EX-99.1 2 ex991veltiseptember302011e.htm PRESS RELEASE "VELTI REPORTS THIRD QUARTER 2011 RESULTS" EX 99.1 Velti September 30, 2011 Earnings Release
EX 99.1
FOR IMMEDIATE RELEASE
VELTI REPORTS THIRD QUARTER 2011 RESULTS
•
Company Announces Acquisition of UK's Mobile Interactive Group, Extending Velti's Lead as World's Largest Mobile Marketing Platform
•
Company Raises 2011 Guidance
Dublin, Ireland and San Francisco, CA - November 15, 2011- Velti plc (Nasdaq: VELT),the world's leading mobile marketing and advertising technology provider announced its financial results for the third quarter ended September 30, 2011.
"Our record-setting third quarter results are attributable to the strength of our technology platform, our expanded global footprint and rapid growth in our end markets," said Alex Moukas, Chief Executive Officer. "As we look forward to 2012, we are excited about our global market leadership position, our growing roster of blue chip clients, and the overall growth in smart phones and mobile marketing spending. With the acquisition of MIG we now have a solidified global leadership position for serving our growing roster of blue chip clients in the face of surging growth in smart phones and mobile marketing spending."
The Company also announced today the acquisition of Mobile Interactive Group ("MIG"), the UK's largest mobile marketing company. MIG's global partnership with Skype and its Facebook-integrated Interactive Broadcast Platform have won MIG accolades as a pioneer in bridging social media, mobile marketing and mobile commerce transactions. MIG was named the fastest growing privately owned technology firm in the UK and EMEA, in a report earlier this year by Deloitte. Velti will pay a minimum consideration of $25 million, including $20 million of cash at closing. Depending on MIG's performance, Velti may pay up to an additional $34 million over time through 2013, using a multiple of 7.5 times adjusted EBITDA. Velti expects the transaction to be accretive and to contribute positive EBITDA in the first full quarter after closing.
Q3 Financial Highlights
•
Revenue of $38.2 million, an increase of 85% from Q3 2010,driven by overall growth in smart phones, increased mobile marketing spend, and new blue chip clients;
•
Adjusted EBITDA of $5.6 million, compared with $3.3 million in Q3 2010, an increase of 73%;
•
GAAP net income attributable to Velti of $0.6 million and EPS of $0.01 compared with a net loss of $6.0 million and EPS of $(0.16) for Q3 2010; and
•
Adjusted net loss of $1.1 million and adjusted EPS of $(0.02) compared with an adjusted net loss of $3.9 million and adjusted EPS of $(0.10) for Q3 2010
Q3 Business Highlights
During Q3, the Company:
•
Won a number of new, blue chip customers across geographies, including, among others Budget Rent A Car, Days Inn, Jack in the box, Revel Entertainment, and Safeway Stores;
•
Expanded its relationships with existing customers like Disney, Ford, GM, Groupon, HP, Johnson & Johnson, Motorola, Nissan, Orange, T-Mobile and Vodafone;
•
Won the prestigious 2011 OMMA (Online Media, Marketing and Advertising) Global Award for its Integrated Online Campaign for National Geographic's documentary, "The Last Lions" resulting in over a quarter million mobile consumers engaged;
•
Opened additional sales offices in such high growth markets as Turkey, Dubai and Brazil;
•
Saw continued acceleration in rich media advertising spending, consistent with the surge of 44% in smart phone shipments relative to Q3 2010; and
•
Committed to becoming free cash flow positive by the fourth quarter of 2012.
For the third quarter ended September 30, 2011, Velti reported revenue of $38.2 million, compared with $20.6 million in the third quarter ended September 30, 2010. On a GAAP basis, net income attributable to Velti for the quarter ended September 30, 2011 was $0.6 million, or $0.01 per share, compared with a net loss of $6.0 million, or $(0.16) per share, for the quarter ended September 30, 2010. On a non-GAAP basis, adjusted net loss for the quarter ended September 30, 2011 was $1.1 million, or $(0.02) per share compared with an adjusted net loss of $3.9 million, or $(0.10) per share for the quarter ended September 30, 2010. Adjusted EBITDA for the quarter ended September 30, 2011 was $5.6 million, compared with $3.3 million for the quarter ended September 30, 2010. Included in these results is $13.7 million of third party costs, a portion of which is in preparation for a high volume of large mobile marketing campaigns in the fourth quarter. For the third quarter ended September 30, 2011, Velti reported DSO's for trade receivables of 82 days based on trailing twelve months' revenue.
Business Outlook
Velti is announcing increased organic and consolidated guidance for the fiscal year ending December 31, 2011. The recent Air2Web and MIG acquisitions are expected to contribute approximately $4.0 million in Q4 revenue and $(2.0) million in adjusted EBITDA. Both transactions are expected to begin contributing positively to adjusted EBITDA in the first full quarter after closing, namely Q1 2012. On a consolidated basis, Velti offers the following guidance for 2011: 
Previous Revenue Guidance
Updated Revenue Guidance:
Organic:
Acquisitions:
$172.0 - $177.0 million
$180.0 - $185.0 million
$176.0 - $181.0 million
Approx. $4.0 million
Previous Adjusted EBITDA Guidance:
Updated Adjusted EBITDA Guidance:
Organic:
Acquisitions:
$52.0 - $54.0 million
$52.0 - $54.0 million
$54.0 - $56.0 million
Approx. ($2.0) million
Velti's goal is to continue to be the foremost mobile marketing technology company and offer the most widely adopted SaaS platform for mobile marketing and advertising. Since 2009, the Company has focused its technology acquisition and development, deployment, and sales efforts on making its platform, Velti mGage, a standard for planning, delivering, analyzing and optimizing end-to-end mobile marketing campaigns around the world.
Conference Call and Webcast Information
The Velti third quarter 2011 teleconference and webcast are scheduled to begin at 4:30 p.m., Eastern Time on Tuesday, November 15, 2011. To participate in the live call, analysts and investors should dial (877) 415-4117 or (708) 290-1138 (international), conference ID# 18078474 at least ten minutes prior to the call. The call will also be simulcast on the Internet at http://investors.velti.com. A replay of the call will be available on the Events section of the investor website at http://investors.velti.com/events.cfm for three months.To listen to the telephone replay, call toll-free (855) 859-2056 or (404) 537-3406 (international), conference ID# 18078474. The telephone replay will be available from 7:30 PM Eastern Time November 15 through November 30, 2011. Additional investor information can be accessed at http://www.velti.com.
Use of Non-GAAP Measures
This press release includes non-GAAP financial measures such as adjusted EBITDA, adjusted net income and adjusted earnings per share. These non-GAAP financial measures are not a measure of financial performance or liquidity calculated in accordance with accounting principles generally accepted in the U.S., referred to herein as GAAP, and should be viewed as a supplement to, not a substitute for, our results of operations presented on the basis of GAAP. Reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is detailed in the table below.
Our non-GAAP measures should be read in conjunction with the corresponding GAAP measures. These non-GAAP financial measures have limitations as an analytical tool and you should not consider them in isolation from, or as a substitute for, analysis of our results as reported in accordance with GAAP.
We define adjusted net income (loss) by excluding foreign exchange gains or losses, share-based compensation expense, non-recurring and acquisition related expenses, deferrals of net profits of our equity method investments related to transactions with us, and acquisition-related depreciation and amortization.
We define adjusted EBITDA by excluding from adjusted net income (loss), gains or losses from our equity method investments, the remaining depreciation and amortization, the provision for income taxes, net interest expense, and other income.
Adjusted net income (loss) and adjusted EBITDA are not necessarily comparable to similarly-titled measures reported by other companies.
Adjusted income (loss) per share is adjusted net income (loss) divided by diluted shares outstanding.
We believe these non-GAAP financial measures are useful to management, investors and other users of our financial statements in evaluating our operating performance because these financial measures are additional tools to compare business performance across companies and across periods. We believe that:
•
these non-GAAP financial measures are often used by investors to measure a company's operating performance without regard to items such as interest expense, taxes, depreciation and amortization and foreign exchange gains and losses, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired; and
•
investors commonly use these non-GAAP financial measures to eliminate the effect of restructuring and share-based compensation expenses, one-time non-recurring expenses, and acquisition-related expenses, which vary widely from company to company and impair comparability.
 We use these non-GAAP financial measures:
•
as a measure of operating performance to assist in comparing performance from period to period on a consistent basis;
•
as a measure for planning and forecasting overall expectations and for evaluating actual results against such expectations;
•
as a primary measure to review and assess the operating performance of our company and management team in connection with our executive compensation plan incentive payments; and
•
in communications with our board of directors, stockholders, analysts and investors concerning our financial performance.
Note to Financial Statements
The financial information in this announcement does not constitute statutory financial statements as defined in Article 102 of the Companies (Jersey) Law 1991. Copies of our annual report and financial statements will be available at our registered office: First Floor, 28-32 Pembroke Street Upper, Dublin 2, Republic of Ireland or can be downloaded at the Company's website at www.velti.com.
Forward-Looking Statements
"Safe harbor" statement under the Private Securities Litigation Reform Act of 1995: This press release contains forward-looking statements including statements regarding expected growth, continued expansion as the leading global provider of integrated, comprehensive mobile marketing and advertising technology and the adoption of our SaaS platform. The achievement or success of the matters covered by such forward-looking statements involve risks, uncertainties and assumptions, and if any such risks or uncertainties materialize or if any of the assumptions prove incorrect, the company's results could differ materially from the results expressed or implied by the forward-looking statements we make. These risks and uncertainties include - but are not limited to - risks associated with our ability to continue to expand as the leading global provider of integrated, comprehensive mobile marketing and advertising technology, expand our customer base, achieve the benefits of our acquisitions, keep pace with technological and market developments and remain competitive against potential new entrants into our markets. Further information on these and other factors that could affect the company's results is included in our Annual Report on Form 20-F and our current reports on Form 6-K filed with the Securities and Exchange Commission and in other filings we may make with the Securities and Exchange Commission from time to time.
Velti assumes no obligation and does not intend to update these forward-looking statements, except as required by law.
About Velti
Velti is a leading global provider of mobile marketing and advertising technology and solutions that enable brands, advertising agencies, mobile operators and media to implement highly targeted, interactive and measurable campaigns by communicating with and engaging consumers via their mobile devices. The Velti platform, called Velti mGage™, allows customers to use mobile and traditional media to reach targeted consumers, engage the consumer through the mobile Internet and applications, convert them into customers and continue to actively manage the relationship through the mobile channel. Velti is a publicly-held corporation based in Jersey, and trades on the NASDAQ Global Select Market under the symbol VELT. For more information, visit www.velti.com.
The Velti logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=7438
Reconciliation to Adjusted EBITDA
The following is an unaudited reconciliation of adjusted EBITDA to net income (loss) before non-controlling interest, the most directly comparable GAAP measure, for the periods presented (in thousands, except per share data):
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2011
 
2010
 
2011
 
2010
Reconciliation to adjusted EBITDA:
(in thousands except per share amounts)
Net income (loss) before non-controlling interest
$
623

 
$
(6,067
)
 
$
(40,425
)
 
$
(17,718
)
Adjustments:
 
 
 
 
 
 
 
Foreign exchange (gains) losses
(8,777
)
 
(1,004
)
 
(6,974
)
 
1,052

Non-cash share based compensation(1)
3,773

 
2,920

 
23,626

 
5,327

Non-recurring and acquisition-related expenses(2)
2,404

 
—

 
11,681

 
—

Loss from equity method investments(3)
109

 
—

 
1,398

 
—

Depreciation and amortization - acquisition related
795

 
295

 
2,387

 
851

Adjusted net loss
$
(1,073
)
 
$
(3,856
)
 
$
(8,307
)
 
$
(10,488
)
Loss (gain) from equity method investments - other
(371
)
 
630

 
(1,015
)
 
2,107

Depreciation and amortization - other
4,993

 
2,548

 
11,263

 
7,245

Income tax expense
482

 
1,110

 
3,440

 
670

Interest expense, net
1,482

 
2,826

 
4,584

 
5,193

Other income
120

 
—

 
34

 
—

Adjusted EBITDA
$
5,633

 
$
3,258

 
$
9,999

 
$
4,727

 
 
 
 
 
 
 
 
Adjusted net loss per share - basic
$
(0.02
)
 
$
(0.10
)
 
$
(0.15
)
 
$
(0.28
)
 
 
 
 
 
 
 
 
Adjusted net loss per share - diluted
$
(0.02
)
 
$
(0.10
)
 
$
(0.15
)
 
$
(0.28
)
 
 
 
 
 
 
 
 
Basic shares
61,595

 
38,160

 
53,914

 
37,792

 
 
 
 
 
 
 
 
Diluted shares
61,595

 
38,160

 
53,914

 
37,792

 
 
 
 
 
 
 
 
(1) In March 2011, certain performance based deferred share awards granted to employees in 2009 were approved for vesting. The performance metrics of these awards were set at the time of grant based on then current projections of company performance under IFRS for 2009 and 2010. These metrics did not contemplate our conversion to US GAAP, the impact of acquisitions completed during 2009 and 2010, or the impact on our results of preparing for and completing our US public offering. Due to the judgment required to reconcile actual company performance with the original metrics, it was determined that any vesting would be required to be treated as a modification under the guidance in ASC 718. This required the fair value of the awards to be remeasured on the vesting approval date, with the incremental fair value charged to expense over the remaining vesting period. As a result, we recognized additional compensation expense of approximately $10.5 million during the nine months ended September 30, 2011. Similarly, in May 2010, we allowed for the vesting of certain deferred share awards granted to employees in 2008 under IFRS based on then current projections of company performance under IFRS for 2008 and 2009. As a result of this modification, we recognized additional compensation expense of approximately $1.1 million during the nine months ended September 30, 2010. Share based expenses were included in the condensed consolidated statements of operations for the three and nine months ended September 30, 2010 and 2011 as follows:
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2011
 
2010
 
2011
 
2010
 
(in thousands)
Datacenter and direct project
$
601

 
$
183

 
$
2,980

 
$
356

General and administrative
1,342

 
1,011

 
10,218

 
1,733

Sales and marketing
1,127

 
1,388

 
7,022

 
2,552

Research and development
703

 
338

 
3,406

 
686

 
$
3,773

 
$
2,920

 
$
23,626

 
$
5,327

 
 
 
 
 
 
 
 
(2) Non-recurring and acquisition-related expenses in 2011 included primarily acquisition-related expenses incurred related to completed acquisitions, interest expense related to recognition of the remaining debt discount upon repayment of certain loan facilities, interest expense related to an additional fee due to one of our lenders related to our IPO, and other non-recurring items offset by the reversal of a one-time tax liability accrual related to pre-IPO performance share awards that were released to employees in 2010.
(3) Loss (gain) from equity method investments represents deferral of our equity investments' net profits related to transactions with Velti.

1
Velti plc
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2011
 
2010
 
2011
 
2010
Revenue:
 
 
 
 
 
 
 
Software as a service (SaaS) revenue
$
25,545

 
$
14,987

 
$
76,374

 
$
36,348

License and software revenue
10,091

 
3,883

 
16,959

 
14,304

Managed services revenue
2,552

 
1,752

 
8,763

 
8,130

Total revenue
38,188

 
20,622

 
102,096

 
58,782

Cost and expenses:
 
 
 
 
 
 
 
Third-party costs
13,746

 
4,997

 
35,096

 
18,080

Datacenter and direct project costs
4,127

 
1,570

 
12,218

 
4,370

General and administrative expenses
10,260

 
5,882

 
34,137

 
15,162

Sales and marketing expenses
7,785

 
6,179

 
27,364

 
17,131

Research and development expenses
2,814

 
1,656

 
9,207

 
4,639

Acquisition related charges
—

 
—

 
7,603

 
—

Depreciation and amortization
5,788

 
2,843

 
13,650

 
8,096

Total cost and expenses
44,520

 
23,127

 
139,275

 
67,478

Loss from operations
(6,332
)
 
(2,505
)
 
(37,179
)
 
(8,696
)
Interest expense, net
(1,482
)
 
(2,826
)
 
(6,363
)
 
(5,193
)
Gain (loss) from foreign currency transactions
8,777

 
1,004

 
6,974

 
(1,052
)
Other expense
(120
)
 
—

 
(34
)
 
—

Gain (loss) before income taxes, equity method investments and non-controlling interest
843

 
(4,327
)
 
(36,602
)
 
(14,941
)
Income tax expense
(482
)
 
(1,110
)
 
(3,440
)
 
(670
)
Income (loss) from equity method investments
262

 
(630
)
 
(383
)
 
(2,107
)
Net income (loss)
623

 
(6,067
)
 
(40,425
)
 
(17,718
)
Net income (loss) attributable to non-controlling interest
25

 
(19
)
 
(75
)
 
(60
)
Net income (loss) attributable to Velti
$
598

 
$
(6,048
)
 
$
(40,350
)
 
$
(17,658
)
Net income (loss) attributable to Velti per share:
 
 
 
 
 
 
 
Basic
$
0.01

 
$
(0.16
)
 
$
(0.75
)
 
$
(0.47
)
Diluted
$
0.01

 
$
(0.16
)
 
$
(0.75
)
 
$
(0.47
)
Weighted average number of shares outstanding for use in computing per share amounts:
 
 
 
 
 
 
 
Basic
61,595

 
38,160

 
53,914

 
37,792

Diluted
63,926

 
38,160

 
53,914

 
37,792

 
 
 
 
 
 
 
 



7
Velti plc
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts)
(unaudited)
 
September 30,
 
December 31,
 
2011
 
2010
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
140,389

 
$
17,354

Trade receivables (including related party receivables of $0.2 million and $3.7 million as of September 30, 2011 and December 31, 2010, respectively), net of allowance for doubtful accounts
36,549

 
39,114

Accrued contract receivables (including related party receivables of $2.4 million and $0 as of September 30, 2011 and December 31, 2010, respectively)
42,419

 
33,588

Prepayments
19,738

 
9,533

Other receivables and current assets (including related party receivables of $2.1 million and $731,000 as of September 30, 2011 and December 31, 2010, respectively)
47,745

 
28,307

Total current assets
286,840

 
127,896

Non-current assets:
 
 
 
Property and equipment, net
3,802

 
3,253

Intangible assets, net
50,974

 
45,650

Equity investments
2,403

 
2,328

Goodwill
18,510

 
18,451

Other assets
11,710

 
11,590

Total non-current assets
87,399

 
81,272

Total assets
$
374,239

 
$
209,168

LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
20,832

 
$
32,514

Accrued liabilities
15,773

 
27,515

Deferred revenue and current portion of deferred government grant
4,841

 
2,849

Current portion of acquisition related liabilities
18,975

 
8,529

Current portion of long-term debt and short-term financings (including related party debt of $0 and $500,000 as of September 30, 2011 and December 31, 2010, respectively)
3,293

 
50,430

Income tax liabilities
10,289

 
9,875

Total current liabilities
74,003

 
131,712

Non-current liabilities:
 
 
 
Long-term debt
6,973

 
19,685

Deferred government grant - non-current
3,719

 
4,335

Retirement benefit obligations
542

 
447

Acquisition related liabilities - non-current
—

 
10,915

Other non-current liabilities
9,341

 
5,805

Total liabilities
94,578

 
172,899

Commitments and contingencies
 
 
 
Shareholders' equity:
 
 
 
Share capital, nominal value £0.05, 100,000,000 ordinary shares authorized; 61,670,396 and 38,341,760 shares issued and outstanding as of September 30, 2011 and December 31, 2010, respectively
5,137

 
3,397

Additional paid-in capital
341,997

 
50,415

Accumulated deficit
(59,708
)
 
(19,358
)
Accumulated other comprehensive income (loss)
(7,881
)
 
1,639

Total Velti shareholders' equity
279,545

 
36,093

Non-controlling interests
116

 
176

Total equity
279,661

 
36,269

Total liabilities and shareholders' equity
$
374,239

 
$
209,168

 
 
 
 


8
For further information, please contact:
Velti plc
Wilson W. Cheung
Chief Financial Officer
wcheung@velti.com

Paul W. Clausing
Vice President, Finance
pclausing@velti.com



 





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