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Press Release Details

YuMe Reports Third Quarter 2016 Financial Results

11/09/2016

Announces Executive and Board Changes and Restructuring Plan to Improve Profitability

Board of Directors’ Special Committee to Explore Strategic Alternatives, Engages Deutsche Bank as Financial Advisor

REDWOOD CITY, Calif.--(BUSINESS WIRE)-- YuMe, Inc. (NYSE: YUME), the global audience technology company powered by data-driven insights and cross-screen expertise, today announced its financial results for the third quarter ended September 30, 2016. The Company also announced the transition of its CEO and Chairman of the Board roles, a restructuring plan to improve profitability, and that its Board of Directors’ special committee of independent directors will explore and evaluate a range of strategic alternatives to enhance shareholder value.

Financial highlights for the third quarter of 2016 include:

  • Revenue of $35.0 million, compared to $38.9 million in the third quarter of 2015 (Q3 2015);
  • Revenue from top 20 advertising customers of $15.8 million, an increase of 7% from Q3 2015;
  • Mobile and connected television impressions accounted for 43% of revenue, compared to 32% of revenue in Q3 2015;
  • Gross margin of 48.4%, compared to 44.8% in Q3 2015;
  • Net loss of $4.5 million, or $0.13 per diluted share, compared to a net loss of $6.5 million, or $0.19 per diluted share, in Q3 2015;
  • Adjusted EBITDA1 loss of $0.7 million, compared to an adjusted EBITDA loss of $2.8 million in Q3 2015;
  • $63.7 million in cash, cash equivalents and marketable securities and no debt as of September 30, 2016;
  • Repurchased approximately 1.6 million shares of its common stock to date for $5.8 million.

Executive and Board of Directors Changes, Restructuring Plan Announced

The Company announced today that Jayant Kadambi will no longer serve as YuMe’s Chairman of the Board and Chief Executive Officer, effective immediately. Mr. Kadambi will remain on the Board. Additionally, Jim Soss, Executive Vice President and General Manager, North America, and Hardeep Bindra, Executive Vice President, Operations, will no longer be employed at YuMe, effectively immediately.

YuMe’s Board of Directors has named Paul Porrini to the role of Interim CEO. Mr. Porrini most recently served as the Company’s Executive Vice President, General Counsel and Secretary, and has led YuMe’s legal and human resources functions since July 2012. Prior to joining YuMe, Mr. Porrini served in leadership roles at Hewlett-Packard Company and Bluestone Software, a web application server company. Michael Hudes, a member of YuMe’s executive staff since 2010, has been named Executive Vice President, Chief Revenue Officer, and will lead the Company’s global sales, business development and revenue operations teams. Ayyappan Sankaran, a co-founder, will remain as Executive Vice President, Chief Technology Officer, and will remain on the Board. Tony Carvalho will remain as Executive Vice President, Chief Financial Officer. Messrs. Carvalho, Hudes and Sankaran will report to Mr. Porrini.

Additionally, the Board of Directors has appointed Eric Singer, a current independent Board member and managing member of VIEX Capital Advisors, the largest shareholder in the Company, to the role of Chairman.

Mr. Singer commented, “We appreciate Jayant’s efforts and passion for the business, and we wish him well in his new endeavors. We also would like to thank Jim and Hardeep for their service to the Company. The Board believes Paul has the leadership skills to help YuMe reinvigorate growth, leverage its core software and data management platform, and further improve operating efficiencies. We look forward to working with him and his team.”

Mr. Porrini commented, “I am honored to lead YuMe’s talented and experienced team. In the third quarter, we exceeded our gross margin and our operating expense improvement goals and grew our programmatic channel revenue, but execution issues in the back-half of the quarter resulted in lower-than-expected revenue and adjusted EBITDA. Our strong gross margin performance illustrates the strength of our platform, and our top priorities are to unlock the value of this strategic asset by improving our business fundamentals while exploring a range of strategic alternatives.”

The Board of Directors also approved a restructuring plan to further reduce costs and improve the Company’s profitability. The plan includes the executive changes stated above, real estate consolidation and other workforce changes. This plan, combined with additional cost saving initiatives, is expected to reduce incremental fourth quarter operating expenses by approximately $2.0 million compared to the third quarter of 2016. The Company expects fourth quarter 2016 results to include a $1.5 million charge related to the restructuring plan. The Company anticipates these current initiatives to result in annual cost savings of approximately $6.0 million in 2017, and expects to achieve additional cost savings in 2017 from future initiatives.

Special Committee Update

On September 14, 2016, YuMe disclosed that its Board of Directors had formed a special committee of independent directors, and that it was in the process of selecting a financial advisor. Today, the Company is announcing its Board has initiated a strategic alternatives review process to enhance shareholder value and has selected Deutsche Bank as the Company’s financial advisor.

This review may result in the Company pursuing value-enhancing initiatives as an independent company, a sale of the Company, a merger with another party, or another strategic transaction involving some or all of the assets of the Company. There can be no assurance that this process will result in any strategic alternatives being announced or consummated. The Company has not set a timetable for completion of this review process, and it does not intend to discuss or disclose further developments during this process unless and until the Board has approved a specific action or otherwise determined that further disclosure is appropriate or required by law.

Share Repurchase Program Update

For the three month period ended September 30, 2016, the Company acquired approximately 636,500 shares of its common stock for $2.25 million, at an average price per share of $3.53. From October 1, 2016 to date, the Company acquired approximately 213,000 shares of its common stock for $0.8 million, at an average price per share of $3.84. Since announcing its $10 million share repurchase program on February 18, 2016 to date, the Company has acquired approximately 1.58 million shares of its common stock for $5.8 million, at an average price per share of $3.67.

Business Outlook

Given its renewed focus on lowering its cost structure to improve profitability, the Company is now only providing adjusted EBITDA guidance. For the fourth quarter of 2016, the Company expects adjusted EBITDA in the range of $3.0 million and $6.0 million. Adjusted EBITDA guidance includes the impact of the $2.0 million expected sequential cost saving from its restructuring plan and other cost saving initiatives, and excludes the impact of an associated $1.5 million charge the Company expects to take in the fourth quarter.

Conference Call and Webcast Information

Senior management will host a conference call at 5:00 p.m. ET today to discuss the Company’s results. Investors may access the live call by dialing (866) 393-4306 or (734) 385-2616. A replay will be available through Wednesday, November 16 at (855) 859-2056 or (404) 537-3406. (Conference ID: 94737721). A live and archived Webcast of the call will be available at http://investors.yume.com.

About YuMe

YuMe, Inc. (NYSE: YUME) is a leading provider of global audience technologies, curating relationships between brand advertisers and consumers of premium video content across a growing range of connected devices. Combining data-driven technologies with deep insight into audience behavior, YuMe offers brand advertisers end-to-end marketing software that establishes greater brand resonance with engaged consumers. It is the evolution of brand advertising for an ever-expanding video ecosystem. YuMe is headquartered in Redwood City, CA., with additional offices worldwide. For more information, visit YuMe.com/pr, follow @YuMeVideo and like YuMe on Facebook.

YuMe is a trademark of YuMe. All other brands, products or service names are or may be trademarks or service marks of their respective owners.

Forward-Looking Statements

This press release contains forward-looking statements. All statements other than statements of historical fact are statements that could be forward-looking statements, including, but not limited to our Business Outlook, statements about our growth strategy, potential merger and acquisition activity, impact of management changes, our operating results, market trends, and quotations from management. These forward-looking statements are subject to risks and uncertainties, assumptions and other factors that could cause actual results and the timing of events to differ materially from future results that are expressed or implied in our forward-looking statements. Factors that could cause or contribute to such differences include adaptation to new, changing and competitive technologies and trends in a dynamic market, changes to our management, our history of net losses and limited operating history, which make it difficult to evaluate our prospects, our fluctuating quarterly results of operations, and our dependence on a limited number of customers in a highly competitive industry. These and other risk factors are discussed under “Risk Factors” in YuMe’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 that has been filed with the U.S. Securities and Exchange Commission (the “SEC”), and in our future filings and reports with the SEC. The forward-looking statements in this press release are based on information available to YuMe as of the date hereof, and YuMe assumes no obligation to update any forward-looking statements.

Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with U.S. generally accepted accounting principles (“GAAP”), we report adjusted EBITDA, which is a non-GAAP financial measure. We calculate adjusted EBITDA as net income (loss), excluding income taxes, interest, depreciation and amortization, stock-based compensation and non-recurring proxy contest and restructuring expenses. We believe that adjusted EBITDA provides useful information to investors in understanding our operating results in the same manner as management and the board of directors. This non-GAAP information is not necessarily comparable to non-GAAP information presented by other companies. Non-GAAP financial information should not be viewed as a substitute for, or superior to, financial information prepared in accordance with GAAP. Users of this non-GAAP financial information should consider the types of events and transactions for which adjustments have been made.

We have included adjusted EBITDA in this release because it is a key measure we use 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. In particular, we believe that adjusted EBITDA can provide a useful measure for period-to-period comparisons of our operating results because it excludes some expenses that may mask underlying trends.

In the table following the financial statements attached to this press release, the non-GAAP financial measures used in this press release are reconciled to the most directly comparable GAAP financial measures. With respect to adjusted EBITDA expectations provided under “Business Outlook” above, quantitative reconciliation to the most directly comparable GAAP financial measure is not feasible, because unpredictable fluctuations in our stock price makes it difficult to estimate accurately future stock-based compensation expenses that are excluded from these non-GAAP financial measures. We expect that the variability of the above charges may have a significant and unpredictable impact on our future GAAP financial results.

   

YuMe, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

As of
September 30,
2016

As of
December 31,
2015

Assets (1)
Current assets:
Cash and cash equivalents $ 31,169 $ 17,859
Marketable securities 31,280 30,600
Restricted cash 292
Accounts receivable, net 44,769 67,131
Prepaid expenses and other current assets   4,848   3,978
Total current assets 112,046 119,860
Marketable securities, long-term 1,250 11,724
Property, equipment and software, net 13,015 12,110
Goodwill 3,902 3,902
Intangible assets, net 163 659
Restricted cash, non-current 728 403
Deposits and other assets   592   416
Total assets $ 131,696 $ 149,074
 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable $ 9,039 $ 12,080
Accrued digital media property owner costs 14,219 17,155
Accrued liabilities 12,956 16,767
Deferred revenue 214 214
Capital lease   8  
Total current liabilities   36,436   46,216
Capital lease, non-current 15
Other long-term liabilities 675 77
Deferred tax liability   20   178
Total liabilities   37,146   46,471
 
Stockholders’ equity:
Common stock 36 34
Treasury stock (4,966 )
Additional paid-in-capital 157,445 150,001
Accumulated deficit (57,715 ) (47,167 )
Accumulated other comprehensive loss   (250 )   (265 )
Total stockholders’ equity   94,550   102,603
Total liabilities and stockholders’ equity $ 131,696 $ 149,074
 

(1) The condensed consolidated balance sheet as of December 31, 2015 was derived from audited financial statements.

 
   

YuMe, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 
Three Months Ended

September 30,

Nine Months Ended

September 30,

2016   2015 2016   2015
Revenue $ 34,953 $ 38,870 $ 114,861 $ 119,418
Cost of revenue (1)   18,050   21,470   58,642   66,172
Gross profit   16,903   17,400   56,219   53,246
Operating expenses:
Sales and marketing (1) 12,730 14,888 40,144 45,423
Research and development (1) 2,850 2,961 8,462 8,104
General and administrative (1)   5,877   5,901   17,954   17,772
Total operating expenses   21,457   23,750   66,560   71,299
Loss from operations   (4,554 )   (6,350 )   (10,341 )   (18,053 )
Interest and other income (expense), net
Interest expense (1 ) (3 ) (6 ) (6 )
Other income (expense), net   26   (137 )   (146 )   (136 )
Total interest and other income (expense), net   25   (140 )   (152 )   (142 )
Loss before income taxes (4,529 ) (6,490 ) (10,493 ) (18,195 )
Income tax expense (benefit)   (65 )   44   55   170
Net loss $ (4,464 ) $ (6,534 ) $ (10,548 ) $ (18,365 )
 
Net loss per share:
Basic $ (0.13 ) $ (0.19 ) $ (0.31 ) $ (0.55 )
Diluted $ (0.13 ) $ (0.19 ) $ (0.31 ) $ (0.55 )
Weighted-average shares used to compute net loss per share:
Basic   34,314   34,071   34,524   33,626
Diluted   34,314   34,071   34,524   33,626
 

(1) Stock-based compensation included above (in thousands, unaudited):

 

Three Months Ended
September 30,

Nine Months Ended
September 30,

 

2016

2015

2016

2015

Cost of revenue

$

49

$

64

$

144

$

245

Sales and marketing

706

729

2,152

2,655

Research and development

304

299

924

819

General and administrative

 

1,078

 

1,032

 

3,418

 

3,015

Total stock-based compensation

$

2,137

$

2,124

$

6,638

$

6,734

 
   

YuMe, Inc.

RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION

(In thousands)

(Unaudited)

 
Three Months Ended

September 30,

Nine Months Ended

September 30,

2016   2015 2016   2015
Net loss $ (4,464 ) $ (6,534 ) $ (10,548 ) $ (18,365 )
Adjustments:
Interest expense 1 3 6 6
Income tax expense (65 ) 44 55 170
Depreciation and amortization expense 1,682 1,567 5,090 4,294
Stock-based compensation expense 2,137 2,124 6,638 6,734
Proxy contest expenses       815  
Total Adjustments   3,755   3,738   12,604   11,204
Adjusted EBITDA $ (709) $ (2,796 ) $ 2,056 $ (7,161 )
 

1 Adjusted EBITDA is a non-GAAP financial measure that we calculate as net income (loss), adjusted to exclude income taxes, interest, depreciation and amortization, stock-based compensation and non-recurring proxy contest and restructuring expenses. We believe that adjusted EBITDA provides useful information to investors in understanding and evaluating our operating results in the same manner as management and the board of directors. This non-GAAP information is not necessarily comparable to non-GAAP information of other companies. Non-GAAP information should not be viewed as a substitute for, or superior to, net income prepared in accordance with GAAP as a measure of our profitability or liquidity. Users of this financial information should consider the types of events and transactions for which adjustments have been made.

Source: YuMe, Inc.

Investor Relations

YuMe, Inc.

Gary J. Fuges, CFA, 650-503-7875

ir@yume.com