24/7 Real Media, Inc. (NASDAQ: TFSM): First Quarter Highlights:
Revenue of $57.7 million, an increase of 34% year-over-year; Pro
forma operating income of $4.4 million, or $0.08 per share,
compared with $3.5 million, or $0.07 per share, in Q1 of 2006; GAAP
net loss of $0.1 million, or $0.00 per share, versus GAAP net loss
of $7.5 million, or $0.16 per share, in Q1 of 2006; Global launch
of new www.247realmedia.com website, reflecting �The Science of
Digital Marketing;� Opened the first expanded joint venture office
with Dentsu in Seoul, South Korea; The Company confirmed that it is
assessing strategic alternatives and announced that it has retained
Lehman Brothers as its financial advisor to assist in the process.
24/7 Real Media, Inc. (NASDAQ: TFSM), a leading global digital
marketing company, today announced financial results for the
quarter ended March 31, 2007. Revenue for the first quarter of 2007
was $57.7 million, an increase of 34% over the $42.9 million
reported for the first quarter of 2006. Revenue contribution from
international operations was 64% for the quarter. Pro forma
operating income1 for the first quarter of 2007 was $4.4 million,
or $0.08 per share. This compared with pro forma operating income
of $3.5 million, or $0.07 per share, for the first quarter of 2006.
Under generally accepted accounting principles (GAAP), net loss for
the first quarter of 2007 was $0.1 million, or $0.00 per share.
This compared to a GAAP net loss of $7.5 million, or $0.16 per
share, for the first quarter of 2006. Cash flow from operations for
the first quarter 2007 totaled $8.1 million. The Company reported a
cash balance of $62.6 million as of March 31, 2007, which does not
include the $5.0 million investment funded to the new Pan-Asia
joint venture with Dentsu during the quarter. During the first
quarter, 24/7 Real Media�s joint venture with Dentsu opened the
first of five planned offices to address strategic Asian markets
outside of Japan. The new office, which celebrated the official
launch of operations on April 27, is located in Seoul, South Korea.
�With 34 percent organic revenue growth, the fundamentals of our
businesses remain strong, despite some seasonality,� said David J.
Moore, chairman and chief executive officer of 24/7 Real Media. �As
we look ahead, we are excited about the changes we see taking place
within the digital realm. We are confident that 24/7 Real Media has
made the right strategic decisions and has a great combination of
assets to take full advantage of these changes.� �We are very
excited to have opened our first office in connection with the
expansion of our joint venture with Dentsu. Through our expanded
partnership with Dentsu, we are positioning 24/7 Real Media to be a
significant beneficiary of the strong growth that is projected over
the upcoming decade for many markets throughout Asia and the
Pacific Rim. As the most internationally-diversified company in the
Digital Marketing arena, 24/7 Real Media is well positioned for
strong, sustained growth over the upcoming years.� �The significant
increase in corporate activity in the digital marketing sector has
opened new doors for us, creating opportunity,� said Jonathan K.
Hsu, EVP, chief operating officer and chief financial officer of
24/7 Real Media. �24/7 Real Media will remain aggressive in
leveraging its position as the largest, independent
publisher-focused technology offering in the sector. Technology has
become a strategic asset, and 24/7 Real Media has proven, scalable
platforms, as well as the second largest installed base of ad
serving technology clients globally.� The Company confirmed that it
is assessing strategic alternatives and that it has retained Lehman
Brothers as its financial advisor to assist in this process.
Segment Overview Revenue in the Media Solutions segment grew 13% to
$20.6 million in the first quarter of 2007 from $18.2 million in
the first quarter of 2006. Gross margins were 28.8% in the first
quarter of 2007. Search Solutions revenue advanced 61% to $28.7
million in the first quarter of 2007 from $17.8 million in the
first quarter of 2006. Gross margins for the segment were 21.3% in
the first quarter of 2007. Technology Solutions revenue climbed 21%
to $8.3 million in the first quarter of 2007 from $6.9 million in
the first quarter of 2006. Technology gross margins, excluding
stock based compensation expenses, were 80.1% in the first quarter
of 2007. Financial Guidance and Business Outlook In the first
quarter of 2007, the Company�revised its computation of restricted
stock in the pro forma�earnings per share calculation using the
treasury stock method and revised prior periods to conform to the
current presentation. The revised�pro forma fully diluted per share
numbers for 2006 are 52.1 million for�the first quarter, 54.6
million for the second quarter, 53.9 million for�third quarter and
55.4 million for the fourth quarter. The�pro forma earnings per
share numbers are not�affected. The Company expects second quarter
revenue for 2007 to be between $61 million and $65 million, the
mid-point of which represents an increase of 31% from second
quarter 2006 revenue of $48.2 million. The Company expects diluted
pro forma operating income per share in the second quarter of 2007
to be between $0.09 and $0.12 per share. The Company now expects
full year 2007 revenue to be in the range of $265 million to $275
million, the mid-point of which represents an increase of 35% from
full year revenue of $200.2 million in 2006. The Company expects
diluted pro forma operating income per share for the full year to
be between $0.52 and $0.55 per share. Revenue guidance includes the
projected financial performance of K.K. 24-7 Search, the Japanese
joint venture with Dentsu that 24/7 Real Media reports on a
consolidated basis. Pro forma operating income guidance is provided
net of Dentsu's interest in the projected pro forma operating
income or loss generated by K.K. 24-7 Search. Neither revenue
guidance nor pro forma operating income guidance includes the
projected financial performance of the expanded partnership with
Dentsu to address markets beyond Japan, as 24/7 Real Media will not
be reporting those operations on a consolidated basis. The Company
is not providing GAAP net income per share guidance for the second
quarter of 2007 or the full year 2007 at this time, as certain
items that would be included in that figure are dependent on future
events and accounting determinations.2 In conjunction with this
release, a conference call will be held at 8:30 a.m. EDT on
Thursday, May 10, to discuss these results. The call will be
broadcast live over the Internet at
www.247realmedia.com/EN-US/invest/investor-events. Please allow
extra time to visit our Web site prior to the call and download the
streaming media software required to listen to the Internet
broadcast. The online replay of the broadcast should be available
within two hours following the live call and will be available for
three weeks. About 24/7 Real Media, Inc. 24/7 Real Media, Inc. is a
leading global digital marketing company, empowering advertisers
and publishers to engage their target audiences with greater
precision, transparency and ROI. Using its award winning ad
serving, targeting, tracking and analytics platform, powerful
search marketing capabilities and global network of specialized Web
sites, the company has turned the art of reaching audiences across
virtually any digital medium into a measurable science. The company
is headquartered in New York, with 20 offices in 12 countries
throughout North America, Europe and the Asia Pacific region. For
more information, please visit www.247realmedia.com. 24/7 Real
Media: The Science of Digital Marketing. 24/7 Real Media is a
member of the NAI and adheres to the NAI privacy principles that
have been applauded by the FTC. These principles are designed to
help ensure Internet user privacy. For more information about
online data collection associated with ad serving, including online
preference marketing and an opportunity to opt-out of 24/7 Real
Media cookies, go to: www.networkadvertising.org. Caution
concerning forward-looking statements: Certain statements in this
news release are "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. For instance,
words such as "expects," "anticipates," "predicts," "guidance" and
similar expressions identify forward-looking statements.
Forward-looking statements also include any other passages that
relate to expected future events or trends that can only be
evaluated by events or trends that will occur in the future. Some
of the forward-looking statements in this news release include,
without limitation, statements regarding the expected financial
performance for the second quarter of 2007 and for the full year
2007. Investors are cautioned not to place undue reliance upon
these forward-looking statements, which speak only as of the date
of this release. Except as required by law, 24/7 Real Media
undertakes no obligation to update any forward-looking or other
statements in this news release, whether as a result of new
information, future events or otherwise. Management may reiterate
these forward-looking statements subsequent to the date hereof, but
such reiterations should not be considered an update or
reaffirmation of these statements unless expressly so stated. The
forward-looking statements are based on the subjective opinions and
estimates of management at the time the statements were made and
are subject to substantial risks and uncertainties that could cause
actual results to differ materially from those anticipated in the
forward-looking statements. These substantial risks and
uncertainties include, among others, geopolitical, tax, exchange
rate and other risks associated with international operations,
which currently comprise a majority of the Company's revenue; the
potential for enhanced competition, including with competitors that
have substantially greater resources than those of the Company;
potential issues that may arise in the Company�s Search segment,
which is a less seasoned business than the Company�s other segments
and which is in an ultra competitive and rapidly evolving industry,
in which the Company�s business is somewhat dependent on its
ability to maintain good relations with two major search engines;
due to these factors, the Company�s Search business may not be able
to expand as rapidly as projected, nor maintain its existing
customer base or profitability structure; the potential loss of key
employees and inability to attract qualified new employees,
especially in our Search business, due to a very competitive and
tightening job market; risks that the Company's technology will be
insufficient to meet increased business levels; risk that the
Company's technology services will be disrupted by terrorist
attack, disasters or malicious intrusion, and that the Company's
back-up facilities and disaster recovery plans will not be
adequate; customer concentration or customer loss risks; potential
deterioration or slower-than-expected growth in the Internet
advertising market; the uncertainties, costs and business impacts
of potential new legislation; accounting risks and the risk of
litigation or regulatory investigation involving the Company. In
particular, guidance on results in accordance with GAAP do not
include (i) the potential impact of any mergers, acquisitions or
other business combinations that may be completed after the date of
this release, (ii) any unanticipated non-recurring gains, charges
or write-offs, or (iii) unexpected changes in the Company�s
effective tax rate, which may be caused by, among other things, the
geographical location in which operating income is generated and
the availability of tax-loss carryforwards. Actual stock-based
compensation expense impact may differ from these estimates based
on the timing and amount of restricted stock and options granted,
the assumptions used in option valuation and other factors. More
information about factors that could cause actual results to differ
materially from those predicted in the Company's forward-looking
statements, as well as additional information regarding the
Company's business and financial results and condition, is set out
in its annual report on Form 10-K for the year ended December 31,
2006 and the amendments thereto on Form 10-K/A, and will be set out
in its Quarterly Report on Form 10-Q for the three months ended
March 31, 2007, which the Company expects to file with the
Securities and Exchange Commission on or before May 10, 2007.
Investors are strongly encouraged to read the Company's Form 10-K,
Forms 10-Q and other filings with the Securities and Exchange
Commission in their entirety. 1 Pro forma operating income is a
non-GAAP financial measure. 24/7 Real Media believes pro forma
reporting provides meaningful insight into the Company�s ongoing
economic performance and therefore uses pro forma reporting
internally to assist in evaluating and managing the Company�s
operations. A full reconciliation of GAAP net income to pro forma
operating income for the three months ended March 31, 2007 and 2006
appears in the financial statement portion of this release. 2
Diluted pro forma operating income per share guidance for the
second quarter and full year 2007 excludes the following items that
are required to be included under GAAP: depreciation expense of
$1.3 million and $5.5 million; amortization expense of $0.7 million
and $3.0 million; stock based compensation expense related to
equity instruments already granted of $3.3 million and $14.0
million; and interest income of $0.5 million and $2.0 million. Also
excluded is income tax expense, as the Company is still determining
the overall effective tax rate, which is dependent on the amount of
revenue and income recognized for tax purposes in each jurisdiction
in which the Company operates, and stock based compensation expense
related to grants in future periods, which are as yet undetermined.
24/7 REAL MEDIA, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in
thousands, except share and per share data) � Three months ended
March 31, � 2007� � 2006� (unaudited) Revenues: Media $ 20,620� $
18,230� Search 28,701� 17,833� Technology � 8,342� � 6,878� Total
revenues � 57,663� � 42,941� � Cost of revenues: Media 14,674�
12,576� Search 22,599� 13,092� Technology (a) � 1,780� � 1,599�
Total cost of revenues � 39,053� � 27,267� � Gross profit � 18,610�
� 15,674� � Operating expenses: � Sales and marketing (a) 8,316�
7,985� General and administrative (a) 7,075� 11,298� Product
development (a) 2,636� 2,758� Other expenses: Amortization of
intangible assets and deferred financing costs � 742� � 890� Total
operating expenses � 18,769� � 22,931� Operating loss (159) (7,257)
� Interest income, net 584� 65� Change in fair value of warrant
liability -� (252) Other income (expense), net � (13) � 110� �
Income (loss) before income taxes and minority interest in
operations of consolidated subsidiary 412� (7,334) � Provision for
income taxes (398) (230) Minority interest in operations of
consolidated subsidiary � (70) � 48� � Net loss � (56) � (7,516) �
Basic and fully diluted net loss per share $ (0.00) $ (0.16) �
Weighted average shares used in basic and fully diluted calculation
� 50,645,526� � 46,848,231� � � (a) Stock-based compensation
included in the following expense categories: Cost of revenues $
124� $ 179� Sales and marketing 719� 1,545� General and
administrative 1,732� 6,338� Product development � 220� � 977� $
2,795� $ 9,039� � � 24/7 REAL MEDIA, INC. CONSOLIDATED STATEMENTS
OF OPERATIONS (in thousands, except share and per share data) �
Three months ended March 31, 2007� 2006� (unaudited) Pro forma: �
Operating income (b) 4,380� 3,549� � Diluted operating income per
share $ 0.08� $ 0.07� � Weighted average shares used in pro forma
calculation � 55,391,728� � 52,057,936� � � (b) Pro forma operating
income excludes certain other expenses computed as follows: �
Operating loss $ (159) $ (7,257) Excluding: Amortization of
intangible assets and deferred financing costs 742� 890�
Stock-based compensation 2,795� 9,039� Minority interest in pro
forma operations of consolidated subsidiary (105) 45� Depreciation
� 1,107� � 832� Pro forma operating income $ 4,380� $ 3,549� 24/7
REAL MEDIA, INC. CONDENSED CONSOLIDATED BALANCE SHEET (in
thousands) March 31, December 31, � 2007� � 2006� (unaudited) �
Cash $ 62,613� $ 59,390� Accounts receivable 53,988� 55,490� Total
current assets 118,528� 117,567� Total assets 182,498� 176,658�
Accounts payable and accrued liabilities 54,007� 51,942� Deferred
revenue 3,446� 3,609� Short-term debt 7,500� 7,500� Total current
liabilities 64,953� 63,051� Long-term debt 7,500� 7,500� Total
liabilities 73,079� 71,327� Minority interests 1,757� 1,673� Total
stockholders' equity 107,662� 103,658�
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