Market Overview

Telaria Reports Second Quarter 2018 Financial Results

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Quarterly revenue of $12.4 million, up 25% year-over-year

Telaria, Inc. (NYSE:TLRA), the complete software platform to manage
video advertising for premium publishers, today announced financial
results for the quarter ended June 30, 2018.

Second Quarter 2018 Highlights:

  • Revenue of $12.4 million, up 25% year-over-year
  • Gross profit of $11.3 million, up 25% year-over-year
  • Gross margin of 91%
  • Adjusted EBITDA(1) of $(1.1) million, compared to $(3.2)
    million in the prior year period

(1) Adjusted EBITDA is a non-GAAP financial measure. Please see the
discussion in the section called "Non-GAAP Financial Measures" and the
reconciliation included at the end of this press release.

"I am extremely proud of what we have been able to accomplish in year
one as Telaria," said Mark Zagorski, Telaria CEO. "Our results through
the first six months of this year included strong revenue growth and
further improvements in EBITDA, as well as the addition of numerous key
partners and the launch of our VMP. These advancements are the result of
our leading team, innovative technology and forward-thinking strategy
which is specifically tailored to take advantage of the exciting CTV
opportunity."

Business Highlights:

  • Acquired SlimCut, adding outstream technology to the Company's VMP and
    providing access to new markets in Canada and France.
  • CTV revenue growth continued in Q2, now 24% of total revenue.
  • Launched a comprehensive fraud prevention program in partnership with
    WhiteOps, enhancing Telaria's commitment to a fraud free ecosystem.
  • Closed deal with Nielsen to integrate their Digital Ad Ratings (DAR)
    into the Company's VMP, providing desktop video publishers with
    audience measurement metrics similar to TV to optimize their sales
    efforts.
         

Second Quarter Results Summary

(in millions, except per share amounts), (unaudited)

 
Three Months Ended June 30, Six Months Ended June 30,
2018     2017    

%
Change

2018     2017    

%
Change

 
Revenue $12.4 $9.9 25% $22.0 $16.1 37%
Gross profit $11.3 $9.0 25% $19.9 $14.4 38%

Loss from continuing operations, net of
income taxes

$(3.0) $(6.8) 56% $(9.1) $(16.4) 45%
Adjusted EBITDA $(1.1) $(3.2) 66% $(4.4) $(10.0) 56%

Net loss from continuing operations, net
of income taxes per
share

$(0.06) $(0.14) 57%

$(0.18)

$(0.32)

44%

 

Guidance

Based on information available as of August 8, 2018, the Company expects
the following:

         

Third Quarter and Full Year 2018 Outlook

 
Q3 2018 Full Year 2018
 
Revenue $15.0 - $17.0 million $58.0-$62.0 million
Adjusted EBITDA $0.0 - $2.0 million $5.0-$8.0 million
 

Q2 2018 Financial Results Webcast: The Company will host a
conference call at 8:00 AM ET today to discuss its results. The
conference call can be accessed toll-free at (855) 327-6837 or (631)
891-4304 (Toll/International). The call will also be broadcast
simultaneously at https://telaria.com.
Following completion of the call, a recorded replay of the webcast will
be available on Telaria's website. To listen to the telephone replay,
call toll-free (844) 512-2921 or (412) 317-6671 (Toll/International),
replay Pin #: 10005339. The telephone replay will be available from
11:00 AM ET August 8, 2018 through 11:59 PM ET August 15, 2018.
Additional investor information can be accessed at https://investor.telaria.com.

About Telaria

Telaria (NYSE:TLRA) is a complete software platform to manage premium
video advertising. We engineer the most robust suite of analytics,
automated decisioning, and integrated programmatic and direct
monetization tools in the industry. Global publishers require total
command of their business; Telaria's independent solution empowers
unbiased decisions for the best revenue outcomes.

"Safe Harbor" Statement: This press release contains
forward-looking statements that involve risks, uncertainties,
assumptions and other factors that could cause actual results and the
timing of certain events to differ materially from those set forth in or
implied by such forward-looking statements. All statements other than
statements of historical fact are forward-looking statements, including
statements related to 2018 third quarter and full year financial
guidance and long-term financial targets. Important factors that could
cause actual results or the timing of events to differ materially from
those set forth in or implied by any forward-looking statements include,
without limitation, risks and uncertainties associated with: the
company's continuing development of its business model; the impact of
the disposition of the company's buyer platform on the company's
operations and financial results, including loss of synergies between
the buyer platform and seller platform; unfavorable conditions in the
global economy or reductions in digital advertising spend; the company's
ability to effectively innovate and adapt to rapidly changing technology
and client needs; increased competition as well as innovations by new
and existing competitors; expansion of the online video advertising
market; the company's ability to attract new demand partners and
maintain relationships with current demand partners; the company's
ability to increase or maintain spend from existing demand partners,
including the Tremor Video DSP buyer platform, which the company sold in
August 2017; growth of OTT and connected TV markets; risks of entering
new markets in which we have limited or no experience and difficulty
adapting our solutions for new markets; the company's ability to attract
sellers of premium video advertising inventory to its platform and
secure inventory on terms that are favorable to it; the company's
ability to detect fraudulent or malicious activity and ensure a high
level of brand safety for its clients; identifying, attracting and
retaining qualified personnel; defects, errors or interruptions in the
company's solutions; the company's ability to collect and use data to
deliver its solutions; the impact of tools that block the display of
video ads; the effect of legal, regulatory developments and industry
standards regarding internet privacy and other matters, including the EU
General Data Protection Regulation; maintaining, protecting and
enhancing the company's intellectual property; costs associated with
defending intellectual property infringement, securities litigation and
other claims; future opportunities and plans, including the uncertainty
of expected future financial performance and results; as well as other
risks and uncertainties detailed from time-to-time under the caption
"Risk Factors" and elsewhere in the company's filings with the U.S.
Securities and Exchange Commission, including its Annual Report on Form
10-K for the year ended December 31, 2017, filed with the U.S.
Securities and Exchange Commission on March 2, 2018, its Quarterly
Report on Form 10-Q for the period ended March 31, 2018, filed with the
U.S. Securities and Exchange Commission on May 8, 2018 and future
filings and reports by the company, including its Quarterly Report on
Form 10-Q for the period ended June 30, 2018.

Forward-looking statements are based on current expectations and beliefs
and are not guarantees of future performance or events. Investors are
cautioned not to place undue reliance on any forward-looking statements.
Furthermore, forward-looking statements speak only as of the date on
which they are made, and, except as required by law, Telaria disclaims
any obligation to update these forward-looking statements to reflect
future events or circumstances.

Non-GAAP Financial Measures: To supplement its consolidated
financial statements, which are prepared and presented in accordance
with U.S. generally accepted accounting principles ("GAAP"), Telaria
reports Adjusted EBITDA, which is a non-GAAP financial measure. We
define Adjusted EBITDA as loss from continuing operations, net of income
taxes before depreciation and amortization, total interest expense and
other income (expense), net, provision for income taxes and adjusted to
eliminate the impact of non-cash stock-based compensation expense,
acquisition related costs, restructuring costs, mark-to-market expense,
executive severance, retention and recruiting costs, disposition-related
costs, expenses for transitional services and other adjustments. We use
Adjusted EBITDA for financial and operational decision-making and as a
means to evaluate period-to-period comparisons. We believe that the use
of Adjusted EBITDA provides useful information about our operating
results, enhances the overall understanding of our past financial
performance and future prospects, and allows for greater transparency
with respect to a key metric that is used by management in its financial
and operational decision making. Non-GAAP financial measures should be
considered in addition to results and guidance prepared in accordance
with GAAP, but should not be considered a substitute for, or superior
to, GAAP results. With respect to our expectations under "Guidance"
above, reconciliation Adjusted EBITDA guidance to the closest
corresponding GAAP measure is not available without unreasonable efforts
on a forward-looking basis due to the high variability, complexity and
low visibility with respect to the costs and charges excluded from this
non-GAAP measure, in particular, the measures and effects of stock-based
compensation expense specific to equity compensation awards that are
directly impacted by unpredictable fluctuations in our stock price. We
expect the variability of these costs and charges to have a significant,
and potentially unpredictable, impact on our future GAAP financial
results.

         

Exhibit A

 

Telaria, Inc.

Consolidated Balance Sheets

(in thousands)

 
June 30,     December 31,
2018 2017
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 64,950 $ 76,320
Accounts receivable, net 60,021 59,288
Prepaid expenses and other current assets 3,541   2,499  
Total current assets 128,512   138,107  
Long-term assets:
Property and equipment, net 3,222 3,194
Intangible assets, net 4,926 1,307
Goodwill 9,658 6,320
Deferred tax assets 332 332
Other assets 938   1,168  
Total long-term assets 19,076   12,321  
Total assets $ 147,588   $ 150,428  
 
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses $ 61,171 $ 59,419
Deferred rent, short-term 838 808
Contingent consideration on acquisition 1,443
Deferred income 31 674
Other current liabilities 748   53  
Total current liabilities 64,231 60,954
Long-term liabilities:
Deferred rent 5,990 5,260
Deferred tax liabilities 1,385 338
Other non-current liabilities 98   737  
Total liabilities 71,704   67,289  
Commitments and contingencies
Stockholders' equity:
Common stock 5 5
Treasury stock (8,443 ) (8,443 )
Additional paid-in capital 290,516 288,277
Accumulated other comprehensive loss (504 ) (232 )
Accumulated deficit (205,690 ) (196,468 )
Total stockholders' equity 75,884   83,139  
Total liabilities and stockholders' equity $ 147,588   $ 150,428  
 
                 

Telaria, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(unaudited)

 

Three Months Ended
June 30,

Six Months Ended
June 30,

2018 2017 2018 2017
Revenue $ 12,430 $ 9,934 $ 22,031 $ 16,073
Cost of revenue 1,136   917   2,164   1,681  
Gross profit 11,294   9,017   19,867   14,392  
 
Operating expenses:
Technology and development(1) 2,305 2,109 4,613 4,534
Sales and marketing(1) 6,646 7,700 12,938 14,226
General and administrative(1) 5,365 4,774 10,363 9,647
Restructuring costs 117 117
Depreciation and amortization 874 990 2,675 2,011
Mark-to-market   93     148  
Total operating expenses 15,307   15,666   30,706   30,566  
 
Loss from continuing operations (4,013 ) (6,649 ) (10,839 ) (16,174 )
 
Interest and other income (expense), net:
Interest expense (45 ) (33 ) (48 ) (67 )
Other income (expense), net 1,127   (45 ) 1,844   (38 )
Total interest and other income (expense), net 1,082   (78 ) 1,796   (105 )
 
Loss from continuing operations before income taxes (2,931 ) (6,727 ) (9,043 ) (16,279 )
 
Provision for income taxes 29   89   43   79  
 
Loss from continuing operations, net of income taxes (2,960 ) (6,816 ) (9,086 ) (16,358 )
 
Loss on sale of discontinued operations, net of income taxes (161 ) (136 )
Income from discontinued operations, net of income taxes   4,516     7,198  

Total income (loss) from discontinued operations, net of income
taxes(2)

(161 ) 4,516 (136 ) 7,198
                       
Net loss $ (3,121 ) $ (2,300 ) $ (9,222 ) $ (9,160 )
 
Net income (loss) per share — basic and diluted:
Loss from continuing operations, net of income taxes $ (0.06 ) $ (0.14 ) $

(0.18

) $ (0.32 )
Income from discontinued operations, net of income taxes $   0.09     0.14  
Net loss $ (0.06 ) $ (0.05 ) $

(0.18

) $ (0.18 )
 
Weighted-average number of shares of common stock outstanding:
Basic and diluted 52,241,605   50,205,913   52,035,788   50,102,803  
 

(1) Stock-based compensation expenses included above:

     

Three Months Ended
June 30,

   

Six Months Ended
June 30,

2018     2017 2018     2017
Stock-based compensation expense:  
Technology and development $ 124 $ 156 $

253

$

300

Sales and marketing 394 187

704

350

General and administrative 462   408  

879

 

846

Total stock-based compensation expense in continuing operations $ 980 $ 751 $

1,836

$

1,496

(2) Reflects the sale of our buyer platform to an affiliate of Taptica
on August 7, 2017.

     

Telaria, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

Six Months Ended
June 30,

2018     2017
Cash flows from operating activities:
Net loss from continuing operations $ (9,086 ) $ (16,358 )
Total income (loss) from discontinued operations (136 ) 7,198
Adjustments required to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization expense

2,675

4,706
Bad debt expense

163

325
Mark-to-market expense 148
Compensation expense related to the acquisition contingent
consideration
1,810
Deferred tax benefit 40
Loss on disposal of property and equipment

21

 

Stock-based compensation expense 1,836 2,065
Net changes in operating assets and liabilities:
Decrease in accounts receivable

709

4,742
(Increase)/decrease in prepaid expenses, other current assets and
other long-term assets
(776 ) 161
Decrease in accounts payable and accrued expenses

615

 

(8,892 )
Increase/(decrease) in other current liabilities 243 (79 )
Increase/(decrease) in deferred rent and security deposits payable 760 (315 )
(Decrease)/increase in deferred income (657 ) 90
Decrease in other liabilities (639 )  
Net cash used in operating activities

(4,272

) (4,359 )
 
Cash flows from investing activities:
Purchase of property and equipment

(2,505

) (895 )
Acquisition, net of cash acquired (4,856 )  
Net cash used in investing activities

(7,361

) (895 )
 
Cash flows from financing activities:
Proceeds from the exercise of stock options awards 1,178 62
Proceeds from issuance of common stock under employee stock purchase
plan
239 255
Principal portion of capital lease payments (187 )
Treasury stock — repurchase of stock (2,406 )
Tax withholdings related to net share settlements of restricted
stock unit awards (RSUs)
(1,014 ) (709 )
Net cash provided by (used in) financing activities 403   (2,985 )
 
Net decrease in cash, cash equivalents and restricted cash

(11,230

) (8,239 )
 
Effect of exchange rate changes in cash, cash equivalents and
restricted cash

(140

) 462
   
Cash, cash equivalents and restricted cash at beginning of period 76,320   43,930  
Cash, cash equivalents and restricted cash at end of period $ 64,950   $ 36,153  
 
         

Exhibit B

 

Telaria, Inc.

Reconciliation of Net Loss from Continuing Operations, Net of
Income Taxes to Adjusted EBITDA

(in thousands)

(unaudited)

 

Three Months Ended
June 30,

Six Months Ended
June 30,

2018     2017 2018     2017
 
Loss from continuing operations, net of income taxes $ (2,960 ) $ (6,816 ) $ (9,086 ) $ (16,358 )
Adjustments:
Depreciation and amortization expense 874 990 2,675 2,011
Total interest and other income (expense), net(1) (1,082 ) 78 (1,796 ) 105
Provision for income taxes 29 89 43 79
Stock-based compensation expense 980

752

1,836 1,496
Acquisition-related costs(2) 329 985 329 1,810
Restructuring costs(3) 117 117
Mark-to-market expense(4) 93 148
Executive severance, retention and recruiting costs 80 302 223 332
Disposition-related costs(5) 1 300 2 300
Expenses for transitional services(6) 308 697
Other adjustments(7) 250     563   102  
Total net adjustments 1,886  

3,589

  4,689   6,383  
Adjusted EBITDA $ (1,074 ) $

(3,227

) $ (4,397 ) $ (9,975 )
 
(1)   Reflects sublease income for our two former corporate headquarters
and former Santa Monica location net of rent expense for those same
locations. In addition, includes income received from the sale of
Tremor Video DSP trademark.
 
(2)

For the three and six months ended June 30, 2018, reflects
acquisition-related costs incurred in connection with our
acquisition of SlimCut. For the three and six months ended June
30, 2017, reflects acquisition-related costs incurred in
connection with the acquisition of TVN.

 
(3) Reflects the estimated fair value of costs related to the move of
our Santa Monica location.
 
(4) Reflects expense incurred based on the re-measurement, at June 30,
2017, of the estimated fair value of earn-out payments that were
paid in connection with the acquisition of TVN and which were not
conditioned on continued employment.
 
(5) Reflects professional fees incurred in connection with the sale of
the buyer platform in August 2017.
 
(6) Reflects costs incurred providing transitional services following
the sale of our buyer platform.
 
(7) For the three and six months ended June 30, 2018, reflects rent
expense for our current corporate headquarters during the period of
time in which such space was unoccupied. For the six months ended
June 30, 2017, reflects amounts accrued in connection with a
one-time change in our employee vacation policy for the first
quarter of 2017.
 

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