.25



 




$



0.08



 




$



0.55



 




$



0.38



 



Net income per common share - basic




$



0.27



 




$



0.16



 




$



1.09



 




$



0.50



 



Net income per common share - diluted




$



0.26



 




$



0.15



 




$



1.06



 




$



0.49



 




Weighted-average shares used to compute net income per common


share - basic




65,820



 




75,531



 




66,450



 




75,590



 




Weighted-average shares used to compute net income per common


share - diluted




67,202



 




77,413



 




67,960



 




77,490



 















 















 



Note 1 - Includes stock-based compensation as follows:





Three Months




Six Months





Ended June 30,




Ended June 30,





2014




2013




2014




2013





(Unaudited)




(Unaudited)



Sales and marketing




$



1,371





$



1,389





$



2,532





$



2,547




General and administrative




1,987





2,304





4,390





4,558




Technology




1,470



 




1,140



 




2,655



 




2,245



 



Total stock-based compensation




$



4,828



 




$



4,833



 




$



9,577



 




$



9,350



 



















 






















































































































































































 




 




CONVERSANT, INC.



CONDENSED CONSOLIDATED BALANCE SHEETS



(In thousands)







 





June 30,




December 31,





2014




2013





(Unaudited)



ASSETS








Current Assets:








Cash and cash equivalents




$



83,574





$



81,319



Accounts receivable, net




126,407





148,738



Other current assets




46,352





18,510



Assets held for sale






 




32,802



Total current assets




256,333





281,369








 



Assets held for sale, less current portion








55,642



Property and equipment, net




28,948





28,006



Goodwill




402,254





388,922



Intangible assets, net




45,670





48,501



Other assets




2,985



 




15,335



TOTAL ASSETS




$



736,190



 




$



817,775








 



LIABILITIES AND STOCKHOLDERS' EQUITY








Current liabilities




121,665





130,529



Borrowings under credit facility, less current portion




65,000





140,000



Other non-current liabilities




39,935





33,645



Liabilities related to assets held for sale






 




8,704



Total liabilities




226,600





312,878



Total stockholders' equity




509,590



 




504,897



TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY




$



736,190



 




$



817,775










 


























































































































































































































































































 




CONVERSANT, INC.



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



(In thousands)





 





Six Months
Ended June 30,





2014



 



2013



Cash flows from operating activities:









Net income




$



72,129





$



38,158




Adjustments to reconcile net income to net cash provided by


operating activities:









Loss on note receivable








22,556




Depreciation and amortization




19,212





19,434




Non-cash, stock-based compensation




9,577





9,936




Provision for doubtful accounts and sales credits




1,196





2,174




Gain on sale of business




(34,895



)




(2,286



)



Amortization of discount on note receivable








(570



)



Deferred income taxes




(3,075



)




2,745




Tax benefit from stock-based awards




2,412





2,831




Excess tax benefit from stock-based awards




(2,478



)




(2,986



)




Changes in operating assets and liabilities, excluding business


acquisitions




31,245



 




(12,523



)



Net cash provided by operating activities




95,323





79,469










 



Cash flows from investing activities:









Purchases of property and equipment




(6,666



)




(6,019



)



Principal payments received on note receivable








1,960




Proceeds from the sale of business, net of cash divested




72,813








Payments for acquisitions, net of cash acquired




(24,286



)






 



Net cash provided by (used in) investing activities




41,861





(4,059



)









 



Cash flows from financing activities:









Proceeds from borrowings under credit agreement




115,000





25,000




Repayments under credit agreement




(190,000



)




(65,000



)



Repurchases and retirement of common stock




(81,069



)




(52,079



)



Proceeds from shares issued under employee stock programs




3,836





6,349




Excess tax benefit from stock-based awards




2,478



 




2,986



 



Net cash used in financing activities




(149,755



)




(82,744



)









 



Effect of exchange rate changes on cash and cash equivalents




(107



)




(2,236



)



Effect on cash and cash equivalents from discontinued operations




14,933



 






 



Net increase (decrease) in cash and cash equivalents




2,255





(9,570



)









 



Cash and cash equivalents, beginning of period




81,319



 




136,638



 



Cash and cash equivalents, end of period




83,574



 




127,068



 









 


































































































































































 




 




CONVERSANT, INC.



RECONCILIATION OF NET INCOME FROM CONTINUING OPERATIONS



TO ADJUSTED EBITDA (Note 1)



(In thousands)







 





Three Months




Six Months





Ended June 30,




Ended June 30,





2014



 



2013




2014



 



2013





(Unaudited)




(Unaudited)



Net income from continuing operations




$



16,997





$



6,037





$



37,079





$



29,416



Interest and other (income) expense, net




(528



)




23,464





(264



)




23,870



Income tax expense




11,245





3,927





24,697





17,465



Amortization of acquired intangible assets included in cost of


revenue




2,478





1,986





4,787





3,971



Amortization of acquired intangible assets included in operating


expenses




3,606





3,549





8,144





7,100



Depreciation and leasehold amortization




3,204





3,009





6,272





6,008



Stock-based compensation




4,828



 




4,833



 




9,577



 




9,350



Adjusted EBITDA




$



41,830



 




$



46,805



 




$



90,292



 




$



97,180


















 


Note 1 - "Adjusted EBITDA" (GAAP net income from continuing


operations before interest, income taxes, depreciation, amortization,


and stock-based compensation) included in this press release is a


non-GAAP financial measure.


Adjusted EBITDA, as defined above, may not be similar to adjusted EBITDA


measures used by other companies and is not a measurement under GAAP.


Management believes that adjusted EBITDA provides useful information to


investors about the Company's performance because it eliminates the


effects of period-to-period changes in income from interest on the


Company's cash and cash equivalents, note receivable and borrowings, and


the costs associated with income tax expense, capital investments, and


stock-based compensation which are not directly attributable to the


underlying performance of the Company's business operations. Management


uses adjusted EBITDA in evaluating the overall performance of the


Company's business operations.


Though management finds adjusted EBITDA useful for evaluating aspects of


the Company's business, its reliance on this measure is limited because


excluded items often have a material effect on the Company's earnings


and earnings per common share calculated in accordance with GAAP.


Therefore, management uses adjusted EBITDA in conjunction with GAAP


earnings and earnings per common share measures. The Company believes


that adjusted EBITDA provides investors with an additional tool for


evaluating the Company's core performance, which management uses in its


own evaluation of overall performance, and a baseline for assessing the


future earnings potential of the Company. While the GAAP results are


more complete, the Company prefers to allow investors to have this


supplemental metric since, with a reconciliation to GAAP, it may provide


greater insight into the Company's financial results.











































































































































































 




 




CONVERSANT, INC.



RECONCILIATION OF GAAP NET INCOME FROM CONTINUING OPERATIONS TO



NON-GAAP DILUTED NET INCOME PER COMMON SHARE (Note 1)



(In thousands)







 





Three Months




Six Months





Ended June 30,




Ended June 30,





2014



 



2013




2014



 



2013





(Unaudited)




(Unaudited)



Net income from continuing operations




$



16,997





$



6,037





$



37,079





$



29,416




Stock-based compensation




4,828





4,833





9,577





9,350




Amortization of acquired intangible assets included in cost of


revenue




2,478





1,986





4,787





3,971




Amortization of acquired intangible assets included in operating


expenses




3,606





3,549





8,144





7,100




Tax impact of above items




(4,238



)




(4,134



)




(8,919



)




(8,436



)



Non-GAAP net income




$



23,671



 




$



12,271



 




$



50,668



 




$



41,401



 



Non-GAAP net income per diluted common share




$



0.35



 




$



0.16



 




$



0.75



 




$



0.53



 



Weighted-average shares used to compute non-GAAP net income per


diluted common share




67,202



 




77,413



 




67,960



 




77,490



 















 


Note 1 - "Non-GAAP net income per diluted common share" (GAAP net income


from continuing operations per diluted common share before the impact of


stock-based compensation and amortization of intangible assets) included


in this press release is a non-GAAP financial measure.


Non-GAAP net income per diluted common share, as defined above, may not


be similar to non-GAAP net income per diluted common share measures used


by other companies and is not a measurement under GAAP. Management


believes that non-GAAP net income per diluted common share provides


useful information to investors about the Company's performance because


it eliminates the effects of items which are not directly attributable


to the underlying performance of the Company's business operations.


Management uses non-GAAP net income per diluted common share in


evaluating the overall performance of the Company's business operations.


Though management finds non-GAAP net income per diluted common share


useful for evaluating aspects of the Company's business, its reliance on


this measure is limited because excluded items often have a material


effect on the Company's earnings and earnings per common share


calculated in accordance with GAAP. Therefore, management uses non-GAAP


net income per diluted common share in conjunction with GAAP earnings


and earnings per common share measures. The Company believes that


non-GAAP net income per diluted common share provides investors with an


additional tool for evaluating the Company's core performance, which


management uses in its own evaluation of overall performance, and a


baseline for assessing the future earnings potential of the Company.


While the GAAP results are more complete, the Company prefers to allow


investors to have this supplemental metric since, with a reconciliation


to GAAP, it may provide greater insight into the Company's financial


results.
























































































































































































































































































































































































































































 




 




CONVERSANT, INC.



SEGMENT OPERATING RESULTS



(In thousands)







 





Three Months




Six Months





Ended June 30,




Ended June 30,





2014



 



2013




2014



 



2013





(Unaudited)




(Unaudited)



Affiliate Marketing:















Revenue




$



40,632





$



36,622





$



83,096





$



74,933




Cost of revenue




4,593



 




4,526



 




9,136



 




9,088



 



Gross profit




36,039





32,096





73,960





65,845




Operating expenses




11,284



 




9,512



 




23,093



 




20,336



 



Segment income from operations




$



24,755



 




$



22,584



 




$



50,867



 




$



45,509



 















 



Media:















Revenue




$



96,748





$



91,490





$



200,210





$



187,746




Cost of revenue




40,263



 




35,377



 




80,626



 




71,216



 



Gross profit




56,485





56,113





119,584





116,530




Operating expenses




34,406



 




28,141



 




68,376



 




57,235



 



Segment income from operations




$



22,079



 




$



27,972



 




$



51,208



 




$



59,295



 















 




Reconciliation of segment income from operations to


consolidated income from operations:














Total segment income from operations




$



46,834





$



50,556





$



102,075





$



104,804




Corporate expenses




(8,208



)




(6,760



)




(18,055



)




(13,632



)



Stock-based compensation




(4,828



)




(4,833



)




(9,577



)




(9,350



)




Amortization of acquired intangible assets included in cost of


revenue




(2,478



)




(1,986



)




(4,787



)




(3,971



)




Amortization of acquired intangible assets included in operating


expenses




(3,606



)




(3,549



)




(8,144



)




(7,100



)



Consolidated income from operations




$



27,714



 




$



33,428



 




$



61,512



 




$



70,751



 















 




Reconciliation of segment revenue to consolidated revenue:















Affiliate Marketing




$



40,632





$



36,622





$



83,096





$



74,933




Media




96,748





91,490





200,210





187,746




Inter-segment eliminations






 




(18



)




(13



)




(102



)



Consolidated revenue




$



137,380



 




$



128,094



 




$



283,293



 




$



262,577



 



















 



Investor Contact:
Conversant, Inc.
Erik Randerson, CFA
818-575-4540
eranderson@conversantmedia.com



Source: Conversant, Inc.



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