Demand Media Q1 2013 Report: revenue up 17%, registrar revenue grew 9% (Name.com acquisition)

Demand Media, Inc., a leading digital media and domain services company, reported financial results for the first quarter ended March 31, 2013.

“Strong growth from our owned & operated content and media properties drove our Q1 results, highlighting the unique capabilities of our content discovery, creation and distribution platform. Further, we accelerated our paid content strategy with the acquisition of Creativebug, a premier online destination for arts and crafts instruction, which will provide our large eHow crafts audience with an expanded learning experience. In addition, we signed up over 400 resellers to our new gTLD tools and received more than two million expressions of interest for domains to be registered with new gTLDs,” said Richard Rosenblatt, Chairman and CEO of Demand Media. “We are excited about the distinct long-term growth opportunities for both of our businesses.”

Q1 2013 Financial Summary:

• Content & Media revenue ex-TAC grew 18% year-over-year, driven by 26% Owned & Operated revenue growth, while Network revenue ex-TAC declined 9% due to lower revenue from YouTube Channels.
• Registrar revenue grew 9% year-over-year, due to growth from existing partners and the Q4 2012 acquisition of Name.com.
• Adjusted EBITDA increased 16% year-over-year, driven primarily by the growth in higher margin media content.

“2013 is an investment year for Demand Media and we are pleased to deliver strong Q1 results while investing in both of our businesses,” said Demand Media’s CFO Mel Tang. “Our record Free Cash Flow in the first quarter grew 56% year-over-year and helped fund the acquisition of Creativebug and other new growth initiatives. We believe these investments will help position both of our businesses as leaders in their respective markets, as we continue to make steady progress towards separating our business into two publicly traded companies.”

Business Highlights:

• March 2013 comScore Rankings:
  • On a consolidated basis, Demand Media ranked as the #12 US web property, up from #14 in December 2012.
  • Demand Media’s properties reached more than 126 million unique visitors worldwide.
  • eHow.com ranked as the #10 website in the US and had more than 90 million unique users worldwide, up from #13 in December 2012 with more than 80 million unique users worldwide.
  • Livestrong.com/eHow Health ranked as the #3 Health property in the US.
  • Cracked ranked as the #2 Humor property in the US.

• In March 2013, Demand Media announced its expansion into e-learning with the acquisition of Creativebug, a premier online destination for arts and crafts instruction.
• Demand Media’s Registrar business has received more than two million expressions of interest for domains to be registered with the new gTLDs.
• During Q1 of 2013, Demand Media repurchased approximately 559,000 shares of common stock for $4.8 million under its Board-authorized $50.0 million share repurchase program. To date, the Company has repurchased approximately 4.0 million shares of common stock for $30.8 million.

Q1 2013 Operating Metrics:

• Owned & Operated page views increased 20% year-over-year, driven primarily by strong traffic growth on eHow.com and Livestrong.com. Owned & Operated RPMs increased 5% year-over-year, reflecting higher RPMs on certain of our core properties as well as continued monetization growth from mobile traffic.
• Network page views increased 3% year-over-year to 4.9 billion, due primarily to growth on the IndieClick network, offset somewhat by lower traffic from social media partners. Network RPM ex-TAC decreased 12% year-over-year, reflecting lower revenue associated with less content delivered year-over-year, as we satisfied our final content delivery requirements under the YouTube Channels agreement.
• End of period domains increased 5% year-over-year to 14.0 million, driven by the acquisition of Name.com, as well as organic reseller growth, with average revenue per domain up 3% year-over-year.