After Disappointing IPO Debut, Tremor Q2 May Silence Doubters

Bill Day Tremor 2013By most accounts, Tremor Video's introduction to the public markets was nothing to cheer about, as the video ad network saw its share price sink 20% in its first month of trading. The company's first earnings report is solid and may be enough to turn investors around. Among the high points of Tremor's Q2: its net loss shrank to $300,000 from $4.8 million in Q2. In addition, gross margins improved to 46.5% from 40.6% from Q2 2012. Read the release.

Revenues also soared 41% to $35.5 million year-over-year. Most importantly, Tremor  saw success in its strategy to attract more brand awareness dollars. Over the past year, Tremor has moved away from cheap in-banner advertising -- which can't be measured as "viewable" and is therefore avoided by brand advertisers -- to the more potentially lucrative in-stream ads. That shift appeared to pay off in Q2 as revenue in that segment was up 46% to $34.4 million.

While it will be a steep challenge for Tremor to match that gain next year, these are  just the kind of results the New York company needs now. After all, despite the seeming "boom" in video ad technology companies, doubts remain about the ad network model which is Tremor's core, as many video ad tech players present themselves as a clearer marketplace/programmatic business.

Forecast: 

Looking at the current quarter, Tremor's Q3 outlook calls for revenues to come in between $35.5 million to $36.5 million, while adjusted EBITDA is expected to be in the range of $0.1 million to $0.6 million -- the company, naturally, didn't offer comparisons to Q3 2012.

For the full year, Tremor said its revenue numbers should range from $133.7 million to $135.7 million and Adjusted EBITDA is expected to be in the range of $0.1 million to $1.0 million.

In its May IPO, Tremor sold 7.5 million shares for $10 a piece -- below the previous target of $11 to $12 the company had in mind when it originally filed its S-1 the month before. Since that time, the stock has lost roughly 20% in the past two months, consistently hovering above $8.

Video boom? In the interim, there has been speculation about other video ad tech companies going public or being acquired as the market heats up on the expectation that some sizable portion of the $75 billion TV ad market will shift to what eMarketer says is a $4 billion digital video market. At the moment, the amount of TV dollars coming into digital is minimal at best, but as siloes within media buying agencies come down and digital is placed at the center of ad budgets, that expectation isn't too far-fetched. In any case, cross-platform media buys are becoming more common as advertisers seek an extension of their traditional media placements to capture desired audiences.

Video spotlight: Tremor's first earnings release comes toward the end of a momentous week for online video ad tech companies. In addition to the pricing of fellow video ad network YuMe (at a lower-than-hoped for $9), AOL revealed that it paid $405 million to acquire video marketplace Adap.tv, a company that itself had been on the IPO path. Other video ad tech companies such as BrightRoll, a company that is squarely in the programmatic space, are also candidates for the public markets.

On a call with press, Tremor CEO Bill Day noted the recent Media Ratings Council accreditation for Tremor's proprietary viewability metrics and that Tremor's in-stream ad placements are include traditional pricing formats as well as CPE -- cost per engagement -- and that marketers only pay when a viewer has interacted in some way with a placement.

"We are where programmatic and premium meet," Day said.

Day offered more details about the importance of mobile advertising to the company's revenue stream.

Asked what the factors were in Q2's positive results in comparison to the weaker signs found in the company's IPO, Day said it was simply the market "resonating with what we do" and the fact that video advertising continues to attract rising dollars.

As for mobile advertising, while Tremor doesn't separate out impressions from smartphones and tablets, that segment does make up 13% of the company's revenues. In the meantime, tablets are leading the way for its mobile video ad dollars.

Meanwhile, Day said that connected TV advertising is part of Tremor's plans, but that process is hamstrung by the lack of consumer adoption. In preparation for the connected TV moment when it does materialize, Day said to expect more deals like the recent one with music video streaming service VidZone, which has an app on Sony Playstation.

"We're all set to go when it comes to other platforms," Day said. "One of the questions we had a year ago is how the engagement model can work in the mobile space. But we've made some investments and it will pay off relatively soon, we believe. For the most part, mobile is here and now and connected TV is on the horizon."

1 Comment

  1. Corey Kronengold

    Also, increased margins to 46%.
    Very nice call for $TRMR

    Reply

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