Tremor Video Reports Second Quarter 2017 Financial Results

$Cashtags

Tremor Video exceeds guidance on revenue, Total Spend and Adjusted EBITDA

Second quarter revenue increased 32% from prior year

Thursday, August 3, 2017 7:01 am EDT

Dateline:

NEW YORK

Public Company Information:

NYSE:
TRMR
"For the second consecutive quarter, we exceeded guidance across revenue, Total Spend and Adjusted EBITDA. I look forward to continuing to execute on our strategy in the second half of the year."

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 June 30, 2017 that exceeded expectations across all metrics, including revenue, Total Spend, and Adjusted EBITDA.

Second Quarter 2017 Highlights:

  • Revenue of $48.9 million, up 32% year-over-year
  • Total Spend(1) of $78.6 million, up 44% year-over-year
  • Record gross profit of $24.4 million, up 42% year-over-year
  • Adjusted EBITDA(2) of $3.0 million compared to ($1.2) million in Q2 2016
      (1)   We define Total Spend 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 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.

“These exceptional results underscore the strength of our technology and stellar leadership team,” commented Chief Executive Officer Mark Zagorski. “For the second consecutive quarter, we exceeded guidance across revenue, Total Spend and Adjusted EBITDA. I look forward to continuing to execute on our strategy in the second half of the year.”

Second Quarter and Year-to-Date Results Summary

The table below presents revenue, Total Spend, gross profit, net loss, Adjusted EBITDA and net loss per share for the three month and six month periods ended June 30, 2017 and June 30, 2016.

(in millions, except per share amounts), (unaudited)  
   
Three Months Ended Six Months Ended

June 30,
2017

 

June 30,
2016

 

%
Change

June 30,
2017

 

June 30,
2016

 

%
Change

 
Revenue $48.9 $37.1 32% $90.3 $71.7 26%
Total Spend $78.6 $54.7 44% $139.4 $105.9 32%
Gross profit $24.4 $17.2 42% $43.8 $33.4 31%
Net loss ($2.3) ($5.9) 61% ($9.2) ($16.9) 46%
Adjusted EBITDA $3.0 ($1.2) NM $0.6 ($5.5) NM
Net loss per share ($0.05) ($0.11) 55% ($0.18) ($0.32) 44%
 

Second Quarter and Year-to-Date Breakdown of Total Spend (1)

(in thousands), (unaudited)      
Three Months Ended Six Months Ended

June 30,
2017

 

June 30,
2016

 

%
Change

June 30,
2017

 

June 30,
2016

 

%
Change

 
Programmatic $ 44,005 $ 27,040 63 % $ 73,107 $ 53,177 37 %
Non-programmatic higher function 28,723 22,833 26 % 56,134 42,811 31 %
Non-programmatic media network   5,825   4,796 21 %   10,204   9,910 3 %
Total Spend $ 78,553 $ 54,669 44 % $ 139,445 $ 105,898 32 %
(1)   Please see the discussion in the section called “Non-GAAP Financial Measures.”
 

Guidance

Based on information available as of August 3, 2017, the Company expects the following:

Third Quarter and Full Year 2017 Outlook

    Q3 2017   Full Year 2017
 
Revenue $46.0 – $50.0 million $182.0 – $192.0 million
Total Spend $81.0 – $85.0 million $320.0 – $330.0 million
Adjusted EBITDA $1.0 – $4.0 million $3.0 – $7.0 million
 

Q2 2017 Financial Results Webcast: Tremor Video will host a conference call today at 8:00 a.m. ET to discuss its second quarter financial results. A live webcast of the event will be available on the Tremor Video Investor Relations website at http://investor.tremorvideo.com. A live domestic dial-in is available at (877) 407-9039 or internationally at (201) 689-8470. Until August 10, 2017, a domestic replay will be available at (844) 512-2921 or internationally at (412) 317-6671, using passcode 13666601, and via webcast on the Tremor Video Investor Relations website.

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, growth potential, or future profitability, including 2017 third quarter and 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 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; the rate of decline of the company’s non-programmatic media network; adoption of the company’s programmatic solutions by advertisers and publishers; the company’s inability to realize or loss of synergies between its buyer and seller platforms; adoption of the company’s All-Screen product and other higher-function buying products 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, 2016, filed with the U.S. Securities and Exchange Commission on March 10, 2017, its Quarterly Report on Form 10-Q for the period ended March 31, 2017, filed with the U.S. Securities and Exchange Commission on May 10, 2017, and future filings and reports by the company, including its Quarterly Report on Form 10-Q for the quarter ended June 30, 2017.

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 and Adjusted EBITDA, 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. Within Total Spend, we closely monitor the percentage contributions among the following operational metrics: programmatic; non-programmatic higher function; and non-programmatic media. Programmatic includes all spend attributable to the Tremor Video SSP, Tremor Video DSP and agency trading desks. We define non-programmatic higher-function as non-programmatic spend running through our buyer platform that utilizes our higher-function products, including our All-Screen optimization solution, our advanced data targeting solutions, and our proprietary outcome-based pricing models. We define non-programmatic media as non-programmatic spend running through our buyer platform that is purchased without any of our higher-function products. We track these operational metrics in order to better understand how our clients are transacting on our platforms, which informs decisions as to the allocation of resources and capital. We define Adjusted EBITDA as net loss plus (minus): interest expense and other income (expense), net, provision for income taxes, depreciation and amortization expense, non-cash stock-based compensation expense, non-cash stock-based long-term incentive compensation, executive severance and retention costs, acquisition related costs, litigation costs associated with class action securities litigation, mark-to-market expense, impairment charges, other professional fees, and other adjustments. 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 Total Spend and 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 costs and 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 these costs and 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)
 
June 30, December 31,
2017   2016
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 36,153 $ 43,160
Accounts receivable, net 74,190 79,027
Prepaid expenses and other current assets   2,284       2,405  
Total current assets   112,627       124,592  
Long-term assets:
Restricted cash - 770
Property and equipment, net 8,080 9,656
Intangible assets, net 4,868 6,922
Goodwill 10,881 10,758
Other assets   1,487       1,527  
Total long-term assets   25,316       29,633  
Total assets $ 137,943     $ 154,225  
 
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses $ 56,474 $ 64,691
Deferred rent, short-term 745 704
Contingent consideration on acquisition, short-term 4,635 2,483
Deferred revenue 95 5
Capital leases, short-term 362 362
Other current liabilities   100       179  
Total current liabilities 62,411 68,424
Long-term liabilities:
Deferred rent, long-term 5,716 6,072
Deferred tax liabilities 487 447
Capital leases, long-term   573       760  
Total liabilities   69,187       75,703  
Stockholders' equity:
Common stock 5 5
Treasury stock (8,443 ) (6,037 )
Additional paid-in capital 285,253 283,486
Accumulated other comprehensive loss (204 ) (331 )
Accumulated deficit   (207,855 )     (198,601 )
Total stockholders' equity   68,756       78,522  
Total liabilities and stockholders' equity $ 137,943     $ 154,225  
 
 
Tremor Video, Inc.
Consolidated Statements of Operations
(in thousands, except share and per share data)
(unaudited)
         
Three Months Ended Six Months Ended
June 30,   June 30,
2017   2016   2017   2016
 
Revenue $ 48,867 $ 37,107 $ 90,267 $ 71,672
Cost of revenue   24,441       19,907       46,464       38,254  
Gross profit   24,426       17,200       43,803       33,418  
 
Operating Expenses:
Technology and development(1) 5,190 5,045 10,851 10,888
Sales and marketing(1) 13,908 11,342 26,961 24,006
General and administrative(1) 5,005 4,074 10,088 8,996
Depreciation and amortization 2,357 2,325 4,706 4,564
Mark-to-market(2)   93       45       148       1,089  

Total operating expenses

  26,553       22,831       52,754       49,543  
 
Loss from operations   (2,127 )     (5,631 )     (8,951 )     (16,125 )
 
Interest and other (expense) income, net:
Interest expense (138 ) (13 ) (190 ) (15 )
Other (expense) income, net   60       (33 )     85       (285 )
Total interest and other expense, net   (78 )     (46 )     (105 )     (300 )
 
Loss before provision for income taxes (2,205 ) (5,677 ) (9,056 ) (16,425 )
 
Provision for income taxes 95 178 104 504
             
Net loss $ (2,300 )   $ (5,855 )   $ (9,160 )   $ (16,929 )
 
Net loss per share:
Basic and diluted $ (0.05 )   $ (0.11 )   $ (0.18 )   $ (0.32 )
 
Weighted-average number of shares of common stock outstanding:
Basic and diluted   50,205,913       52,633,054       50,102,803       52,502,955  
 
 
(1) Stock-based compensation expense included above:
 
Three Months Ended Six Months Ended
June 30,   June 30,
2017   2016   2017   2016
(unaudited) (unaudited)
 
Technology and development $ 234 $ 244 $ 445 $ 462
Sales and marketing 405 381 773 767
General and administrative   410       400       847       760  
Total stock-based compensation expense $ 1,049     $ 1,025     $ 2,065     $ 1,989  
 
(2) Reflects expense incurred based on the Company’s re-measurement, at June 30, 2017 and June 30, 2016, of the estimated fair value of earn-out payments that have become or may become due in connection with the acquisition of The Video Network Pty Ltd, an Australian proprietary limited company (“TVN”), and which are not conditioned on continued employment with the Company.
 
Tremor Video, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
     
Six Months Ended
June 30,
2017   2016
 
Cash flows from operating activities:
Net loss $   (9,160 ) $   (16,929 )
 
Adjustments required to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense 4,706 4,564
Loss from sublease - 341
Bad debt expense (recovery) 325 (61 )
Stock-based compensation expense 2,065 1,989
Compensation expense related to acquisition contingent consideration 1,810 2,142
Mark-to-market expense 148 1,089
Loss on disposal of property and equipment - 23
Deferred tax benefit 40 -
Net changes in operating assets and liabilities:
Decrease in accounts receivable 4,742 14,964
Decrease (increase) in prepaid expenses and other assets 161 (176 )
Decrease (increase) in restricted cash 770 (170 )
Decrease in accounts payable and accrued expenses (8,884 ) (15,032 )
Decrease in other current liabilities (79 ) -
Decrease in deferred rent (315 ) (26 )
Increase (decrease) in deferred revenue     90         (47 )
Net cash used in operating activities     (3,581 )       (7,329 )
 
Cash flows from investing activities:
Purchase of property and equipment     (907 )       (2,323 )
Net cash used in investing activities     (907 )       (2,323 )
 
Cash flows from financing activities:
Proceeds from common stock issuance 255 245
Proceeds from the exercise of stock options awards 62 153
Principal portion of capital lease payments (187 ) -
Treasury stock - repurchase of stock (2,406 ) (332 )
Tax withholdings related to net share settlements of restricted stock units     (709 )       (252 )
Net cash used in financing activities     (2,985 )       (186 )
 
Net decrease in cash and cash equivalents (7,473 ) (9,838 )
 
Effect of exchange rate changes in cash and cash equivalents 466 (72 )
 
Cash and cash equivalents at beginning of period     43,160         59,887  
Cash and cash equivalents at end of period $   36,153     $   49,977  
 

Exhibit B

 

         
Tremor Video, Inc.
Reconciliation of Total Spend to Revenue
(in thousands)
(unaudited)
 
Three Months Ended Six Months Ended
June 30,   June 30,
2017   2016   2017   2016
 
Total Spend $   78,553 $   54,669 $   139,445 $   105,898

SSP inventory costs(1)

    29,686       17,562       49,178       34,226
Revenue $   48,867   $   37,107   $   90,267   $   71,672
 
(1) We record revenue from our buyer platform on a gross basis, including costs of inventory. Accordingly, for revenue generated from our buyer platform, total spend is equivalent to revenue. We record revenue from our seller platform, the Tremor Video SSP, net of inventory costs. Total spend through the Tremor Video SSP is equal to the revenue generated from the Tremor Video SSP plus associated costs of inventory.
         
Tremor Video, Inc.
Reconciliation of Net Loss to Adjusted EBITDA
(in thousands)
(unaudited)
 
Three Months Ended Six Months Ended
June 30, June 30,
2017   2016   2017   2016
 
Net loss $   (2,300 ) $   (5,855 ) $   (9,160 ) $   (16,929 )
Adjustments:
Depreciation and amortization expense 2,357 2,325 4,706 4,564
Stock-based compensation expense 1,049 1,025 2,065 1,989
Executive severance, retention and recruiting costs(1) 362 67 432 172
Acquisition-related costs(2) 985 929 1,810 2,148
Litigation expenses - - - 181
Provision for income taxes 95 178 104 504
Mark-to-market expense(3) 93 45 148 1,089
Interest and other (income) expense, net 78 46 105 300
Other adjustments(4) - - 109 520
Other professional fees     300         -         300         -  
Total net adjustments     5,319         4,615         9,779         11,467  
Adjusted EBITDA $   3,019     $   (1,240 )   $   619     $   (5,462 )
 
(1) Reflects severance costs related to the termination of certain executives, the accrual of compensation expense in connection with retention bonuses that may become payable to certain executives and executive recruitment costs.
 
(2) Reflects acquisition-related costs incurred in connection with our acquisition of TVN. Includes compensation-related expenses related to contingent consideration payments that may become due to certain TVN sellers that are subject to continued employment of $985 and $924 for the three months ended June 30, 2017 and 2016 respectively and $1,810 and $2,130 for the six months ended June 30, 2017 and June 30, 2016, respectively
 
(3) Reflects expense incurred based on the Company’s re-measurement, at June 30, 2017 and June 30, 2016, of the estimated fair value of earn-out payments that have become or may become due in connection with the acquisition of TVN and which are not conditioned on continued employment with the Company.
 
(4) 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 2016   Q2 2016   Q3 2016   Q4 2016   Q1 2017   Q2 2017
 
Revenue $   34,565 $   37,107 $   41,281 $   53,808 $   41,400 $   48,867
 
Inventory costs 16,368 17,922 19,198 25,476 16,088 18,449
Other cost of revenue     1,979         1,985         3,500         4,060         5,935         5,992  
Total cost of revenue 18,347 19,907 22,698 29,536 22,023 24,441
                     
Gross Profit 16,218 17,200 18,583 24,272 19,377 24,426
 
Total operating expenses     26,712         22,831         22,311         24,998         26,201         26,553  
 
Loss from operations (10,494 ) (5,631 ) (3,728 ) (726 ) (6,824 ) (2,127 )
 
Total interest and other (expense) income, net     (254 )       (46 )       68         (20 )       (27 )       (78 )
 
Loss before provision for income taxes (10,748 ) (5,677 ) (3,660 ) (746 ) (6,851 ) (2,205 )
 
Provision for income taxes 326 178 (43 ) (345 ) 9 95
                     
Net loss $   (11,074 )   $   (5,855 )   $   (3,617 )   $   (401 )   $   (6,860 )   $   (2,300 )

Contact:

Tremor Video, Inc.
Investor Relations:
Andrew Posen, 212-792-2315
Vice President, Head of Investor Relations
IR@TremorVideo.com
or
Media:
Lekha Rao, 646-699-7706
Vice President, Media Relations & Corporate Communications
lrao@tremorvideo.com

Related Materials:

Investor Relations

Andrew Posen

VP, Investor Relations

212-792-2315

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