REDWOOD CITY, Calif., Nov. 7, 2013 (GLOBE NEWSWIRE) -- Rocket Fuel Inc. (Nasdaq:FUEL), a leading provider of artificial intelligence (AI) advertising solutions for digital marketers, today reported financial results for the third quarter ended September 30, 2013.
"Rocket Fuel continued its strong growth during the third quarter, as revenue grew 132% to $62.5 million. We continued this fast-paced growth while managing EBITDA close to break-even, producing an adjusted EBITDA loss of $(0.7) million," said George John, Chairman and CEO of Rocket Fuel. "Compared to last year's third quarter, we more than doubled our customer base and more than tripled the percent of revenue coming from new advertising channels that include mobile, social and video, to 26% of our total revenue. We maintained our focus on increasing market share, investing heavily in growth, continuing to expand our big data technology platform and Artificial Intelligence technology, and adding high-quality employees."
Financial and Business Highlights for the Third Quarter of 2013
Revenue of $62.5 million increased 132% compared to $26.9 million for the third quarter of 2012.
Revenue less media costs of $36.0 million increased 149%, compared to $14.4 million for the third quarter of 2012, growing to 58% of revenue for the current quarter.1
Gross Profit of $30.6 million increased 156% compared to $11.9 million over the prior year period representing a Gross Margin improvement to 49% from 44%.
Net Loss was $(6.9) million, or $(0.61) per diluted share, as compared to a net loss of $(2.0) million, or $(0.25) per diluted share in the third quarter of 2012. Adjusted net loss for the quarter was $(1.8) million, or $(0.16) per diluted common share.1
Adjusted EBITDA loss was $(0.7) million compared to a loss of $(0.5) million in the third quarter of 2012.1
Other channels revenue which includes revenue from delivery of digital advertising to mobile, social, and video channels of $16.2 million increased by 735% compared to $1.9 million for the third quarter of 2012 and more than tripled from 7% to 26% as a percentage of revenue from the prior year period.
Active customer count expanded to 938, up from 406 in the third quarter of 2012.
Employee headcount increased by 263 in the first three quarters of 2013 to a total 552 as of September 30, 2013.
International offices now include a presence in Stockholm, Sweden and Milan, Italy.
Cash and Cash equivalents as of September 30, 2013 were $125.3 million. Rocket Fuel received net proceeds from its IPO of $107.9 million during the third quarter.
Shares outstanding as of September 30, 2013 were 32.8 million.
1 Revenue less media costs, adjusted net loss, and adjusted EBITDA are non-GAAP financial measures. Please see the discussion below under the heading "Use of Non-GAAP Measures" and the reconciliations at the end of this release.
Business Outlook
"Our strong financial performance in the first three quarters of the year signals an ongoing potential to drive rapid growth and scale while managing costs," said Peter Bardwick, CFO of Rocket Fuel. "We will continue to invest in talent and our technology which we believe will position us to increase our share of the markets in which we compete and to achieve continued growth in the future."
Rocket Fuel's fourth quarter and full year outlook is as follows:
Fourth Quarter 2013
- Revenue in the range of $74 million to $77 million
- Adjusted EBITDA in the range of $1.0 million to $2.0 million
Fiscal Year 2013
- Revenue in the range of $229 million to $232 million
- Adjusted EBITDA loss in the range of $(3.9) million to $(2.9) million
Conference Call and Webcast Information
The Rocket Fuel third quarter 2013 teleconference and webcast is scheduled to begin at 2:00 p.m. Pacific Time on Thursday, November 7, 2013. To participate on the live call, analysts and investors should dial 1-877-941-1428 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 the Company's web site at www.rocketfuel.com.
Use of Non-GAAP Measures
This press release includes information relating to revenue less media costs, adjusted net loss, and adjusted EBITDA, 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 revenue less media costs 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 revenue less media costs is that it is a measure designed for internal purposes that may be unique to the Company and may not enhance the comparability of the Company'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, cost of revenue, and total operating expenses.
We define adjusted net income/(loss) as GAAP net income/(loss) excluding stock-based compensation expense and change in fair value of convertible preferred stock warrant liability, net of estimated tax. A limitation of adjusted net income/(loss) is that it is a measure that may be unique to the Company and may not enhance the comparability of the Company's results to other companies in the same industry that define adjusted net income/(loss) differently. This measure may also exclude expenses that may have a material impact on the Company's reported financial results. Our management compensates for these limitations by also considering the comparable GAAP financial measure of net income/(loss).
We define adjusted EBITDA as net income before income tax (expense) benefit, interest expense, net, depreciation and amortization (excluding amortization of internal use software), stock-based compensation expense and change in fair value of convertible preferred stock warrant liability. Adjusted EBITDA has a number of limitations as an analytical tool 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, the Company's working capital needs;
- adjusted EBITDA does not consider the potentially dilutive impact of equity-based compensation;
- adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; and
- other companies, including those in the Company's 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 various cash flow metrics, net income/(loss) and the Company's other GAAP results.
For a reconciliation of non-GAAP financial measures to the nearest comparable GAAP financial measures, see "Reconciliation of Revenue to Revenue Less Media Costs," "Reconciliation of Net Loss to Adjusted Net Loss" and "Reconciliation of Net Loss to Adjusted EBITDA" 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.
Forward-Looking Statements
This press release includes "forward-looking statements" including, without limitation, statements regarding Rocket Fuel's forecasted financial results, anticipated reach, capabilities and opportunities, planned investments in employees and technology, expansion of revenue from the mobile, social and video channels, expected benefits to advertisers, and market opportunities, including opportunities outside of the United States. 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; risks associated with our rapid growth, particularly outside of the U.S.; our inability to realize value from significant investments in our business; 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 prospectus filed with the Securities and Exchange Commission on September 20, 2013 pursuant to Rule 424(b) under the Securities Act. These forward-looking statements are made as of November 7, 2013 and Rocket Fuel expressly disclaims any obligation or undertaking to update the forward-looking statements contained herein to reflect events that occur or circumstances that exist after the date on which such statements were made. Further, the financial results discussed herein are preliminary based on information currently available to Rocket Fuel. While Rocket Fuel believes these preliminary results are meaningful, they could differ from the actual results that Rocket Fuel later reports in its quarterly report on Form 10-Q for the fiscal quarter ended September 30, 2013. Rocket Fuel assumes no obligation and does not intend to update these preliminary results before filing its Form 10-Q for the fiscal quarter ended September 30, 2013.
About Rocket Fuel
Rocket Fuel delivers a leading programmatic media-buying platform at Big Data scale that harnesses the power of artificial intelligence to improve marketing ROI in digital media across web, mobile, video, and social channels. Rocket Fuel powers digital advertising and marketing programs globally for customers in North America, Europe, and Japan. Customers use Rocket Fuel's Advertising That Learns ® platform to achieve brand and direct-response objectives in diverse industries from luxury cars to groceries to retail. Rocket Fuel currently operates in 19 offices worldwide and trades on the NASDAQ Global Select Market under the ticker symbol "FUEL." For more information, please visit http://www.rocketfuel.com.
Rocket Fuel and Advertising That Learns are trademarks or registered trademarks of Rocket Fuel Inc. in the United States and other countries.
| Rocket Fuel Inc. | ||
| CONDENSED CONSOLIDATED BALANCE SHEET | ||
| (In thousands) | ||
| September 30, | December 31, | |
| 2013 | 2012 | |
| Assets | (unaudited) | |
| Current Assets: | ||
| Cash and cash equivalents | $ 125,282 | $ 14,896 |
| Accounts receivable, net | 67,984 | 47,333 |
| Deferred tax assets | 334 | 334 |
| Prepaid expenses and other current assets | 2,159 | 1,215 |
| Total current assets | 195,759 | 63,778 |
| Property, equipment and software, net | 20,941 | 10,939 |
| Other assets | 1,165 | 472 |
| Total assets | $ 217,865 | $ 75,189 |
| Liabilities and Stockholder's Equity | ||
| Current Liabilities: | ||
| Accounts payable | $ 34,088 | $ 17,482 |
| Accrued and other current liabilities | 15,707 | 6,186 |
| Deferred revenue | 451 | 187 |
| Current portion of line of credit | 11,853 | -- |
| Current portion of long-term debt | 4,375 | 1,988 |
| Total current liabilities | 66,474 | 25,843 |
| Line of credit | -- | 1,853 |
| Long-term debt - Less current portion | 10,625 | 3,125 |
| Deferred rent - Less current portion | 482 | 430 |
| Deferred tax liabilities | 334 | 334 |
| Convertible preferred stock warrant liability | -- | 2,741 |
| Total liabilities | 77,915 | 34,326 |
| Stockholders' Equity | ||
| Convertible preferred stock, Series A | -- | 9,788 |
| Convertible preferred stock, Series B | -- | 9,935 |
| Convertible preferred stock, Series C | -- | 6,501 |
| Convertible preferred stock, Series C-1 | -- | 34,393 |
| Common stock | 33 | 8 |
| Additional paid-in capital | 182,332 | 3,865 |
| Accumulated other comprehensive loss | (101) | (84) |
| Accumulated deficit | (42,314) | (23,543) |
| Total stockholders' equity | 139,950 | 40,863 |
| Total liabilities and stockholders' equity | $ 217,865 | $ 75,189 |
| Rocket Fuel Inc. | ||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
| (In thousands, except loss per share data) | ||||
| Three Months Ended | Nine Months Ended | |||
| September 30, | September 30, | |||
| 2013 | 2012 | 2013 | 2012 | |
| (unaudited) | (unaudited) | |||
| Revenue | $ 62,458 | $ 26,902 | $ 155,039 | $ 66,494 |
| Cost of revenue | 31,877 | 14,955 | 81,529 | 36,988 |
| Gross Profit | 30,581 | 11,947 | 73,510 | 29,506 |
| Operating expenses: | ||||
| Research and development | 4,464 | 1,066 | 10,587 | 2,604 |
| Sales and marketing | 21,644 | 10,351 | 56,293 | 25,893 |
| General and administrative | 8,719 | 1,675 | 19,671 | 4,245 |
| Total operating expenses | 34,827 | 13,092 | 86,551 | 32,742 |
| Loss from operations | (4,246) | (1,145) | (13,041) | (3,236) |
| Other expense, net: | ||||
| Interest expense | (251) | (63) | (604) | (233) |
| Other income (expense) - net | 155 | 65 | (213) | 157 |
| Change in fair value of convertible preferred stock warrant liability | (2,385) | (831) | (4,740) | (1,093) |
| Other expense, net | (2,481) | (829) | (5,557) | (1,169) |
| Loss before income taxes | (6,727) | (1,974) | (18,598) | (4,405) |
| Provision for income taxes | (133) | (28) | (173) | (67) |
| Net loss | $ (6,860) | $ (2,002) | $ (18,771) | $ (4,472) |
| Basic and diluted net loss per share attributable to common stockholders | $ (0.61) | $ (0.25) | $ (2.01) | $ (0.56) |
| Basic and diluted weighted-average shares used to compute net loss per share attributable to common stockholders | 11,315 | 8,067 | 9,346 | 7,971 |
| (1) Stock-based compensation expense was as follows (in thousands): | ||||
| Three Months Ended | Nine Months Ended | |||
| September 30, | September 30, | |||
| 2013 | 2012 | 2013 | 2012 | |
| (unaudited) | (unaudited) | |||
| Cost of revenue | $ 93 | $ 5 | $ 211 | $ 20 |
| Research and development | 506 | 46 | 1,266 | 111 |
| Sales and marketing | 1,152 | 100 | 2,471 | 196 |
| General and administrative | 902 | 61 | 2,305 | 200 |
| $ 2,653 | $ 212 | $ 6,253 | $ 527 | |
| Rocket Fuel Inc. | ||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| (In thousands) | ||
| Nine Months Ended | ||
| September 30, | ||
| 2013 | 2012 | |
| (unaudited) | ||
| OPERATING ACTIVITIES: | ||
| Net loss | $ (18,771) | $ (4,472) |
| Adjustments to reconcile net loss to net cash used in operating activities: | ||
| Depreciation and amortization | 4,583 | 2,461 |
| Provision for doubtful accounts | 521 | 63 |
| Stock-based compensation | 6,277 | 507 |
| Issuance of restricted stock | -- | 20 |
| Amortization of debt discount | 1 | 6 |
| Loss on disposal of property, equipment and software | (26) | -- |
| Change in fair value of preferred stock warrant liability | 4,740 | 1,093 |
| Changes in operating assets and liabilities: | ||
| Accounts receivable | (21,236) | (15,586) |
| Prepaid expenses and other current assets | (941) | (679) |
| Other assets | (700) | (251) |
| Accounts payable | 12,532 | 3,951 |
| Accrued and other liabilities | 5,496 | 2,235 |
| Deferred rent | 100 | 315 |
| Deferred revenue | 264 | 18 |
| Net cash used in operating activities | (7,160) | (10,319) |
| INVESTING ACTIVITIES: | ||
| Purchases of property, equipment and software | (5,564) | (2,513) |
| Capitalized internal use software development costs | (4,486) | (3,294) |
| Net cash used in investing activities | (10,050) | (5,807) |
| FINANCING ACTIVITIES: | ||
| Proceeds from the issuance of convertible preferred stock/ warrants | 97 | 34,500 |
| Issuance costs related to convertible preferred stock | -- | (105) |
| Proceeds from initial public offerings | 107,880 | -- |
| Issuance costs related to public offerings | (1,534) | -- |
| Proceeds from exercise of vested common stock options | 208 | 46 |
| Proceeds from early exercise of unvested common stock options | 1,058 | 378 |
| Repurchases of common stock options early exercised | (11) | (3) |
| Payments for deferred offering costs | -- | -- |
| Borrowings from line of credit | 10,000 | 4,000 |
| Repayment of line of credit | -- | (6,000) |
| Proceeds from issuance of long-term debt | 10,000 | 3,000 |
| Repayment of long-term debt | (114) | (311) |
| Net cash provided by financing activities | 127,584 | 35,505 |
| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND EQUIVALENTS | 12 | (51) |
| CHANGE IN CASH AND CASH EQUIVALENTS | 110,386 | 19,328 |
| CASH AND CASH EQUIVALENTS—Beginning of period | 14,896 | 5,071 |
| CASH AND CASH EQUIVALENTS—End of period | $ 125,282 | $ 24,399 |
| Rocket Fuel Inc. | ||||
| KEY METRICS | ||||
| (In thousands, except number of active customers) | ||||
| Three Months Ended | Nine Months Ended | |||
| September 30, | September 30, | |||
| 2013 | 2012 | 2013 | 2012 | |
| (unaudited) | (unaudited) | |||
| Revenue | $62,458 | $ 26,902 | $155,039 | $ 66,494 |
| Revenue less media cost (non-GAAP) | $36,035 | $ 14,448 | $ 87,327 | $ 35,874 |
| Adjusted EBITDA (non-GAAP) | $ (657) | $ (477) | $ (4,941) | $ (1,656) |
| Number of active customers | 938 | 406 | 938 | 406 |
| Rocket Fuel Inc. | ||||
| RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA | ||||
| (In thousands) | ||||
| Three Months Ended | Nine Months Ended | |||
| September 30, | September 30, | |||
| 2013 | 2012 | 2013 | 2012 | |
| (unaudited) | (unaudited) | |||
| Net loss | $ (6,860) | $ (2,002) | $(18,771) | $ (4,472) |
| Adjustments: | ||||
| Interest expense, net | 251 | 63 | 604 | 233 |
| Provision for income taxes | 133 | 28 | 173 | 67 |
| Depreciation and amortization expense (excludes amortization of internal use software) | 781 | 391 | 2,060 | 896 |
| Stock-based compensation expense | 2,653 | 212 | 6,253 | 527 |
| Change in fair value of convertible preferred stock warrant liability | 2,385 | 831 | 4,740 | 1,093 |
| Total adjustments | 6,203 | 1,525 | 13,830 | 2,816 |
| Adjusted EBITDA | $ (657) | $ (477) | $ (4,941) | $ (1,656) |
| Rocket Fuel Inc. | ||||
| RECONCILIATION OF REVENUE TO REVENUE LESS MEDIA COSTS | ||||
| (In thousands) | ||||
| Three Months Ended | Nine Months Ended | |||
| September 30, | September 30, | |||
| 2013 | 2012 | 2013 | 2012 | |
| (unaudited) | (unaudited) | |||
| Revenue | $62,458 | $ 26,902 | $155,039 | $ 66,494 |
| Less media cost | 26,423 | 12,454 | 67,712 | 30,620 |
| Revenue less media cost | $36,035 | $ 14,448 | $ 87,327 | $ 35,874 |
| Rocket Fuel Inc. | ||||
| RECONCILIATION OF NET LOSS TO | ||||
| ADJUSTED NET LOSS | ||||
| (In thousands, except per share data) | ||||
| Three Months Ended | Nine Months Ended | |||
| September 30, | September 30, | |||
| 2013 | 2012 | 2013 | 2012 | |
| (unaudited) | (unaudited) | |||
| Net loss | $ (6,860) | $ (2,002) | $ (18,771) | $ (4,472) |
| Stock-based compensation expense | 2,653 | 212 | 6,253 | 527 |
| Change in fair value of convertible preferred stock warrant liability | 2,385 | 831 | 4,740 | 1,093 |
| Tax impact of the above items | -- | -- | -- | -- |
| Adjusted net loss | $ (1,822) | $ (959) | $ (7,778) | $ (2,852) |
| Adjusted diluted net loss per share | $ (0.16) | $ (0.12) | $ (0.83) | $ (0.36) |
| Weighted average shares used in computing adjusted diluted net loss per share | 11,315 | 8,067 | 9,346 | 7,971 |