Tremor Video Reports Strong First Quarter 2017 Results; Building on Momentum, Increases 2017 Outlook

Tremor Video beats guidance across all three metrics

First quarter revenue increased 20% from prior year

NEW YORK--()--Tremor Video, Inc. (NYSE:TRMR), a provider of software for video ad effectiveness, today announced financial results for the first quarter ended March 31, 2017 that exceeded expectations across all metrics, including Total Spend, revenue and Adjusted EBITDA.

First Quarter 2017 Highlights:

  • Revenue of $41.4 million, up 20% year-over-year
  • Total Spend(1) of $60.9 million, up 19% year-over-year
  • Gross profit of $19.4 million, up 19% year-over-year
  • Adjusted EBITDA(2) of ($2.4) million compared to ($4.2) million in Q1 2016
  • Raising full year 2017 financial guidance
 
(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.
 

“We had a very strong quarter, and I am incredibly proud of our team’s ability to execute on our strategy, delivering results that exceeded guidance across all metrics,” commented Interim Chief Executive Officer Paul Caine. “We saw continued momentum in our SSP, significantly expanding the depth and quality of our publisher relationships. Our success this quarter and our positive outlook for the remainder of the year enables us to increase our full year guidance.”

First Quarter 2017 Financial Results

The table below presents revenue, Total Spend, gross profit, net loss, Adjusted EBITDA and net loss per share for the three month periods ended March 31, 2017 and March 31, 2016.

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

March 31,

2017

     

March 31,

2016

     

%
Change

 
Revenue $41.4 $34.6 20%
Total Spend $60.9 $51.2 19%
Gross profit $19.4 $16.2 19%
Net loss ($6.9) ($11.1) 38%
Adjusted EBITDA ($2.4) ($4.2) 43%
Net loss per share ($0.14) ($0.21) 35%
 

First Quarter 2017 Breakdown of Total Spend(1)

(in millions), (unaudited)      
 
Three Months Ended

March 31,

2017

     

March 31,

2016

     

%
Change

 
Programmatic

 

$ 29.1 $ 26.1 11%
Non-programmatic higher function 27.4 20.0 37%
Non-programmatic media network 4.4 5.1 (14%)
Total Spend $ 60.9 $ 51.2 19%
(1)     Please see the discussion in the section called “Non-GAAP Financial Measures.”
 

Guidance

Based on information available as of May 9, 2017, the Company expects the following:

Q2 and Full Year 2017 Outlook            
Q2 2017 Full Year 2017
 
Revenue $38.0 – $42.0 million $182.0 – $192.0 million
Total Spend $66.0 – $70.0 million $320.0 – $330.0 million
Adjusted EBITDA ($2.0) – $1.0 million $3.0 – $7.0 million
 

Q1 2017 Financial Results Webcast: Tremor Video will host a conference call today at 8:00 a.m. ET to discuss its first 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 May 16, 2017, a domestic replay will be available at (844) 512-2921 or internationally at (412) 317-6671, using passcode 13659536, 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 second 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; 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, including a successor CEO; 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 and future filings and reports by the company, including its Quarterly Report on Form 10-Q for the quarter ended March 31, 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, 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)
 
      March 31,     December 31,
2017     2016
(unaudited)
Assets

Current assets:

Cash and cash equivalents $ 28,032 $ 43,160
Accounts receivable, net 67,665 79,027
Prepaid expenses and other current assets   3,114         2,405  
Total current assets   98,811         124,592  
Long-term assets:
Restricted cash - 770
Property and equipment, net 9,209 9,656
Intangible assets, net 5,933 6,922
Goodwill 10,871 10,758
Other assets   1,596         1,527  
Total long-term assets   27,609         29,633  
Total assets $ 126,420       $ 154,225  
 
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses $ 44,653 $ 64,691
Deferred rent and security deposits payable 880 704
Contingent consideration on acquisition, short-term 3,517 2,483
Deferred revenue 27 5
Capital leases, current 352 362
Other current liabilities   100         179  
Total current liabilities 49,529 68,424
Long-term liabilities:
Deferred rent, long-term 5,778 6,072
Deferred tax liabilities 446 447
Capital leases, long-term   668         760  
Total liabilities   56,421         75,703  
Stockholders' equity:
Common stock 5 5
Treasury stock (8,443 ) (6,037 )
Additional paid-in capital 284,237 283,486
Accumulated other comprehensive loss (245 ) (331 )
Accumulated deficit   (205,555 )       (198,601 )
Total stockholders' equity   69,999         78,522  
Total liabilities and stockholders' equity $ 126,420       $ 154,225  
 
 
Tremor Video, Inc.
Consolidated Statements of Operations
(in thousands, except share and per share data)
 
      Three Months Ended
March 31,
2017     2016
(unaudited)    
 
Revenue $ 41,400 $ 34,565
Cost of revenue   22,023         18,347  
Gross profit   19,377         16,218  
 
Operating Expenses:
Technology and development(1) 5,661 5,843
Sales and marketing(1) 13,053 12,664
General and administrative(1) 5,083 4,922
Depreciation and amortization 2,349 2,239
Mark-to-market(2)   55         1,044  
Total operating expenses   26,201         26,712  
 
Loss from operations   (6,824 )       (10,494 )
 
Interest and other (expense) income, net:
Interest expense (52 ) (2 )
Other (expense) income, net   25         (252 )
Total interest and other expense, net   (27 )       (254 )
 
Loss before provision for income taxes (6,851 ) (10,748 )
 
Provision for income taxes 9 326
       
Net loss $ (6,860 )     $ (11,074 )
 
Net loss per share:
Basic and diluted $ (0.14 )     $ (0.21 )
 
Weighted-average number of shares of common stock outstanding:
Basic and diluted   49,998,547         52,372,857  
 

(1) Stock-based compensation expense included above:

      Three Months Ended
March 31,
2017     2016
(unaudited)
   
Technology and development $ 211 $ 218
Sales and marketing 368 386
General and administrative   437       360
Total stock-based compensation expense $ 1,016     $ 964
(2) Reflects expense incurred based on the Company’s re-measurement, at March 31, 2017 and March 31, 2016, of the estimated fair value of earn-out payments that 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)
 
      Three Months Ended
March 31,
2017     2016
   
Cash flows from operating activities:
Net loss $ (6,860 ) $ (11,074 )
Adjustments required to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense 2,349 2,239
Loss from sublease - 341
Bad debt expense (recovery) 296 (35 )
Stock-based compensation expense 1,016 964
Compensation expense related to acquisition contingent consideration 825 1,206
Mark-to-market expense 55 1,049
Net changes in operating assets and liabilities:
Deferred tax benefit (27 ) -
Decrease in accounts receivable 11,262 17,966
Increase in prepaid expenses and other assets (779 ) (137 )
Decrease in accounts payable and accrued expenses (20,499 ) (14,932 )
Decrease in other current liabilities (79 ) -
Decrease (increase) in deferred rent (118 ) 245
Decrease (increase) in restricted cash 770 (320 )
Increase in deferred revenue   22         79  
Net cash used in operating activities   (11,767 )       (2,409 )
 
Cash flows from investing activities:
Purchase of property and equipment   (754 )       (854 )
Net cash used in investing activities   (754 )       (854 )
 
Cash flows from financing activities:
Proceeds from common stock issuance 256 -
Proceeds from the exercise of stock options awards 38 -
Principal portion of capital lease payments (102 ) -
Treasury stock - repurchase of stock (2,406 ) -
Tax withholdings related to net share settlements of restricted stock units   (654 )       (215 )
Net cash used in financing activities   (2,868 )       (215 )
 
Net decrease in cash and cash equivalents (15,389 ) (3,478 )
 
Effect of exchange rate changes in cash and cash equivalents 261 35
 
Cash and cash equivalents at beginning of period   43,160         59,887  
Cash and cash equivalents at end of period $ 28,032       $ 56,444  
 
 
Exhibit B
 
Tremor Video, Inc.
Reconciliation of Total Spend to Revenue
(in thousands)
(unaudited)
 
      Three Months Ended
March 31,
2017     2016
   
Total Spend $ 60,892 $ 51,230
SSP inventory costs(1)   19,492       16,665
Revenue $ 41,400     $ 34,565
(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
March 31,
2017     2016
   
Net loss $ (6,860 ) $ (11,074 )
Adjustments:
Depreciation and amortization expense 2,349 2,239
Stock-based compensation expense 1,016 964
Executive severance and retention costs(1) 70 105
Acquisition-related costs(2) 825 1,219
Litigation expenses - 181
Provision for income taxes 9 326
Mark-to-market expense(3) 55 1,044
Interest and other (income) expense, net 27 254
Other adjustments(4)   109         520  
Total net adjustments   4,460         6,852  
Adjusted EBITDA $ (2,400 )     $ (4,222 )
(1) Reflects severance costs related to the termination of certain executives and the accrual of compensation expense in connection with retention bonuses that may become payable to certain executives.
 
(2) Reflects acquisition-related costs incurred in connection with the Company’s acquisition of TVN. Includes $825 and $1,206 for the three months ended March 31, 2017 and March 31, 2016, respectively, of compensation-related expenses related to contingent consideration payments that may become due to certain TVN sellers that are subject to continued employment.
 
(3) Reflects expense incurred based on the Company’s re-measurement, at March 31, 2017 and 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.
 
(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
               
Revenue $ 34,565 $ 37,107 $ 41,281 $ 53,808 $ 41,400
 
Inventory costs 16,368 17,922 19,198 25,476 16,088
Other cost of revenue   1,979         1,985         3,500         4,060         5,935  
Total cost of revenue 18,347 19,907 22,698 29,536 22,023
                         
Gross Profit 16,218 17,200 18,583 24,272 19,377
 
Total operating expenses   26,712         22,831         22,311         24,998         26,201  
 
Loss from operations (10,494 ) (5,631 ) (3,728 ) (726 ) (6,824 )
 
Total interest and other (expense) income, net   (254 )       (46 )       68         (20 )       (27 )
 
Loss before provision for income taxes (10,748 ) (5,677 ) (3,660 ) (746 ) (6,851 )
 
Provision for income taxes 326 178 (43 ) (345 ) 9
                         
Net loss $ (11,074 )     $ (5,855 )     $ (3,617 )     $ (401 )     $ (6,860 )

Contacts

Investor Relations:
Tremor Video, Inc.
Andrew Posen, 212-792-2315
IR@TremorVideo.com
or
Media:
MWWPR
Ivy Chen, 415-580-6133
ichen@mww.com

Contacts

Investor Relations:
Tremor Video, Inc.
Andrew Posen, 212-792-2315
IR@TremorVideo.com
or
Media:
MWWPR
Ivy Chen, 415-580-6133
ichen@mww.com