Non-GAAP Net Revenue Grew 6% over the First
Quarter of 2015
Rocket Fuel Inc. (NASDAQ:FUEL), a leading programmatic marketing
platform provider, today announced financial results for the first
quarter ended March 31, 2016.
“I am pleased we have started 2016 with a good
first quarter year-on-year performance and ahead of our guidance
ranges on all measures, with higher net revenue, substantially
lower operating expenses and thus a much-narrowed loss in a
seasonally lighter quarter,” said Randy Wootton, chief executive
officer. “We are totally focused on our vision to make
marketing meaningful, our three strategic imperatives of becoming a
trusted platform partner, strengthening our brand value
proposition and extending our direct response leadership across all
devices, and meeting our financial commitments.”
Financial Highlights for the First
Quarter of 2016
GAAP Revenue: $104.7 million,
slightly above last year's first quarter total of $104.3
million.
GAAP Net Loss: $(20.8) million,
or $(0.48) per diluted share compared to a net loss of $(36.9)
million, or $(0.88) per diluted share, in the first quarter of
2015.
Non-GAAP Net Revenue: $62.2
million, up 6% compared to $58.8 million non-GAAP Net Revenue in
the first quarter of 2015.
Non-GAAP Adjusted EBITDA:
$(2.6) million compared to $(13.6) million in the first quarter of
2015.
Non-GAAP Adjusted Net Loss:
$(12.0) million, or $(0.28) per diluted share, compared to an
adjusted net loss of $(25.1) million, or $(0.60) per diluted share,
for the first quarter of 2015.
Cash and Cash Equivalents:
$67.4 million as of March 31, 2016, down from $78.6 million as of
December 31, 2015.
Delivery: Revenue derived from
mobile, social, and video channels was $36.2 million in the first
quarter, a decrease of 3% from $37.4 million for the first quarter
of 2015. Revenue derived from delivery of advertising to the mobile
channel was $27.1 million, an increase of 6% from $25.4 million in
the first quarter of 2015.
Top Customers: Revenue from top
50 customers was 49% of total revenue, compared to 47% in the first
quarter of fiscal year 2015. Revenue from top 250 customers was 80%
of total revenue, compared to 79% in the first quarter of fiscal
year 2015.
Active Customers: 1,530 during
the quarter, up from 1,487 in the first quarter of 2015.
Employee Headcount: 917 as of
March 31, 2016, down from 1,183 in the first quarter of 2015.
Financial Outlook for the Second Quarter
of 2016
For the second quarter of 2016, the Company
expects:
- Non-GAAP net revenue between $64 million and $67 million.
- Non-GAAP Adjusted EBITDA between break even and $3
million.
Conference Call, Webcast and Related
Information
The Rocket Fuel first quarter 2016
teleconference and webcast is scheduled to begin at 2:00 PM Pacific
time on Tuesday, May 10, 2016. To participate on the live call,
analysts and investors should dial 1-888-395-3227, or outside the
U.S. 719-325-2435, at least ten minutes prior to the call. Rocket
Fuel will post supplemental slides with the Company's latest
financial results on http://investor.rocketfuel.com under Events
& Presentations concurrently with this earnings press release.
Rocket Fuel will also offer a live and archived webcast of the
conference call, accessible from the “Investors” section of its
website at http://investor.rocketfuel.com.
Use of Non-GAAP Measures
We provide information relating to non-GAAP net
revenue, non-GAAP adjusted EBITDA, non-GAAP adjusted net income
(loss) and non-GAAP operating expenses, which are financial
measures that have not been prepared in accordance with generally
accepted accounting principles in the United States ("GAAP"). These
non-GAAP financial measures have been included in this press
release, or discussed on our teleconference and webcast, because
they are measures used by our management and 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 operational plans.
We define non-GAAP net revenue as GAAP revenue
less media costs. Media costs consist of costs for advertising
impressions we purchase from advertising exchanges or other third
parties. A limitation of non-GAAP net revenue is that it is a
measure designed for internal purposes that may be unique to Rocket
Fuel and may not enhance the comparability of Rocket Fuel’s results
to other companies in the same industry that have similar business
arrangements but present the impact of media costs differently. Our
management compensates for this limitation by also considering the
comparable GAAP financial measures of revenue, media costs and
other costs of revenue.
We define non-GAAP adjusted EBITDA as GAAP net
income (loss) before interest expense, other income (expense), net,
income tax provision (benefit), depreciation and amortization
expense (including amortization of capitalized software development
expenses), stock-based compensation expense and related payroll
taxes, acquisition and restructuring related expenses, and
impairment charges. Non-GAAP adjusted EBITDA has a number of
limitations, including the following: although depreciation and
amortization are non-cash charges, the assets being depreciated and
amortized may have to be replaced in the future and non-GAAP
adjusted EBITDA does not reflect cash capital expenditure
requirements for such replacements or for new capital expenditure
requirements; non-GAAP adjusted EBITDA is often considered an
approximation of operating cash flow, but in our case excludes
software development costs capitalized in a current period and
excludes those costs as they are amortized over future periods;
non-GAAP adjusted EBITDA does not reflect changes in, or cash
requirements for, our working capital needs; non-GAAP adjusted
EBITDA does not consider the potentially dilutive impact of
equity-based compensation; non-GAAP adjusted EBITDA does not
reflect acquisition and restructuring related expenses, the
expenses capitalized for internal-use software, tax and interest
expenses that may represent payments reducing the cash available to
us; and other companies, including those in our industry, may
calculate non-GAAP adjusted EBITDA differently, which reduces its
usefulness as a comparative measure. Because of these limitations,
our management considers non-GAAP adjusted EBITDA alongside other
financial performance measures, including cash flow metrics, net
income (loss) and our other GAAP results.
We define non-GAAP adjusted net income (loss) as
GAAP net income (loss) excluding stock-based compensation expense,
amortization of intangible assets, impairment charges, acquisition
and restructuring related expenses and the estimated tax impact of
the foregoing items. A limitation of non-GAAP adjusted net income
(loss) is that it is a measure that may be unique to Rocket Fuel
and may not enhance the comparability of Rocket Fuel’s results to
other companies in the same industry that define adjusted net
income (loss) differently. This measure may also exclude expenses
that may have a material impact on Rocket Fuel’s reported financial
results. Our management compensates for these limitations by also
considering the comparable GAAP financial measure of net income
(loss).
We define non-GAAP operating expenses as GAAP
total costs and expenses less media costs, depreciation and
amortization expense (including amortization of capitalized
software development costs), impairment charges, stock-based
compensation expense and related payroll taxes, and acquisition and
restructuring related expense. Non-GAAP operating expenses has a
number of limitations, including the following: although
depreciation and amortization are non-cash charges, the assets
being depreciated and amortized may have to be replaced in the
future and this measure does not reflect cash capital expenditure
requirements for such replacements or for new capital expenditure
requirements; non-GAAP operating expenses is often considered an
approximation of operating cash flow, but in our case excludes
software development costs capitalized in a current period and
excludes those costs as they are amortized over future periods;
non-GAAP operating expenses does not reflect changes in, or cash
requirements for, our working capital needs; non-GAAP operating
expenses does not consider the potentially dilutive impact of
equity-based compensation; non-GAAP operating expenses does not
reflect acquisition and restructuring related expenses, the
expenses capitalized for internal-use software, tax and interest
expenses that may represent payments reducing the cash available to
us; and other companies, including those in our industry, may
calculate non-GAAP operating expenses differently, which reduces
its usefulness as a comparative measure. Because of these
limitations, our management considers non-GAAP operating expenses
alongside other financial performance measures, including total
expenses, cash from operating activities and our other GAAP
results.
For a reconciliation of non-GAAP financial
measures to the nearest comparable GAAP financial measures, see
“Reconciliation from GAAP Revenue to Non-GAAP Net Revenue,”
“Reconciliation from GAAP Net Income (Loss) to Non-GAAP Adjusted
EBITDA,” “Reconciliation from GAAP Net Income (Loss) to Non-GAAP
Adjusted Net Income (Loss)” and “Reconciliation from GAAP Total
Cost and Expenses to Non-GAAP Operating Expenses " included in this
press release.
These non-GAAP financial measures are not
intended to be considered in isolation from, as substitutes for, or
as superior to, the corresponding financial measures prepared in
accordance with GAAP.
Cautions Regarding Forward-Looking
Statements
This press release and the webcast of the same
date contain forward-looking statements regarding future events and
our future financial performance, including but not limited to
expected progress against achieving our strategic business
imperatives including but not limited to growing our brand, direct
response, and platform businesses; the value of our moment scoring
technology; our customer strategy and focus on high value accounts;
expectations regarding growth in our platform solutions business
and changes in revenue mix and margins; our ability to grow our
media services business and improve relationships with agencies and
agency holding companies; expected investment in international
growth; our anticipated capital expenditures; and expectations for
second quarter non-GAAP net revenue and non-GAAP adjusted EBITDA,
and financial goals for fiscal year 2016. Words such as "expect",
"believe", "intend", "plan", "goal", "focus" and other similar
words are also intended to identify forward-looking statements.
These forward-looking statements are subject to
a number of risks and uncertainties that may cause actual results
to differ materially from the results anticipated by such
statements, including, without limitation: our limited operating
history, particularly as a relatively new public company;
fluctuations in our operating results, including but not limited to
fluctuations due to seasonality; our history of losses; our ability
to achieve the expected benefits of our efficiency improvement
plans; risks due to employee attrition and integration of new
leadership and employees; risks associated with our growth,
including growth outside of the U.S.; our ability to adequately
address competition, particularly from agency trading desks; our
ability to serve the needs of agencies and agency holding companies
and make the right investment decisions with regard to new
products, technology, and sales strategies; and risks associated
with maintaining or increasing sales to new and existing customers
and maintaining customer satisfaction.
Additional factors that could cause actual
results to differ materially from those anticipated by our
forward-looking statements are under the caption “Risk Factors” in
our Quarterly Report on Form 10-Q filed with the Securities and
Exchange Commission (“SEC”) on May 10, 2016 and in subsequent SEC
filings. These forward-looking statements are made as of the date
of this press release and the related webcast, and Rocket Fuel
expressly disclaims any obligation or undertaking to update the
forward-looking statements contained herein or therein to reflect
events that occur or circumstances that exist after the date on
which the statements were made.
About Rocket Fuel
Rocket Fuel applies artificial intelligence and
big data to predict the potential of every moment and make
marketing more meaningful and accountable.
We serve 96 of the Ad Age 100 and three of the
top five agency holding company trading desks, and we partner with
some of the world's leading CRM platforms, marketing platforms and
systems integrators.
Headquartered in Redwood City, California,
Rocket Fuel has more than 20 offices worldwide and trades on the
NASDAQ Global Select Market under the ticker symbol "FUEL." For
more information, please visit http://www.rocketfuel.com or call
1-888-717-8873.
Rocket Fuel, the Rocket Fuel logo, Moment
Scoring, Advertising That Learns and Marketing That Learns are
trademarks or registered trademarks of Rocket Fuel Inc. in the
United States and other countries.
Rocket Fuel Inc. |
|
|
UNAUDITED CONDENSED CONSOLIDATED BALANCE
SHEETS |
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
|
2016 |
|
2015 |
|
Assets |
|
|
|
|
Current Assets: |
|
|
|
|
Cash and cash equivalents |
$ |
67,392 |
|
|
$ |
78,560 |
|
|
Accounts receivable, net |
109,821 |
|
|
124,998 |
|
|
Prepaid expenses |
4,474 |
|
|
3,803 |
|
|
Other current assets |
2,987 |
|
|
2,081 |
|
|
Total current assets |
184,674 |
|
|
209,442 |
|
|
Property, equipment and
software, net |
75,715 |
|
|
82,781 |
|
|
Restricted cash |
2,002 |
|
|
2,141 |
|
|
Intangible assets,
net |
46,792 |
|
|
50,919 |
|
|
Deferred tax assets,
net |
722 |
|
|
718 |
|
|
Other assets |
1,059 |
|
|
1,053 |
|
|
Total
Assets |
$ |
310,964 |
|
|
$ |
347,054 |
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity |
|
|
|
|
Current
Liabilities: |
|
|
|
|
Accounts payable |
$ |
59,999 |
|
|
$ |
71,292 |
|
|
Accrued and other current
liabilities |
34,596 |
|
|
40,734 |
|
|
Deferred revenue |
1,642 |
|
|
2,116 |
|
|
Current portion of capital
leases |
8,723 |
|
|
8,602 |
|
|
Current portion of debt |
61,957 |
|
|
45,720 |
|
|
Total current liabilities |
166,917 |
|
|
168,464 |
|
|
Debt - Less current portion |
— |
|
|
17,617 |
|
|
Capital leases - Less
current portion |
9,793 |
|
|
11,855 |
|
|
Deferred rent - Less
current portion |
14,866 |
|
|
14,042 |
|
|
Other liabilities |
1,143 |
|
|
1,176 |
|
|
Total liabilities |
192,719 |
|
|
213,154 |
|
|
|
|
|
|
|
Stockholders'
Equity: |
|
|
|
|
Common stock |
44 |
|
|
44 |
|
|
Additional paid-in capital |
458,631 |
|
|
453,338 |
|
|
Accumulated other comprehensive
loss |
(326 |
) |
|
(151 |
) |
|
Accumulated deficit |
(340,104 |
) |
|
(319,331 |
) |
|
Total stockholders' equity |
118,245 |
|
|
133,900 |
|
|
Total
Liabilities and Stockholders' Equity |
$ |
310,964 |
|
|
$ |
347,054 |
|
|
|
|
|
|
|
|
|
|
|
Rocket Fuel Inc. |
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS |
(In thousands, except loss per share
data) |
|
|
Three Months Ended |
|
March 31, |
|
2016 |
|
2015 |
Revenue |
$ |
104,745 |
|
|
$ |
104,334 |
|
Costs and
expenses: |
|
|
|
Media costs |
42,559 |
|
|
45,561 |
|
Other cost of revenue (1) |
20,085 |
|
|
19,956 |
|
Research and development (1) |
10,639 |
|
|
11,323 |
|
Sales and marketing (1) |
36,840 |
|
|
42,878 |
|
General and administrative (1) |
14,321 |
|
|
17,574 |
|
Restructuring |
(199 |
) |
|
— |
|
Total costs and
expenses |
124,245 |
|
|
137,292 |
|
Operating loss |
(19,500 |
) |
|
(32,958 |
) |
Interest expense |
1,237 |
|
|
1,340 |
|
Other (income) expense, net |
(194 |
) |
|
2,208 |
|
Loss before income
taxes |
$ |
(20,543 |
) |
|
$ |
(36,506 |
) |
Income tax provision |
230 |
|
|
357 |
|
Net
loss |
$ |
(20,773 |
) |
|
$ |
(36,863 |
) |
|
|
|
|
Basic and diluted net
income (loss) per share attributable to common stockholders |
$ |
(0.48 |
) |
|
$ |
(0.88 |
) |
Basic and diluted
weighted-average shares used to compute net loss per share
attributable to common stockholders |
43,601 |
|
|
41,981 |
|
|
(1) Includes unaudited stock-based compensation expense
as follows (in thousands): |
|
|
Three Months Ended |
|
|
March 31, |
|
|
2016 |
|
2015 |
|
Other
cost of revenue |
$ |
530 |
|
|
$ |
625 |
|
|
Research
and development |
1,365 |
|
|
2,247 |
|
|
Sales
and marketing |
1,489 |
|
|
2,831 |
|
|
General
and administrative |
1,426 |
|
|
1,744 |
|
|
|
$ |
4,810 |
|
|
$ |
7,447 |
|
|
|
Rocket Fuel Inc. |
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS |
(In thousands) |
|
|
|
Three Months Ended |
|
March 31, |
|
2016 |
|
2015 |
Operating
Activities: |
|
|
|
Net loss |
$ |
(20,773 |
) |
|
$ |
(36,863 |
) |
Adjustments to reconcile net loss
to net cash used in operating activities: |
|
|
|
Depreciation and amortization |
12,264 |
|
|
11,866 |
|
Accelerated amortization of
leasehold improvements |
3,533 |
|
|
— |
|
Stock-based compensation |
4,810 |
|
|
7,447 |
|
Other non-cash adjustments,
net |
1,350 |
|
|
794 |
|
Changes in operating assets and
liabilities: |
|
|
|
Accounts receivable |
14,103 |
|
|
22,549 |
|
Prepaid expenses and other
assets |
(1,796 |
) |
|
5,379 |
|
Accounts payable |
(10,846 |
) |
|
(14,812 |
) |
Accrued and other liabilities |
(1,851 |
) |
|
(4,271 |
) |
Deferred rent |
(3,074 |
) |
|
1,184 |
|
Deferred revenue |
(474 |
) |
|
2,530 |
|
Net cash used in operating
activities |
(2,754 |
) |
|
(4,197 |
) |
|
|
|
|
Investing
Activities: |
|
|
|
Purchases of property, equipment
and software |
(1,787 |
) |
|
(5,519 |
) |
Capitalized internal-use software
development costs |
(2,924 |
) |
|
(3,076 |
) |
Proceeds from sale of property |
293 |
|
|
— |
|
Change in restricted cash |
39 |
|
|
636 |
|
Net cash used in investing
activities |
(4,379 |
) |
|
(7,959 |
) |
|
|
|
|
Financing
Activities: |
|
|
|
Proceeds from employee stock plans,
net |
28 |
|
|
189 |
|
Tax withholdings related to net
share settlements of restricted stock units |
(241 |
) |
|
— |
|
Repayment of capital lease
obligations |
(2,092 |
) |
|
(1,090 |
) |
Proceeds from debt facilities, net
of issuance costs |
22,350 |
|
|
(242 |
) |
Repayment of debt facilities |
(24,000 |
) |
|
(1,500 |
) |
Net cash used in financing
activities |
(3,955 |
) |
|
(2,643 |
) |
|
|
|
|
Effect of
Exchange Rate Changes on Cash and Cash Equivalents |
(80 |
) |
|
(202 |
) |
Change in Cash
and Cash Equivalents |
(11,168 |
) |
|
(15,001 |
) |
Cash and Cash
Equivalents—Beginning of period |
78,560 |
|
|
107,056 |
|
Cash and Cash
Equivalents—End of period |
$ |
67,392 |
|
|
$ |
92,055 |
|
|
|
|
|
|
|
|
Three Months Ended |
|
March 31, |
|
2016 |
|
2015 |
Supplemental Disclosures of
Other Cash Flow Information: |
|
|
|
Cash paid for income taxes, net of
refunds |
$ |
351 |
|
|
$ |
205 |
|
Cash paid for interest |
1,021 |
|
|
914 |
|
Supplemental Disclosures of
Noncash Investing and Financing Activities: |
|
|
|
Purchases of property, equipment
and software recorded in accounts payable and accruals |
$ |
563 |
|
|
$ |
623 |
|
Property, equipment and software
acquired under capital lease obligations |
151 |
|
|
325 |
|
Vesting of early exercised
options |
25 |
|
|
53 |
|
Stock-based compensation
capitalized in internal-use software costs |
711 |
|
|
494 |
|
Rocket Fuel Inc. |
UNAUDITED NON-GAAP MEASURES |
(In thousands, except per share
data) |
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
March 31, |
|
2016 |
|
2015 |
Non-GAAP
net revenue |
$ |
62,186 |
|
|
$ |
58,773 |
|
Non-GAAP
adjusted EBITDA |
$ |
(2,625 |
) |
|
$ |
(13,626 |
) |
Non-GAAP
adjusted net income (loss) |
$ |
(12,035 |
) |
|
$ |
(25,099 |
) |
Non-GAAP
adjusted diluted net income (loss) per share |
$ |
(0.28 |
) |
|
$ |
(0.60 |
) |
Non-GAAP
operating expenses |
$ |
64,811 |
|
|
$ |
72,399 |
|
|
Rocket Fuel Inc. |
UNAUDITED RECONCILIATION FROM GAAP REVENUE TO
NON-GAAP NET REVENUE |
(In thousands) |
|
|
Three Months Ended |
|
March 31, |
|
2016 |
|
2015 |
Revenue |
$ |
104,745 |
|
|
$ |
104,334 |
|
Less: Media costs |
42,559 |
|
|
45,561 |
|
Non-GAAP
net revenue |
$ |
62,186 |
|
|
$ |
58,773 |
|
|
|
Rocket Fuel Inc. |
UNAUDITED RECONCILIATION FROM GAAP NET LOSS TO
NON-GAAP ADJUSTED EBITDA |
(In thousands) |
|
|
Three Months Ended |
|
March 31, |
|
2016 |
|
2015 |
Net loss |
$ |
(20,773 |
) |
|
$ |
(36,863 |
) |
Adjustments: |
|
|
|
Interest expense |
1,237 |
|
|
1,340 |
|
Income tax provision (benefit) |
230 |
|
|
357 |
|
Amortization of intangibles |
4,127 |
|
|
4,227 |
|
Amortization of capitalized
software |
2,290 |
|
|
1,637 |
|
Depreciation |
5,847 |
|
|
6,002 |
|
Stock-based compensation
expense |
4,810 |
|
|
7,447 |
|
Other (income) expense, net |
(194 |
) |
|
2,208 |
|
Restructuring expense (credit) |
(199 |
) |
|
— |
|
Payroll tax expense related to
stock-based compensation |
— |
|
|
19 |
|
Total adjustments |
18,148 |
|
|
23,237 |
|
Non-GAAP adjusted
EBITDA |
$ |
(2,625 |
) |
|
$ |
(13,626 |
) |
|
|
|
|
|
|
|
|
Rocket Fuel Inc. |
UNAUDITED RECONCILIATION FROM GAAP NET LOSS
TO |
NON-GAAP ADJUSTED NET
INCOME (LOSS) |
(In thousands, except per share
data) |
|
|
Three Months Ended |
|
March 31, |
|
2016 |
|
2015 |
Net loss |
$ |
(20,773 |
) |
|
$ |
(36,863 |
) |
Stock-based compensation
expense |
4,810 |
|
|
7,447 |
|
Amortization of intangible
assets |
4,127 |
|
|
4,227 |
|
Restructuring expense (credit) |
(199 |
) |
|
— |
|
Tax impact of the above items |
— |
|
|
90 |
|
Non-GAAP adjusted net
income (loss) |
$ |
(12,035 |
) |
|
$ |
(25,099 |
) |
|
|
|
|
Basic and diluted net
income (loss) per share attributable to common stockholders |
$ |
(0.48 |
) |
|
$ |
(0.88 |
) |
|
|
|
|
Non-GAAP adjusted net income (loss)
per diluted share |
$ |
(0.28 |
) |
|
$ |
(0.60 |
) |
|
|
|
|
Weighted average shares used in
computing non-GAAP adjusted net income (loss) per diluted
share |
43,601 |
|
41,981 |
|
|
Rocket Fuel Inc. |
UNAUDITED RECONCILIATION FROM GAAP TOTAL COSTS
AND EXPENSES TO NON-GAAP OPERATING EXPENSES |
(In thousands) |
|
|
|
|
|
Three Months Ended |
|
March 31, |
|
2016 |
|
2015 |
Total
costs and expenses |
$ |
124,245 |
|
|
$ |
137,292 |
|
Less
media costs |
42,559 |
|
|
45,561 |
|
Adjustments: |
|
|
|
Amortization of intangibles |
4,127 |
|
|
4,227 |
|
Amortization of capitalized
software |
2,290 |
|
|
1,637 |
|
Depreciation |
5,847 |
|
|
6,002 |
|
Stock-based compensation |
4,810 |
|
|
7,447 |
|
Restructuring expense (credit) |
(199 |
) |
|
— |
|
Payroll
tax expense related to stock based compensation |
— |
|
|
19 |
|
Total
adjustments |
16,875 |
|
|
19,332 |
|
Non-GAAP
operating expenses |
$ |
64,811 |
|
|
$ |
72,399 |
|
|
Investor Relations:
(650) 481-6082
ir@rocketfuel.com
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