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H12017 RESULTS1 Apr to 30 Sep 2016
NOVEMBER 2016
RhythmOne plc
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FORWARD-LOOKING STATEMENTS This announcement contains (or may contain) certain forward-looking statements with respect to certain of RhythmOne’s plans and its current goals and expectations relating to its future financial condition and performance and which involve a number of risks and uncertainties. RhythmOne cautions readers that no forward-looking statement is a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking statements. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements sometimes use words such as 'aim', 'anticipate', 'target', 'expect', 'estimate', 'intend', 'plan', 'goal', 'believe', or other words of similar meaning. Examples of forward-looking statements include, among others, statements regarding RhythmOne's future financial position, income growth, impairment charges, business strategy, projected levels of growth in its markets, projected costs, estimates of capital expenditure, and plans and objectives for future operations of RhythmOne and other statements that are not historical fact.
By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances,including, but not limited to, UK domestic and global economic and business conditions, the effects of continued volatility in credit markets, market-related risks such as changes in interest rates and exchange rates, the policies and actions of governmental andregulatory authorities, changes in legislation, the further development of standards and interpretations under International Financial Reporting Standards ("IFRS") applicable to past, current and future periods, evolving practices with regard to the interpretation and application of standards under IFRS, the outcome of pending and future litigation, the success of future acquisitions and other strategic transactions and the impact of competition - a number of which factors are beyond RhythmOne's control. As a result, RhythmOne's actual future results may differ materially from the plans, goals, and expectations set forth in RhythmOne's forward-looking statements.
Any forward-looking statements made herein by or on behalf of RhythmOne speak only as of the date they are made. Except as required by the FCA, AIM or applicable law, RhythmOne expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained in this announcement to reflect any changes in RhythmOne expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based. Neither the content of the Company’s website (or any other website) nor the content of any website accessible from hyperlinks on the Company’s website (or any other website) is incorporated into, or forms part of, this announcement.
COPYRIGHT STATEMENT© 2016 RhythmOne, LLC. All rights reserved. All materials contained herein are the property of RhythmOne, LLC. and may only be used, copied or distributed with the express written permission of RhythmOne, LLC. Other products and companies referred to herein are the trademarks or registered trademarks of their respective companies or mark holders.
Safe Harbor & Copyright Statements
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Agenda
OVERVIEW
FINANCIALS
SECTOR
PRODUCTS
CONCLUSIONS
APPENDIX
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H12017 Highlights
OUTLOOK
FINANCIALS
OPERATIONS
INITIATIVES
SECTOR• Migration of offline spend provides sector wide tailwinds, driving +15% CAGR, +5x of other industries• Mobile, video and programmatic remain fastest growing as consumer and advertiser preferences evolve• Dynamic landscape, accelerating consolidation, interest and exits with the second coming of ad tech
• Revenue of $80.7M (83% from Core), adjusted EBITDA1 loss of ($2.5M), both ahead of expectations• Programmatic grows to $55M (+45%), as Non-Core, non-programmatic drawdown continues (-50%) • Debt free balance sheet with over $69.2M in cash, cash equivalents and marketable securities
• Sector revenues doubled to $70B2 in last 5 years, expected to grow to over $110B2 in the next 5 years• Return to full-year profitability3 in FY2017 assuming programmatic growth offsets seasonal Q4 slowdown• Strong technology, product and staff foundation to scale and integrate organic and acquisition growth
• Rationalized product and operations footprint, resulting in a 26% reduction in annualized expenses• Invested over $7M in R&D and infrastructure upgrades to drive quality and internationalization efforts • Integrated platform and functions to drive operational gearing and accelerate organic and acquisition growth
• Intense focus on Core prog. revenues and drawdown of Non-Core/non-prog. products, to drive profitability• Increase throughput from new and existing supply and demand partners to drive volume and fill rates• Integrate high-value, high-impact, high-margin video, native and rich media ad units to improve pricing
Notes: Covering the period between 1 April 2016 to 30 September 20161. Excludes acquisition and non-recurring expenses, purchase intangibles and share base compensation2. US Digital Marketing Spend, Source: eMarketer, September 20163. On an adjusted EBITDA basis
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Agenda
OVERVIEW
FINANCIALS
SECTOR
PRODUCTS
CONCLUSIONS
APPENDIX
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Key Metrics1
REVENUE$80.7M$91.3M
PROG.$55M$38M
NET CASH3
$69.2M$78.5M
EMPLOYEES 265308
CORE83%69%
ADJ. EBITDA2
($2.5M)($6.8M)
1. Numbers are H12016 compared to H1 2017 except Net Cash, which is 30 September 2016 compared to 31 March 2016. 2. Excludes acquisitions and non-recurring expenses, share based compensation and other expense.3. Includes cash, cash equivalents and marketable securities.
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Core vs. Non-Core Revenues
Mobile
Video
Programmatic
NON-COREDesktop
Services
Technologies
KEY DRIVERS
• Ramp and existing Supply and Demand partners
• Onboard new Supply and Demand partners
• Programmatically enable mobile, video, native, rich media ad formats
• Improve pricing and margin leveraging proprietary data
• Expand geographically to access international budgets
• Exit unprofitable products and consolidate operational footprint
48%69% 70% 83%
52%31% 30% 17%
FY2015 H12016 FY2016 H12017
CORE
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Income Statement, Balance SheetINCOME STATEMENT ($M)
78.5
37.2
24.2 22.8 19.2 29.9
69.2
37.2
22.1
33.2
19.2
37.6
Cash Goodwill Intangibles Receivables Deferred Tax Trade Payables
31-Mar-16 30-Sep-16
BALANCE SHEET ($M)
* Note: Excludes depreciation, amortization and share-based comp expense.
91.3
55.3
22.3 13.8
6.7 (6.8)
80.7
50.6
16.4 10.4
5.8 (2.5)
H1-2016 H1- 2017
Revenue Cost of Sales
Sales & Marketing
Research & Development
General &Administrative Adjusted EBITDA
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FY 2017 Beginning Cash
Adj EBITDA
Acquisitions, Exceptionals
Working Capital
Capital Development
Deferred Consideration
Lease Obligation
Interest. FX
H1 FY 2017 Ending Cash
78.569.2
(2.3) (0.5) (0.7) 0.2(2.0)(1.5)(2.5)
EBITDA, Cash BridgesEBITDA BRIDGE – H1 FY2017($M)
CASH BRIDGE – H1 FY2017 ($M)
LBT Purchase Intangibles Amortization
Amortization, Depreciation
Share Based Compensation
Acquisitions, Exceptionals
Adjusted EBITDA
(10.7)
2.7
2.31.5
1.7
(2.5)
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Revenue Model
SUPPLY
Owned
Extended
Controlled
DEMAND
Direct
Programmatic
Network
Definitions:Volume: Total number of ad requests processed through the platform and available to monetizeFill: Proportion of ad requests actually monetized, based on filtering, targeting and availability of demandPrice: Weighted average price of inventory across all ad formats flowing through the platform
REVENUE VOLUME FILL RATE PRICE
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KPIsREVENUE SPLIT H1 2016 H1 2017 CHANGE
CoreCore (%)
$62.9M69%
$66.8M83% 6%
Non-CoreNon-Core (%)
$28.4M31%
$13.9M17% (51%)
Total $91.3M $80.7M (12%)
CORE METRICS1
Volume 4,012B 7,469B 86%
Fill Rate 1.69% 0.58% (66%)
Price (CPM) $0.93 $1.54 65%
1. Core is defined as mobile, video and programmatic.
OPPORTUNITY TO IMPROVE FILL RATE AND PRICE WHILE SIMULTANEOUSLY DRAWING DOWN NON-CORE REVENUES.
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Growth Vectors
INT’L
UNIQUE SUPPLY
DEMAND
FILL RATE
EMEA and APAC O&O, Controlled
PRICING
Video, Native Private Marketplaces Direct, Integrations
DRIVEN BY ORGANIC AND ACQUISITION INITIATIVES.
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Competitive MapAUDIENCES441M Global Uniques 611B Desktop Opp/Month716B Mobile Opp/Month1,029B Display Opp/Month298B Video Opp/Month11B Native Opp/Month
BRANDSOver 600 top brands with campaigns across desktop and mobile video, display, social and native.
PUBLISHERS Relationships with over 900professional publishers.
DEVICESCross-screen advertising targetable across devices by individual or segment.
Source for scale figures: Global Uniques, Quantcast, October, 2016; Opportunities – RhythmOne Platform, Monthly figures, April-Sept, 2016
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Agenda
OVERVIEW
FINANCIALS
SECTOR
PRODUCTS
CONCLUSIONS
APPENDIX
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Sector Trends
Ongoing migration of offline spend online
Growth of mobile, video, programmatic trading
Rise of social, native formats and branded content
Focus on privacy, protection and performance
Rapid consolidation and the “second coming” of Ad Tech
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2
3
4
5
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Spend Continues to Migrate OnlineUS TOTAL AND DIGITAL AD SPEND, BY FORMAT, 2015-2020 ($B)
7283
93103
113
71 73 75 7678
52 52 52 52 52
2016 2017 2018 2019 2020
Digital TV Traditional (ex. TV)
MEDIA CONSUMPTION V. AD SPEND, 2015
US DIGITAL AD SPEND BY CHANNEL, 2016-2020 ($B)
26 25 24 26 26
46
57
6978
87
2016 2017 2018 2019 2020
Desktop Mobile
4%
13%
36%
22%25%
16%
10%
39%
23%
Print Radio TV Internet Mobile
Time Spent Ad Spend
13%
US DIGITAL AD SPEND, BY FORMAT, 2015-2020 ($B)
33 3742
4751
14 16 18 2021
1013 14 16 18
8 10 12 13 15
2 2 2 2 2
2016 2017 2018 2019 2020
Search Banners and otherVideo Rich mediaSponsorships
~$22B Opportunity
Source: Upper left: Source: Advertising spend based on IAB data for full year 2015. Print includes newspaper and magazine. Internet includes desktop + laptop + other connected devices. ~$22B opportunity calculated assuming Mobile ad spend share equal its respective time spent share. Time spent share data based on eMarketer 4/16. Arrows denote Y/Y shift in percent share. Excludes out-of-home, video game, and cinema advertising. All other graphs:: eMarketer, Sept 2016.
12%
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Rise of Mobile and VideoAVG. TIME SPENT PER DAY WITH MEDIA BY US ADULTS, 2016 GLOBAL CONNECTED DEVICE SHIPMENT FORECAST (M)
DIGITAL VIDEO AD SPEND, 2016-2020 ($B) US MOBILE AD SPEND, 2016-2020 ($B)
287 299 312
1,959 1,983 2,034
195 196 198
2016 2017 2018
Desktop/Laptop Mobile Phone Tablet
10
13
14
16
18
2016 2017 2018 2019 2020
46
57
69
78
87
2016 2017 2018 2019 2020
Radio
1:27
TV
4:07
Connected Devices
3:07
2:09
Source: Upper Left: eMarketer comparative estimates, Sept 2016. Upper Right: Gartner, January, 2016. Lower graphs (both): eMarketer comparative estimates, March 2016.
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1824 29
75%
80%
83%
70%
75%
80%
85%
0
10
20
30
40
2016 2017 2018Mobile programmatic display ad spend
% of total mobile display ad spending
Shift to Programmatic TradingUS PROGRAMMATIC DIGITAL DISPLAY AD SPEND ($B) US PROGRAMMATIC MOBILE AD SPEND ($B)
US PROGRAMMATIC VIDEO AD SPEND ($B)
Source: eMarketer Comparative Estimates, Sept 2016
25 32 38
73%
78%
82%
68%70%72%74%76%78%80%82%84%
05
10152025303540
2016 2017 2018Programmatic digital display ad spend
% of total digital display ad spend
6 9 11
60%69% 74%
0%
20%
40%
60%
80%
02468
1012
2016 2017 2018
Programmatic digital video ad spend
% of total digital video ad spend
US DISPLAY AD SPEND SHARE, BY TYPE (% OF TOTAL)
22% 20% 19% 18% 17%
37% 42% 44% 47% 48%
42% 38% 37% 36% 35%
2016 2017 2018 2019 2020
Programmatic (Non-RTB) RTB Nonprogrammatic
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Programmatic Adoption
Source: Digiday, ‘State of the Industry: Programmatic TV is Up Next”, March 2, 2015
DISPLAY86%
SOCIAL/NATIVE49%
MOBILE69%
VIDEO67%
TV24%
DIGITAL OUT OF HOME7%
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Issues and OpportunitiesAD BLOCKING
CONSOLIDATION AND TRENDS (JAN-OCT, 2016)
TOP CONCERNS
28%27%
26%24%
19%18%
17%15%15%
12%
SwedenGermanyDenmark
CanadaSpain
USUK
NetherlandsItaly
France
57%
60%
71%
78%
78%
52%
40%
70%
59%
63%
Conflicting Audience Data
Ad Blocking
Viewability
Bot Traffic
Click Fraud
Brand Marketers Media Agencies
TRANSACTIONS128
EST. VALUE
$129B+
Source: Upper Left: PageFair as cited in Adobe Digital Insights, "Advertising Demand Report 2016: North America," Sep 26, 2016; Upper Right MyersBizNet, "Survey of Advertising and Marketing Executives on Media Effectiveness" as cited by MediaVillage, May 2, 2016; Lower: Ad Ops Insider, Jan-Oct, 2016
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Agenda
OVERVIEW
FINANCIALS
SECTOR
PRODUCTS
CONCLUSIONS
APPENDIX
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Ecosystem
CONNECT AUDIENCES AND BRANDS THROUGH CONTENT ACROSS DEVICES.
CONTENT
CONSUMERBRAND
DEVICE
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ATD: Agency Trading DesksDSP: Demand Side PlatformSSP: Supply Side Platform
Technology Platform
RG: RhythmGuard – traffic quality filterRMP: RhythmMax for PublishersDMP: Data Management Platform
SUPPLY
Owned
Extended
Controlled
DEMAND
Direct
Programmatic
Network
A UNIFIED PLATFORM THAT CONSOLIDATES THE SUPPLY CHAIN TO DELIVER ENGAGED AUDIENCES AT SCALE.
SSP WEBSITESSP CONSUMEREXCHANGEATDBRAND AGENCY DSP NETWORK
TagManager
/SDK
Rhythm Guard
RhythmExchange
Analytics & Reporting
AdServer
DMP
RMP
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Owned190M+ Display690M+ Mobile649M+ Video27M+ Native
Extended 1,020B + Display
603B+ Mobile181B+ Video11B+ Native
Controlled 9B+ Display
112B+ Mobile116B+ Video
Estimated monthly opportunities
Engaged Audiences at Scale
RANK NETWORK/EXCHANGE UNIQUES REACH
1 Google Ad Network 215,333 92.9
2 Yahoo Audience Network 201,537 86.9
3 Conversant 189,040 81.5
4 RhythmOne 181,533 78.35 RadiumOne 179,946 77.6
Source for reach figures: RhythmMax platform, October, 2016. Source for Rankings: comScore US Display Ad Ecosystem, Media Metrix, September 2016
RANKED
US
#4
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Quality & Brand Safety
INDUSTRY ASSOCIATIONS
RANK SELLER NAMEFINALSCORE
REACH SCORE
SIVT SCORE1
GIVTSCORE2
MASKING SCORE
VIEWABILITYSCORE
NETWORK SCORE
1 OpenX 95 A 98 A 93 A 92 B 89 A 93 A 98 A
2 Sovrn 95 A 98 A 92 A 91 B 89 A 99 A 99 A
3 Rubicon Project 93 A 97 A 93 A 88 B 88 A 95 A 96 A
4 Index Exchange 93 A 93 A 95 B 91 B 87 A 90 A 95 A
5 UnderDog Media 93 A 86 B 98 A 94 B 85 B 92 A 98 A
6 RhythmOne 93 A 99 A 85 B 85 B 99 A 97 A 98 A
RANK SELLER NAMEFINALSCORE
REACH SCORE
SIVT SCORE1
GIVTSCORE2
MASKING SCORE
VIEWABILITYSCORE
NETWORK SCORE
1 OpenX 94 A 96 A 94 A 91 B 88 A 90 A 98 A
2 Rubicon Project 94 A 99 A 90 B 92 B 90 A 90 A 97 A
3 PulsePoint 93 A 97 A 91 B 88 B 92 A 91 A 98 A
4 Google AdExchange 93 A 98 A 90 B 89 B 92 A 87 A 98 A
5 Velis Media 93 A 88 B 97 A 93 B 85 B 85 B 99 A
6 RhythmOne 93 A 99 A 82 B 90 B 99 A 93 A 99 A
RANKED
US
#6
RANKED
INTL.
#6
PRE-BID
POST-BID
SOURCE
USER
CREATIVE
PLACEMENT
DOMAIN
3RD PARTY VERIFICATION PARTNERS GLOBAL SELLER TRUST INDEX
Source: Pixalate’s Global Seller Trust Index, September, 20161. SIVT: Sophisticated Invalid Traffic - Includes traffic identified through advanced analytics, multipoint corroboration,
human intervention—such as hijacked devices, ad tags, or creative; adware; malware; misappropriated content.2. GIVT: General Invalid Traffic - Includes traffic identified through routine and list-based means of filtration—such as
bots, spiders, other crawlers; non-browser user agent headers; and pre-fetch or browser pre-rendered traffic.
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Agenda
OVERVIEW
FINANCIALS
SECTOR
PRODUCTS
CONCLUSIONS
APPENDIX
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RhythmOne Engine
SUPPLY
Owned
Extended
Controlled
Direct
Programmatic
Network
DEMAND
GROW UNIQUE AUDIENCES
FORTIFY CORE PLATFORM
EXPAND DEMAND FOOTPRINT
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UNIQUES DATA CREATIVES OPTIMIZ. CONTENTBRAND PERFORM. SUPPLY
DEMAND, UNIQUE AUDIENCES AND PERFORMANCE CAPABILITIES REMAIN KEY FOCUS AREAS OF ORGANIC/INORGANIC GROWTH.
FOCUS
MOBILE
VIDEO
PROGRAM-MATIC
AUDIENCESAD TECH
Product Portfolio
DEMAND
Strong EmergingLegend:
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ConclusionsConnect audiences and brands through content across devices
Sector continues to evolve and is expected to grow to $113B/Yr1 over next 5 years
Focus on Core Mobile, Video and Programmatic growth
Strong, well-understood growth and cost drivers
Scale, scope and reach across the digital advertising supply chain
Opportunities to accelerate growth and profitability (Organically & Acquisitions)
1. Source: US Digital Advertising Spend, eMarketer, RhythmOne Estimates
VIDEO
PROGRAMMATIC
MOBILE
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Agenda
OVERVIEW
FINANCIALS
SECTOR
PRODUCTS
CONCLUSIONS
APPENDIX
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1. Adjusted for acquisitions and exceptional expenses, share based compensation and net investment revenueSource for scale figures: Global Uniques, Quantcast, October, 2016; Opportunities – RhythmOne Platform, Monthly figures, April-Sept, 2016
BUSINESS RhythmOne is an online advertising company that connects digital audiences with brands through premium content across devices. The Company’s mission is to maximize return on spend by providing the most efficient and effective marketplace for digital advertising.
HISTORY Founded 2004IPO 2007, LSE AIM: RTHM
HEADQUARTERS Headquartered in San Francisco, CA with 11 offices in the US, UK and Canada
EMPLOYEES 265 staff, including Sales (77), Technology (70), G&A (36), Operations (35), Services (26), Marketing (12), Content (9)
TECHNOLOGY Ad Tech Platform, Audience Platform, Unified Programmatic Platform, Owned & Operated Properties, Display, Mobile, Video Networks
H1 2017 FINANCIALS(YE 30 SEPT.)
$80.7M – Revenue ($2.5M) – Adjusted EBITDA1
$69.2M – Net Cash and Marketable Securities
SCALE 441M Global Uniques across 10 markets611B Desktop Opportunities/Month716B Mobile Opportunities/Month
Corporate Snapshot
1,029B Display Opportunities/Month298B Video Opportunities/Month11B Native Opportunities/Month
MISSION: MAXIMIZE RETURN ON SPEND BY PROVIDING THE MOST EFFICIENT AND EFFECTIVE PLATFORM FOR DIGITAL ADVERTISING.
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Market Opportunity
DIGITAL ADVERTISING IS EXPECTED TO BECOME THE #1 ADVERTISING MEDIUM THIS YEAR AND GROW TO OVER $113B IN THE NEXT FIVE YEARS1.
1. eMarketer comparative estimates for September 2016.
MEDIA AD SPEND
U.S.$323B1
WORLDWIDE$550.5B1
DIGITAL AD SPEND
WORLDWIDE$195.8B1
U.S. $72.1B1
Branding 42%Performance 58%
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Digital Marketing ILLUSTRATIVE
1. Prices are illustrative averages across each segment
OBJECTIVES (FORMATS)
METRICS (PRICING)
Awareness (Video,Display)
Interest (Social)
Consideration (Email)
Conversion (Search)
Visits$0.01/Visit
Audiences$0.05/Profile
Signups$0.25/Lead
Purchase$1.00/Click
BRAND
PERFORMANCE
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Value FlowCONTENT
CONSUMERBRAND DEVICEMonetization
Audience
Content
Attention
Monetization Distribution
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Fragmentation
Monetization
Audience
Content
Attention
Monetization Distribution
AUDIENCESDEVICESBRANDS
CONTENT
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AUDIENCES
Intermediation
PUBLISHERSBRANDS AGENTS
CONTENT
DEVICES
RhythmOne
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RhythmOne Ecosystem
BRANDS PLATFORMS AUDIENCESAGENTS
RhythmOne
CONTENT
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ProductsVIDEO PREROLL
COMPARISON SHOPPING
FIND A STORE
MOBILE BANNER
VIDEO SEARCH
NATIVE, SOCIAL
MOBILE RICH MEDIA
RICH MEDIA
CONTEXTUAL
MOBILE VIDEO
BRANDPERFORMANCE
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