Last week X+1 secured a new $17 million debt facility with Ares Capital, a cash reservoir the demand-side platform plans to tap for two acquisitions this quarter (one social, one mobile). A global expansion will follow in the second half of the year, including a possible outpost in Brazil, according to CEO John Nardone.
By using credit instead of an equity round, X+1 gains access to capital without diluting the equity of existing investors. Nardone told AdExchanger the company was able to get the credit line because it is cash flow positive – though it's not yet profitable.
"There's no specific incentive for us to be profitable right now," he said. The company grew net revenues 36% in 2012 and expects similar growth this year.
The lack of concern for profitability is fairly remarkable considering X+1 is a 14-year-old company, having been founded in 1999 as Poindexter Systems. But X+1 rebooted in 2008, in part to capitalize on the opportunity around real-time bidding and predictive optimization. Today its headcount is 120, up from about 90 in Q2 2012.
Meanwhile its total funding since 1999 is just $45 million. Nardone says X+1 has been out-raised by competitors such as Turn, OpenX, MediaMath, and AppNexus at a rate of about three-to-one.
A big part of X+1's value proposition is around channel integration. It splices display media campaigns with e-mail, affiliate marketing, search, call centers, and SMS. Partnerships have provided some of these channel extensions. (For instance, the call center capability comes through a relationship with Oracle. Search comes from Kenshoo.)
Clients such as Intuit want that holistic approach. Since late 2011, the financial software marketer has used X+1 as its system of record for display media buying. The relationship includes RTB and private exchange buying, among other areas. About six months ago, it began using X+1's DMP to append third party data to its own customer data.
"They're providing us with a lot of attribution data for our analysts to then mine and model out the effectiveness of display relative to search. They've been instrumental in that regard," said Cézanne Huq, head of online acquisition for Intuit.
With X+1's help Intuit now optimizes its paid media spend using data from display, affiliate partners, email, search, mobile, and paid social media. It recently put in place a universal customer ID that lets internal marketers use X+1's DMP platform to mine touch points across channels.
"Through the coagulation of first party data across our disparate business units, we now have a single source for customer data. I'm not implying that this is a replacement for an enterprise data mart. In the interim though, it serves as a place for us to mine for all sorts of interesting data points," he said.
X+1 has often been the display media platform of choice for clients that want direct relationships with display ad vendors. Agencies represent just 25% of its business.
"I'd be happy to do more business with agencies, but not at the expense of our direct-client relationships," said Nardone.
The reason, he said, is that X+1 works in both paid and owned media channels. Nardone says owned media is not a priority for media agencies, since they make their money on the paid side.
Not surprisingly, many of these clients have been heavy users of X+1's managed services offering. Twenty-five percent of its revenue comes from professional services today, though Nardone says that figure has declined over time by design.
"As clients have matured, more and more of the burden of day-to-day usage has moved from our organization to the client's organization," he said. The most active clients now have 40 to 70 people using X+1 software.