TubeMogul Inc Slashes Earnings Outlook

By Markets Fool.com

Image source: TubeMogul.

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TubeMogul (NASDAQ: TUBE) saw its second-quarter losses widen even as the digital advertising company delivered sales growth of more than 20%.

TubeMogul results: The raw numbers

Metric

Q2 2016

Q2 2015

Growth (YOY)

Revenue

$55.431 million

$45.440 million

22%

Net loss

($3.817 million)

($1.333 million)

N/A

Earnings per share

($0.11)

($0.04)

N/A

Data source: TubeMogul Q2 2016 earnings press release.

What happened with TubeMogul this quarter?

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Total spend -- essentially the amount that customers spend through TubeMogul's platform, including the cost of media purchases and TubeMogul's fees -- grew 33% year over year to $139 million.

Spend on TubeMogul's Platform Direct offering, which provides software that advertisers can use to run their own digital ad campaigns, rose 39% to $107 million, representing 77% of total spend. And spend on the company's Platform Services offering, which allows advertisers to specify objectives and have TubeMogul's team execute the campaign on their behalf, increased 16% to $32 million.

Together, these increases in spend helped to fuel a 22% year-over-year rise in revenue to$55.4 million. In turn, gross profit rose 28% to$38.6 million, with gross margin improving to 69.6% from 66.3% in Q2 2015.

"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," saidCEO Brett Wilson in a press release. "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."

Operating loss, however, increased to $3.4 million, compared to an operating loss of$1.5 millionin the second quarter of 2015. Net loss also widened, increasing to $3.8 million from $1.3 millionin the prior year period.

Looking forward

In the third quarter, Tube Mogul expects total spend of $134 millionto$136 million and revenue of $53 millionto$55 million. The company also anticipates third-quarter gross profit ofbetween $35 millionand$37 million and adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) in the range of negative $5 milliontonegative $3 million.

Additionally, management lowered its full-year 2016 outlook.

"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."

Wilson went on to state:

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.

TubeMogul's reduced guidance now includes:

  • Total spend in the range of$558 millionto$562 million, down from a prior forecast of $576 millionto$582 million.
  • Revenue of $217 millionto $221 million, down from $226 millionto $232 million.
  • Gross profit of$149 millionto$153 million versus $157 millionto$163 million.
  • Adjusted EBITDA of$1 million vs. $7 million.

"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 top-line growth in 2017," added Wilson."This growth will flow through to the bottom line and should result in significantly improved operating leverage in 2017."

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Joe Tenebruso has no position in any stocks mentioned. The Motley Fool owns shares of and recommends TubeMogul. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.