Tremor Video Reports First Quarter 2016 Financial Results

First quarter Total Spend increases 26% from prior year

Thursday, May 5, 2016 4:05 pm EDT

Dateline:

NEW YORK

Public Company Information:

NYSE:
TRMR
"Our first quarter results reflect a strong start to 2016"

NEW YORK--(BUSINESS WIRE)--Tremor Video, Inc. (NYSE:TRMR), a provider of software for video ad effectiveness, today announced financial results for the quarter ended March 31, 2016.

First Quarter 2016 Highlights:

  • Total Spend1 of $51.2 million, up 26% year-over-year
  • Revenue of $34.6 million, down 9% year-over-year
  • Gross profit of $16.2 million, flat year-over-year
  • Adjusted EBITDA2 of ($4.2) million; Adjusted EBITDA per share2 of ($0.08)
  • Net loss of ($11.1) million; net loss per share of ($0.21)
(1)   We define Total Spend (formerly reported as our GAAP revenue) as the aggregate gross spend transacted through our platforms. Total Spend is a non-GAAP financial measure. Please see the discussion in the section called “Non-GAAP Financial Measures” and the reconciliations included at the end of this press release.
(2) Adjusted EBITDA and Adjusted EBITDA per share are non-GAAP financial measures. Please see the discussion in the section called “Non-GAAP Financial Measures” and the reconciliations included at the end of this press release.
 

“Our first quarter results reflect a strong start to 2016,” said Bill Day, Tremor Video CEO. “Programmatic and higher-function products continue to drive momentum—increasing more than 70% over last year—and further our position as the premium video marketplace.”

The table below presents Total Spend, revenue, gross profit, net loss, Adjusted EBITDA, net loss per share and Adjusted EBITDA per share for the three month period ending March 31, 2016.

 
First Quarter Results Summary
(in millions, except per share amounts), (unaudited)
        Three Months Ended
March 31,
2016     2015     % Change
 
Total Spend $51.2 $40.6 26%
Revenue $34.6 $38.1 (9%)
Gross profit $16.2 $16.2 --
Net loss ($11.1) ($6.9) (61%)
Adjusted EBITDA ($4.2) ($3.9) (8%)
Net loss per share ($0.21) ($0.14) (50%)
Adjusted EBITDA per share

($0.08)

($0.08)

--

 
 

First Quarter Breakdown of Total Spend

(in thousands), (unaudited)        
Three Months Ended
March 31,
2016     2015     % Change
 
Programmatic $ 26,137 $ 7,305 258 %
Non-programmatic higher function 19,978 19,669 2 %
Non-programmatic media network   5,115   13,629 (62 %)
Total Spend $ 51,230 $ 40,603 26 %
 

Guidance

Based on information available as of May 5, 2016, the Company expects the following:

           
Q2 and Full Year 2016 Outlook
Q2 2016 Full Year 2016
 
Total Spend $57 - $59 million $255 - $265 million
Revenue $39.5 - $41.5 million $180 - $190 million
Adjusted EBITDA $0 - $1 million $0 - $5 million
 

Q1 2016 Financial Results Webcast: Tremor Video will review its first quarter 2016 results on Thursday May 5, 2016 beginning at 4:30 PM EST. The event will be hosted by Tremor Video CEO, Bill Day and feature presentations from himself as well as other executives on the Company’s performance, strategy and financial outlook. The event will be broadcast live and can be accessed on Tremor Video’s Investor Relations website at http://investor.tremorvideo.com. Following completion of the event, a recorded replay of the webcast will be available on Tremor Video’s website for a period of six months.

About Tremor Video: Tremor Video (NYSE:TRMR) provides software for video advertising effectiveness. Our buyer and seller platforms enable seamless transactions in a premium video marketplace by offering control and transparency to clients. We employ patented all-screen technology to make every advertising moment more relevant for consumers, and deliver maximum results for buyers and sellers.

"Safe harbor" Statement: This press release contains forward-looking statements that involve risks, uncertainties, assumptions and other factors that could cause actual results and the timing of certain events to differ materially from those set forth in or implied by such forward-looking statements. All statements other than statements of historical fact are forward-looking statements, including, but not limited to, statements related to Tremor Video’s future financial results or growth potential, including second quarter 2016 and 2016 full year financial guidance, and statements with respect to future revenue mix or the development or adoption of the company’s solutions. Important factors that could cause actual results or the timing of events to differ materially from those set forth in or implied by any forward-looking statements include, without limitation, risks and uncertainties associated with: the company’s limited operating history and the continuing development of its business model; unfavorable conditions in the global economy or reductions in digital advertising spend; the company’s ability to effectively innovate and adapt to rapidly changing technology and client needs; increased competition as well as innovations by new and existing competitors; expansion of the online video advertising market; the company’s ability to attract new advertisers and increase spend from existing advertisers; the company’s ability to attract advertising spend from TV media buyers; risks of entering new markets in which we have limited or no experience and difficulty adapting our solutions for new markets; adoption of brand-centric metrics, advanced ad formats and performance-based pricing models by advertisers; the company’s ability to effectively deliver video ad campaigns with demo guarantees; adoption of the company’s programmatic solutions by advertisers and publishers; adoption of the company’s All-Screen product by advertisers; the company’s ability to acquire an adequate supply of premium video advertising inventory from publishers on terms that are favorable to it; the company’s ability to detect fraudulent or malicious activity and ensure a high level of brand safety for its clients; identifying, attracting and retaining qualified personnel; defects, errors or interruptions in the company’s solutions; the company’s ability to collect and use data to deliver video ads; the impact of tools that block the display of video ads; the effect of regulatory developments and industry standards regarding Internet privacy and other matters; maintaining, protecting and enhancing the company’s intellectual property; costs associated with defending intellectual property infringement, securities litigation and other claims; future opportunities and plans, including the uncertainty of expected future financial performance and results; as well as other risks and uncertainties detailed from time-to-time under the caption “Risk Factors” and elsewhere in Tremor Video’s filings with the U.S. Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2015 filed with the U.S. Securities and Exchange Commission on March 15, 2016 and future filings and reports by the company, including its Quarterly Report on Form 10-Q for the quarter ended March 31, 2016.

Forward-looking statements are based on current expectations and beliefs and are not guarantees of future performance or events. Investors are cautioned not to place undue reliance on any forward-looking statements. Furthermore, forward-looking statements speak only as of the date on which they are made, and, except as required by law, Tremor Video disclaims any obligation to update these forward-looking statements to reflect future events or circumstances.

Non-GAAP Financial Measures: To supplement its consolidated financial statements, which are prepared and presented in accordance with U.S. generally accepted accounting principles (“GAAP”), Tremor Video reports Total Spend, Adjusted EBITDA, and basic and diluted Adjusted EBITDA per share, which are non-GAAP financial measures. We define Total Spend as the aggregate gross spend transacted through our platforms. Total Spend does not represent revenue earned by us. We define Adjusted EBITDA as net loss plus (minus): interest expense and other income (expense), net, income tax expense, depreciation and amortization expense, non-cash stock-based compensation expense, non-cash stock-based long-term incentive compensation, non-cash impairment charges, litigation costs associated with class action securities litigation, executive severance costs, acquisition related costs, and other adjustments. We define Adjusted EBITDA per share as Adjusted EBITDA divided by weighted average common shares outstanding. We use these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. We believe that these measures provide useful information about our operating results, enhance the overall understanding of our past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making. Non-GAAP financial measures should be considered in addition to results and guidance prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. The non-GAAP financial measures included in this press release have been reconciled to the nearest GAAP measure in the table following the financial statements attached to this press release. With respect to our expectations under “Guidance” above, reconciliation of Adjusted EBITDA guidance to the closest corresponding GAAP measure is not available without unreasonable efforts on a forward-looking basis due to the high variability, complexity and low visibility with respect to the charges excluded from these non-GAAP measures, in particular, the measures and effects of stock-based compensation expense specific to equity compensation awards that are directly impacted by unpredictable fluctuations in our stock price. We expect the variability of the above charges to have a significant, and potentially unpredictable, impact on our future GAAP financial results.

               
Exhibit A
 
Tremor Video, Inc.
Consolidated Balance Sheets
(in thousands)
 

     March 31,     

December 31,

2016

2015

(unaudited)

Assets
Current assets:
Cash and cash equivalents $       56,444 $       59,887
Accounts receivable, net 52,966 70,778
Prepaid expenses and other current assets         4,270           3,721
Total current assets 113,680 134,386
Long-term assets:
Restricted cash 920 600
Property and equipment, net 10,697 10,094
Intangible assets, net 10,391 11,469
Goodwill 10,883 10,781
Other assets         867           794  
Total long-term assets         33,758           33,738  
Total assets $       147,438   $       168,124  
 
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses $ 44,584 $ 58,742
Deferred rent, short-term 575 401
Contingent consideration on acquisition, short-term 2,774 987
Deferred revenue         187           108  
Total current liabilities 48,120 60,238
Deferred rent, long-term 6,118 5,237
Deferred tax liabilities 537 510
Contingent consideration on acquisition, long-term 1,053 443
Other long-term liabilities         280           264  
Total liabilities         56,108           66,692  
Stockholders' equity:
Common stock 5 5
Additional paid-in capital 280,130 279,136

Accumulated other comprehensive (loss)

(77 ) (55 )
Accumulated deficit         (188,728 )         (177,654 )
Total stockholders' equity         91,330           101,432  
Total liabilities and stockholders' equity $       147,438   $       168,124  
 
               
Tremor Video, Inc.
Consolidated Statements of Operations
(in thousands, except share and per share data)
 
 
Three Months Ended
March 31,
2016

2015(1)

(unaudited)
 
Revenue $       34,565 $       38,052
Cost of revenue         18,347           21,859  
Gross Profit         16,218           16,193  
 
Operating Expenses:

Technology and development(2)

5,843 4,951

Sales and marketing(2)

12,664 11,961

General and administrative(2)

4,922 4,344
Depreciation and amortization 2,239 1,777

Mark-to-market(3)

       

1,044

         

-

 
Total operating expenses        

26,712

          23,033  
 
Loss from operations        

(10,494

)         (6,840 )
 
Interest and other (expense) income, net:
Interest expense (2 ) (2 )

Other (expense) income, net

       

(252

)         14  

Total interest and other (expense) income, net

       

(254

)         12  
 
Loss before provision for income taxes (10,748 ) (6,828 )
 
Provision for income taxes 326 122
   
Net loss $       (11,074 ) $       (6,950 )
 
Net loss per share:
Basic and diluted $       (0.21 ) $       (0.14 )
 
Weighted-average number of shares of common stock outstanding:
Basic and diluted         52,372,857           51,217,220  
 
 

(1) As discussed in our Form 10-K for the year ended December 31, 2015, filed with the SEC on March 15, 2016,
the previously issued quarterly financial statements for the three months ended March 31, 2015 have been restated to
reflect the reporting of revenue attributable to the Company’s seller platform on a net instead of a gross basis. The
restatement has the effect of decreasing both revenue and cost of revenue in a like amount in such quarterly financial
statements, and has no impact on reported gross profit, net loss or Adjusted EBITDA.

 

(2) Stock-based compensation expense included above:

 
Three Months Ended
March 31,
2016 2015
(unaudited)
 
Technology and development $ 218 $ 214
Sales and marketing 386 409
General and administrative         360           485  
Total stock-based compensation expense $       964   $       1,108  
 

.

(3) Reflects expense incurred based on the Company’s re-measurement, at March 31, 2016, of the estimated fair value of earn-out payments that may become due in connection with the acquisition of TVN and which are not conditioned on continued employment with the Company.

 
         
Tremor Video, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended
March 31,
2016       2015
 
Cash flows from operating activities:
Net loss $       (11,074 ) $       (6,950 )
Adjustments required to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense 2,239 1,777
Loss from sublease 341

-

Bad debt recovery (expense) (35 ) 13
Stock-based compensation expense 964 1,108
Stock-based long-term incentive compensation expense - 19
Mark-to-market expense (income) 1,049 (3 )
Net changes in operating assets and liabilities:
Decrease in accounts receivable 17,966 3,336
Increase in prepaid expenses and other assets (137 ) (354 )
Decrease in accounts payable and accrued expenses

(15,485

) (1,159 )

Increase in contingent consideration on acquisition

1,206

-

Increase in deferred rent

245 390
Increase in deferred revenue         79           7  
Net cash used in operating activities         (2,642 )         (1,816 )
 
Cash flows from investing activities:
Purchase of property and equipment (301 ) (1,108 )
Changes in restricted cash         (320 )         -  
Net cash used in investing activities         (621 )         (1,108 )
 
Cash flows from financing activities:
Proceeds from the exercise of stock option awards - 5
Tax withholdings related to net share settlements of restricted stock units         (215 )         (132 )
Net cash used in financing activities         (215 )         (127 )
 
Net decrease in cash and cash equivalents (3,478 ) (3,051 )
 
Effect of exchange rate changes in cash and cash equivalents 35 (60 )
 
Cash and cash equivalents at beginning of period         59,887           77,787  
Cash and cash equivalents at end of period $       56,444   $       74,676  
 
             
Exhibit B
 
Tremor Video, Inc.
Reconciliation of Total Spend to Revenue
(in thousands)
(unaudited)
 
Three Months Ended
March 31,
2016 2015
 
Total Spend $       51,230 $       40,603
SSP inventory costs         16,665           2,551  
Revenue $       34,565   $       38,052  
 
 
Tremor Video, Inc.
Reconciliation of Net Loss to Adjusted EBITDA
(in thousands)
(unaudited)
 
Three Months Ended
March 31,
2016 2015
 
Net loss $ (11,074 ) $ (6,950 )
Adjustments:
Depreciation and amortization expense 2,239 1,777
Stock-based compensation expense 964 1,108
Executive severance 105 -
Acquisition-related costs(1) 1,219 -
Litigation costs 181 4
Stock-based long-term incentive compensation expense - 19
Provision for income taxes 326 122

Mark-to-market expense(2)

1,044

-

Interest and other expense (income), net

254

(12 )
Other adjustments(3)         520          

-

 
Total net adjustments         6,852           3,018  
Adjusted EBITDA $       (4,222 ) $       (3,932 )
 
 
Tremor Video, Inc.
Reconciliation of Net Loss to Adjusted EBITDA - Per Share
(unaudited)
 
Three Months Ended
March 31,
2016 2015
 
Net loss $ (0.21 ) $ (0.14 )
Adjustments:
Depreciation and amortization expense 0.04 0.03
Stock-based compensation expense 0.02 0.02
Executive severance - -
Acquisition-related costs(1) 0.02 -
Litigation costs - -
Stock-based long-term incentive compensation expense - -
Provision for income taxes 0.01 0.01

Mark-to-market expense(2)

0.02

-

Interest and other expense (income), net

0.01

-
Other adjustments(3)         0.01           -  
Total net adjustments        

0.13

          0.06  
Adjusted EBITDA per share - basic and diluted $      

(0.08

) $       (0.08 )
 
Weighted-average number of shares of common stock outstanding:
Basic and diluted         52,372,857           51,217,220  
(1) Reflects acquisition-related costs incurred in connection with the Company’s acquisition of The Video Network Pty Ltd, an Australian proprietary limited company (“TVN”). Includes $1,206 of compensation-related expenses, relating to certain earn-out payments that may become due to the former stockholders of TVN and which are conditioned on continued employment with the Company.

(2) Reflects expense incurred based on the Company’s re-measurement, at March 31, 2016, of the estimated fair value of earn-out payments that may become due in connection with the acquisition of TVN and which are not conditioned on continued employment with the Company.

(3) Reflects amounts accrued in connection with a one-time change in the Company’s employee vacation policy.
 
Exhibit C                                  
 
Tremor Video, Inc.
Consolidated Quarterly Statement of Operations
(in thousands)
(unaudited)
 
 
Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016
 
Revenue $       38,052 $       42,404 $       41,624 $       51,757 $       34,565
 
Inventory costs 20,317 22,991 22,494 27,206 16,368
Other cost of revenue         1,542           1,403           1,530           1,783           1,979  
Total cost of revenue 21,859 24,394 24,024 28,989 18,347
         
Gross Profit 16,193 18,010 17,600 22,768 16,218
 
Total operating expenses         23,033           23,139           46,280           24,886          

26,712

 
 
Loss from operations (6,840 ) (5,129 ) (28,680 ) (2,118 )

(10,494

)
 
Total interest and other (expense) income, net         12           6           77           (75 )        

(254

)
 
Loss before provision for income taxes (6,828 ) (5,123 ) (28,603 ) (2,193 ) (10,748 )
 
Provision for income taxes 122 117 19 225 326
         
Net loss $       (6,950 ) $       (5,240 ) $       (28,622 ) $       (2,418 ) $       (11,074 )
 
 

Contact:

Tremor Video, Inc.
Investor Relations:
Andrew Posen, 212-792-2315
Senior Director Investor Relations
IR@TremorVideo.com
or
Public Relations:
Mandy Robinson, 646-278-7416
Tremor Video Corporate Communications
MRobinson@TremorVideo.com

Related Materials:

Investor Relations

Andrew Posen

Senior Director, Investor Relations

212-792-2315

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