Aquantive (NASDAQ:AQNT)
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aQuantive, Inc. (NASDAQ:AQNT), a global digital marketing company, today
reported financial results for the second quarter ended June 30, 2007.
Removing the impact of expenses associated with the pending acquisition
of aQuantive, Inc. by Microsoft Corporation, aQuantive results for
revenue, net income and adjusted EBITDA all exceeded the guidance given
by the company.
2007 second quarter results, which
include contributions from acquisitions made during 2006 and 2007, were:
Revenue of $156.0 million, an increase of 48 percent over the
second quarter of 2006.
Net income1 of $9.6 million, or $0.11 per
diluted share, a decrease of 22 percent from the second quarter of
2006.
Adjusted EBITDA1,2
of $26.1 million, or $0.29 per diluted share, a decrease of 9 percent
over the second quarter of 2006.
2007 six-month results, which include
contributions from all acquisitions made during 2006 and 2007, were:
Revenue of $298.6 million, an increase of 51 percent over the first
half of 2006.
Net income1 of $23.9 million, an increase of
20 percent over the first half of 2006.
Adjusted EBITDA1 of $58.8 million, or $0.65
per diluted share, an increase of 17 percent over the first half of
2006.
1 Net income and Adjusted EBITDA include $10.9
million ($6.2 million after taxes) related to expenses incurred in
connection with the pending acquisition of aQuantive, Inc. by Microsoft
Corporation.
2 Adjusted EBITDA (i.e. earnings before
interest expense, net interest and other income, income tax,
depreciation, amortization and stock-based compensation) is a non-GAAP
financial measure. See the supplemental schedule attached to this press
release for more information.
“aQuantive’s growth
continues to be tremendous. We benefited from each business unit’s
strong market position, our focus on serving clients, anticipating
market demand and effective recruiting initiatives,”
said Brian McAndrews, president and CEO of aQuantive. “In
the second quarter, organic growth was an impressive 33 percent.”
aQuantive operates three business segments. Unallocated corporate
expenses, including amounts recorded for stock-based compensation
expense, are centrally managed at the corporate level and are not
included in the segment operating results. Expenses related to the
pending acquisition of aQuantive, Inc. by Microsoft Corporation were
included within unallocated corporate expenses. Segment performance was
as follows:
Digital Marketing Services
aQuantive’s digital marketing services (DMS)
segment had revenue of $94.2 million in the second quarter of 2007,
compared to revenue of $64.1 million in the second quarter of 2006.
Operating income was $13.0 million in the second quarter of 2007,
compared to $11.3 million in the second quarter of 2006.
Digital Marketing Technologies
aQuantive’s digital marketing technologies
(DMT) segment had revenue of $40.2 million in the second quarter of
2007, compared to revenue of $29.7 million in the second quarter of
2006. Operating income was $15.6 million for the second quarter of 2007,
compared to $12.1 million in the second quarter of 2006.
Digital Performance Media
aQuantive’s digital performance media (DPM)
segment had revenue of $21.6 million in the second quarter of 2007,
compared to revenue of $11.9 million in the second quarter of 2006.
Operating income was $3.1 million for the second quarter of 2007,
compared to $2.4 million in the second quarter of 2006.
The Company will not provide guidance for revenue, net income, and
adjusted EBITDA.
About aQuantive, Inc.
aQuantive, Inc., is a global digital marketing company, founded in 1997
to help marketers acquire, retain and grow customers across all digital
media. It is the parent company of Avenue A |
Razorfish, the largest interactive agency in the U.S., and five
international agencies, Avenue A | Razorfish
U.K., Amnesia, NEUE DIGITALE, e-Crusade and Duke; Atlas, provider of
integrated digital marketing technologies and expertise; and DRIVEpm and
Franchise Gator, performance media and behavioral targeting businesses.
Through its business units, aQuantive is positioned to bring value to
any interaction in the digital marketplace. Its stock (ticker symbol:
AQNT) is listed on the NASDAQ exchange. aQuantive’s
website address is www.aquantive.com.
aQuantive, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
June 30,2007
December 31,2006
Assets
Current assets:
Cash, cash equivalents, and short-term investments
$
309,697
$
278,807
Accounts receivable, net of allowances
271,093
273,174
Other receivables
3,132
2,312
Prepaid expenses and other current assets
6,407
4,459
Deferred tax assets, net
4,451
4,475
Total current assets
594,780
563,227
Property and equipment, net
43,152
34,343
Goodwill and other intangible assets, net
322,502
316,580
Long-term investments
18,975
32,509
Other assets
3,544
2,754
Deferred tax assets, net
12,187
2,915
Total assets
$
995,140
$
952,328
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued expenses
$
225,558
$
251,072
Pre-billed media
23,643
27,945
Deferred revenue
13,726
16,517
Other current liabilities
1,120
1,027
Total current liabilities
264,047
296,561
Notes payable
79,715
80,000
Other long-term liabilities
4,651
7,941
Total liabilities
348,413
384,502
Shareholders' equity:
Common stock
801
778
Paid-in capital
575,086
522,657
Retained earnings and other comprehensive income
70,840
44,391
Total shareholders' equity
646,727
567,826
Total liabilities and shareholders' equity
$
995,140
$
952,328
aQuantive, Inc.
Consolidated Statement of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2007
2006
2007
2006
Revenue
155,975
105,629
298,596
197,814
Costs and expenses:
Cost of revenue
24,793
15,258
48,381
28,636
Client support
72,019
46,458
136,986
91,630
Product development
4,873
3,608
9,712
7,288
Sales and marketing
10,318
7,331
20,849
13,971
General and administrative
25,948
11,710
40,998
20,968
Amortization of intangible assets
2,912
2,149
5,655
4,185
Client reimbursed expenses
2,544
1,242
4,599
2,110
Total costs and expenses
143,407
87,756
267,180
168,788
Other operating income
505
-
1,551
-
Income from operations
13,073
17,873
32,967
29,026
Interest and other income, net
4,380
3,746
8,509
5,445
Interest expense
603
582
1,190
1,164
Income before provision for income taxes
16,850
21,037
40,286
33,307
Provision for income taxes
7,237
8,700
16,431
13,355
Net income
$
9,613
$
12,337
$
23,855
$
19,952
Basic net income per share
$
0.12
$
0.16
$
0.30
$
0.28
Diluted net income per share
$
0.11
$
0.15
$
0.27
$
0.25
Shares used in computing basic net income per share
79,238
76,157
78,688
72,207
Shares used in computing diluted net income per share
90,844
87,448
89,970
83,707
Supplemental Schedule of Adjusted EBITDA and Non-GAAP Estimates
The term adjusted EBITDA refers to a financial measure that is
defined by us as earnings before net interest and other income,
interest expense, income taxes, depreciation and amortization, and
stock-based compensation expense. Adjusted EBITDA is a non-GAAP
financial measure, and may not be comparable to similarly titled
measures reported by other companies. Adjusted EBITDA should not
be construed as a substitute for net income or as a better measure
of liquidity than cash flow from operating activities, which are
determined in accordance with GAAP. Management believes that
adjusted EBITDA is a useful measure for analyzing operating
results, and uses this non-GAAP financial measure to review past
results and forecast future results. The following schedule
reconciles adjusted EBITDA to net income on the company's
consolidated statement of operations, which the company believes
is the most directly comparable GAAP measure.
Three Months Ended
Six Months Ended
June 30,
June 30,
(in thousands, except per share data)
2007
2006
2007
2006
(unaudited)
(unaudited)
Net income
$
9,613
$
12,337
23,855
19,952
Depreciation of property and equipment
4,990
3,682
9,909
7,205
Stock-based employee compensation expense
4,666
4,876
9,370
9,625
Amortization of intangible assets
3,353
2,341
6,585
4,569
Interest and other income, net
(4,380
)
(3,746
)
(8,509
)
(5,445
)
Interest expense
603
582
1,190
1,164
Provision for income taxes
7,237
8,700
16,431
13,355
Adjusted EBITDA
$
26,082
$
28,772
$
58,831
$
50,425
Adjusted EBITDA per basic share
$
0.33
$
0.38
$
0.75
$
0.70
Adjusted EBITDA per diluted share
$
0.29
$
0.33
$
0.65
$
0.60
Supplemental Schedule of Segment Information
(in thousands)
Digital Marketing Services 1
Digital Marketing Tech-nologies 2
Digital Performance Media 3
Un-allocated Corporate Expenses 5
Total
(unaudited)
Three Months Ended June 30, 2007
Revenue
$
94,162
$
40,188
$
21,625
$
-
$
155,975
Costs and expenses:
Cost of revenue
754
11,568
12,264
207
24,793
Client support
67,815
-
1,858
2,346
72,019
Product development
-
4,493
-
380
4,873
Sales and marketing
2,126
4,787
3,078
327
10,318
General and adminis-trative
6,283
3,453
866
15,346
4
25,948
Amortization of intangible assets
2,120
298
494
-
2,912
Client reimbursed expenses
2,544
-
-
-
2,544
Total costs and expenses
81,642
24,599
18,560
18,606
143,407
Other operating income
505
-
-
-
505
Income from operations
$
13,025
$
15,589
$
3,065
$
(18,606
)
$
13,073
Three Months Ended June 30, 2006
Revenue
$
64,064
$
29,683
$
11,882
$
-
$
105,629
Costs and expenses:
Cost of revenue
1,254
7,817
6,044
143
15,258
Client support
43,089
-
939
2,430
46,458
Product development
-
3,031
-
577
3,608
Sales and marketing
1,397
3,837
1,716
381
7,331
General and adminis-trative
4,193
2,562
536
4,419
11,710
Amortization of intangible assets
1,583
311
255
-
2,149
Client reimbursed expenses
1,242
-
-
-
1,242
Total costs and expenses
52,758
17,558
9,490
7,950
87,756
Income from operations
$
11,306
$
12,125
$
2,392
$
(7,950
)
$
17,873
(in thousands)
Digital Marketing Services 1
Digital Marketing Tech-nologies 2
Digital Performance Media 3
Un-allocated Corporate Expenses 5
Total
(unaudited)
Six Months Ended June 30, 2007
Revenue
$
177,215
$
78,332
$
43,049
$
-
$
298,596
Costs and expenses:
Cost of revenue
858
22,686
24,450
387
48,381
Client support
128,785
-
3,591
4,610
136,986
Product development
-
8,929
-
783
9,712
Sales and marketing
4,750
9,316
6,166
617
20,849
General and adminis-trative
12,463
7,229
1,632
19,674
4
40,998
Amortization of intangible assets
4,027
642
986
-
5,655
Client reimbursed expenses
4,599
-
-
-
4,599
Total costs and expenses
155,482
48,802
36,825
26,071
267,180
Other operating income
1,551
-
-
-
1,551
Income from operations
$
23,284
$
29,530
$
6,224
$
(26,071
)
$
32,967
Six Months Ended June 30, 2006
Revenue
$
119,276
$
57,352
$
21,186
$
-
$
197,814
Costs and expenses:
Cost of revenue
1,981
15,046
11,323
286
28,636
Client support
85,232
-
1,681
4,717
91,630
Product development
-
5,955
-
1,333
7,288
Sales and marketing
2,986
7,552
2,682
751
13,971
General and adminis-trative
6,373
5,000
948
8,647
20,968
Amortization of intangible assets
3,218
622
345
-
4,185
Client reimbursed expenses
2,110
-
-
-
2,110
Total costs and expenses
101,900
34,175
16,979
15,734
168,788
Income from operations
$
17,376
$
23,177
$
4,207
$
(15,734
)
$
29,026
1 Digital Marketing Services includes
Avenue A | Razorfish and five
international agencies.
2 Digital Marketing Technologies includes
Atlas and AdManager.
3 Digital Performance Media includes
DRIVEpm and Franchise Gator.
4 For the three and six months ended June
30, 2007, unallocated general and administrative expenses include
$10,860 in expenses related to the pending acquisition of
aQuantive, Inc. by Microsoft Corporation.
5 For the three and six months ended June
30, 2007 and 2006, unallocated corporate expenses include
stock-based compensation expense. This expense is not allocated to
our segments, as it is centrally managed at the corporate level
and not reviewed by our chief operating decision maker in
evaluating results by segment. For the three and six months ended
June 30, 2007 and 2006, stock-based compensation expense was as
follows:
Three Months Ended
Six Months Ended
June 30,
June 30,
2007
2006
2007
2006
Cost of Revenue
$
207
$
143
$
387
$
286
Client Support
2,346
2,430
4,610
4,717
Product Development
288
385
585
959
Sales and Marketing
314
381
604
751
General and Administrative
1,511
1,537
3,184
2,912
Total stock-based compensation expense
$
4,666
$
4,876
$
9,370
$
9,625