Conversant reports second quarter 2014 results

Announces $150 Million Increase in Stock Repurchase Program

WESTLAKE VILLAGE, Calif.--(BUSINESS WIRE)--

Conversant, Inc. (NASDAQ: CNVR) today reported financial results for the

second quarter ended June 30, 2014.

"I am encouraged by our recent progress on integration initiatives and

key investments in the areas of product, sales and technology that

strengthen our foundation to drive stronger growth and will maximize our

longer-term value for clients, employees and shareholders," said
John

Giuliani, president and CEO of Conversant.

"We generated very strong cash flows in Q2 that we returned to

shareholders by repurchasing approximately four percent of our common

shares outstanding during the quarter," Giuliani added. "Today's

announcement of a $150 million increase in our stock repurchase program

underscores our confidence in our strategy and Conversant's future as a

leader in personalized digital marketing."

Q2 2014 Financial Summary

• 
  

  Revenue was $137.4 million, an increase of 7% year-over-year.

  
  


• 
  

  Adjusted EBITDA was $41.8 million, a decrease of 11% year-over-year.

  
  

  The decrease reflects significant investments in people, products and

  
  

  technology to support future growth.

  
  


• 
  

  Non-GAAP net income per diluted common share was $0.35 and GAAP net

  
  

  income from continuing operations per diluted share was $0.25, up from

  
  

  $0.16 and $0.08, respectively, in the second quarter of 2013. Non-GAAP

  
  

  and GAAP net income per diluted share measures in Q2 2013 were

  
  

  negatively impacted by a non-cash impairment charge equivalent to

  
  

  approximately $0.18.

  
  

Recent Business Highlights

• 
  

  Conversant has strategically expanded its real-time bidding technology

  
  

  platform to include ad inventory from Conversant's thousands of direct

  
  

  publisher relationships in the Media segment, enabling its CRM client

  
  

  campaigns to access this high-quality source of display and mobile

  
  

  publisher inventory via real-time bidding.

  
  


• 
  

  The Company recently added significant new analytics capabilities to

  
  

  further leverage Conversant data sources companywide in creating

  
  

  custom audiences to maximize ad campaign performance.

  
  


• 
  

  The Company has integrated SET Media's video content consumption data,

  
  

  which greatly enhances Conversant's anonymous consumer profiles for

  
  

  audience targeting based on consumer interests.

  
  


• 
  

  Total bid requests (real-time bidding opportunities for individual

  
  

  advertising impressions) exceeded one trillion in June 2014,

  
  

  demonstrating Conversant's vast scale and media reach.

  
  


• 
  

  Internet Retailer named Conversant's CJ Affiliate the top

  
  

  affiliate marketing vendor in its "Top Tech 2014" book. Internet

  
  

  Retailer data indicated that 57 percent of the Internet Retailer

  
  

  500 advertisers on an affiliate network choose CJ Affiliate.

  
  


• 
  

  The Company has increased its headcount by approximately 9% since

  
  

  December 31, 2013 to accelerate its growth initiatives.

  
  

Cash Flows

• 
  

  Free cash flow for the six months ended June 30, 2014 was $88.7

  
  

  million, an increase of 21% year-over-year. (The Company defines free

  
  

  cash flow as net cash provided by operating activities less capital

  
  

  expenditures.)

  
  


• 
  

  Free cash flow for the trailing 12 month period ended June 30, 2014

  
  

  was $180.1 million.

  
  

Stock Repurchases

• 
  

  Conversant repurchased 2,556,000 common shares at an average cost of

  
  

  $24.39 during the second quarter ended June 30, 2014. For the trailing

  
  

  12 month period through June 30, 2014, Conversant has repurchased

  
  

  11,314,000 common shares.

  
  


• 
  

  The Company recently surpassed the milestone of more than $1 billion

  
  

  in total stock repurchases. Since the program's inception in 2001 and

  
  

  through June 30, 2014, Conversant has repurchased 84.3 million common

  
  

  shares at an average cost of approximately $12.00, a greater than 50%

  
  

  discount to Conversant's closing stock price on August 5, 2014.

  
  


• 
  

  In July 2014, the Company repurchased an additional 778,000 common

  
  

  shares and utilized its remaining stock repurchase authorization.

  
  

  Shortly thereafter, Conversant's Board of Directors approved a $150

  
  

  million increase in the stock repurchase program.

  
  

Balance Sheet

• 
  

  Cash and cash equivalents were $83.6 million and total debt was $65.0

  
  

  million as of June 30, 2014. Strong cash flow enabled Conversant to

  
  

  remain in a positive net cash position despite investing $62.4 million

  
  

  to repurchase shares during the second quarter.

  
  

Q2 2014 Segment Results Summary

• 
  

  Affiliate marketing segment revenue was $40.6 million, an increase of

  
  

  11% year-over-year.

  
  


• 
  

  Media segment revenue was $96.7 million, an increase of 6%

  
  

  year-over-year.

  
  


• 
  

  The decrease in Media segment income from operations primarily

  
  

  reflects increased headcount, higher marketing expenses, and an

  
  

  approximately $2 million operating loss contribution from SET Media,

  
  

  the digital video technology company acquired in February 2014.

  
  

Q3 2014 Business Outlook

Conversant's financial guidance for the third quarter of 2014 is

presented in the following tables.

Additional Guidance Assumptions

Conversant's third quarter 2014 guidance assumes: stock-based

compensation of $5.8 million; amortization of intangible assets of $6.1

million ($2.5 million of which will be included in cost of revenue); net

interest and other expense of $0.5 million; a 40% effective tax rate;

and 66.0 million diluted shares outstanding.

Use of Non-GAAP Financial Measures

To provide investors with additional information regarding Conversant's

financial results, Conversant has disclosed in the tables below and

elsewhere in this press release Adjusted EBITDA and Non-GAAP Net Income

Per Diluted Common Share. Each of these Non-GAAP measures is defined

within the following section of this press release and reconciled to

their most comparable GAAP financial measure. Investors should not

consider these Non-GAAP measures in isolation or as a substitute for

GAAP financial measures. Conversant's definition of Adjusted EBITDA and

Non-GAAP Net Income Per Diluted Common Share may not necessarily be

directly comparable to similarly titled Non-GAAP measures employed by

other companies.

Q2 2014 Conference Call and Webcast Today at 4:30 p.m. Eastern Time

(1:30 p.m. Pacific Time)

Conversant management will host a conference call at 4:30 p.m. Eastern

Time (1:30 p.m. Pacific Time) today to discuss its financial and

operating results for the second quarter of 2014. A live webcast of the

conference call, along with a financial highlights presentation

containing supplemental information, will be available on Conversant's

investor relations website at http://ir.conversantmedia.com.

A replay of the webcast will be available through the same link

beginning approximately two hours after the completion of the live call.

To access the live conference call by telephone, interested parties

should dial 888-256-9154 (for domestic participants) or 913-312-0850

(for international participants) at least 10 minutes prior to the start

time and use conference ID 2825301. A telephonic replay of the

conference call will be available from 7:30 p.m. Eastern Time on August

6, 2014 until 7:30 p.m. Eastern Time on August 13, 2014. To access the

replay, interested parties should dial 888-203-1112 (for domestic

participants) and 719-457-0820 (for international participants) and the

conference ID 2825301.

About Conversant

Conversant, Inc. (NASDAQ: CNVR) is the leader in personalized digital

marketing. Conversant helps the world's biggest companies grow by

creating personalized experiences that deliver higher returns for brands

and greater satisfaction for people. We offer a fully integrated

personalization platform, personalized media programs and the world's

largest affiliate marketing network - all fueled by a deep understanding

of what motivates people to engage, connect and buy. For more

information, please visit www.conversantmedia.com.

Cautionary Information Regarding Forward-Looking Statements

This release contains forward-looking statements that involve risks

and uncertainties, including, but not limited to, the risk that market

demand for on-line advertising will not grow as rapidly as predicted,

and the risk that legislation and governmental regulation could

negatively impact the Company's performance. Actual results may differ

materially from the results predicted, and reported results should not

be considered an indication of future performance. Important factors

that could cause actual results to differ materially from those

expressed or implied in the forward-looking statements are detailed

under "Risk Factors" and elsewhere in filings with the Securities and

Exchange Commission made from time to time by Conversant, including, but

not limited to: its annual report on Form 10-K filed on March 3, 2014;

recent quarterly reports on Form 10-Q; and other current reports on Form

8-K.

The Business Outlook contained in this release is based on current

expectations. These statements are forward-looking, and actual results

may differ materially. These statements do not include the potential

impact of any mergers, acquisitions or other business combinations that

may be completed after the date of this release. Actual stock-based

compensation may differ from these estimates based on the timing and

amount of stock awards granted, the assumptions used in stock award

valuation and other factors. Actual income tax expense may differ from

these estimates based on tax planning, changes in tax accounting rules

and laws, and other factors.

Conversant undertakes no obligation to release publicly any revisions

to any forward-looking statements to reflect events or circumstances

after the date hereof or to reflect the occurrence of unanticipated

events.

Note 1 - "Adjusted EBITDA" (GAAP net income from continuing

operations before interest, income taxes, depreciation, amortization,

and stock-based compensation) included in this press release is a

non-GAAP financial measure.

Adjusted EBITDA, as defined above, may not be similar to adjusted EBITDA

measures used by other companies and is not a measurement under GAAP.

Management believes that adjusted EBITDA provides useful information to

investors about the Company's performance because it eliminates the

effects of period-to-period changes in income from interest on the

Company's cash and cash equivalents, note receivable and borrowings, and

the costs associated with income tax expense, capital investments, and

stock-based compensation which are not directly attributable to the

underlying performance of the Company's business operations. Management

uses adjusted EBITDA in evaluating the overall performance of the

Company's business operations.

Though management finds adjusted EBITDA useful for evaluating aspects of

the Company's business, its reliance on this measure is limited because

excluded items often have a material effect on the Company's earnings

and earnings per common share calculated in accordance with GAAP.

Therefore, management uses adjusted EBITDA in conjunction with GAAP

earnings and earnings per common share measures. The Company believes

that adjusted EBITDA provides investors with an additional tool for

evaluating the Company's core performance, which management uses in its

own evaluation of overall performance, and a baseline for assessing the

future earnings potential of the Company. While the GAAP results are

more complete, the Company prefers to allow investors to have this

supplemental metric since, with a reconciliation to GAAP, it may provide

greater insight into the Company's financial results.

Note 1 - "Non-GAAP net income per diluted common share" (GAAP net income

from continuing operations per diluted common share before the impact of

stock-based compensation and amortization of intangible assets) included

in this press release is a non-GAAP financial measure.

Non-GAAP net income per diluted common share, as defined above, may not

be similar to non-GAAP net income per diluted common share measures used

by other companies and is not a measurement under GAAP. Management

believes that non-GAAP net income per diluted common share provides

useful information to investors about the Company's performance because

it eliminates the effects of items which are not directly attributable

to the underlying performance of the Company's business operations.

Management uses non-GAAP net income per diluted common share in

evaluating the overall performance of the Company's business operations.

Though management finds non-GAAP net income per diluted common share

useful for evaluating aspects of the Company's business, its reliance on

this measure is limited because excluded items often have a material

effect on the Company's earnings and earnings per common share

calculated in accordance with GAAP. Therefore, management uses non-GAAP

net income per diluted common share in conjunction with GAAP earnings

and earnings per common share measures. The Company believes that

non-GAAP net income per diluted common share provides investors with an

additional tool for evaluating the Company's core performance, which

management uses in its own evaluation of overall performance, and a

baseline for assessing the future earnings potential of the Company.

While the GAAP results are more complete, the Company prefers to allow

investors to have this supplemental metric since, with a reconciliation

to GAAP, it may provide greater insight into the Company's financial

results.