Company Update (NASDAQ:TUBE): TubeMogul Inc Reports Financial Results for Second Quarter 2016


TubeMogul Inc (NASDAQ:TUBE), a leading software platform for brand advertising, today reported financial results for its second quarter ended June 30, 2016.

“We saw very strong growth in our non-desktop pre-roll channels as brand clients are increasingly using our software to plan and buy campaigns across an array of inventory sources,” said Brett Wilson, CEO of TubeMogul. “As consumption of video becomes increasingly fragmented, brands are relying more heavily on software solutions that allow them to strategically reach incremental audiences beyond traditional TV. Our software enables brands to plan and execute campaigns that complement their TV buy with a high degree of control and transparency, making TubeMogul an essential part of our clients’ advertising workflow.”

“Total Spend in Q2 came in slightly below our expectations,” said Wilson. “The transition in ad spending from desktop to mobile is accelerating, and while this impacted our results, this is precisely the trend we anticipated, and we are well positioned over the long term as brands require multi-screen solutions. In particular, the investments we have made in our mobile offering over the last two years evidence our leadership. In Q2, mobile spend through our platform grew 146% and now makes up nearly 30% of our Spend.  In addition, Programmatic TV spend grew 143% year over year to over $20 million, nearly twice the level of PTV spend in Q1 2016.  Cross-screen platform spend now accounts for 48% of Total Spend as mobile and Programmatic TV growth accelerates.  We are confident that our strategy and unique cross-screen capabilities will make us the strategic platform of choice for brands.”

Wilson concluded, “We feel strongly that the investments we have made in PTV, mobile and social, along with the mix shift to these areas, positions us well to see strong topline growth in 2017.  This growth will flow through to the bottom-line and should result in significantly improved operating leverage in 2017.”

Second Quarter 2016 Financial Highlights:

  • GAAP Revenue was $55.4 million, an increase of 22% compared to $45.4 million in the second quarter of 2015.
  • Total Spend1 was $139.3 million, an increase of 33% compared to $105.0 million in the second quarter of 2015.
  • Gross profit was $38.6 million, an increase of 28% compared to $30.1 million in the second quarter of 2015.
  • Operating loss was $(3.4) million, compared to operating loss of $(1.5) million in the second quarter of 2015.
  • Net loss was $(3.8) million, compared to net loss of $(1.3) million in the second quarter of 2015.
  • Adjusted EBITDA2 was $2.4 million, compared to Adjusted EBITDA of $2.0 million in the second quarter of 2015.

1 Total Spend is a non-GAAP financial measure. Please see the discussion below under the heading “Use of Non-GAAP Measures” and the reconciliation at the end of this release.

2 Adjusted EBITDA is a non-GAAP financial measure. In March 2016 we revised our definition of Adjusted EBITDA to exclude all amortization, including amortization of internal-use software. Please see the discussion below under the heading “Use of Non-GAAP Measures” and the reconciliation at the end of this release.

Second Quarter and Recent Business Highlights include:

  • Increasing number of large spenders: In Q2 2016 the Company had 26 Platform Direct customers that spent over $1 million in the quarter, compared to 18 in Q1 2016, and 16 in Q2 2015.
  • Cross-screen channels continue to see strong adoption. Spend from mobile, Programmatic TV (PTV), display and social channels accounted for 48% of overall Total Spend, up from 26% in Q2 2015.
  • Significant momentum with Programmatic TV.  PTV spend grew 143% year over year to over $20 million, nearly twice the level of PTV spend in Q1 2016.
  • Growth in Private Inventory through Platform Direct software.  Spend from clients’ Private Inventory grew 175% year over year, demonstrating the value advertisers see in consolidating their video buying via TubeMogul’s software platform.
  • Enhanced cross-screen and social offering through the addition of Snapchat and Twitter inventory: 
    • Social spend is accelerating and grew over 1100% in Q2 as clients use TubeMogul to buy Facebook and Instagram.
    • TubeMogul was named a Snapchat Partner, which will enable brand advertisers to buy Snap Ads using TubeMogul.  Snapchat inventory will offer markerters a way to scale reach, particularly with younger audiences.
    • TubeMogul is one of the first video advertising software platforms to join Twitter’s pre-roll ads program. This program enables brand marketers to purchase real-time ads that precede in-Tweet video content posted by over 200 premium sports, TV, and digital publishers.
  • Notable client updates in the quarter included: 
    • carsales.com Ltd, Australia’s largest automotive classifieds site, named TubeMogul its software partner for video advertising after taking programmatic buying in-house.
    • 22squared, an independent full-service advertising agency, named TubeMogul one of its preferred partners for video advertising. Through the partnership, 22squared will leverage TubeMogul’s software to streamline media planning, buying, reporting and optimization on behalf of its entire client roster, including Southeast Toyota, Mizuno and Publix.
    • A top five global beverage brand, top 10 technology company and top 10 financial services company selected TubeMogul as their preferred video advertising platform of choice.
    • In Q2, over 150 executives and media traders completed our Client Certification Program. Brands certified include Clorox, Dairy Farmers of Canada, Diageo, Foxtel, Klick Health, Pernod Ricard, Qantas and Walmart Canada; agencies and trading desks include Boulder Strategies, Cadreon, Carat, FCB New Zealand, IKON, Mindshare, Publicis Health and UM.
  • Recognized as one of the Best Workplaces for Millennials in the US.  In a survey commissioned by Fortune, the Best Workplaces list recognizes top employers of millennials when it comes to pay, shared decision-making and fair promotions.

Forward Outlook:

The Company is issuing Q3 guidance as follows:

Third Quarter 2016

  • GAAP Revenue in the range of $53 million to $55 million
  • Total Spend in the range of $134 million to $136 million
  • Gross profit in the range of $35 million to $37 million
  • Adjusted EBITDA in the range of $(5) million to $(3) million

Given the Company’s Q2 results, its expectation for normal Q3 and Q4 seasonality, and considering the accelerating transition from desktop to mobile advertising that is temporarily impacting growth, the Company is modestly lowering full year guidance as follows:

Full Year 2016

  • GAAP Revenue in the range of $217 million to $221 million
  • Total Spend in the range of $558 million to $562 million
  • Gross profit in the range of $149 million to $153 million
  • Adjusted EBITDA of $1 million (Original Source)

Shares of TubeMogul are falling nearly 23% to $9.75 in after-hours trading Monday. TUBE has a 1-year high of $14.93 and a 1-year low of $9.11. The stock’s 50-day moving average is $11.35 and its 200-day moving average is $12.10.

On the ratings front, TUBE as been the subject of a number of recent research reports. In a report issued on June 14, Stephens Inc analyst Brett Huff reiterated a Buy rating on TUBE, with a price target of $20, which implies an upside of 58% from current levels. Separately, on May 23, JMP’s Ronald Josey maintained a Buy rating on the stock and has a price target of $22.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Brett Huff and Ronald Josey have a total average return of 7.7% and 4.4% respectively. Huff has a success rate of 69% and is ranked #1365 out of 4019 analysts, while Josey has a success rate of 63% and is ranked #913.

The street is mostly Bullish on TUBE stock. Out of 7 analysts who cover the stock, 6 suggest a Buy rating and one recommends to Hold the stock. The 12-month average price target assigned to the stock is $19.80, which represents a potential upside of 56.6% from where the stock is currently trading.

TubeMogul, Inc. engages in the design, development, and marketing of software for digital branding. Its solutions include cross-channel advertising, premium ad inventory, and creative advertising services. It offers its platform through the Platform Direct, which which allows advertisers to continuously run campaigns through a self-serve model, and Platform Services, which allows advertisers to specify campaign objectives and its team execute the campaign on their behalf using the firm’s platform.