Nine Month 2010 Interim Resul

RNS Number : 3236W

Velti PLC

17 November 2010

 



For Immediate Release                                                                            November 17, 2010

Velti Plc

 ("Velti" or the "Company")

VELTI ANNOUNCES NINE MONTH 2010 INTERIM RESULTS

Dublin, Ireland - Velti (AIM:VEL), a leading global provider of mobile marketing and advertising technology, today reported its interim financial results for the nine months ended September 30, 2010. The Company benefited from increasing demand for its technology and services from existing and new customers.

"The environment for mobile marketing continued to improve in the third quarter, driving year-on-year revenue and EBITDA growth for Velti.  Additionally, we recently bolstered our capabilities with the acquisition of Mobclix, a leading mobile ad exchange network.  Velti's proprietary databases and analytics platforms, including those we have acquired recently, are able to process, analyze and optimize more than 1.3 billion new data facts daily," said Alex Moukas, CEO of Velti.

Financial Highlights for the Nine Months Ended September 30, 2010 and Full Year 2009

(in thousands USD)

	Nine Months YTD 2010 (unaudited)	Nine Months YTD  2009 (unaudited)	% Change	FY2009
Revenue	$    58,782	$  24,166	143%	$    89,965
Adjusted EBITDA*	$      4,727	$ (10,035)	N/A	$    24,727

* The Company presents Adjusted EBITDA as a supplemental measure of its performance. Adjusted EBITDA is defined as net income (loss) before non-controlling interest plus (i) income tax expense (benefit), (ii) interest expense, (iii) loss in equity investments, (iv) foreign exchange gains (losses), (v) depreciation and amortization, (vi) non-cash share-based compensation, and (vii) non-recurring expenses. Refer to footnotes below on reconciliation from net income (loss) before non-controlling interest to Adjusted EBITDA.

Statement of the Chairman and Chief Executive Officer

Introduction

During the nine months ended September 30, 2010, Velti benefited from demand for its technology and services from existing and new customers, who are increasingly turning to mobile advertising and marketing as a way to engage and retain consumers, and measure and optimize traditional media expenditure.

Financial Performance

The Company's total revenue has grown to $90.0 million for the year ended December 31, 2009, an increase of 45% from $62.0 million for the year ended December 31, 2008, and an increase of 278%, from $16.4 million for the year ended December 31, 2007. For the nine months ended September 30, 2010, the Company's total revenue was $58.8 million, an increase of $34.6 million, or 143%, compared to the same period in 2009.

The Company has been able to grow its business by expanding its sales and marketing activities in order to respond to the opportunities presented by the emergence of the mobile device as a principal interactive channel for brands, advertising agencies, mobile operators and media companies to reach consumers. In addition, the growth in mobile marketing and advertising is further driven by the continued growth of wireless data subscribers, the proliferation of mobile devices, smartphones and advanced wireless networks, and the increased usage of mobile content, applications and services. Smartphones offer access to features previously available only on PCs, such as Internet browsing, email and social networking, and accordingly are gaining importance as a separate platform. Increasingly, brands and advertising agencies are recognizing the unique benefits of the mobile channel and they are seeking to maximize its potential by integrating mobile media within their overall advertising and marketing campaigns. The Company's platform allows its customers to focus on campaign strategy, creativity and media efficiency without having to worry about the complexity of implementing mobile marketing and advertising campaigns globally.

The Company believes that its continued growth depends upon its ability to maintain its technology leadership as well as its ability to maintain existing, and develop new relationships with brands, advertising agencies, mobile operators and media companies in both developed and emerging markets. In addition, the Company expects its growth to be dependent upon the increased adoption of its Velti mGage platform.

In 2009, the Company continued to increase revenue for licenses and software, compared to 2008. In 2010, as the Company has increasingly focused its efforts on its SaaS pricing model, the Company has seen an increase in its SaaS revenue and a deceleration in the growth of its license revenue. Its SaaS revenue for the nine months ended September 30, 2010 increased to $36.3 million, an increase of $24.9 million, or 216%, over the same period of 2009, while its license and software revenue increased to $14.3 million, an increase of $7.9 million, or 123% over the same period in the prior year. The Company expects that its SaaS revenue will continue to increase both in absolute dollars and as a percentage of total revenue as its customers seek more flexible pricing models that better address their marketing and advertising needs, and the Company is therefore able to derive increased transactions-based and performance-based SaaS revenue.

In addition, the Company's financial results for 2009 and the first nine months of 2010 reflect a combination of:

• continued investment in its global footprint, which resulted in customer growth in China, India, the U.S.

and Europe through its local operations, joint ventures, and equity method investments;

• the impact of its enhanced sales, marketing and business development operations, which has led to

revenue growth; during the first nine months of 2010 the Company continued to gain new customer wins and create increased sales pipeline opportunities, and, as a result, over 525 brands, advertising agencies, mobile operators and media companies, including 13 of the 20 largest mobile operators worldwide, based on number of subscribers, used its software platform to conduct over 1,200 campaigns; and

• continued roll-out of enhanced versions of its Velti mGage platform, unifying mobile media planning,

mobile advertising, mobile marketing and mobile CRM functionality.

David Mann, Non-Executive Chairman commented:

"As smartphones penetrate the mobile user base and as quantity of data consumed increases, we believe brand managers are increasingly eager to advertise and market via the mobile medium.  Velti's innovative technology platform allows its customers to conduct highly effective and measurable mobile marketing and advertising campaigns."

Alexandros Moukas, Chief Executive Officer added:

"Velti's revenue growth and financial performance is reflective of the strength of customer relationships, with new and existing customers choosing to partner with Velti and utilize our innovative mGage platform to conduct cutting edge advertising and marketing campaigns.  We continue to invest in our business and to drive our growth and profitability."

Acquisitionof Mobclix

On October 1, 2010, Velti announced the acquisition of Mobclix, a leading privately-held mobile ad exchange network. The acquisition gives Velti a mobile ad exchange that connects more than 25 online, video and mobile ad networks. This exchange serves and monetizes more than 3,280 ad requests per second or 8.5 billion ad requests per month through more than 15,000 mobile applications. The Mobclix SDK has been downloaded more than 312,000 times, and the ad exchange has served 33 billion ad impressions on more than 100 million unique smartphone devices.

VELTI PLC

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

	Nine months ended September 30,		Year Ended December 31,
	2010	2009	2009
	(unaudited)
Revenue
Software as a service (SaaS) revenue	$  36,348	$   11,491	$   30,965
License and software revenue	14,304	6,427	45,811
Managed services revenue	8,130	6,248	13,189
Total revenue	58,782	24,166	89,965
Cost and expenses:
Third-party costs	18,080	10,980	27,620
Datacenter and direct project costs	4,370	3,117	4,908
General and administrative expenses	15,162	10,413	17,387
Sales and marketing expenses	17,131	10,991	15,919
Research and development expenses	4,639	2,585	3,484
Depreciation and amortization	8,096	7,180	9,394
Total cost and expenses	67,478	45,266	78,712
Income (loss) from operations	(8,696)	(21,100)	11,253
Interest income	78	47	50
Interest expense	(5,271)	(1,366)	(2,420)
Gain (loss) from foreign currency transactions	(1,052)	(433)	14
Income (loss) before income taxes, investment in associates and non-controlling interests	(14,941)	(22,852)	8,897
Income tax benefit (expense)	(670)	1,053	(410)
Loss from equity investments	(2,107)	(1,449)	(2,223)
Net income (loss) before non-controlling interest	(17,718)	(23,248)	6,264
Net income (loss) attributable to non-controlling interest	(60)	(14)	(191)
Net income (loss) attributable to Velti	$(17,658)	$(23,234)	$6,455
Net income (loss) per share attributable to Velti:
Basic	$    (0.47)	$    (0.67)	$      0.18
Diluted	$    (0.47)	$    (0.67)	$      0.17
Weighted average shares outstanding for use in computing:
Basic net income (loss) per share	37,792	34,629	35,367
Diluted net income per share	37,792	34,629	37,627

VELTI PLC

CONSOLIDATED BALANCE SHEETS

(in thousands)

	September 30,		December 31,
	2010	2009	2009
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$ 18,787	$ 9,482	$ 19,655
Trade receivables, net of allowance for doubtful accounts	41,395	13,159	32,505
Accrued contract receivables	20,988	12,575	15,342
Prepayments	8,187	2,890	2,775
Other receivables and current assets	12,247	3,902	5,231
Total current assets	101,604	42,008	75,508
Non-current assets:
Property and equipment, net	3,193	3,898	3,342
Intangible assets, net	47,852	30,407	34,412
Equity investments	2,367	5,028	3,254
Goodwill	19,773	4,041	3,874
Other assets	7,189	4,375	1,668
Total non-current assets	80,374	47,749	46,550
Total assets	$181,978	89,757	$122,058
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and other accrued liabilities	$ 53,906	$ 36,896	$ 29,896
Deferred revenue and government grant - current	1,731	1,207	1,565
Current portion of long-term debt	51,831	10,705	21,200
Income tax liabilities	2,969	─	─
Total current liabilities	110,437	48,808	52,661
Long term debt	14,273	18,177	17,661
Deferred government grant - non-current	1,141	3,800	2,651
Retirement benefit obligations	424	334	346
Other non-current liabilities	20,625	5,305	1,803
Total liabilities	146,900	76,424	75,122
Commitments and contingencies
Shareholders' equity:
Share capital, nominal value £0.05; 100,000,000 ordinary shares authorized as of September 30, 2010 and December 31, 2009 and 50,000,000 shares authorized as of December 31, 2008; 38,095,845 shares, 34,763,248 shares and 37,530,261 shares issued and outstanding as of September 30, 2010, December 31, 2009 and 2008, respectively	3,396	3,084	3,339
Additional paid-in capital	49,573	38,085	42,885
Accumulated deficit	(21,347)	(33,378)	(3,689)
Accumulated other comprehensive income	3,251	5,217	4,315
Total Velti shareholders' equity	34,873	13,008	46,850
Non-controlling interests	205	325	86
Total shareholders' equity	35,078	13,333	46,936
Total liabilities and shareholders' equity	$181,978	89,757	$122,058

VELTI PLC

CONSOLIDATED CASH FLOW STATEMENTS

(in thousands)

	Nine months ended September 30,		Year Ended December 31,
	2010	2009	2009
	(unaudited)
Cash flows from operating activities:
Net income (loss) before non-controlling interest	$ (17,718)	$ (23,248)	$    6,264
Adjustments to reconcile net loss to net cash generated from (used in) operating activities:
Depreciation and amortization	8,096	7,180	9,394
Share-based compensation	5,327	1,685	1,292
Retirement benefit obligations	92	73	85
Deferred income taxes	3,793	(902)	258
Deferred revenue and government grant income	1,332	(1,454)	(117)
Undistributed loss of equity investments	2,107	(1,449)	274
Change in operating assets and liabilities:
Trade receivables, other receivables and other current assets	(25,172)	(5,583)	(28,910)
Accounts payable and accrued liabilities	13,401	17,790	9,369
Other assets	(98)	(2,558)	(1,186)
Net cash generated from (used in) operating activities	(8,840)	(5,568)	(3,277)
Cash flow from investing activities:
Purchase of property and equipment	(842)	(519)	(601)
Investment in intangible assets	(14,888)	(13,579)	(19,391)
Investment in subsidiaries and associates, net of cash acquired	(651)	(919)	(919)
Sales of equity method investments	263	-	-
Net cash used in investing activities	(16,118)	(15,017)	(20,911)
Cash flow from financing activities:
Proceeds from issuance of ordinary shares, net	43	4,322	4,322
Proceeds from borrowings and debt financing	28,990	19,361	33,668
Repayment of borrowings	(3,621)	(9,974)	(9,974)
Net cash generated from financing activities	25,412	13,709	28,016
Effect of change in foreign exchange rates	(1,322)	2,037	1,506
Net (decrease) increase in cash and cash equivalents	(868)	(4,839)	5,334
Cash and cash equivalents at beginning of period	19,655	14,321	14,321
Cash and cash equivalents at end of period	$  18,787	$9,482	$  19,655

VELTI PLC

Notes 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 the Company's annual report and financial statements are available at the registered office of the Company: 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.

Reconciliation to Adjusted EBITDA

Set forth below is a reconciliation of net loss before non-controlling interest to Adjusted EBITDA:

	Nine months YTD 2010 (unaudited)	Nine months YTD 2009 (unaudited)	FY2009
Net income (loss) before non-controlling interest	$   (17,718)	$   (23,248)	$     6,264
Adjustments:
Income tax benefit	670	(1,053)	410
Interest expense, net	5,193	1,319	2,370
Loss from equity method investments	2,107	1,449	2,223
Foreign exchange (gains) losses	1,052	433	(14)
Depreciation and amortization	8,096	7,180	9,394
Non-cash share based compensation	5,327	1,685	1,292
Non-recurring expenses	─	2,200	2,788
Adjusted EBITDA	$    4,727	$ (10,035)	$   24,727

Non-recurring expenses in 2009 included G&A expenses with respect to the Company's redomiciliation exercise and professional fees associated with its consideration of corporate opportunities.

Principles of consolidation

The accompanying consolidated financial statements include the results of Velti plc and all subsidiaries that the Company controls. Intercompany accounts and transactions have been eliminated. Investments in companies in which the Company owns 20% to 50% of the voting stock or have the ability to exercise significant influence over operating and financial policies of the investee are accounted for using the equity method of accounting and, as a result, the Company's share of the earnings or losses of such equity affiliates is included in the statement of operations.

Revenue Recognition

The Company recognizes revenue when all of the following conditions are satisfied: (i) persuasive evidence of an arrangement exists, (ii) service has been delivered, (iii) fee is fixed or determinable, and (iv) collectability of the fee is reasonably assured. The timing of revenue recognition in each case depends upon a number of factors, including the specific terms of each arrangement, the nature of the Company's deliverables and obligations, and the existence of evidence to support recognition of its revenue as of the reporting date. If the Company determines that any one of the four criteria is not met, the Company will defer recognition of revenue until all the criteria are met.

Share‑Based Payments

Compensation expense related to shared‑based payment, including employee and director share‑based awards, is estimated using the Black‑Scholes option valuation model at the date of grant based on the share awards fair value and is recognized as expense over the requisite service period, using the "graded vesting attribution method" which allocates expense on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in substance, multiple awards.

The Company account for share options issued to non-employees and employees of its joint ventures using the fair value approach. The value of share options issued for consideration other than employee services is determined on the earlier of (i) the date on which there first exists a firm commitment for performance by the provider of goods or services, or (ii) on the date performance is complete, using the Black‑Scholes option valuation model. The compensation costs of these arrangements are subject to re-measurement over the vesting terms as earned.

Net Income (Loss) per Share

Basic net income (loss) per share is calculated by dividing the profit attributable to equity holders by the weighted average number of ordinary shares outstanding during the year. Diluted net income per share is computed by including all potentially dilutive ordinary shares, deferred share awards and share options. For the nine months ended September 30, 2010 and 2009, deferred share awards and share options were not included in the computation of diluted net loss per share because the effect would have been anti-dilutive.

* * * * * *

For further information, please contact:

Bankside Consultants Simon Bloomfield [e-mail] [phone] The Blueshirt Group Mike Bishop [e-mail] [phone] RBC Capital Markets (NOMAD and Broker) Joshua Critchley Matthew Coakes Brett Jacobs [phone]

Velti plc Alex Moukas Chief Executive Officer [phone] Wilson Cheung Chief Financial Officer [phone] Dakota Sullivan VP Global Marketing [e-mail] [phone]

About Velti

Velti is a leading global technology provider of mobile marketing and advertising 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 Company's technology 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. In the nine months ended September 30, 2010, over 525 brands, advertising agencies, mobile operators and media companies have used the Company's platform to execute more than 1,200 campaigns. Velti has the ability to conduct campaigns in over 30 countries and reach more than 2.5 billion consumers. Velti is a publicly-held corporation based in Jersey which trades on the London Stock Exchange's AIM under the symbol VEL. For more information, visit www.velti.com.

 

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