MaxPoint reports slightly higher revenue (and slightly higher losses) in Q1 earnings report
The name MaxPoint likely doesn’t mean much to some TNM readers, but if you are getting more involved with digital ad sales you start to come across companies such as this in conversations on a regular basis. MaxPoint describes itself in its press releases as a “marketing technology company that generates hyperlocal intelligence to optimize brand and retail performance.”
From the digital publishing perspective, MaxPoint can be described as a company that buys inventory, often from publishers, in order to fulfill its programmatic ad orders. That is why the Traffic Acquisition Costs line of its P&L can be an important number to monitor.
Another thing to look for is that start-ups in this space, as in other areas of tech, growth is everything – most often at the cost of profits. Earlier this year, MaxPoint announced that it was expanding its programmatic Digital Zip technology to France, Germany, Italy and Spain.
One of MaxPoint’s competitors in the programmatic ad market is Rocket Fuel, which reported its earnings last week. Rocket Fuel’s revenue is nearly four times that of MaxPoint, though both companies reported about the same loss for the first quarter.
There is increasing demand for ad services in this area, which is why TNM will be paying more attention to it, but there is still a question about whether these companies can be profitable. Maybe an area to watch in regards to M&A?
Here is MaxPoint’s Q1 earnings announcement:
- Revenue of $29.5 million increased 3% in the first quarter of 2016, compared to $28.7 million for the first quarter of 2015.
- Revenue ex-TAC1 of $19.4 million increased 15% in the first quarter of 2016, compared to $16.8 million for the first quarter of 2015.
- Net loss of $10.7 million in the first quarter of 2016 compared to a net loss of $8.1 million for the first quarter of 2015.
- Adjusted EBITDA1 of $(7.2) million in the first quarter of 2016 compared to $(5.2) million for the first quarter of 2015.
- Net loss per basic and diluted share of $1.63 in the first quarter of 2016 compared to $3.59 for the first quarter of 2015.
- Non-GAAP net loss per basic and diluted share1 of $1.48 in the first quarter of 2016 compared to $1.47 for the first quarter of 2015.
“We’re off to a solid start to the year,” said Joe Epperson, MaxPoint’s co-founder and CEO. “We beat our Q1 revenue ex-TAC and adjusted EBITDA guidance as we continue to focus on going deeper with our clients and leveraging our 2015 investments across all areas of the business. We are progressing well against our 2016 initiatives and look forward to the year ahead as we continue to build on developments made during the quarter to reaccelerate growth.”
First Quarter Operating Highlights:
- Our total number of enterprise customers1 increased to 751 in the first quarter, up 42% from 529 for the first quarter of 2015.
- During the quarter, non-display advertising, which includes mobile, video and social, accounted for 43% of revenue, up from 24% of revenue in the first quarter of 2015.
- During the quarter, revenue from mobile advertising on phones and tablets accounted for 40% of revenue, up from 19% of revenue in the first quarter of 2015.
The following forward-looking statements reflect MaxPoint’s expectations as of May 16, 2016.
Second Quarter 2016 Guidance:
- Revenue ex-TAC1 for the second quarter ending June 30, 2016 is expected to be between $22.0 million and $24.0 million.
- Adjusted EBITDA1 for the second quarter ending June 30, 2016 is expected to be between $(3.5) million and $(2.5) million.
Fiscal Year 2016 Guidance:
- Revenue ex-TAC1 for the fiscal year ending December 31, 2016 is expected to be between $93.0 million and $97.0 million.
- Adjusted EBITDA1 for the fiscal year ending December 31, 2016 is expected to be between $(9.5) million and $(7.5) million.
1 Represents a Non-GAAP financial measure or operating performance metric. Please see the discussion below under the heading “Non-GAAP Financial Measures and Operating Performance Metrics” and the reconciliations that follow within this release.
Reverse Stock Split
On April 25, 2016, we amended our amended and restated certificate of incorporation effecting a 1-for-4 reverse stock split of our outstanding shares of capital stock. The reverse stock split did not change the number of our authorized shares of capital stock or cause an adjustment to the par value of our capital stock. As a result of the reverse stock split, we were required to adjust the share amounts under our equity incentive plans and common stock warrant agreements with third parties. All disclosures of shares and per share data in this earnings release have been retroactively adjusted to reflect the reverse stock split for all periods presented.
Non-GAAP Financial Measures and Operating Performance Metrics
To supplement our consolidated financial statements, which are prepared and presented in accordance with U.S. Generally Accepted Accounting Principles (GAAP), we use the following Non-GAAP financial measures: Revenue ex-TAC, Adjusted EBITDA, Non-GAAP net loss and Non-GAAP net loss per basic and diluted share. We also use number of enterprise customers, which is an operating performance metric. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.
We use these Non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period performance. Our management believes that these Non-GAAP financial measures provide meaningful supplemental information regarding our results by (1) excluding certain expenses and charges that may not be indicative of our recurring core business activities; and (2) providing information for comparable periods that help both management and investors assess our operating performance. We believe these Non-GAAP financial measures are useful to investors both because they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and because they help our institutional investors and the analyst community analyze our business.
For more information on these Non-GAAP financial measures, see the following descriptions and the tables below captioned “Supplemental Information Including Reconciliations of Non-GAAP Measures to the Nearest Comparable GAAP Measure.”
Revenue ex-TAC is a Non-GAAP financial measure defined by us as revenue less traffic acquisition costs. Traffic acquisition costs consist of purchases of advertising impressions from real-time bidding exchanges. We believe that Revenue ex-TAC is a meaningful measure of operating performance because it is frequently used for internal management purposes, indicates the effectiveness of delivering results to advertisers and facilitates a more complete period-to-period understanding of factors and trends affecting our underlying revenue performance. A limitation of Revenue ex-TAC is that it is a measure that other companies, including companies in our industry that have similar business arrangements, either may not use or may calculate differently, which reduces its usefulness as a comparative measure. Because of these and other limitations, we consider, and you should consider, Revenue ex-TAC alongside other GAAP financial measures, such as revenue, gross profit and total operating expenses.
To provide investors with additional information regarding our financial results, we provide Adjusted EBITDA, a Non-GAAP financial measure. We define Adjusted EBITDA as net loss before income taxes, interest, amortization and write-off of debt discount, amortization and write-off of deferred financing costs and depreciation and amortization, adjusted to eliminate stock-based compensation expense and change in fair value of common stock warrant liabilities.
We have presented Adjusted EBITDA because it is a key measure 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 operating plans. In particular, we believe the exclusion of certain items in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our business. Accordingly, we believe that Adjusted EBITDA provides useful information to investors in understanding and evaluating our operating results.
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 results as reported under GAAP. Some of these limitations are:
• Although depreciation and amortization 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 changes in, or cash requirements for, our working capital needs;
• Adjusted EBITDA does not reflect the potentially dilutive impact of equity-based compensation;
• Adjusted EBITDA does not reflect interest or tax payments that may represent a reduction in cash available to us; and
• Other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure.
Because of these and other limitations, we consider, and you should consider, Adjusted EBITDA together with other GAAP-based financial performance measures, including various cash flow metrics, net loss and our other GAAP results.
Number of Enterprise Customers
Our number of enterprise customers is a key operating metric. We believe our ability to increase the revenue we generate from existing customers and attract new customers is an important component of our growth strategy. We also believe that those customers from which we have generated more than $10,000 of revenue during any trailing twelve-month period best identifies customers that are actively using our solution and contribute more meaningfully to revenue. We refer to these customers as our enterprise customers. Our ability to generate additional revenue from our enterprise customers is an important indicator of our ability to grow revenue over time.
In those cases where we work with multiple brands or divisions within the same company or where the company runs marketing campaigns in multiple geographies, even though multiple insertion orders may be involved, we count that company as a single customer. When an insertion order is with an advertising agency, we consider the company on behalf of which the marketing campaign is conducted as our enterprise customer. If a company has its marketing spend with us managed by multiple advertising agencies, that company is counted as a single enterprise customer.
While the number of our enterprise customers has increased over time, this number can also fluctuate from quarter to quarter due to the seasonal trends in the advertising spend of our enterprise and other customers, which can impact the timing and amount of revenue we generate from them. Therefore, there is not necessarily a direct correlation between a change in the number of enterprise customers for a particular period and an increase or decrease in our revenue during that period.
Non-GAAP Net Loss
We define Non-GAAP net loss as net loss less non-cash stock-based compensation expense. We believe the exclusion of this non-cash charge can provide a useful measure for period-to-period comparisons of our business. A limitation of Non-GAAP net loss is that it is a measure that other companies, including companies in our industry that have similar business arrangements, either may not use or may calculate differently, which reduces its usefulness as a comparative measure. Because of these and other limitations, we consider, and you should consider, Non-GAAP net loss together with other GAAP-based financial performance measures, including various cash flow metrics, net loss and our other GAAP results.
Non-GAAP Net Loss per Basic and Diluted Share
We define Non-GAAP net loss per basic and diluted share as net loss less non-cash stock-based compensation expense per basic and diluted share as adjusted for the conversion of preferred stock in periods presented to assume the conversion of all outstanding shares of convertible preferred stock into common stock, as of the beginning of the period. We consider, and you should consider, Non-GAAP net loss per basic and diluted share together with other GAAP-based financial performance measures, including net loss per basic and diluted share, weighted-average shares used to compute net loss per basic and diluted share, net loss and our other GAAP results.
MaxPoint is not able to provide a reconciliation to GAAP revenue or GAAP net loss for its second quarter and full year 2016 Revenue ex-TAC and Adjusted EBITDA guidance at this time because of the difficulty of estimating certain items that are excluded from Revenue ex-TAC and Adjusted EBITDA guidance, such as traffic acquisition costs and the items excluded from net loss to calculate Adjusted EBITDA, the effect of which may be significant.