TubeMogul Inc. Sales Rise 21% Ahead of Acquisition by Adobe

By Markets Fool.com

Image source: TubeMogul.

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TubeMogul (NASDAQ: TUBE) posted a respectable 21% increase in sales in the third quarter, but its results were overshadowed by news that software maker Adobe Systems (NASDAQ: ADBE) will be acquiring the advertising company at a sizable premium.

TubeMogul results: The raw numbers

Metric

Q3 2016

Q3 2015

Growth (YOY)

Revenue

$56.081 million

$46.485 million

21%

Net loss

$12.426 million

$3.754 million

N/A

Earnings per share

($0.34)

($0.11)

N/A

YOY = year over year. Data source: TubeMogul Q3 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 -- rose 34% year over year to $138.3 million.

Spend on TubeMogul's Platform Direct offering, which provides software that advertisers can use to run their own digital ad campaigns, increased 38% to $103 million, representing 75% 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, rose 23% to $35 million.

In turn, this growth in spend helped to drive a 21% year-over-year rise in revenue to$56.1 million.

"Programmatic TV spend nearly tripled year over year, while other cross-screen channels such as social, display, and mobile continued to see strong adoption," saidCEO Brett Wilson in a press release. "As brand advertisers are increasingly seeking to consolidate their spend on a single platform, TubeMogul's focus on cross-screen planning and automating channels beyond video is positioning us well to win new brands globally."

Still, TubeMogul remains unprofitable. Operating loss increased to $11.1 million, compared with $3 millionin Q3 2015. Net loss also widened, increasing to $12.4 million from $3.8 millionin the year-ago period.

Looking forward

Far outweighing the company's third-quarter results, however, was the announcement that Adobe will be acquiring TubeMogul for approximately $540 million net of cash and debt. TubeMogul stock soared more than 80% on the news, surging to a level slightly below Adobe's $14 offering price.

Adobe intends to integrate TubeMogul into its Marketing Cloud platform, thereby creating "the first end-to-end independent advertising and data management solution that spans TV and digital formats."

"With the acquisition ofTubeMogul, Adobe will give customers a 'one-stop shop' for video advertising, providing even more strategic value for our Adobe Marketing Cloud customers," said Adobe executive Brad Rencher in a press release.

TubeMogul's Wilson added: "The combination of Adobe Marketing Cloud with TubeMogul's software creates a uniquely comprehensive platform that will help marketers always know what's working -- and act on it. We're thrilled to call Adobe home and believe this will be a great move for our clients, team, and shareholders."

The deal is expected to close by the end of February.

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Joe Tenebruso has no position in any stocks mentioned. The Motley Fool owns shares of and recommends TubeMogul. The Motley Fool recommends Adobe Systems. 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.