Bankrate Announces Fourth Quarter & Full Year 2012 Financial Results

NEW YORK--(BUSINESS WIRE)--Bankrate, Inc. (NYSE: RATE):

($ in millions, except per share amounts)
	Q4-12		Q4-11		FY-12		FY-11
Revenue	$	93.2	$	113.8	$	457.2	$	424.2
Net Income
GAAP		0.3		14.0		29.3		(13.4	)
Adjusted		5.8		19.1		56.0		62.1
Diluted Earnings per Share (EPS)
GAAP	$	0.00	$	0.14	$	0.29		($0.14	)
Adjusted	$	0.06	$	0.19	$	0.56	$	0.61
Adjusted EBITDA		17.9		38.5		123.1		135.4

Bankrate, Inc. (NYSE: RATE) today reported financial results for the fourth quarter and full fiscal year ended December 31, 2012. Total revenue for the fourth quarter was $93.2 million compared to $113.8 million in the fourth quarter of 2011, a decrease of 18%. Revenue for the full year ended December 31, 2012 was $457.2 million compared to $424.2 million in 2011, representing a $33.0 million or 8% increase.

Net income for the quarter was $0.3 million or approximately zero cents per fully diluted share, compared to net income of $14.0 million, or $0.14 per fully diluted share in the fourth quarter of 2011. For the full year 2012, net income was $29.3 million or $0.29 per fully diluted share, compared to a net loss of $13.4 million, or $0.14 per fully diluted share in 2011.

Adjusted EPS, as outlined in the attached reconciliation, were $0.06 for the fourth quarter of 2012, compared to Adjusted EPS of $0.19 for the fourth quarter of 2011, representing a decrease of 68%. Adjusted EPS were $0.56 for the full year 2012, compared to $0.61 in 2011, representing a decrease of 8%.

Adjusted EBITDA, as outlined in the attached reconciliation, were $17.9 million, with a margin of 19%, in the fourth quarter of 2012 compared to $38.5 million, with a margin of 34%, in the fourth quarter of 2011, a decrease of 53%. For the full year 2012, Adjusted EBITDA were $123.1 million, compared to $135.4 million in 2011, a decrease of 9%.

2013 Guidance

Bankrate expects revenue for 2013 to be relatively flat compared to 2012 with an Adjusted EBITDA margin in the low to mid 20% range. In addition, the Company expects the first half of 2013 to show a year over year decrease in revenue of 10% to 20%, and the second half of 2013 to post a year over year revenue increase of 10% to 20%.

"In insurance, the strategic transition to higher quality, high-margin leads is moving even more aggressively forward --- and with our deep cuts of poor performing traffic behind us in Q4, is now on-track in many of our key criteria, such as agent sign ups and retention," said Thomas R. Evans, President and CEO of Bankrate, Inc. "That's why we see Q4 as the bottoming out of that transition curve that we've discussed in the last two quarters. Encouragingly, in credit cards, we’re beginning to see the increased marketing activity across our portfolio of card issuers after a period of marketplace caution," Mr. Evans added.

Fourth Quarter & Full Year 2012 Financial Highlights

• Total revenue for the quarter was $93.2 million, a decrease of 18%, or $20.5 million from the $113.8 million in 2011. Revenue for the full year totaled $457.2 million, up 8% or $33.0 million vs. 2011.
• Adjusted EBITDA of $17.9 million in the fourth quarter was 53% or $20.6 million lower compared to the fourth quarter of 2011. For the full year 2012, Adjusted EBITDA was $123.1 million vs. $135.4 million in 2011 or down 9%.
• Display advertising, or CPM revenue, in the fourth quarter was 18% higher compared to the same period last year. For the full year 2012, CPM product revenue was up 26% vs. the prior year.
• Hyperlink, or CPC revenue, for the quarter was 18% higher compared to the same period last year. Full year 2012 CPC revenue was up 65% vs. 2011.
• Lead generation revenue, which consists of CPA and CPL revenue, was 29% lower compared to the fourth quarter 2011. For the full year 2012, lead generation revenue was 5% lower vs. 2011. Marketing by credit card issuers on the Company’s platform was significantly lower compared to historically high Q4 2011 and full year 2011 levels. In addition the Company continues to transition its insurance business to higher quality, higher converting volume and to reduce lesser converting lead sources. As a result, low agent termination rates in Q4 2012 led to a sequential increase in the number of purchasing agents in January 2013.
• At the end of the fourth quarter, the company’s leverage ratio was 0.9x on a net debt basis based on the company’s trailing twelve month Adjusted EBITDA of $123.1 million compared to 0.9x at the end of the third quarter of 2012.

Share Repurchase Program

Bankrate’s Board of Directors has authorized a $70 million share repurchase program. The program is effective immediately and authorizes the repurchase of up to $70 million of Bankrate’s common stock in open market or private transactions. The timing of the repurchases will depend on several factors, including prevailing market conditions and prices. The program will expire on December 31, 2014.

February 12, 2013 Conference Call Interactive Dial-In and Webcast Information:

To participate in the teleconference please call: [phone], passcode 40657231. International participants should dial: [phone], passcode 40657231. Please access at least 10 minutes prior to the time the conference is set to begin. A webcast of this call can be accessed at Bankrate’s website: http://investor.bankrate.com/.

Replay Information:

A replay of the conference call will be available beginning February 12, 2013 at 6:30 p.m. ET / 3:30 p.m. PT through February 19, 2013 at 11:59 p.m. ET / 8:59 p.m. PT. To listen to the replay, call [phone] and enter the passcode: 43619501. International callers should dial [phone] and enter the passcode: 43619501.

Non-GAAP Measures:

To supplement Bankrate’s financial statements presented in accordance with generally accepted accounting principles (“GAAP”), Bankrate uses non-GAAP measures of certain components of financial performance, including EBITDA, Adjusted EBITDA, Adjusted EPS, and Gross Margin excluding stock based compensation, which are adjusted from results based on GAAP to exclude certain expenses, gains and losses. These non-GAAP measures are provided to enhance investors’ overall understanding of Bankrate’s current financial performance and its prospects for the future. Specifically, Bankrate believes the non-GAAP results provide useful information to both management and investors by excluding certain expenses, gains and losses that may not be indicative of its core operating results. In addition, because Bankrate has historically reported certain non-GAAP results to investors, Bankrate believes the inclusion of non-GAAP measures provides consistency in its financial reporting. These measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. The non-GAAP measures included in this press release have been reconciled to the nearest GAAP measure in the financial tables below.

About Bankrate, Inc.

Bankrate is a leading publisher, aggregator and distributor of personal finance content on the Internet. Bankrate provides consumers with proprietary, fully researched, comprehensive, independent and objective personal finance editorial content across multiple vertical categories including mortgages, deposits, insurance, credit cards, and other categories, such as retirement, automobile loans, and taxes. The Bankrate network includes Bankrate.com, our flagship website, and other owned and operated personal finance websites, including, but not limited to, CreditCards.com, Interest.com, Bankaholic.com, Mortgage-calc.com, CreditCardGuide.com, InsuranceQuotes.com, CarInsuranceQuotes.com, AutoInsuranceQuotes.com, InsureMe.com, CreditCards.ca, and NetQuote.com. Bankrate aggregates rate information from over 4,800 institutions on more than 300 financial products. With coverage of approximately 600 local markets in all 50 U.S. states, Bankrate generates over 172,000 distinct rate tables capturing, on average, over three million pieces of information weekly. Bankrate develops and provides web services to over 75 co-branded websites with online partners, including some of the most trusted and frequently visited personal finance sites on the Internet such as Yahoo!, AOL, CNBC and Bloomberg. In addition, Bankrate licenses editorial content to over 100 newspapers on a daily basis including The Wall Street Journal, USA Today, The New York Times, The Los Angeles Times and The Boston Globe.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995:

Certain matters included in this press release may be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Those statements include statements regarding the intent, belief or current expectations of the Company and members of our management team. Such forward-looking statements include, without limitation, statements made with respect to future revenue, revenue growth, market acceptance of our products, our strategy and profitability. Investors and prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. Important factors currently known to management that could cause actual results to differ materially from those in forward-looking statements include the following: the willingness of our advertisers to advertise on our web site; increased competition and its effect on our website traffic, advertising rates, margins and market share; our dependence on internet search engines to attract a significant portion of the visitors to our websites; interest rate volatility; technological changes; our ability to manage traffic on our websites and service interruptions; our ability to maintain and develop our brands and content; the fluctuations of our results of operations from period to period; our indebtedness and the effect such indebtedness may have on our business; our need and our ability to incur additional debt or equity financing; our ability to integrate the operations and realize the expected benefits of businesses that we have acquired and may acquire in the future; the effect of unexpected liabilities we assume from our acquisitions; changes in application approval rates by our credit card issuer customers; our ability to successfully execute on our strategy, including without limitation our insurance quality initiative, and the effectiveness of our strategy; our ability to attract and retain executive officers and personnel; the impact of resolution of lawsuits to which we are a party; our ability to protect our intellectual property; the effects of facing liability for content on our websites; our ability to establish and maintain distribution arrangements; our ability to maintain good working relationships with our customers and third-party providers and to continue to attract new customers; the effect of our expansion of operations in China and possible expansion to other international markets, in which we may have limited experience; the willingness of consumers to accept the Internet and our online network as a medium for obtaining financial product information; the strength of the U.S. economy in general and the financial services industry in particular; changes in monetary and fiscal policies of the U.S. Government; changes in consumer spending and saving habits; changes in the legal and regulatory environment; changes in accounting principles, policies, practices or guidelines; and our ability to manage the risks involved in the foregoing. For more information about factors that could cause actual results to differ materially from our expectations, refer to our reports filed with the Securities and Exchange Commission, including the discussion under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2011, and additional information will also be set forth in our Annual Report on Form 10-K that will be filed for the year ended December 31, 2012. These documents are available on the SEC’s website at www.sec.gov. Any factor described above or in our SEC reports could, by itself or together with one or more other factors, adversely affect our financial results and condition. We undertake no obligation to update or revise forward-looking statements as a result of new information, future events or otherwise, except as otherwise required by law.

-Financial Statements Follow-

Bankrate, Inc. and Subsidiaries
Consolidated Balance Sheets
($ In thousands, except per share data)
		December 31,			December 31,
		2012			2011
	Assets
Cash and cash equivalents		$	83,590		$	56,213
Accounts receivable, net of allowance for doubtful accounts of
	$658 and $1,534 at December 31, 2012 and 2011		52,598			60,543
Deferred income taxes			3,763			24,690
Prepaid expenses and other current assets			13,691			2,535
	Total current assets		153,642			143,981
Furniture, fixtures and equipment, net of accumulated depreciation of
	$12,851 and $6,676 at December 31, 2012 and 2011		10,024			9,065
Intangible assets, net of accumulated amortization of $128,366 and
	$81,212 at December 31, 2012 and 2011		382,732			378,240
Goodwill			602,173			595,522
Other assets			11,579			10,604
	Total assets	$	1,160,150		$	1,137,412
	Liabilities and Stockholders' Equity
	Liabilities
Accounts payable		$	8,227		$	9,564
Accrued expenses			22,033			26,288
Deferred revenue and customer deposits			3,861			5,891
Accrued interest			10,588			10,588
Other current liabilities			6,399			3,969
	Total current liabilities		51,108			56,300
Deferred income taxes			64,482			82,670
Senior secured notes, net of unamortized discount			193,943			193,613
Other liabilities			22,466			16,367
	Total liabilities		331,999			348,950
Commitments and contingencies
	Stockholders' equity
Common stock, par value $.01 per share -
	300,000,000 shares authorized at December 31, 2012 and 2011;
	100,097,969 and 99,992,000 shares issued at December 31, 2012 and 2011;
	100,047,441 and 99,992,000 shares outstanding at December 31, 2012 and 2011		1,000			1,000
Additional paid-in capital			843,393			832,797
Accumulated deficit			(15,264	)		(44,595	)
Less: Treasury stock, at cost 50,528 and 0 shares at December 31, 2012 and 2011			(591	)		-
Accumulated other comprehensive loss			(387	)		(740	)
	Total stockholders' equity		828,151			788,462
	Total liabilities and stockholders' equity	$	1,160,150		$	1,137,412

Bankrate, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
($ In thousands, except per share data)
		(Unaudited)						(Unaudited)
		Three months ended						Twelve months ended
		December 31,			December 31,			December 31,			December 31,
		2012			2011			2012			2011
Revenue		$	93,244		$	113,769		$	457,164		$	424,200
Cost of revenue (excludes depreciation and amortization)			30,788			32,364			146,357			143,710
Gross margin			62,456			81,405			310,807			280,490
			67.0	%		71.6	%		68.0	%		66.1	%
Operating expenses:
	Sales		4,037			3,402			16,114			12,980
	Marketing		28,435			26,344			126,222			86,053
	Product development		4,371			4,048			17,023			14,866
	General and administrative		9,962			11,684			37,431			36,662
	Legal settlements		(24	)		-			874			-
	Acquisition, offering and related expenses and related party fees		(32	)		3,390			335			44,248
	Restructuring charges		-			1,034			-			1,272
	Depreciation and amortization		14,395			10,971			52,854			43,536
			61,144			60,873			250,853			239,617
	Income from operations		1,312			20,532			59,954			40,873
Interest and other expenses, net			(6,494	)		(6,431	)		(25,771	)		(31,786	)
Change in fair value of contingent acquisition consideration			4,785			(208	)		2,645			(292	)
Loss on early extinguishment of debt			-			-			-			(16,629	)
	(Loss) income before income taxes		(397	)		13,893			36,828			(7,834	)
Income tax expense (benefit)			(741	)		(152	)		7,497			5,588
	Net income (loss)	$	344		$	14,045		$	29,331		$	(13,422	)
Basic and diluted net income (loss) per share:
	Basic	$	0.00		$	0.14		$	0.29		$	(0.14	)
	Diluted		0.00			0.14			0.29			(0.14	)
Weighted average common shares outstanding:
	Basic		100,097,969			99,879,865			99,985,782			94,160,687
	Diluted		100,101,578			100,933,237			100,831,459			94,160,687
Other comprehensive income (loss), net of tax:
Net income (loss)		$	344		$	14,045		$	29,331		$	(13,422	)
Foreign currency translation gain (loss)			14			(57	)		353			-
Comprehensive income (loss)		$	358		$	13,988		$	29,684		$	(13,422	)

Bankrate, Inc. and Subsidiaries
Non-GAAP Measures (unaudited)
($ in thousands, except per share data)
			(Unaudited)						(Unaudited)
			Three months ended						Twelve months ended
			December 31,			December 31,			December 31,			December 31,
			2012			2011			2012			2011
Revenue			$	93,244		$	113,769		$	457,164		$	424,200
Gross margin excluding stock based compensation (1)			$	62,584		$	81,613		$	311,406		$	280,935
Gross margin excluding stock based compensation %				67.1	%		71.7	%		68.1	%		66.2	%
Adjusted EBITDA (2)			$	17,929		$	38,509		$	123,137		$	135,438
Adjusted EBITDA margin				19.2	%		33.8	%		26.9	%		31.9	%
Adjusted net income (3)			$	5,798		$	19,096		$	56,030		$	62,060
Adjusted EPS			$	0.06		$	0.19		$	0.56		$	0.61
Common shares outstanding (4):				100,101,578			100,933,237			100,831,459			100,933,237
(1	)	Gross margin excluding stock based compensation represents gross margin plus stock based compensation classified as cost of revenue.
		Reconciliation of gross margin excluding stock based compensation
		Gross margin	$	62,456		$	81,405		$	310,807		$	280,490
		Stock based compensation		128			208			599			445
		Gross margin excluding stock based compensation	$	62,584		$	81,613		$	311,406		$	280,935
(2	)	Adjusted EBITDA represents earnings before interest, taxes, depreciation and amortization adjusted to exclude legal settlements; acquisition, offering and related expenses and related party fees; restructuring charges; stock based compensation; changes in fair value of contingent acquisitions consideration and loss on early extinguishment of debt.
		Reconciliation of adjusted EBITDA
		Income from operations	$	1,312		$	20,532		$	59,954		$	40,873
		Legal settlements		(24	)		-			874			-
		Acquisition, offering and related expenses and related party fees		(32	)		3,390			335			44,248
		Restructuring charges		-			1,034			-			1,272
		Stock based compensation		2,278			2,582			9,120			5,509
		Depreciation and amortization		14,395			10,971			52,854			43,536
		Adjusted EBITDA	$	17,929		$	38,509		$	123,137		$	135,438
(3	)	Adjusted net income adds back other income; change in fair value of contingent acquisition consideration; accretion interest included in change in fair value of contingent acquisition consideration; loss on early extinguishment of debt; legal settlements; acquisition, offering and related expenses and related party fees; restructuring charges; stock based compensation; and amortization; net of tax.
		Reconciliation of adjusted net income
		(Loss) income before income taxes	$	(397	)	$	13,893		$	36,828		$	(7,834	)
		Other income		-			-			(135	)		-
		Non-recurring change in fair value of contingent acquisition consideration (5)		(5,816	)		-			(4,812	)		-
		Loss on early extinguishment of debt		-			-			-			16,629
		Legal settlements		(24	)		-			874			-
		Acquisition, offering and related expenses and related party fees		(32	)		3,390			335			44,248
		Restructuring charges		-			1,034			-			1,272
		Stock based compensation (6)		2,278			2,582			9,120			5,509
		Amortization		13,496			10,406			49,643			41,913
		Adjusted income before tax		9,505			31,305			91,853			101,737
		Income tax (7)		3,707			12,209			35,823			39,677
		Adjusted net income	$	5,798		$	19,096		$	56,030		$	62,060
(4	)	Pro forma for post-IPO share count for 2011 periods presented.
(5	)	Non-recurring change in fair value of acquisition consideration represents changes in fair value attributable to lower than expected earnings of acquired businesses.
		Reconciliation of non-recurring change in fair value of acquisition consideration
		Change in fair value of contingent acquisition consideration	$	4,785		$	(208	)	$	2,645		$	(292	)
		Change in fair value due to passage of time		(1,031	)		(208	)		(2,167	)		(292	)
		Non-recurring change in fair value of contingent acquisition consideration	$	5,816		$	-		$	4,812		$	-
(6	)	Stock based compensation is recorded in the following line items:
		Cost of revenue	$	128		$	208		$	599		$	445
		Sales		353			415			1,387			899
		Marketing		271			261			1,013			520
		Product development		341			462			1,492			985
		General and administrative		1,185			1,236			4,629			2,660
		Total stock based compensation expense	$	2,278		$	2,582		$	9,120		$	5,509
(7	)	Assumes 39% income tax rate.