Cxense ASA Q3 2018 - Personalization, Conversion Rate ... · Personalization for Publishers RETAIN...

30
www.cxense.com 9 November 2018 Cxense ASA Q3 2018

Transcript of Cxense ASA Q3 2018 - Personalization, Conversion Rate ... · Personalization for Publishers RETAIN...

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9 November 2018

Cxense ASA – Q3 2018

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Sector

Product

Value proposition

Customers

Data processing footprint

Offices

Share ticker

2

Cxense at a glance

Software-as-a-Service (SaaS)

Data Management and Personalization Software

Real-time audience insight, increased online engagement and digital

revenue growth

~190 publishers and ecommerce companies

2bn devices, 19bn sessions per quarter

Oslo (HQ), Berlin, Samara, New York, Buenos Aires, Tokyo, Singapore

OSE:CXENSE

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Data is your most valuable resource

The future of Media, Marketing and eCommerce

3

1-1

Personalization

Present

Targeted

2010s

Digital

2000s

Mass

Marketing

1990s

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We enable customers with a leading DMP with intelligent personalization

Data fusion Track behavior and integrate with

internal/external data sources to get a 360

view of each user

Data intelligenceEnrich known data with AI modelling to create

rich user profiles and segments

Data activationReal-time 1:1 personalization

Data driven ROI

Content Subscriptions

Products

Advertising

Web

Apps

CRM

Commerce

Panel

Survey

3rd party

Gender – Age

Location

Look-alike

Behavior

CRM data

Device

Subscription

propensity

Interests

Deterministic data AI modelled data

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ROI increase for both Publishers and Advertisers

Without targeting

• Ad is shown to 200k high income and 800K low income

• Publisher gets 10 000€

• The advertiser’s cost for reaching high income is50€ CPM (10/200*1000)

With premium segment

• Ad is shown to 750K high income and 250K low income

• Publisher get 13 000€

• The advertiser’s cost for reaching high income is 17€ CPM (13/750*1000)

Premium segments provide ad targeting to AI modelled audiences such as ”High income”, “Children 7-12y”, “Automotive”, “Health/fitness”

Example

• An advertiser wants to promote a product to the “high income” segment, with an impression goal of 1 million

• 10€ CPM* without targeting / 13€ CPM* with premium segments

• Distribution of high/low income audience on publisher is 20% / 80%

• Prediction accuracy for the “high income” segment is 75%

5 * CPM = Cost per mille (cost per thousand impressions)

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3.4

4.0

Q1'1

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Q2'1

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Q3'1

2

Q4'1

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Q2'1

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Q3'1

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Q4'1

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Q1'1

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Q2'1

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Q3'1

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Q4'1

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Q1'1

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Q2'1

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Q3'1

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Q4'1

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Q1'1

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Q2'1

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Q3'1

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Q4'1

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Q2'1

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Q3'1

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Q3'1

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• Growth for core DMP and Personalization segment

• 19% YoY and 3% sequentially

• 15 new contracts including leading Asian media companies Singapore Press Holdings, Mainichi and Star Media Group

• High churn driven by loss of one large customer

• New leadership team, including CTO, CPO and CCO, successfully onboarded

• New CFO hired (starting December 2018)

• 80% reported gross margin, up 1 pp from Q2 2018

• Adjusted EBITDA of USD -0.47 million compared to USD -2.1 million in Q3 2017

• Reported EBITDA impacted by Enreach integration costs

• Positive cash flow in the quarter

• Cash position of USD 4.4 million, up 8% from end of Q2 2018, driven by working capital movements

• Funded through break-even with ongoing churn improvement program and cost reductions

• The new Conversion Engine and DMP features strengthens pipeline

• Positive outlook for new sales in Q4

Quarterly revenue development

USD million

Data Management and Personalization license revenues

Consulting revenues

6

Q3 2018 highlights

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Financials

7

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Last recurring revenue Churn New Revenue New recurring revenue

Upsell

existing customers

New customers

Lost customers

Cxense’s SaaS recurring revenue business model

Illustrative

8

Building recurring revenue base to drive growth

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3.4

4.0

0.9

0.70.1

0.70.4

Q3'17 Q3'18

Core business grew 19% Y/Y

Core business: DMP & Personalization

• Growth in core on demand from publishers and marketers

• 19% y/y net growth from;

• +45% gross organic growth from new revenue

• +4% from acquired growth

• -5% contribution from other

• -25% reduction from lost recurring revenue (churn)

• Customer retention a key priority

• Non-core business:

• Advertising divestment ongoing

• Video portfolio to remain in Cxense as bids came in below expected future cash flow

Advertising

DMP &

Personalization

5.1

Video

5.1

Revenues

USD million

9

Core

Non

coreMporium

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282

366 335

316

229

(92)

(187)(219)

(199)

(253)

190 179

116 117

(25)

Q3'17 Q4'17 Q1'18 Q2'18 Q3'18

Lost QRR Net new QRRNew QRR

*Full recurring revenue value of contracts closed and terminated in the period. For comparison to effect in reported figures see appendix.

Q3 sales update

• Closed 15 new contracts for DMP and Personalization

• New QRR of USD 229 thousand

• 32% of new QRR was from upsell to existing customers

• 9 average sales reps in Q3 (11.5 in Q2)

• Sales efficiency down 7% Q/Q due to seasonal effects

• 10 sales reps at end of October

• Lost QRR of USD 253 thousand

• 1/3 of churn related to one customer, a subsidiary having to implement a group-wide solution

DMP & Personalization – new and lost quarterly recurring revenue (QRR) – value of closed an terminated contracts in the period*

USD thousand

10

Strong sales efficiency – high churn driven by one large customer loss

1/3 related to

one customer

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Singapore Press Holdings is home to some of Asia's most

influential and well-known publications.

SPH will implement Conversion Engine to grow subscription

revenues

Star Media Group is one of the largest media companies in

Malaysia

Star Media Group has decided to use the Cxense DMP with

Intelligent Personalization to help transform their raw data into

valuable resource

11

Selected contracts signed in Q3 2018

Mainichi Shimbun is one of the largest publishing companies in

Japan

Mainichi will upgrade Cxense DMP and implement Conversion

Engine to grow subscription revenues

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74% 74%77%

80% 81%

79%

80%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018

Gross margin development

% of Revenue

• Q3’18 gross margin of 80%

• Increase of 1 ppt from Q2’18

• Cxense invested in a second EU data center in Q2’18

• Adds 33% core hosting capacity – 83% gross margin

potential compared to current 80%

• Simplifies GDPR compliance, enabling Cxense to offer EU-

only hosting

• Improved redundancy setup with 4 instead of 3 data

centers

Potential with

new DC: 83%

12

Gross margin increase in Q3Long term margin improvement potential

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Adjusted EBITDA increase – on track to realize integration cost synergies

• Sequential adjusted EBITDA improvement as a result of gross

margin increase and integration cost synergies

• Q3’18 adjusted EBITDA of USD -0.5 million, adjusted for 0.7 million

integration cost and non-IFRS adjustments

• USD 0.4 million integration and office cost provisions

• USD 0.3 million share based payments and one-off receivable

write-down

• On track to achieve targeted integration cost synergies

• Adjusted OPEX down 6% Q-o-Q

• More than half of the targeted ~10% reduction by end of

Q1’19 realized

Key figures

USD 1,000 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018

DMP & Intelligent personalization 3,357 3,617 3,816 3,875 3,993

SaaS Non-Core 1,699 1,530 1,423 1,243 1,077

Revenues 5,055 5,148 5,239 5,118 5,070

Gross margin 77% 80% 81% 79% 80%

OPEX 7,476 5,074 4,661 4,544 5,230

Non-IFRS OPEX adjustments (1,464) (253) (215) 259 (723)

OPEX adjusted 6,012 4,821 4,446 4,803 4,507

EBITDA (3,567) (931) (420) (518) (1,191)

EBITDA adjusted (2,103) (678) (204) (777) (468)

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• USD 4.4 million of cash at period end, up 8% from Q2’18

• Driven by reduction of working capital after build-up in previous

quarter

• Funded through break-even with ongoing churn improvement

program and the integration cost synergies

14

Positive cash flow in Q3’18

Cash flow summary

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Operations and strategy

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Sharpen technology vision

• Focus on core product growth

• Strengthened product offering in areas with clear customer traction

• Enreach (13 joint cases before acquisition)

• Conversion Engine (WSJ collaboration)

• Extended machine learning capabilities

CEO – One year at Cxense New and profitable growth trajectory

Refine go-to-market model

• Global rollout of Conversion Engine and Enreach

• Same product offering in all regions

• Customer retention increase through:

• Larger accounts

• Better implementations

New and profitable growth trajectory

16

New leadership team

• International experience from relevant companies

• Fresh perspectives and strengthened competencies

• Agile, customer-driven product development

• B2B solution sales

• Improved execution power

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May June July August September October November

Commercialization of Conversion Engine generating revenue

Customer driven development and commercialization of Cxense Conversion Engine

Proven, world-class solution developed with

The Wall Street Journal

2017

WSJ re-invents its

pay model with new

user-centric solution

based on Cxense

software

20182016

WSJ wins Axel

Springer paid

content award for

pioneering digital

subscriptions

Strong market

interest and several

leads in pipeline

Conversion Engine

officially introduced

as standalone

service

First publisher signs

up for Conversion

Engine

Productizing v2 of

Conversion Engine

for general

availability

17

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Core market

Adjacent market

opportunities

DMP for Publishers / Ad networks

Content Recommendation Engines

Global Intelligence Platforms

Digital Marketing Software

E-commerce

~0.7

~3.8

~5.8

33

2,300

16%

17%

18%

16%

23%

Market size

USD billion

Growth

CAGR

Segment

Description

18

Our offering targets high-growth markets

Sources: Markets&Markets.com, Marketprognis.com, Persistence Market Research, Forrester

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Growth opportunities beyond Publishing

Solid core offering:

1. DMP for Publishers

2. Personalization for Publishers

RETAIN

DEVELOP

Existing products New products

HOW TO WIN

Pu

blis

hin

gD

igita

l M

ark

etin

g

WH

ER

E T

O P

LA

Y

5

8

7

6

4

3

2

1

Recent product extensions:

3. New DMP capabilities (Enreach)

4. Subscription optimization (Conversion Engine)

Unrealized market extensions:

5. Conversion optimization for marketers*

* Industries with long-lasting customer relationships to be approached first, e.g. telecom, finance, gaming/entertainment, other memberships

6. DMP for data alliances

7. DMP for media agencies

8. DMP for marketers*

MONETIZE

Personalization

DMP

19

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Cxense is well positioned for the data alliances growthLarger deals with network opportunities

Shared among all

Shared bilaterally

Private

Common data alliance architecture Example customers

20

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Strong, international leadership team

Christian P. HalvorsenChief Executive Officer

Pankaj Saharan Chief Technology Officer

David GosenChief Commercial Officer

Ben GrahamChief Product Officer

Jørgen EvjenChief Financial Officer

Elisabeth Monrad-HansenVP of Human Resources

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Summary and outlook

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• Growth for core DMP and Personalization segment

• Adjusted EBITDA of USD -0.47 million and positive cash flow

• Funded through break-even with ongoing churn improvement program and cost reductions

• New leadership team successfully onboarded

• The new Conversion Engine and DMP features strengthens pipeline

• Positive outlook for new sales in Q4

Summary and outlook

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Appendix

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https://www.cxense.com/insights-lab/obstacle-opportunity-cxense-commitment-gdpr

Cxense welcomes changing regulatory environment and the General Data Protection Regulation (GDPR)

25

• EU regulation implemented on 25

May 2018

• Strengthened data protection for all

EU and EEA citizen

No financial impact from GDPR so far

1st party data DMPs, such as Cxense,

strengthened over 3rd party data DMPs

since implementation of GDPR

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USD 1,000 (unaudited) Q3-12 Q4-12 Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18

Total SaaS revenues 674 736 840 993 1,090 2,650 3,568 3,442 3,530 3,590 3,301 2,954 4,183 5,291 5,467 5,381 5,511 5,654 5,209 5,077 5,055 5,148 5,239 5,118 5,070

Where of Advertising 301 384 384 369 374 1,762 2,439 2,202 2,074 2,046 1,558 1,347 1,920 1,847 1,900 1,448 1,216 1,159 911 861 678 525 407 325 326

Total DMP and Personalization

revenue (old segm.) 373 352 456 624 716 888 1,129 1,240 1,456 1,544 1,743 1,607 2,263 3,444 3,566 3,933 4,295 4,495 4,299 4,215 4,378 4,622 4,802 4,754 4,715

Where of consulting 276 197 210 234 362 161 246 481 293 377 348 278 318 269 367 265 245 212 185

Where of license 373 352 456 624 716 888 853 1,043 1,246 1,310 1,381 1,446 2,017 2,963 3,273 3,556 3,947 4,217 3,981 3,946 4,011 4,357 4,557 4,542 4,530

Video revenue 967 1,001 1,230 1,224 1,297 1,033 896 875 864 840 801 722

Where of consulting 272 37 115 136 114 73 69 55 43 55 72 55

Where of license 695 964 1,115 1,088 1,183 960 827 820 821 785 729 667

Mporium 74 148 142 136 185 141 132 136 131 146 141 147 77 -

Where of consulting 42

Where of license 76 148 142 136 143 141 132 136 131 146 141 147 77 -

Total DMP and Personalization

revenue (CORE) 373 352 456 624 716 888 1,129 1,240 1,456 1,544 1,743 1,533 2,115 2,335 2,429 2,518 2,930 3,066 3,130 3,188 3,357 3,617 3,816 3,875 3,993

Where of consulting - - - - - - 276 197 210 234 362 161 246 209 256 220 212 164 245 200 312 222 190 140 130

Where of license 373 352 456 624 716 888 853 1,043 1,246 1,310 1,381 1,370 1,869 2,126 2,173 2,298 2,718 2,902 2,885 2,988 3,045 3,395 3,626 3,736 3,863

growth q/q -11 % -6 % 30 % 37 % 15 % 24 % 27 % 10 % 17 % 6 % 13 % -12 % 38 % 10 % 4 % 4 % 16 % 5 % 2 % 2 % 5 % 8 % 5 % 2 % 3 %

growth y/y 17 % 49 % 92 % 152 % 148 % 99 % 103 % 74 % 54 % 24 % 45 % 51 % 39 % 64 % 39 % 31 % 29 % 27 % 15 % 18 % 22 % 22 % 19 %

26

Core business – historical revenue development

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Closed and terminated in the period – USD thousand Effect in reported figures – USD thousand

New QRR Lost QRR

282

366335

316

229

(92)

(187)

(219)(199)

(253)

Q3'17 Q4'17 Q1'18 Q2'18 Q3'18

235

408437 434

381

(206)(182)

(274) (262)

(138)

Q3'17 Q4'17 Q1'18 Q2'18 Q3'18

*Includes USD 48k in acquired revenue (Enreach)

*

Closed and notified terminated compared to P&L effectDMP & Personalization – new and lost quarterly recurring revenue (QRR)

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SaaS segment – P&L

USD 1,000 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018

IFRS IFRS IFRS IFRS IFRS IFRS IFRS IFRS IFRS

SaaS segment

DMP with Intelligent Personalization (CORE) 2,930 3,066 3,130 3,188 3,357 3,617 3,816 3,875 3,993

Advertising (Non-core) 1,216 1,159 911 861 678 525 436 364 355

mporium (Non-core) 141 132 136 131 146 141 147 77 -

Video (Non-core) 1,224 1,297 1,033 896 875 864 840 801 722

Revenues total 5,511 5,654 5,209 5,077 5,055 5,147 5,239 5,118 5,070

Cost of sales 1,252 1,195 1,361 1,321 1,146 1,005 997 1,091 1,031

Gross profit 4,259 4,460 3,848 3,756 3,909 4,143 4,242 4,027 4,039

Gross margin % 77 % 79 % 74 % 74 % 77 % 80 % 81 % 79 % 80 %

Personnel 4,141 4,574 4,402 5,826 5,305 3,018 2,505 2,474 2,931

Other OPEX 1,772 2,258 2,088 2,284 2,170 2,056 2,156 2,070 2,299

OPEX 5,913 6,832 6,490 8,110 7,476 5,074 4,661 4,544 5,230

EBITDA (1,654) (2,374) (2,642) (4,354) (3,567) (931) (420) (518) (1,191)

Non-IFRS adjustment of OPEX level

Share-based payment costs 149 191 244 239 (32) (18) (4) 39 115

Share-based social costs provision

Commission accrual reversals (343)

Restructuring costs and provisions 1,280 164 411

Office moving costs 210 (21) 0 140 103 60

Extraordinary/special 32 585 24 3

One-off provision for doubtful debt 84 142 (2) 137

Transaction costs 78 79 103 58 52 1 77 47

R&D refund (167)

Total reported OPEX adjustment items 226 397 358 882 1,464 253 215 (259) 723

OPEX adjusted 5,686 6,435 6,132 7,228 6,012 4,821 4,446 4,803 4,507

EBITDA adjusted (1,428) (1,977) (2,284) (3,472) (2,103) (678) (204) (777) (468)

Capitalized operating expense (496) (891) (507) (507) (557) (268) (226) (365) (421)

EBITDA adjusted with capitalization add back (1,924) (2,868) (2,791) (3,980) (2,660) (946) (431) (1,142) (889)

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Revenue bridge for SaaS- and core DMP and personalization segment

Quarterly figures (unaudited) Total revenue DMP and personalization revenue

USD 1,000 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018

Revenue in previous quarter 5,077 5,055 5,147 5,239 5,118 3,188 3,357 3,617 3,816 3,875

New recurring license revenue effect 243 468 491 357 333 235 408 437 337 333

Acquired recurring license revenue - - - 97 48 - - - 97 48

Divested recurring license revenue - (93) (183) - - - - - - -

Churn effect (333) (240) (292) (429) (315) (206) (182) (274) (262) (138)

Change in service revenue 97 (102) (21) (33) (27) 111 (89) (33) (50) (10)

Change in other variables (121) 69 33 (49) (30) (56) 106 35 (20) (48)

Currency effect 92 (10) 64 (63) (57) 85 17 34 (44) (66)

Revenue this quarter 5,055 5,147 5,239 5,118 5,070 3,357 3,617 3,816 3,875 3,993

Accumulated currency effect, reversed (95) (85) (149) (86) (29) (60) (77) (111) (67) (1)

Outbound revenue currency adjusted 4,960 5,062 5,090 5,033 5,041 3,297 3,540 3,705 3,807 3,992

Q3 run-rate adjustments

Full effect of contracts closed until 02 November 2018 (Core) 226

Full effect of known churn until 02 November (Core) (326)

DMP & Personalization run-rate revenue after adjustments 3,893

Number of closed contracts in the quarter* 29 30 18 22 15 26 26 18 22 15

Whereof new customers* 19 12 11 12 6 18 12 11 12 6

Whereof upsell* 10 18 7 10 9 8 14 7 10 9

Full QRR effect of contracts notified closed in the period 306 429 335 316 229 282 366 335 316 229

Full QRR effect of contracts notified lost in the period (215) (221) (335) (221) (442) (92) (187) (219) (199) (253)

Net 91 208 (0) 95 (213) 191 179 115 117 (25)

*Restated to include only license revenue contracts. Previously also included service and consulting contracts. In Q3 2018, number of new contracts were 15 license contracts and 2 service and consulting contracts

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New contracts reflect demand for core offering

• Closed 15 new contracts on Data Management & Personalization

• QRR of USD 229 thousand

• 9 average sales reps., lower sales efficiency on seasonal effects

• 60% of contracts were upsell on existing customers

23

37

30

22

26 26

18

22

15

9

14 1412

11

14 19 14

15

Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18

# new SaaS contracts for DMP and Personalization segment

Average QRR per new contract (USD k)

# of new core contracts and average contract size*

*Restated to include only license revenue contracts. Previously also included service and consulting contracts. In Q3 2018, number of new contracts were 15 license contracts and 2 service and consulting contracts