Demand Media reports sharp rise in income in Q2 thanks to sale of Cracked business to E.W. Scripps
Company continued to reduce operating costs during the second quarter, and ended Q2 with $60.9 million cash on hand and no outstanding debt
SANTA MONICA, Calif. – August 4, 2016 — Demand Media, Inc., a diversified Internet company comprised of several marketplaces and media properties, today reported financial results for the second quarter ended June 30, 2016.
“Q2 was another strong quarter for our Marketplace businesses, with Saatchi Art and Society6 both growing in revenue, traffic and conversion rates,” said Sean Moriarty, CEO of Demand Media. “In addition, Livestrong.com delivered its highest Q2 traffic of all time and increased revenue versus Q1.”
(1) These non-GAAP financial measures are described below and reconciled to their most directly comparable GAAP measures in the accompanying tables.
Q2 2016 Financial Summary:
Demand Media is comprised of two service offerings: Marketplaces and Content & Media.
“In Q2, our Marketplaces businesses grew to 55% of our total revenue and grew 28% year-over-year,” said Rachel Glaser, Demand Media’s CFO. “That growth, coupled with gradually increasing stability of our media businesses and streamlined corporate overhead costs, puts us on a great trajectory for 2017.”
For the second quarter of 2016:
- Total revenue declined 18% year-over-year due to a 43% decline in Content & Media revenue partially offset by a 28% increase in Marketplaces revenue. On a pro forma basis eliminating the impact of the dispositions of the Cracked business and other non-strategic properties, total revenue declined 7% year-over-year.
- Marketplaces revenue grew 28% year-over-year driven primarily by increased traffic, new product introductions and higher conversion rates.
- Content & Media revenue declined 43% year-over-year driven primarily by the divestitures of certain online properties including Cracked, traffic declines to eHow and lower ad monetization yields. On a pro forma basis eliminating the impact of the dispositions of the Cracked business and certain other non-strategic properties, Content & Media revenue declined 30% year-over-year.
- Adjusted EBITDA was $(5.2) million for the quarter, primarily reflecting the decline in higher margin Content & Media advertising revenue, partially offset by growth in Marketplaces and managed reductions in operating expenses other than product and marketing costs. On a pro forma basis eliminating the impact of the dispositions of the Cracked business and certain other non-strategic properties, Adjusted EBITDA was $(4.9) million for Q2 2016.
- Cash and cash equivalents was $60.9 million at period end with no debt outstanding.
- Demand Media continued to reduce operating costs during Q2, and also expects that the integration of its studioD business into its broader Content & Media business during the quarter will result in annualized savings of approximately $8 million.
- On a consolidated basis, Demand Media’s properties reached more than 46 million unique visitors in the US in June 2016, including more than 33 million mobile visitors (source: June 2016 US comScore).
- Society6 launched towels as a new product during Q2, as well as metal prints at the end of the quarter, and now has 32 products available for customization on the site. Society6 saw strong growth in revenue, traffic and conversion rates year-over-year, including an increase in the number of repeat customer transactions. Society6 ended Q2 with over 620,000 followers across social sites, primarily Facebook and Pinterest.
- Saatchi Art continued to demonstrate strong growth in revenue, traffic and gross transaction value in Q2 versus the prior year. Both new customers and repeat customers increased more than 60% year-over-year, and traffic from social channels grew nearly 50%. During Q2, Saatchi Art introduced “all-inclusive pricing” and continued to increase Art Advisory sales, both of which helped lead to a significant lift in the conversion rate for the quarter. Saatchi Art ended the quarter with over 470,000 followers across social sites, primarily Facebook and Pinterest.
Content & Media:
- eHow saw strong social growth during Q2, with followers increasing on Facebook and Pinterest, and ended Q2 with approximately 1.1 million followers across social sites, primarily Facebook and Pinterest. In June 2016, eHow Home ranked as the #6 Home property in the US among ad-supported websites, and eHow reached nearly 16 million unique visitors in the US across desktop and mobile platforms (source: June 2016 US comScore).
- Livestrong.com revenue grew during Q2 as compared to Q1, driven by increasing revenue per one thousand visits, or RPVs, during the quarter. Traffic also grew year-over-year in multiple channels including search, email and social, resulting in the site’s highest Q2 traffic ever. Livestrong.com ended Q2 with over 580,000 followers across social sites, primarily Facebook and Pinterest. In June 2016, Livestrong.com ranked as the #4 Health property in the US among ad-supported websites, and Livestrong.com reached more than 25 million unique visitors in the US across desktop and mobile platforms (source: June 2016 US comScore).
- studioD, which is comprised of the company’s content channels and custom content businesses, was realigned during Q2 to be better integrated within the company’s media operations. studioD will continue to create content for third-party brands and publishers, with the custom content business focused on creating sponsored content and integrated native advertising campaigns that include distribution of the custom content on the company’s owned and operated properties.