What's All This About Digital TV?-DGIT

Discussion in 'Stocks' started by stonedinvestor, Jan 27, 2009.

  1. Everything is digital these days. Well not my new flat screen in the bedroom haven't got the box yet and therin lies a lot of confusion for me. When the gov mandated switch over happens what happens to my analog signal the tv is receiving now?... won't the cable company just smooth this out on their end of the pipe? Then again I'll need that digital box. In Europe they have all but given up for AM radio but they have an interesting digital thing happening with FM... FM digital radio... I think that could be huge here and offer us a rebirth ofr radio like never before... college style without the glam of famous hosts...of course it would put XM & Serius out of business. There is a killer ap out there not yet touched- low cost digital radios re wired into soundsystems, digital radio that will include cover art and possibly GPS functions and other tie ins. There is a reason Apple has not only refused to put radio chips in their IPOD's & they have bought out a few companies that have the technology... They do not want Digital radio to land here but give a year and it will be sweeeping Europe. Then Apple will shift and seek to control it... they do as of now have the magic chip that would allow every IPOD to provide radio... and commercials...

    Anyway, TV is a semi reality NOW & there has been a delay in the roll out in the US which allows for a smoother transition. It seems like the right move with one million old folks waiting for their crossover boxes... in this giant move to digital isn't their an investment angle? A pure play? Why yes probably NFLX! Which is up huge today. I've got another name that will benefit from the new digital world DG Fastchannel DGIT. Advertising for the new digital world.

    How the company came about-
    Originally called Digital Generation Systems
    Its ad delivery business consisted almost entirely of shipping tapes to radio stations.
    From an all-time high of about $13 in mid-1996, a few months after going public, its stock had dropped to around $0.50 by the end of 2005.

    The company then ramped up it's comeback strategy and through a combination of internal development and acquisition, it had moved into the delivery of broadcast television spots, eliminating competition and increasing prices. It has also been increasingly beaming digital ads to stations through satellite.

    then came 2006 and the merger with FastChannel Network, which was delivering advertising through the internet. on May 26, 2006, it did a reverse-split of 1:10, turning a $0.55 stock into a $5.50 stock.

    DG FastChannel has also bought up other key competitors> GTN, Point.360 (which brought in a large number of clients from Hollywood) and Pathfire (which increased its ability to deliver ads through the Internet as well as increasing its business with clients such as Warner Bros, Sony Corp. and Paramount. Finally, it reached a partnership with Viewpoint Corp. and bought 13% of the company, giving it a presence in delivering ads to Internet sites. —it now counts over 5,000 advertising clients, including 75 of the 100 largest advertisers. (as of 07 probably higher #'s now)

    “declining customer concentration is an important development in the DG FastChannel story.”

    Through these clever acquisitions DGIT has a nice mini- -monopoly in digital distribution of ads, the company’s next big opportunity is high definition television.

    >> the company revealed that every 1% of its ad volume that shifts to HD generates an additional $5 million in incremental revenues because of higher prices.

    This is huge because when you run numbers the sheer amount of ads makes everything add up very fast indeed. Gross margins on delivery of HD ads are 75.6%, compared with 59.6% margins on electronically delivered standard definition ads.

    “The catalyst for growth is the migration to high-def,” says ThinkEquity analyst Darren Aftahi.

    So Obama's delay of going to digital allows us to fully appreciate all that is changing within the advertising world. there will be the old way and the new way and the transferring to the new way and there will be DGIT in the thick of it.

    BWS Financial recently initiated DGIT with a Strong Buy and price target of $30 saying the Federally mandated transition to digital transmission has created a true catalyst for earnings growth at DGIT. The firm says the has become the single source for agencies, advertisers, and media outlets in transferring commercials, syndicated programs, and video news releases to the appropriate media outlet.

    And I agree, the move to digital is constant. Every guy and gal who bought a big screen TV is watching these games in digital it's just me who hasn't got the new cable box yet! All ads pushed on the digital network-- that number-- is guaranteed to increase even as ad spending in other forms, ie magazines is declining... it's a hit spot of advertising and that's what stonedinvesting is all about- finding those hot spots.

    DGIT's two recent acquisitions reflect its strategy of consolidating smaller, less financially capable competitors enabling it to both increase share and margin. DGIT will benefit from revenue gains with the deepening HD penetration of TV advertising.

    *Partnership with Viewpoint's Unicast, enables
    companies to take advantage of online video growth

    * VWPT's web-based solutions complement DGITs creative services, video
    platform and advertiser relationships
    * this partnership will enable thousands of existing video ads to be cost-
    efficiently repurposed on to the web

    * The online video industry could increase 10x by 2010 from $300mm today.

    * Partnership will include DGIT $4.3mm equity investment in VWPT

    Keep this Digital darling on your radar screen folks and I'm calling Time Warner now for a new box! ~ stoney

    PS:I cribbed some history of the company stuff from SeekingAlpha and I used an Oppenheimer internal report from 07 & the BWS piece from yesterday to help me form this opinion. I currently own 800 shares. Plan to increase.
  2. I assume you know they have record earnings just because of the expanding market but let's highlight their last earnings report (nov-08) as we await the next one for in a world of slow growth- this aint' that!

    REV UP 65%!!!!!DG FastChannel Third Quarter Revenues Increase 65% to $41.4 Million
    - Third Quarter Operating Income Rises 140%!!! to $8.9 Million - - Adjusted EBITDA Rises 109% to a Record $16.5 Million - -

    Third quarter 2008 consolidated revenue of $41.4 million compared to $25.1 million in the same period of 2007.
    Third quarter 2008 revenue from the delivery of high definition (HD) advertising content of $9.3 million compared to $1.2 million in the same period of 2007..... (repeat:$9 mln vs $1.2)
    Adjusted EBITDA (earnings before interest, taxes, unrealized investment gains and losses, depreciation and amortization, and stock-based compensation) of $16.5 million for the three months ended September 30, 2008 compared to $7.9 million in the same period of 2007.

    Third quarter 2008 income from continuing operations of $2.3 million, or $0.12 per diluted share, compared to income from continuing operations of $1.1 million, or $0.06 per diluted share, in the same period of 2007. 100% growth before the official switchover!

    Third quarter 2008 normalized net income of $7.1 million, or $0.38 per diluted normalized net income per share, compared to normalized net income of $4.3 million, or $0.25 per diluted normalized net income per share in the same period of 2007. For a company that used to scarpe by with $5 mln in cash they now have a respectable $29 plus million!!!

    As of September 30, 2008, DG FastChannel had $29.6 million in cash and $176.6 million of debt, or net debt of approximately $147.0 million. That's the bad part. Try and forget it, they do. I love the building of cash without coming to market-- read cash flow positive is a nice place to be and in such a hot market with all their Hollywood ties, I can't think of the bank that would refuse these guys funds if they needed them to buy someone.

    DG FastChannel produced significant free cash flow in the third quarter while funding major growth initiatives and reducing debt. The Company ended the quarter with $29.6 million of cash, or almost $3 million more than the end of last quarter, while also reducing debt by over $3 million. Mr. Ginsburg observed, “Our business generates free cash flow available for debt reduction or to deploy on other corporate objectives. We expect substantial free cash flow in future periods as we have completed most of the capital spending for our technology based initiatives.”

    Ok... let that sink in tool... once you set the network up you have the signal from the satellite you just push more and more content over your costs become somewhat fixed... There's an angle here- DGIT's reliance on which and who's signal in the sky and is always satellite based? I'm working on that.

    “DG FastChannel has positioned itself to be a leading beneficiary of the expanding digital advertising vertical by aligning our product offerings with the needs of the most esteemed brands in the world. We are at the doorstep of an ‘all digital’ age, and have taken every appropriate action to put the Company’s future in sync with advertising’s massive transition to digital standards including, most importantly, HD broadcasting.” says the CEO, Ginsbrug.

    Business Outlook

    Mr. Ginsburg said, “On February 17, 2009, (now delayed) broadcasters will complete the federally mandated transition to digital broadcasting. DG FastChannel’s revenue from the delivery of HD content already has grown exponentially on a year-over-year-basis. During the third quarter 2008, HD revenues rose to $9.3 million, extending the positive quarterly progression of this metric. We are still in the earliest stages of the overall transition to HD advertising adoption with an extremely positive outlook for future periods.

    “Revenue growth from HD content delivery accelerates as media outlets -- cable, satellite, and over-the-air broadcasters -- upgrade their HD infrastructure and make the full transition to digital broadcast standards. A substantial portion of the nation’s TV, satellite and cable networks expect to finish their HD digital workflows over the next few months, and the growing number of media outlets fully operational to broadcast advertising in an HD format significantly impacts our revenue potential.

    “In conjunction with the industry’s progress toward the adoption of HD advertising, we’ve completed the deployment of the next generation Spot Box HD Xtreme at broadcast TV stations, TV and cable networks and cable systems across the U.S. Universal deployment of DG FastChannel’s new Spot Box HD Xtreme is the foundation of the Company’s HD initiative, and this robust technology platform has been installed at over 4,200 media outlets. The new edge servers significantly increase digital spot delivery capacity and allow the seamless delivery of spots in multiple HD and SD (standard definition) standards on an electronic basis.”

    Operating Synergies

    “A major focus of our operating strategy is to wring out cost savings from the various entities that have been acquired by the Company. The Company already has taken action on over $3 million of cost savings related to Enliven Marketing Technologies through the elimination of duplicative corporate overhead. These savings should be fully realized in the first quarter of 2009. We also are making great progress with the integration of the Vyvx advertising services operations acquired in the second quarter. We already have taken action on over $2 million of operational synergies related to Vyvx ADS. We expect to achieve our target of $7 million to $9 million of operational synergies related to Vyvx ADS over the next three quarters, and operate the Company more efficiently than ever.”

    Rich Digital Media Marketing and Creative Digital Solutions

    DG FastChannel acquired the remaining 89% of Enliven Marketing Technologies Corporation (“Enliven”) that it did not previously own on October 2, 2008 for approximately $71 million, excluding transaction costs but inclusive of approximately $5.0 million of debt. In the aggregate, DG FastChannel issued approximately 2.9 million shares of its common stock to complete the transaction.

    Mr. Ginsburg commented, “The Enliven transaction combined DG FastChannel’s leadership in traditional advertising services with Unicast’s unique digital marketing technologies and SpringBox’s creative digital marketing solutions with this transaction. DG FastChannel is now uniquely positioned to bundle and cross-market traditional and new media solution sets to the world’s leading brands and advertisers.

    “Unicast empowers media agencies, creative agencies, online publishers and advertisers to deliver rich media for online and mobile advertising. DG FastChannel customers will benefit from our diversified digital platform as brands increasingly migrate valuable content to computers, cell phones, smart phones, game players and other portable, mobile devices.

    “DG FastChannel is well positioned to participate in the fastest growing verticals in the advertising industry: HD advertising distribution, rich media for online and mobile advertising, and digital marketing and creative services.”
  3. Folks this is a name from last year's work here. In my account I sold @ $38 for a double. It was recommended here at $18.50-$20.00.

    This name is still on my watch list so lets rehash this research and only say the story is better and better. I think. 3D commercials is the next big thing and I have been reading that pricing will not be any different than digital- that's bad. insiders have been selling - that's bad.

    This is a new era name you all should know about. The price to buy it at is unclear to me at the moment. $28-$33 is my initial thought. Long term just look at the chart, these guys are the real deal. ~stoney
  4. We got a nice update on DGIT via a Seeking Alpha piece no doubt inspired by the re boot of this thread. There is some doubt whether we will get a good pull back in this name now....

    DG Fastchannel (DGIT) operates a digital network connecting over 5,000 advertisers with 21,000 TV, cable, radio, network, and print destinations and is the nations leading provider of digital media services to the advertising industry. While this may not sound that exciting it allows rapid, cost-effective and reliable electronic transmission of spot distribution and provides a high level of quality, accountability and flexibility to both advertisers and broadcasters.

    This Commercial Services-Advertising company is clearly head-and-shoulders above the rest of the 33 other stocks that make up this industry group. As ranked via the data compiled by Marketsmith.com (data provided by William O'Neil + Co. Incorporated), the stock ranks 1st out of 34 stocks in EPS rating, 3rd out of 34 stocks in the RS rating, 3rd out of 34 in Accumulation/Distribution rating, and 3rd out of 34 stocks in Sales, Profit Margin, and ROE rating.

    These strong numbers can be seen via the impressive YOY quarterly growth going back the past eight quarters. EPS growth, YOY, has seen impressive gains in seven of the past eight quarters with gains of 39%, 52%, 57%, (-51%), 5%, 58%, 21%, and 116%. During the same time, sales have been even more impressive with gains of 59%, 65%, 68%, 42%, 27%, 17%, 11%, and 31%. These numbers are nothing short of extremely stellar and it appears there is more room for growth with 2011 EPS estimates expecting growth of 29%.

    On top of this growth, DG Fastchannel has a strong Return-on-Equity of 15% and a cash flow of $3.04. These numbers are more-than-likely the reason mutual fund ownership of this stock has grown from 52 to 57 to 60 funds during the past three reported quarters. On top of that, management still owns 17% of the shares outstanding which shows that they are invested in the future growth of the company also.

    DG Fastchannel also is part of strong overall industry group that has some other strong performing stocks moving higher like National Cinemedia (NCMI), Valueclick (VCLK), Insignia Systems (ISIG), Focus Media Holdings (FMCN), Schawk (SGK), Harte Hanks (HHS), Charm Communications (CHRM), SuperMedia (SPMD), Valassis Communications (VCI), China MediaExpress (CCME), and MDC Partners (MDCA). It is always a plus when looking to go long a strong stock that it has other well performing stocks in its industry group so it is very positive to see that DG Fastchannel is in good company.

    While the fundamental picture of DG Fastchannel is extremely bright, the technical pattern of this stock is just as beautiful. DG Fastchannel has been in a strong uptrend since retaking the 50 and 200 day moving average in September 2009 on strong volume. Since then the stock has climbed the 50 day moving average higher finding support all along the way at this very important technical support level.

    What is more impressive is that despite the market selling off in May DG Fastchannel held up extremely well and continued higher on strong accumulation. As the market attempted to take another leg down in June, DG Fastchannel actually looked like it may have wanted to pullback also. But the stock found support, once again, right on the 50 day moving average and despite the below average volume it still is clearly getting more volume (accumulation) on the up days compared to volume on the down sessions (distribution).

    With DG Fastchannel hugging the 50 day moving average right here, I am looking to get long this stock with the next higher volume bounce off of this key moving average. If there is not a higher volume bounce off the 50 day moving average and the stock continues to build a base I will be looking to get long the next higher volume breakout to new highs out of the current base it is attempting to build.

    As always, a defensive plan is needed in case the bounce or breakout does not occur. Therefore, if the stock breaks the 50 day moving average here on volume, I will look for another proper base to setup before attempting to go long. Also, if I do go long and the stock reverses lower with the market and closes below the 50 day moving average, I will look to cut my loss short.