company records 68% growth in core programmatic revenues … · 2017-11-06 · approximately 40...
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BLINKX PLC ANNOUNCES AUDITED FINANCIAL YEAR 2016 RESULTS
Company records 68% growth in Core programmatic revenues while simultaneously reducing annualized
operating expenses by $40M, during a year of rapid Industry evolution and reaffirms its expectation to
return to full year profitability1 in Financial Year 2017.
London, England and San Francisco, CA – 17 May 2016 – blinkx PLC (BLNX.L, “Company” or
“Group”), today reports audited 2016 results for the year ended 31 March 2016 (“FY2016” or “the
Period”). The Company’s FY2016 conference call will be webcast live at www.blnx.com on 17 May 2016
at 8:30AM BST; 3:30AM EST; 12:30AM PST.
Financial Highlights
Year ended
Year ended
31 March
31 March
2016
2015
$000
$000
Operating Metrics:
Core Programmatic2 Revenue
75,150
44,862
Core Direct Revenue
40,898
58,500
Total Core Revenue
116,048
103,362
Non-Core Revenue
50,668
111,607
Adjusted EBITDA3
(10,476)
3,526
Headcount
274
363
Statutory Metrics:
Revenue
166,716
214,969
Loss before Taxation
(94,284)
(24,800)
Net Cash Used in Operating Activities
(6,288)
(2,989)
Cash, Cash Equivalents & Marketable Securities
78,486
95,734
Cents
Cents
Basic - Loss per Share
(22.88)
(5.19)
Adjusted Basic4 - Loss per Share
(4.42)
(0.94)
Rationalized product portfolio and realigned resources to focus on “Core” mobile, video and
programmatic trading, which grew to $116M (FY2015: $103M) and now represent 70% of total
revenues (FY2015: 48%, FY2014: 25%);
Invested approximately $20M in research and development to build and launch integrated
programmatic platform, ending the Period with a strong debt-free balance sheet with over $78M
in cash, cash equivalents and marketable securities;
Achieved profitability in third quarter of FY2016, ahead of expectations, which was followed by
the usual fourth quarter seasonality;
Executed planned draw down of certain historical, Non-Core product lines, which are no longer
strategic to Company or Industry growth, reducing annual revenues by over $60M;
Approximately $81M of the statutory loss before taxation of $94M was non-cash in nature, due to
depreciation and amortization, share-based compensation and the impairment of goodwill and
accelerated amortization of intangible assets related to the draw down of “Non-Core” product
lines;
Reduced over $40M in annualized operating expenses through extensive Group-wide
restructuring at a cost of $3M, to better align the Company’s cost structure with Core products,
operations and market dynamics;
Operational Highlights
Launched the “RhythmOne” (“1R”) brand and built a massively scalable and highly competitive
programmatic trading platform that drove over 68% growth in programmatic revenues year-on-
year, well ahead of Industry growth rates;
Programmatic platform volumes grew over 1,200% during the Period, trending to almost 1.2
trillion requests per month in Q42016, since production launch in September 2015:
Metric Q12016 Q22016 Q32016 Q42016
Volume Billions 961.8 2,484.4 3,080.4 3,748.9
Desktop5 % n/a n/a 56.7% 54.4%
Mobile5 % n/a n/a 43.3% 45.6%
Fill Rate6 % 0.25 0.22 0.25 0.15
8
Price7 $, (CPM) 0.78 1.02 1.53 1.53
The RhythmOne platform ranks #5 in quality and #6 by volume, as measured by Pixalate (April
2016) and comScore (March 2016) respectively, featuring within the top 5% of the competitive
set;
Introduced market-leading brand safety technology (“RhythmGuard”) to ensure quality of traffic –
inventory scores 97% clean by top measurement partners;
Enhanced viewability and verification measurement through technology integrations with leading
traffic quality partners that include Integral Ad Science, DoubleVerify and Moat, and ad quality
partners, The Media Trust and RiskIQ;
Added 27 programmatic demand side partners, including marquee platforms such as DataXu,
MediaMath, BidSwitch, Criteo and The Trade Desk;
Expanded programmatic supply relationships – adding 38 new partners that include OpenX,
Pubmatic, Sovrn, Rubicon Project and AOL;
Forged or expanded direct relationships with major brands such as UPS, Verizon, AutoZone,
Macy’s, JC Penney, Iams, Pedigree and Kellogg’s Froot Loops;
Signed over 500 publisher partners, including Monster, Topix, Hubbard Broadcasting, The Daily
Beast, Vice Media, Venture Beat and Mail.com;
Appointed Mr. Raj Chellaraj as Chairman of the blinkx Board of Directors; and
Appointed Ms. Andy Cunningham as an Independent, Non-Executive Director.
Commenting on the results, S. Brian Mukherjee, CEO of blinkx, said: “As anticipated, FY2016 was a year
of integration and investment for the Company, during a Period of rapid Industry evolution. We undertook
a broad restructuring of the business to focus on our Core capabilities of mobile, video and programmatic
trading, under the RhythmOne brand – perfectly aligned with dominant Industry growth trends.
Simultaneously, we accelerated the draw down on certain legacy “Non-Core” product lines that are no
longer considered strategic to the Company’s future, resulting in short-term impact on revenue and
profitability. As a result of this deliberate shift, Core products now represent over 70% of our revenues,
compared with less than less than 25% two years ago.
Within the course of the financial year, blinkx rebranded the majority of its commercial offerings and
launched “RhythmMax,” its fully integrated programmatic trading platform. The platform brings together
our comprehensive, cross-device, cross-format inventory through a single point of access. Through
RhythmMax, the Company aims to unify the entire supply side of the value chain – eliminating
intermediary, margin-compressed point solutions and streamlining the value exchange between consumers
and advertisers, via the content users consume. Programmatic revenues for FY2016 grew far in excess of
Industry growth rates, driven by the RhythmMax platform. This platform now provides us the structural
foundation and critical mass upon which to build momentum for future growth.
During the Period, blinkx aligned its engineering, product, sales, marketing and operations teams around
the Company’s unified RhythmOne proposition. This resulted in a reduction of approximately $40M, or
over 40%, of the Company’s annualized operating expenses. We believe the significant steps we took in
FY2016 to realign the business around our Core capabilities and achieve operational efficiency have set
the stage for higher quality top-line growth and a return to full year profitability1 in FY2017.”
Notes:
1. On an adjusted EBITDA basis, which is a close proxy for cash flow from operations.
2. “Programmatic” characteristically refers to the use of software to purchase digital advertising on a data-driven basis, as
opposed to the “direct” process, where person to person negotiations, “insertion orders” and a manual process is used to
execute campaigns.
3. This press release contains references to adjusted EBITDA and adjusted Loss for the Period attributable to equity holders of
the parent. These financial measures do not have any standardized meaning prescribed by IFRS and are therefore referred to
as non-GAAP measures. The non-GAAP measures used by blinkx may not be comparable to similar measures used by other
companies. Adjusted EBITDA is defined as profit/(loss) attributable to equity holders of the parent before interest, other
expenses, taxes, depreciation and amortisation, share based payment expense, acquisition and exceptional costs and other
expense. Management believes that this measure is a useful supplemental metric as it provides an indication of the results
generated by the Company’s principal business activities prior to consideration of how the results are impacted by non-
recurring costs, how the results are taxed in various jurisdictions, or how the results are affected by the accounting standards
associated with the Group’s share based payment expense.
4. Adjusted Loss for the Period attributable to equity holders of the parent before acquisition and exceptional costs,
amortization of purchased intangibles and other (expense)/income.
5. Volume of transactions (ad requests) processed through the platform. Q12016 and Q22016 split not available, as the platform
was still in pre production (select beta release) state.
6. Proportion of the above transaction volume monetized. Note the significant but usual sector wide Q42016 (Calendar Q1)
slowdown in demand.
7. Average price across all ad formats, expressed as Cost per Mille or Thousand Impressions.
8. Q42016 fill rate represents the seasonally-weaker calendar Q1, i.e., the period covering Jan-March 2016.
For further information please contact:
Analyst and Investor Contact Dan Slivjanovski
blinkx plc
(US) 415 655 1450
Financial Media Contacts Edward Bridges/Charles Palmer
FTI Consulting
(UK) 020 3727 1000
NOMAD and Joint Broker for blinkx plc Christopher Wren
Citigroup Global Markets Limited
(UK) 020 7986 9756
Joint Broker for blinkx plc Lorna Tilbian/Mark Lander/Nick Westlake
Numis Securities Limited
(UK) 020 7260 1000
Overview
FY2016 was a Period of rapid evolution within the online advertising Industry. As the Company indicated
at the start of the Period, the operating themes for financial year 2016 were integration and investment.
Over the past year, the Company strengthened its Core strategic capabilities of mobile, video and
programmatic trading and took the difficult but necessary decision to completely restructure the way in
which it does business – launching a unified, cross-device programmatic platform and consolidating the
Company’s comprehensive supply channels through a centralized point of access. Concurrently, blinkx
accelerated its drawdown of certain historical product lines that are considered Non-Core to future growth
and will no longer be the focus of ongoing operations.
Performance for FY2016 was led by strong growth in Core revenues – specifically programmatic trading.
While blinkx experienced an overall operating loss in FY2016 as a result of the anticipated decline in
Non-Core revenues, management took decisive steps to align the Group’s cost structure with changing
market conditions and profitability profiles of its product mix. Despite the active elimination of Non-Core
revenues, the Company’s adjusted2 EBITDA loss for the Period was in line with expectations, while
intense financial and operating discipline resulted in a balance of cash, cash equivalents and marketable
securities that slightly exceeded expectations.
For the first time in 2015, US programmatic ad spend outpaced traditional digital ad spend to account for
59% of total digital display ad spend – a trend that is expected to continue. The market has also changed in
the way it buys advertising. Advertisers have shifted from buying publishers’ inventory in the traditional
sense to buying audiences regardless of device and format. To match these shifts, blinkx invested
significantly in its programmatic capabilities during the Period, launching its unified and unique
programmatic platform, RhythmMax, which provides a comprehensive marketplace for automated buying
and selling of online ads. Importantly, the RhythmMax platform was purpose built to reach highly targeted
audiences across all devices and all formats, at significant scale. The Company consolidated its inventory
through RhythmMax, including owned, controlled and extended supply sources. As a result of the
platform launch and supply consolidation, RhythmMax now represents one of the Industry’s highest
quality (ranked #5 according to Pixalate) and largest (ranked #6 in the US by comScore) supply footprints
by volume, as at April 2016 and March 2016, respectively. By bridging the entire supply chain,
RhythmMax helps to streamline advertiser-consumer interactions, and lets blinkx capture a greater share
of each advertising dollar spent.
During the Period, blinkx integrated RhythmMax with nearly 30 Industry-leading programmatic demand
partners, such as The Trade Desk, Media Math, DataXu, Criteo and Bidswitch. blinkx expects demand-
side integrations to ramp steadily, with a corresponding increase in programmatic revenues. On the brand
side, blinkx has attracted new and repeat advertisers, including Kellogg’s, UPS, Verizon, AutoZone,
Macy’s, JC Penny, and Mars Petcare. The Company also bolstered supply side integrations with
approximately 40 top-tier programmatic supply partners, including OpenX, Pubmatic, Rubicon Project,
Sovrn and AOL. All of these integrations are now live within RhythmMax.
Through RhythmMax, blinkx has taken highly visible measures around brand safety – a prerequisite to
attracting and maintaining programmatic advertising demand spend. According to a study released by the
IAB in 2015, ad fraud is costing the US marketing and media Industry an estimated $8.2 billion each year.
During FY2016, the Company launched its proprietary brand safety filtering technology, RhythmGuard,
which is designed to eliminate suspicious and underperforming traffic before it reaches the marketplace –
enhancing ROI for advertisers and maximizing yield for quality publisher partners. Designed to
complement third-party verification tools, RhythmGuard represents the Company’s initiative to combat
fraud, and aligns RhythmMax with emerging traffic and ad quality standards and requirements. These
infrastructure and technology enhancements have required investments in hardware and software, as well
as traffic and ad quality detection and monitoring technology, which blinkx believes will be critical for the
future of the Company and Industry.
Complementing its RhythmGuard brand safety initiative, blinkx also has partnered with high profile, well-
respected viewability and verification vendors the Company believes will be instrumental in establishing
common standards for the Industry. blinkx has contributed to help shape these standards through its work
with OpenVV.org, membership in Interactive Advertising Bureau (“IAB”), participation in the
Trustworthy Accountability Group (“TAG”) initiative, and work with several leading third-party experts,
including Nielsen, Pixalate, comScore, Integral Ad Science, Moat and DoubleVerify. The combination of
these partnerships and RhythmGuard helps to ensure blinkx’s audience quality consistently meets
advertisers’ requirements in this competitive environment. blinkx expects to see a corresponding increase
in price and margins over the long term.
blinkx also has continued to enhance its mobile and video advertising offerings for brands. As users’
attention is increasingly fragmented due to multi-screen, simultaneous viewing across devices, advertisers
are tasked with targeting individuals, not devices or sites. This cross-screen expansion is especially
apparent in mobile and video growth rates. According to eMarketer, mobile ad spend in the US is
expected to exceed desktop spend, with channel growth of 15% Compound Average Growth Rate
(CAGR) over the next five years. Online video leads segment growth, with 14% CAGR, while mobile
video ad spend is expected to grow at an impressive 18% CAGR. As the lines between mobile and
desktop blur, blinkx’s ability to execute user-centric cross-screen advertising is critical to growth, and will
be an area of ongoing investment within its marketplace.
Finally, the Company consistently displayed strong operating discipline throughout the year. blinkx took
critical steps to optimize the Group’s cost structure and better align with changing Industry conditions,
revenue mix and profitability profile. As a result of these actions and the Company’s integration efforts,
blinkx was able to reduce over $40M in annualized operating costs across all areas of the business. This
included consolidating its physical locations from 21 to 12 globally, building a highly efficient and
scalable hybrid cloud infrastructure and decreasing the number of data centers from 12 to 5. In addition,
the Company reduced overall headcount by almost a third – a reflection of integration synergies. Such
moves, while difficult, resulted in significant business efficiencies. blinkx’s ability to preserve and extend
its resources during a time of significant Industry change will be instrumental as the Company looks to
drive future organic and acquisition-related growth.
Market
Online advertising continued to grow in 2015. Today, worldwide digital ad spending accounts for 34% of
total media ad spending, or approximately $187 billion – and is projected to grow at a 13% CAGR over
five years (2016-2020). By 2020, worldwide digital ad spending is projected to ramp significantly to $301
billion, which would equate to almost half (45%) of total media ad spending.
Programmatic trading, or the automated buying, selling and fulfillment of ads using technology, is
becoming the most popular buying modality for display, mobile and video advertising. In the US,
eMarketer estimates that programmatic display ad spending will reach $22 billion in 2016. Of that
amount, mobile programmatic accounts for two out of three programmatic dollars (68%, or $15 billion)
spent. Currently, however, a significant majority of mobile advertising bought programmatically is
performance-focused (e.g., driving an app install). However, video – and especially mobile video – is
quickly becoming the advertising format of choice, and is expected to gain programmatic adoption. Like
TV, mobile video allows for immersive and engaging advertising experiences in extended and short
forms. Unlike linear TV, however, mobile video can be targeted and customized to consumers wherever
and whenever they are viewing content, offering the potential for far more personalization.
The ability to identify individuals using first-party data regardless of the device they are using is fast
becoming an Industry imperative. The potential for true user targeting has driven major deals in the
Industry. This trend will likely continue, with key partnerships being forged between telecoms and ad tech
firms as they combine user data with the ability to deliver, optimize, measure and monetize ad campaigns.
Key sector trends of note include the following:
1. Programmatic buying in 2015 has surpassed direct sales. According to eMarketer, for the first time,
programmatic spending outpaced direct spending in 2015, accounting for 59% of total US digital display
ad spend, or $16 billion. The programmatic share of total US digital display ad spending is expected to
surge to 72.0% by 2017 ($27 billion), fueled by growth of private marketplace and programmatic direct
deals, the rapid rise of programmatically-driven mobile ad revenues, and the increased availability of more
premium inventory via such channels. Real-Time Bidding (auction-based) remains an important part of
the programmatic equation as well, representing 47% of estimated programmatic ad spend in 2016 at over
$10 billion. Mobile programmatic ad spending will reach $15 billion in 2016 and account for 70% of total
US Programmatic display ad spending.
2. An overwhelming majority of Internet users consumes video. In the US, nearly two-thirds of the
population views digital video. According to Cisco, global consumer Internet traffic will constitute 80% of
all consumer traffic by 2019 – up from 64% in 2014. Concurrent with increased consumption, video
advertising spending is projected to increase at 14% CAGR over the next five years. According to
eMarketer, advertisers will spend $10 billion on video this year and that figure is projected to increase
significantly by 2020, reaching an estimated $17 billion.
3. Smartphone and tablet use is surging – and advertising dollars are following suit. In 2016, nearly
80% of US Internet users use a smartphone and 63% use a tablet. Moreover, at over three hours per day
(3:06) in 2016, over one-quarter (26%) of US users’ total time spent with media occurs on mobile devices
(non-voice) – a figure that exceeds daily desktop/laptop Internet use by almost an hour (55 minutes). In
line with this trend, mobile advertising spending in 2016 is expected to outpace desktop/laptop spending
by $18.4 billion. Within mobile, video ad spending is projected to reach nearly $4.2 billion in 2016
(almost 10% of total mobile spending).
4. New consumer preferences are emerging. According to Deloitte (March 2016), 27% of US Internet
users use some variety of ad blockers. This issue came into relief in September 2015 with the launch of
Apple’s iOS 9 with ad blocking options built into the operating system. While consumer backlash to the
proliferation of online advertising and data collection tools may be understandable, ads are an integral part
of the value exchange between consumers and content providers. In response to ad blocking, participants
from across the ecosystem have adopted strategies to encourage ad viewing. Publishers are employing a
number of tactics to preserve monetization – serving more “native” ads that are delivered directly from
publishers’ content management systems so that they are harder to block, installing anti-ad blocking
software and enabling pay walls to access content. Advertisers, brands and media technology companies
are seeking to develop advertising that is more engaging and relevant to consumers. During the Period,
the IAB issued standards for L.E.A.N (Light, Encrypted, Ad choice supported, Non-invasive) ad formats,
which blinkx has adopted and made them available to advertisers. Currently, the impact of ad blocking on
blinkx’s business has been minimal. However, ad blocking does highlight a larger trend – the need to
develop a sustainable value exchange proposition that is respectful of consumer choice, impactful for the
advertiser and sustainable for the content owner.
5. Technology is shifting. Technology shifts to enhance consumer experiences online continue to
proliferate. A key development has been the blocking of Flash ads by browsers (used extensively for
online video but blocked on iOS devices) in favor of the more universal HTML5 standard that runs
seamlessly on all mobile and desktop devices. This technology change is driving faster load times for
mobile web pages, which are becoming indistinguishable from those of mobile apps and deliver a better
consumer experience in the long term.
6. Big data is growing in importance as a means of targeting: Increasingly, brands are looking to marry
their first-party data with third-party proprietary data to better segment, target and deliver relevant
advertising messages to their audiences. This is part of an overall trend in the Industry that sees
advertising technology converging with marketing technology. One of the key benefits of aggregating
supply is blinkx’s ability to leverage the data across its significant supply footprint, including 300M
device IDs and data from campaigns run across the Company’s platform. Not only will this allow blinkx
to offer more effective cross-device targeting, it also presents an opportunity to enhance location and
beacon-based targeting, as well as ad customization. The Company has already begun to explore
packaging this data in ways that resonate with advertisers, making its campaigns more attractive because
of their ability to reach discreet user segments with a compelling message any time, on any device, at
scale.
7. Consolidation is increasing. Industry consolidation continues to be an ongoing trend as the ad tech
space matures. According to Ad Exchanger, there were over 120 major M&A transactions in the ad tech
sector in 2015 alone – primarily oriented around programmatic and mobile deals. Point solutions are
becoming increasingly unsustainable and some platforms that have achieved substantial scale have not yet
hit key profitability milestones. Industry consolidation also represents a potential path to scale quickly. As
parts of the ecosystem combine, there will be opportunity to augment the Company’s supply footprint.
Technology
During the Period, blinkx invested approximately $20M in products, platforms, research and development,
with a priority focus on programmatic trading and cross-screen advertising – inter-related elements that
are essential to the Company’s future growth. blinkx launched its RhythmMax programmatic platform and
has seen exchange requests increase by more than 1,200% from April to March, trending to almost 1.2
trillion requests/month. To support this growth, blinkx has updated its regional data centers and increased
capacity (server and network). The platform is now integrated with nearly 30 of the largest programmatic
partners globally, including The Trade Desk, Media Math, DataXu, Bidswitch, Feature Forward and
Criteo, to name a few. These integrations let agencies and brands access blinkx’s inventory on-demand.
With programmatic trading gaining in prominence, blinkx’s unified platform allows the Company to
represent its inventory through automated trading channels in a manner that maximizes revenue share for
the enterprise. The volume of impressions within the platform is currently being monetized at average rate
0.23% for the Period – representing an inherent growth opportunity for the Company, as additional
demand integrations are completed. Importantly, high-value ad formats such as video, rich media and
native, remain to be fully integrated and scaled, which could materially increase average price.
blinkx also made critical enhancements to its RhythmGuard technology, including additional automated
protections against malware ads and post-bid domain masking by publishers. These added protections help
to increase transparency around supply quality and brand safety. The result is a highly differentiated
marketplace proposition that allows the Company to enrich inventory made available to advertisers
through its programmatic channels, and drive greater demand. Through RhythmMax, the Company can
provide one of the cleanest sources of pre-filtered, verified and targetable inventory in the Industry, at
scale – over 97% clean according to key measurement partners. These capabilities make the platform
strategically important to key ecosystem partners, including Mobile and Cable Carriers, Web, Video and
App Developers, Content Publishers, Trading Desks, Agencies and Marketers. As at April 2016, the
Company ranked #5 on Pixalate’s Trusted Seller Index.
On the supply side, blinkx released a comprehensive management platform for publishers and developed a
single, universal “tag,” that helps publishers better manage and monetize their inventory, and enables
blinkx to take advantage of opportunities for exclusive and first look inventory. The tag provides greater
transparency into ad placements and deepens the Company’s relationships with key publisher partners. In
addition, the Company released a new version of its software development kit (SDK) for mobile app
developers, allowing for easier installation and campaign management as well as deeper reporting features
– including integration with one of the Industry’s the top mobile performance and viewability partners,
Moat. The SDK supports all standard video and rich media ad units and includes emerging viewability
standards for both display and video.
blinkx also made significant enhancements to its Advanced Creative Platform (ACP), a self-serve utility
that allows demand partners to dynamically build custom rich media ads. ACP is expected to drive parallel
revenue streams – a modest software-as-a-service (SaaS) revenue from demand partners that access the
tool independently for ad production, and greater incremental media fees for advertisers that use the tool
as a value-add platform within the blinkx programmatic marketplace.
The Company also designed new creative ad units in support of its mobile video business, and converted
all Flash ad units and infrastructure to HTML5, ensuring creative is no longer Flash- dependent as demand
partners switch to HTML5.
Taken together, these developments represent a significant step forward as the Company coalesces its
products and technology to better serve advertisers and publishers in a competitive and challenging
marketplace, and continues to invest in capacity to drive future growth.
Integration
Integration efforts during the Period have been focused on eight key areas: Products, Technology,
Operations, Marketing, Sales, Finance, Legal and Human Resources. Achievements included aggregation
of all supply sources so that they are now accessible through our unified programmatic platform,
RhythmMax, consolidation of office locations, strategic staff reductions, and integration of legacy
infrastructure and technology to reduce redundancies and streamline operations.
blinkx’s signature achievement for FY2016 was the launch of the RhythmMax platform at mid-year and
the subsequent integration of all supply sources and ad servers. RhythmMax now provides a centralized
platform to access cross-device, cross-format RhythmOne inventory across Owned, Controlled and
Extended supply sources. It also provides advertisers with the flexibility to purchase ads through their
desired buying modality, whether traditional direct deals, private “walled garden” marketplaces with
closed site lists, or via auction-based mechanisms, all of which use the OpenRTB (Real-Time Bidding)
protocol. Through RhythmMax, advertisers can reach target audiences to achieve measurable ROI at their
desired spend level through a single entry point.
During FY2016, the Company closed or consolidated nine physical locations. In line with its integration
initiatives, the Company made staff reductions across sales, advertising operations and publisher
operations. As a result, headcount was reduced to approximately 274 from a peak of over 364 employees,
and the Company consolidated its offices from 21 to 12 globally. blinkx also built a highly efficient and
scalable hybrid cloud infrastructure that facilitated reduction of its operations infrastructure from 12
legacy and acquired to 5 globally distributed data centers.
During the Period, key integration milestones included consolidation of reporting, invoice and HR
platforms, the streamlining of banking and vendor relationships, and transition to a new human resources
management platform. Marketing launched both RhythmOne and RhythmMax brands, built new corporate
and trade websites, and significantly ramped content development and lead generation efforts. Sales teams
have been fully integrated across regions, and a comprehensive training program was launched to facilitate
unified, cross-platform sales that advance the RhythmOne proposition.
The progress of integration is in line with or ahead of expectations and provides a strong foundation from
which to realize growth and profitability. These measures have resulted in a reduction of $40M in
operating costs on an annualized basis, through Group-wide restructuring at a cost of $3M. Moreover, the
Company has now fully integrated its technology stack and is poised to reap the benefit of having a true
cross-screen, cross-format offering that will enable advertisers to reach their target audiences whenever
and wherever they consume content and to meet their desired KPIs.
Board Changes
During the Period, blinkx made several changes to the Board and Executive teams. Mr. Raj Chellaraj, the
Group’s independent Non-Executive Director, assumed the role of Chairman of the blinkx Board of
Directors. In addition to his role as Chairman of the Board, Mr. Chellaraj serves on the Company’s
Nomination and Audit Committees.
During the Period, Mr. Anthony Bettencourt, former Chairman and Non-Executive Director of blinkx’s
Board, resigned from the Board. Mr. Bettencourt had been Chairman of the blinkx Board of Directors
since 2008.
Additionally, Ms. Andrea Lee “Andy” Cunningham joined the Board as an independent Non-Executive
Director. Andy brings over 30 years’ experience in corporate, product and brand marketing with some of
the most world’s most recognizable brands.
Financial Highlights
Total revenue for FY2016 was $166.7M compared with $215.0M in FY2015, materially in line with
Company guidance. The change in revenue was principally driven by a planned reduction of our Non-
Core revenue streams, which was partially offset by an accelerating trend toward programmatic trading of
ads. Cost of revenue for the Period was $100.4M, which was down 17% from prior year figures, but
increased as a percent of revenue by 4%. We continued to see the shift in product mix toward fast growing
but lower margin products. Total headcount reduced to 274 (2015: 363) primarily driven by proactive
steps taken during the year to reduce its Operating Expenses by approximately $40.0M on an annualized
basis to better align its operations with its emerging product lines. The Group delivered an adjusted2
EBITDA loss of $10.5M (FY2015: adjusted2 EBITDA of $3.5M). Basic loss per share was 22.88 cents
(FY2015: Loss per share: 5.19 cents) and diluted loss per share was 22.88 cents (FY2015: Diluted Loss
per share: 5.19 cents).
The Company has taken decisive steps to draw down various historical product lines that were considered
Non-Core. These steps have simplified operational complexity, addressed certain issues impacting the
Industry and established the foundation for future growth. Based on these actions and an adjusted forecast
due to weaker than expected performance of some products, certain value of Goodwill related to Non-
Core legacy assets acquired was considered impaired, as the recoverable amount was less than its carrying
value, leading to a non-cash impairment charge of $50.3M. In addition, the Company accelerated a
$12.0M non-cash write off of certain intangible assets related to legacy platforms and products. As a
consequence, the Company reported a Net loss of $92.3M for FY2016 compared with a Net loss of
$20.8M for FY2015.
The Group’s balance sheet remains strong, with a closing cash, cash equivalents & marketable securities
balance of $78.5M (FY2015: $95.7M). Excluding payments for exceptional costs of $3.0M the Company
used $3.3M in operating activities. Excluding investments in marketable securities, net cash used in
investing and financing activities totaled $11.0M, principally reflecting the cash outflows for investments
in the technology platform, payment of deferred acquisition consideration and capital lease payments.
Outlook
FY2016 was a transformational year for the Industry and the Company. The digital advertising Industry is
projected to show continued strong structural growth, as offline spend continues to migrate online. Key
growth vectors of mobile, video and programmatic trading are expected to outpace all other formats and
channels. Against this backdrop, however, the market continues to polarize between entities that provide
a fully integrated offering and are gaining share, at the expense of fragmented point solutions that face
deficits of scale and scope, and will need to consolidate in order to overcome challenged economics.
blinkx made enormous strides during the past year in restructuring its operations and integrating its
offering through RhythmMax. RhythmMax not only provides the Company with an Industry-leading
technology platform to drive scale, but also a unique commercial platform to integrate and consolidate the
value chain, and accelerate organic growth and recapture margins.
In the coming year, the Company expects to intensify its focus on Core products and, specifically, its
programmatic initiatives to fuel high quality organic growth – deriving from a number of well understood
growth drivers. These include: the continued migration and consolidation of diversified inventory sources
onto the RhythmMax platform; higher pricing as a result of value-added targeting through proprietary
data; increased throughput from existing supply and demand side partners; new direct and programmatic
supply and demand side partners; delivery of high impact, high margin video and rich media campaigns
programmatically; and the establishment of private (trading) marketplaces to directly connect preferred
supply and demand partners within the RhythmMax platform.
blinkx enters the new financial year in a strong, competitive position, with a product portfolio that is well
aligned with Industry growth trends. The Company continues to anticipate that FY2017 will be a Period of
revenue stabilization, with strong growth in Core revenues and a return to full year profitability1.
The Company now has the unique combination of technology, talent and relationships in place to scale
both organic and inorganic growth as the Industry continues to evolve and consolidate. With Core product
areas constituting a critical mass of revenues, the Company expects FY2017 to show continued mobile,
video and programmatic growth. The scale of RhythmMax – in both volume and revenue terms – will be
a major driver of growth, as advertisers seek to maximize their return on advertising spend by reaching
highly targeted audiences, across devices and formats.
BLINKX PLC
CONSOLIDATED INCOME STATEMENT
Results for the year to 31 March 2016
(in thousands, except per share amounts)
YEAR
ENDED
YEAR
ENDED
31 MARCH
2016
31 MARCH
2015
NOTE
$'000
$'000
Revenue
166,716
214,969
Cost of revenue
(100,440)
(120,445)
Research and development
(30,196)
(30,068)
Sales and marketing
(41,536)
(58,591)
Administrative expenses
(14,478)
(13,651)
Total cost and expenses
(186,650)
(222,755)
Loss from operations before acquisition and exceptional costs and
amortization of purchased intangibles*
(19,934)
(7,786)
Amortisation of purchased intangibles
Research and development
(3,030)
(3,525)
Sales and marketing
(5,830)
(8,763)
Administrative expenses
(250)
(72)
(9,110)
(12,360)
Acquisition and exceptional costs
6
(65,295)
(4,662)
Loss from operations
(94,339)
(24,808)
Other expense
(39)
(12) Finance income
256
58
Finance costs
(162)
(38) Loss before taxation
(94,284)
(24,800)
Tax
3
2,031
4,001 Loss for the year attributable to equity holders of the parent before
acquisition and exceptional costs, amortization of purchased intangibles
and other (expense)/income**
(17,809)
(3,765)
Loss for the year attributable to equity holders of the parent
(92,253)
(20,799)
Note
Cents
Cents
LOSS PER SHARE
BASIC
4
(22.88)
(5.19)
ADJUSTED BASIC**
4
(4.42)
(0.94)
DILUTED
4
(22.88)
(5.19)
ADJUSTED DILUTED**
4
(4.42)
(0.94)
* Adjusted for acquisition and exceptional charges of $65.3m (2015: $4.7m) and amortization of purchased intangibles of $9.1m (2015: $12.3m). ** Adjusted for acquisition and exceptional charges of $65.3m (2015: $4.7m), amortization of purchased intangibles of $9.1m (2015: $12.3m) and other
expense of $0.04m (2015: $0.01m).
BLINKX PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Results for the year to 31 March 2016
(in thousands)
YEAR
ENDED
YEAR
ENDED
31 MARCH
2016
31 MARCH
2015
$'000
$'000
Loss for the year
(92,253)
(20,799)
Other comprehensive loss which is potentially reclassifiable to loss:
Exchange difference on translation of foreign operations
(34)
(333)
Unrealized gains on Marketable Securities
19
-
TOTAL COMPREHENSIVE LOSS FOR THE YEAR
(92,268)
(21,132)
BLINKX PLC
CONSOLIDATED BALANCE SHEET
As at 31 March 2016
(in thousands)
AS AT
AS AT
31 MARCH 2016
31 MARCH 2015
$'000
$'000
ASSETS
NON-CURRENT ASSETS
Goodwill
37,207
87,520
Intangible assets
24,200
43,806
Property, plant and equipment
3,358
3,340
Other receivables and restricted cash
828
1,071
Deferred tax asset
19,208
19,128
Marketable securities
29,539
-
114,340
154,865
CURRENT ASSETS
Trade receivables
22,825
37,741
Other receivables
2,422
7,193
Cash and cash equivalents
18,222
95,734
Marketable securities
30,725
-
74,194
140,668
TOTAL ASSETS
188,534
295,533
LIABILITIES
NON-CURRENT LIABILITIES
Deferred tax liability
(318)
(59)
Other payables
(1,679)
(1,189)
Provisions for liabilities and charges
(5)
(172)
(2,002)
(1,420)
CURRENT LIABILITIES
Trade and other payables
(29,894)
(49,839)
Provisions for liabilities and charges
(700)
(577)
(30,594)
(50,416)
TOTAL LIABILITIES
(32,596)
(51,836)
NET ASSETS
155,938
243,697
SHAREHOLDERS' EQUITY
Share capital
7,537
7,502
Share premium account
168,045
168,008
Shares to be issued
24
1,686
Share based compensation reserve
26,590
22,175
Currency translation reserve
(8,836)
(8,802)
Merger reserve
65,208
63,554
Accumulated other comprehensive income
19
-
Retained deficit
(102,649)
(10,426)
TOTAL EQUITY
155,938
243,697
BLINKX PLC
CONSOLIDATED CASH FLOW STATEMENT
Results for the year to 31 March 2016
(in thousands)
Year ended
Year ended
31 March
31 March
2016
2015
$'000
$'000
CASH FLOWS FROM OPERATING ACTIVITIES
Loss from operations
(94,339)
(24,808)
Adjustments for:
Depreciation and amortization
26,180
18,819
Share based payments
4,415
4,853
Non-cash acquisition and exceptional costs
-
240
Impairment of goodwill
50,322
-
Loss on sales of computer equipment
56
25
Change in provisions
(490)
712
Foreign exchange gain
3
143
Operating cash flows before movements in working capital
(13,853)
(16)
Changes in operating assets and liabilities:
Decrease in trade and other receivables
18,350
9,863
Decrease in trade and other payables
(14,967)
(10,367)
(10,470)
(520)
Income tax (paid) / refund received
4,182
(2,469)
Net cash used in operating activities
(6,288)
(2,989)
CASH FLOWS FROM INVESTING ACTIVITIES
Net interest received
134
20
Purchase of property, plant and equipment
(741)
(730)
Purchase of software
-
(1,587)
Capitalization of internal development charges
(4,353)
(3,885)
Proceeds from the sale of property, plant and equipment
4
49
Purchase of marketable securities
(60,245)
-
Acquisition payment of deferred consideration
(5,000)
-
Acquisitions, net of cash acquired
-
(21,747)
Net cash used in investing activities
(70,201)
(27,880)
CASH FLOWS FROM FINANCING ACTIVITIES
Net payments on finance lease
(1,080)
(92)
Proceeds from issuance of shares
64
84
Net cash used in financing activities
(1,016)
(8)
Net decrease in cash and cash equivalents
(77,505)
(30,877)
Beginning cash and cash equivalents
95,734
126,909
Effect of foreign exchange on cash and cash equivalents
(7)
(298)
Ending cash and cash equivalents
18,222
95,734
BLINKX PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Results for the year to 31 March 2016
(in thousands)
ORDINARY SHARE SHARES SHARE BASED
CURRENCY
RETAINED
SHARE PREMIUM TO BE COMPENSATION
TRANSLATION MERGER OTHER (DEFICIT)/ TOTAL
CAPITAL ACCOUNT ISSUED RESERVE
RESERVE RESERVE RESERVES EARNINGS EQUITY
$'000 $'000 $'000 $'000
$'000 $'000 $'000 $'000 $'000
BALANCE AS AT 31 MARCH 2014
7,461 167,945 3,579 17,322
(8,469) 61,681 - 12,372 261,891
Net loss for the year
- - - -
- - - (20,799) (20,799)
Other comprehensive loss
- - - -
(333) - - - (333)
Total comprehensive loss for the year
- - - -
(333) - - (20,799) (21,132)
Issue of shares, net of costs
41 63 (1,893) -
- 1,873 - - 84
Credit to equity for Share based payments
- - - 4,853
- - - - 4,853
Tax movement on share options
- - - -
- - - (1,999) (1,999)
BALANCE AS AT 31 MARCH 2015
7,502 168,008 1,686 22,175
(8,802) 63,554 - (10,426) 243,697
Net loss for the year
- - - -
- - - (92,253) (92,253)
Other comprehensive loss
- - - -
(34) - 19 - (15)
Total comprehensive loss for the year
- - - -
(34) - 19 (92,253) (92,268)
Issue of shares, net of costs
35 37 (1,662) -
- 1,654 - - 64
Credit to equity for Share based payments
- - - 4,415
- - - - 4,415
Tax movement on share options
- - - -
- - - 30 30
BALANCE AS AT 31 MARCH 2016
7,537 168,045 24 26,590
(8,836) 65,208 19 (102,649) 155,938
BLINKX PLC
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. Basis of preparation
This consolidated financial information has been prepared in accordance with the EU adopted
International Financial Reporting Standards (IFRSs), IFRS Interpretations Committee and those
parts of the Companies Act 2006 applicable to companies reporting under IFRS. The accounting
policies adopted are consistent with those described in the Annual Report and Accounts 2015
which have not changed. The financial information set out in this document does not constitute
statutory accounts for the years ended 31 March 2015 or 31 March 2016 but is derived from the
Annual Report and Accounts 2016. The Annual Report and Accounts for 2015 have been
delivered to the Registrar of Companies and the Annual Report and Accounts for 2016 will be
delivered to the Registrar of Companies in due course. The auditors have reported on those
accounts and have given an unqualified report which does not contain a statement under Chapter 3
of Part 16 of the Companies Act 2006. Full financial statements that comply with IFRSs are
included in the Annual Report and Accounts 2016 which will be made available to shareholders in
due course.
The Directors have considered the financial resources of the Group and the risks associated with
doing business in the current economic environment and believe that the Group is well placed to
manage these risks successfully. In doing this, the Board has prepared a business plan and cash
flow forecast setting out key business assumptions, including the rate of revenue growth, discount
rate, terminal growth rate and cost control. The Directors have considered these assumptions to be
reasonable and that the Group has adequate resources to continue in operational existence for the
foreseeable future being a period of no less than 12 months from the date of this announcement.
Accordingly, they continue to adopt the going concern basis in preparing these financial
statements.
2. Share-based payments
Included within cost and expenses are the following amounts in respect of share based payments:
YEAR ENDED
YEAR ENDED
31 MARCH 2016
31 MARCH 2015
$'000
$'000
Sales and marketing
1,041
2,004
Research and development
588
852
Administrative expenses
2,786
1,997
4,415
4,853
3. Taxation
The tax credit of $2.0 million (2015: $4.0 million tax credit), includes a prior year adjustment of
$3.8 million in the year. The effective tax rate for the year is 2%, compared to an effective tax rate
in FY15 of 16%.
4. Earnings per share
The calculation of the basic and diluted earnings per share is based on the following information.
YEAR ENDED
YEAR ENDED
31-MARCH 2016
31-MARCH 2015
$'000
$'000
LOSS
Loss used in calculation of basic and diluted earnings per share
(92,253)
(20,799)
Loss used in calculation of adjusted basic earnings per share*
(17,809)
(3,765)
SHARES
SHARES
NUMBER OF SHARES
Weighted average number of shares for the purpose of basic and adjusted* basic earnings per share
403,198,763
400,908,111
Weighted average number of shares for the purpose of diluted and
adjusted* diluted earnings per share
403,198,763
400,908,111
* Adjusted for acquisition and exceptional charges of $65.3m (2015: $4.7m), amortization of purchased intangibles of $9.1m (2015: $12.3m)
and other expense of $0.04m (2015: $0.01m).
5. Goodwill impairment During the year the Company took decisive steps to build out its Core Mobile, Video and
Programmatic capabilities and began to limit investments in historical product lines that are
considered Non-Core, including certain Desktop products, services and technologies. Based on
these actions and an adjusted forecast to weaker than expected performance of some products,
certain value of Goodwill related to Non-Core legacy assets acquired was impaired as the
recoverable amount was less than its carrying value, leading to a non-cash impairment charge of
$50.3M.
Goodwill:
As at
31 March 2015
Reclassifications
and acquisition
adjustments
Impairment
charge
As at
31 March 2016
$'000
$'000
$'000
$'000
Burst 25,000
(25,000)
-
-
Rhythm NewMedia 24,306
(24,306)
-
-
LYFE Mobile 2,242
(2,242)
-
-
All Media Network 1,892
(1,892)
-
-
RhythmOne -
53,449
(32,363)
21,086
blinkx 2,417
-
(2,417)
-
PVMG 21,663
-
(15,542)
6,121
AdKarma 10,000
-
-
10,000
Total 87,520
9
(50,322)
37,207
6. Acquisition and exceptional costs
In line with the way the Board and the Chief Operating Decision Maker reviews the business,
large one-off acquisition and exceptional costs are separately identified and adjusted results are
reviewed. The types of costs included within acquisition costs are those that are directly
attributable to an acquisition, such as legal and accounting expenses, integration costs, severance
costs and retention remuneration. The types of costs that are considered exceptional include
goodwill impairment, accelerated charges related to change in intangible asset lives, severance
costs and one-time integration charges.
Acquisition and exceptional costs:
Year ended
Year ended
31-Mar
31-Mar
2016
2015
$'000
$'000
Acquisition costs:
Severance and retention costs
825
2,255
Professional fees
309
838
Total acquisition costs
1,134
3,093
Exceptional costs:
Goodwill impairment
50,322
-
Change in intangible assets lives
12,027
-
Restructuring charges
595
643
Severance costs
1,217
926
Total exceptional costs
64,161
1,569
Total acquisition and exceptional costs
65,295
4,662
7. Share capital
During the current year 2,136,359 shares were issued, of which 512,877 shares related to the
acquisition of Rhythm NewMedia Inc., 255,980 shares were issued related to exercise of
employee share options and 1,367,502 shares were issued related to restricted stock units (2015:
2,418,132 shares were issued, of which 511,197 shares related to the acquisition of Rhythm
NewMedia Inc., 541,408 shares were issued related to exercise of employee share options,
1,258,973 shares were issued related to restricted stock units and 106,554 related to consideration
for the acquisition of Burst Media Corporation).
8. Shares to be issued and Merger reserve
The shares to be issued represent the shares that are expected to be issued to former Burst
shareholders as part of the consideration, who have not yet submitted the paperwork to effect the
exchange of Burst shares for blinkx shares.
The merger reserve arises in business combinations where shares are issued as whole or part
consideration. The difference between the fair value and the nominal value of the shares
transferred as consideration is taken to the merger reserve.
9. Related party transactions
Balances and transactions between the Company and its subsidiaries, which are related parties,
have been eliminated on consolidation and are not disclosed in this note.
For the purposes of IAS 24 "Related Party Disclosures" the Directors are considered to be the
Group's Key Management Personnel. Comprehensive details concerning Directors’ remuneration
and share activity for the financial year ended 31 March 2016 will be included in the Directors’
Remuneration Report of the annual report which does not form part of this preliminary
announcement. There were no other related party transactions in the current or prior year.
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