Motricity Reports Second Quarter 2010 Results
Motricity, a leading provider of mobile data solutions that enable wireless carriers to deliver high value mobile data services to their subscribers, today announced financial results for the second quarter ended June 30, 2010, its first quarter as a publicly traded company.
"Solid execution, accelerated revenue growth and significant margin expansion enabled Motricity to exceed expectations in revenues, Adjusted EBITDA and Adjusted Net Income," said Ryan Wuerch, chief executive officer. "Motricity's mCore platform is driving mobile data services and mobile internet growth for some of the largest carriers and enterprises in the world. Our ability to deliver 'Mobile as a Service' through a cloud computing environment is producing strong results that were evidenced in the second quarter. Our domestic business is continuing to grow as AT&T has contracted to implement our next-generation storefront solution -- Marketplace. Moreover, we signed a multi-year extension to our longstanding relationship with Verizon Wireless, which includes enabling the mobile internet across Verizon's newest smartphones such as the HTC Incredible and Droid X. We are capitalizing on the massive global opportunity for mobile internet users by adding XL Axiata in Indonesia, one of the largest and fastest growing carriers in Southeast Asia, as the first customer in our Asia Pacific region growth strategy. We believe that this new relationship is a powerful leading indicator that carriers are turning to Motricity as their mobile data services partner of choice on a worldwide basis."
Motricity's operating performance for the second quarter of 2010 is compared to the first quarter of 2010 in this press release, as the Company believes that the sequential comparison is particularly useful to investors, given trends in the business. Information about the Company's financial results for the prior year periods is included in attached tables.
Revenue and Net Loss:
Revenue for the second quarter of 2010 was $30.4 million, an increase of 5% over revenue of $29.1 million for the first quarter of 2010. Revenue growth was primarily driven by an increase in managed services revenue, which rose 5% to $21.9 million, while professional services revenue grew 4% to $8.5 million. Net loss for the second quarter of 2010, including the impact of a one-time charge of $17.5 million for stock-based compensation related to vesting of previous restricted stock grants based upon completion of Motricity's initial public offering, was $(11.6) million, compared with net loss of $(1.5) million for the first quarter of 2010. Earnings per share was $(1.95) for the second quarter of 2010 as compared to $(1.38) for the first quarter of 2010.
Margin Expansion:
Adjusted Net Income margin improved to 12% in the second quarter, up from 2% in the first quarter of 2010. Adjusted EBITDA margin grew to 21% in the second quarter, up from 11% in the first quarter. Motricity's margin performance in the second quarter is a benefit of the mCore platform, which drives efficiencies by delivering carrier and enterprise customers high quality "Mobile as a Service" solutions while enabling Motricity to maintain control over its costs. Margin expansion is driving substantial improvements in Adjusted EBITDA and Adjusted Net Income, non-GAAP measures that Motricity believes are relevant ways for investors to evaluate Motricity's operating performance.
Adjusted EBITDA:
Adjusted EBITDA for the second quarter of 2010 was $6.3 million, an increase of more than 100% compared with Adjusted EBITDA of $3.1 million for the first quarter of 2010. The following table reconciles Adjusted EBITDA to net loss for the quarter ended June 30, 2010:
June 30,
2010
---------
(in
millions)
Net loss $ (11.6)
Other income (expense), net (3.8)
Provision for income taxes 0.5
Depreciation and amortization 3.0
Stock-based compensation 18.2
---------
Adjusted EBITDA $ 6.3
=========
Adjusted Net Income:
Adjusted Net Income for the second quarter of 2010 was $3.7 million, or $0.09 per Adjusted EPS, more than a seven-fold increase compared with Adjusted Net Income of $0.5 million, or $0.01 per Adjusted EPS, for the first quarter of 2010[1]. The following table reconciles Adjusted Net Income to net loss for the quarter ended June 30, 2010:
June 30,
2010
---------
(in
millions)
Net loss $ (11.6)
Amortization of purchased
intangibles 0.4
Stock-based compensation 18.2
Non-cash tax expense 0.5
Fair value adjustment of
warrants in other income (3.8)
Tax impact of adjustments --
---------
Adjusted Net Income $ 3.7
=========
[1] Adjusted EPS reflects Adjusted Net Income divided by Adjusted Shares Outstanding (weighted average basic shares outstanding as calculated under GAAP, adjusted to reflect the share impact of the IPO and other related adjustments as if the IPO had occurred at the beginning of the respective period). See the Use of Non-GAAP Measures section for related reconciliations.
Cash and Debt:
As of June 30, 2010, Motricity had cash and cash equivalents of $74.0 million and no debt outstanding. The Company received $51.4 million in proceeds from its initial public offering, net of issuance costs paid through June 2010.
Financial Outlook:
For the third quarter 2010, Motricity believes that revenue will grow to approximately $37 million to $38 million driven by increased mobile data services usage by its carrier customers' subscribers, the deployment of new solutions for several customers and large implementation projects for AT&T and XL Axiata. Motricity expects continued margin expansion and increased Adjusted Net Income in the range of $5.3 million to $6.3 million.
Motricity's 2-3 year long-term financial model suggests accelerating annual revenue growth up to approximately 30%, and further margin expansion, reaching an Adjusted EBITDA margin of approximately 32% and Adjusted Net Income margin of approximately 25%.
Conference Call and Webcast Information:
The Motricity second quarter 2010 teleconference and webcast is scheduled to begin at 2:00 p.m., Pacific Time, on Tuesday, August 3, 2010. To participate on the live call, analysts and investors should dial 877-941-8416 at least ten minutes prior to the call. Motricity will also offer a live and archived webcast of the conference call, accessible from the "Investors" section of the Company's website at www.motricity.com.
Supplemental Data Schedule
March 31, June 30, September December March June 30,
30, 31, 31,
2009 2009 2009 2009 2010 2010
--------- -------- --------- --------- -------- --------
(Dollars in millions)
Revenues
Managed services $ 20.2 $ 20.3 $ 20.4 $ 20.4 $ 20.9 $ 21.9
Professional services $ 3.1 $ 16.7 $ 7.7 $ 4.9 $ 8.2 $ 8.5
--------- -------- --------- --------- -------- --------
Total revenues $ 23.3 $ 37.0 $ 28.1 $ 25.3 $ 29.1 $ 30.4
Percentage of managed
services
revenue that varies with
number of users
and transactions 76% 74% 70% 57% 52% 55%
Adjusted EBITDA $ (1.9) $ 7.4 $ 5.2 $ (0.3) $ 3.1 $ 6.3
Adjusted EBITDA margin -8% 20% 19% -1% 11% 21%
Adjusted Net Income $ (5.4) $ 4.7 $ 2.2 $ (2.9) $ 0.5 $ 3.7
Adjusted Net Income
margin -23% 13% 8% -11% 2% 12%
Adjusted EPS (using
adjusted shares
outstanding) $ (0.13) $ 0.11 $ 0.05 $ (0.07) $ 0.01 $ 0.09
Capital Expenditures
Purchased property and
equipment $ (0.1) $ (0.9) $ (0.9) $ (0.9) $ (1.2) $ (3.2)
Capitalization of
software development
costs $ (2.1) $ -- $ -- $ -- $ (1.2) $ (2.8)
Use of Non-GAAP Measures
This press release includes non-GAAP financial measures for Adjusted EBITDA, Adjusted Net Income, and Adjusted EPS (Adjusted Net Income per Adjusted Shares Outstanding). Adjusted EBITDA, Adjusted Net Income and Adjusted EPS are not measures 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. Reconciliations of each of these non-GAAP financial measures to the most directly comparable GAAP financial measures are detailed in tables below.
Our non-GAAP measures should be read in conjunction with the corresponding GAAP measures. The non-GAAP measures should be considered in addition to and not as an alternative or substitute for the measures prepared in accordance with GAAP. Adjusted EBITDA and Adjusted Net Income have limitations as analytical tools and you should not consider them in isolation from, or as a substitute for analysis of our results as reported under GAAP. Adjusted EBITDA and Adjusted Net Income do not purport to represent cash flow provided by, or used in, operating activities as defined by GAAP. Our statement of cash flows presents our cash flow activity in accordance with GAAP.
We define Adjusted EBITDA as net income (loss) before interest expense, provision for income taxes, depreciation and amortization, restructuring expenses, asset impairments and stock-based compensation expense, interest income and other income (expense), net. We define Adjusted Net Income as net income (loss) before amortization of purchased intangibles, stock compensation expense, restructuring expenses, asset impairments, non-cash tax expense and the impact from changes in the fair value of warrants. We define Adjusted EPS as Adjusted Net Income divided by Adjusted Shares Outstanding. Adjusted Shares Outstanding reflect the weighted-average common shares outstanding as if the IPO and other adjustments occurred at the beginning of the respective period. Furthermore, Adjusted EBITDA, Adjusted Net Income and Adjusted EPS are not necessarily comparable to similarly-titled measures reported by other companies.
We believe Adjusted EBITDA, Adjusted Net Income and Adjusted EPS are useful for management, investors and other users of our financial statements in evaluating our operating performance because these financial measures provide an additional tool to compare business performance across companies and across periods. We believe that:
-- Adjusted EBITDA is often used by investors to measure a company's
operating performance without regard to items such as interest expense,
taxes, depreciation and amortization, 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 Adjusted EBITDA and Adjusted Net Income to
eliminate the effect of restructuring and stock-based compensation
expenses, which vary widely from company to company and impair
comparability.
We use Adjusted EBITDA and Adjusted Net Income:
-- as measures of operating performance to assist in comparing performance
from period to period on a consistent basis;
-- as measures for planning and forecasting overall expectations and for
evaluating actual results against such expectations;
-- as primary measures 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.
The following is a reconciliation of Adjusted EBITDA to net loss, the most directly comparable GAAP measure, for each of the quarters ended:
March 31, June 30, September December March
30, 31, 31, June 30,
2009 2009 2009 2009 2010 2010
--------- -------- --------- -------- -------- ---------
(in millions)
Net Loss $ (7.0) $ (3.2) $ (1.8) $ (4.4) $ (1.5) $ (11.6)
Other income (expense), net 0.1 0.2 1.3 0.0 0.3 (3.8)
Provision for income taxes 0.4 0.4 0.5 0.5 0.5 0.5
Depreciation and amortization 3.8 3.2 3.3 3.0 2.9 3.0
Restructuring and asset
impairments 0.3 6.2 1.3 0.1 0.4 --
Stock-based compensation 0.5 0.6 0.6 0.5 0.5 18.2
--------- -------- --------- -------- -------- ---------
Adjusted EBITDA $ (1.9) $ 7.4 $ 5.2 $ (0.3) $ 3.1 $ 6.3
========= ======== ========= ======== ======== =========
The following is a reconciliation of Adjusted Net Income to net loss, the most directly comparable GAAP measure, for each of the quarters ended:
March 31, June 30, September December March June 30,
2009 2009 30, 2009 31, 2009 31, 2010 2010
--------- -------- --------- -------- -------- ---------
(in millions)
Net Loss $ (7.0) $ (3.2) $ (1.8) $ (4.4) $ (1.5) $ (11.6)
Amortization of purchased
intangibles 0.4 0.4 0.3 0.3 0.4 0.4
Restructuring and asset
impairments 0.3 6.2 1.3 0.1 0.4 --
Stock-based compensation 0.5 0.6 0.6 0.5 0.5 18.2
Non-cash tax expense 0.4 0.4 0.5 0.5 0.5 0.5
Fair value adjustment of
warrants in other income 0.1 0.2 1.3 0.1 0.2 (3.8)
Tax impact of adjustments -- -- -- -- -- --
--------- -------- --------- -------- -------- ---------
Adjusted Net Income $ (5.3) $ 4.6 $ 2.2 $ (2.9) $ 0.5 $ 3.7
========= ======== ========= ======== ======== =========
The following is a reconciliation of Adjusted EPS to EPS, the most directly comparable GAAP measure, for each of the quarters ended:
March 31, June 30, September December March 31, June 30,
2009 2009 30, 2009 31, 2009 2010 2010
--------- --------- --------- --------- --------- ---------
Net loss per share $ (2.20) $ (1.55) $ (1.31) $ (1.79) $ (1.38) $ (1.95)
Accretion of redeemable preferred stock
and Series DI preferred dividends 1.02 1.01 1.01 1.04 1.11 0.66
Amortization of purchased intangibles 0.07 0.07 0.05 0.06 0.07 0.04
Restructuring and asset impairments 0.04 1.05 0.22 0.02 0.07 --
Stock-based compensation 0.09 0.09 0.10 0.09 0.09 2.04
Non-cash tax expense 0.08 0.07 0.09 0.08 0.08 0.05
Fair value adjustment of warrants in
other income (0.01) 0.04 0.22 0.00 0.05 (0.43)
Share count adjustments assuming IPO
occurred at the beginning of the year 0.78 (0.67) (0.32) 0.43 (0.08) (0.32)
--------- --------- --------- --------- --------- ---------
Adjusted EPS $ (0.13) $ 0.11 $ 0.06 $ (0.07) $ 0.01 $ 0.09
========= ========= ========= ========= ========= =========
The following is a reconciliation of Adjusted Shares Outstanding to Basic Shares Outstanding, the most directly comparable GAAP measure, for each of the quarters ended:
June March June
March 31, 30, September December 31, 30,
2009 2009 30, 2009 31, 2009 2010 2010
--------- ------ --------- -------- ------ ------
(in millions)
Basic shares outstanding for the quarter ended 5.9 5.9 5.9 5.7 5.7 8.9
Assume IPO occurred at the beginning of the year 6.0 6.0 6.0 6.0 6.0 5.1
Assume preferred stock conversion occurred at the
beginning of the year 26.1 26.1 26.1 26.1 26.1 23.8
As converted impact of Series H 2.4 2.4 2.4 2.4 2.4 2.4
Vested restricted stock 0.4 0.5 0.6 0.7 0.8 0.9
--------- ------ --------- -------- ------ ------
Adjusted Shares Outstanding for the quarter ended 40.8 40.9 41.0 40.9 41.0 41.1
========= ====== ========= ======== ====== ======
This press release also includes an outlook for the third quarter 2010 non-GAAP Adjusted Net Income. Motricity is unable to reconcile its guidance to GAAP net income because we do not predict the future impact of special items due to the difficulty of doing so. In the past, the impact of special items has been material to our operating results computed in accordance with GAAP. We note that such information is not in accordance with GAAP and should not be viewed as a substitute for GAAP information.
Statements made in this release and related statements that express Motricity's or its management's intentions, indications, beliefs, expectations, guidance, estimates, forecasts or predictions of the future constitute forward-looking statements, as defined by the Private Securities Litigation Reform Act of 1995, and relate to matters that are not historical facts. They include, without limitation, statements regarding; our view of general economic and market conditions; and our revenue, expense, earnings or financial outlook for the third quarter of 2010 or any current or future period. They also include statements about our ability to develop, produce, market, license or sell our products, solutions and services, reduce or control expenses, improve efficiency, realign resources, continue operational improvement and year-over-year or sequential growth, and about the applicability of accounting policies used in our financial reporting. These statements represent beliefs and expectations only as of the date they were made. We may elect to update forward-looking statements but we expressly disclaim any obligation to do so, even if our beliefs and expectations change. Actual results may differ from those expressed or implied in our forward-looking statements. Such forward-looking statements involve and are subject to certain risks and uncertainties that may cause our actual results to differ materially from those discussed in a forward-looking statement. These include, but are not limited to, risks and uncertainties described more fully in our filings with the Securities and Exchange Commission.
About Motricity, Inc.
Motricity is a leading mobile data solutions provider exclusively focused on the rapidly growing mobile Internet market. It serves some of the world's largest mobile carriers, simplifying the mobile Internet and creating a personalized mobile experience for subscribers. Motricity helps companies leverage the power of mobility to make direct, personalized connections with their customers. For more information, visit www.motricity.com or follow the company on Twitter @motricity.
The Motricity, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=7813
Motricity, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share data)
(unaudited)
June 30, December
2010 31, 2009
----------- -----------
Assets
Current assets
Cash and cash equivalents $ 74,020 $ 35,945
Restricted short-term
investments 1,115 1,375
Accounts receivable, net of
allowance for doubtful
accounts of $349 and
$272 at June 30, 2010 and
December 31, 2009,
respectively 22,270 17,306
Assets held for sale -- 1,606
Prepaid expenses and other
current assets 4,772 3,542
----------- -----------
Total current assets 102,177 59,774
Property and equipment, net 25,803 26,717
Goodwill 74,658 74,658
Intangible assets, net 13,810 10,692
Other assets 158 2,335
----------- -----------
Total assets $ 216,606 $ 174,176
=========== ===========
Liabilities, redeemable
preferred stock and
stockholders' equity
(deficit)
Current liabilities
Accounts payable $ 11,719 $ 9,585
Accrued compensation 8,696 9,282
Accrued expenses 3,434 2,648
Deferred revenue, current
portion 1,277 7,771
Other current liabilities 1,863 2,185
----------- -----------
Total current liabilities 26,989 31,471
Deferred revenue, net of
current portion 211 4,013
Redeemable preferred stock
warrants -- 5,012
Deferred tax liability 4,695 3,760
Other noncurrent liabilities 659 1,345
----------- -----------
Total liabilities 32,554 45,601
----------- -----------
Redeemable preferred stock 51,280 417,396
----------- -----------
Stockholders' deficit
Preferred stock, $0.001 par
value; 350,000,000 shares
authorized; 0 and 7,338,769
shares issued and
outstanding at June 30, 2010
and December 31, 2009,
respectively -- 17,393
Common stock, $0.001 par
value, 625,000,000 shares
authorized; 39,976,356 and
7,633,786 shares issued and
outstanding as of June 30,
2010 and December 31, 2009,
respectively 40 115
Additional paid-in capital 463,042 --
Accumulated deficit (330,196) (306,443)
Accumulated other
comprehensive income (loss) (114) 114
----------- -----------
Total stockholders' equity
(deficit) 132,772 (288,821)
----------- -----------
----------- -----------
Total liabilities, redeemable
preferred stock and
stockholders' equity
(deficit) $ 216,606 $ 174,176
=========== ===========
Motricity, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except share data and per share amounts)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
2010 2009 2010 2009
----------- ----------- ----------- -----------
Revenues
Managed services $ 21,912 $ 20,314 $ 42,793 $ 40,536
Professional services 8,496 16,694 16,695 19,748
----------- ----------- ----------- -----------
Total revenues 30,408 37,008 59,488 60,284
Operating expenses
Direct third party costs 2,408 5,366 3,713 6,537
Datacenter and network
operations, excluding
depreciation 7,595 7,786 15,629 16,469
Product development and
sustainment, excluding
depreciation 6,182 9,739 14,364 17,416
Sales and marketing, excluding
depreciation 3,351 2,763 7,006 5,752
General and administrative,
excluding depreciation 22,809 4,495 28,073 9,670
Depreciation and amortization 2,980 3,205 6,021 6,982
Restructuring -- 712 407 947
Long-lived asset impairment
charges -- 5,488 -- 5,488
----------- ----------- ----------- -----------
Total operating expenses 45,325 39,554 75,213 69,261
----------- ----------- ----------- -----------
Operating loss (14,917) (2,546) (15,725) (8,977)
----------- ----------- ----------- -----------
Other income (expense), net
Other income (expense) 3,796 (196) 3,538 (278)
Interest and investment income,
net (1) 124 (1) 204
Interest expense -- (126) -- (220)
----------- ----------- ----------- -----------
Other income (expense), net 3,795 (198) 3,537 (294)
----------- ----------- ----------- -----------
Loss from continuing operations,
before income tax (11,122) (2,744) (12,188) (9,271)
Provision for income taxes 468 444 935 888
----------- ----------- ----------- -----------
Net loss (11,590) (3,188) (13,123) (10,159)
Accretion of redeemable
preferred stock (5,683) (5,815) (11,911) (11,630)
Series D1 preferred dividends (160) (172) (332) (344)
----------- ----------- ----------- -----------
Net loss attributable to common
stockholders $ (17,433) $ (9,175) $ (25,366) $ (22,133)
=========== =========== =========== ===========
----------- ----------- ----------- -----------
Net loss per share attributable
to common stockholders - basic
and diluted ($1.95) ($1.55) ($3.45) ($3.75)
=========== =========== =========== ===========
Weighted-average common shares
outstanding - basic and diluted 8,928,242 5,929,727 7,349,416 5,908,364
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