Goldman Sachs Communacopia Conference September 20, Demand Media, Inc.

Transcription

1 Goldman Sachs Communacopia Conference September 20, 2012 Hilliard MelCharles Tang President CFO Chief Financial&Officer Demand Media, Inc.

2 Forward Looking Statements DISCLAIMER: THE MATERIAL SET FORTH IN THIS PRESENTATION CONTAINS FORWARD-LOOKING STATEMENTS This presentation contains certain forward-looking statements. All statements other than statements of historical facts contained in this presentation, including statements regarding Demand Media, Inc. s ( Demand Media or the Company ) future results of operations and financial position, business strategy, plans and objectives for future operations, are forward-looking statements. The Company has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy, short term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described under the heading Risk Factors in the Company s periodic reports filed with the Securities and Exchange Commission (the SEC ), which are incorporated herein by reference. Moreover, the Company operates in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for Company management to predict all risks, nor can the Company assess the impact of all factors on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements the Company may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this presentation may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. You should not rely upon forward-looking statements as predictions of future events or results. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee that the future results, execution of its business strategy, as well as short term and long-term business operations, plans and objectives, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither the Company nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. Except as required by law, the Company undertakes no obligation to update publicly any forward-looking statements for any reason after the date of this presentation, to conform these statements to actual results or to changes in the Company s expectations. The Company is publicly traded on the New York Stock Exchange under the ticker symbol DMD and is a registrant under the rules and regulations promulgated by the SEC. Before evaluating whether you should consider an investment in the Company s securities, you should read the Company s annual, quarterly and period reports filed with the SEC, including all of the disclosures set forth therein, including under the headings Risk Factors and Management s Discussion and Analysis of Financial Condition and Results of Operations. The Company s SEC filings can be found at and ir.demandmedia.com. 2

3 About Demand Media We are a LEADING DIGITAL MEDIA COMPANY with two service offerings: CONTENT & MEDIA, differentiated by an innovative data-driven approach to content creation and extensive distribution to a broad consumer audience REGISTRAR, offering domain registration and other web services to businesses and consumers 3

4 Key Highlights Innovative content publishing model: Listen, Create, Connect 14 th largest media property in the US* Reaching 122M people WW* Significant growth opportunities: Content partners, mobile and video #1 wholesale registrar with 13.5M domains; New gtld opportunity *comscore: August

5 Our Innovative Approach LISTEN CREATE CONNECT to billions of signals of people s intentions intent-based content that we know users want qualified intenders and brands through unique opportunities to engage 5

6 O&O Sites Reach 122M Unique Visitors*!"#$%&'%()*+',-().'/'0"#/)0")121)3'0(/4)) MMs F"S)6T)'+)U(D)) V%W(#J/'+G)M;0(G"#'(/)X*3Y4) 56)7"8()9):;#%(+)) )) 5<)7-8"#)) 5<)=(#/"+;$)>'+;+?( )) )) )) 5E)F(?A+"$"GD)H(&/)) 5E)I%-?;J"+)K+C"#8;J"+)) 5L)M;#((#)N(/"-#?(/))) 5L)O(;-0DP>;/A'"+P30D$() 5Q)>""%)9)1#'+R) *comscore August

7 New Growth Drivers - Media M"+0(+0)=;#0+(#/) Sept. 20, 2012 /.'%(") Investor Presentation 2"Z'$() 7

8 Leading Registrar Business! Subscription service business with attractive cash flow characteristics! #1 wholesale registrar worldwide! #2 registrar worldwide! 13.5M domain names under management Synergies Data Proprietary insight into Internet traffic: 2B+ avg. daily DNS queries 3M+ avg. daily domain name queries Platform Technology synergies Distribution Proprietary access to SMB & undeveloped websites Sept. 20, 2012 / Investor Presentation 8

9 New gtld Opportunity ICANN s new gtlds to drive industry growth:! Multi-billion dollar industry today with more than 230M* registered domain names! 11% annual registration growth rate*! 74% renewal rates* Businesses and consumers can soon go beyond.com,.net &.org to choose from more than a thousand alternatives like.web,.home &.app Demand Media expects to benefit from new gtlds in three ways**: Operating the back-end for new gtld registries Owning and operating new gtld registries Increased number of domain registrations through our Registrar channels *Source: Verisign July 2012 **Timing subject to ICANN s process 9

10 FINANCIAL HIGHLIGHTS

11 How We Generate Revenue: Simple Revenue Model Content & Media! Traffic! Growth: o Page Views X O&O: Organic and Investment in content assets RPMs! Advertising driven = Content & Media Revenue 64% of Q Gross Revenue o Network: New & Existing Partners Domains ARPD (Annual Revenue per Domain) X = Registrar Revenue Registrar! Registrations! Resellers & Direct/Retail Relationships With Website Owners! Annual subscription fees paid upfront 36% of Q Gross Revenue 11

12 Unique Content Model Generates Long-Term Returns Our Long-Lived Internet Content Revenue!"#$%&'(!)*+'!"$#+,' -#$."/ Long-lived Internet content revenue curve:! Text Articles! Video Time Traditional Content Revenue Traditional content revenue curve:! Filmed entertainment! Music Time 12

13 2012 YTD and Q3 Business Outlook (1) mm s except per share amounts Revenue ex-tac Q1 12 Q2 12 Q3 12E Midpoint (2) $82.9 $88.7 $91.0 Y-o-Y Growth 9% 16% 17% Adjusted EBITDA $21.9 $24.6 $25.5 Margin 26.4% 27.7% 28.0% Adjusted EPS $0.07 $0.09 $0.10 Cash Flow from Operations $18.5 $21.9 NA Free Cash Flow $11.9 $16.6 NA (1) As of August 7, 2012 per the Company s Q financial results news release. Excludes up to $4 million of 2012 expenses that the Company expects to incur related to the formation of its gtld initiative. These non-gaap financial measures are described and reconciled to their comparable GAAP measures in the accompanying tables available in the Goldman Sachs Communacopia presentation on the investor relations section of the Company s website. Effective Q1 2012, the Company began reporting Adjusted EBITDA instead of Adjusted OIBDA. Reconciliations for both measures are available on the investor relations section of the Company's website. (2) Using mid-point of 2012 previously issued Business Outlook provided on August 7,

14 Key Highlights Unique, innovative content publishing model Top ranked O&O properties reaching 122M unique visitors WW* New Content & Media growth opportunities, including content partners, mobile and video Well positioned to capitalize on new gtld opportunity *comscore August

15 DEMAND MEDIA, INC. Mel Tang, Chief Financial Officer GOLDMAN SACHS COMMUNACOPIA CONFERENCE SEPTEMBER 20, 2012

16 Non-GAAP Financial Measures To provide investors, analysts and others who utilize the Company s financial statements with additional information regarding the Company s financial results, this presentation includes the following non-gaap financial measures: adjusted earnings before interest, taxes, depreciation and amortization expense, or Adjusted EBITDA, revenue less traffic acquisition costs, or Revenue ex-tac, discretionary free cash flow and total free cash flow. A reconciliation of these non-gaap financial measures to the most directly comparable GAAP financial measures has been included in the Appendix to this presentation. The Company s non-gaap Adjusted EBITDA financial measure differs from GAAP in that it excludes certain expenses such as interest, taxes, depreciation, amortization, stock-based compensation, the financial impact of acquisition and realignment costs, the formation expenses directly related to its generic Top Level Domain ( gtld } initiative, and any gains or losses on certain asset sales or dispositions. The Company s non-gaap Revenue ex-tac financial measure differs from GAAP as it reflects the Company s consolidated revenues net of its traffic acquisition costs. The Company s non-gaap free cash flow financial measures differ from GAAP as discretionary free cash flow reflects the Company s cash flow from operating activities, excluding cash outflows from acquisition and realignment activities, and the formation expenses directly related to its gtld initiative, less capital expenditures, and total free cash flow reflects discretionary free cash flow net of investments in intangibles. The Company uses these non-gaap financial measures to measure its consolidated operating performance, to understand and compare operating results from period to period, to analyze growth trends, to assist in internal budgeting and forecasting purposes, to develop short and long-term operational plans, to calculate annual bonus payments for substantially all of its employees, and to evaluate its financial performance from period to period. The Company also frequently uses Adjusted EBITDA in its discussions with analysts, investors, commercial bankers and other users of the Company s financial statements. In addition, management believes these non-gaap financial measures reflect the Company s ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends. Accordingly, the Company also believes that these non-gaap financial measures provide useful information to investors and others in understanding and evaluating the Company s consolidated revenue and operating results in the same manner as the Company s management and in comparing financial results across accounting periods and to those of peer companies. The use of non-gaap financial measures has certain limitations because they do not reflect all items of income and expense that affect the Company s operations. The Company compensates for these limitations by reconciling the non-gaap financial measures to the most comparable GAAP financial measures as set forth in the Appendix to this presentation. These non-gaap financial measures should be considered in addition to, not as a substitute for, measures prepared in accordance with GAAP. Further, these non-gaap measures may differ from the non-gaap information used by other companies, including peer companies, and therefore financial comparability may be limited. The Company encourages investors and others to review the Company s financial information in its entirety and not rely on a single financial measure. 16

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19 DEMAND MEDIA, INC. Mel Tang, Chief Financial Officer GOLDMAN SACHS COMMUNACOPIA CONFERENCE SEPTEMBER 20, 2012