Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
TUBE > SEC Filings for TUBE > Form 10-Q on 27-Aug-2014All Recent SEC Filings

Show all filings for TUBEMOGUL INC

Form 10-Q for TUBEMOGUL INC


27-Aug-2014

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition, results of operations and cash flows should be read in conjunction with (1) the unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q, and (2) the audited consolidated financial statements and notes thereto and management's discussion and analysis of financial condition and results of operations for the fiscal year ended December 31, 2013 included in our prospectus dated July 17, 2014, filed with the SEC on July 18, 2014 pursuant to Rule 424(b)(4) under the Securities Act (File No. 333-194817). This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements are often identified by the use of words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "plan," "project," "will," "would" or the negative or plural of these words or similar expressions or variations. Such forward-looking statements are subject to a number of risks, uncertainties, assumptions and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified herein, and those discussed in the section titled "Risk Factors", set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q and in our other SEC filings. You should not rely upon forward-looking statements as predictions of future events. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

Overview

TubeMogul is an enterprise software company for digital branding. By reducing complexity, improving transparency and leveraging real-time data, our platform enables advertisers to gain greater control of their digital video advertising spend and achieve their brand advertising objectives.

Our customers plan, buy, measure and optimize their global digital video advertising spend from our self-serve platform. By integrating programmatic technologies and disparate sources of inventory within a single platform, we enable our customers to launch sophisticated, scalable digital video advertising campaigns - onto any digital device - within minutes. Brands use our platform to verify the success and impact of their digital video advertising campaigns by measuring the audience reached by the campaign, how the audience interacted with their advertisements and the impact the campaign had on the consumer's perception of the brand. Our platform uses these real-time insights to dynamically optimize spend across digital sources of inventory including digital ad exchanges, supply-side platforms, private marketplaces, ad networks and direct premium publishers. Our platform measures key brand advertising metrics including brand lift, as measured by integrated brand surveys, as well as GRPs and engagement.

We make our platform available through two offerings: Platform Direct, which allows advertisers to continuously run campaigns through a self-serve model, and Platform Services, which allows advertisers to specify campaign objectives and have our team execute on their behalf using our platform.

Our Platform Direct offering allows advertisers to run self-serve campaigns eliminating the often complex and inefficient RFP process through which digital media is typically bought. Platform Direct customers enter into master service agreements with us that enable them to execute all of their campaigns under the agreement without the need for campaign-by-campaign insertion orders, or IOs. We generate Platform Direct revenue by charging our customers a utilization fee that is a percentage of media spend as well as fees for additional features offered through our platform. Because Platform Direct customers have control of the media purchasing decisions through our platform, our Platform Direct revenue is recognized on a net basis, meaning that it only includes our fees and not the cost of media purchased. The gross margin for our Platform Direct offering for the year ended December 31, 2013 was 95%.

Our Platform Services offering allows advertisers who continue to use a traditional RFP process to realize the benefits of our platform without needing to alter their purchasing process. Platform Services arrangements are generally in the form of discrete IOs which are negotiated on a campaign-by-campaign basis. We generate Platform Services revenue by delivering digital video advertisements based upon our customer's campaign specifications. Our Platform Services revenue is recognized on a gross basis, meaning that it includes the cost of the media purchased. The gross margin for our Platform Services offering for the year ended December 31, 2013 was 51%.

We believe customers value both our Platform Direct and our Platform Services offerings as Total Spend through our platform has increased from $25.2 million for the three months ended June 30, 2013 to $61.1 million for the three months ended June 30, 2014, representing a period-over-period growth of 143%. Total Spend through our platform increased from $41.5 million for the six months ended June 30, 2013 to $109.1 million for the six months ended June 30, 2014, representing period-over-period growth of 163%. We define Total Spend as the aggregate gross dollar volume that our Platform Direct customers and Platform Services customers spend through our platform, which includes media purchases and our fees. We actively engage with our Platform Services customers to educate them about the benefits of migrating to our Platform Direct offering.


We consider our global capabilities to be a competitive differentiator to global brands and agencies. Campaigns can be executed through our platform in over 70 countries using a single integrated workflow. During the six months ended June 30, 2014, we executed campaigns in 35 countries and generated 34% of our revenue from customers with billing addresses outside of the United States. For financial information about our geographic areas, please see Note 11 of the notes to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

We were incorporated in California in 2007 and reincorporated in Delaware in March 2014. We initially developed video content syndication and video analytics software for publishers and launched our advertiser-focused platform in 2011. For the three months ended June 30, 2013 and 2014, our revenue increased from $12.6 million to $28.7 million, and for the six months ended June 2013 and 2014, our revenue increased from $22.2 million to $50.7 million. For the three months ended June 30, 2013 and 2014. Our gross margin increased from 66% to 68%, and for the six months ended June 30, 2013 and 2014, our gross margin increased from 65% to 70%. We had net losses of $2.6 million and $4.5 million for the three months ended June 30, 2013 and the six months ended June 30, 2013, respectively. We had net income of $2.1 million and $1.3 million for the three months ended June 30, 2014 and the six months ended June 30, 2014, respectively.

Key Operating and Financial Performance Metrics

To help us monitor the overall performance of our business and identify trends, we evaluate the following key metrics: Total Spend, Platform Direct Spend, revenue, gross profit, gross margin, Adjusted EBITDA, and Number of Platform Direct Clients. Total Spend, Platform Direct Spend Adjusted EBITDA and Number of Platform Direct Clients are discussed immediately following the table below. Revenue, gross profit and gross margin are further discussed under the headings "Components of our Results of Operations."

                                           Three Months                      Six Months
                                          Ended June 30,                   Ended June 30,
                                     2013               2014             2013          2014
                                          (in thousands, except percentages and clients)
Key Metrics
Platform Direct Spend             $    16,495       $     43,952       $  25,558     $  79,222
Platform Services Spend                 8,665             17,148          15,933        29,926
Total Spend                       $    25,160       $     61,100       $  41,491     $ 109,148
Platform Direct revenue           $     3,976       $     11,567       $   6,288     $  20,815
Platform Services revenue               8,665             17,148          15,933        29,926
Total revenue                     $    12,641       $     28,715       $  22,221     $  50,741
Gross profit                      $     8,353       $     19,607       $  14,541     $  35,418
Gross margin                               66 %               68 %            65 %          70 %
Adjusted EBITDA                   $    (2,344 )     $      2,547       $  (4,053 )   $   2,653
Number of Platform Direct Clients         143                283             143           283


Total Spend and Platform Direct Spend

For purposes of calculating Total Spend and Platform Direct Spend, we define spend as the aggregate gross dollar volume that our customers spend through our platform, which includes cost of media purchases and our fees. Platform Direct Spend does not represent revenue earned by us and is a non-GAAP financial measure defined by us as the spend through our Platform Direct offering. Platform Services Spend equals our Platform Services revenue. Total Spend does not represent revenue earned by us and is a non-GAAP financial measure defined by us as the sum of Platform Direct Spend and Platform Services Spend. We believe Platform Direct Spend and Total Spend are meaningful measures of our operating performance because our ability to generate increases in Platform Direct Spend and Total Spend are strongly correlated to our ability to generate increases in Platform Direct revenue and revenue, respectively. Platform Direct Spend and Total Spend are used by our management and board of directors to understand our business and make operating decisions. A limitation of each of Platform Direct Spend and Total Spend is that each is a measure that we have defined for internal purposes that may be unique to us, and therefore it may not enhance the comparability of our results to other companies in our industry that have similar business arrangements but present the impact of media costs differently. Because of these limitations you should consider Platform Direct Spend and Total Spend along with the corresponding GAAP-based measures. The following is a reconciliation of these measures to Platform Direct revenue and revenue, the most directly comparable financial measures calculated in accordance with GAAP:

                                                                    Three Months                Six Months
                                   December 31,                    Ended June 30,             Ended June 30,
                          2011         2012         2013          2013         2014         2013         2014
                                                             (in thousands)
Platform Direct         $  2,171     $  5,433     $  19,331     $  3,976     $ 11,567     $  6,288     $  20,815
Revenue
Plus: Non-GAAP
Platform Direct Media
Cost (unaudited)           2,143       19,599        54,685       12,519       32,385       19,270        58,407
Platform Direct Spend   $  4,314     $ 25,032     $  74,016     $ 16,495     $ 43,952     $ 25,558     $  79,222
(unaudited)
Platform Services       $ 13,488     $ 28,726     $  37,883     $  8,665     $ 17,148     $ 15,933     $  29,926
Spend (unaudited)
Total Spend             $ 17,802     $ 53,758     $ 111,899     $ 25,160     $ 61,100     $ 41,491     $ 109,148
(unaudited)

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP financial measure defined by us as net loss before interest expense, net, provision for income tax, depreciation and amortization expense excluding amortization of internal use software development costs, stock-based compensation expense and change in fair value of convertible preferred stock warrant liability. We have provided below a reconciliation of Adjusted EBITDA to net loss the most directly comparable GAAP financial measure. Adjusted EBITDA is a key measure used by our management and the board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short and long-term operating plans. In particular, we believe that the exclusion of the amounts eliminated in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business. Accordingly, we believe that Adjusted EBITDA provides useful information in understanding and evaluating our operating results in the same manner as our management and our board of directors.

Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP. Some of these limitations are as follows:

although depreciation and amortization expense (excluding amortization of internal use software development costs) are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;

Adjusted EBITDA does not reflect: (1) changes in, or cash requirements for, our working capital needs; (2) the potentially dilutive impact of stock-based compensation; or (3) tax payments that may represent a reduction in cash available to us; and

other companies, including companies in our industry, may calculate Adjusted EBITDA or similarly titled measures differently, which reduces its usefulness as a comparative measure.


Because of these and other limitations, you should consider Adjusted EBITDA along with other GAAP-based financial performance measures, including various cash flow metrics, loss, and our GAAP financial results. The following is a reconciliation of Adjusted EBITDA to net loss, the most directly comparable financial measure calculated in accordance with GAAP for each of the periods indicated:

                                                                                                             Three Months              Six Months
                                                                                                            Ended June 30,           Ended June 30,
                                                                                                           2013        2014         2013        2014
                                                                                                                        (in thousands)
Net (loss) income                                                                                        $ (2,606 )   $ 2,084     $ (4,510 )   $ 1,317
Interest expense, net                                                                                          45          79           93         120
Provision for income taxes                                                                                     20          92           34         137
Depreciation and amortization expense, excluding amortization of internal use software development costs       48         109           80         199
Stock-based compensation expense                                                                              129         632          231       1,048
Change in fair value of convertible preferred stock warrant liability                                          20        (449 )         19        (168 )
Adjusted EBITDA                                                                                          $ (2,344 )   $ 2,547     $ (4,053 )   $ 2,653


Number of Platform Direct Clients

We define a Platform Direct Client as a customer that had total aggregate spend
of at least $10,000 through our platform during the previous twelve months. For
purposes of this definition, all branches or divisions of a customer that
operate under its contract with us are considered a single Platform Direct
Client. In a limited number of instances in any period, branches or divisions of
an advertiser that operate under distinct contracts are each considered a
separate Platform Direct Client. For example, of our 208 Platform Direct Clients
in 2013, 19 represented distinct operations of six global companies, primarily
advertising agencies, based in different jurisdictions and with respect to which
we have negotiated and manage separate contractual relationships. We believe
that our total number of Platform Direct Clients is an important measure of our
ability to increase revenue and the effectiveness of our sales force.

Platform Direct Cohort Spend

In order to analyze the contribution to the growth of our business driven by the
increase in spend from pre-existing Platform Direct customers, we measure
Platform Direct Spend for the set of customers, or Cohort, that commenced
spending on our Platform Direct offering in a specific year relative to
subsequent periods. As illustrated in the following tables, the spend from our
2011 and 2012 Cohorts has increased over subsequent periods. For 2013, the 2011
Cohort contributed 45% of Platform Direct Spend, the 2012 Cohort contributed 25%
and the 2013 Cohort contributed 30%. For 2012, the 2011 Cohort contributed 71%
of Platform Direct Spend, and the 2012 Cohort contributed 29%. We believe that
this analysis is helpful in understanding our business.



                                                                          2011-2012                        2012-2013

                       Twelve Months Ended December 31,                          % of Total                       % of Total
                                                                                  Platform                         Platform
Cohort (1)           2011             2012           2013         % Change      Direct Spend       % Change      Direct Spend
                                                      (in thousands, except percentages)
Customers First
Spent 2011        $    2,552       $    17,170     $  32,833            573 %              71 %           91 %              45 %
Customers First
Spent 2012                NA             6,847        18,456             NA                29 %          170 %              25 %
Customers First
Spent 2013                NA                NA        22,189             NA                NA             NA                30 %
Total             $    2,552       $    24,017     $  73,478            841 %             100 %          206 %             100 %

(1) Does not include revenue, which equals spend, from our video syndication software offering, a legacy technology which is not part of our digital video advertising spend platform. Customers who use this software are generally not customers for our Platform Direct and Platform Services offerings. We believe that excluding such revenue from the cohort analysis presents a more accurate basis for comparing results across the periods presented.


Factors Affecting Our Performance

We believe that the continued growth and future success of our business depend on various opportunities, challenges and other factors, including the following:

Retention of and Growth in Spend by Existing Customers

Our future revenue is dependent upon our ability to retain our existing customers and to gain a larger amount of their advertising spend through both our Platform Direct and Platform Services offerings. In particular, our recent growth in Total Spend has been driven by an increase in spend by our existing Platform Direct customers.

Customer Transition from Platform Services to Platform Direct

Our sales strategy is to educate our customers about the benefits of shifting from Platform Services, where purchases are made on a campaign-by-campaign basis, to Platform Direct, where customers are able to consolidate their video advertising spend through one solution on a self-serve basis. Our future performance will be impacted by our ability to continue to convince customers to shift to our Platform Direct offering. The growth in the proportion of our Total Spend represented by Platform Direct Spend is an indicator of our ability to convince customers to shift from Platform Services to our Platform Direct offering.

Sales Leverage Improvement

Our ability to increase our revenue without a commensurate increase in our sales and marketing expenses depends on the adoption of our Platform Direct offering. After our customers first transact through our Platform Direct offering, they have generally increased their spend through our platform without significant follow-on sales expense.

Investment in Growth

We plan to continue to invest for long-term growth. We anticipate that our operating expenses will increase in the foreseeable future as we invest in research and development to enhance our platform, in sales and marketing primarily to acquire new customers and general and administrative expenses to support our growth. We believe that these investments will contribute to our long-term growth, although they will adversely affect our results of operations in the near term. In addition, the timing of these investments can result in fluctuations in our annual and quarterly operating results.

Market Growth

We expect to benefit from the continued growth in the digital video advertising market but any material change in the growth rate of this market could affect our performance. The growth of such market may be adversely impacted by a variety of factors including any delays in the shift of video advertising spend from traditional TV to digital channels. In addition, advertising spend is closely tied to the performance of the economy and a downturn in economic conditions could adversely affect the overall advertising market and our operating results.

Seasonality

In the advertising industry, companies commonly experience seasonal fluctuations in revenue. For example, many advertisers allocate the largest portion of their budgets to the fourth quarter of the calendar year to coincide with increased holiday purchasing. Historically, the fourth quarter of the year reflects our highest level of advertising activity, and the first quarter reflects the lowest level of such activity. We expect our revenue to continue to fluctuate based on seasonal factors that affect the advertising industry as a whole.

Components of Our Results of Operations

Revenue

We generate revenue from our Platform Direct customers from fees based on a percentage of their media spend through our platform as well as from fees for additional services such as audience targeting data, ad serving, brand safety, topic targeting and other reporting related services that we offer. We generate revenue from our Platform Services customers by delivering digital video advertisements based upon a pre-agreed set of fixed objectives with an advertiser or agency. Our Platform Services business is generally priced based upon a cost per thousand impressions, or CPM, or based upon specific campaign specifications such as number of engagements, completed views or on-target impressions.


Cost of Revenue

Cost of revenue is comprised primarily of media costs. Media costs consist of advertising impressions we purchase from advertising sources of inventory in connection with our Platform Services offering. We typically pay for these impressions on a CPM basis. Cost of revenue also includes technical infrastructure costs which include the cost of internal and third-party servers and related services, internet access costs and amortization of internal use software development costs on revenue-producing technologies. Technical infrastructure costs represented 5% of our cost of revenue for the year ended December 31, 2013. After giving effect to the allocation of these costs between our Platform Direct revenue (in respect of which it is the largest component of cost of revenue) and Platform Services revenue based upon the amount of media purchases through each service, our gross margin for Platform Direct revenue and Platform Services revenue was 95% and 51%, respectively, for the year ended December 31, 2013. We anticipate that cost of revenue will increase in absolute dollars as our revenue increases, but will decrease as a percentage of revenue as our Platform Direct revenue increases as a percentage of our total revenue. We also expect that over time our Platform Services gross margins will decrease and our Platform Direct gross margins will remain relatively stable.

In our Platform Services arrangements, we generally enter into binding IOs with fixed price commitments which are determined prior to the launch of an advertising campaign. To fulfill these commitments, we purchase advertising inventory on a real-time basis during the course of the advertising campaign period, which may be weeks or months. As a result, we are exposed to market risk that the cost of such inventory to us may be greater than we expected when we entered into the IO or we may benefit from market prices being less than we expected, either of which impact our media costs as a percentage of revenue.

Operating Expenses

We classify our operating expenses into three categories: research and development, sales and marketing and general and administrative. Our operating expenses consist primarily of personnel costs, professional fees and facilities costs. Personnel costs include salaries, bonuses and commissions for sales personnel, stock-based compensation expense and employee benefit costs.

Our research and development expenses consist primarily of personnel costs outsourced engineering costs associated with the ongoing maintenance and development of our platform and related technologies, allocated technical infrastructure costs directly related to research and development activities, such as testing, and other operating costs allocable to engineering activities. We believe that continued investment in our platform is critical to achieving our objectives, and we expect research and development expenses to continue to increase over time.

Our sales and marketing expenses consist primarily of personnel costs, including operations personnel costs allocable to sales and marketing activities, outsourced sales and marketing activities, brand marketing, trade shows, travel and entertainment, and marketing collateral. In order to increase our share of video advertising spend, we expect sales and marketing expenses to continue to increase in future periods.

Our general and administrative expenses consist primarily of personnel costs, associated with our executive, finance, human resources, legal and other administrative personnel, and also include accounting, legal and other professional service fees, facility costs, bad debt expense, depreciation expense and other corporate expenses. We expect to continue to invest in our corporate infrastructure and incur further expenses related to being a public . . .

  Add TUBE to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for TUBE - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.