Document_and_Entity_Informatio
Document and Entity Information | 6 Months Ended | |
Jun. 30, 2014 | Aug. 11, 2014 | |
Document and Entity Information | ' | ' |
Entity Registrant Name | 'Sizmek Inc. | ' |
Entity Central Index Key | '0001591877 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 30-Jun-14 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Current Reporting Status | 'Yes | ' |
Entity Filer Category | 'Non-accelerated Filer | ' |
Entity Common Stock, Shares Outstanding | ' | 30,398,505 |
Document Fiscal Year Focus | '2014 | ' |
Document Fiscal Period Focus | 'Q2 | ' |
CONSOLIDATED_AND_COMBINED_BALA
CONSOLIDATED AND COMBINED BALANCE SHEETS (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
CURRENT ASSETS: | ' | ' |
Cash and cash equivalents | $93,646 | $22,648 |
Accounts receivable (less allowances of $187 in 2014 and $776 in 2013) | 45,462 | 47,362 |
Deferred income taxes | 490 | 472 |
Restricted cash | 1,747 | 1,725 |
Other current assets | 8,148 | 6,817 |
Current assets of TV business | 4,990 | ' |
Total current assets | 154,483 | 79,024 |
Property and equipment, net | 29,045 | 26,002 |
Goodwill | 134,086 | 134,086 |
Intangible assets, net | 76,324 | 84,319 |
Deferred income taxes | 202 | 329 |
Restricted cash | 4,521 | 3,497 |
Other non-current assets | 3,883 | 2,766 |
Non-current assets of TV business | 160 | ' |
Total assets | 402,704 | 330,023 |
CURRENT LIABILITIES: | ' | ' |
Accounts payable | 2,313 | 3,625 |
Accrued liabilities | 16,617 | 17,959 |
Deferred income taxes | 94 | 94 |
Current liabilities of TV business | 1,124 | ' |
Total current liabilities | 20,148 | 21,678 |
Deferred income taxes | 7,493 | 8,324 |
Other non-current liabilities | 6,953 | 6,885 |
Non-current liabilities of TV business | 260 | ' |
Total liabilities | 34,854 | 36,887 |
STOCKHOLDERS' EQUITY or BUSINESS CAPITAL: | ' | ' |
Preferred stock, $0.001 par value-Authorized 15,000 shares; issued and outstanding-none | ' | ' |
Common stock, $0.001 par value-Authorized 200,000 shares; 30,399 issued and outstanding at June 30, 2014 | 30 | ' |
Additional capital | 369,789 | ' |
Accumulated deficit | -3,067 | ' |
Parent company investment | ' | 292,454 |
Accumulated other comprehensive income | 1,098 | 682 |
Total stockholders' equity or business capital | 367,850 | 293,136 |
Total liabilities and stockholders' equity or business capital | $402,704 | $330,023 |
CONSOLIDATED_AND_COMBINED_BALA1
CONSOLIDATED AND COMBINED BALANCE SHEETS (Parenthetical) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
In Thousands, except Per Share data, unless otherwise specified | ||
CONSOLIDATED AND COMBINED BALANCE SHEETS | ' | ' |
Accounts receivable, allowances (in dollars) | $187 | $776 |
Preferred stock, par value (in dollars per share) | $0.00 | ' |
Preferred stock, Authorized shares | 15,000 | ' |
Preferred stock, issued shares | 0 | ' |
Preferred stock, outstanding shares | 0 | ' |
Common stock, par value (in dollars per share) | $0.00 | ' |
Common stock, Authorized shares | 200,000 | ' |
Common stock, issued shares | 30,399 | ' |
Common stock, outstanding shares | 30,399 | ' |
CONSOLIDATED_AND_COMBINED_STAT
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, except Per Share data, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS | ' | ' | ' | ' |
Revenues | $44,001 | $41,267 | $82,380 | $75,336 |
Cost of revenues (excluding depreciation and amortization) | 15,268 | 13,839 | 29,754 | 26,108 |
Sales and marketing | 14,514 | 14,543 | 30,102 | 28,967 |
Research and development | 3,193 | 2,626 | 6,741 | 5,320 |
General and administrative | 5,083 | 4,699 | 13,188 | 9,202 |
Merger, integration and other | 1,344 | 631 | 6,289 | 2,108 |
Depreciation and amortization | 6,449 | 5,842 | 12,977 | 11,715 |
Loss from operations | -1,850 | -913 | -16,671 | -8,084 |
Interest expense | ' | ' | ' | 10 |
Other (income) and expense, net | 205 | 146 | 208 | -194 |
Loss before income taxes | -2,055 | -1,059 | -16,879 | -7,900 |
Provision (benefit) for income taxes | -413 | 173 | -819 | 1,291 |
Net loss | ($1,642) | ($1,232) | ($16,060) | ($9,191) |
Basic and diluted loss per common share (in dollars per share) | ($0.05) | ($0.04) | ($0.53) | ($0.30) |
Weighted average common shares outstanding: | ' | ' | ' | ' |
Basic and diluted (in shares) | 30,399 | 30,399 | 30,399 | 30,399 |
CONSOLIDATED_AND_COMBINED_STAT1
CONSOLIDATED AND COMBINED STATEMENTS OF COMPREHENSIVE LOSS (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
CONSOLIDATED AND COMBINED STATEMENTS OF COMPREHENSIVE LOSS | ' | ' | ' | ' |
Net loss | ($1,642) | ($1,232) | ($16,060) | ($9,191) |
Other comprehensive income (loss): | ' | ' | ' | ' |
Unrealized gain (loss) on derivatives, net of tax | -15 | 164 | -92 | 117 |
Unrealized gain (loss) on available for sale securities, net of tax | 770 | -126 | 36 | -40 |
Foreign currency translation adjustment | 375 | -669 | 472 | -1,107 |
Total other comprehensive income (loss) | 1,130 | -631 | 416 | -1,030 |
Total comprehensive loss | ($512) | ($1,863) | ($15,644) | ($10,221) |
CONSOLIDATED_STATEMENT_OF_STOC
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (USD $) | Total | Common Stock | Parent Company Investment | Additional Capital | Accumulated Deficit | Accumulated Other Comprehensive Income |
In Thousands, unless otherwise specified | ||||||
Balance at Dec. 31, 2013 | $293,136 | ' | $292,454 | ' | ' | $682 |
Increase (Decrease) in Stockholders' Equity | ' | ' | ' | ' | ' | ' |
Net loss | -16,060 | ' | -12,993 | ' | -3,067 | ' |
Net contributions from Parent | 89,292 | ' | 89,292 | ' | ' | ' |
Share-based compensation | 1,066 | ' | ' | 1,066 | ' | ' |
Other comprehensive income | 416 | ' | ' | ' | ' | 416 |
Conversion of Parent company investment to capital | ' | 30 | -368,753 | 368,723 | ' | ' |
Conversion of Parent company investment to capital (in shares) | ' | 30,399 | ' | ' | ' | ' |
Balance at Jun. 30, 2014 | $367,850 | $30 | ' | $369,789 | ($3,067) | $1,098 |
Balance (in shares) at Jun. 30, 2014 | 30,399 | 30,399 | ' | ' | ' | ' |
CONSOLIDATED_AND_COMBINED_STAT2
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS (USD $) | 6 Months Ended | |
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 |
Cash flows from operating activities: | ' | ' |
Net loss | ($16,060) | ($9,191) |
Adjustments to reconcile net loss to net cash provided by operating activities: | ' | ' |
Depreciation of property and equipment | 4,959 | 3,876 |
Amortization of intangibles | 8,018 | 7,839 |
Deferred income taxes | -702 | -1,770 |
(Benefit) provision for accounts receivable (recoveries) losses | -157 | 185 |
Share-based compensation | 7,533 | 3,471 |
Other | -349 | ' |
Changes in operating assets and liabilities: | ' | ' |
Accounts receivable | 1,814 | 5,455 |
Other assets | -1,568 | 438 |
Accounts payable and other liabilities | -1,322 | -1,902 |
Deferred revenue | ' | -14 |
Net cash provided by operating activities | 2,166 | 8,387 |
Cash flows from investing activities: | ' | ' |
Purchases of property and equipment | -2,310 | -3,067 |
Capitalized costs of developing software | -5,639 | -4,364 |
Purchase of long-term investment | -975 | -175 |
Proceeds from maturity of short-term investments | ' | 314 |
Other | -776 | 1,296 |
Net cash used in investing activities | -9,700 | -5,996 |
Cash flows from financing activities: | ' | ' |
Payments on seller financing and earnout | ' | -2,531 |
Payments of TV business liabilities | -9,346 | ' |
Proceeds from TV business assets | 43,013 | ' |
Net contributions from Parent | 44,833 | 6,111 |
Net cash provided by financing activities | 78,500 | 3,580 |
Effect of exchange rate changes on cash and cash equivalents | 32 | -1,105 |
Net increase in cash and cash equivalents | 70,998 | 4,866 |
Cash and cash equivalents at beginning of year | 22,648 | 13,692 |
Cash and cash equivalents at end of period | 93,646 | 18,558 |
Supplemental disclosures of cash flow information: | ' | ' |
Cash paid (received) for income taxes | $1,396 | ($2,551) |
Basis_of_Presentation
Basis of Presentation | 6 Months Ended |
Jun. 30, 2014 | |
Basis of Presentation | ' |
Basis of Presentation | ' |
1. Basis of Presentation | |
The Company | |
Sizmek Inc. (“Sizmek” the “Company,” “we,” “us,” and “our”), a Delaware corporation formed in 2013, operates a leading independent global online ad campaign management and distribution platform as measured by the number of advertising impressions served and the number of countries in which we serve customers. Our revenues are principally derived from services related to online advertising. We help advertisers, agencies and publishers engage with consumers across multiple online media channels (mobile, display, rich media, video and social) while delivering efficient, impactful and measurable ad campaigns. We connect nearly 14,000 advertisers and over 5,000 agencies to audiences in about 65 countries, serving more than 1.5 trillion impressions a year. | |
Separation from Digital Generation, Inc. | |
Prior to February 7, 2014, we operated as the online segment of Digital Generation, Inc. (“DG”), a leading global television and online advertising management and distribution business. On February 7, 2014, pursuant to the terms of the Agreement and Plan of Merger, dated as of August 12, 2013 (the “Merger Agreement”), by and among Extreme Reach Inc. (“Extreme Reach”), Dawn Blackhawk Acquisition Corp., a wholly-owned subsidiary of Extreme Reach (“Acquisition Sub”), and DG, all of our issued and outstanding shares of common stock, par value $0.001 per share (“Sizmek Common Stock”) were distributed by DG pro rata to its stockholders (the “Spin-Off”) with the DG stockholders receiving one share of Sizmek Common Stock for each share of the common stock of DG (“DG Common Stock”). Immediately after the distribution of the Sizmek Common Stock, pursuant to the Merger Agreement, Acquisition Sub merged with and into DG with DG as the surviving corporation (the “Merger”) and all of the outstanding shares of DG Common Stock were converted into the right to receive $3.00 per share, and DG became a wholly-owned subsidiary of Extreme Reach. Prior to the Spin-Off, DG contributed to us all of the business and operations of its online advertising segment, all of DG’s cash, most of the working capital from its television segment, and certain other corporate assets pursuant to the separation and redemption agreement and related documents, and we agreed to indemnify DG and affiliates of DG (including Extreme Reach) for all pre-closing liabilities of DG, including stockholder litigation, tax obligations, and employee liabilities. Sizmek now operates as a separate, stand-alone publicly-traded company in the online advertising services business segment. | |
Carve-out Financial Statements Prior to Spin-Off | |
Prior to our Spin-Off from DG on February 7, 2014, our combined financial statements were derived from the consolidated financial statements and accounting records of DG. These statements reflected the combined historical results of operations, financial position and cash flows of DG’s online business primarily conducted through MediaMind Technologies Inc., EyeWonder, LLC, Peer39, Inc., and Unicast, and an allocable portion of DG’s corporate costs. Prior to the Spin-Off, our financial statements are presented as if such businesses had been combined for all periods presented. | |
All intercompany transactions have been eliminated. All intercompany transactions between us and DG have been included in these combined financial statements and are considered to be effectively settled for cash in the combined financial statements at the time the transaction is recorded. The total net effect of the settlement of these intercompany transactions is reflected in the combined statements of cash flows as a financing activity and in the combined balance sheet as “Parent company investment.” | |
For periods prior to our Spin-Off on February 7, 2014, the combined financial statements include expense allocations for (1) certain corporate functions historically provided by DG, including, but not limited to, finance, audit, legal, information technology, human resources, communications, compliance, and shared services; (2) employee benefits and incentives; and (3) share-based compensation. These expenses have been allocated to us on the basis of direct usage when identifiable, with the remainder allocated on a pro-rata basis of combined revenues, headcount or other measures of the Company and DG. We consider the basis on which the expenses have been allocated to be a reasonable reflection of the utilization of services provided to or the benefit received by us during the periods presented. The allocations may not, however, reflect the expense we would have incurred as an independent, publicly-traded company for the periods presented. We benefited from sharing the corporate cost structure of DG rather than incurring such costs ourselves on a stand-alone basis. For the six months ended June 30, 2013, DG reported corporate overhead (excluding share-based compensation) of $12.7 million. The amount of such corporate overhead that was allocated to us in these carve-out financial statements was $4.9 million, in accordance with the allocation principles for preparing carve-out financial statements. As a result, these carve-out financial statements include corporate overhead expenses which represent approximately 39% of DG’s total corporate overhead for the first six months of 2013. After the Spin-Off, we ultimately expect about 70% to 75% of DG’s total corporate overhead will shift to us, rather than the 39% that was allocated to us during the six months ended June 30, 2013. Accordingly, we expect our corporate overhead costs as a stand-alone public company will be substantially greater than the amounts that were allocated to us in the carve-out financial statements prior to completion of the Spin-Off. | |
DG used a centralized approach to cash management and the financing of its operations. Prior to the Spin-Off, the majority of our cash was transferred to DG on a daily basis, and DG funded our operating and investing activities as needed. Cash transfers to and from DG’s cash management accounts are reflected in “Parent company investment.” | |
Prior to the Spin-Off, the combined financial statements included certain assets and liabilities that were held at the DG corporate level but were specifically identifiable or otherwise allocable to us. The cash and cash equivalents held by DG at the corporate level were not specifically identifiable to us and therefore were not allocated to us for any of the periods presented prior to the Spin-Off; however, at the Spin-Off date, cash and working capital associated with DG’s TV business were contributed to us. Cash and cash equivalents in our combined balance sheet prior to the Spin-Off primarily represents cash held locally by entities included in our combined financial statements. DG’s third-party debt and the related interest expense have not been allocated to us for any period as we were not the legal obligor and those amounts were paid off on or about February 7, 2014 as part of DG’s Merger with Extreme Reach. |
General
General | 6 Months Ended | |||||||||||||
Jun. 30, 2014 | ||||||||||||||
General | ' | |||||||||||||
General | ' | |||||||||||||
2. General | ||||||||||||||
Principles of Consolidation and Combination | ||||||||||||||
The consolidated and combined financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and include the accounts of our subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation or combination. For the period prior to the Spin-Off, the carve-out financial statements have been prepared on a basis that management believes to be reasonable to reflect the financial position, results of operations and cash flows of the Company’s operations, including portions of DG’s corporate costs and administrative shared services. These unaudited financial statements should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. | ||||||||||||||
These financial statements have been prepared by us without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, we believe the disclosures are adequate to make the information presented not misleading. The unaudited consolidated and combined financial statements reflect all adjustments, which are, in the opinion of management, of a normal and recurring nature and necessary for a fair presentation of our financial position as of the balance sheet dates, and the results of operations and cash flows for the periods presented. | ||||||||||||||
Seasonality | ||||||||||||||
Our business is seasonal. Revenues tend to be the highest in the fourth quarter as a large portion of our revenues follow the advertising patterns of our customers. | ||||||||||||||
Use of Estimates | ||||||||||||||
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates, including those related to the recoverability and useful lives of our long-lived assets, the adequacy of our allowance for doubtful accounts and credit memo reserves, contingent consideration and income taxes. We base our estimates on historical experience, future expectations and on other relevant assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. | ||||||||||||||
See Note 5 for a discussion of the risk of a future impairment of our goodwill. | ||||||||||||||
Assets and Liabilities of DG’s TV Business | ||||||||||||||
Pursuant to the Separation and Redemption Agreement, DG contributed to us substantially all of its television business current assets and certain other assets existing on February 7, 2014, and we agreed to assume substantially all of DG’s television business liabilities that existed on February 7, 2014 or were attributable to periods up to and including February 7, 2014. These net assets contributed were recorded at $75.7 million. The details of these assets and liabilities outstanding as of June 30, 2014 were as follows (in thousands): | ||||||||||||||
Description | June 30, 2014 | |||||||||||||
(in thousands) | ||||||||||||||
Current assets of television business: | ||||||||||||||
Income tax receivables | $ | 3,936 | ||||||||||||
Trade accounts receivable | 708 | |||||||||||||
Springbox revenue sharing | 180 | |||||||||||||
Prepaid expenses | 166 | |||||||||||||
Total | $ | 4,990 | ||||||||||||
Non-current assets of television business: | ||||||||||||||
Springbox revenue sharing | $ | 160 | ||||||||||||
Current liabilities of television business: | ||||||||||||||
Trade accounts payable | $ | 624 | ||||||||||||
Accrued liabilities | 500 | |||||||||||||
Total | $ | 1,124 | ||||||||||||
Non-current liabilities of television business: | ||||||||||||||
Uncertain tax positions | $ | 260 | ||||||||||||
Derivative Instruments | ||||||||||||||
We enter into foreign currency forward contracts and options to hedge a portion of the exposure to the variability in expected future cash flows resulting from changes in related foreign currency exchange rates between the New Israeli Shekel (“NIS”) and the U.S. Dollar. These transactions are designated as cash flow hedges, as defined by Accounting Standards Codification (“ASC”) Topic 815, “Derivatives and Hedging.” | ||||||||||||||
ASC Topic 815 requires that we recognize derivative instruments as either assets or liabilities in our balance sheet at fair value. These contracts are Level 2 fair value measurements in accordance with ASC Topic 820, “Fair Value Measurements and Disclosures.” For derivative instruments that are designated and qualify as a cash flow hedge (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income (loss), net of taxes, and reclassified into earnings (various operating expenses) in the same period or periods during which the hedged transaction affects earnings. | ||||||||||||||
Our cash flow hedging strategy is to hedge against the risk of overall changes in cash flows resulting from certain forecasted foreign currency rent and salary payments during the next twelve months. We hedge portions of our forecasted expenses denominated in the NIS with foreign currency forward contracts and options. At June 30, 2014, we had $2.1 million notional amount of foreign currency forward contracts and options outstanding that had a net fair value asset balance of $0.0 million ($0.0 million asset, net of a $0.0 million liability). The net asset is included in “other current assets” and is expected to be recognized in our results of operations in the next twelve months. As a result of our hedging activities, we incurred the following gains in our results of operations (in thousands): | ||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 30, | June 30, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
Hedging gain recognized in operations | $ | 29 | $ | 282 | $ | 115 | $ | 481 | ||||||
At December 31, 2013, we had $5.2 million notional amount of foreign currency forward contracts and options outstanding that had a net fair value asset balance of $0.1 million ($0.1 million asset, net of a $0.0 million liability). The vast majority of any gain or loss from hedging activities is included in our various operating expenses. It is our policy to offset fair value amounts recognized for derivative instruments executed with the same counterparty. In connection with our foreign currency forward contracts and options and other banking arrangements, we have agreed to maintain $1.7 million of cash in bank accounts with our counterparty, which we classify as restricted cash on our balance sheet. | ||||||||||||||
Accumulated Other Comprehensive Income (Loss) | ||||||||||||||
Components of accumulated other comprehensive income (loss) (“AOCI” or “AOCL”), net of tax, for the three and six months ended June 30, 2014 and 2013 were as follows (in thousands): | ||||||||||||||
Three Months Ended June 30, 2014 | ||||||||||||||
Foreign | Unrealized | Unrealized | Accumulated | |||||||||||
Currency | Gain on | Gain (Loss) | Other | |||||||||||
Translation | Foreign | on Available | Comprehensive | |||||||||||
Currency | for Sale | Income (Loss) | ||||||||||||
Derivatives | Securities | |||||||||||||
Balance at March 31, 2014 | $ | (1,101 | ) | $ | 39 | $ | 1,030 | $ | (32 | ) | ||||
Other comprehensive income (loss) before reclassifications | 375 | 10 | 770 | 1,155 | ||||||||||
Amounts reclassified out of AOCL | — | (25 | ) | — | (25 | ) | ||||||||
Net current period activity | 375 | (15 | ) | 770 | 1,130 | |||||||||
Balance at June 30, 2014 | $ | (726 | ) | $ | 24 | $ | 1,800 | $ | 1,098 | |||||
Six Months Ended June 30, 2014 | ||||||||||||||
Foreign | Unrealized | Unrealized | Accumulated | |||||||||||
Currency | Gain on | Gain (Loss) | Other | |||||||||||
Translation | Foreign | on Available | Comprehensive | |||||||||||
Currency | for Sale | Income (Loss) | ||||||||||||
Derivatives | Securities | |||||||||||||
Balance at December 31, 2013 | $ | (1,198 | ) | $ | 116 | $ | 1,764 | $ | 682 | |||||
Other comprehensive income (loss) before reclassifications | 472 | 8 | 36 | 516 | ||||||||||
Amounts reclassified out of AOCI | — | (100 | ) | — | (100 | ) | ||||||||
Net current period activity | 472 | (92 | ) | 36 | 416 | |||||||||
Balance at June 30, 2014 | $ | (726 | ) | $ | 24 | $ | 1,800 | $ | 1,098 | |||||
Three Months Ended June 30, 2013 | ||||||||||||||
Foreign | Unrealized | Unrealized | Accumulated | |||||||||||
Currency | Gain on | Gain (Loss) | Other | |||||||||||
Translation | Foreign | on Available | Comprehensive | |||||||||||
Currency | for Sale | Income (Loss) | ||||||||||||
Derivatives | Securities | |||||||||||||
Balance at March 31, 2013 | $ | (1,325 | ) | $ | 326 | $ | 82 | $ | (917 | ) | ||||
Other comprehensive income (loss) before reclassifications | (669 | ) | 418 | (126 | ) | (377 | ) | |||||||
Amounts reclassified out of AOCL | — | (254 | ) | — | (254 | ) | ||||||||
Net current period activity | (669 | ) | 164 | (126 | ) | (631 | ) | |||||||
Balance at June 30, 2013 | $ | (1,994 | ) | $ | 490 | $ | (44 | ) | $ | (1,548 | ) | |||
Six Months Ended June 30, 2013 | ||||||||||||||
Foreign | Unrealized | Unrealized | Accumulated | |||||||||||
Currency | Gain on | Gain (Loss) | Other | |||||||||||
Translation | Foreign | on Available | Comprehensive | |||||||||||
Currency | for Sale | Income (Loss) | ||||||||||||
Derivatives | Securities | |||||||||||||
Balance at December 31, 2012 | $ | (887 | ) | $ | 373 | $ | (4 | ) | $ | (518 | ) | |||
Other comprehensive income (loss) before reclassifications | (1,107 | ) | 512 | (40 | ) | (635 | ) | |||||||
Amounts reclassified out of AOCL | — | (395 | ) | — | (395 | ) | ||||||||
Net current period activity | (1,107 | ) | 117 | (40 | ) | (1,030 | ) | |||||||
Balance at June 30, 2013 | $ | (1,994 | ) | $ | 490 | $ | (44 | ) | $ | (1,548 | ) | |||
The following tables summarize the reclassifications from AOCL to the consolidated and combined statements of operations for the three and six months ended June 30, 2014 and 2013 (in thousands): | ||||||||||||||
Amounts Reclassified out of AOCL | ||||||||||||||
Three Months | Three Months | Affected Line Items in the Consolidated and Combined | ||||||||||||
Ended June 30, | Ended June 30, | Statements of Operations | ||||||||||||
2014 | 2013 | |||||||||||||
Gains (losses) on cash flow hedges: | ||||||||||||||
Foreign currency derivatives | $ | 4 | $ | 33 | Cost of revenues | |||||||||
Foreign currency derivatives | 2 | 18 | Sales and marketing | |||||||||||
Foreign currency derivatives | 19 | 187 | Research and development | |||||||||||
Foreign currency derivatives | 5 | 53 | General and administrative | |||||||||||
Foreign currency derivatives | (1 | ) | (9 | ) | Other (income) and expense, net | |||||||||
Total before taxes | 29 | 282 | ||||||||||||
Tax amounts | (4 | ) | (28 | ) | ||||||||||
Income after tax | $ | 25 | $ | 254 | ||||||||||
Amounts Reclassified out of AOCL | ||||||||||||||
Six Months | Six Months | Affected Line Items in the Consolidated and Combined | ||||||||||||
Ended June 30, | Ended June 30, | Statements of Operations | ||||||||||||
2014 | 2013 | |||||||||||||
Gains (losses) on cash flow hedges: | ||||||||||||||
Foreign currency derivatives | $ | 11 | $ | 55 | Cost of revenues | |||||||||
Foreign currency derivatives | 5 | 32 | Sales and marketing | |||||||||||
Foreign currency derivatives | 54 | 315 | Research and development | |||||||||||
Foreign currency derivatives | 15 | 89 | General and administrative | |||||||||||
Foreign currency derivatives | 30 | (10 | ) | Other (income) and expense, net | ||||||||||
Total before taxes | 115 | 481 | ||||||||||||
Tax amounts | (15 | ) | (86 | ) | ||||||||||
Income after tax | $ | 100 | $ | 395 | ||||||||||
Merger, Integration and Other Expenses | ||||||||||||||
Merger, integration and other expenses reflect the expenses incurred in (i) DG’s Merger with Extreme Reach and our Spin-Off from DG, (ii) acquiring or disposing of a business, (iii) integrating an acquired operation (e.g., severance pay, office closure costs) into the Company and certain other expenses. A summary of our merger, integration and other expenses are as follows (in thousands): | ||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
Description | 2014 | 2013 | 2014 | 2013 | ||||||||||
Severance | $ | 648 | $ | 106 | $ | 891 | $ | 190 | ||||||
Merger and Spin-Off (1) | 158 | — | 4,860 | — | ||||||||||
Strategic alternatives | — | 312 | — | 614 | ||||||||||
MediaMind preacquisition liability | — | — | — | 720 | ||||||||||
Proxy contest | — | — | — | 165 | ||||||||||
Integration costs | 538 | 213 | 538 | 419 | ||||||||||
Total | $ | 1,344 | $ | 631 | $ | 6,289 | $ | 2,108 | ||||||
(1) See discussion of Merger and Spin-Off under “Separation from Digital Generation, Inc.” in Note 1. | ||||||||||||||
Recently Issued Accounting Guidance | ||||||||||||||
In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU 2014-09 modifies revenue recognition guidance for U.S. GAAP. Previous revenue recognition guidance in U.S. GAAP comprised broad revenue recognition concepts together with numerous revenue requirements for particular industries or transactions, which sometimes resulted in different accounting for economically similar transactions. In contrast, International Accounting Standards Board (“IASB”) provided limited guidance on revenue recognition. Accordingly, the FASB and IASB initiated a joint project to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and International Financial Reporting Standards (“IFRS”). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: | ||||||||||||||
Step 1: Identify the contract(s) with a customer. | ||||||||||||||
Step 2: Identify the performance obligations in the contract. | ||||||||||||||
Step 3: Determine the transaction price. | ||||||||||||||
Step 4: Allocate the transaction price to the performance obligations in the contract. | ||||||||||||||
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation. | ||||||||||||||
For Sizmek, the amendments in ASU 2014-09 are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is not permitted. An entity shall adopt the amendments in ASU 2014-09 by either (i) retrospectively adjusting each prior reporting period presented or (ii) retrospectively adjusting for the cumulative effect of initially applying ASU 2014-09 at the date of initial adoption. We have not as yet determined (i) the extent to which we expect ASU 2014-09 will impact our reported revenues or (ii) the manner in which it will be adopted. | ||||||||||||||
Recently Adopted Accounting Guidance | ||||||||||||||
Effective January 1, 2014, we adopted ASU 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” on a prospective basis. ASU 2013-11 amends the accounting guidance related to the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss or a tax credit carryforward exists. The guidance requires an unrecognized tax benefit to be presented as a decrease in a deferred tax asset where a net operating loss, a similar tax loss, or a tax credit carryforward exists and certain criteria are met. The adoption of ASU 2013-11 did not have a material impact on our financial statements. |
Fair_Value_Measurements
Fair Value Measurements | 6 Months Ended | |||||||||||||||
Jun. 30, 2014 | ||||||||||||||||
Fair Value Measurements | ' | |||||||||||||||
Fair Value Measurements | ' | |||||||||||||||
3. Fair Value Measurements | ||||||||||||||||
ASC 820, Fair Value Measurements and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. | ||||||||||||||||
ASC 820 establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows: | ||||||||||||||||
· Level 1—Quoted prices in active markets for identical assets or liabilities. | ||||||||||||||||
· Level 2—Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. | ||||||||||||||||
· Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. | ||||||||||||||||
We have classified our assets and liabilities that are measured at fair value on a recurring basis (at least annually) into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date. | ||||||||||||||||
The tables below set forth by level assets and liabilities that were accounted for at fair value as of June 30, 2014 and December 31, 2013. The carrying values of our accounts receivable and accounts payable approximate their respective fair values due to the short-term nature of these financial instruments. The tables do not include cash on hand or assets and liabilities that are measured at historical cost or any basis other than fair value (in thousands). | ||||||||||||||||
Fair Value Measurements at June 30, 2014 | ||||||||||||||||
Balance | Quoted Prices | Significant | Significant | Total | ||||||||||||
Sheet | in Active | Other | Unobservable | Fair Value | ||||||||||||
Location | Markets | Observable | Inputs | Measurements | ||||||||||||
(Level 1) | Inputs | (Level 3) | ||||||||||||||
(Level 2) | ||||||||||||||||
Assets: | ||||||||||||||||
Money market funds | (a) | $ | 513 | $ | — | $ | — | $ | 513 | |||||||
Currency forward derivatives/options | (b) | — | 27 | — | 27 | |||||||||||
Marketable equity securities | (c) | 2,141 | — | — | 2,141 | |||||||||||
Revenue sharing arrangement | (d)(e) | — | — | 340 | 340 | |||||||||||
Total | $ | 2,654 | $ | 27 | $ | 340 | $ | 3,021 | ||||||||
Liabilities: | ||||||||||||||||
Revenue earnout payable | (f) | $ | — | $ | — | $ | 225 | $ | 225 | |||||||
Fair Value Measurements at December 31, 2013 | ||||||||||||||||
Balance | Quoted Prices | Significant | Significant | Total | ||||||||||||
Sheet | in Active | Other | Unobservable | Fair Value | ||||||||||||
Location | Markets | Observable | Inputs | Measurements | ||||||||||||
(Level 1) | Inputs | (Level 3) | ||||||||||||||
(Level 2) | ||||||||||||||||
Assets: | ||||||||||||||||
Currency forward derivatives/options | (b) | $ | — | $ | 137 | $ | — | $ | 137 | |||||||
Marketable equity securities | (c) | 2,105 | — | — | 2,105 | |||||||||||
Total | $ | 2,105 | $ | 137 | $ | — | $ | 2,242 | ||||||||
Liabilities: | ||||||||||||||||
Revenue earnout payable | $ | — | $ | — | $ | — | $ | — | ||||||||
(a) Included in cash and cash equivalents. | ||||||||||||||||
(b) Included in other current assets. | ||||||||||||||||
(c) Included in other non-current assets. | ||||||||||||||||
(d) Included in current assets of TV business. | ||||||||||||||||
(e) Included in non-current assets of TV business. | ||||||||||||||||
(f) Included in current liabilities of TV business. | ||||||||||||||||
The fair value of our money market funds was determined based upon quoted market prices. The currency forward derivatives/options are derivative instruments whose value is based upon quoted market prices from various market participants. We have a zero cost basis in these derivative instruments. Our marketable equity securities relate to a single issuer that has an adjusted cost basis of $0.3 million. | ||||||||||||||||
In connection with our Spin-Off from DG, DG contributed a revenue sharing asset to us that resulted from DG’s sale of its Springbox unit. We are entitled to a percentage of the revenues collected by the business for three years after the closing date (June 1, 2012). Revenue sharing payments are generally made once a year. We have estimated the future revenues of Springbox based on the historical revenues and certain other factors, discounted to their present value. The following table provides a reconciliation of changes in the fair values of our Level 3 assets (in thousands): | ||||||||||||||||
Revenue Sharing | ||||||||||||||||
Arrangement | ||||||||||||||||
Six Months | ||||||||||||||||
Ended June 30, | ||||||||||||||||
2014 | ||||||||||||||||
Balance at beginning of year | $ | — | ||||||||||||||
Additions | 340 | |||||||||||||||
Balance at end of period | $ | 340 | ||||||||||||||
Also in connection with our Spin-Off from DG, we assumed a portion of a revenue earnout arrangement that DG had agreed to in its purchase of North Country. Under the arrangement, to the extent North Country’s revenues exceed a specified amount for the twelve months ended July 31, 2014; we are obligated to pay the North Country sellers a fee equal to a percentage of those revenues up to a maximum of $225,000. We have estimated North Country’s future revenues based on the historical revenues and certain other factors. The following table provides a reconciliation of changes in the fair values of our Level 3 liabilities (in thousands): | ||||||||||||||||
Revenue Earnout | ||||||||||||||||
Payable | ||||||||||||||||
Six Months | ||||||||||||||||
Ended June 30, | ||||||||||||||||
2014 | ||||||||||||||||
Balance at beginning of year | $ | — | ||||||||||||||
Additions | 225 | |||||||||||||||
Balance at end of period | $ | 225 | ||||||||||||||
Revenue and other earnout arrangements sometimes require a minimum level of performance (e.g., revenues, adjusted EBITDA) before any earnout payment becomes due. Accordingly, there can be significant volatility in the earnout liability. Each reporting period, we update our estimates of the performance indicators (e.g., revenue, adjusted EBITDA) and the corresponding earnout levels achieved, discounted to their present values. Changes in fair value are recorded in cost of revenues in the accompanying statements of operations. | ||||||||||||||||
In connection with our acquisition of Republic Project, we agreed to a contingent consideration component of the purchase price based on 2014 and 2015 revenues and adjusted EBITDA. The earnouts have minimum levels for revenue and adjusted EBITDA before any earnout payment becomes due. As of June 30, 2014, we do not expect to make any payments with respect to the Republic Project contingent consideration arrangement. See Note 4—Acquisition of Republic Project. | ||||||||||||||||
In May 2014, we purchased $1.0 million of Abakus convertible promissory notes (“Convertible Notes”) for $1.0 million. The Convertible Notes are due 90 days after written notice after the earlier of (i) May 30, 2016 and (ii) an occurrence of an Event of Default (as defined). Abakus is a private company that has developed a digital attribution software solution. The Convertible Notes bear interest at 5% per annum payable at maturity. The Convertible Notes are convertible into Abakus Series A Preferred Stock (“Series A Preferred”) as follows: | ||||||||||||||||
a) Automatic conversion if Abakus sells $2.0 million of Series A Preferred (“Qualified Financing”), whereupon the Convertible Notes shall be converted, at Sizmek’s option, at either (i) 75% of the share price in the Qualified Financing, or (ii) the quotient of $7.0 million divided by the number of shares outstanding upon exercise of all dilutive securities, and | ||||||||||||||||
b) Optional conversion at Sizmek’s election if Abakus completes an Equity Financing (as defined) that is not a Qualified Financing, whereupon the Convertible Notes shall be converted at 75% of the share price in the Equity Financing. | ||||||||||||||||
In addition, upon a Change in Control, as defined, the Convertible Notes shall be paid off at the greater of (i) the outstanding balance, or (ii) the amount the holder would have received upon conversion of the Convertible Notes. The Convertible Notes are considered held-to-maturity securities and carried at amortized cost. The fair value of the Convertible Notes is not readily determinable. The Convertible Notes are included in other non-current assets. |
Acquisition_of_Republic_Projec
Acquisition of Republic Project | 6 Months Ended |
Jun. 30, 2014 | |
Acquisition of Republic Project | ' |
Acquisition of Republic Project | ' |
4. Acquisition of Republic Project | |
On October 4, 2013, we acquired the assets and operations of privately-held Republic Project, a cloud-based ad platform that enables agencies and brands to create, deliver and measure social and mobile rich media campaigns, for $1.1 million in cash, a $0.3 million deferred payment obligation and contingent consideration we valued at zero. The contingent consideration payment ranges from zero to $13.1 million based on reaching revenue and adjusted EBITDA performance targets in 2014 and 2015. | |
The objective was to expand our product offerings and to better serve the advertising community. We expect to realize operating synergies from this transaction, and we expect Republic Project to create opportunities to sell its services to our customers. Republic Project has been included in our results of operations since the date of closing. | |
The purchase price was allocated to the assets acquired and liabilities assumed based upon their estimated fair values. We allocated $0.3 million to customer relationships, $0.6 million to developed technology and $0.4 million to noncompetition agreements. The customer relationships, developed technology and noncompetition agreements acquired in the transaction are being amortized on a straight-line basis over 5 years, 4 years and 4 years, respectively. The weighted average amortization period is 4.2 years. The intangible assets created in the acquisition are deductible for tax purposes. |
Goodwill
Goodwill | 6 Months Ended | ||||||||||
Jun. 30, 2014 | |||||||||||
Goodwill | ' | ||||||||||
Goodwill | ' | ||||||||||
5. Goodwill | |||||||||||
We operate as a single reporting unit. Changes in the carrying value of our goodwill for the six months ended June 30, 2014 are as follows (in thousands): | |||||||||||
Goodwill | Accumulated | Net Carrying | |||||||||
Impairment | Value | ||||||||||
Losses | |||||||||||
Balance at December 31, 2013 | $ | 376,417 | $ | (242,331 | ) | $ | 134,086 | ||||
2014 activity | — | — | — | ||||||||
Balance at June 30, 2014 | $ | 376,417 | $ | (242,331 | ) | $ | 134,086 | ||||
We test goodwill for possible impairment each year on December 31st and whenever events or changes in circumstances indicate the carrying value of our goodwill may not be recoverable. The goodwill impairment test involves a two-step process. In the first step, we compare the fair value of our online reporting unit to its carrying value. If the fair value of our online reporting unit exceeds its carrying value, goodwill is not impaired and no further testing is required. If the fair value of our online reporting unit is less than its carrying value, we must perform the second step of the impairment test to measure the amount of the impairment loss. In the second step, the reporting unit’s fair value is allocated to its assets and liabilities, including any unrecognized intangible assets, in a hypothetical analysis that calculates the implied fair value of goodwill in the same manner as if the reporting unit was being acquired in a business combination. If the implied fair value of the reporting unit’s goodwill is less than the carrying value, the difference is recorded as an impairment loss. At December 31, 2013, we performed our annual goodwill impairment test for our online reporting unit and determined it was not impaired. At June 30, 2014, we are not aware of any indicators of impairment of our goodwill. | |||||||||||
Risk of Future Impairment | |||||||||||
At December 31, 2013, based on a variety of methods including a discounted cash flow model (a Level 3 fair value measurement) that uses our internal forecast, we determined the fair value of our online reporting unit was only 5% in excess of its carrying value. In preparing our discounted cash flow model, we make assumptions about future revenues and expenses to determine the cash flows that will result from the online reporting unit. | |||||||||||
As with any forecast, there is substantial risk the forecasted cash flows of our online reporting unit may fall short of our expectations. If actual or expected future cash flows should fall sufficiently below our current forecast, it is likely we would be required to record another goodwill impairment charge. Future net cash flows are impacted by a variety of factors including revenues, operating margins, capital expenditures, income tax rates, and a discount rate. | |||||||||||
Further, the market value of our common stock plus a reasonable control premium is an indicator of the fair value of our Company. If the market value of our common stock should decline sufficiently below the book value of our shareholders’ equity for an extended period of time, it would likely cause us to conclude that our goodwill is impaired and we would be required to record another goodwill impairment charge. |
Sharebased_Compensation
Share-based Compensation | 6 Months Ended | |||||||
Jun. 30, 2014 | ||||||||
Share-based Compensation | ' | |||||||
Share-based Compensation | ' | |||||||
6. Share-based Compensation | ||||||||
Prior to our Spin-Off from DG on February 7, 2014, certain of our employees participated in DG’s equity based incentive programs. Share-based compensation expense reflected in the accompanying financial statements up until February 7, 2014 relates to DG’s stock plan awards and not to our stock awards. Immediately prior to completing the Spin-Off transaction, all outstanding equity awards became fully vested and were converted into shares of DG Common Stock, to the extent the award had an intrinsic value. Equity awards with no intrinsic value were cancelled. DG’s equity incentive plans were terminated in connection with the Merger Agreement (see Note 1). Below is a summary of our share-based compensation expense related to stock awards (in thousands): | ||||||||
Six Months Ended June 30, | ||||||||
Description | 2014 | 2013 | ||||||
DG stock options and RSUs awarded to our employees | $ | 2,650 | $ | 2,052 | ||||
DG share-based awards allocated to us as part of corporate services | 3,817 | 1,419 | ||||||
Sizmek share-based awards granted | 1,066 | — | ||||||
Total | $ | 7,533 | $ | 3,471 | ||||
During the first quarter of 2014, subsequent to the Spin-Off on February 7, 2014, Sizmek’s Compensation Committee granted (i) 134,760 performance-based Restricted Stock Units (“RSUs”), (ii) 89,839 time-based RSUs and (iii) 141,118 time-based stock options, to certain of our executive officers. The RSUs and stock options expected to vest were valued at $2.2 million and $0.8 million, respectively. The awards (i) vest over periods ranging from ten months to three years, (ii) are subject to the employees’ continued employment with us, and (iii) with respect to the performance-based RSUs, are subject to reaching certain (a) revenue, (b) adjusted EBITDA and (c) free cash flow growth targets (i.e., performance conditions). In addition, during the first quarter, we granted 67,230 time-based RSUs to our outside directors with a value of $0.8 million. These awards vest over a one-year period and are subject to the directors providing continued services to us. | ||||||||
During the second quarter of 2014, Sizmek’s Compensation Committee granted (i) 99,134 performance-based RSUs, (ii) 98,400 time-based RSUs and (iii) 464,880 time-based stock options, to certain of our employees. The RSUs and stock options expected to vest were valued at $1.9 million and $2.5 million, respectively. The awards (i) vest over periods ranging from 8 to 34 months, (ii) are subject to the employees’ continued employment with us, and (iii) with respect to the performance-based RSUs, are subject to reaching certain (a) revenue, (b) adjusted EBITDA and (c) free cash flow growth targets (i.e., performance conditions). | ||||||||
For the six months ended June 30, 2014, we recognized $1.1 million in share-based compensation expense related to the Sizmek equity awards. Unrecognized compensation costs related to unvested RSUs and stock options were $7.1 million at June 30, 2014. These costs are expected to be recognized over the weighted average remaining vesting period of 2.5 years. |
Income_Taxes
Income Taxes | 6 Months Ended | |||||||
Jun. 30, 2014 | ||||||||
Income Taxes | ' | |||||||
Income Taxes | ' | |||||||
7. Income Taxes | ||||||||
For the six months ended June 30, 2014, our effective tax rate was 4.9% compared to (16.3%) for the six months ended June 30, 2013. The effective tax rates for each period differ from the expected federal statutory rate of 35.0% as a result of state and foreign income taxes; certain non-deductible expenses; and valuation allowances in the U.S. and state jurisdictions within the U.S. The valuation allowance creates an effective tax rate of zero for income or loss earned in the U.S., substantially reducing our effective tax rate. | ||||||||
For the period from January 1, 2014 through the Spin-Off from DG on February 7, 2014, our operations were included in the consolidated income tax returns of DG. However, income taxes were calculated and provided for Sizmek on a separate return basis for all periods presented. The amount of assets and liabilities related to income taxes prior to the Spin-Off that were retained by Sizmek are reflected in our consolidated balance sheet. | ||||||||
We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more-likely-than not sustain the position following an audit. For tax positions meeting the more-likely-than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. During the six months ended June 30, 2014, there were no additional uncertain tax positions. Interest and penalties related to uncertain tax positions are recognized in income tax expense. For the six months ended June 30, 2014, we recognized less than $0.1 million of interest or penalties related to uncertain tax positions in our financial statements compared to less than $0.1 million for the six months ended June 30, 2013. | ||||||||
The changes in uncertain tax positions for the six months ended June 30, 2014 and 2013 were as follows (in thousands): | ||||||||
Six Months Ended June 30, | ||||||||
2014 | 2013 | |||||||
Balance at beginning of year | $ | 1,701 | $ | 1,801 | ||||
Changes to tax positions related to current or prior periods | — | — | ||||||
Balance at end of period | $ | 1,701 | $ | 1,801 | ||||
If we reduced our reserve for uncertain tax positions, it would result in us recognizing a tax benefit. | ||||||||
As of June 30, 2014, we provided a valuation allowance against substantially all of our U.S. and state NOL carryforwards as ultimate realization of these NOLs was not determined to be more-likely-than not. Accordingly, we have NOL carryforwards available to us (should we have sufficient future taxable income to utilize them) that are not reflected in our consolidated and combined balance sheets at June 30, 2014 and December 31, 2013, respectively. | ||||||||
We are subject to U.S. federal income tax, income tax from multiple foreign jurisdictions including Israel and the United Kingdom, and income taxes of multiple state jurisdictions. U.S. federal, state and local income tax returns for 2010 through 2013 remain open to examination. Israeli and United Kingdom income tax returns remain open to examination for 2007 through 2013 and 2008 through 2013, respectively. Historically, our operating results have been included DG’s U.S. federal and state tax returns or tax returns of non-U.S. jurisdictions. Effective for the period beginning February 8, 2014, we will file stand-alone income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions and various foreign jurisdictions. Prior to the Spin-Off, we entered into a tax matters agreement with DG that governs the parties’ respective rights, responsibilities and obligations with respect to taxes. The tax matters agreement generally provides that the filing of tax returns, the control of audit proceedings, and the payment of any additional tax liability relative to periods prior to February 8, 2014 is our responsibility. | ||||||||
We do not provide deferred taxes on the undistributed earnings of our non-U.S. subsidiaries in situations where our intention is to reinvest such earnings indefinitely. Furthermore, we believe both our U.S. and non-U.S. subsidiaries have significant net assets, liquidity, and other financial resources available to meet their operational and capital investment requirements. |
Earnings_Loss_per_Share
Earnings (Loss) per Share | 6 Months Ended | |||||||||||||
Jun. 30, 2014 | ||||||||||||||
Earnings (Loss) per Share | ' | |||||||||||||
Earnings (Loss) per Share | ' | |||||||||||||
8. Earnings (Loss) per Share | ||||||||||||||
Basic earnings (loss) per common share excludes dilution and is calculated by dividing net earnings (loss) by the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per common share is calculated by dividing net earnings (loss) by the weighted-average number of common shares outstanding during the period, as adjusted for the potential dilutive effect of non-participating share-based awards such as stock options and RSUs. | ||||||||||||||
On February 7, 2014, 30.4 million shares of our common stock were distributed to DG stockholders in conjunction with the Spin-Off. For comparative purposes, and to provide a more meaningful calculation of the weighted-average shares outstanding, we have assumed this amount to be outstanding as of the beginning of each period presented prior to the Spin-Off in the calculation of weighted-average shares outstanding. | ||||||||||||||
The following table presents earnings (loss) per common share for the three and six months ended June 30, 2014 and 2013 (in thousands, except per share data): | ||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 30, | June 30, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
Net loss | $ | (1,642 | ) | $ | (1,232 | ) | $ | (16,060 | ) | $ | (9,191 | ) | ||
Weighted average common shares outstanding — basic | 30,399 | 30,399 | 30,399 | 30,399 | ||||||||||
Dilutive securities | — | — | — | — | ||||||||||
Weighted average common shares outstanding - diluted | 30,399 | 30,399 | 30,399 | 30,399 | ||||||||||
Basic loss per common share | $ | (0.05 | ) | $ | (0.04 | ) | $ | (0.53 | ) | $ | (0.30 | ) | ||
Diluted loss per common share | $ | (0.05 | ) | $ | (0.04 | ) | $ | (0.53 | ) | $ | (0.30 | ) | ||
Antidilutive securities not included: | ||||||||||||||
Stock options and RSUs | 864 | — | 503 | — | ||||||||||
Geographical_Information
Geographical Information | 6 Months Ended | |||||||||||||
Jun. 30, 2014 | ||||||||||||||
Geographical Information. | ' | |||||||||||||
Geographical Information | ' | |||||||||||||
9. Geographical Information | ||||||||||||||
We operate in one business segment, online advertising services. Our chief operating decision maker is considered to be our Chief Executive Officer. The chief operating decision maker allocates resources and assesses performance of the business and other activities at the operating segment level. The following table summarizes our revenues by geographic area (in thousands): | ||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 30, | June 30, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
Revenues: | ||||||||||||||
United States | $ | 19,779 | $ | 19,020 | $ | 38,541 | $ | 34,342 | ||||||
North America (excluding U.S.) | 1,033 | 639 | 2,084 | 1,159 | ||||||||||
Europe, Middle East and Africa | 14,647 | 13,114 | 25,627 | 24,590 | ||||||||||
Asia Pacific | 6,339 | 7,213 | 12,412 | 12,705 | ||||||||||
Latin America | 2,203 | 1,281 | 3,716 | 2,540 | ||||||||||
Total | $ | 44,001 | $ | 41,267 | $ | 82,380 | $ | 75,336 | ||||||
For the six months ended June 30, 2014, about 53% of our revenues were attributable to foreign jurisdictions. However, no one country other than the United States and the United Kingdom represented more than 10% of our consolidated or combined revenues. |
Related_Party_Transactions
Related Party Transactions | 6 Months Ended | |||||||||||||
Jun. 30, 2014 | ||||||||||||||
Related Party Transactions | ' | |||||||||||||
Related Party Transactions | ' | |||||||||||||
10. Related Party Transactions | ||||||||||||||
Prior to the Spin-Off, DG provided certain management and administrative services to us. These services include, among others, accounting, treasury, audit, tax, legal, executive oversight, human resources, real estate, information technology and risk management. These expenses have been allocated to us on a basis of direct usage when identifiable, with the remainder allocated on the basis of revenue, headcount, or other measures. Further, DG allocated merger, integration and other expenses to us largely based on revenues. The allocations of such expenses to us were as follows (in thousands): | ||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
DG’s Expense Allocation to Sizmek | 2014 | 2013 | 2014 | 2013 | ||||||||||
Management and administrative services | $ | — | $ | 2,018 | $ | 514 | $ | 3,744 | ||||||
Merger, integration and other | — | 350 | 4,038 | 860 | ||||||||||
Total | $ | — | $ | 2,368 | $ | 4,552 | $ | 4,604 | ||||||
The above expense allocations do not include share-based compensation which is discussed in Note 6. | ||||||||||||||
Included in the above are allocated costs of DG’s employee benefit plans and other employee incentives. Employee benefits and incentives include 401(k) matching contributions, participation in DG’s long-term incentive compensation award plans and healthcare plans. The employee benefit and incentive costs are reflected in the statements of operations and are classified consistent with how the underlying employee’s salary and other compensation costs have been recorded. | ||||||||||||||
DG and the Company consider the allocated cost for corporate services, employee benefits and incentives to be reasonable based on the utilization of the services. However, we believe the allocated cost for these services differs from what would have resulted from transactions among third parties if we were a stand-alone entity. See Note 1—Basis of Presentation — Carve-out Financial Statements Prior to Spin-Off regarding our expectation that Sizmek’s corporate overhead expenses will increase following the Spin-Off. | ||||||||||||||
In addition, DG primarily used a centralized approach to cash management and financing of its operations with all related activity between DG and us reflected in business capital in our December 31, 2013 balance sheet. The transactions included: | ||||||||||||||
· cash deposits from our customers to us that were transferred to DG’s bank accounts on a regular basis; | ||||||||||||||
· cash infusions from DG to fund our operations, capital expenditures and acquisitions; | ||||||||||||||
· allocations of DG’s corporate services, employee benefits and other incentives; and | ||||||||||||||
· intercompany charges for expenses related to facilities we shared with DG’s other business segment. | ||||||||||||||
The following is a reconciliation of the amounts presented as “Net contributions from Parent” on the consolidated statement of stockholders’ equity and the amounts presented as “Net contributions from Parent” and monetization of other Parent contributions on the consolidated and combined statements of cash flows (in thousands): | ||||||||||||||
Six Months Ended | ||||||||||||||
June 30, | ||||||||||||||
2014 | 2013 | |||||||||||||
Net contributions from Parent per the statements of stockholders’ equity | $ | 89,292 | $ | 9,582 | ||||||||||
Non-cash changes to business capital: | ||||||||||||||
Share-based compensation prior to Spin-Off | (6,467 | ) | (3,471 | ) | ||||||||||
TV business net assets remaining on balance sheet | (3,766 | ) | — | |||||||||||
Amortization of TV business assets | (559 | ) | — | |||||||||||
Net contributions from Parent and monetization of other Parent contributions per the statements of cash flows | $ | 78,500 | $ | 6,111 | ||||||||||
Pursuant to the Merger Agreement, shortly prior to the Spin-Off, DG contributed to us all of its cash, and most of its other current assets and current liabilities relating to its television business. Accordingly, our current assets and liabilities at June 30, 2014 include these additional assets and liabilities that are not typically included in our balance sheet. |
Litigation
Litigation | 6 Months Ended |
Jun. 30, 2014 | |
Litigation | ' |
Litigation | ' |
11. Litigation | |
Although the Company is not a party to any of the litigation discussed below, under the Separation and Redemption Agreement that we entered into with DG in connection with the Spin-Off, we have agreed to indemnify and hold harmless DG and its former directors for the costs of defending the cases, and any damages that may be awarded to the plaintiff and purported class of former DG stockholders. | |
On January 14, 2014, a purported holder of common stock of Digital Generation, Inc. (“DG”), Equity Trading (“Plaintiff”), filed a complaint in the Supreme Court of the State of New York, County of New York, Equity Trading v. Scott K. Ginsburg, et al., No. 050112/2014, on behalf of itself and all others similarly situated, against DG, all directors of DG, Extreme Reach, Inc. (“Extreme Reach”) and Dawn Blackhawk Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of Extreme Reach (“Acquisition Sub”), alleging breaches of fiduciary duty in connection with the then pending Agreement and Plan of Merger, dated as of August 12, 2013, by and among Extreme Reach, Acquisition Sub and DG. The complaint sought an injunction barring the consummation of the transaction and unspecified monetary damages. | |
On January 16, 2014, Plaintiff filed with the New York state court a request seeking an order (i) preliminarily enjoining the Merger, (ii) requiring expedited discovery and (iii) scheduling a post-discovery hearing to continue the injunction (Plaintiff’s “Request”), and on January 17, 2014, the New York state court issued an order setting a briefing schedule and a hearing for January 30, 2014, on Plaintiff’s Request. On January 27, 2014, the defendants removed this action from the New York state court to the United States District Court for the Southern District of New York, causing the matter to now be captioned Equity Trading v. Scott K. Ginsburg, et al., 14 Civ. 499 (RWS) (RLE). The defendants also submitted briefing in opposition to the Request. At a hearing held on January 30, 2014, the Court denied Plaintiff’s Request. On February 4, 2014, the Court agreed to a Stipulation for Extension of Time and Order (the “Scheduling Order”), providing a proposed briefing schedule. On February 26, 2014, Plaintiff filed a Motion to Remand the action to the Supreme Court of the State of New York, County of New York. On March 12, 2014, the defendants stipulated to remand. On April 11, 2014, Plaintiff filed an amended complaint, asserting the same causes of action as the initial complaint and adding certain additional factual allegations. On July 18, 2014, the defendants filed motions to dismiss the amended complaint. According to a scheduling stipulation filed with the motions to dismiss, Plaintiff’s oppositions to the motions to dismiss are due on September 16, 2014, and the defendants’ replies in support of the motions are due on October 6, 2014. | |
The Company believes Plaintiff’s allegations are without merit and intends to defend this action vigorously. We believe the purported claims and our defense costs will qualify for reimbursement under DG’s and/or our insurance coverage, which are subject to the applicable deductible and the limits of the policies. |
Agreement_to_Acquire_Aerify_Me
Agreement to Acquire Aerify Media | 6 Months Ended |
Jun. 30, 2014 | |
Agreement to Acquire Aerify Media | ' |
Agreement to Acquire Aerify Media | ' |
Note 12 — Agreement to Acquire Aerify Media | |
On August 11, 2014, Sizmek announced a definitive agreement to acquire Aerify Media, a private company specializing in mobile tracking and retargeting, for $6.25 million. Aerify’s mobile in-app and web tracking technology expands Sizmek’s capabilities in the fast-growing mobile segment, adding both talent and technology to the platform. The transaction is not expected to have a material impact on our full year revenues or EBITDA. |
General_Policies
General (Policies) | 6 Months Ended | |||||||||||||
Jun. 30, 2014 | ||||||||||||||
General | ' | |||||||||||||
Principles of Consolidation and Combination | ' | |||||||||||||
Principles of Consolidation and Combination | ||||||||||||||
The consolidated and combined financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and include the accounts of our subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation or combination. For the period prior to the Spin-Off, the carve-out financial statements have been prepared on a basis that management believes to be reasonable to reflect the financial position, results of operations and cash flows of the Company’s operations, including portions of DG’s corporate costs and administrative shared services. These unaudited financial statements should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. | ||||||||||||||
These financial statements have been prepared by us without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, we believe the disclosures are adequate to make the information presented not misleading. The unaudited consolidated and combined financial statements reflect all adjustments, which are, in the opinion of management, of a normal and recurring nature and necessary for a fair presentation of our financial position as of the balance sheet dates, and the results of operations and cash flows for the periods presented. | ||||||||||||||
Seasonality | ' | |||||||||||||
Seasonality | ||||||||||||||
Our business is seasonal. Revenues tend to be the highest in the fourth quarter as a large portion of our revenues follow the advertising patterns of our customers. | ||||||||||||||
Use of Estimates | ' | |||||||||||||
Use of Estimates | ||||||||||||||
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates, including those related to the recoverability and useful lives of our long-lived assets, the adequacy of our allowance for doubtful accounts and credit memo reserves, contingent consideration and income taxes. We base our estimates on historical experience, future expectations and on other relevant assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. | ||||||||||||||
See Note 5 for a discussion of the risk of a future impairment of our goodwill. | ||||||||||||||
Assets and Liabilities of DG's TV Business | ' | |||||||||||||
Assets and Liabilities of DG’s TV Business | ||||||||||||||
Pursuant to the Separation and Redemption Agreement, DG contributed to us substantially all of its television business current assets and certain other assets existing on February 7, 2014, and we agreed to assume substantially all of DG’s television business liabilities that existed on February 7, 2014 or were attributable to periods up to and including February 7, 2014. These net assets contributed were recorded at $75.7 million. The details of these assets and liabilities outstanding as of June 30, 2014 were as follows (in thousands): | ||||||||||||||
Description | June 30, 2014 | |||||||||||||
(in thousands) | ||||||||||||||
Current assets of television business: | ||||||||||||||
Income tax receivables | $ | 3,936 | ||||||||||||
Trade accounts receivable | 708 | |||||||||||||
Springbox revenue sharing | 180 | |||||||||||||
Prepaid expenses | 166 | |||||||||||||
Total | $ | 4,990 | ||||||||||||
Non-current assets of television business: | ||||||||||||||
Springbox revenue sharing | $ | 160 | ||||||||||||
Current liabilities of television business: | ||||||||||||||
Trade accounts payable | $ | 624 | ||||||||||||
Accrued liabilities | 500 | |||||||||||||
Total | $ | 1,124 | ||||||||||||
Non-current liabilities of television business: | ||||||||||||||
Uncertain tax positions | $ | 260 | ||||||||||||
Derivative Instruments | ' | |||||||||||||
Derivative Instruments | ||||||||||||||
We enter into foreign currency forward contracts and options to hedge a portion of the exposure to the variability in expected future cash flows resulting from changes in related foreign currency exchange rates between the New Israeli Shekel (“NIS”) and the U.S. Dollar. These transactions are designated as cash flow hedges, as defined by Accounting Standards Codification (“ASC”) Topic 815, “Derivatives and Hedging.” | ||||||||||||||
ASC Topic 815 requires that we recognize derivative instruments as either assets or liabilities in our balance sheet at fair value. These contracts are Level 2 fair value measurements in accordance with ASC Topic 820, “Fair Value Measurements and Disclosures.” For derivative instruments that are designated and qualify as a cash flow hedge (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income (loss), net of taxes, and reclassified into earnings (various operating expenses) in the same period or periods during which the hedged transaction affects earnings. | ||||||||||||||
Our cash flow hedging strategy is to hedge against the risk of overall changes in cash flows resulting from certain forecasted foreign currency rent and salary payments during the next twelve months. We hedge portions of our forecasted expenses denominated in the NIS with foreign currency forward contracts and options. At June 30, 2014, we had $2.1 million notional amount of foreign currency forward contracts and options outstanding that had a net fair value asset balance of $0.0 million ($0.0 million asset, net of a $0.0 million liability). The net asset is included in “other current assets” and is expected to be recognized in our results of operations in the next twelve months. As a result of our hedging activities, we incurred the following gains in our results of operations (in thousands): | ||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 30, | June 30, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
Hedging gain recognized in operations | $ | 29 | $ | 282 | $ | 115 | $ | 481 | ||||||
At December 31, 2013, we had $5.2 million notional amount of foreign currency forward contracts and options outstanding that had a net fair value asset balance of $0.1 million ($0.1 million asset, net of a $0.0 million liability). The vast majority of any gain or loss from hedging activities is included in our various operating expenses. It is our policy to offset fair value amounts recognized for derivative instruments executed with the same counterparty. In connection with our foreign currency forward contracts and options and other banking arrangements, we have agreed to maintain $1.7 million of cash in bank accounts with our counterparty, which we classify as restricted cash on our balance sheet. | ||||||||||||||
Accumulated Other Comprehensive Income (Loss) | ' | |||||||||||||
Accumulated Other Comprehensive Income (Loss) | ||||||||||||||
Components of accumulated other comprehensive income (loss) (“AOCI” or “AOCL”), net of tax, for the three and six months ended June 30, 2014 and 2013 were as follows (in thousands): | ||||||||||||||
Three Months Ended June 30, 2014 | ||||||||||||||
Foreign | Unrealized | Unrealized | Accumulated | |||||||||||
Currency | Gain on | Gain (Loss) | Other | |||||||||||
Translation | Foreign | on Available | Comprehensive | |||||||||||
Currency | for Sale | Income (Loss) | ||||||||||||
Derivatives | Securities | |||||||||||||
Balance at March 31, 2014 | $ | (1,101 | ) | $ | 39 | $ | 1,030 | $ | (32 | ) | ||||
Other comprehensive income (loss) before reclassifications | 375 | 10 | 770 | 1,155 | ||||||||||
Amounts reclassified out of AOCL | — | (25 | ) | — | (25 | ) | ||||||||
Net current period activity | 375 | (15 | ) | 770 | 1,130 | |||||||||
Balance at June 30, 2014 | $ | (726 | ) | $ | 24 | $ | 1,800 | $ | 1,098 | |||||
Six Months Ended June 30, 2014 | ||||||||||||||
Foreign | Unrealized | Unrealized | Accumulated | |||||||||||
Currency | Gain on | Gain (Loss) | Other | |||||||||||
Translation | Foreign | on Available | Comprehensive | |||||||||||
Currency | for Sale | Income (Loss) | ||||||||||||
Derivatives | Securities | |||||||||||||
Balance at December 31, 2013 | $ | (1,198 | ) | $ | 116 | $ | 1,764 | $ | 682 | |||||
Other comprehensive income (loss) before reclassifications | 472 | 8 | 36 | 516 | ||||||||||
Amounts reclassified out of AOCI | — | (100 | ) | — | (100 | ) | ||||||||
Net current period activity | 472 | (92 | ) | 36 | 416 | |||||||||
Balance at June 30, 2014 | $ | (726 | ) | $ | 24 | $ | 1,800 | $ | 1,098 | |||||
Three Months Ended June 30, 2013 | ||||||||||||||
Foreign | Unrealized | Unrealized | Accumulated | |||||||||||
Currency | Gain on | Gain (Loss) | Other | |||||||||||
Translation | Foreign | on Available | Comprehensive | |||||||||||
Currency | for Sale | Income (Loss) | ||||||||||||
Derivatives | Securities | |||||||||||||
Balance at March 31, 2013 | $ | (1,325 | ) | $ | 326 | $ | 82 | $ | (917 | ) | ||||
Other comprehensive income (loss) before reclassifications | (669 | ) | 418 | (126 | ) | (377 | ) | |||||||
Amounts reclassified out of AOCL | — | (254 | ) | — | (254 | ) | ||||||||
Net current period activity | (669 | ) | 164 | (126 | ) | (631 | ) | |||||||
Balance at June 30, 2013 | $ | (1,994 | ) | $ | 490 | $ | (44 | ) | $ | (1,548 | ) | |||
Six Months Ended June 30, 2013 | ||||||||||||||
Foreign | Unrealized | Unrealized | Accumulated | |||||||||||
Currency | Gain on | Gain (Loss) | Other | |||||||||||
Translation | Foreign | on Available | Comprehensive | |||||||||||
Currency | for Sale | Income (Loss) | ||||||||||||
Derivatives | Securities | |||||||||||||
Balance at December 31, 2012 | $ | (887 | ) | $ | 373 | $ | (4 | ) | $ | (518 | ) | |||
Other comprehensive income (loss) before reclassifications | (1,107 | ) | 512 | (40 | ) | (635 | ) | |||||||
Amounts reclassified out of AOCL | — | (395 | ) | — | (395 | ) | ||||||||
Net current period activity | (1,107 | ) | 117 | (40 | ) | (1,030 | ) | |||||||
Balance at June 30, 2013 | $ | (1,994 | ) | $ | 490 | $ | (44 | ) | $ | (1,548 | ) | |||
The following tables summarize the reclassifications from AOCL to the consolidated and combined statements of operations for the three and six months ended June 30, 2014 and 2013 (in thousands): | ||||||||||||||
Amounts Reclassified out of AOCL | ||||||||||||||
Three Months | Three Months | Affected Line Items in the Consolidated and Combined | ||||||||||||
Ended June 30, | Ended June 30, | Statements of Operations | ||||||||||||
2014 | 2013 | |||||||||||||
Gains (losses) on cash flow hedges: | ||||||||||||||
Foreign currency derivatives | $ | 4 | $ | 33 | Cost of revenues | |||||||||
Foreign currency derivatives | 2 | 18 | Sales and marketing | |||||||||||
Foreign currency derivatives | 19 | 187 | Research and development | |||||||||||
Foreign currency derivatives | 5 | 53 | General and administrative | |||||||||||
Foreign currency derivatives | (1 | ) | (9 | ) | Other (income) and expense, net | |||||||||
Total before taxes | 29 | 282 | ||||||||||||
Tax amounts | (4 | ) | (28 | ) | ||||||||||
Income after tax | $ | 25 | $ | 254 | ||||||||||
Amounts Reclassified out of AOCL | ||||||||||||||
Six Months | Six Months | Affected Line Items in the Consolidated and Combined | ||||||||||||
Ended June 30, | Ended June 30, | Statements of Operations | ||||||||||||
2014 | 2013 | |||||||||||||
Gains (losses) on cash flow hedges: | ||||||||||||||
Foreign currency derivatives | $ | 11 | $ | 55 | Cost of revenues | |||||||||
Foreign currency derivatives | 5 | 32 | Sales and marketing | |||||||||||
Foreign currency derivatives | 54 | 315 | Research and development | |||||||||||
Foreign currency derivatives | 15 | 89 | General and administrative | |||||||||||
Foreign currency derivatives | 30 | (10 | ) | Other (income) and expense, net | ||||||||||
Total before taxes | 115 | 481 | ||||||||||||
Tax amounts | (15 | ) | (86 | ) | ||||||||||
Income after tax | $ | 100 | $ | 395 | ||||||||||
Merger, Integration and Other Expenses | ' | |||||||||||||
Merger, Integration and Other Expenses | ||||||||||||||
Merger, integration and other expenses reflect the expenses incurred in (i) DG’s Merger with Extreme Reach and our Spin-Off from DG, (ii) acquiring or disposing of a business, (iii) integrating an acquired operation (e.g., severance pay, office closure costs) into the Company and certain other expenses. A summary of our merger, integration and other expenses are as follows (in thousands): | ||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
Description | 2014 | 2013 | 2014 | 2013 | ||||||||||
Severance | $ | 648 | $ | 106 | $ | 891 | $ | 190 | ||||||
Merger and Spin-Off (1) | 158 | — | 4,860 | — | ||||||||||
Strategic alternatives | — | 312 | — | 614 | ||||||||||
MediaMind preacquisition liability | — | — | — | 720 | ||||||||||
Proxy contest | — | — | — | 165 | ||||||||||
Integration costs | 538 | 213 | 538 | 419 | ||||||||||
Total | $ | 1,344 | $ | 631 | $ | 6,289 | $ | 2,108 | ||||||
(1) See discussion of Merger and Spin-Off under “Separation from Digital Generation, Inc.” in Note 1. | ||||||||||||||
Recently Issued and Adopted Accounting Guidance | ' | |||||||||||||
Recently Issued Accounting Guidance | ||||||||||||||
In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU 2014-09 modifies revenue recognition guidance for U.S. GAAP. Previous revenue recognition guidance in U.S. GAAP comprised broad revenue recognition concepts together with numerous revenue requirements for particular industries or transactions, which sometimes resulted in different accounting for economically similar transactions. In contrast, International Accounting Standards Board (“IASB”) provided limited guidance on revenue recognition. Accordingly, the FASB and IASB initiated a joint project to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and International Financial Reporting Standards (“IFRS”). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: | ||||||||||||||
Step 1: Identify the contract(s) with a customer. | ||||||||||||||
Step 2: Identify the performance obligations in the contract. | ||||||||||||||
Step 3: Determine the transaction price. | ||||||||||||||
Step 4: Allocate the transaction price to the performance obligations in the contract. | ||||||||||||||
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation. | ||||||||||||||
For Sizmek, the amendments in ASU 2014-09 are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is not permitted. An entity shall adopt the amendments in ASU 2014-09 by either (i) retrospectively adjusting each prior reporting period presented or (ii) retrospectively adjusting for the cumulative effect of initially applying ASU 2014-09 at the date of initial adoption. We have not as yet determined (i) the extent to which we expect ASU 2014-09 will impact our reported revenues or (ii) the manner in which it will be adopted. | ||||||||||||||
Recently Adopted Accounting Guidance | ||||||||||||||
Effective January 1, 2014, we adopted ASU 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” on a prospective basis. ASU 2013-11 amends the accounting guidance related to the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss or a tax credit carryforward exists. The guidance requires an unrecognized tax benefit to be presented as a decrease in a deferred tax asset where a net operating loss, a similar tax loss, or a tax credit carryforward exists and certain criteria are met. The adoption of ASU 2013-11 did not have a material impact on our financial statements. |
General_Tables
General (Tables) | 6 Months Ended | |||||||||||||
Jun. 30, 2014 | ||||||||||||||
General | ' | |||||||||||||
Schedule of DG's assets and liabilities outstanding | ' | |||||||||||||
The details of these assets and liabilities outstanding as of June 30, 2014 were as follows (in thousands): | ||||||||||||||
Description | June 30, 2014 | |||||||||||||
(in thousands) | ||||||||||||||
Current assets of television business: | ||||||||||||||
Income tax receivables | $ | 3,936 | ||||||||||||
Trade accounts receivable | 708 | |||||||||||||
Springbox revenue sharing | 180 | |||||||||||||
Prepaid expenses | 166 | |||||||||||||
Total | $ | 4,990 | ||||||||||||
Non-current assets of television business: | ||||||||||||||
Springbox revenue sharing | $ | 160 | ||||||||||||
Current liabilities of television business: | ||||||||||||||
Trade accounts payable | $ | 624 | ||||||||||||
Accrued liabilities | 500 | |||||||||||||
Total | $ | 1,124 | ||||||||||||
Non-current liabilities of television business: | ||||||||||||||
Uncertain tax positions | $ | 260 | ||||||||||||
Schedule of gains recognized in consolidated results of operations due to hedging activities | ' | |||||||||||||
As a result of our hedging activities, we incurred the following gains in our results of operations (in thousands): | ||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 30, | June 30, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
Hedging gain recognized in operations | $ | 29 | $ | 282 | $ | 115 | $ | 481 | ||||||
Schedule of components of accumulated other comprehensive income (loss) (AOCI or AOCL), net of tax | ' | |||||||||||||
Components of accumulated other comprehensive income (loss) (“AOCI” or “AOCL”), net of tax, for the three and six months ended June 30, 2014 and 2013 were as follows (in thousands): | ||||||||||||||
Three Months Ended June 30, 2014 | ||||||||||||||
Foreign | Unrealized | Unrealized | Accumulated | |||||||||||
Currency | Gain on | Gain (Loss) | Other | |||||||||||
Translation | Foreign | on Available | Comprehensive | |||||||||||
Currency | for Sale | Income (Loss) | ||||||||||||
Derivatives | Securities | |||||||||||||
Balance at March 31, 2014 | $ | (1,101 | ) | $ | 39 | $ | 1,030 | $ | (32 | ) | ||||
Other comprehensive income (loss) before reclassifications | 375 | 10 | 770 | 1,155 | ||||||||||
Amounts reclassified out of AOCL | — | (25 | ) | — | (25 | ) | ||||||||
Net current period activity | 375 | (15 | ) | 770 | 1,130 | |||||||||
Balance at June 30, 2014 | $ | (726 | ) | $ | 24 | $ | 1,800 | $ | 1,098 | |||||
Six Months Ended June 30, 2014 | ||||||||||||||
Foreign | Unrealized | Unrealized | Accumulated | |||||||||||
Currency | Gain on | Gain (Loss) | Other | |||||||||||
Translation | Foreign | on Available | Comprehensive | |||||||||||
Currency | for Sale | Income (Loss) | ||||||||||||
Derivatives | Securities | |||||||||||||
Balance at December 31, 2013 | $ | (1,198 | ) | $ | 116 | $ | 1,764 | $ | 682 | |||||
Other comprehensive income (loss) before reclassifications | 472 | 8 | 36 | 516 | ||||||||||
Amounts reclassified out of AOCI | — | (100 | ) | — | (100 | ) | ||||||||
Net current period activity | 472 | (92 | ) | 36 | 416 | |||||||||
Balance at June 30, 2014 | $ | (726 | ) | $ | 24 | $ | 1,800 | $ | 1,098 | |||||
Three Months Ended June 30, 2013 | ||||||||||||||
Foreign | Unrealized | Unrealized | Accumulated | |||||||||||
Currency | Gain on | Gain (Loss) | Other | |||||||||||
Translation | Foreign | on Available | Comprehensive | |||||||||||
Currency | for Sale | Income (Loss) | ||||||||||||
Derivatives | Securities | |||||||||||||
Balance at March 31, 2013 | $ | (1,325 | ) | $ | 326 | $ | 82 | $ | (917 | ) | ||||
Other comprehensive income (loss) before reclassifications | (669 | ) | 418 | (126 | ) | (377 | ) | |||||||
Amounts reclassified out of AOCL | — | (254 | ) | — | (254 | ) | ||||||||
Net current period activity | (669 | ) | 164 | (126 | ) | (631 | ) | |||||||
Balance at June 30, 2013 | $ | (1,994 | ) | $ | 490 | $ | (44 | ) | $ | (1,548 | ) | |||
Six Months Ended June 30, 2013 | ||||||||||||||
Foreign | Unrealized | Unrealized | Accumulated | |||||||||||
Currency | Gain on | Gain (Loss) | Other | |||||||||||
Translation | Foreign | on Available | Comprehensive | |||||||||||
Currency | for Sale | Income (Loss) | ||||||||||||
Derivatives | Securities | |||||||||||||
Balance at December 31, 2012 | $ | (887 | ) | $ | 373 | $ | (4 | ) | $ | (518 | ) | |||
Other comprehensive income (loss) before reclassifications | (1,107 | ) | 512 | (40 | ) | (635 | ) | |||||||
Amounts reclassified out of AOCL | — | (395 | ) | — | (395 | ) | ||||||||
Net current period activity | (1,107 | ) | 117 | (40 | ) | (1,030 | ) | |||||||
Balance at June 30, 2013 | $ | (1,994 | ) | $ | 490 | $ | (44 | ) | $ | (1,548 | ) | |||
Summary of reclassifications from AOCL to the consolidated and combined statements of operations | ' | |||||||||||||
The following tables summarize the reclassifications from AOCL to the consolidated and combined statements of operations for the three and six months ended June 30, 2014 and 2013 (in thousands): | ||||||||||||||
Amounts Reclassified out of AOCL | ||||||||||||||
Three Months | Three Months | Affected Line Items in the Consolidated and Combined | ||||||||||||
Ended June 30, | Ended June 30, | Statements of Operations | ||||||||||||
2014 | 2013 | |||||||||||||
Gains (losses) on cash flow hedges: | ||||||||||||||
Foreign currency derivatives | $ | 4 | $ | 33 | Cost of revenues | |||||||||
Foreign currency derivatives | 2 | 18 | Sales and marketing | |||||||||||
Foreign currency derivatives | 19 | 187 | Research and development | |||||||||||
Foreign currency derivatives | 5 | 53 | General and administrative | |||||||||||
Foreign currency derivatives | (1 | ) | (9 | ) | Other (income) and expense, net | |||||||||
Total before taxes | 29 | 282 | ||||||||||||
Tax amounts | (4 | ) | (28 | ) | ||||||||||
Income after tax | $ | 25 | $ | 254 | ||||||||||
Amounts Reclassified out of AOCL | ||||||||||||||
Six Months | Six Months | Affected Line Items in the Consolidated and Combined | ||||||||||||
Ended June 30, | Ended June 30, | Statements of Operations | ||||||||||||
2014 | 2013 | |||||||||||||
Gains (losses) on cash flow hedges: | ||||||||||||||
Foreign currency derivatives | $ | 11 | $ | 55 | Cost of revenues | |||||||||
Foreign currency derivatives | 5 | 32 | Sales and marketing | |||||||||||
Foreign currency derivatives | 54 | 315 | Research and development | |||||||||||
Foreign currency derivatives | 15 | 89 | General and administrative | |||||||||||
Foreign currency derivatives | 30 | (10 | ) | Other (income) and expense, net | ||||||||||
Total before taxes | 115 | 481 | ||||||||||||
Tax amounts | (15 | ) | (86 | ) | ||||||||||
Income after tax | $ | 100 | $ | 395 | ||||||||||
Summary of merger, integration and other expenses | ' | |||||||||||||
A summary of our merger, integration and other expenses are as follows (in thousands): | ||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
Description | 2014 | 2013 | 2014 | 2013 | ||||||||||
Severance | $ | 648 | $ | 106 | $ | 891 | $ | 190 | ||||||
Merger and Spin-Off (1) | 158 | — | 4,860 | — | ||||||||||
Strategic alternatives | — | 312 | — | 614 | ||||||||||
MediaMind preacquisition liability | — | — | — | 720 | ||||||||||
Proxy contest | — | — | — | 165 | ||||||||||
Integration costs | 538 | 213 | 538 | 419 | ||||||||||
Total | $ | 1,344 | $ | 631 | $ | 6,289 | $ | 2,108 | ||||||
(1) See discussion of Merger and Spin-Off under “Separation from Digital Generation, Inc.” in Note 1. |
Fair_Value_Measurements_Tables
Fair Value Measurements (Tables) | 6 Months Ended | |||||||||||||||
Jun. 30, 2014 | ||||||||||||||||
Fair Value Measurements | ' | |||||||||||||||
Schedule of assets and liabilities accounted for at fair value | ' | |||||||||||||||
The tables do not include cash on hand or assets and liabilities that are measured at historical cost or any basis other than fair value (in thousands). | ||||||||||||||||
Fair Value Measurements at June 30, 2014 | ||||||||||||||||
Balance | Quoted Prices | Significant | Significant | Total | ||||||||||||
Sheet | in Active | Other | Unobservable | Fair Value | ||||||||||||
Location | Markets | Observable | Inputs | Measurements | ||||||||||||
(Level 1) | Inputs | (Level 3) | ||||||||||||||
(Level 2) | ||||||||||||||||
Assets: | ||||||||||||||||
Money market funds | (a) | $ | 513 | $ | — | $ | — | $ | 513 | |||||||
Currency forward derivatives/options | (b) | — | 27 | — | 27 | |||||||||||
Marketable equity securities | (c) | 2,141 | — | — | 2,141 | |||||||||||
Revenue sharing arrangement | (d)(e) | — | — | 340 | 340 | |||||||||||
Total | $ | 2,654 | $ | 27 | $ | 340 | $ | 3,021 | ||||||||
Liabilities: | ||||||||||||||||
Revenue earnout payable | (f) | $ | — | $ | — | $ | 225 | $ | 225 | |||||||
Fair Value Measurements at December 31, 2013 | ||||||||||||||||
Balance | Quoted Prices | Significant | Significant | Total | ||||||||||||
Sheet | in Active | Other | Unobservable | Fair Value | ||||||||||||
Location | Markets | Observable | Inputs | Measurements | ||||||||||||
(Level 1) | Inputs | (Level 3) | ||||||||||||||
(Level 2) | ||||||||||||||||
Assets: | ||||||||||||||||
Currency forward derivatives/options | (b) | $ | — | $ | 137 | $ | — | $ | 137 | |||||||
Marketable equity securities | (c) | 2,105 | — | — | 2,105 | |||||||||||
Total | $ | 2,105 | $ | 137 | $ | — | $ | 2,242 | ||||||||
Liabilities: | ||||||||||||||||
Revenue earnout payable | $ | — | $ | — | $ | — | $ | — | ||||||||
(a) Included in cash and cash equivalents. | ||||||||||||||||
(b) Included in other current assets. | ||||||||||||||||
(c) Included in other non-current assets. | ||||||||||||||||
(d) Included in current assets of TV business. | ||||||||||||||||
(e) Included in non-current assets of TV business. | ||||||||||||||||
(f) Included in current liabilities of TV business. | ||||||||||||||||
Schedule of reconciliation of changes in the fair values of Level 3 assets | ' | |||||||||||||||
The following table provides a reconciliation of changes in the fair values of our Level 3 assets (in thousands): | ||||||||||||||||
Revenue Sharing | ||||||||||||||||
Arrangement | ||||||||||||||||
Six Months | ||||||||||||||||
Ended June 30, | ||||||||||||||||
2014 | ||||||||||||||||
Balance at beginning of year | $ | — | ||||||||||||||
Additions | 340 | |||||||||||||||
Balance at end of period | $ | 340 | ||||||||||||||
Schedule of reconciliation of changes in the fair values of Level 3 liabilities | ' | |||||||||||||||
The following table provides a reconciliation of changes in the fair values of our Level 3 liabilities (in thousands): | ||||||||||||||||
Revenue Earnout | ||||||||||||||||
Payable | ||||||||||||||||
Six Months | ||||||||||||||||
Ended June 30, | ||||||||||||||||
2014 | ||||||||||||||||
Balance at beginning of year | $ | — | ||||||||||||||
Additions | 225 | |||||||||||||||
Balance at end of period | $ | 225 |
Goodwill_Tables
Goodwill (Tables) | 6 Months Ended | ||||||||||
Jun. 30, 2014 | |||||||||||
Goodwill | ' | ||||||||||
Schedule of changes in carrying value of goodwill | ' | ||||||||||
Changes in the carrying value of our goodwill for the six months ended June 30, 2014 are as follows (in thousands): | |||||||||||
Goodwill | Accumulated | Net Carrying | |||||||||
Impairment | Value | ||||||||||
Losses | |||||||||||
Balance at December 31, 2013 | $ | 376,417 | $ | (242,331 | ) | $ | 134,086 | ||||
2014 activity | — | — | — | ||||||||
Balance at June 30, 2014 | $ | 376,417 | $ | (242,331 | ) | $ | 134,086 |
Sharebased_Compensation_Tables
Share-based Compensation (Tables) | 6 Months Ended | |||||||
Jun. 30, 2014 | ||||||||
Share-based Compensation | ' | |||||||
Summary of share-based compensation expense related to DG stock awards | ' | |||||||
Below is a summary of our share-based compensation expense related to stock awards (in thousands): | ||||||||
Six Months Ended June 30, | ||||||||
Description | 2014 | 2013 | ||||||
DG stock options and RSUs awarded to our employees | $ | 2,650 | $ | 2,052 | ||||
DG share-based awards allocated to us as part of corporate services | 3,817 | 1,419 | ||||||
Sizmek share-based awards granted | 1,066 | — | ||||||
Total | $ | 7,533 | $ | 3,471 |
Income_Taxes_Tables
Income Taxes (Tables) | 6 Months Ended | |||||||
Jun. 30, 2014 | ||||||||
Income Taxes | ' | |||||||
Schedule of changes in uncertain tax positions | ' | |||||||
The changes in uncertain tax positions for the six months ended June 30, 2014 and 2013 were as follows (in thousands): | ||||||||
Six Months Ended June 30, | ||||||||
2014 | 2013 | |||||||
Balance at beginning of year | $ | 1,701 | $ | 1,801 | ||||
Changes to tax positions related to current or prior periods | — | — | ||||||
Balance at end of period | $ | 1,701 | $ | 1,801 |
Earnings_Loss_per_Share_Tables
Earnings (Loss) per Share (Tables) | 6 Months Ended | |||||||||||||
Jun. 30, 2014 | ||||||||||||||
Earnings (Loss) per Share | ' | |||||||||||||
Schedule of earnings (loss) per common share | ' | |||||||||||||
The following table presents earnings (loss) per common share for the three and six months ended June 30, 2014 and 2013 (in thousands, except per share data): | ||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 30, | June 30, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
Net loss | $ | (1,642 | ) | $ | (1,232 | ) | $ | (16,060 | ) | $ | (9,191 | ) | ||
Weighted average common shares outstanding — basic | 30,399 | 30,399 | 30,399 | 30,399 | ||||||||||
Dilutive securities | — | — | — | — | ||||||||||
Weighted average common shares outstanding - diluted | 30,399 | 30,399 | 30,399 | 30,399 | ||||||||||
Basic loss per common share | $ | (0.05 | ) | $ | (0.04 | ) | $ | (0.53 | ) | $ | (0.30 | ) | ||
Diluted loss per common share | $ | (0.05 | ) | $ | (0.04 | ) | $ | (0.53 | ) | $ | (0.30 | ) | ||
Antidilutive securities not included: | ||||||||||||||
Stock options and RSUs | 864 | — | 503 | — | ||||||||||
Geographical_InformationTables
Geographical Information(Tables) | 6 Months Ended | |||||||||||||
Jun. 30, 2014 | ||||||||||||||
Geographical Information. | ' | |||||||||||||
Schedule of revenues by geographic area | ' | |||||||||||||
The following table summarizes our revenues by geographic area (in thousands): | ||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 30, | June 30, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
Revenues: | ||||||||||||||
United States | $ | 19,779 | $ | 19,020 | $ | 38,541 | $ | 34,342 | ||||||
North America (excluding U.S.) | 1,033 | 639 | 2,084 | 1,159 | ||||||||||
Europe, Middle East and Africa | 14,647 | 13,114 | 25,627 | 24,590 | ||||||||||
Asia Pacific | 6,339 | 7,213 | 12,412 | 12,705 | ||||||||||
Latin America | 2,203 | 1,281 | 3,716 | 2,540 | ||||||||||
Total | $ | 44,001 | $ | 41,267 | $ | 82,380 | $ | 75,336 |
Related_Party_TransactionsTabl
Related Party Transactions(Tables) | 6 Months Ended | |||||||||||||
Jun. 30, 2014 | ||||||||||||||
Related Party Transactions | ' | |||||||||||||
Schedule of allocation of related party expenses | ' | |||||||||||||
The allocations of such expenses to us were as follows (in thousands): | ||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
DG’s Expense Allocation to Sizmek | 2014 | 2013 | 2014 | 2013 | ||||||||||
Management and administrative services | $ | — | $ | 2,018 | $ | 514 | $ | 3,744 | ||||||
Merger, integration and other | — | 350 | 4,038 | 860 | ||||||||||
Total | $ | — | $ | 2,368 | $ | 4,552 | $ | 4,604 | ||||||
Schedule of reconciliation of the amounts presented as Net contributions from Parent on statement of stockholders' equity and on statements of cash flows | ' | |||||||||||||
The following is a reconciliation of the amounts presented as “Net contributions from Parent” on the consolidated statement of stockholders’ equity and the amounts presented as “Net contributions from Parent” and monetization of other Parent contributions on the consolidated and combined statements of cash flows (in thousands): | ||||||||||||||
Six Months Ended | ||||||||||||||
June 30, | ||||||||||||||
2014 | 2013 | |||||||||||||
Net contributions from Parent per the statements of stockholders’ equity | $ | 89,292 | $ | 9,582 | ||||||||||
Non-cash changes to business capital: | ||||||||||||||
Share-based compensation prior to Spin-Off | (6,467 | ) | (3,471 | ) | ||||||||||
TV business net assets remaining on balance sheet | (3,766 | ) | — | |||||||||||
Amortization of TV business assets | (559 | ) | — | |||||||||||
Net contributions from Parent and monetization of other Parent contributions per the statements of cash flows | $ | 78,500 | $ | 6,111 |
Basis_of_Presentation_Details
Basis of Presentation (Details) (USD $) | Jun. 30, 2014 | Feb. 07, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | Feb. 07, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2014 |
In Millions, except Share data, unless otherwise specified | item | Maximum | Minimum | DG | DG | DG | DG | |
item | item | Maximum | Minimum | |||||
Basis of Presentation | ' | ' | ' | ' | ' | ' | ' | ' |
Number of advertisers connected to audiences | ' | ' | 14,000 | ' | ' | ' | ' | ' |
Number of agencies connected audiences | ' | ' | ' | 5,000 | ' | ' | ' | ' |
Number of countries in which entity operates | 65 | ' | ' | ' | ' | ' | ' | ' |
Number of impressions served | ' | ' | ' | 1,500,000,000,000 | ' | ' | ' | ' |
Common stock, par value (in dollars per share) | $0.00 | $0.00 | ' | ' | ' | ' | ' | ' |
Number of shares of Sizmek Common Stock issued per share of common stock of DG | ' | ' | ' | ' | 1 | ' | ' | ' |
Per share distribution to DG shareholders (in dollars per share) | ' | ' | ' | ' | $3 | ' | ' | ' |
Corporate overhead reported by DG | ' | ' | ' | ' | ' | $12.70 | ' | ' |
Amount of corporate overhead allocated to entity | ' | ' | ' | ' | ' | $4.90 | ' | ' |
Percentage of DG's total corporate overhead representing corporate overhead costs of entity (as a percent) | ' | ' | ' | ' | ' | 39.00% | ' | ' |
Percentage of DG's total corporate overhead that will shift to entity after spin-off (as a percent) | ' | ' | ' | ' | ' | ' | 75.00% | 70.00% |
Percentage of corporate overhead allocated to entity | ' | ' | ' | ' | ' | 39.00% | ' | ' |
General_Details
General (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Assets and Liabilities of DG's TV Business | ' | ' |
Net assets contributed | $402,704 | $330,023 |
Current assets of television business: | ' | ' |
Trade accounts receivable | 45,462 | 47,362 |
Total | 4,990 | ' |
Current liabilities of television business: | ' | ' |
Accrued liabilities | 16,617 | 17,959 |
Total | 1,124 | ' |
DG contributed assets to entity and DG liabilities assumed by entity | DG | ' | ' |
Assets and Liabilities of DG's TV Business | ' | ' |
Net assets contributed | 75,700 | ' |
Current assets of television business: | ' | ' |
Income tax receivables | 3,936 | ' |
Trade accounts receivable | 708 | ' |
Springbox revenue sharing | 180 | ' |
Prepaid expenses | 166 | ' |
Total | 4,990 | ' |
Non-current assets of television business: | ' | ' |
Springbox revenue sharing | 160 | ' |
Current liabilities of television business: | ' | ' |
Trade accounts payable | 624 | ' |
Accrued liabilities | 500 | ' |
Total | 1,124 | ' |
Non-current liabilities of television business: | ' | ' |
Uncertain tax positions | $260 | ' |
General_Details_2
General (Details 2) (USD $) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Dec. 31, 2013 | |
Derivative Instruments | ' | ' | ' | ' | ' |
Period for which certain forecasted foreign currency rent and salary payments are hedged | ' | ' | '12 months | ' | ' |
Notional amount of foreign currency forward contracts and options outstanding | $2,100,000 | ' | $2,100,000 | ' | $5,200,000 |
Net fair value balance of foreign currency forward contracts and options outstanding | 0 | ' | 0 | ' | 100,000 |
Fair value asset balance of foreign currency forward contracts and options outstanding | 0 | ' | 0 | ' | 100,000 |
Fair value liability balance of foreign currency forward contracts and options outstanding | 0 | ' | 0 | ' | 0 |
Period expected to be recognized in results of operations | ' | ' | '12 months | ' | ' |
Hedging gain recognized in operations | 29,000 | 282,000 | 115,000 | 481,000 | ' |
Amount of cash in bank accounts with the counterparty the entity has agreed to maintain | $1,700,000 | ' | $1,700,000 | ' | ' |
General_Details_3
General (Details 3) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
Accumulated Other Comprehensive Income (Loss) | ' | ' | ' | ' |
Balance at beginning of the period | ($32) | ($917) | $682 | ($518) |
Other comprehensive income (loss) before reclassifications | 1,155 | -377 | 516 | -635 |
Amounts reclassified out of AOCL | -25 | -254 | -100 | -395 |
Net current period activity | 1,130 | -631 | 416 | -1,030 |
Balance at end of the period | 1,098 | -1,548 | 1,098 | -1,548 |
Foreign Currency Translation | ' | ' | ' | ' |
Accumulated Other Comprehensive Income (Loss) | ' | ' | ' | ' |
Balance at beginning of the period | -1,101 | -1,325 | -1,198 | -887 |
Other comprehensive income (loss) before reclassifications | 375 | -669 | 472 | -1,107 |
Net current period activity | 375 | -669 | 472 | -1,107 |
Balance at end of the period | -726 | -1,994 | -726 | -1,994 |
Unrealized Gain on Foreign Currency Derivatives | ' | ' | ' | ' |
Accumulated Other Comprehensive Income (Loss) | ' | ' | ' | ' |
Balance at beginning of the period | 39 | 326 | 116 | 373 |
Other comprehensive income (loss) before reclassifications | 10 | 418 | 8 | 512 |
Amounts reclassified out of AOCL | -25 | -254 | -100 | -395 |
Net current period activity | -15 | 164 | -92 | 117 |
Balance at end of the period | 24 | 490 | 24 | 490 |
Unrealized Gain (Loss) on Available for Sale Securities | ' | ' | ' | ' |
Accumulated Other Comprehensive Income (Loss) | ' | ' | ' | ' |
Balance at beginning of the period | 1,030 | 82 | 1,764 | -4 |
Other comprehensive income (loss) before reclassifications | 770 | -126 | 36 | -40 |
Net current period activity | 770 | -126 | 36 | -40 |
Balance at end of the period | $1,800 | ($44) | $1,800 | ($44) |
General_Details_4
General (Details 4) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
Affected Line Items in the Consolidated and Combined Statements of Operations | ' | ' | ' | ' |
Cost of revenues | ($15,268) | ($13,839) | ($29,754) | ($26,108) |
Sales and marketing | -14,514 | -14,543 | -30,102 | -28,967 |
Research and development | -3,193 | -2,626 | -6,741 | -5,320 |
General and administrative | -5,083 | -4,699 | -13,188 | -9,202 |
Other (income) and expense, net | -205 | -146 | -208 | 194 |
Loss before income taxes | -2,055 | -1,059 | -16,879 | -7,900 |
Tax amounts | 413 | -173 | 819 | -1,291 |
Net loss | -1,642 | -1,232 | -16,060 | -9,191 |
Gains (losses) on cash flow hedges | Foreign currency derivatives | Amounts Reclassified out of AOCL | ' | ' | ' | ' |
Affected Line Items in the Consolidated and Combined Statements of Operations | ' | ' | ' | ' |
Cost of revenues | 4 | 33 | 11 | 55 |
Sales and marketing | 2 | 18 | 5 | 32 |
Research and development | 19 | 187 | 54 | 315 |
General and administrative | 5 | 53 | 15 | 89 |
Other (income) and expense, net | -1 | -9 | 30 | -10 |
Loss before income taxes | 29 | 282 | 115 | 481 |
Tax amounts | -4 | -28 | -15 | -86 |
Net loss | $25 | $254 | $100 | $395 |
General_Details_5
General (Details 5) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
Deferred Revenue | ' | ' | ' | ' |
Total | $1,344 | $631 | $6,289 | $2,108 |
Merger, Integration and Other Expenses | ' | ' | ' | ' |
Deferred Revenue | ' | ' | ' | ' |
Severance | 648 | 106 | 891 | 190 |
Merger and Spin-Off | 158 | ' | 4,860 | ' |
Strategic alternatives | ' | 312 | ' | 614 |
MediaMind preacquisition liability | ' | ' | ' | 720 |
Proxy contest | ' | ' | ' | 165 |
Integration costs | 538 | 213 | 538 | 419 |
Total | $1,344 | $631 | $6,289 | $2,108 |
Fair_Value_Measurements_Detail
Fair Value Measurements (Details) (Recurring basis, USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Quoted Prices in Active Markets (Level 1) | ' | ' |
Assets: | ' | ' |
Total | $2,654 | $2,105 |
Quoted Prices in Active Markets (Level 1) | Cash and cash equivalents | ' | ' |
Assets: | ' | ' |
Money market funds | 513 | ' |
Quoted Prices in Active Markets (Level 1) | Other non-current assets | ' | ' |
Assets: | ' | ' |
Marketable equity securities | 2,141 | 2,105 |
Significant Other Observable Inputs (Level 2) | ' | ' |
Assets: | ' | ' |
Total | 27 | 137 |
Significant Other Observable Inputs (Level 2) | Other current assets | ' | ' |
Assets: | ' | ' |
Currency forward derivatives/options | 27 | 137 |
Significant Unobservable Inputs (Level 3) | ' | ' |
Assets: | ' | ' |
Total | 340 | ' |
Significant Unobservable Inputs (Level 3) | Current assets and non-current assets | ' | ' |
Assets: | ' | ' |
Revenue sharing arrangement | 340 | ' |
Significant Unobservable Inputs (Level 3) | Current Liabilities | ' | ' |
Liabilities: | ' | ' |
Revenue earnout payable | 225 | ' |
Total Fair Value Measurements | ' | ' |
Assets: | ' | ' |
Total | 3,021 | 2,242 |
Total Fair Value Measurements | Cash and cash equivalents | ' | ' |
Assets: | ' | ' |
Money market funds | 513 | ' |
Total Fair Value Measurements | Other current assets | ' | ' |
Assets: | ' | ' |
Currency forward derivatives/options | 27 | 137 |
Total Fair Value Measurements | Other non-current assets | ' | ' |
Assets: | ' | ' |
Marketable equity securities | 2,141 | 2,105 |
Total Fair Value Measurements | Current assets and non-current assets | ' | ' |
Assets: | ' | ' |
Revenue sharing arrangement | 340 | ' |
Total Fair Value Measurements | Current Liabilities | ' | ' |
Liabilities: | ' | ' |
Revenue earnout payable | $225 | ' |
Fair_Value_Measurements_Detail1
Fair Value Measurements (Details 2) (USD $) | 0 Months Ended | 6 Months Ended | ||
Jun. 01, 2012 | Jun. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | |
Revenue Earnout Payable | Revenue Sharing Arrangement | |||
Fair Value Measurements | ' | ' | ' | ' |
Cost basis of currency forward derivative/options | ' | $0 | ' | ' |
Marketable equity securities, adjusted cost basis | ' | 300,000 | ' | ' |
Period after the date of sale for which entity is entitled to receive a percentage of revenue collected | '3 years | ' | ' | ' |
Reconciliation of changes in fair value of Level 3 assets | ' | ' | ' | ' |
Additions | ' | ' | ' | 340,000 |
Balance at end of period | ' | ' | ' | 340,000 |
Maximum amount payable to North Country sellers if their revenue exceeds specified amount | ' | ' | 225,000 | ' |
Reconciliation of changes in the fair values of level 3 liabilities | ' | ' | ' | ' |
Additions | ' | ' | 225,000 | ' |
Balance at end of period | ' | ' | $225,000 | ' |
Fair_Value_Measurements_Detail2
Fair Value Measurements (Details 3) (Convertible Notes, Abakus, USD $) | 1 Months Ended | 6 Months Ended |
In Millions, unless otherwise specified | 31-May-14 | Jun. 30, 2014 |
Convertible Notes | Abakus | ' | ' |
Fair Value Measurements | ' | ' |
Amount of convertible notes purchased | $1 | ' |
Period of time convertible notes are due after written notice | ' | '90 days |
Interest rate (as a percent) | ' | 5.00% |
Number of preferred shares to be sold by Abakus for triggering automatic conversion (in shares) | ' | 2 |
Conversion price as a percentage of the share price in Qualified Financing | ' | 75.00% |
Amount divided by the number of shares outstanding upon exercise of all dilutive securities to derive quotient for determining conversion price upon automatic conversion | ' | $7 |
Conversion price as a percentage of the share price in the Equity Financing | ' | 75.00% |
Acquisition_of_Republic_Projec1
Acquisition of Republic Project (Details) (Republic Project, USD $) | 0 Months Ended |
Oct. 04, 2013 | |
Acquisition of Republic Project | ' |
Cash Consideration | $1,100,000 |
Deferred payment obligation | 300,000 |
Contingent consideration | 0 |
Contingent consideration payment , low end of range | 0 |
Contingent consideration payment, high end of range | 13,100,000 |
Weighted average amortization period | '4 years 2 months 12 days |
Customer relationships | ' |
Acquisition of Republic Project | ' |
Finite lived intangible assets acquired | 300,000 |
Customer relationships | Minimum | ' |
Acquisition of Republic Project | ' |
Weighted average amortization period | '5 years |
Developed technology | ' |
Acquisition of Republic Project | ' |
Finite lived intangible assets acquired | 600,000 |
Developed technology | Minimum | ' |
Acquisition of Republic Project | ' |
Weighted average amortization period | '4 years |
Noncompetition agreements | ' |
Acquisition of Republic Project | ' |
Finite lived intangible assets acquired | $400,000 |
Noncompetition agreements | Minimum | ' |
Acquisition of Republic Project | ' |
Weighted average amortization period | '4 years |
Goodwill_Details
Goodwill (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Goodwill | ' | ' |
Balance at beginning of the period | $376,417 | $376,417 |
Balance at end of the period | 376,417 | 376,417 |
Accumulated Impairment Losses | ' | ' |
Balance at beginning of the period | -242,331 | -242,331 |
Balance at end of the period | -242,331 | -242,331 |
Net Carrying Value | ' | ' |
Balance at beginning of the period | 134,086 | 134,086 |
Balance at end of the period | $134,086 | $134,086 |
Fair value of reporting unit in excess of carrying value (as a percent) | ' | 5.00% |
Sharebased_Compensation_Detail
Share-based Compensation (Details) (USD $) | 6 Months Ended | 2 Months Ended | 3 Months Ended | 2 Months Ended | 3 Months Ended | 2 Months Ended | 3 Months Ended | 2 Months Ended | 3 Months Ended | 6 Months Ended | 6 Months Ended | ||||||||||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2013 | Feb. 07, 2014 | Jun. 30, 2014 | Jun. 30, 2013 | |
Sizmek Plan | Sizmek Plan | Sizmek Plan | Sizmek Plan | Sizmek Plan | Sizmek Plan | Sizmek Plan | Sizmek Plan | Sizmek Plan | Sizmek Plan | Sizmek Plan | Sizmek Plan | Sizmek Plan | Sizmek Plan | DG | DG | DG | DG | DG | |||
Executive officer | Executive officer | Employees | Employees | Stock options | Stock options | Restricted Stock Units | Restricted Stock Units | Restricted Stock Units | Restricted Stock Units | Restricted Stock Units | Restricted Stock Units | Restricted Stock Units | DG Plan | DG Plan | DG Plan | DG Plan | DG Plan | ||||
Maximum | Minimum | Maximum | Minimum | Time-based | Time-based | Executive officer | Employees | Performance-based | Performance-based | Time-based | Time-based | Time-based | Stock options and RSUs | Stock options and RSUs | |||||||
Executive officer | Executive officer | Employees | Executive officer | Directors | Employees | ||||||||||||||||
Share-based Compensation | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Intrinsic value of equity awards cancelled | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $0 | ' | ' |
Stock-based awards allocated to the entity as part of corporate services | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 3,817,000 | 1,419,000 | ' | ' | ' |
Total | 7,533,000 | 3,471,000 | 1,066,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 2,650,000 | 2,052,000 |
Awards other than options, granted in period (in shares) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1,900,000 | 134,760 | 99,134 | 89,839 | 67,230 | 98,400 | ' | ' | ' | ' | ' |
Options granted (in shares) | ' | ' | ' | ' | ' | ' | ' | 464,880 | 141,118 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Value of RSUs granted in period | ' | ' | ' | ' | ' | ' | ' | ' | ' | 2,200,000 | ' | ' | ' | ' | 800,000 | ' | ' | ' | ' | ' | ' |
Value of stock options granted in period | ' | ' | ' | ' | ' | ' | ' | 2,500,000 | 800,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Vesting period | ' | ' | ' | '3 years | '10 months | '34 months | '8 months | ' | ' | ' | ' | ' | ' | ' | '1 year | ' | ' | ' | ' | ' | ' |
Unrecognized compensation costs related to unvested RSUs and stock options | ' | ' | $7,100,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Weighted average remaining vesting period for recognition of compensation costs | ' | ' | '2 years 6 months | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Income_Taxes_Details
Income Taxes (Details) (USD $) | 6 Months Ended | |
Jun. 30, 2014 | Jun. 30, 2013 | |
Income Taxes | ' | ' |
Effective tax rate (as a percent) | 4.90% | -16.30% |
Federal statutory tax rate (as a percent) | 35.00% | 35.00% |
Effective tax rate for income or loss earned in the U.S. (as a percent) | 0.00% | ' |
Maximum interest or penalties related to uncertain tax positions | $100,000 | $100,000 |
Changes in uncertain tax positions | ' | ' |
Balance at beginning of period | 1,701,000 | 1,801,000 |
Balance at end of period | $1,701,000 | $1,801,000 |
Earnings_Loss_per_Share_Detail
Earnings (Loss) per Share (Details) (USD $) | 0 Months Ended | 3 Months Ended | 6 Months Ended | ||
In Thousands, except Share data, unless otherwise specified | Feb. 07, 2014 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
Earnings (Loss) per Share | ' | ' | ' | ' | ' |
Common stock distributed in conjunction with the Spin-Off | 30,400,000 | ' | ' | ' | ' |
Net loss | ' | ($1,642) | ($1,232) | ($16,060) | ($9,191) |
Weighted average common shares outstanding - basic | ' | 30,399,000 | 30,399,000 | 30,399,000 | 30,399,000 |
Weighted average common shares outstanding - diluted | ' | 30,399,000 | 30,399,000 | 30,399,000 | 30,399,000 |
Basic loss per common share (in dollars per share) | ' | ($0.05) | ($0.04) | ($0.53) | ($0.30) |
Diluted loss per common share (in dollars per share) | ' | ($0.05) | ($0.04) | ($0.53) | ($0.30) |
Antidilutive securities not included: | ' | ' | ' | ' | ' |
Stock options and RSUs (in shares) | ' | 864,000 | ' | 503,000 | ' |
Geographical_Information_Detai
Geographical Information (Details) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
segment | ||||
Geographical Information. | ' | ' | ' | ' |
Number of operating segment | ' | ' | 1 | ' |
Geographical information | ' | ' | ' | ' |
Revenues | $44,001 | $41,267 | $82,380 | $75,336 |
Percentage of revenue attributable to foreign jurisdictions | ' | ' | 53.00% | ' |
United States | ' | ' | ' | ' |
Geographical information | ' | ' | ' | ' |
Revenues | 19,779 | 19,020 | 38,541 | 34,342 |
North America (excluding U.S.) | ' | ' | ' | ' |
Geographical information | ' | ' | ' | ' |
Revenues | 1,033 | 639 | 2,084 | 1,159 |
Europe, Middle East and Africa | ' | ' | ' | ' |
Geographical information | ' | ' | ' | ' |
Revenues | 14,647 | 13,114 | 25,627 | 24,590 |
Asia Pacific | ' | ' | ' | ' |
Geographical information | ' | ' | ' | ' |
Revenues | 6,339 | 7,213 | 12,412 | 12,705 |
Latin America | ' | ' | ' | ' |
Geographical information | ' | ' | ' | ' |
Revenues | $2,203 | $1,281 | $3,716 | $2,540 |
Related_Party_Transactions_Det
Related Party Transactions (Details) (Management and administrative services, DG, USD $) | 3 Months Ended | 6 Months Ended | |
In Thousands, unless otherwise specified | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
Management and administrative services | DG | ' | ' | ' |
DG's Expense Allocation to Sizmek | ' | ' | ' |
Management and administrative services | $2,018 | $514 | $3,744 |
Merger, integration and other | 350 | 4,038 | 860 |
Total | $2,368 | $4,552 | $4,604 |
Related_Party_Transactions_Det1
Related Party Transactions (Details 2) (USD $) | 6 Months Ended | |
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 |
DG's Expense Allocation to Sizmek | ' | ' |
Net contributions from parent per the statements of stockholders' equity | $89,292 | $9,582 |
Non-cash changes to business capital: | ' | ' |
Share-based compensation prior to Spin-Off | -7,533 | -3,471 |
DG | ' | ' |
Non-cash changes to business capital: | ' | ' |
Share-based compensation prior to Spin-Off | -6,467 | -3,471 |
TV business net assets remaining on balance sheet | -3,766 | ' |
Amortization of TV business assets | -559 | ' |
Net contributions from Parent and monetization of other Parent contributions per the statements of cash flow | $78,500 | $6,111 |
Agreement_to_Acquire_Aerify_Me1
Agreement to Acquire Aerify Media (Details) (Subsequent event, Aerify Media, Forecast, USD $) | 0 Months Ended |
In Millions, unless otherwise specified | Aug. 11, 2014 |
Subsequent event | Aerify Media | Forecast | ' |
Agreement to Acquire Aerify Media | ' |
Purchase price | $6.25 |