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Telaria Reports Third Quarter 2017 Financial Results

Revenue increases 67% year-over-year with positive Adjusted EBITDA

NEW YORK--(BUSINESS WIRE)-- Telaria, Inc. (NYSE:TLRA), a leading video monetization software company, today announced financial results for the quarter ended September 30, 2017 that exceeded expectations across both revenue and Adjusted EBITDA.

Third Quarter Highlights:

  • Revenue of $12.7 million, up 67% year-over-year
  • Gross profit of $12.0 million, up 68% year-over-year
  • Gross margin of 94%
  • Adjusted EBITDA1 of $0.4 million

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

“This was a strong quarter as we continued our mission to become the single, essential seller platform for the monetization and management of premium video anywhere. Our results underscore our position as the leading independent video SSP, committed to transparency and premium inventory, focused on advanced solutions for CTV and OTT. With market-leading technology, an exemplary team and deep premium publisher relationships, we believe that we have all the pieces in place to continue our momentum as we close out the year and head into 2018,” said Chief Executive Officer Mark Zagorski.

Third Quarter and Year-to-Date Results Summary
(in millions, except per share amounts), (unaudited)
Three Months Ended Nine Months Ended

September 30,
2017

September 30,
2016

%
Change

September 30,
2017

September 30,
2016

%
Change

Revenue $12.7 $ 7.6 67% $28.8 $18.7 54%
Gross profit $12.0 $ 7.1 68% $26.3 $17.3 52%
Net loss from continuing operations ($3.3) ($4.1) 20% ($19.6) ($20.8) 6%
Adjusted EBITDA $0.4 ($2.0) NM ($9.6) ($10.9) 12%
Net loss per share from continuing operations ($0.06) ($0.08) 25% ($0.39) ($0.40) 3%

Guidance

Based on information available as of November 7, 2017, the Company expects the following:

Fourth Quarter and Full Year 2017 Outlook
Q4 2017 Full Year 2017
Revenue $14.5 - $16.5 million $43.2 - $45.2 million
Adjusted EBITDA $2.5 - $3.5 million ($7.1) – ($6.1) million

Q3 2017 Financial Results Webcast: The Company will host a conference call at 8:00 AM ET today to discuss the results. The conference call can be accessed toll-free at (877) 407-9039 or (201) 689-8470 (Toll/International). The call will also be broadcast simultaneously at http://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 #: 13672244. The telephone replay will be available from 11:00 AM ET November 7, 2017 through 11:59 PM ET November 14, 2017. Additional investor information can be accessed at http://telaria.com.

About Telaria

Telaria (NYSE: TLRA) is the leading independent data-driven software platform built to monetize and manage premium video inventory with the greatest speed, control, and transparency, wherever and however audiences are watching.

“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 2017 fourth quarter and full year financial guidance. 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; 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, 2016, filed with the U.S. Securities and Exchange Commission on March 10, 2017, its Quarterly Report on Form 10-Q for the period ended March 31, 2017, filed with the U.S. Securities and Exchange Commission on May 10, 2017, its Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, filed with the U.S. Securities and Exchange Commission on August 9, 2017, and future filings and reports by the company, including its Quarterly Report on Form 10-Q for the quarter ended September 30, 2017.

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 net loss before total interest expense and other income (expense), net, provision for income taxes, and depreciation and amortization expense, and adjusted to eliminate the impact of non-cash stock-based compensation expense, acquisition related costs, mark-to-market expense, executive severance, retention and recruiting costs, other professional fees, expenses for transitional services, other adjustments, and litigation costs. 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)
(unaudited)
September 30, December 31,
2017 2016
Assets
Current assets:
Cash and cash equivalents $ 77,173 $ 43,160
Accounts receivable, net 48,784 29,429
Prepaid expenses and other current assets 2,076 1,718
Current assets of discontinued operations - 50,285
Total current assets 128,033 124,592
Long-term assets:
Restricted cash - 770
Property and equipment, net 4,990 7,263
Intangible assets, net 1,401 1,544
Goodwill 6,323 6,149
Other assets 1,104 1,416
Non-current assets of discontinued operations - 12,491
Total long-term assets 13,818 29,633
Total assets $ 141,851 $ 154,225
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses $ 51,132 $ 33,601
Deferred rent, short-term 788 669
Contingent consideration on acquisition, short-term - 2,483
Deferred income 674 -
Other current liabilities 208 179
Current liabilities of discontinued operations - 31,492
Total current liabilities 52,802 68,424
Long-term liabilities:
Deferred rent, long-term 5,453 5,996
Deferred tax liabilities 484 447
Other non-current liabilities 233 -
Non-current liabilities of discontinued operations - 836
Total liabilities 58,972 75,703
Stockholders' equity:
Common stock 5 5
Treasury stock (8,443 ) (6,037 )
Additional paid-in capital 287,124 283,486
Accumulated other comprehensive loss (246 ) (331 )
Accumulated deficit (195,561 ) (198,601 )
Total stockholders' equity 82,879 78,522
Total liabilities and stockholders' equity $ 141,851 $ 154,225
Telaria, Inc.
Consolidated Statements of Operations
(in thousands, except share and per share data)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Revenue $ 12,715 $ 7,633 $ 28,788 $ 18,744
Cost of revenue 764 510 2,445 1,442
Gross profit 11,951 7,123 26,343 17,302
Operating Expenses:
Technology and development(1) 2,116 1,565 6,650 5,127
Sales and marketing(1) 7,461 5,359 21,687 16,362
General and administrative(1) 5,343 3,388 14,990 11,943
Depreciation and amortization 984 1,018 2,995 2,802
Mark-to-market(2) - 6 148 1,095
Total operating expenses 15,904 11,336 46,470 37,329
Loss from continuing operations (3,953 ) (4,213 ) (20,127 ) (20,027 )
Interest and other (expense) income, net:
Interest expense (64 ) (4 ) (254 ) (19 )
Other (expense) income, net 715 72 800 (213 )
Total interest and other (expense) income, net 651 68 546 (232 )
Loss from continuing operations before income taxes (3,302 ) (4,145 ) (19,581 ) (20,259 )
Provision for income taxes (29 ) (31 ) 56 497
Loss from continuing operations, net of income taxes $ (3,273 ) $ (4,114 ) $ (19,637 ) $ (20,756 )
Gain on sale of discontinued operations, net of income taxes 14,924 - 14,924 -
Income from discontinued operations, net of income taxes 643 497 7,847 210
Total income from discontinued operations, net of income taxes $ 15,567 $ 497 $ 22,771 $ 210
Net income (loss) $ 12,294 $ (3,617 ) $ 3,134 $ (20,546 )
Net earnings (loss) per share - basic and diluted:
Continuing operations $ (0.06 ) $ (0.08 ) $ (0.39 ) $ (0.40 )
Discontinued operations $ 0.30 $ 0.01 $ 0.45 $ 0.01
Attributable to Telaria, Inc. $ 0.24 $ (0.07 ) $ 0.06 $ (0.39 )
Weighted-average number of shares of common stock outstanding:
Basic and diluted 50,642,344 52,473,601 50,280,849 52,493,099
(1) Stock-based compensation expense included above:
Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
(unaudited) (unaudited)
Technology and development $ 155 $ 131 $ 455 $ 336
Sales and marketing 902 83 1,252 362
General and administrative 477 397 1,323 1,155
Total in continuing operations 1,534 611 3,030 1,853
Discontinued operations 102 349 671 1,096
Total stock-based compensation expense $ 1,636 $ 960 $ 3,701 $ 2,949

(2) Reflects expense incurred based on the Company’s re-measurement, at June 30, 2017 and September 30, 2016, of the estimated fair value of earn-out payments that were paid in connection with the acquisition of The Video Network Pty Ltd, an Australian proprietary limited company (“TVN”), and which are not conditioned on continued employment with the Company.

Telaria, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Nine Months Ended
September 30,
2017 2016
Cash flows from operating activities:
Net loss from continuing operations $ (19,637 ) $ (20,756 )
Net income from discontinued operations 22,771 210
Adjustments required to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense 6,217 6,922
Gain on sale of discontinued operations, before income taxes (15,222 ) -
Loss from sublease - 341
Bad debt expense (recovery) 385 (61 )
Mark-to-market expense 148 1,095
Compensation expense related to acquisition contingent consideration 1,810 2,751
Loss on disposal of property and equipment - 23
Stock-based compensation expense 3,706 2,949
Net changes in operating assets and liabilities:
(Increase) decrease in accounts receivable

(8,856

) 10,590
(Increase) decrease in prepaid expenses and other assets (3,014 ) 682
(Increase) decrease in restricted cash 770 (170 )
Increase (decrease) in accounts payable and accrued expenses

5,225

(9,815 )
Increase in other current liabilities 29 -
Decrease in contingent consideration on acquisition (4,753 ) (3,406 )
Increase (decrease) in deferred rent (143 ) 889
Increase (decrease) in deferred tax liability 37 (8 )
Increase (decrease) in deferred income 902 (60 )
Net cash used in operating activities

(9,625

) (7,824 )
Cash flows from investing activities:
Purchase of property and equipment (1,017 ) (2,727 )
Cash received from sale of discontinued operations 49,000 -
Expenses paid with respect to sale of discontinued operations (1,954 ) -
Net cash provided by (used in) investing activities 46,029 (2,727 )
Cash flows from financing activities:
Proceeds from common stock issuance 446 500
Decrease in contingent consideration on acquisition - (431 )
Proceeds from the exercise of stock options awards 403 150
Principal portion of capital lease payments (215 ) -
Treasury stock - repurchase of stock (2,406 ) (1,516 )
Tax withholdings related to net share settlements of restricted stock units (1,011 ) (405 )
Net cash used in financing activities (2,783 ) (1,702 )
Net increase (decrease) in cash and cash equivalents

33,621

(12,253 )
Effect of exchange rate changes in cash and cash equivalents

392

(82 )
Cash and cash equivalents at beginning of period 43,160 59,887
Cash and cash equivalents at end of period $ 77,173 $ 47,552
Exhibit B
Telaria, Inc.
Consolidated Quarterly Statement of Operations
(in thousands)
(unaudited)
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017
Revenue $ 5,409 $ 5,702 $ 7,633 $ 10,377 $ 6,139 $ 9,934 $ 12,715
Other cost of revenue 526 406 510 769 764 917 764
Gross Profit 4,883 5,296 7,123 9,608 5,375 9,017 11,951
Technology & development 1,951 1,611 1,565 1,967 2,425 2,109 2,116
Sales & marketing 5,708 5,295 5,359 5,781 6,526 7,700 7,461
General & administrative 4,717 3,838 3,388 4,147 4,873 4,774 5,343
Depreciation and amortization 815 969 1,018 952 1,021 990 984
Mark to market 1,044 45 6 168 55 93 -
Total operating expenses 14,235 11,758 11,336 13,015 14,900 15,666 15,904
Loss from operations (9,352 ) (6,462 ) (4,213 ) (3,407 ) (9,525 ) (6,649 ) (3,953 )
Total interest and other (expense) income, net (254 ) (46 ) 68 (20 ) (27 ) (78 ) 651
Loss before provision for income taxes (9,606 ) (6,508 ) (4,145 ) (3,427 ) (9,552 ) (6,727 ) (3,302 )
Provision for income taxes 338 190 (31 ) (333 ) 9 76 (29 )
Loss from continuing operations, net of income taxes $ (9,944 ) $ (6,698 ) $ (4,114 ) $ (3,094 ) $ (9,561 ) $ (6,803 ) $ (3,273 )
Income (loss) from discontinued operations, net of income taxes (1,130 ) 843 497 2,693 2,701 4,503 15,567
Net income (loss) $ (11,074 ) $ (5,855 ) $ (3,617 ) $ (401 ) $ (6,860 ) $ (2,300 ) $ 12,294
Adjusted EBITDA $ (5,150 ) $ (3,782 ) $ (1,958 ) $ (835 ) $ (6,748 ) $ (3,227 ) $ 416
Exhibit C
Telaria, Inc.
Reconciliation of Net Loss from Continuing Operations to Adjusted EBITDA
(in thousands)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Net loss from continuing operations $ (3,273 ) $ (4,114 ) $ (19,637 ) $ (20,756 )
Adjustments:
Depreciation and amortization expense 984 1,018 2,995 2,802
Total interest and other expense (income), net (651 ) (68 ) (546 ) 232
Provision for income taxes (29 ) (31 ) 56 497
Stock-based compensation expense 1,534 611 3,030 1,853
Acquisition-related costs(1) - 616 1,810 2,764
Mark-to-market expense(2) - 6 148 1,095
Executive severance, retention and recruiting costs 887 (9 ) 1,219 163
Other professional fees(3) 600 - 900 -
Expenses for transitional services(4) 364 - 364 -
Other adjustments(5) - - 102 266
Litigation costs - 13 - 194
Total net adjustments 3,689 2,156 10,078 9,866
Adjusted EBITDA $ 416 $ (1,958 ) $ (9,559 ) $ (10,890 )
(1) Reflects acquisition-related costs incurred in connection with our acquisition of TVN. Includes compensation-related expenses related to contingent consideration payments that were paid to certain TVN sellers that are subject to continued employment of $0 and $616 for the three months ended September 30, 2017 and 2016 respectively and $1,810 and $2,751 for the nine months ended September 30, 2017 and September 30, 2016, respectively.
(2) Reflects expense incurred based on the Company’s re-measurement, at June 30, 2017 and September 30, 2016, of the estimated fair value of earn-out payments that were paid in connection with the acquisition of TVN and which are not conditioned on continued employment with the Company.
(3) Professional fees incurred in connection with the Company’s sale of its buyer platform in August 2017.
(4) Reflects cost incurred providing transitional services to Taptica in connection with the Company’s sale of its buyer platform.
(5) Reflects amounts accrued in connection with a one-time change in the Company’s employee vacation policy.
Telaria, Inc.
Reconciliation of Net Loss from Continuing Operations to Adjusted EBITDA
(in thousands)
(unaudited)
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017
Net loss from continuing operations $ (9,944 ) $ (6,698 ) $ (4,114 ) $ (3,094 ) $ (9,561 ) $ (6,803 ) $ (3,273 )
Adjustments:
Depreciation and amortization expense 815 969 1,018 952 1,021 990 984
Total interest and other expense (income), net 254 46 (68 ) 20 27 78 (651 )
Provision for income taxes 338 190 (31 ) (333 ) 9 76 (29 )
Stock-based compensation expense 572 670 611 633 744 752 1,534
Acquisition-related costs(1) 1,219 929 616 819 825 985 -
Mark-to-market expense(2) 1,044 45 6 168 55 93 -
Executive severance, retention and recruiting costs 105 67 (9 ) - 30 302 887
Other professional fees(3) - - - - - 300 600
Expenses for transitional services(4) - - - - - - 364
Other adjustments(5) 266 - - - 102 - -
Litigation costs 181 - 13 - - - -
Total net adjustments 4,794 2,916 2,156 2,259 2,813 3,576 3,689
Adjusted EBITDA $ (5,150 ) $ (3,782 ) $ (1,958 ) $ (835 ) $ (6,748 ) $ (3,227 ) $ 416
(1) Reflects acquisition-related costs incurred in connection with our acquisition of TVN. Includes compensation-related expenses related to contingent consideration payments that were paid to certain TVN sellers that are subject to continued employment.
(2) Reflects expense incurred based on the Company’s re-measurement of the estimated fair value of earn-out payments that were paid in connection with the acquisition of TVN and which are not conditioned on continued employment with the Company.
(3) Professional fees incurred in connection with the Company’s sale of its buyer platform in August 2017.
(4) Reflects cost incurred providing transitional services to Taptica in connection with the Company’s sale of its buyer platform.
(5) Reflects amounts accrued in connection with a one-time change in the Company’s employee vacation policy.

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Telaria, Inc.
Investor Relations:
Andrew Posen, 212-792-2315
Vice President, Head of Investor Relations
IR@telaria.com
or
Media:
Lekha Rao, 646-699-7706
Vice President, Media Relations & Corporate Communications
lrao@telaria.com

Source: Telaria, Inc.