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Executives

Leslie Green

Alexandros Moukas - Co-Founder, Chief Executive Officer, Executive Director and Chairman of Executive Committee

Wilson W. Cheung - Chief Financial Officer and Member of Executive Committee

Analysts

Peter Misek - Jefferies & Company, Inc., Research Division

Andre Sequin - RBC Capital Markets, LLC, Research Division

Scott Zeller - Needham & Company, LLC, Research Division

Richard Fetyko - Janney Montgomery Scott LLC, Research Division

Peter Stabler - Wells Fargo Securities, LLC, Research Division

Robert Coolbrith - ThinkEquity LLC, Research Division

Ryan R. Bergan - Craig-Hallum Capital Group LLC, Research Division

Velti Plc (VELT) Q2 2012 Earnings Call August 14, 2012 8:30 AM ET

Operator

Good day, ladies and gentlemen, and welcome to the Velti 2012 Second Quarter Financial Earnings Conference Call. [Operator Instructions] As a reminder, today's call is being recorded. I would now like to turn the conference over to Leslie Green, Investor Relations for Velti. Ma'am, you may begin.

Leslie Green

Thank you, and good morning, everyone, and welcome to Velti's conference call to discuss the results of the second quarter ended June 30, 2012. With me today are Alex Moukas, Velti's Chief Executive Officer; and Wilson Cheung, Chief Financial Officer.

The company issued a press release reporting financial results for the second quarter of 2012 at 8 a.m. Eastern time today. The press release can be accessed from the Investors section of the company's website at velti.com. In addition, the company has made available its Q2 2012 earnings slide deck in the Events section of the Investor website, which is also referenced in the press release.

Before we begin, I would like to remind you that during the course of this conference call, including comments made in response to your questions, the company will provide projections and make other forward-looking statements regarding, among other things, its future financial performance, its ability to control costs and improve efficiency, its success in qualifying additional opportunities, and its ability to continue to drive business in 2012, as well as other market conditions and trends.

Management wishes to caution you that such statements deal with future events and are based on management's current expectations and are subject to risks and uncertainties that could cause actual results to differ materially. These uncertainties and risks include, but are not limited to, overall conditions in the market in which Velti competes, global financial conditions and uncertainties, market acceptance and demand for Velti's products, the impact of potential delays, including customer mandates, the potential liability resulting from pending or future litigation, the timing of marketing campaign execution and Velti's ability to integrate recently completed acquisitions, including Air2Web, Mobile Interactive Group and CASEE.

In addition to the factors that may be discussed in this call, management refers you to its annual report on Form 20-F and periodic reports filed with the Securities and Exchange Commission available online by link from the company's website for additional information on the factors that could cause actual results to differ materially from current expectations. A replay of this conference call will be available at velti.com for 3 months from today.

And with that, I'd like to turn the call over to Velti's Chief Executive Officer, Alex Moukas. Alex?

Alexandros Moukas

Thanks, Leslie, and welcome everyone to our Q2 earnings call. This was an excellent quarter for Velti. In addition to revenue growth of more than 70% and adjusted EBITDA growth of 100% from the comparable quarter last year, with improving EBITDA margins for 400 basis points on a trailing 12-month basis. We also had disposed [ph] the free and operating cash flows, reduced our comprehensive DSOs, successfully integrated our 2 recent acquisitions, Air2Web and MIG, and signed significant new customers that will drive revenue in Q4 and beyond.

Despite global macroeconomic weakness, the secular growth story of the mobile channels continue to trump the cyclical market concerns. We experienced healthy growth across our product portfolio and throughout all geographies, especially in the Americas, Western Europe and Asia, underscoring the rapid adoption of mobile worldwide as a medium of choice for brands and operators to engage with customers and drive desired business goals. As such, our new customer acquisition efforts continue to give strong results. During the quarter, we signed new agreements with brands including Disney and Nestea, representing exciting opportunities across our portfolio, and we also signed incremental agreements with current customers, including Calvin Klein and Toyota.

Another major achievement in the second quarter was our completion of integrations of Air2Web and MIG. We're very pleased with our performance to date, as well as the benefits they are bringing to our complete solution. In fact, because of MIG's outperformance of our original goals, we are accelerating their [ph] associated with this acquisition and we're quickly moving MIG's outstanding leadership team into tier roles at Velti. We'll pay nearly the maximum amount as consideration, while maintaining the timing and the structure of the earn-out payments.

With regards to our balance sheet, we are very pleased to report that we have attained positive operating cash flows in Q2 of $25 million, a full quarter ahead of our goal. This was the result of consolidated efforts across the company that we launched after our May earnings call, particularly in the area of collections. These efforts also allowed us to achieve positive free cash flow of $7 million. Going forward, we expect our operating cash flow to be neutral in Q3 with sustainable positive operating cash flow thereafter.

We also expect that our net cash position will be strong in Q2 with no incremental debt. We are confident that we'll deliver against our goal of sustainable positive free cash flow by Q4.

As Wilson will discuss, our comprehensive DSOs improved to 66 days in the second quarter from 272 days in Q1. We expect more significant improvements in the next 2 quarters, given our focused efforts around comprehensive receivables and cash conversion that started in May of this year. By Q3, most of our Q4 2011 revenues will have been collected and this will positively impact our DSOs as a large portion of our accrued revenues for the year are typically generated in the fourth quarter given the seasonality of our business.

Looking ahead, investor asked us what are the primary focus areas as we move into the second half and plan for our business for 2013. I would categories our focus in 3 areas: Product and technology, expansion of our customer base and geographical base, and execution. In terms of technology, we continue to devote significant resources, to enhancing the capability, reach and effectiveness of our technology platform that spans across mobile advertising and marketing. In fact, no other single competitive offering can address the breadth of our offering or reach and scalability of our platform to mobile consumers, combining mobile advertising with post-click mobile marketing and mobile customer life cycle management.

As we have discussed, the competitive landscape is quite fragmented, both in terms of services and geographies. Our customers seek great value in having one provider that can address the full gamut of mobile services rather than having to piece together multiple solutions to address their requirements. We believe that the mobile channel is still merely scratching the surface of this potential. Marketers using our platform can reach out to 4.3 billion consumers in more than 70 countries.

Every day, we process more than 3 billion data facts and this is a critical part of our platform. The longer a brand is our customer, the better we know their consumers, the better the performance of our platform becomes. We'll continue to focus single manner to providing great experience to the consumers out there, focusing on protecting personal identifiable information and structuring campaigns as often, where consumers only participate in the campaign if they choose to.

What makes Velti so unique is that we can accomplish all these to our scalable, intelligent technology platform and that we can offer end-to-end integrating mobile programs, with a strong track record of positive outcomes. We are employing more than 450 software engineers who continually enhance the capability of our technology, translating into tangible results for our customers. We'll continue working to enhance our offering and assure that we're making the best use of our data, ODIN's management optimization and predictive analytics to maximize these outcomes for our customers.

Turning to our geographically diversifying customer base, we're excited by the progress to expand and diversify into strategically important areas. We're particularly pleased to see 126% year-over-year growth in Americas, primarily the U.S. market, in Q2. We continue to believe that revenue from the U.S. will double this year, making the U.S. our largest country by far. This is very beneficial for Velti, both in terms of the exciting growth opportunity that it represents, as well as a positive income to our business model from better collection terms and strong margin performance.

Further, we're also seeing healthy growth in the U.K. as a result of our acquisition of MIG. MIG continues to dominate Western Europe in high-growth areas, such as real-time mobile and social interactions, as well as mobile to TV interaction. Our acceleration of the turnout [ph] is directly attributable to its strong business performance to date and we expect to be able to leverage the customer relationships to expand the penetration of our product portfolio throughout the region in the quarters to come.

Outside the U.K., we also continue to perform extraordinarily well in Europe, demonstrating double in [ph] growth 30% year-over-year, even in a challenging macroeconomic environment. We're very pleased with our European results as a whole and expect strong, continued growth out of the region, the U.K. and Western Europe in particular.

Turning to Asia now. In China, we do not expect significant contribution for revenues this year and we're putting in place an efficient operational structure in expanding our mobile marketing presence there to augment CASEE's mobile advertising offering. We're also putting in place consistent controls in order to prepare for strong future growth. In India, we're seeing significant acceleration of our efforts with major brands and mobile carriers and we believe India, alongside China, were going to be the cornerstones of our growth in the region.

As we look ahead, we look to further build our footprint in the U.S. and other areas, such as Lat Am and Middle East and Africa, where mobile technology is becoming an increasingly important link between brands and consumers.

Finally, the third point in terms of execution, I'm very proud of the way our entire organization executed to our strategy, managing our costs despite strong revenue growth and ahead of a very strong second half, reducing our comprehensive DSOs and driving positive free and operating cash flows this quarter. With tremendous growth comes some growing pains and continued to improve and adapt our organization. By accelerating the integration of the Air2Web and MIG acquisitions, we're actually reducing headcount and expenses by several millions on an annual basis compared to our original budget. The full effects of this effort will be visible sometime in Q4. We'll continue to work with our customers on shorter payment terms and expect to see benefits of this process begin in Q3. We are committed to world-class financial reporting and controls and we'll continue to consider steps necessary to fulfill that vision.

With that, I'll turn it onto Wilson to provide more color on our Q2 results and our third quarter and fiscal year guidance. Wilson?

Wilson W. Cheung

Thank you, Alex and again, welcome to our Q2 earnings call. Let me review for you our second quarter revenue and then get into more detail on the operating expense side, as well as cash flows.

Total revenue for the second quarter of 2012 was $58.7 million, an increase of $24.3 million or 71% compared with $34.4 million in the revenue recorded in the second quarter of 2011. SaaS revenue for the second quarter of 2012 was $48.9 million, an increase of 78% compared with $27.6 million in the second quarter of 2011. SaaS comprised 83% of total revenue in the second quarter of 2012 compared with 80% in the second quarter of 2011. License and software revenue for the second quarter of 2012 was $2.9 million, a decrease of 29% compared to the second quarter of 2011. License and software comprised only 5% of total revenue in the second quarter, down from 12% in Q2 of 2011. As you are aware, we try to drive our customers through our SaaS solutions when possible, say for instances where regulatory or operating issues preclude us and we anticipate license revenue to continue to comprise only a small portion of our total revenue going forward.

Managed services revenue for the second quarter of 2012 was $6.8 million, an increase of 151% compared with $2.7 million in the second quarter of 2011. Managed services comprised 12% of total revenue for the second quarter of 2012 compared with 8% in Q2 of 2011. On a trailing 12-month basis, total revenue for the second quarter of 2012 was $235.8 million, an increase of $93.8 million or 66% compared with $142 million of revenue recorded in the prior year period.

In terms of the breakdown between our advertising and marketing businesses for the second quarter of 2012, advertising revenues comprised approximately 24% of total revenues while marketing revenues comprised the remaining 76%, with gross margins of 25% and 76%, respectively. In terms of geography breakdown, we generated $18.8 million of our Q2 2012 revenue in Europe, excluding the U.K., versus $15.6 million in Q2 of 2011. Our U.K. revenue grew to $13.6 million in Q2 of 2012 from $4.7 million in Q2 of 2011 and our Americas revenue, primarily the U.S., grew to $16.7 million from approximately $7.4 million in Q2 of 2011. In 2012, we expect the Americas, primarily the U.S., to be our biggest revenue contributor, with the U.K. being our second biggest country. As a percentage of total Q2 2012 revenue, PIIGGS countries represented approximately 10%.

Now onto our operating expenses and adjusted EBITDA. As usual, we review the operating expenses on this call since most of you view our business exclusive of share base compensation, I will be referring to non-GAAP figures, which excludes share base compensation expense, as well as some nonrecurring expenses, which we'll call out specifically. A breakdown of our share base compensation can be found in our earnings release under the header Reconciliation to Adjusted EBITDA. For additional information, I would direct you to our earnings presentation.

Let me start with third party costs, which totaled $20.9 million for the second quarter of 2012 compared with $10.7 million in the second quarter of 2011 despite significant organic growth in our advertising business for the past year, as well as the inclusion of our acquisitions. As a percentage of revenue for Q2 2012, third party costs were 36% compared with 31% in the same period in the prior year, primarily a result of a more rapid acceleration in our advertising business relative to our marketing business, which is in line with our expectations, given the geographic breakdown of our advertising and marketing revenue.

Our revenue less third party costs, a proxy for gross profit reached $37.7 million, an increase of 60% relative to the second quarter of 2011 and again, was driven by gains across all business units acquired and otherwise. Consolidated revenue less third party cost margins were 64% for Q2 2012, down slightly from 69% in Q2 2011, primarily due to the faster growing advertising business, which made up 24% of our Q2 revenues with traditionally lower margins than our marketing business. As you know, we also focus on revenue less third party costs on a trailing 12-month basis from the perspective of both our advertising and our marketing businesses. For the trailing 12-month period ended Q2 2012 versus Q2 2011, margins improved on the mobile advertising business from 23% to 25% year-over-year while margins on the mobile marketing business declined just slightly from 78% to 76%.

Our total operating expenses for the second quarter excluding nonrecurring expenses, share base compensation, depreciation and amortization, acquisition-related and other charges were $31.5 million. Adjusted EBITDA for the second quarter of 2012 came in at $6.2 million compared with $3.1 million in the second quarter of 2011, up 100% year-over-year. This is in line with the high end of our expectations given our Q2 revenue.

As we have said in our past earnings calls, we are managing to the greatest amounts of absolute revenue less third party costs and adjusted EBITDA that we can drive while maintaining reasonable margins. I would also point you at this time to our Q2 earnings deck, which Alex referenced, where we detailed our quarterly expenses quarterly for 2011 and Q2 2012, adjusted to exclude share-based compensation and nonrecurring items. You'll see exactly how we went from a 21% EBITDA margin in Q2 2011 to a 25% EBITDA margin in Q2 2012 on a trailing 12-month basis and from a 9% Q2 2011 EBITDA margin to an 11% Q2 2012 EBITDA margin on a quarter-over-quarter basis.

Our second quarter income tax provision was $862,000, which, as in prior quarters, represents taxes due on profits resulting from the application of our global transfer pricing methodology. On an adjusted basis, excluding the impact of FX gain, noncash share-based compensation, nonrecurring and acquisition-related expenses, loss from equity method investments, and acquisition-related depreciation and amortization, we recorded a second quarter adjusted net loss of $939,000 or $0.01 loss per diluted share versus an adjusted net loss of $2 million or $0.04 loss per diluted share in the second quarter of 2011. Turning to shares outstanding, we ended Q2 with 64.8 million shares outstanding and 65.8 million and on a fully diluted share basis, which includes 1.8 million shares issued as deferred consideration for both Mobclix and MIG.

Now to the balance sheet. We ended the second quarter with cash and cash equivalents of approximately $45 million compared to $41 million in Q1. Long term debt, including the current portion was approximately $8.3 million. Speaking of debt, I would like to announce that since the end of the quarter, we closed a $50 million credit facility with HSBC on August 10. It is a 3-year, senior revolving line of credit with tiered interest rates between LIBOR plus 2.25% to 2.75%. We will file a Form 6-K on the credit agreement shortly. We felt it prudent to put this facility in place to fund our growth and potentially to defer and earn out payments for the acquisitions as we achieved positive operating and free cash flow over the course of this year. This facility has been secured by our receivables worldwide, which attests to the quality of our assets and our ability to generate free cash flows in the near term.

Trade receivables net of reserves and accrued receivables were $108 million and $75.1 million, respectively as of June 30, 2012, compared with $85.5 million and $103.3 million, respectively as of March 31, 2012. The significant increase in trade receivables is primarily the result of our efforts to begin pushing for more frequent invoicing of our customers since May 2012. And because of our strong collections in Q2, we were able to drive improvement in our comprehensive DSOs from 272 days in Q1 to 266 days in Q2. Now please bear in mind, we only significantly accelerated our efforts in the mid-May timeframe. You can see the exact calculation of our comprehensive DSOs in our earnings deck, which included pro forma adjustments on MIG's past return transactions. As Alex have mentioned, as the aging of our trade receivables bears out, we continue to believe that the quality of our receivables in total remains very strong.

Now let's talk about cash, too. We ended the second quarter at approximately $45 million from $41 million in Q1 of 2012. Let me break down for you the movement in cash, which we can also see illustrated in Slide #16 of our earnings deck. We generated $25 million of operating cash flow, primarily on the back of our accelerated efforts in receivables collections. We then deducted $15.9 million in CapEx, which is simply investments in PP&E of $2.1 million, and investments in software development and purchase software of $13.9 million. We've excluded from that deduction approximately $2.6 million for acquisition-related cash payments, which made up the remainder of the cash used in investing activities. After deducting non-acquisition-related investing activities, we then simply add or subtract the effect of changes in FX rates to complete our free cash flow calculation. Though you will continue -- we will continue aggressive investment in our platform in the form of capital expenditures, we are reiterating our intention and are more confident than ever in our ability to remain operating cash flow positive for the foreseeable future and become sustainably free cash flow positive by the end of this year. For Q3, we expect our cash balance to exceed $25 million.

Finally, let's go to our guidance for the third quarter and full year 2012 before I turn it back to Alex for his closing remarks. Starting with the third quarter, we estimate total revenue will be in the range of $60 million to $64 million and adjusted EBITDA of $8.5 million to $10.5 million. From a full year perspective, we are increasing the low end of our revenue guidance to $285 million and maintaining the high end at $296 million. With regard to adjusted EBITDA, we are tightening our range to between $82 million and $87 million.

And with that, I'll pass it back to Alex before we open up for Q&A. Alex?

Alexandros Moukas

Thanks, Wilson. Let me quickly summarize what we'd like you to take away from today's call. Number 1, we'll continue to invest in our technology platform and especially in data, audience management, media attribution [ph], optimization and predictive analytics. Number 2, we have built a solid geographical and customer footprint on top of which we're driving ever-increasing revenue with improved EBITDA margins. Despite global macroeconomic weakness, the secular growth story of the mobile channel continues to trump the cyclical macro concerns.

Closing our Q2 2012 performance sets the stage for a solid 2012 with improved visibility and consistent free cash flow generation from Q4 onwards. We're going to have a very strong year.

And with that, we would like to open it up to questions.

Question-and-Answer Session

Operator

[Operator Instructions]

Our first question is from Peter Misek with Jefferies.

Peter Misek - Jefferies & Company, Inc., Research Division

Just a couple of quick questions. Firstly, on acquisitions, can you walk us through what your acquisition strategy is going forward? Do you foresee any gaps in technology or geographies that we should think about in terms of acquisitions? And then in terms of free cash flow, the number obviously was a lot stronger than we were expecting. Do you have any targeted range of free cash flow? In terms of what percentage of sales do you want to achieve for -- on a go-forward basis after Q4? Can you give us any sort of ranges, that will be great, or any sort of ways we should frame or we should think about that? And then how do you suspect you're going to use that free cash flow? Your stock looks ridiculously cheap, should we be thinking about buybacks next year?

Alexandros Moukas

So a couple of different things. As we discussed last quarter on the acquisition side, right now, we're just focusing on sort of -- it's a year of execution. We're focusing on integrating the acquisitions that we did. We had made very good progress as we last discussed on Air2Web and MIG. We're going to be putting for the remainder of the year our efforts into CASEE. Now in terms of your second question, in terms of free cash flow, again, what we want to do, we had that call sometime in mid-May, we heard sort of loud and clear the message from the market and are -- sort of we focused 100% on sort of: number 1, collecting much faster; and number 2, managing our expenses; and number 3, managing our vendors. So all of this drove a very, very sort of positive number. In terms of cash flow, sort of ranges and generation for sort of Q4 and next year, we really cannot provide you a number right now. If you look at our strategy again is we see the constraints of sort of solid free cash flow generation, tried to grow revenue as much as possible and tried to grow our EBITDA as much as possible. So our strategy is going to continue to be to sort of generate good amounts of all sort of cash flow and then continue to grow the business as fast as are within that constraint.

Operator

Our next question is from Andre Sequin with RBC Capital Markets.

Andre Sequin - RBC Capital Markets, LLC, Research Division

Now you mentioned Europe a couple of times that you're able to grow through the macroeconomic headwinds there. Is there anything -- could you give any commentary or color on what you might have been looking at without that? Do you feel you could have grown much more stronger in that? And then also if you could give us a bit of a reminder around what the size of the earn-out payments might be going forward. And you noticed -- noted that would be at the maximum end of the range, but where that might be on the timing of those.

Alexandros Moukas

Sure. So with regards to Europe, it's -- we continue to invest to expand our offering within existing customer and penetrating some new customers. And as you saw, even with some European countries' sort of experiences in recessions, some other European countries are barely growing, we managed to grow our business in Europe by 30% year-over-year. It's somewhat hard to say what would that growth had been if Europe was growing by, let's say 2% or 3% a year. It would probably have been more but it's actually very hard to quantify. We're being right now very selective with our customers in Europe in terms not just their pedigree but also in terms of the terms and conditions we can get for them in terms of their payments and accounts receivable and all that is within the sort of the constraints or what we've discussed in May of generating significant cash flow. So we're not so picking Europe and if Europe wasn't really experiencing recession, it would actually be growing sort of much quicker. Now in terms of the remaining sort of payments for the earn outs, I will just pass it out to Wilson.

Wilson W. Cheung

There will not be a significant amount of payments that we actually need to make for the remainder of 2012. MIG alone, you're probably looking at roughly $34 million remaining consideration. Primarily, most of those would be paid in 2013. For CASEE, you're looking at roughly $20 million. Approximately $3 million would be paid out in cash in the third quarter, and the remaining would be in 2013.

Alexandros Moukas

And that essentially assumes the MIG amount is fixed. The CASEE amount, that really depends on their earn-out. We're paying that amount in 2013 and 2014 primarily and the remaining earn-out, the maximum, as Wilson said, can be up to $20 million, but it can be anywhere from $0 million to that $20 million depending on the performance.

Operator

Our next question is from Scott Zeller with Needham and Company.

Scott Zeller - Needham & Company, LLC, Research Division

I wanted to ask about the improved collections efforts. I mean, you've discussed this on your previous update call and I wanted to hear, Alex, if -- how far you are along in these efforts of changing, I think you said, at the billing frequency. And do you think going forward that you can materially change the frequency again? Or what other types of improvements do you see happening versus what you achieved thus far as far as the operational efforts are concerned?

Alexandros Moukas

Of course, Scott. There are a couple of different things here. Number 1, we sort of started 100% focus on this sometime in mid-May so since then, we have been sort of, as we discussed, approaching customers, starting to change some of the terms of our engagement with them. Obviously, we only had 45 days in Q2 to essentially play with. That's why, as we discussed during our previous sort of prepared remarks, you're going to see most of the effect of that happening in Q3 and Q4. So that's going to be sort of the major driver there. And again, it's a combination of sort of changing the structure of some of our contracts to allow us to invoice sort of much quicker. You're already seeing some of that because we accrued contracts receivable balance essentially move primarily into trade receivables, so a lot of more invoicing, a lot of faster invoicing. You're going to see that starting to translate from Q3 and Q4 into much weaker collections as well.

Scott Zeller - Needham & Company, LLC, Research Division

Got a follow-up on the balance sheet. Regarding the credit line that you put into place, can you tell us if you expect to draw from the line in the 3Q?

Alexandros Moukas

Of course, yes, as part of the closing conditions, we're required to pay off other existing debt to the order of something like $8 million, $9 million or so. But our net cash position, pre- and post-facility, is essentially the same. We'll be in the trade line to optimize the cash position in different currencies globally and that was also one of the main reasons that we put the facility in place, to help us with our cash management within the context of our tax optimization so we don't have to change currencies and sort of switch currencies around. So to answer your question, our net cash positions, which is what we care about, has not really changed in a material way before and after closing the facility.

Operator

Our next question is from Richard Fetyko with Janney Capital.

Richard Fetyko - Janney Montgomery Scott LLC, Research Division

Curious on the managed services revenues pop in the second quarter, curious as to why -- and also the sources of growth in the Americas, particularly in the U.S., you mentioned, you expect to double revenue this year. Again, curious which products and solutions, probably Mobclix for the most part. And then lastly, with respect to CapEx anticipated in the second half of this year and 2013, wondering if you're still expecting a declining CapEx.

Alexandros Moukas

Of course, so a couple of different things. Now, first of all, in the managed services, it's not material. It's actually sort of some noise there. You might have some campaigns that require some sort of incremental, sort of managed services fitting on different parts of the quarter. It's not a trend that we should try to essentially extrapolate. We continue to see our managed services to be approximately 10% of revenue and again, this is some assistance we provide to our customers to achieve campaigns and trading services. We always feel that's going to be around 10% of that sort of always being there. We shouldn't try to read too much into these movements. In terms of the U.S. and Americas in general, yes, we're seeing sort of -- we're seeing very, very good traction. It's a combination actually of our advertising offering with this, as you discussed, based on Mobclix and our marketing offering, our post-click marketing efforts, but also our sort of customer life cycle management efforts. So if you look at our sort of biggest customers in that area in terms of revenue, it's not so much on the advertising side. The biggest customer in terms of revenue is on the sort of customer life cycle management side. So we're seeing sort of significant growth across everything. And remember, this is organic growth because it includes sort of everything we have done with Mobclix, which we acquired back in 2010. So all of the 2011 versus 2012 numbers are sort of organic comparisons. And then finally, on your CapEx question, on a very high level, yes, we'll continue to see that and we are -- we'll continue to see that, even though that sort of CapEx especially are intangible CapEx that everybody is focusing on is going to be slightly less than the previous year as we discussed.

Operator

Our next question is from Peter Stabler with Wells Fargo.

Peter Stabler - Wells Fargo Securities, LLC, Research Division

Just a quick question, can you give us a sense of what you're thinking of third party costs for the rest of the year? And secondly, can you talk a little bit more -- can you give us a little more color on what you're seeing from the PIIGGS nations in Europe?

Wilson W. Cheung

Let me address the first question. It's Wilson here. Third party costs as a percentage of revenues, you should expect that, for Q3, it should be roughly between 32% to 33%. And primarily, the reason being, we have a lot of large scale campaigns that we anticipate for preparation, so that we would have some frontloading of those costs in Q3. So this is very similar to how we did it in last year. However, having said that, Q4, third party costs as a percentage of revenues would drop. You're probably looking at in the low 20% range, so that for the entire year, my third party costs as a percentage would roughly be around 30-ish.

Alexandros Moukas

Now in terms of [indiscernible], let me give you some color in terms of PIIGGS. We -- if you look at sort of PIIGGS revenues at approximately on the same level that it was sort of previous quarters. Again, since we have -- if you look at some of our customers there, there are some of our customers in the Middle East, a couple of our customers in Asia, they're really driving some more -- sort of longer DSOs. We're actually sort of trying to negotiate some of its contracts to actually sort of reduce our total DSO exposure, but in terms of revenues as a percent of the total, it's pretty much where it was in the previous quarter, it's around 10%.

Operator

Our next question is from Robert Coolbrith with ThinkEquity.

Robert Coolbrith - ThinkEquity LLC, Research Division

Can you give us an indication of pro forma growth in the U.K. adjusted for the MIG acquisition? Then I have a couple of follow-ups.

Alexandros Moukas

Now we have actually fully integrated the MIG acquisition, fully sort of joined the resources there and the customer base and we're not breaking that down separately.

Robert Coolbrith - ThinkEquity LLC, Research Division

Okay. Can you give us an indication of the types of activities that are outperforming for MIG in the U.K. or just any indication of the business drivers there?

Alexandros Moukas

Yes, of course. So if you look at MIG, I would say it's across the board. I would say the business that focused on sort of combining sort of social media with broadcast media like TV with mobile is really booming. The combination of our salesforce in the U.K. also drove a lot short lived: Number 1, new contracts in existing customers, but we also -- we have a couple of new customers that we're not ready to announce yet that are really going be to driving significant revenue in the future.

Robert Coolbrith - ThinkEquity LLC, Research Division

Right. And the managed services outperformance in the quarter, if you want to call it that, I know you already said we shouldn't take it that way, but regardless if we do, could you associate that with the specific types of activities? Was it more on the marketing side or the advertising side? Where are customers requiring more help and where is the opportunity?

Alexandros Moukas

It's clearly on the marketing side. There's really no material managed services revenue on the advertising side. In terms of the marketing side now, I would say it's a combination. Some of it is sort of from the marketing, sort of the mobile marketing presence side, some other is on the optimization, yet some others is on the sort of long term customer life cycle management engagements. But pretty much, all of it is on the marketing side, not on the advertising side.

Robert Coolbrith - ThinkEquity LLC, Research Division

Great. And then finally, have you looked at potentially rolling out a media offering? Obviously, you have a lot of the assets from the Ad Exchange to the optimization platform with mGage, and then of course, the sales force. Is that an opportunity that you've looked at?

Alexandros Moukas

We constantly evaluate our technology offering and the best sort of go-to-market strategy for that offering, how to better sort of leverage our capabilities. So it's something that we'll continue to evaluate. But there's nothing right now to discuss.

Robert Coolbrith - ThinkEquity LLC, Research Division

And then Wilson, finally, a housekeeping, could you repeat the EBITDA guidance which you just gave for the full year?

Wilson W. Cheung

Yes, so I actually said in the call that our EBITDA for the year is going to be between $82 million to $87 million.

Operator

Our next question is from Ryan Bergan with Craig-Hallum.

Ryan R. Bergan - Craig-Hallum Capital Group LLC, Research Division

You talked about the efforts to improve receivables and DSOs in Q2. Obviously, it was just for a shorter period of time. But I mean, it should improve in the back half of the year, but are there efforts that you have not yet begun that you've talked about that can even, not only as time goes on we've seen improvement, but just more intense efforts on improving DSOs and receivables that you haven't started yet and what more effort can we expect to see from you guys going forward.

Wilson W. Cheung

Let me just clarify the earlier question about the EBITDA. Actually the high-end number is not $87 million, it's $88 million. And then with respect to your second question, on the improvements on DSOs, well, obviously, we have to improve on the -- our side and as you can see, we are also sort of managing the AP as well, because we want to make sure that the payment patterns start to converge also on our collection side as well. So this is going to take some time for us to make sure that both sides are converging so that we can actually have a -- right size the business models to ensure that the -- cash flows, we would be able to have the business generate the positive cash flows. We are still in the process of going through a lot of contract renewals with our customers. We're working very closely with them and for a lot of the campaigns that we've been running in the past where the data reconciliations is very pristine, there's no reason why we cannot actually do more frequent invoicing. There may be a small amount of customers that may give us some hesitation, but at the end of the day, this is really how we manage our business and we're making things happen.

Alexandros Moukas

Another thing here is that we're, as Wilson said, doing that on a customer-by-customer basis. Obviously, some customers are pushing back and depending on the surface [ph], the importance or not of the customer, we have to make sometimes sort of tough decisions, sort of continue with them or dropping them if they don't sort of -- if they don't adapt the sort of a better aim and policy for our services and products.

Ryan R. Bergan - Craig-Hallum Capital Group LLC, Research Division

And then, can you check what's the level of visibility you're seeing in your business, both marketing and advertising and RFP activity, especially as you look towards the back half of this year or even into campaigns that might be for early part of 2013?

Alexandros Moukas

Yes, absolutely. So that part of the business has not really changed and we have very strong visibility into the second half of the year and well into the next year. That is the only upside. I don't know sort of having somewhat long sales cycle if you're not in the pipeline by sort of by this time of the year, it's unlikely we'll be recognizing any revenue. So continue to have very strong visibility in sort of the remaining part of the year again, and if you look at our campaigns, because a lot of these companies are sort of multi-year campaigns, we're looking in how we're going to be sort of layering on new offerings on top of the existing contracts. So we might start with a customer on let's say, a new customer, let's say, a new acquisition efforts for all the big brands. Then, we're very going sort of layer on top of that mobile presence, then we're going to layer on top of that mobile CRM, then we're going to try to attack some of the other products. So we had this sort of staggered approach on the combined, both advertising and marketing, that allows us to do the right thing.

Ryan R. Bergan - Craig-Hallum Capital Group LLC, Research Division

And last one for me. Who'd you -- I know you've talked about -- the better landscape has been very fragmented. Who would you consider to be the most formidable competition in the United States or in the Americas geography and is there any difficult competitor that is more present now than say, 12 months ago?

Alexandros Moukas

So as we discussed, we see a quite fragmented competitive landscape out there, both in terms of geographies, but in terms of offerings. So there's no company out there that can essentially combine what we do on the advertising side, on the exchange side and what we do on the marketing side, on the post-click marketing, on the optimization, on the long term customer engagement. There's also a lot of fragmentation in terms of geographies. So if you look at sort of people that are sort of bidding against us in different RFPs, they're very, very different in different geographies. So I'm not trying to avoid the question, but it's sort of -- it's the reality that we see sort of very, very fragmented competition in completely different companies, sort of across the board. And you can actually see that from our revenues, our profitability and the presence that we have in these 70 countries. If you look at other folks out there and they have a small fraction of our revenue of our presence.

Operator

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the conference. You may now disconnect.

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