Tremor Video Reports Third Quarter 2014 Financial Results

Q3 2014 revenue grows 11%

  • Revenue for the three months ended September 30, 2014 grew 10.7% year-over-year to $39.0 million
  • Revenue for the nine months ended September 30, 2014 grew 23.2% year-over-year to $117.6 million
  • Net loss of ($5.5) million; Non-GAAP Adjusted EBITDA of ($2.3) million
  • Net loss per share of ($0.11); Non-GAAP Adjusted EBITDA per share of ($0.04)
Thursday, November 6, 2014 4:01 pm EST

Dateline:

NEW YORK

Public Company Information:

NYSE:
TRMR
"We saw outstanding adoption of our All-Screen and performance based pricing products and recently signed a significant agency for our DSP."

NEW YORK--(BUSINESS WIRE)--Tremor Video, Inc. (NYSE:TRMR), an advertising technology company elevating brand performance across all screens for the world’s leading brands and publishers, today announced financial results for the third quarter 2014.

“I am pleased with our results through three quarters, powered by the growth of our premium managed service business and the early traction of our self-service platform, furthering our programmatic capabilities,” said Bill Day, President and CEO of Tremor Video. “We saw outstanding adoption of our All-Screen and performance based pricing products and recently signed a significant agency for our DSP.”

Q3 & YTD 2014 Financial Summary

Revenue: For the three months ended September 30, 2014, revenue was $39.0 million compared to $35.3 million for the three months ended September 30, 2013, representing a 10.7% increase over the same period one year ago.

For the nine months ended September 30, 2014, revenue was $117.6 million compared to $95.5 million for the nine months ended September 30, 2013, representing a 23.2% increase over the same period one year ago.

Gross Margin: For the three months ended September 30, 2014, gross margin was 38.4% compared to 40.3% for the same period one year ago.

For the nine months ended September 30, 2014, gross margin was 35.5% compared to 43.6% for the same period one year ago.

Net Loss: For the three months ended September 30, 2014, net loss was ($5.5) million compared to a net loss of ($2.2) million for the same period one year ago.

For the nine months ended September 30, 2014, net loss was ($18.1) million compared to a net loss of ($7.7) million for the same period one year ago.

Adjusted EBITDA: For the three months ended September 30, 2014, Adjusted EBITDA, a non-GAAP financial measure, was ($2.3) million compared to Adjusted EBITDA of $0.1 million for the same period one year ago.

For the nine months ended September 30, 2014, Adjusted EBITDA, a non-GAAP financial measure, was ($9.2) million compared to Adjusted EBITDA of ($0.6) million for the same period one year ago.

EPS: For the three months ended September 30, 2014, basic and diluted net loss per share was ($0.11). Non-GAAP basic and diluted Adjusted EBITDA per share was ($0.04). Basic and diluted net loss per share and Non-GAAP basic and diluted Adjusted EBITDA per share are based on 50.8 million weighted average shares of common stock for the three months ended September 30, 2014.

For the nine months ended September 30, 2014, basic and diluted net loss per share was ($0.36). Non-GAAP basic and diluted Adjusted EBITDA per share was ($0.18). Basic and diluted net loss per share and Non-GAAP basic and diluted Adjusted EBITDA per share are based on 50.5 million weighted average shares of common stock for the nine months ended September 30, 2014.

A description of the non-GAAP calculations and reconciliation to comparable GAAP measures is provided in the accompanying tables entitled “Reconciliation of Non-GAAP Financial Information” and “Reconciliation of Non-GAAP Financial Information-Per Share.”

Business & Financial Highlights

As a percentage of total revenue, revenue attributable to performance-based pricing for the three months ended September 30, 2014 was 28.4% compared to 26.1% for the same period one year ago and for the nine months ended September 30, 2014 was 26.1% compared to 31.5% for the same period one year ago.

As a percentage of total revenue, revenue attributable to our All-Screen product for the three months ended September 30, 2014 was 33.0%. Our All-Screen product, which we introduced during the second quarter, optimizes delivery of video ad campaigns across screens, eliminating the need for advertisers to allocate campaign budgets to a specific device.

Guidance

Based on information available as of November 6, 2014, the Company reiterates its guidance for full year 2014 as follows:

Full year 2014 revenue is expected to be in the range of $158.0 million to $163.0 million and Adjusted EBITDA is expected to be in the range of ($8.0) million to ($11.0) million.

Q3 2014 Financial Results Conference Call: Tremor Video will host a conference call today at 4:30 p.m. ET to discuss its third quarter financial results with the investment community. 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 November 20, 2014, a domestic replay will be available at (877)870-5176 or internationally at (858)384-5517, using passcode 13592906, and via webcast on the Tremor Video Investor Relations website.

About Tremor Video

Tremor Video (NYSE: TRMR) is transforming the video advertising experience across all screens for the world’s leading brands. Our proprietary technology, VideoHub®, offers advertisers and publishers a complete programmatic solution to reach and engage consumers while providing new insights into what drives the success of brand advertising performance across multiple devices. Tremor Video is based in New York with offices throughout the U.S. and across the globe. For more information, visit tremorvideo.com and find Tremor Video on Twitter, Facebook and LinkedIn.

"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 2014 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; 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; a delay in, or failure of advertisers or publishers to adopt, the company’s programmatic solutions, including its self-service platform; adoption of the company’s all-screen buying solution 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 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 Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2013 filed with the U.S. Securities and Exchange Commission on March 28, 2014, its Quarterly Report on Form 10-Q for the three months ended March 31, 2014 filed with the U.S. Securities and Exchange Commission on May 15, 2014, its Quarterly Report on Form 10-Q for the six months ended June 30, 2014 filed with the U.S. Securities and Exchange Commission on August 14, 2014, and future filings and reports by the company, including its Quarterly Report on Form 10-Q for the quarter ended September 30, 2014.

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 Adjusted EBITDA and basic and diluted Adjusted EBITDA per share which are non-GAAP financial measures. 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, and litigation costs associated with pending class action securities litigation. 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.

Tremor Video, Inc.
Consolidated Balance Sheets
(in thousands)
     
  September 30, 2014 December 31, 2013
  (unaudited)  
     
Assets    
Current assets:    
Cash and cash equivalents $77,909  $92,691 
Accounts receivable, net  46,519   41,458 
Prepaid expenses and other current assets  1,614   1,912 
Total current assets  126,042   136,061 
Long-term assets:    
Restricted cash  600   600 
Property and equipment, net  4,730   3,388 
Intangible assets, net  16,760   20,387 
Goodwill  29,719   29,719 
Deferred tax assets  189   189 
Other assets  249   216 
Total long-term assets  52,247   54,499 
Total assets $178,289  $190,560 
     
Liabilities and stockholders’ equity    
Current liabilities:    
Accounts payable and accrued expenses $33,157  $32,312 
Deferred rent and security deposits payable, short-term  --   14 
Deferred revenue  314   271 
Deferred tax liabilities, short-term  189   189 
Total current liabilities  33,660   32,786 
Deferred rent, long-term  763   742 
Total liabilities  34,423   33,528 
Stockholders’ equity:    
Common stock  5   5 
Additional paid-in capital  272,734   267,767 
Accumulated other comprehensive income  137   195 
Accumulated deficit  (129,010)  (110,935)
Total stockholders’ equity  143,866   157,032 
Total liabilities and stockholders’ equity $178,289  $190,560 
         
Tremor Video, Inc.
Consolidated Statements of Operations
(in thousands, except share and per share data)
         
  Three Months Ended Nine Months Ended
  September 30, September 30,
   2014   2013   2014   2013 
  

(unaudited)

Revenue $39,039  $35,267  $117,609  $95,497 
Cost of revenue  24,046   21,057   75,882   53,869 
Gross profit  14,993   14,210   41,727   41,628 
         
Operating expenses:        
Technology and development(1)  4,270   2,833   12,583   8,348 
Sales and marketing(1)  10,761   9,477   31,118   28,263 
General and administrative(1)  3,724   2,681   11,037   8,069 
Depreciation and amortization  1,673   1,581   4,902   4,576 
Total operating expenses  20,428   16,572   59,640   49,256 
         
Loss from operations  (5,435)  (2,362)  (17,913)  (7,628)
         
Interest and other income (expense), net:        
Interest expense, net  (3)  (14)  (3)  (127)
Other income (expense), net  8   153   (15)  323 
Total interest and other income (expense), net  5   139   (18)  196 
         
Loss before income taxes  (5,430)  (2,223)  (17,931)  (7,432)
Income tax expense  44   20   144   243 
Net loss  (5,474)  (2,243)  (18,075)  (7,675)
Series F preferred stock deemed dividend  --   15,849   --   15,849 
Net loss attributable to common stockholders $(5,474) $(18,092) $(18,075) $(23,524)
         
Net loss per share:        
Basic and diluted $(0.11) $(0.05) $(0.36) $(0.35)
         

Net loss attributable to common stockholders per share:

        
Basic and diluted $(0.11) $(0.37) $(0.36) $(1.08)
         

Weighted-average number of shares of common stock outstanding:

        
Basic and diluted  50,751,303   49,115,766   50,485,734   21,686,759 
 
         

(1) Stock-based compensation expense included above:

        
         
  Three Months Ended Nine Months Ended
  September 30, September 30,
   2014   2013   2014   2013 
  

(unaudited)

Technology and development $239  $142  $653  $391 
Sales and marketing  342   317   1,063   883 
General and administrative  607   459   1,578   1,145 
Total stock-based compensation expense $1,188  $918  $3,294  $2,419 
         
Tremor Video, Inc.
Reconciliation of Non-GAAP Financial Information
(in thousands)
         
  Three Months Ended Nine Months Ended
  September 30, September 30,
   2014   2013   2014   2013 
  (unaudited)
Net loss $(5,474) $(2,243) $(18,075) $(7,675)
Adjustments:        
Depreciation and amortization expense  1,673   1,581   4,902   4,576 
Stock-based compensation expense  1,188   918   3,294   2,419 
Stock-based long-term incentive compensation  160   --   274   -- 
Interest and other (income) expense, net  (5)  (139)  18   (196)
Income tax expense  44   20   144   243 
Litigation costs  132   --   279   -- 
Total net adjustments  3,192   2,380   8,911   7,042 
Adjusted EBITDA $(2,282) $137  $(9,164) $(633)
         
Tremor Video, Inc.
Reconciliation of Non-GAAP Financial Information-Per Share
         
  Three Months Ended Nine Months Ended
  September 30, September 30,
   2014   2013   2014   2013 
  (unaudited)
Net loss $(0.11) $(0.05) $(0.36) $(0.35)
Adjustments:        
Depreciation and amortization expense  0.03   0.03   

0.10

   0.21 
Stock-based compensation expense  0.02   0.02   0.06   0.11 
Stock-based long-term incentive compensation  0.01   --   0.01   -- 
Interest and other (income) expense, net  --   --   --   (0.01)
Income tax expense  --   --   --   0.01 
Litigation costs  0.01   --   0.01   -- 
Total net adjustments  0.07   0.05   0.18   0.32 
Adjusted EBITDA per share - basic $(0.04) $--  $(0.18) $(0.03)
         

Weighted-average number of shares of common stock outstanding:

        
Basic  50,751,303   49,115,766   50,485,734   21,686,759 
         
Adjusted EBITDA per share – diluted $(0.04) $--  $(0.18) $(0.03)
         

Weighted-average number of shares of common stock outstanding:

        
Diluted  50,751,303   53,243,233   50,485,734   21,686,759 
                 
Tremor Video, Inc.
Consolidated Statements of Cash Flows
(in thousands)
     
  Nine Months Ended
  September 30,
   2014   2013 
  (unaudited)
Cash flows from operating activities:    
Net loss $(18,075) $(7,675)
Adjustments required to reconcile net loss to net cash (used in) provided by operating    
activities:    
Depreciation of property and equipment  1,275   919 
Amortization of intangible assets  3,627   3,657 
Bad debt recovery  (36)  (26)
Mark-to-market income  --   (313)
Contingent stock grant to third party vendor  24   -- 
Stock-based compensation expense  3,294   2,419 
Stock-based long-term incentive compensation  274   -- 
Net changes in operating assets and liabilities:    
Increase in accounts receivable  (5,061)  (3,376)
Decrease (increase) in prepaid expenses and other long-term assets  292   (835)
Increase in accounts payable and accrued expenses  2,039   8,998 
  
  
Increase in deferred rent and security deposits payable  7   119 
Increase (decrease) in deferred revenue  43   (16)
Net cash (used in) provided by operating activities  (12,297)  3,871 
     
Cash flows from investing activities:    
Purchase of property and equipment  (2,617)  (1,757)
Changes in restricted cash  --   621 
Net cash used in investing activities  (2,617)  (1,136)
     
Cash flows from financing activities:    
Net proceeds from common stock issuance  --   66,598 
Repayment of amount outstanding under credit facility  --   (6,000)
Proceeds from the exercise of stock options  727   492 
  
Tax withholdings related to net share settlements of restricted stock units  (565)  -- 
Net cash provided by financing activities  162   61,090 
     
Net (decrease) increase in cash and cash equivalents  (14,752)  63,825 
     
Effect of exchange rate changes in cash and cash equivalents  (30)  (100)
     
Cash and cash equivalents at beginning of period  92,691   32,533 
Cash and cash equivalents at end of period $77,909  $96,258 
     
Supplemental disclosure of cash flow activities:    
Cash paid for income taxes $--  $147 
Cash paid for interest expense $3  $127 
     
Supplemental disclosure of non-cash financing activities:    
Common stock issued in connection with the conversion of preferred stock $--  $162,657 
Common stock issued in connection with the Series F preferred stock deemed dividend $--  $15,849 
Reclassification of liability warrants to equity warrants $--  $790 
Common stock issued for settlement of RSUs $952  $-- 
         

 

Contact:

Investor Relations:
Andrew Posen, 212-792-2315
Senior Director Investor Relations
IR@TremorVideo.com
or
Public Relations:
Billy Kenny, 646-421-6217
Tremor Video Corporate Communications
BKenny@TremorVideo.com

Related Materials:

Investor Relations

Andrew Posen

VP, Investor Relations

212-792-2315

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