24/7 Real Media, Inc. (Nasdaq: TFSM): Fourth Quarter Highlights: --
Revenue of $41.7 million, an increase of 52% over the comparable
period in 2004. -- Pro forma operating income of $0.08 per share
compared with $0.03 per share in Q4 of 2004; GAAP net income of
$0.03 per share versus a GAAP net loss of $0.06 per share in Q4 of
2004. -- Successful operational launch of K.K. 24-7 Search, a joint
venture with Dentsu Inc., to capitalize on the growing Search
Engine Marketing sector in Japan. -- Expansion of leading German
operations with the opening of new Hamburg office. 24/7 Real Media,
Inc. (Nasdaq: TFSM), a pioneer in interactive marketing and
technology, today announced financial results for the fourth
quarter and full year ended December 31, 2005. Revenue for the
fourth quarter of 2005 was $41.7 million, an increase of 52% from
the $27.5 million reported for the fourth quarter of 2004, and a
sequential increase of 19% from the $35.1 million reported during
the third quarter of 2005. 24/7 Real Media continued to expand its
global reach in 2005 with the opening of offices in Tokyo, Rome and
Hamburg, and non-U.S. operations contributed 57% of the Company's
revenue in the fourth quarter. Operating strength in each of its
geographies and business segments contributed to the robust
sequential and year-over-year growth for the Company. Pro forma
operating income(1) for the fourth quarter of 2005 was $4.0
million, or $0.08 per share. This compares with pro forma operating
income of $1.5 million, or $0.03 per share, for the fourth quarter
of 2004. Under generally accepted accounting principles (GAAP), net
income for the fourth quarter of 2005 was $1.4 million, or $0.03
per share, compared with a net loss of $2.8 million, or $0.06 per
share, for the fourth quarter of 2004. For the year ended December
31, 2005, revenue was $139.8 million, an increase of 64% from the
$85.3 million reported for the year ended December 31, 2004. Pro
forma operating income for 2005 was $9.9 million, or $0.20 per
share, an increase of more than 300% over the pro forma operating
income of $2.4 million, or $0.06 per share, in the prior year. GAAP
net income for 2005 was $0.0 million, or $0.00 per share, compared
with a GAAP net loss of $3.5 million, or $0.10 per share, in 2004.
"2005 was a breakthrough year for 24/7 Real Media," said David J.
Moore, chairman and chief executive officer of 24/7 Real Media. "We
executed on a number of key strategic objectives during the year,
in particular the launch of our Japanese operations with Dentsu
Inc., the largest advertising agency in Asia. Rigorous cost
control, operational leverage and outstanding execution in each of
our business lines allowed the Company to consistently outperform
expectations, and we are enjoying a healthy pace of business that
has continued into the first part of 2006." "Entering 2006, we will
continue to capitalize on increased spending online and the rapid
growth of the paid search market. Global advertisers are starting
to shift significant portions of their budget to Internet
advertising due to the unparalleled transparency and accountability
of the medium. As the most internationally-diversified company in
the Internet advertising arena, 24/7 Real Media is ideally
positioned for sustained, strong growth over the upcoming years."
Segment Overview Revenue in the Media Solutions segment climbed 23%
to $18.9 million in the fourth quarter of 2005 from $15.4 million
in the fourth quarter of 2004. Segment gross margins for the
quarter were 30.7%. Search Solutions revenue advanced 141% to $16.4
million from $6.8 million in the fourth quarter of 2004. Gross
margins for the segment were 26.2% in the fourth quarter of 2005.
Technology Solutions revenue climbed 23% to $6.5 million in the
fourth quarter of 2005 from $5.3 million in the fourth quarter of
2004. Technology gross margins were 83.2% in the fourth quarter of
2005. Guidance The Company expects first quarter revenue for 2006
to be between $40 million and $41 million, the mid-point of which
represents an increase of 39% from first quarter 2005 revenue of
$29.1 million. The Company expects diluted pro forma operating
income per share in the first quarter of 2006 to be $0.06 per
share. The Company is raising guidance for full year 2006 revenue
to a range of $185 million to $195 million and anticipates pro
forma operating income per share for the full year of $0.32 to
$0.35. The Company is not providing GAAP net income per share
guidance for the first quarter of 2006 or the full year 2006 at
this time, as certain items that would be included in those figures
are dependent on future events and accounting determinations.(2)
Revenue guidance includes the projected financial performance of
K.K. 24-7 Search, the partnership with Dentsu in which 24/7 Real
Media holds a majority interest and reports on a consolidated
basis. Pro forma operating income guidance is provided net of
Dentsu's 49% minority interest in the projected pro forma operating
income or loss generated by K.K. 24-7 Search. In conjunction with
this release, a conference call will be held at 8:30 a.m. EST on
Thursday, March 2 to discuss these results. The call will be
broadcast live over the Internet at
www.247realmedia.com/about/investor. 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, a pioneer in
interactive marketing and technology, targets and delivers
audiences for publishers and marketers. Our customers generate
increased revenue and profits through media and search services,
coupled with one seamless platform of serving, targeting, tracking
and analytics technologies. The company is headquartered in New
York, with offices in other major U.S. cities, Canada, Europe and
Asia. For more information, please visit www.247realmedia.com. 24/7
Real Media: Delivering Today. Defining Tomorrow. 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 first quarter of 2006 and for the full year
2006. 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 significant portion 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 a
few 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.
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, 2005, which the Company expects to file
with the Securities and Exchange Commission on or before March 15,
2006. 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. -0- *T (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 and the year ended December
31, 2005 and 2004 appears in the financial statement portion of
this release. (2) Our diluted pro forma operating income per share
guidance for the first quarter of 2006 and the full year 2006
excludes depreciation expense of $0.9 million and $4.0 million,
respectively; amortization expense of $0.9 million and $3.4
million; and stock-based compensation related to restricted stock
vesting over time of $0.8 million and $3.1 million. Also excluded
are interest income/expense, which we do not expect to be material;
income taxes, as we anticipate that net operating loss carry
forwards will offset any taxable income; equity instrument with
contingencies; and amounts related to stock-based compensation to
be incurred upon adoption of Statement of Financial Accounting
Standards ("SFAS") No.123(R), "Shared-Based Payments." We are in
the process of evaluating the requirements of SFAS 123(R) and have
not yet determined our exact method of adoption. Equity instrument
with contingencies include $6.0 million in stock based compensation
related to restricted stock that vest upon a market contingency;
warrant liabilities that effect the income statement based upon
changes in the price of our common stock; and approximately 0.6
million shares of restricted stock that may accelerate vesting
based on the achievement of certain performance criteria over the
next one to three years that will be expensed based upon the
likelihood of reaching those targets and the price of our common
stock. 24/7 REAL MEDIA, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data) Three months ended
Twelve months ended
--------------------------------------------------- December 31,
December 31, 2005 2004 2005 2004 ------------ ------------
------------ ------------ (unaudited) (unaudited) Revenues: Media $
18,903 $ 15,428 $ 65,363 $ 49,879 Search 16,367 6,781 51,430 16,439
Technology 6,451 5,261 23,001 18,937 ------------ ------------
------------ ------------ Total revenues 41,721 27,470 139,794
85,255 ------------ ------------ ------------ ------------ Cost of
revenues: Media 13,092 10,211 44,562 35,197 Search 12,085 4,208
36,490 10,571 Technology 1,081 934 4,248 3,462 ------------
------------ ------------ ------------ Total cost of revenues
26,258 15,353 85,300 49,230 ------------ ------------ ------------
------------ Gross profit 15,463 12,117 54,494 36,025 ------------
------------ ------------ ------------ Operating expenses: Sales
and marketing 5,952 5,166 22,579 16,647 General and administrative
4,750 4,599 19,207 14,226 Product development 1,662 1,279 5,833
4,540 Other expenses: Amortization of intangible assets and
deferred financing costs 972 1,061 4,391 4,331 Stock-based
compensation 780 (168) 2,227 538 Restructuring costs - 340 973 841
Impairment of intangible assets - 896 - 896 Impairment of property
& equipment - 787 - 787 ------------ ------------ ------------
------------ Total operating expenses 14,116 13,960 55,210 42,806
------------ ------------ ------------ ------------ Operating
income (loss) 1,347 (1,843) (716) (6,781) Interest expense, net
(23) (92) (213) (463) Change in fair value of warrant liability
(37) (35) (381) 2,040 Recovery of investment 240 - 2,340 -
Impairment of marketable securities - (1,052) (588) (1,052) Gain on
sale of marketable securities 34 - 16 - Gain on legal settlement -
- - 2,896 Other income, net 248 105 153 228 ------------
------------ ------------ ------------ Income (loss) before
provision for income taxes and minority interest in operations of
consolidated subsidiary 1,809 (2,917) 611 (3,132) Provision for
income taxes (517) 153 (701) (23) Minority interest in operations
of consolidated subsidiary 107 - 128 - ------------ ------------
------------ ------------ Net income (loss) 1,399 (2,764) 38
(3,155) Dividends on preferred stock - (11) (25) (306) ------------
------------ ------------ ------------ Net income (loss)
attributable to common stockholders $ 1,399 $ (2,775) $ 13 $
(3,461) ============ ============ ============ ============ Basic
net income (loss) attributable to common stockholders per share $
0.03 $ (0.06) $ 0.00 $ (0.10) ============ ============
============ ============ Weighted average shares used in basic
calculation 46,100,532 44,695,486 45,350,466 35,373,973
============ ============ ============ ============ Diluted net
income (loss) attributable to common stockholders per share $ 0.03
$ (0.06) $ 0.00 $ (0.10) ============ ============ ============
============ Weighted average shares used in diluted calculation
51,743,986 44,695,486 47,706,498 35,373,973 ============
============ ============ ============ Pro forma: Operating income
(a) 3,988 1,490 9,866 2,441 Diluted operating income per share $
0.08 $ 0.03 $ 0.20 $ 0.06 ============ ============ ============
============ Weighted average shares used in pro forma calculation
51,743,986 48,210,279 49,795,724 43,685,255 ============
============ ============ ============ (a)Pro forma operating
income excludes certain other expenses computed as follows:
Operating income (loss) $ 1,347 $ (1,843) $ (716) $ (6,781)
Excluding: Amortization of intangible assets and deferred financing
costs 972 1,061 4,391 4,331 Stock-based compensation 780 (168)
2,227 538 Restructuring costs - 340 973 841 Impairment of
intangible assets - 896 - 896 Impairment of property &
equipment - 787 - 787 Minority interest in pro forma operating loss
of consolidated subsidiary 100 - 122 - Depreciation 789 417 2,869
1,829 ------------ ------------ ------------ ------------ Pro forma
operating income $ 3,988 $ 1,490 $ 9,866 $ 2,441 ============
============ ============ ============ 24/7 REAL MEDIA, INC.
CONDENSED CONSOLIDATED BALANCE SHEET (in thousands) December 31,
December 31, 2005 2004 ------------ ------------ (unaudited) Cash $
40,009 $ 27,690 Short-term investments - 3,876 Accounts receivable
38,316 28,224 Total current assets 80,694 62,500 Total assets
142,804 121,398 Accounts payable and accrued liabilities 43,383
28,233 Deferred revenue 3,218 3,222 Short-term debt 14,542 7,500
Total current liabilities 61,143 38,955 Long-term debt - 6,431
Total liabilities 62,529 46,109 Minority interests 1,556 21 Total
stockholders' equity 78,719 75,268 *T
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