Millennial Media's (MM) CEO Michael Barrett on Q1 2014 Results - Earnings Call Transcript

May. 7.14 | About: Millennial Media, (MM)

Millennial Media (NYSE:MM)

Q1 2014 Earnings Call

May 07, 2014 5:00 pm ET

Executives

Joseph Wilkinson -

Michael G. Barrett - Chief Executive Officer, President and Director

Michael B. Avon - Chief Financial Officer and Executive Vice President

Analysts

Jason S. Helfstein - Oppenheimer & Co. Inc., Research Division

Todd Van Fleet - First Analysis Securities Corporation, Research Division

Jordan Monahan - Morgan Stanley, Research Division

Andrew McNellis - Evercore Partners Inc., Research Division

Operator

Good day, ladies and gentlemen, and welcome to the First Quarter 2014 Millennial Media Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes.

And at this time, I would now like to turn the presentation over to your host for today, Joe Wilkinson, Vice President, Investor Relations. Please proceed.

Joseph Wilkinson

Thank you. Good afternoon, and welcome to the Millennial Media Earnings Call for First Quarter 2014. Before we begin, I'd like to remind you that during the call, we'll make some forward-looking statements, which may include projected financial results or operating metrics, business strategies, anticipated future products or services, anticipated market demand or opportunities and other forward-looking topics. The matters covered by these statements are subject to risks, uncertainties and assumptions. Accordingly, actual results could differ materially from the expected results discussed in these forward-looking statements.

For detailed disclosures of the risks and uncertainties that could cause our results to differ from today's discussion, please refer to today's press release, as well as the documents we file from time to time with the Securities and Exchange Commission, including our Form 10-K for the year ended December 31, 2013, which was filed on March 3, 2014.

Also, I'd like to remind you that during the course of this conference call, we may discuss non-GAAP measures of our performance. Reconciliations to the most directly comparable GAAP financial measures are provided in today's press release and on our website under the Investor Relations section.

On this call, we'll also discuss a number of combined pro forma financial measures that are a combination of Millennial's results with those of Jumptap. We have provided a schedule of quarterly pro forma results for the quarters and full years 2012 and 2013 in past filings.

Today's call is available via webcast, and a replay will be available following the conclusion of this call for 1 week until May 14. To access the press release, supplemental financial information or the webcast replay of today's call, please visit the Investor Relations section of the Millennial Media website.

And now I'll turn the call over to Michael Barrett, CEO of Millennial Media.

Michael G. Barrett

Thanks, Joe, and welcome to Millennial Media's First Quarter 2014 Earnings Call. On the last earnings call in February, I had only been with the company a couple of weeks. Now I have approximately 90 days under my belt, and I've had a chance to extensively look under the hood. And I've had a number of sessions with the management team, the Board of Directors and key partners and clients.

I've been especially pleased by the feedback from our strong app developer community, who we distribute our SDK to, and our brand advertising partners, who spend their advertising dollars with us. Both groups have expressed their support for Millennial, the desire to see an independent mobile first brand succeed and the real energy around deeper partnerships. And both these groups tell us that having a strong independent platform in the market is critical to their success.

While I'm still coming up to speed, I've had a chance to make some broad observations and some early assessments. First, I'm thrilled to be at Millennial Media. The team is excellent, our products are strong and the mobile space is, to say the least, dynamic and growing in size and importance to advertisers and content developers.

The mobile app space has experienced a frenzy of activity recently, with significant growth of large competitors' mobile ad revenues, new point solutions, initial public offerings, M&A and new product and exchange launches. All this activity validates Millennial Media's mobile first thesis, and we're very happy to be in the middle of this fast-growing, vibrant and exciting space.

Based on what I've seen to this point, I'm enthusiastic and believe we have a great opportunity in mobile advertising and can build on the excellent foundation already in place at Millennial, especially related to the brand segment, our fast-growing exchange business and the company's valuable mobile data assets. But I also realize that we have some significant work to do. We are developing aggressive plans, some of which I'll share with you today. But before I get into specifics, I'd like to address the results of Q1 and our Q2 outlook.

After a pretty good Q4, we're not satisfied with the Q1 results or Q2 guidance. Our brand business is working well and was up substantially year-over-year in Q1, and our exchange business grew at a faster rate than anticipated. However, our performance business, especially the app download business, was down year-over-year and substantially from Q4, and these trends continue.

I'll go into greater detail on our performance business, but first, let me give you some color in Q1, with some discussion of bright spots and areas where we're doing well, which we can build upon. The brand business grew by more than 30% in Q1, as our relationships with the largest global brands, including 90 of the Ad Age top 100, translated to growth in number of campaigns and campaign spend globally. This was helped by growth in video, which more than doubled from last year's first quarter, with strong results both domestically and internationally.

We also saw success with the launch of 2 new significant ad products: PATH, our cross-screen advertising product; and POINT, our location-based targeted ad product. And we're having success with our suite of post-campaign measurement services that help brand advertisers better calculate the impact of the ads that they run with Millennial Media.

Our exchange business growth also exceeded expectations. And while the revenue is still small, the long-term potential for MMX is large. Thus far, we've amassed more than 180 buyers and billions of impressions, and we continue to integrate new buyers and grow available inventory. We'll talk more later about our exchange and programmatic aspirations.

But these growth areas were offset by weaknesses in the app download performance business. After a strong Q4, we experienced a very significant drop-off in Q1, due mainly to a small number of large clients spending far less with us than in Q3 and Q4. While we believe that some of the decrease in spend from these clients can be attributed to budget reductions, clearly, a few big players entering the mobile space are also taking significant chunks of the app download business. We need improvement here. The performance business will remain an important revenue generator in the mobile environment for the foreseeable future.

There are really 2 types of performance advertisers: pure app downloads, which are often games utilities, but these are hit-driven and the types of the advertisers that fueled some of our Q4 revenue success but which are now exiting in Q1 and Q2; and brand performance advertisers, for example, financial services like Progressive and LowerMyBills.

Though Millennial hasn't historically had the dominance in branded performance that it has in the pure brand business, this is an area where the company has always been reasonably strong, and that makes sense. Branded performance requires many of the same elements as our brand business. Advertisers are either the same clients as our brand business or very similar. Both categories use technology and data to target specific types of consumers, and both require the ability to target consumers at scale through a lot of inventory that is appropriate to the needs of the brands.

Conversely, in the app download performance business, historically, Millennial Media has relied upon a relatively small number of large performance advertisers to generate the bulk of our revenue. Our ad products, organization and strategy focused heavily on these accounts perhaps at the expense of building systems, processes and infrastructure to accommodate a much broader market for performance advertisers. It's clear to me that this has to change in order to better accommodate a broader and more diverse list of clients.

In late 2013, the team recognized the need to shift much of the performance business to what are called programmatic platforms. Through acquisitions, internal development and a big partnership last year, Millennial built out its programmatic platform, but there is still work to be done to capture the benefits of this shift to programmatic.

Programmatic platforms, like our exchange, MMX, allow advertisers, small and large, to access Millennial's broad base of inventory and tap into our proprietary data set to more efficiently run performance campaigns through real-time bidding. By self-service interfaces and APIs, performance advertisers can access Millennial's inventory either directly or through a third-party DSP. For Millennial, this is much more efficient way to serve small and midsize performance advertisers, which will help us build a performance business that is based on many singles and doubles each quarter instead of being reliant on the home runs. But shifting from this home run business reliant on big hits, spending a lot of money, to more healthy, longer-term business based on singles and doubles is a shift that will take some time to work through.

Though our platform business grew very nicely in Q1 with triple-digit year-over-year growth, it was admittedly off a small base. It will take some time to build out this platform business. While we're working hard and fast, we acknowledge that these fixes won't have a material impact to our performance business for a few quarters.

So how do we get going in the right direction? Here are a few key areas of focus. In order to reaccelerate Millennial's revenue growth rate, we will focus on 4 strategic objectives: first, we need to expand our programmatic presence to capture more streams of revenue; second, we're going to continue to invest in new products and features for our brand business; third, we're going to fix our performance business, which I just covered; and fourth, we're going to continue our expansion into new international markets. We will be moving fast to accomplish these changes, but some of these changes will require time and, as we're seeing, will lead to some choppiness in 2014 revenue.

One of the things that attracted -- that most attracted me to Millennial Media was the opportunity to leverage our network business to build an end-to-end mobile platform company. Thus far, Millennial has made a promising start in transitioning the company and assembling necessary pieces, with the addition of Jumptap's DMP and DSP, third-party data profiles and intellectual property. As of today, we have a portfolio of 77 issued patents, with many more pending. These patents cover a wide range of technology that is core to mobile advertising, including contextual and behavioral advertising, the use of first- and third-party data for targeting, serving ads across multiple mobile devices and cross-screen targeting. We believe our portfolio is a unique asset in our industry and plan to leverage it to maximize its strategic value.

Additionally, in late 2013, we rolled out MMX, our own exchange platform. We see a significant business opportunity in using these combined assets and capabilities to create a true end-to-end mobile ad technology platform that would enable us to generate greater monetization from the more than 650 million active user profiles we've amassed over the years and continue to build upon. These profiles are a huge competitive advantage for us. Many of these profiles have dozens of attributes that would be extraordinarily difficult to replicate without an SDK footprint across tens of thousands of apps.

Our profiles, which enable us to build audiences that advertisers can target, are at the core of the value proposition we bring to mobile advertising. While we have historically been able to monetize these profiles through our own ad sales force, we believe that by opening up our system to more external monetization opportunities and by leveraging our existing relationships with brands as their mobile budgets grow, we can grow impressions and, therefore, monetization opportunities per user profile. And with greater than 650 million profiles globally and greater than 170 million in the U.S., small upward movements in -- per profile monetization can potentially create significant revenue growth.

The opportunity is enormous, and we are well-positioned to win. When I was CEO of AdMeld, we saw many similar dynamics. We believe by making this transition, we are positioning Millennial Media for greater participation in expanded and more diverse revenue sources, with greater presence in more segments of the value chain and less reliance on a single -- on single revenue sources.

Moving the company in this direction has the added benefit of freeing up our sales, data and management teams to concentrate mostly on working closely with large clients. These clients often need high-touch services for bigger accounts and budgets and longer-term campaigns, while clients who are becoming more self-sufficient can access the platform in a more automated way. The goal is to move smaller dollar transactions to high-volume automation while allowing longer-term, highly creative large dollar campaigns more personal attention.

As we make this transition, we believe we are creating a very valuable and not easily replicable third-party independent mobile advertising platform, built on a foundation of data, tech, team and relationships that will have a more predictable revenue flow and will reaccelerate growth. We believe large brand advertisers value an independent platform because they don't want to concentrate all of their demand on a small number of large platforms that own their own inventory.

We're building this platform on a foundation of strength with brand advertisers. Our foundation is in the brand network business. The brand business represents huge advertisers with large budgets, who are only beginning to spend in mobile, and we expect to grow with them over time. Our sales and marketing teams have been cultivating these brand relationships for years, and we believe this gives Millennial a significant advantage in this market segment, as evidenced by our strong growth in Q1 and our positive outlook for the brand business.

I built my career on brand advertising and understand how difficult it is to develop the confidence of brand advertisers and how sticky those relationships are once you are able to build them.

According to eMarketer, nearly half of all digital spend this year, or more than $20 billion, is branded spend. Only a small fraction of that has yet moved on to mobile, yet as consumers spend more and more time consuming content on their mobile devices, those branded advertising dollars are certainly beginning to shift.

Millennial has already been the beneficiary of the early shifting of brand dollars to mobile, and as that shift accelerates, I believe we are incredibly well-positioned to capture an increasing share of those dollars. We already work with 90 of the Ad Age top 100 advertisers, so we have built the relationships and the trust to capture a significant portion of their mobile dollars as they accelerate into the space.

How are we able to compete so well among brand advertisers when a few of our competitors are often much larger than us? Brand advertisers love the fact that we are independent and open. We do not own our own content and, therefore, are not conflicted in our goals and aspirations. Our goal is to deliver results for the advertiser. Not to drive search or monetize our own content or replace ad agencies, we're there to serve the needs of the brands and their agencies. We are open in how we use data. Brand advertisers trust us as a neutral third party when they develop proprietary data around their campaigns. And we are focused. We use technology, data and people to help brand advertisers reach, target and engage consumers across devices, and that has been a powerful position in the market. While our brand business is still largely a full-service business, we are also well-positioned to capture brand dollars as they ultimately shift to programmatic.

Our exchange, MMX, is connected to the trading desks of many of the top brands and agencies, which are beginning to test programmatic spend in mobile. While we believe the majority of brand spending will still require a high-touch managed approach for quite some time, we are well-poised to capture share as brands begin to spend programmatically in mobile.

As I mentioned, our international business grew impressively year-over-year. We are expanding internationally, and our overseas operations are gaining traction in those markets. From our operational hubs in the U.K. and Singapore, we've grown our international footprint in Europe and Asia, and our overseas revenue stream is growing rapidly.

We have seen really stellar growth of our brand business in Asia, where we launched about 1.5 years ago and are now looked to as a mobile brand leader, not just in Singapore, Indonesia and Japan, where we have offices, but across China, India, Australia and other countries that we support out of Singapore.

The Asian market represents a large and rapidly growing market, where there are already more than 2 billion mobile device users. Already, the majority of the approximately 4 billion worldwide total mobile devices are in Asia, and some projections are that Asia will account for nearly 60% of all mobile users by 2016.

Oftentimes, a mobile device is the first screen in these markets. And so the usage of these devices and their content is often more comprehensive, intense and varied than in other markets.

We have plans to open new sales offices in other Asian countries this year. For example, we're in the process of opening our first office in Korea. And we're setting the stage for more meaningful expansion in the region moving forward.

We're seeing excellent engagement from large international brands, who are seeking longer-term multinational branding campaigns that, in many cases, want to begin their campaigns in the Asia-Pacific region and then move to the U.S. and EMEA.

The trend towards programmatic is also taking hold internationally, and we feel we are well-positioned as we expand MMX to all regions.

So to wrap things up, I'm thrilled to be here. This is a great asset, and the plan that we have going forward is absolutely able to be accomplished. When I was recruited to the company, I was under no illusion that everything was perfect and all streams of revenue automatically headed up and to the right. I was brought in here to, in a sense, fix and reposition the business. So I'm not surprised nor am I in any way dismayed by where we are. The company is well-positioned, we have a great team in place and I know from my prior experience that the market absolutely will embrace an independent, customer-focused mobile solution.

We are that solution and can serve that role better than anyone else in the business. It's going to take a few quarters for us to realize the full potential of this business, but I am confident that we will get there.

I'll turn the call over to Mike Avon to take you through the numbers and then jump back on for a moment before we take your questions.

Michael B. Avon

Thanks, Michael. Michael covered a lot of details in his remarks. So I'll jump right into the numbers for the first quarter and our Q2 outlook.

In Q1, we delivered $72.6 million in revenue, a 12.4% increase from 2013's Q1 pro forma combined revenue and an increase of 46.9% for Millennial's standalone Q1 2013 GAAP revenue. This was at the lower end of our guidance range.

Adjusted EBITDA was a loss of $4.7 million for Q1, which was better than our guidance range of a loss of $5 million to $6 million.

Our Q1 revenue was largely driven by strength in the brand business, which grew by more than 30% year-over-year compared to our combined pro forma 2013 Q1 results.

This growth came in a quarter where brand business is typically seasonally slow, which was encouraging for us. The brand growth, however, was dampened by a drop-off in the app download performance business, both year-over-year and sequentially on a pro forma combined basis.

As Michael mentioned, this drop-off can be attributed to a number of factors, including a significant drop-off of a handful of large performance advertisers who spent very heavily in Q4 and then pulled back spending in Q1, as well as losses to competition.

During the first quarter, Millennial Media showed continued strength in brand advertising, both in the U.S. and globally. Growth of our video offerings, rich media campaigns and audience-targeted brand campaigns all helped drive top line brand growth. We added new brand customers during the quarter and were also able to increase spend from existing customers. We saw particular strength in categories such as automotive and consumer packaged goods during the quarter. Overall, on a combined basis, our branded performance revenue split for Q1 was approximately 50/50.

For Millennial Media as a whole, once again, overall pricing was solid in the quarter. Global effective CPMs grew by 18% in Q1 of 2014 as compared to Q1 of 2013. CPM increases were primarily driven by a higher concentration of more highly targeted brand business, as well as an increase in advertisers' use of video, native and other highly engaging ad formats. In Q1, for example, we more than doubled our total video revenue versus prior year quarter. We believe that our higher effective CPMs are a good indication of the strong competitive positioning of our business, particularly in the brand portion of the market.

In Q1, again, we saw strong growth from our international operations. Our revenue generated through our international sales offices represented a little more than 20% of our revenue in the quarter.

We saw strong year-over-year growth in both Europe and Asia Pacific. I would note that some of our Q1 international revenue was concentrated among a small number of performance advertisers and may fluctuate quarter-to-quarter. In both Asia and EMEA, we're adding new branded performance clients and growing campaigns in our major markets.

With a global footprint of apps and sites on our platform, we see billions of impressions globally each day and reach approximately 480 million monthly unique users outside of the U.S.

Though we have seen good early success in our international efforts, we still have a long way to generate the level of revenue per user outside the U.S. that we're able to generate domestically.

Through global expansion of our platform business and targeted expansion of our sales teams to locations with the most revenue opportunity, we plan to continue to ramp up our global business.

We have built operational hubs in Singapore and London to support Asia Pacific and EMEA, respectively, and have strong leadership in each region. We continue to be very excited about the international opportunity for Millennial moving forward.

Our exchange, MMX, while it's still small, is growing rapidly and is performing above expectations. While still in the early stages, MMX allows access to more than 180 DSPs, agency trading desks and ad networks and is live in more than 40 countries.

eCPMs and margins on MMX are tracking above expectations. And we're now seeing meaningful revenue growth rates, as buying and selling activity increases and draws more inventory and demand dollars onto the platform.

Though not a large enough number to break out in the next quarter or 2, if activity and growth rates continue on their current trajectory, we expect MMX revenue generation to add meaningfully to overall revenue several quarters from now.

Each quarter, we share a number of nonfinancial metrics that we use to measure and monitor the scope, scale and reach of our business. For example, in Q1 2014, our total reach was more than 650 million monthly unique users. Our reach included approximately 170 million monthly unique users in the U.S. alone. The number of sites and apps enabled on our platform increased to approximately 60,000 in Q1 2014 as compared to just over 40,000 in Q1 of last year.

We've also developed more than 650 million active anonymous user profiles, and over 50 million of these link users across multiple devices and PCs. These profiles are a key asset for the company, enabling us to identify unique users on a completely anonymous basis across mobile devices to target ads more effectively based on the demographics, interest or location of the consumer.

Our gross margin for Q1 2014 was 41.2%. This was considerably higher than our initial expectations for the quarter and was higher than our 38.2% gross margin on a pro forma combined basis in Q4 of 2013.

Brand business often drives higher margin for us than performance business, and our strong results in brand, coupled with weaker-than-expected performance revenue, drove our gross margin higher than expected.

Our ability to recognize certain synergies with Jumptap more quickly than expected and the higher effective CPMs in our brand business also helped drive gross margins higher.

In the near term, we would expect gross margins to drop back down slightly below 40% as we see growth in the exchange, which typically drives lower gross margin than the network business.

Operating expenses in Q1 were a bit lower than initially anticipated. This was driven primarily by lower-than-forecasted personnel costs and IT-related costs.

Our adjusted EBITDA for Q1 2014 was a loss of $4.7 million, which compares to an adjusted EBITDA loss of $4.8 million on a pro forma combined basis in the first quarter of 2013. Our adjusted EBITDA in Q1 was better than our guidance range of a loss of $5 million to $6 million, even though our revenue was at the lower end of the guidance range. This outperformance was driven by our higher-than-expected gross margin and lower-than-forecasted operating expenses.

Our GAAP earnings per share for the quarter was a loss of $0.12 per share, while our non-GAAP earnings per share for the quarter, which is adjusted EBITDA divided by outstanding shares, was a loss of $0.04 per share.

Our balance sheet remains very strong, with $98 million of cash and cash equivalents as of March 31, 2014.

Our days sales outstanding and receivables continue to remain within expected ranges, with no material deviations from prior periods.

We now have approximately 107 million shares outstanding. In addition, we have another 10.1 million potentially dilutive shares, mainly represented by unexercised stock options.

Our capital expenditure in Q1 was $2.9 million, which was in line with expectations.

We expect stock-based compensation to be a bit higher this year than last year due to recent and expected grants to new executives. We think stock-based compensation will be approximately $4 million per quarter this year.

Now turning to our future outlook, I'll share our thoughts regarding the second quarter 2014 based on information available to us as of today, May 7, 2014.

For the second quarter of 2014, we anticipate revenue to be in the range of $70 million to $75 million. We anticipate adjusted EBITDA in the second quarter of 2014 to be in the range of a loss of $5 million to $6 million.

Finally, I'd like to take a minute to talk about my planned departure from Millennial. As many of you know, I've been involved with the company in one form or another since our founding nearly 8 years ago. I very much appreciated the opportunity to work at Millennial Media during such an exciting time in our company's history, and I'm very proud of what we've built.

While there's never a perfect time to leave, I've decided that now is the right time for me to move back to my entrepreneurial roots. I've enjoyed the opportunity getting to know many of you over the last several years, and I want to thank you for your engagement and your support.

I look forward to watching Millennial Media continue to grow, and I have confidence the company will thrive under the leadership of Michael and our strong and capable management team.

And with that, I'd like to turn the call back over to Michael.

Michael G. Barrett

Thanks, Mike. Before I take questions, I also want to close with a few words about our departing CFO, Mike Avon. I want to thank Mike for his many contributions to Millennial Media over the 8 years he was involved with the company. Mike was an early investor in the company during his venture capital days with Columbia Capital and then decided to join as CFO. He was instrumental in the company's initial public offering in 2012 and led numerous important strategic projects and acquisitions throughout his tenure with Millennial.

I know Mike has been thinking about getting back to his entrepreneurial roots, but I'm gratified that he stayed on for a transition period as I came onboard. Mike has been a key contributor to Millennial Media's success over the years, and in the past couple of months, his guidance, counsel and institutional knowledge during my first days here at Millennial have been invaluable to me and our Board of Directors. On behalf of Millennial Media, I wish him all the best for the future.

And now, I'll turn it over to the operator for your questions.

Question-and-Answer Session

Operator

[Operator Instructions] And your first question comes from the line of Jason Helfstein with Oppenheimer & Co.

Jason S. Helfstein - Oppenheimer & Co. Inc., Research Division

Two questions and then kind of a housekeeping suggestion. So first, when you think about the performance advertising that you're losing, I mean, is it a function of price? Are they able to buy that inventory somewhere else, and for a host of reasons, you can't match the price, having to do with just the way the company is set up? Or is it that they looking for something else that you cannot deliver? Then secondly, just -- can you talk about what you think the impact in the industry will be of the Facebook ad network? We obviously haven't -- that obviously had no impact on the first quarter because it just went live, but kind of how you see that impacting both you and the overall industry, potentially, positively and negatively? And then lastly, can I encourage you to think about breaking out media costs as a percent of COGS going forward? I think investors really are trying to value these companies more on a net revenue basis until they have cash flow and earnings.

Michael G. Barrett

Yes. Thanks, Jason. So the first question, performance advertising spend, is it a question of price? Is it a question of lack of capabilities? I think I'll just go back to what we originally said about it, and that is we know it's a growing business. Our focus primarily going forward will be on diversification, so many, many more performance advertisers, with a particular focus on branded performance advertisers. We think the natural affinity to our brand efforts in the network business lead to capabilities that are strong in the branded performance area. I think what honestly has happened is the big advertisers are very hit-driven, and that has served us well. When I came onboard, I saw the concentration of a handful of advertisers. And then I looked historically at Millennial's past history, as well as Jumptap's, and now the pro forma-combined company, and it just seemed like that was a normal occurrence in the mobile app download business, that the hits would arrive, they'd play themselves out, they wouldn't be hits anymore and the new wave of hits would occur. So what has happened to us is that, that new wave hasn't arrived yet. It could still arrive, and I think we'd still be a very viable advertising choice for them. But that's where we find ourselves. As far as price, I think we've always been upfront that as a network business, given our model and not owning inventory, it is more challenging than if we owned our own inventory. So I do think that the folks that own their own inventory that are strong at this game have an advantage. But I don't believe, as we build out our capabilities, from a network perspective, third-party inventory, that we have any structural inability to compete fiercely for those dollars. As far as the Facebook network, I mean, we've been obviously following it very closely. I guess I'll step back on that for a second. We've been competing with Facebook in the mobile advertising business for well over a year now. So as they expand into the network space and as we understand how they're going to deploy it, I guess we look at it 2 ways: we have 2 constituents as a network that we cater to 2 clients, the supply side of the equation, app developers; and the demand side, our advertisers. On the app development side, I think it will be a net positive for app developers. Facebook isn't trying to do exclusivities. They are going to just be another source of revenue. We've been competing head-to-head against Google in this space for supply. We've been competing head-to-head against Apple. We think Facebook will be a strong competitor, but I don't think this is a winner take all in the supply side. It's a winner by a few -- by a handful, and we'll be one of those companies. So on the supply side with the Facebook network, we watch it, but that is not a great concern. On the demand side, again, I think Facebook has done a great job in app download business. As they transition those dollars onto the network business, they may encounter some of the same economics that we encounter, but we anticipate that they'll be very aggressive. As far as brand is concerned, I think that we have a nice head start in that area. We have 60,000 distributed SDKs that are fueling our databases, with great profiles that brand advertisers love. So I think that we are going to continue to focus and enjoy the growth that we have in the brand business. And as far as media cost as a percent of COGS, Mike?

Michael B. Avon

Yes, I'll take that one, Jason. Today, the vast majority of our COGS are media costs. We certainly have considered and discussed potentially breaking those out, particularly as we bring -- as we see more substantial revenue from the exchange, which will have a different margin profile. And I think Michael and the team, going forward, will consider the best presentation to get the appropriate data in front of investors.

Operator

And your next question comes from the line of Todd Van Fleet with First Analysis.

Todd Van Fleet - First Analysis Securities Corporation, Research Division

Just thinking about the new outlook for 2014, have you thought about changes to the cost structure at all in light of kind of the revenue challenges that you have here in the near term?

Michael G. Barrett

That's a great question, Todd, and we certainly have given it a lot of thought. We met with the board 1.5 weeks ago. We are still in growth mode. We are growing as a company. We are growing our capabilities. We are growing our product suite. We see a huge opportunity here as we transition to this mobile platform end-to-end approach. And now is not the time to be throttling back. I think we've always been a pretty good company as it relates to keeping an eye on the expense line. The money we spend is -- we get a great return on it. We will always be watching it carefully. But this is not an option on the table right now. We are aggressively moving ahead and implementing the strategy.

Todd Van Fleet - First Analysis Securities Corporation, Research Division

So you're still expecting to spend maybe $20 million, $25 million in CapEx this year?

Michael B. Avon

Yes, that's -- this is Mike. That's still the plan. That's correct.

Todd Van Fleet - First Analysis Securities Corporation, Research Division

Okay. I was just trying to think about 2015 and the financial profile for the business. I know it sounds like, maybe from your perspective, Michael, as relative to 60, 90 days ago, maybe the company here has kind of set back maybe several quarters from -- relative to achieving kind of a financial profile that maybe -- the general thinking was that maybe you could achieve kind of in 2015. I'm just trying to think about, this year, if investors kind of think about this year as you have to really rethink what this year is going to look like. But in 2015, it sounds like your expectation is that you'll have business stabilized on the performance side. But what -- how should we think about maybe your aspirations for what the business might look like in 6 to 12 to 18 months?

Michael G. Barrett

I think that as we stated, the idea would be to diversify our revenue streams, participate in more the economics that a platform business can bring to you. It would be more stable revenue, more forecastable revenue. And we're kind of in build mode right now. And so we haven't done extensive modeling on it. But we know this, the macro trends and the dollar shifting to mobile and the shift within mobile to programmatic, fueled by our brand business. I think we feel very confident with the 2015 outlook.

Operator

And your next question comes from the line of Jordan Monahan with Morgan Stanley.

Jordan Monahan - Morgan Stanley, Research Division

So I guess just a couple of questions. The first is, I think last quarter, you had talked about looking at kind of a 20s full year growth rate, and I guess our assumption would be that, that may change a little bit. And I apologize if I missed it, but I'm just wondering if you are -- if you're updating that view for the full year. And then how much visibility do you have as you look out? Is it really fairly real time? Or do you actually get a decent amount of visibility based on some of the commitments from your brand advertisers? And then just a third, just quick kind of housekeeping question, on the 18% eCPM growth, was that primarily just due to mix, higher brand mix, meant that eCPMs were just naturally higher? Or was there actual real organic growth in the brand, eCPM?

Michael G. Barrett

Thanks, Jordan. For the 20% outlook, I'll address that right on because I was the guy who said it, with the caveat that I was at the company for about 14 days. But again, going back to the idea, this heavy concentration of the small number of advertisers in the performance app download business, it seemed like a reasonable projection at the time because we saw brand strength. We saw the strength of the platform, our MMX. And we anticipated a renewal of these larger advertisers. At the same time, we had budgeted decline in the spend, and that obviously hasn't happened. And that's the biggest change in terms of my outlook as I look at the company. That guidance was loose. It was kind of -- we kind of expect it to grow in the 20% range. Brand has grown over 30% and expected to grow so -- probably at even a faster rate in Q2. Performance is growing in the triple-digit area -- I mean, I'm sorry. Platform is growing in the triple-digit area. It's just very difficult for me to sit here and try to do the same loose guidance that I did in Q1. And so my approach now is to really back off any guidance as it relates to annual. We'll obviously be giving you quarterly guidance. And we'll be happy to be as transparent as possible about the annual guidance. And it kind of does tie to the visibility of the forecast. Brand is a little bit more forecastable, although still a transactional business on a quarterly basis. The platform business, you can kind of -- based upon run rates on a daily basis, it's easier to extend but it's very small. And then the performance business is this highly volatile business. And so that indeed gives some inability for forecasting.

Michael B. Avon

And then, Jordan, I'll take the question on eCPMs. eCPMs -- the higher eCPMs were driven both by mix towards brand, but we also saw organic growth in eCPMs in brand, which for us was good news. We think that was driven by greater adoption of our targeted products, our audience targeting products and also a higher mix of video and native other engaging ad formats. So we're continuing to see prices organically increase, particularly on the brand side. We think that's good news. We think that's not unexpected, given the fact that time spent is still quite a bit larger than dollars spent in mobile. And we expect as the brand dollars continue to move into mobile, that overall, we'll see prices continue to increase.

Operator

And your next question comes from the line of Andrew McNellis with Evercore.

Andrew McNellis - Evercore Partners Inc., Research Division

I was hoping you could discuss the stickiness of your publisher relationships in light of the headwinds you're seeing. I understand demand is more likely to come and go, but how likely is the size of your publisher inventory and overall scale likely to show similar volatility, especially if publishers aren't getting the yield that they may have gotten before?

Michael B. Avon

Yes, this is Mike. I'll take it. We've seen very little volatility as far as the actual integrations with our publishers and developers. Most developers take a few SDKs or have a few deep relationships. And when they're actually -- for their apps -- and they're actually taking your SDK and embedding that in their code, they have a number of reasons why they like to only work with a few -- with a handful of partners. We've seen that consistently over time. It's almost never one partner. They are almost always working with 2, 3, 4 partners, something like that. And we have been one of those for tens of thousands of these apps. Today, we have over 60,000 apps enabled on the platform. As I said in my remarks, that's up 50% year-over-year. We were at 40,000 apps a year ago enabled on the platform. We think that's great for us. And we would expect to continue to see apps and sites become enabled on our platform. Day in and day out, we have to win impressions by delivering results. And certainly, as we're able to deliver brand dollars to app developers, they look to us as a very important monetization partner. I think for many of the developers on our platform, they look at us as a truly critical partner, given the brand dollars that we deliver to them. But we have to win those impressions, and ultimately, we have to deliver results. We've seen very good stickiness with all of our key developers, and we certainly expect to see that going forward.

Operator

Okay. And this concludes the presentation for today's conference, ladies and gentlemen. Have a wonderful day. You may now all disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Millennial Media (MM): Q1 EPS of -$0.04 beats by $0.02. Revenue of $72.6M (+46.8% Y/Y) misses by $2.92M. Shares -30.8%.