Positive signs in net sales and good progress in product development Tradedoubler Interim report January June 2015 Stockholm, 23 July 2015
Agenda
Tradedoubler in brief
A European Performance Marketing leader We drive online sales through our network of publishers who promote advertiser products in return for commission Online consumer Desired action Publisher website Merchant website
Network & technology: the next step in performance marketing Our performance marketing platform combines programmes on private networks and our public network, in a single solution This enables clients to manage their own publishers and extend activity beyond Tradedoubler s geographical footprint Clients can plug into our proven and established international network
We create results for leading brands We work with over 2,000 advertisers and 180,000 publishers
The digital marketing landscape is complex and competitive Performance marketing Technology enablers Inventory Lead generation DSP SSP Mobile networks Retargeting Ad server Data supplier Video networks Affiliate Tracking DMP Publishers
Redefining our position in this complex marketplace
Tradedoubler repositions as a leading performance marketing partner addressing a larger market Niche player Position Leading public affiliate marketing network Integrator Position Leading performance marketing partner Lead Demand Side Platform Sell Side Platform Mobile Network Lead Demand Side Platform Sell Side Platform Mobile Network Retargeting Ad server Data supplier Video Network Retargeting Ad server Data supplier Video Network Affiliate Tracking Data Mgt Platform Publishers Affiliate Tracking Data Mgt Platform Publishers Offering Affiliate Offering Affiliate, Performance marketing, Branding Affilite PUB Affliate PRI Branding Other PM Search Affilite PUB Affliate PRI Branding Other PM Search Ad-spend split (%) 7 7 20 26 40 100 Ad-spend split (%) 7 7 20 26 40 100 2 1 6 11 1 GP split WE (BSEK) 21 GP split WE (BSEK) 2 1 6 11 1 21 Addressable market 14% of ad-spend / 3 BSEK in GP Addressable market 60% of ad-spend / 20 BSEK in GP Ad-spend split: Branding 20%, Search 40%, Other performance marketing 26%, Affiliate public 7%, Affiliate private 7% Estimated GP margins: Branding 15%, Search 1,5%, Other performance marketing 20%, Affiliate public 15%, Affiliate private 5% Source: emarketer Western Europe Digital Ad Spending - March 2015; Tradedoubler estimates.
Update on latest developments
Significant progress with strategy realisation Delivering on product development Focus on key priorities Re-established product development teams Prioritising development resource in line with strategic decisions First deliveries are ahead of schedule Better than expected fit of Adnologies with our product portfolio. Integration progressing smoothly
Significant progress with strategy realisation New commercial offerings Rolling out new strategic offerings Test Campaigns using integrated Tradedoubler and Adnologies technology running in four markets, with initial positive results Plan to release more advanced pilot offering in September Data-driven insight ADAPT roll out continues with positive customer response User Journey data will give greater insights and further enhance the results we deliver for clients Technology business Re-established technology business unit with positive results and outlook
An attractive offering that creates value for clients In Q2 2015 We signed 207 new client contracts, of which 47 are international We are implementing 283 new programmes In 2014 we delivered 37 million sales for clients
Q2 2015 financial results
Overall Q2 financials MSEK Q2 Q2 Profit and loss 2014 2015 Net sales 411 419 Gross Profit 91 84 Gross Margin 22.1% 19.9% OPEX -87-90 EBITDA 4-6 One offs -12-7 Reported EBITDA -9-13 CAPEX -3-8 Cash flow from operations -43-32 Q2 net sales increased by 2% y-o-y, decreased by 4% currency adjusted Gross Profit in Q2 was down -8% and currency adjusted -13% Operating costs increased by 3% or decreased by 2% currency adjusted EBITDA in Q2 was -6 (4) MSEK Increase in CAPEX, mainly due to higher capitalized development expenses in line with strategy Cash and financial investments were down by -57 MSEK during last 12 months and closed at 323 MSEK at the end of Q2 Cash and financ ial investments 380 323 Net Cash 135 77 All numbers in the text above are excluding change related items
Net Sales 700 600 500 400 300 200 490 479 Net Sales (SEK M) 504 445 411 424 462 431 419 Q2 net sales SEK 419 M (411), an increase by 2% y-o-y or a decrease of 4% currency adjusted During Q2 revenues increased in UK, Germany, Spain, Sweden and Poland while France had challenges 100 0 Q213 Q313 Q413 Q114 Q214 Q314 Q414 Q115 Q215 Note: All numbers are excluding change related items Details regarding change related items: Above not disclosed change related items for 2014 refers to a correction of prepayments amounting to SEK -10 M in Q4 2014 and an adjustment referring to Badwill of SEK +1 M in Q1 2015. The latter refers to the acquisition of Adnologies. In Q2 2015, reported net sales was affected by an one time adjustment of SEK 5 M referring to an adjustment for errors in recurring invoicing to one large customer since mid-2013.
Gross Profit 140 120 100 80 60 40 20 0 Gross Profit (SEK M) 114 115 107 101 91 91 96 89 84 23.2 22.4 22.7 22.7 22.1 21.4 20.8 20.7 19.9 Q213 Q313 Q413 Q114 Q214 Q314 Q414 Q115 Q215 31 29 27 25 23 21 19 17 15 Gross Profit was SEK 84 M (91), down 8% y-o-y or 13% currency adjusted Underlying Q2 gross Profit within core business roughly declined in line with the year-on-year trend from recent quarters Gross Margin was 19.9 (22.1) %, mainly due to price pressure within affiliate Gross profit Gross margin, % Note: All numbers are excluding change related items Details regarding change related items: Above not disclosed change related items referring to Net Sales relate to a correction of prepayments amounting to SEK -10 M in Q4 2014, an adjustment referring to Badwill of SEK +1 M in Q1 2015 and adjustment of SEK 5 M in Q2 2015 referring to an error in recurring invoicing to one large customer since mid-2013. Also cost of goods sold have been adjusted with a publisher debt revaluation of SEK +8 M in Q3 2014.
Operating Costs 160 140 120 100 80 60 40 20 0 Operating Costs (SEK M) 121 99 81 88 94 92 94 87 99 89 87 79 85 86 90 Q213 Q313 Q413 Q114 Q214 Q314 Q414 Q115 Q215 Q2 operating costs were SEK 90 M (87), an increase by 3% or decrease by 2% currency adjusted Currency adjusted costs decreased mainly due to fewer staff of 355 (378) at the end of Q2 Operating costs increased versus Q1 2015 and can be explained by increased product development costs in line with strategy Operating costs, excl. dep & amort Change related costs Note: All numbers are excluding change related items Details regarding change related items: Change related costs in Q2 2015 and Q3 2014 mainly referred to severance payments. In Q2 2014, one offs included severance payments and administrative closure of offices. In Q4 2014, change related costs mainly referred to the new strategy, while in Q1 2015 the non recurring items to the largest part referred to the closing of the Norwegian office, an office move in London and costs for the acquisition of Adnologies.
EBITDA 25 20 15 10 5 0-5 -10-15 EBITDA (SEK M) 18 16 12 20 21 12 4 12 3-2 -6-4 -6-9 EBITDA Change related items -13 Q213 Q313 Q413 Q114 Q214 Q314 Q414 Q115 Q215 EBITDA in Q2 2015, excluding change, related items was -6 (4) MSEK Main drivers are the gross profit decrease, increased expenditure in product development and other selected operational areas Note: All numbers are excluding change related items, see previous pages for details
Cash flow and financial position MSEK Q1 Q2 Q3 Q4 Q1 Q2 FY LTM Cashflow 2014 2014 2014 2014 2015 2015 2014 Q2 2015 EBITDA incl change related 12-9 18-2 -4-13 19-1 Non cash items 0 8-11 7-1 2 5-3 Paid tax & interest -5-6 -3-5 -3-2 -19-13 Changes in working capital -83-37 27-22 9-18 -116-4 CF from operations -75-43 30-22 2-32 -110-22 CAPEX -4-3 -4-7 -12-8 -18-31 Other -52-8 2-8 57 94-66 145 CF for the period -131-54 28-37 47 54-194 92 Opening cash 305 173 128 160 117 165 305 128 Fx 0 8 4-6 0-1 6-3 Cash end period 173 128 160 117 164 218 117 218 Cash end period 173 128 160 117 164 218 117 218 Short term investments 256 253 250 255 200 105 255 105 Cash and short term inv 429 381 410 372 365 324 372 324 Cash and short term inv 429 381 410 372 365 324 372 324 Bond Loan -245-245 -245-245 -245-246 -245-246 Net Cash end period 184 135 165 126 119 77 126 77 W orking c ap end period -143-121 -142-131 -144-124 -131-124 Cash and financial investments were down by -57 MSEK during the last 12 months and closed at 323 MSEK at end Q2 Decrease mainly referred to paid taxes & interest and CAPEX Quarterly changes in working capital relate to a large extent to random timings of customer payments. Total 4 MSEK during the last 12 months Increase in short term investments and increase in cash due to new finance policy
CEO conclusion We see positive signs on revenue and have grown revenue for the first time again in a very long time. We made good further progress with the realisation of our new offerings and are currently running test campaigns in selected markets using integrated Tradedoubler and Adnologies technology with encouraging results. In September we will have a beta product to further test and develop together with selected clients. With these new offerings we are extending our addressable market considerably and are now in the process of strengthening our commercial teams in the markets to ensure that we will be able to take full advantage of the market potential. Stockholm 23 July 2015 Matthias Stadelmeyer
Q&A Q A Q&A Q&A Q A Questions and answers Q3/2015 report to be published on 12 November 2015