RNS Number:4734T
Burst Media Corporation
22 March 2007
22 March 2007
Burst Media
Preliminary results for the twelve months ended 31 December 2006
Burst Media Corporation ("Burst" or "the Company"), the international online
advertising services business, announces its preliminary results for the year
ended 31 December 2006.
Financial Summary
*Revenues increased 9% to $23.5 million (2005: $21.6 million)
*Burst Network's revenues up 4% to $21.9 million (2005: $21.1 million)
*AdConductorTM revenues up 120% to $1.1 million (2005: $0.5 million)
*Maiden contribution from newly launched Burst Direct division
*Gross profit up 11% to $11.2 million (2005: $10.1 million)
*Gross margin was 48% (2005: 47%)
*Adjusted earnings before income taxes and depreciation and amortization
("EBITDA") was $2.4 million (2005: $3.4 million)
*Net Income before tax (excluding equity-based compensation) was $2.7
million, down 21% (2005: $3.4 million)
*Net cash at 31 December 2006 was $13.0 million (31 December 2005: $7.5
million)
Commenting on the maiden full year results, CEO Jarvis Coffin said, "Burst Media
has started 2007 with a strong sales pipeline and an increased sales capacity,
which is essential to the Company's progress in what is a growing and fast
moving market place. A lot of time, effort and resources have been invested in
resolving the operational difficulties Burst faced during 2006, and the Board is
confident that the Company, supported by a recently strengthened management
team, is now in a far stronger position to capitalise on the exciting
opportunities in the internet advertising market."
Enquiries:
Burst Media Tel: +44 (0) 20 7796 4133 or +1 781-852-5481
Jarvis Coffin, Chief Executive
Susan Villare, Chief Financial Officer
Hudson Sandler Tel: +44 (0) 20 7796 4133
Nick Lyon / James White
Chairman's statement
It has been a challenging year for Burst Media. We launched a new division of
the Company, Burst Direct, and expanded staff presence in the U.K. and across
the U.S. However, our maiden year as an AIM listed company was a disappointment
to us and our investors as the performance of the Company was significantly
below our initial expectations. The Board remains focused on ensuring that
shareholders benefit from the opportunities that we believe exist for Burst
Media within an Internet advertising industry that continues to be vibrant and
growing.
A summary of the financial results from the past year are as follows:
*Revenue grew 9% to $23.5 million with the majority of this increase due
to the Burst Network division, which saw revenues rise by 4% to $21.9
million. The AdConductor division saw revenues increase by 120% to $1.1
million while Burst Direct, launched in May 2006, made a small maiden
contribution.
*Gross profit was up 11% to $11.2 million and gross margin improved to
48%, from 47% last year.
*Operating costs, excluding equity-based compensation charges of $2.6
million, were up 33% to $9.2 million due to the significant investments,
primarily personnel related, made in all three divisions of the Company as
management has sought to increase the capacity of the business.
*Adjusted EBITDA for fiscal 2006 was $2.4 million.
*Net cash at 31 December 2006 was $13.0 million compared to $7.5 million
last year.
The core business of Burst Media is Burst Network, which services the
advertising needs of specialty publishers and brand advertisers. To fulfill the
needs of additional web publishers not served by Burst Network, and to support
advertisers who seek broad reach for direct response related campaigns, we
introduced Burst Direct in 2006. This provided our advertisers with the
flexibility to choose the appropriate network for their type of campaign,
whether it is high consideration brand advertising provided through Burst
Network, or direct response campaigns through Burst Direct.
We encountered challenges in the form of sales conflicts that arose as a result
of launching Burst Direct, which we believe affected performance in the core
Burst Network business. We have taken steps to address those issues and continue
to work to distinguish Burst's product offerings in the marketplace. The Board
is pleased with the positive contribution made by Burst Direct in recent months.
The enhancement of our AdConductor platform has led to increasing interest in
the product and did yield some notable contract wins, such as Reed Business
Information. These large contracts did take longer to complete than anticipated,
resulting in less revenue being recognized in 2006 than expected.
We invested in our sales capacity and our geographic presence during 2006.
Within our Network division, we expanded our outside sales staff in Atlanta, GA,
Chicago, IL, New York, NY, San Francisco, CA, and in London, U.K. Additionally,
new offices were opened in Chicago, IL, Los Angeles, CA, and London, U.K. We
expanded our office space in New York City, NY and at our headquarters in
Burlington, MA, and opened an office in Albany, NY as headquarters to Burst
Direct.
Burst Media was awarded its seventh consecutive year of systems certification by
BPA Worldwide and we remain the only advertising network with such
certification. We are proud of our commitment to advertisers that ensures their
campaign statistics are accurately being recorded and delivered.
During the year, our Board sadly lost one of its members. Our non-executive
Director David Ferrari passed away unexpectedly on 29 August 2006. David made
important contributions during his time as a non-executive Director and we miss
his sound advice. The Board appointed non-executive Director Steven Hill as
Chairman of the Audit Committee to replace David.
In the second half of 2006, the Board focused its efforts on improving the
performance of Burst Media by strengthening its management team. I'm pleased to
report that we believe the necessary steps have been taken to accomplish this,
with the successful recent recruitment of a new Chief Financial Officer, Chief
Marketing Officer, and Managing Director of the Burst Network business. We feel
confident that Burst Media is moving in a direction that benefits the interests
of our shareholders, customers, and employees.
David Hanger
Non-executive Chairman
22 March 2007
Chief Executive's statement
Introduction
Burst Media represents the advertising distribution needs of web publishers and
online advertisers on a global basis with three distinct product offerings: its
well-established Burst Network brand, the newly launched Burst Direct and its
technology platform, Burst AdConductor. These three product offerings give
publishers of all sizes the opportunity to use Burst Media to sell or manage
their online display advertising.
Overview
Total revenues increased 9% to $23.5 million in 2006 as compared to $21.6
million the previous year. Adjusted EBITDA for 2006 was $2.4 million as compared
to $3.4 million in 2005. Both numbers were broadly in line with the revised
guidance provided by management in September 2006, although significantly below
our expectations earlier in the year. Net Income before income tax, excluding
equity-based compensation, was $2.7 million. Cash increased $5.5 million from
the previous year and was $13.0 million at 31 December 2006.
Burst Media sought to strengthen its future position in 2006 by expanding the
Company's product offering and sales efforts. We launched a new division,
increased headcount by 50%, principally in sales, and invested in the technology
of our AdConductor enterprise software business. The Company also completed the
roll-out of its new corporate identity to reinforce Burst's brand position in
the marketplace. These activities were major undertakings that we believe will
position the Company as a leader within our industry going forward.
Online Reach
Ad networks serve campaigns across a wide variety of sites that represent
Internet traffic measured by individual visitors to a site, or "unique
visitors." Burst Media reached 95 million unique monthly Internet visitors in
the U.S. in December 2006, up 51% from 63 million unique visitors in December
2005, according to comScore MediaMetrix. This placed Burst Media as the 11th
largest Internet property in the U.S.
Burst Media reached 13 million unique monthly Internet visitors in the U.K. in
December 2006, up 44% from 9 million in December 2005, according to comScore
MediaMetrix. This placed Burst Media as the 17th largest Internet property in
the U.K.
Burst Network
Burst Network celebrated its tenth year of operations in 2006. The Company's
core product offering gives advertisers targeted access to tens of millions of
monthly unique visitors. Advertisers are guaranteed full disclosure as to which
sites their advertisements will appear on, from among 3,800 premium
specialty-content websites that are segmented into more than 400 content
channels. The advertisers can target by content, behaviour, demographics,
geography, and time of day. The inventory of available advertising impressions
for Burst Network grew steadily during 2006, as reflected in our growth to 56.8
billion impressions for the full year in 2006, up from 46.6 billion impressions
for 2005.
The Burst Network experienced growth in revenue of 4% to $21.9 million compared
to $21.1 million in 2005. This performance was disappointing, as the Company's
historical growth rates had previously compared very positively to industry
growth rates. There are several contributing factors: the launch of Burst Direct
in conjunction with the rapid expansion in personnel and new offices stretched
the operational capacity of the Company infrastructure; sales vacancies, now
filled, impacted upon the important Christmas sales period; and there was a
dramatic increase in the number of ad networks appearing in the market place,
which increased competition.
The Burst Network business continues to focus on the cost per thousand
impressions, or CPM, model valued by brand advertisers who demand transparency
regarding where their advertisements appear, and are willing to pay a premium
for such awareness. This also benefits our network of specialty content
publishers, who benefit from the premium price that this model commands.
During the year, we increased the outside sales force for Burst Network from 7
to 15 people, most notably in Atlanta, GA, Chicago, IL, New York City, NY, San
Francisco, CA, and London, U.K. We expect to see positive results from these
investments in 2007.
Notable advertisers in the Burst Network in 2006 included Adidas, Disney, Delta,
ESPN, Expedia, Ford Motor Company, Monster Worldwide, Skechers and Vonage.
We have been pleased with the progress we have made in the year in developing
our U.K. presence. The Burst Network's U.K. office experienced a 91% growth in
revenue in 2006 over 2005. Notable contract wins in 2006 included clients such
as BT, Expedia UK, BSkyB, British Airways, Weight Watchers, Apple, O2, Samsung,
Orange and Disneyland.
In 2006, the Burst Network began to offer brands the ability to use video in
their online advertising, through a partnership between Burst Media and
PointRoll. This enables advertisers to use their existing video creative to
capture the attention of the online audience with a brand message targeted to
audiences across the Burst Network of sites. PointRoll developed its NetStream
service initially for the exclusive use of the Burst Network.
Burst Direct
The goal of Burst Direct, which was launched in May 2006, is to enable Burst
Media to provide alternative display advertising programs to web publishers to
serve the needs of direct response advertisers seeking large audiences at cost
effective, run-of-network rates. Burst Direct offers millions of impressions
through over a thousand member publishers and through inventory relationships
with large Internet portal sites. Direct marketing campaigns are aggressively
managed to maximize the performance of each campaign, by employing advanced
optimization technology, powered by Burst's AdConductor platform.
Despite strong sales efforts, revenues for the Burst Direct business in its
first year of operation were considerably lower than we expected. This reflected
our inability to successfully deliver on the full volume of orders due to a
combination of factors, including the need to better manage the inventory to
support the campaigns being sold. In 2007, we will be continuing to focus on
refining the Burst Direct model to address such issues. New initiatives for the
acquisition of inventory and improvements to the sales process have already
resulted in stronger revenue and outlook for this business. We expect 2007
results to capitalise on the rapid growth in this sector of the market.
Between June 2006 and the end of December 2006, the number of websites in the
Burst Direct ad network increased approximately 70% to nearly 2,500 sites.
Whilst the launch of the division came later than planned during the year, which
limited full year results, we were pleased to see the rate at which revenues
have grown in recent months.
Burst AdConductorTM
AdConductor, Burst Media's ad serving platform, applies proven technology and
more than 11 years of experience with building and running premium ad networks.
As a market offering, AdConductor provides a one-stop solution that integrates
sales, campaign management and financial business processes in order to serve
the ad placement needs of large and multi-site web publishers. The two products
offered by the AdConductor Division include Desktop, which enables small to
medium size web publishers to manage their own advertising placement, and
Enterprise which supports large multi-site publishers with a complete ad
management system.
Revenues in the AdConductor division were $1.1 million, which represents a
growth of 120% from the previous year. AdConductor successfully signed 21 new
contracts in 2006 with an aggregate value over the life of the contracts of $2.5
million. The bulk of these contracts are two-year agreements, providing a strong
base for 2007. Significant 2006 wins and contract renewals include F&W
Publishing, Reed Business Information and TACODA. Burst AdConductor had a good
start to 2007 with a new contract win from Reed Business Affiliate Network that
will use our AdConductor system to deliver and manage their online advertising
across their U.S. network of business to business websites. The growth in
display advertising and the need to manage its distribution on a targeted basis
has resulted in a strong pipeline for 2007.
During 2006, several important enhancements were made to the AdConductor
platform to increase performance, competitiveness, and reporting capabilities.
Specifically, we:
*Created a platform for sharing advertising inventory between AdConductor
clients and Burst, referred to as the Burst Audience Backplane;
*Developed the technology and business rules for running performance-based
advertising campaigns to support the creation of the Burst Direct business
and
*Implemented Behavioural Targeting capability, and the ability to target
individuals who show interest in a specific order.
Outlook
The Company has entered 2007 with a strong sales pipeline and a significant
increase in sales capacity. At the end of 2006, Burst Media decided to make
significant changes to its management team. This will bring new experience into
the Company and support the management of its individual business units. Susan
Villare joined the Company as Chief Financial Officer from MatrixOne, a NASDAQ
listed company acquired by Dassault Systemes, where she was CFO of their Enovia
division. David Cooperstein has accepted the new role of Chief Marketing Officer
for Burst Media. Mr. Cooperstein brings over 15 years of Internet and New Media
experience to the Company, most recently from the social networking site
Gather.com. Don Byrnes is Burst Media's new Managing Director for the Burst
Network business, bringing over 25 years of sales experience in the advertising
and publishing industries. This new management team will focus on improving the
Company's growth in revenue, its financial discipline and its strategic
marketing efforts.
In 2007, the Company will continue to invest in its ad management technology and
service offerings to stay ahead of the rapid pace of development in the industry
and to continue to provide tools that help improve sales performance and
productivity.
The Board believes that the Company is now in a better position to capitalise on
the opportunities that continue to exist in the online advertising industry and
remains focused on taking all steps to increase results and shareholder value.
Jarvis Coffin
Chief Executive Officer
22 March 2007
Condensed Financial Statements (in thousands, except share amounts)
Balance Sheets (unaudited)
2006 2005
------- -------
ASSETS:
CURRENT ASSETS
Cash and cash equivalents $ 13,012 $ 7,462
Accounts receivable, less allowance for doubtful accounts of
$220 in 2006
and $200 in 2005 5,565 5,336
Prepaid expenses and other current assets 761 288
------- -------
Total current assets 19,338 13,086
PROPERTY AND EQUIPMENT, NET 747 224
OTHER ASSETS 623 223
------- -------
$ 20,708 $13,533
======= =======
LIABILITIES AND STOCKHOLDERS'/MEMBERS' EQUITY (DEFICIT):
CURRENT LIABILITIES:
Due to publishers $3,500 $3,978
Other current liabilities 1,377 942
------- -------
Total current liabilities 4,877 4,920
OTHER LONG TERM LIABILITIES: 56 13
------- -------
Total liabilities 4,933 4,933
------- -------
REDEEMABLE PREFERRED MEMBERSHIP UNITS:
Series C units, 2,519,580 economic and participating units
issued and outstanding at December 31, 2005 - 15,000
------- -------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS'/MEMBERS' EQUITY (DEFICIT):
Series A units, 8,762,782 economic units issued and
outstanding at
December 31, 2005, of which 8,729,016 are
participating units in 2005. - 946
Series B units, 1,400,000 economic and participating units
issued and outstanding at December 31, 2005 - 3,000
Common stock, $.01 par value; 150,000,000 shares authorized,
82,928,562 shares at issued and outstanding December
31, 2006 829 -
Additional paid-in capital 25,092 -
Deferred equity-based compensation - 8
Accumulated deficit (10,146) (10,354)
------- -------
Total stockholders'/members' equity (deficit) 15,775 (6,400)
------- -------
$ 20,708 $13,533
======= =======
Consolidated Statements of Operations (unaudited)
(in thousands, except share amounts)
2006 2005
-------- --------
Revenue $23,477 $21,561
Cost of revenue 12,251 11,436
-------- --------
Gross profit 11,226 10,125
-------- --------
Operating Expenses:
Sales and marketing 5,309 3,977
General and administrative 2,360 1,788
Technology and product development 1,514 1,149
Equity-based compensation 2,584 -
-------- --------
Total operating expenses 11,767 6,914
-------- --------
Income/(loss) from operations (541) 3,211
-------- --------
Other Income:
Interest income 520 166
Other income 159 38
-------- --------
Total other income 679 204
-------- --------
Net income before income tax benefit 138 3,415
-------- --------
Income tax benefit 70 -
-------- --------
Net income $ 208 $ 3,415
======== ========
Basic earnings per share $ 0.00 $ 0.07
======== ========
Fully diluted earnings per share $ 0.00 $ 0.07
======== ========
Shares Used in Calculating:
Basic earnings per share 73,350,634 50,813,915
======== ========
Fully diluted earnings per share 73,498,934 50,813,915
========= =========
Consolidated Statements of Operations (unaudited)
Adjusted EBITDA
(in thousands)
2006 2005
--------- ------
Net income $ 208 $3,415
--------- ------
Adjustments:
Equity-based compensation 2,584 -
Interest income (520) (166)
Income tax benefit (70) -
Depreciation and amortization 212 105
--------- -------
Total adjustments 2,206 (61)
--------- -------
Adjusted EBITDA(1) $2,414 $3,354
========= =======
Adjusted EBITDA(1) as percentage of Revenue 10% 16%
========= =======
(1) "Adjusted EBITDA" (earnings excluding equity-based compensation before
interest income, taxes, deprecation and amortization) is a non-GAAP financial
measure. Burst Media believes adjusted EBITDA provides meaningful insight into
the Company's ongoing economic performance and therefore uses adjusted EBITDA
internally to assist in evaluating and managing the Company's operations.
Consolidated Statements of Cash Flows (unaudited)
(in thousands, except share amounts)
2006 2005
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 208 $ 3,415
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 212 105
Deferred income taxes (409) -
Bad debt 34 88
Equity-based compensation 2,584 4
Accretion of discount on Series C units - 2
Deferred rent 47 -
Changes in:
Accounts receivable (263) (2,643)
Prepaid expenses and other current assets (473) (129)
Other assets (4) (56)
Due to publishers (478) 1,077
Other current liabilities 435 387
Net cash provided by operating activities 1,893 2,250
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (731) (165)
Cost of acquiring trademarks and other properties (26) -
Repayments of note receivable from member 34 21
Net cash used in investing activities (723) (144)
CASH FLOWS FROM FINANCING ACTIVITIES
Stock option exercises 645 -
Common stock issued, net of expenses 3,318 -
Series C units preference settlement 421 -
Repayments of capital lease obligation (4) (4)
Net cash provided by (used in) financing activities 4,380 (4)
Net Increase in cash and cash equivalents 5,550 2,102
Cash and cash equivalents, beginning of year 7,462 5,360
Cash and cash equivalents, end of year $ 13,012 $ 7,462
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
During the year ended December 31, 2006, the Company paid cash in the amounts of
$1 for interest and $381 for taxes. There was no cash paid for interest or taxes
during the years ended December 31, 2005.
NON-CASH FINANCING ACTIVITIES
The Company issued 63,745,150 common shares in exchange for the Series A, B and
C membership units upon conversion to a C Corporation during the year ended
December 31, 2006.
The Company issued 14,235,667 common shares in settlement of a Series C
membership unit holders' preference during the year ended December 31, 2006.
Notes to Consolidated Condensed Financial Statements (unaudited)
(in thousands except share amounts)
1. Basis of Presentation
The consolidated condensed financial statements of Burt Media Corporation
("Burst" or "the Company") have been prepared in accordance with accounting
principles generally accepted in the United States of America (U.S. GAAP) and
include the accounts of BURST Media UK Limited, Burst's wholly-owned subsidiary.
All intercompany balances and transactions have been eliminated. Certain
information and note disclosures, which are normally included in annual
financial statements prepared in accordance with U.S. GAAP, have been omitted.
The consolidated statements reflect all adjustments which are, in the opinion of
management, necessary to present fairly the Company's financial position and the
results of operations.
Certain previously recorded amounts have been reclassified to conform to the
current period presentation.
2. Re-incorporation and Initial Public Offering
Burst was originally organized in January 1996 as a New York limited liability
company (Burst Media LLC). On April 10, 2006, Burst was reincorporated under the
laws of the State of Maryland. The re-incorporation changed the form of the
entity from a Limited Liability Corporation (LLC) to a C Corporation. Burst
acquired 100% of the assets and liabilities of the Burst LLC in exchange for all
of Burst's outstanding capital stock (equivalent to 63,745,150 shares of $0.01
par value common stock) which was thereupon distributed to members of Burst LLC
on a pro rata basis in connection with its dissolution on April 11, 2006. The
exchange has been recorded at the Company's historical carrying value on the
date of conversion.
On April 21, 2006, the Company issued 3.5 million new shares of common stock on
the AIM market of the London Stock Exchange at $1.47 per share, generating $3.3
million in proceeds. These proceeds are recorded net of the issue costs (legal,
commissions and other) totalling $1.8 million in cash. The stock trades on the
AIM market under the symbol "BRST".
Prior to the Initial Public Offering ("IPO") on April 21, 2006, the operations
of Burst LLC were governed by its amended and restated operating agreement dated
January 31, 2000. The amended and restated operating agreement provides for the
issuance of membership units that entitled each series of membership to certain
rights and obligations.
3. Equity-Based Compensation
For the year ended December 31, 2005, Burst LLC elected to account for
equity-based compensation plans using the intrinsic value method as set forth in
APB Opinion No. 25, "Accounting for Stock Issued to Employees" as permitted by
SFAS No. 123, "Accounting for Stock Based Compensation". As such, compensation
expense was recognized if, on the grant date, the fair value of the underlying
unit exceeded the exercise price. Under SFAS No. 123, the Company disclosed the
pro-forma net income (loss) as if the fair-value method defined in SFAS No.123
had been applied. Compensation expense associated with option grants to
non-employees was measured using a fair value method in accordance with SFAS No.
123 and related interpretations. Had compensation expense been recorded based on
the fair value method set forth under SFAS No. 123, the change in the Company's
net income (loss) would have been immaterial for the year ended December 31,
2005.
SFAS No.123(R), "Share-Based Payment", requires the use of an option pricing
model for estimating fair value, which is amortized to expense over the vesting
periods of an option grant. As such pro-forma disclosure of fair value
recognition is no longer an alternative. The Company has applied the provisions
of SFAS No. 123(R) to the financial statements for the year ended December 31,
2006. Burst applied the modified prospective application transition method as
permitted by this statement. As such, financial statements for prior periods to
the effective date of this statement will not be restated.
4. Foreign Currency
The financial accounts of Burst Media UK Limited are measured using the local
currency as the functional currency. The assets and liabilities of this
subsidiary are generally translated into U.S. dollars at the current exchange
rates as of the balance sheet dates, and revenues and expenses are translated at
average rates each month. Burst also conducts certain transactions denominated
in foreign currencies.
Net foreign currency transaction gains were $137 and $20 for the years ended
December 31, 2006 and 2005, respectively and are included in Other income in the
accompanying consolidated statements of operations.
5. Earnings per common share
Basic and diluted earnings per share for the years ending December 31 are
calculated as follows:
2006 2005*
-------- --------
Numerator:
Net income used in calculating basic and diluted
earnings per share $208 $3,415
======== ========
Denominator:
Weighted average number of common shares
outstanding.
73,350,634 50,813,915
Effect of dilutive securities - stock options 148,300 -
-------- --------
Shares used in calculating diluted earnings per
share 73,498,934 50,813,915
======== ========
*Share count used in determining earnings per share for the year ended December
31, 2005 are affected for the 5 for 1 stock exchange, which occurred at the date
of the IPO (April 21, 2006). See further discussion of the Company's IPO in Note
2.
Antidilutive options outstanding were 868,222 at December 31, 2006. There were
no antidilutive options outstanding at December 31, 2005.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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