REDWOOD CITY, Calif., Aug. 5, 2015 (GLOBE NEWSWIRE) -- Rocket Fuel Inc. (NASDAQ:FUEL), a leading programmatic marketing platform provider that uses artificial intelligence (AI) at Big Data scale to optimize marketing ROI for global agencies and enterprise marketers, today reported results for the second quarter ended June 30, 2015. Rocket Fuel posted 30% growth in both revenue and non-GAAP net revenue, and positive adjusted EBITDA of $1.4 million.
"Rocket Fuel had a strong second quarter as results beat our prior guidance and our focus on efficiency and costs led to a faster than expected return to adjusted EBITDA profitability," said Monte Zweben, Interim Chief Executive Officer. "We also made solid progress adding new agency and direct customers and are in discussions with some of the largest companies and brands in the world about using Rocket Fuel's AI to power their marketing programs."
Financial Highlights for the Second Quarter of 2015
Revenue of $120.1 million increased 30% compared to $92.6 million for the second quarter of 2014. Revenue for the quarter included $43.4 million from digital advertising delivered through mobile, social and video channels, an increase of 6% from $40.8 million in the second quarter of 2014.
Non-GAAP net revenue of $70.9 million increased 30% compared to $54.7 million for the second quarter of 2014.
Net loss was $(24.4) million, or $(0.58) per diluted share, compared to a net loss of $(9.8) million, or $(0.28) per diluted share for the second quarter of 2014.
Non-GAAP adjusted net loss for the quarter was $(7.2) million, or $(0.17) per diluted share, compared to non-GAAP adjusted net loss of $(3.7) million, or $(0.10) per diluted share, for the second quarter of 2014.
Non-GAAP adjusted EBITDA was $1.4 million compared to $1.5 million in the second quarter of 2014.
Cash and cash equivalents were $81.1 million as of June 30, 2015.
Active customer count expanded to 1,592, up from 1,444 in the second quarter of 2014.
Employee headcount was 1,008 as of June 30, 2015.
Financial Outlook for the Third Quarter of 2015
For the third quarter of 2015, the company expects:
- Non-GAAP net revenue in the range of $68 million to $73 million.
- Non-GAAP adjusted EBITDA of $0 to $4 million.
Rocket Fuel continues to have a financial goal of achieving positive non-GAAP adjusted EBITDA for the full fiscal year 2015.
Conference Call and Webcast Information
The Rocket Fuel second quarter 2015 teleconference and webcast is scheduled to begin at 2:00 PM Pacific time on Wednesday, August 5, 2015. To participate on the live call, analysts and investors should dial 1-888-417-8516, or outside the U.S. 719-457-2661, at least ten minutes prior to the call. Rocket Fuel will also offer a live and archived webcast of the conference call, accessible from the "Investors" section of its website at http://investor.rocketfuel.com.
Use of Non-GAAP Measures
This press release includes information relating to non-GAAP net revenue, adjusted EBITDA and adjusted net income (loss), which are financial measures that have not been prepared in accordance with generally accepted accounting principles in the United States ("GAAP"). These non-GAAP financial measures have been included in this press release because they are measures used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget, and to develop short- and long-term operational plans.
We define non-GAAP net revenue as GAAP revenue less media costs. Media costs consist of costs for advertising impressions we purchase from real-time advertising exchanges or other third parties. A limitation of non-GAAP net revenue is that it is a measure designed for internal purposes that may be unique to Rocket Fuel and may not enhance the comparability of Rocket Fuel's results to other companies in the same industry that have similar business arrangements but present the impact of media costs differently. Our management compensates for this limitation by also considering the comparable GAAP financial measures of revenue, media costs and other cost of revenue.
We define non-GAAP adjusted EBITDA as GAAP net loss before interest expense, other income (expense), net, income tax provision (benefit), depreciation and amortization expense, stock-based compensation expense and related payroll taxes, and acquisition and restructuring related expenses. Adjusted EBITDA has a number of limitations, including the following: although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; adjusted EBITDA does not consider the potentially dilutive impact of equity-based compensation; adjusted EBITDA does not reflect acquisition and restructuring related expenses, tax and interest expenses that may represent payments reducing the cash available to us; and other companies, including those in our industry, may calculate adjusted EBITDA differently, which reduces its usefulness as a comparative measure. Because of these limitations, our management considers adjusted EBITDA alongside other financial performance measures, including cash flow metrics, net income (loss) and our other GAAP results.
We define non-GAAP adjusted net income (loss) as GAAP net income (loss) excluding stock-based compensation expense, amortization of intangible assets, acquisition and restructuring related expenses and the estimated tax impact of the foregoing items. A limitation of adjusted net income (loss) is that it is a measure that may be unique to Rocket Fuel and may not enhance the comparability of Rocket Fuel's results to other companies in the same industry that define adjusted net loss differently. This measure may also exclude expenses that may have a material impact on Rocket Fuel's reported financial results. Our management compensates for these limitations by also considering the comparable GAAP financial measure of net income (loss).
For a reconciliation of non-GAAP financial measures to the nearest comparable GAAP financial measures, see "Reconciliation from GAAP Revenue to Non-GAAP Net Revenue," "Reconciliation from GAAP Net Loss to Adjusted EBITDA" and "Reconciliation from GAAP Net Income (Loss) to Adjusted Net Income (Loss)" included in this press release.
These non-GAAP financial measures are not intended to be considered in isolation from, as substitutes for, or as superior to, the corresponding financial measures prepared in accordance with GAAP.
Cautions Regarding Forward-Looking Statements
This press release and the webcast of the same date contain "forward-looking statements" regarding future events and our future financial performance, including but not limited to: expected progress toward positioning the company for long-term strategic and financial success and our ability to unlock value in the Company; our ability to replicate, expand and deepen relationships with large agency holding companies and their operating agencies; the success of early stage strategic agency relationships; our ability to penetrate independent small and medium sized agencies; our ability to sell our enterprise solutions direct to marketers; broader acceptance of our SaaS offerings; our competitive differentiators; the success of our multi-channel, cross device approach and accuracy of our solutions; our ability to partner with the broader marketing ecosystem and add value to CRM and Marketing Software providers; the success of our go to market and marketing strategies; the status of our CEO search; our expectations for margins and product mix going forward; our goal of positive adjusted EBITDA for the full year 2015; our target DSO; expectations regarding capital and general cash spending and cash balances; our free cash flow expectations; and expectations for third quarter non-GAAP net revenue and adjusted EBITDA. Words such as "expect," "believe," "intend," "plan," "goal", "focus" and other similar words are also intended to identify such forward-looking statements.
These forward-looking statements are subject to a number of risks and uncertainties that may cause actual results to differ materially from the results anticipated by such statements, including, without limitation: our limited operating history, particularly as a relatively new public company; our history of losses; fluctuations in our operating results, including but not limited to fluctuations due to seasonality; risks associated with our growth, particularly including growth outside of the U.S.; failure to achieve expected synergies and efficiencies of operations between Rocket Fuel and [x+1]; failure to adequately address competition from agency trading desks; failure to achieve the expected benefits of our efficiency plan including various cost-cutting measures; and general market, political, economic and business conditions.
Additional factors that could cause actual results to differ materially from those anticipated by our forward-looking statements are under the caption "Risk Factors" in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 16, 2015 and in subsequent SEC filings. These forward-looking statements are made as of the date of this press release and the related webcast, and Rocket Fuel expressly disclaims any obligation or undertaking to update the forward-looking statements contained herein or therein to reflect events that occur or circumstances that exist after the date on which the statements were made.
About Rocket Fuel
Rocket Fuel combines the science of Artificial Intelligence with the scale of Big Data to improve the effectiveness of programmatic marketing. Customers trust Rocket Fuel's Marketing That Learns® to achieve brand and direct-response objectives in diverse industries across North America, Latin America, Europe, and APAC. With the acquisition of marketing technology firm [x+1] in September of 2014, Rocket Fuel now offers a complete programmatic marketing platform for the world's most innovative, always-on marketers. The platform includes data management, programmatic media-buying, site optimization, and predictive analytics capabilities that extend across a marketer's paid and owned channels, and personalize every customer interaction. Rocket Fuel operates in more than 20 offices worldwide and trades on the NASDAQ Global Select Market under the ticker symbol "FUEL." For more information, please visit http://www.rocketfuel.com or call 1-888-717-8873.
Rocket Fuel, the Rocket Fuel logo, Advertising That Learns and Marketing That Learns are trademarks or registered trademarks of Rocket Fuel Inc. in the United States and other countries.
| Rocket Fuel Inc. | ||
| UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS | ||
| (In thousands) | ||
|
June 30, 2015 |
December 31, 2014 |
|
| Assets | ||
| Current Assets: | ||
| Cash and cash equivalents | $ 81,065 | $ 107,056 |
| Accounts receivable, net | 119,423 | 135,400 |
| Deferred tax assets, net | 1,716 | 1,716 |
| Prepaid expenses | 3,167 | 3,698 |
| Other current assets | 6,847 | 12,531 |
| Total current assets | 212,218 | 260,401 |
| Property, equipment and software, net | 86,719 | 89,441 |
| Restricted cash | 2,304 | 2,915 |
| Intangible assets, net | 60,845 | 69,299 |
| Goodwill | 115,412 | 115,412 |
| Other assets | 1,620 | 1,797 |
| Total assets | $ 479,118 | $ 539,265 |
| Liabilities and Stockholders' Equity | ||
| Current Liabilities: | ||
| Accounts payable | $ 63,305 | $ 76,085 |
| Accrued and other current liabilities | 32,740 | 33,258 |
| Deferred revenue | 1,931 | 593 |
| Current portion of capital leases | 6,233 | 5,482 |
| Current portion of debt | 45,720 | 45,705 |
| Total current liabilities | 149,929 | 161,123 |
| Debt - Less current portion | 20,477 | 23,335 |
| Capital leases - Less current portion | 10,649 | 12,341 |
| Deferred rent - Less current portion | 25,498 | 26,818 |
| Deferred tax liabilities | 1,949 | 2,068 |
| Other liabilities | 1,204 | 814 |
| Total liabilities | 209,706 | 226,499 |
| Stockholders' Equity: | ||
| Common stock | 43 | 42 |
| Additional paid-in capital | 439,542 | 421,630 |
| Accumulated other comprehensive loss | (113) | (120) |
| Accumulated deficit | (170,060) | (108,786) |
| Total stockholders' equity | 269,412 | 312,766 |
| Total Liabilities and Stockholders' Equity | $ 479,118 | $ 539,265 |
| Rocket Fuel Inc. | ||||
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
| (In thousands, except loss per share data) | ||||
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|||
| 2015 | 2014 | 2015 | 2014 | |
| Revenue | $ 120,065 | $ 92,642 | $ 224,399 | $ 167,039 |
| Costs and expenses: | ||||
| Media costs | 49,155 | 37,930 | 94,716 | 67,637 |
| Other cost of revenue (1) | 19,826 | 8,993 | 39,782 | 16,821 |
| Research and development (1) | 11,791 | 8,434 | 23,114 | 15,675 |
| Sales and marketing (1) | 41,750 | 33,789 | 84,628 | 63,548 |
| General and administrative (1) | 14,761 | 12,135 | 32,335 | 22,475 |
| Restructuring | 6,471 | — | 6,471 | — |
| Total costs and expenses | 143,754 | 101,281 | 281,046 | 186,156 |
| Operating loss | (23,689) | (8,639) | (56,647) | (19,117) |
| Interest expense | 1,045 | 514 | 2,385 | 928 |
| Other (income) expense, net | (696) | 425 | 1,512 | 444 |
| Loss before income taxes | $ (24,038) | $ (9,578) | $ (60,544) | $ (20,489) |
| Income tax (benefit) provision | 372 | 181 | 729 | 496 |
| Net loss | $ (24,410) | $ (9,759) | $ (61,273) | $ (20,985) |
| Basic and diluted net loss per share attributable to common stockholders | $ (0.58) | $ (0.28) | $ (1.45) | $ (0.61) |
| Basic and diluted weighted-average shares used to compute net loss per share attributable to common stockholders | 42,296 | 35,172 | 42,140 | 34,606 |
| (1) Includes unaudited stock-based compensation expense as follows (in thousands): | ||||
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|||
| 2015 | 2014 | 2015 | 2014 | |
| Other cost of revenue | $ 477 | $ 276 | $ 1,102 | $ 528 |
| Research and development | 1,834 | 1,311 | 4,081 | 2,298 |
| Sales and marketing | 2,325 | 2,748 | 5,156 | 4,915 |
| General and administrative | 1,798 | 1,664 | 3,542 | 3,215 |
| $ 6,434 | $ 5,999 | $ 13,881 | $ 10,956 | |
| Rocket Fuel Inc. | ||
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| (In thousands) | ||
|
Six Months Ended June 30, |
||
| 2015 | 2014 | |
| OPERATING ACTIVITIES: | ||
| Net loss | $ (61,273) | $ (20,985) |
| Adjustments to reconcile net loss to net cash used in operating activities: | ||
| Depreciation and amortization | 24,023 | 6,940 |
| Impairment of leasehold improvements | 2,704 | — |
| Stock-based compensation | 13,881 | 11,241 |
| Deferred taxes | (20) | 112 |
| Excess tax benefit from stock-based activity | — | (163) |
| Other non-cash adjustments, net | 1,044 | 69 |
| Changes in operating assets and liabilities, net of effects of acquisition: | ||
| Accounts receivable | 15,362 | (3,179) |
| Prepaid expenses and other assets | 6,318 | (14,614) |
| Accounts payable | (11,538) | (248) |
| Accrued and other liabilities | 182 | (1,301) |
| Deferred rent | 890 | 15,749 |
| Deferred revenue | 1,338 | 457 |
| Net cash used in by operating activities | (7,089) | (5,922) |
| INVESTING ACTIVITIES: | ||
| Purchases of property, equipment and software | (10,085) | (19,141) |
| Capitalized internal-use software development costs | (6,048) | (3,555) |
| Change in restricted cash | 636 | (2,203) |
| Net cash used in investing activities | (15,497) | (24,899) |
| FINANCING ACTIVITIES: | ||
| Proceeds from the issuance of common stock in public offering, net of issuance costs | — | 115,130 |
| Proceeds from employee stock plans, net | 3,139 | 5,671 |
| Excess tax benefit from stock-based activity | — | 163 |
| Tax withholdings related to net share settlements of restricted stock units | (533) | (53) |
| Repayment of capital lease obligations | (2,755) | (430) |
| Proceeds from debt facilities, net of debt issuance costs | (242) | — |
| Repayment of debt facilities | (3,000) | — |
| Net cash (used in) provided by financing activities | (3,391) | 120,481 |
| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND EQUIVALENTS | (14) | 7 |
| CHANGE IN CASH AND CASH EQUIVALENTS | (25,991) | 89,667 |
| CASH AND CASH EQUIVALENTS—Beginning of period | 107,056 | 113,873 |
| CASH AND CASH EQUIVALENTS—End of period | $ 81,065 | $ 203,540 |
| SUPPLEMENTAL DISCLOSURES OF OTHER CASH FLOW INFORMATION: | ||
| Cash paid for income taxes, net of refunds | $ 454 | $ 205 |
| Cash paid for interest | 1,921 | 791 |
| SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES: | ||
| Purchases of property and equipment recorded in accounts payable and accruals | $ 428 | $ 9,079 |
| Property, plant and equipment acquired under capital lease obligations | 1,786 | 7,350 |
| Vesting of early exercised options | 97 | 576 |
| Stock-based compensation capitalized in internal-use software costs | 1,286 | 762 |
| Rocket Fuel Inc. | ||||
| UNAUDITED NON-GAAP MEASURES | ||||
| (In thousands, except per share data) | ||||
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|||
| 2015 | 2014 | 2015 | 2014 | |
| Non-GAAP net revenue | $ 70,910 | $ 54,712 | $ 129,683 | $ 99,402 |
| Non-GAAP adjusted EBITDA | $ 1,394 | $ 1,535 | $ (12,232) | $ (856) |
| Non-GAAP adjusted net income (loss) | $ (7,177) | $ (3,660) | $ (32,276) | $ (9,929) |
| Non-GAAP adjusted diluted net income (loss) per share | $ (0.17) | $ (0.10) | $ (0.77) | $ (0.29) |
| Rocket Fuel Inc. | ||||
| UNAUDITED RECONCILIATION FROM GAAP REVENUE TO NON-GAAP NET REVENUE | ||||
| (In thousands) | ||||
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|||
| 2015 | 2014 | 2015 | 2014 | |
| Revenue | $ 120,065 | $ 92,642 | $ 224,399 | $ 167,039 |
| Less: Media costs | 49,155 | 37,930 | 94,716 | 67,637 |
| Non-GAAP net revenue | $ 70,910 | $ 54,712 | $ 129,683 | $ 99,402 |
| Rocket Fuel Inc. | ||||
| UNAUDITED RECONCILIATION FROM GAAP NET LOSS TO NON-GAAP ADJUSTED EBITDA | ||||
| (In thousands) | ||||
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|||
| 2015 | 2014 | 2015 | 2014 | |
| Net loss | $ (24,410) | $ (9,759) | $ (61,273) | $ (20,985) |
| Adjustments: | ||||
| Interest expense, net | 1,045 | 514 | 2,385 | 928 |
| Income tax (benefit) provision | 372 | 181 | 729 | 496 |
| Depreciation and amortization expense | 12,158 | 3,890 | 24,024 | 6,810 |
| Stock-based compensation expense | 6,434 | 5,999 | 13,881 | 10,956 |
| Other (income) expense, net | (696) | 425 | 1,512 | 444 |
| Acquisition expense | — | 100 | — | 100 |
| Restructuring expense | 6,471 | — | 6,471 | — |
| Payroll tax expense related to stock-based compensation | 20 | 185 | 39 | 395 |
| Total adjustments | 25,804 | 11,294 | 49,041 | 20,129 |
| Non-GAAP adjusted EBITDA | $ 1,394 | $ 1,535 | $ (12,232) | $ (856) |
| Rocket Fuel Inc. | ||||
| UNAUDITED RECONCILIATION FROM GAAP NET LOSS TO | ||||
| NON-GAAP ADJUSTED NET INCOME (LOSS) | ||||
| (In thousands, except per share data) | ||||
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|||
| 2015 | 2014 | 2015 | 2014 | |
| Net loss | $ (24,410) | $ (9,759) | $ (61,273) | $ (20,985) |
| Stock-based compensation expense | 6,434 | 5,999 | 13,881 | 10,956 |
| Amortization of intangible assets | 4,227 | — | 8,454 | — |
| Acquisition expense | — | 100 | — | 100 |
| Restructuring expense | 6,471 | — | 6,471 | — |
| Tax impact of the above items | 101 | — | 191 | — |
| Non-GAAP adjusted net income (loss) | $ (7,177) | $ (3,660) | $ (32,276) | $ (9,929) |
| Basic and diluted net loss per share attributable to common stockholders | $ (0.58) | $ (0.28) | $ (1.45) | $ (0.61) |
| Non-GAAP adjusted net income (loss) per diluted share | $ (0.17) | $ (0.10) | $ (0.77) | $ (0.29) |
| Weighted average shares used in computing non-GAAP adjusted net income (loss) per diluted share | 42,296 | 35,172 | 42,140 | 34,606 |