Tremor Video's (TRMR) CEO Bill Day Hosts Q4 2015 Earnings Review & Analyst and Investor Day (Transcript)

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Tremor Video, Inc. (TRMR) Q4 2015 Earnings Review & Analyst and Investor Day Conference Call March 3, 2016 1:00 PM ET


Bill Day - President and CEO

John Rego - CFO

Lauren Wiener - President, Buyer Platforms

Adam Lichstein - President, Seller Platform


Jason Helfstein - Oppenheimer

[Calls Starts Abruptly] 2015 earnings call and Investor Day. I’d like to take this opportunity to remind you that during the course of these presentations, management will make forward-looking statements, which are subject to various risks and uncertainties. Actual results and the timing of certain events may differ materially from the results or timing predicted or implied by such forward-looking statements, and reported results should not be considered as an indication of future performance.

Further information regarding the factors that could affect the Company’s financial results is included in filings it makes with the Securities and Exchange Commission from time-to-time, including the sections entitled Risk Factors in the Company’s 10-K, filed with the SEC on March 16, 2015, and 10-Q, filed with the SEC on May 11, 2015, 10-Q filed with the SEC on August 10, 2015, and its Form 10-Q for the period ended September 30, 2015, filed with the SEC on November 9, 2015, as well as future filings and reports by the Company, including its annual report on Form 10-K for the period ended December 31, 2015.

Also, I’d like to remind you that we will discuss non-GAAP measures in talking about the Company’s performance. Reconciliations to the most directly comparable GAAP financial measures are provided in the tables in the press release, or in the appendix to the presentation, which is available on our website. This presentation is being broadcast on the Internet and is available through the Investor Relations section of Tremor Video website.

I’ll now turn the call over to Bill Day, Tremor Video’s President and CEO.

Bill Day

Thanks, Andrew. And welcome to all of you who were able to make it to our headquarters. We’re doing things a little bit differently today with our first ever Investor Day. John and I will briefly review our results and highlights before taking questions from the room, and then diving into our Investor Day presentations. All of the presentations for this afternoon are available on our Investor Relations website, and we invite you to follow along with the slides that you can download.

For the ninth consecutive quarter, we are delivering results that are better or in line with our guidance and reflect the successful execution of our strategy as the premium video marketplace. I am pleased with the strength and quality of our earnings this year, driven by significant outperformance of our programmatic business and continued innovation in our higher function non-programmatic products.

We delivered record results this quarter, including revenue of $51.8 million on total spend of $67.9 million, up 24% and 62%, respectively, year-over-year. We were also profitable this quarter, with adjusted EBITDA of $2.1 million, as increasing operating leverage is driving our revenue growth to the bottom line. As we shared with you last quarter, we’re seeing a substantive change in our revenue composition towards programmatic and proprietary higher-function products, more than offsetting the secular shift away from our media network business.

For the fourth quarter -- for the quarter, our programmatic spend represented 47% of our total spend, compared to 14% in the same period a year ago. For the full year, programmatic spend was 35% of our business, compared to under 9% in 2014. We believe that programmatic revenue will contribute more than 50% of total spend in 2016. Our supply side platform continues to experience strong adoption, with 364 publishers currently live, including Warner Brothers and NBC local. We’re continuing to work towards increasing the number of agencies and clients transacting through our buyer platform, building on the MSAs we have signed with Amnet and Varick Media, while continuing to pursue additional agreements with several of the other major agency holding companies.

Our other strong growth driver, proprietary higher function products continue to show strength, growing 37% in 2015. We see higher function buying as a source of innovation, and proof that our technology is resonating with buyers. We believe these brand optimization capabilities are extendable into our programmatic product, and will serve as strong differentiators for our self-service business.

In conclusion, I’m very pleased with our results this year, and the consistent execution of our strategy. We believe that we are poised to deliver further success in 2016, based on the significant momentum we have in the market, exiting 2015.

Now, I’d like to turn the presentation over to John, who will walk you through the financials before we take questions and then kick off our Investor Day.

John Rego

Thanks, Bill. 2015 was a very strong year for Tremor Video. We reported results that were ahead of our expectations for both the quarter and the year across revenue and adjusted EBITDA. Before diving deeper into our results, I’d like to take a few minutes to discuss the accounting change that we disclosed this morning.

Considering the rapid expansion and evolution of our SSP throughout 2015, and our expectations for its continued growth, we reevaluated the accounting treatment of our SSP as it relates to principal agent considerations around the recording of revenue. And although we provide a number of services to buyers, we believe our SSP primarily provides value to sellers of advertising and that the sellers are our ultimate customer. Therefore, we determined that we are not the primary obligor in the SSP transaction and that such revenue should be booked, net of inventory costs, rather than on a gross basis, as had been previously reported. As a result of this correction, we’ve restated our financial statements for the first three quarters of 2015. We provided the restated quarters in the tables at the back of the earnings release.

This restatement has the impact of lowering revenue and cost of revenue in equal amounts. There was no impact on our reported gross profit, net loss, or adjusted EBITDA. To enable ease of comparison against our prior reporting and our guidance for 2015, we’ll now be reporting total spend to accompany GAAP revenue. Total spend is equal to our previous reporting of revenue and is defined as the aggregate gross spend transacted through our platforms.

Full year total spend, was $203.9 million, up 28% from 2014. In the fourth quarter, total spend increased 62%, year-over-year, to $67.9 million. Full-year revenue was $173.8 million, up 9% from last year. In the fourth quarter, revenue increased 24% year-over-year to $51.8 million. The growth rate of our revenues relative to last year was significantly affected by the accounting change that I just discussed. Our reported revenue for the year is $30.1 million lower than it would have been had we not modified our revenue recognition policy.

Full year gross profit was $74.6 million, up 29% from 2014. And in the fourth quarter, gross profit increased 42% year-over-year to $22.8 million. And while the change in revenue classification did not affect our gross profit, our gross margins increased significantly to 43%, as a result of the reduction in our reported revenue. Our full year adjusted EBITDA was a loss of $4.6 million, a significant improvement from last year. For the fourth quarter, we reported adjusted EBITDA of $2.1 million, up from a loss of $1.8 million in the same period of 2014.

Turning to slide six, you can see that the increase in total spend was largely driven by our programmatic business, which contributed 35% of our total spend in 2015, compared to 9% in 2014. Programmatic spend was $32.1 million in Q4 2015, up more than five times from Q4 2014. Our higher function products increased to $25.7 million, up 22% from Q4 last year. Collectively, these growth drivers represented 85% of our total spend in the fourth quarter, up from 65% in the same period last year.

Our non-programmatic media network business decreased 32% compared to the prior year quarter, and continued to trend lower as a percentage of total spend, contributing 15% this quarter. This compares to 35% of our total spend in last year’s fourth quarter.

Our net loss in the fourth quarter was $2.4 million, compared to a net loss of $5.4 million in the same quarter in 2014. Basic and diluted net loss per share for the quarter was $0.05, compared to a loss of $0.11 per share in Q4 2014. Full year operating expenses were $117.3 million, which includes last quarter’s non-cash impairment charge of $22.7 million. Excluding that non-cash charge, operating expenses increased 17% from 2014. Total operating expenses for the quarter increased to $24.9 million from $21.4 million in Q4 last year, but decreased as a percent of total spend to 37% in the quarter, from 51% a year ago.

I want to finish it up, with review of our expectations for the first quarter and the full year 2016. In order to enable better period-over-period comparisons, we’re now providing guidance with three key metrics -- total spend, revenue, and adjusted EBITDA. In Q1, we expect total spend to be in the range of $48 million to $50 million, revenue to be in the range of $34 million to $36 million, and adjusted EBITDA to be between a loss of $5 million to a loss of $4 million. For the full year, we expect total spend to be between $255 million and $265 million, revenue to be between $180 million and $190 million, and adjusted EBITDA profit between breakeven and $5 million. Our guidance reflects what we believe is a typical seasonal spending pattern that is weighted towards the second half of the year. Weighted average basic share count is estimated to be $52.4 million for Q1, and $52.8 million for the year.

In summary, we ended 2015 with significant momentum and excellent results. We believe our programmatic business and proprietary higher function products will continue to drive our business forward.

We’re now going to open the floor for questions about the statements so far, and there’ll be additional time to ask questions throughout our Investor Day presentation. Thank you.

Question-and-Answer Session

Q - Jason Helfstein

I could start off. Jason Helfstein from Oppenheimer. So, we saw stability in the media networks business in the quarter. Maybe talk about how much of that was seasonal. We also saw in the quarter the gross profit grew very nicely, year-over-year, and just talk about how you see that evolving seasonally over the next few quarters? Thanks.

Bill Day

Sorry. So, Jason’s question, first, was about the media network business, which was essentially flat on a dollar spend basis. It decreased as a percent of revenue, given how much revenue grew in Q4. I think, as John will lay out later on, our expectation for that business is that while it won’t go away immediately, there are definitely clients who are still buying it. And again, the kind of things that fit that are CPM buys, demographically targeted buys that that will become an increasingly small percent of our overall revenue, and fairly rapidly. Anything you want to add on that?

John Rego

Particularly on the gross profit piece that you asked, when we get into my presentation later on today, I am going to give some thoughts prospectively of how we should be looking at. So, I’ll ask you to hold that one till this afternoon.

[Investor Day Presentation]

Bill Day

Three, two, one. Okay, great. We’re going to shift gears then. So, thank you. This is the part I like. We just may never really get into things and talk. So, it’s Bill Day, I’m the CEO of Tremor Video. And we’re now going to begin the Investor Day portion of the conversation. Again, reminding people on the phone that this deck is available for them to download and follow along. We’ll try to make an effort through the presentation though, talk to what slide we’re on, so that you don’t have a problem following it. The first thing I want to do is I want to remind everyone that everything we do today is subject to our Safe Harbor statement.

So, the agenda for today, I am going to speak a little at the beginning about the Company, our corporate strategy, what we see going on in the market; going to follow up by a deep dive into our buyer platform and a deep dive into our sell platform; we take a break at that moment; then we’re going to come back talk a little bit about the underlying technology the powers all that and then dig into a little bit about our growth strategy, our financial model, the long-term targets and as John referenced, I think we’re going to dive into a lot of things that are on people’s mind and the questions and then wrap it up at that point.

I know some people have to leave at points and stuff like that. Our general ambition is that the questions go to the end because many of the questions I think will be answered as we go through the progression, but if you have to leave or do something that’s really important, obviously they will be break points where we can entertain a call.

So, I think the first thing I want to tell is why do an Investor Day? It’s our first Investor Day we’ve done as a Company. I love it personally because I think we try to talk to investors a lot clearly when the window is open and we can see, but it’s always great to be able to step back and take a deeper in, particularly given what’s gone on in the Company. As we mentioned now for two quarters with the increased revenue transparency we’ve given, there’s been a substantive change in the composition of our revenue, I mean dramatic, quickly we’re crossing over 50% of revenue being programmatically driven.

As you know, last quarter we said look, we think that by the end of 2016, it will have crossed over 50%; well, now we are saying we think it will be 50% or greater in 2016 for the whole year. So that continues to accelerate. And the high function buying part of the business continues to grow. We’re going to talk a lot about that today. I think programmatic was new in 2015 and 2016 it’ll be more balanced growth between the two lines. Second, we’re seeing very strong traction with a very strong Q4 with very strong second half of 2015 that I think is in line with what we’ve been talking about. Then as these products take hold and gain market share, you’re going to see it really impact the financial trajectory of the Company. And the third is that the change in GAAP accounting, while reasonably straight forward, obviously we want to make sure everybody understands well, so why it was done, how we think it really fits with where the business is going and make sure there is no confusion around those points.

So, with that I’m now on the company background slide for people on the phone. And I am going to begin by introducing some of the people in the room that you’re going to hear from or speak today. So, I am Bill Day, I am CEO of Tremor Video and I’ve been the CEO since 2008. Prior to that, I was C-level at a public company called Marchex that I think many people are familiar with. I was a co-founder of, a private company, took it public and sold it in 2000. And I go back actually to starting at Prodigy in 1987. So, I am coming up on my 30-year anniversary in the Internet and online space.

Lauren Wiener is going to then follow me and speak to our buyer platform. Lauren is the President of our buyer platform, previous Meredith and Primedia. Adam Lichstein is our President of our seller platform will follow and dig in on our sales platform, how we sell to people, who our clients are, what the product looks like, things like that. I think you will be interested in both those presentations. John Walsh, the newest member of this team is our CTO, previously from CareCloud and Constant Contact. Then, John Rego, you met now for two earnings call as our CFO, previous Virgin Galactic and Vonage. There are other members of the senior management team but these are the people that are going to speak to you today.

Everything we do is about our mission. And this mission isn’t something that we just posted last year, this actually goes back to 2011. It is bringing the certainty of science to the art of brand marketing. As we talk about that, you will see I think today how that resonates with all the different things that we do and ties it together into very-very-very focused company. What changes how we do it, right? Historically we did that through an ad network. We don’t do that anymore. We are now building software for video effectiveness. And so both, through the composition of our financials, the way the financials are growing, margins are changing, also the products you see today, I think you see this company changing very rapidly from a media-driven company to a software-driven company. And a little about the company, just so you understand.

The company is incorporated in 2005. I am not a founder, I came on, as I said, in 2008. We went public in mid-2013. The company is a principal inventor of video categorization and analysis from back to 2007. That’s the ability to analyze actually the video itself and metadata about it, and make very good detailed targeting decisions and brand protection decisions. How we introduced the first CPE unit or Cost Per Engagement unit, several years later. We will talk about more of that a little bit. More recently, we introduced our all-chain product which we’ll talk about, 2014. And our seller platform was launched last year. And I think again everything along that continue speaks to a consistent set of innovation around that mission statement that we talked about.

335 employees located in 15 offices globally, that’s about 18% of our employees are now outside the U.S. And the U.S. in Q4 of last year -- outside the U.S. counted for about 10% of spend. So one of the things we’ll talk about from growth standpoint is we are investing globally but we see a lot of growth coming from outside the U.S. as well as the U.S. And the company has won many-many awards over the year, both around the technology, innovation, the quality of our sales team and the customer relationships.

So, if I focus on corporate strategy now, I really want to talk about three things that we think underpin why Tremor Video is special. And they are in order and I’m going to dig into each one, that we’re a pure play video focused company. And the net-net on that there’s going to be that we believe people are underestimating the size of the video market globally. And we see in the next 10 years a potential for a $100 million TAM, I’ll take you through our thinking on that. The second is that the company has been a principal inventor and innovator in this new science called brand performance optimization, I’ll take you through that.

And then finally, as the premium video marketplace working with both the buy and the sell side, we’re finding that we’re in a highly differentiated competitive position. I’ll try to share our thinking on that as well. So, I’m going to start going on the first one, and I’m now on that pure play video focus slide, for those on the phone. We, I think many people believe that video is the preeminent worldwide media growth market opportunity. So, that’s probably not new news to anybody here. But we think when people put pencil to paper and try to figure out how big it is though that they underestimate the size. So, when we attack this is we start with what we call it core market. And the core market should be comfortable, that’s what people think about when they think about online video. So, what’s the core market? Well, it’s global, increasingly it’s not just the U.S. alone, desktop mobile, mobile obviously with smartphones and tablets, IPV television. So, I think people, when they think about video, they think about things like connected devices, they think about over the top OTT, you will hear me talk about. And it’s -- whether it’s programmatic or not, right now it’s probably 50-50 in terms of how the spend is rolling, depending on the country whether it’s programmatic or not. That all fits in a sort of comfortable projection.

The thing to understand is pretty much up to now, most of that money going into videos come from two places, come from online digital display being redirected into video as a better mouse trap for their branding needs or it’s coming from offline but it’s coming from print as opposed to television. And so when you take all those factors and combine them, you come up with an e-marketer size. And it says look, the video spend is about $13 billion global market, growing $27 billion in 2018 that’s a 20% plus CAGR.

Okay. And then, I’m now going to show you a slide on consumption because I think everybody gets their consumption shifting to online but obviously that’s a driver. But the other big driver going on there is programmatic spend is increasing much more quickly. So, in the U.S. $3 billion in ‘15 going to 17, so let’s just say a 50% plus CAGR. That’s only consistent with what’s going on outside the U.S. 5 billion in 2015 going to 15 billion. And this is where I think people stop. They take that and they are in there, sort of their vision ends in about two, three years from now, and they stop thinking about where this goes. And so what we do as a company is we take that and we spend that. And so I’m now showing the slide that will run through 2025. And we see this very comfortably in the core TAM being a $60 billion plus global market. And so essentially video started in 2005 at about zero spend, the first 10 years in 2015, it’s getting to about $15 billion globally. The next 10 years are going to go from 15 to 16 plus and that’s a 15% plus CAGR even assuming the declining growth rate, which is probably reasonable, given their increasing scale.

Unidentified Company Representative

So by 2025, what share is online in that projection?

Bill Day

What share is online?

Unidentified Company Representative

What share is accounted for out of total -- the total media spend?

Bill Day

Yes, our total media spend, this would be something like video would be a quarterish of U.S. media spend, material, right; it’s not immaterial. I don’t have an exact number for you but it’s obviously material to get to that kind of number if you think of U.S. spend, we’re going to show in minute of about $240 billion right now offline, online in that space. So, video basically we believe it’s going to look like another search from that standpoint in terms of the scale. Now, there are three other factors that we want to talk about because I’ve used the word core a lot, because there are three factors we are watching very closely that we think could potentially make the market either more comfortably 60 billion or larger than 60 billion and those factors are the fact that we think people are underestimating U.S. digital video growth that this whole mobile thing is fantastic but they don’t really understand how to project mobile video and where does addressable TV fit into that mix. And so I’ll walk through each one of those. The first one to look at is U.S. growth. So, I’m on this slide, it says Research Underestimates U.S. Video Ad Growth.

Essentially, the logic we’re supposed to buy into is that video grew 28% in 2013. I don’t even have that chart, 42% in 2014 in the U.S. 44% in 2015, but then it immediately decelerates to 28% in ‘16, 19%, 15%, whereas the non-U.S. continues to grow at 20 plus percent rate and U.S. becomes less than half of the spend. There is nothing we see to be clear on our business right now that would underpin that deceleration. And so, we just believe that numbers are off from a forecasting standpoint and that there is an increased opportunity in U.S. as part of that overall growth markets.

The second one around mobile is sort of preaching motherhood and apple pie. I think again we all understand that mobile is a big part of media consumption now. The numbers basically say that very quickly, digital is becoming half of all the time, the consumer spend was media. And mobile is the biggest piece of that half the time and growing very rapidly. I think everyone buys into that, right? I think personal, our own personal experience. So, we shared the numbers, we don’t typically share because we talk about all-screen a lot. But essentially Tremor -- these are Tremor numbers. So on the phone, we have seen strong mobile ad growth.

So Tremor is just about 50% of our spend now coming off of the mobile platform. So, we’re just about to cross over 50% from that standpoint, growing very rapidly, obviously from that standpoint. So, everything we see internally, entirely agrees with that trend from a consumption standpoint that things are shifting mobile very rapidly. Interesting though when you look at the research because while the research, on either a U.S. or worldwide basis, speaks to strong mobile growth. So, the research we’re showing here is $31 billion in ‘15 going to 58 in 2018. The assumption is that video, as a percent of mobile, stays relatively flat. And so, the vast majority of mobile spend is driven either off of search and display.

We work with many of the top publishers. I think the publishers would take great exception to this, because they’re actively looking for ways to increase their video content, increase their mobile video advertising opportunities, in some cases decrease or eliminate their display advertising on the mobile platform. And so, we just believe when it’s all said and done, that while the growth in mobile is probably right that the share shift into mobile video is going to be much stronger than this and that represents an upside on the overall market size.

The last one -- I talked before about how really video has been driven up to now by print and digital display and that’s changing, it’s not changing overnight but this was done by advertiser perceptions, really looking at talking to people who spend the money, asking them where they’re taking money out of now, going forward, as they think about putting money into video. And that competition now is dominated by television, whether it’s cable or network television from that standpoint and it creates a really interesting, we think, opportunity around addressable TV. So, addressable TV, 40ish million household have the capability for dynamic ad insertion at the household level. Well, that sounds an awful lot like ad tech to me, right? So that, and one of the things you’ll hear from us, throughout the day is that addressable component of the TV market is very, very interesting to us because it’s very data-rich. And data-rich allows for optimization. It may not be optimization at the same level you can achieve in online digital video but an optimization that’s still a huge value-add, nonetheless.

The forecast here from Magna Global is that while there’s some spend going on an in addressable TV right now, it will become a $10 billion market in 2020. And so in summary for this section, there are three things going on that gets us to this $100 billion number, potentially. One is in mobile to cable, and growing very rapidly underappreciated as a factor in the growth of overall video, and I believe Tremor video is very well positioned. When we talk about our platforms later on, and our product capabilities, we are very mobile centric on both the buy and the sell side. Second is spend increasingly coming from television. So television, both in terms of your sales strategy as well as your device strategy has to be an increasing point of the overall conversation. And as I said, if you take the $60 billion core TAM and you infuse it with potential from addressable TV, the incremental U.S. and mobile video very quickly, numbers can get up closed to $100 billion, so which is an extraordinary growth. That takes the CAGR from 15%, and takes it over 20% through the time period 2016 to 2021. So that’s the first piece.

The second topic -- and for people on the phone, I’m on the slide that just a holding slide through brands performance optimization. To really talk about brand performance optimization, you have to talk about what’s going on with branding in general. And so, branding in general, we really think that brand advertising is the last big marketplace that hasn’t been automated yet. There are so many others that have changed and the internet had such impact on that but most branding is still done offline and most branding is still done by e-mail and phone and fax, and that’s a huge opportunity. To understand that more, I think a couple of slides and really dig into branding.

If you look at total U.S. ad spend, $200 billion -- $234 billion in 2016, that’s evenly split between direct response and branding. And so it might be easier to think, well they are kind of similar because often I hear people confuse the two or speak about the two in one voice where you think that they are very similar but they are actually very, very different.

Our direct response has always been a mass driven process. DR is largely aligned. Search is now the 800 pound gorilla in the DR world, even the offline things tend to now rotate around the search ecosystem. And importantly it’s a silo thing, meaning you talk to an agency. And the people you talk to in the DR world are very, very different than the people you talk to from a branding standpoint. Branding has been a data driven process and will continue to have a creative component to it, very different than DR. And as I sort of hinted in the prior session, it’s largely offline. Television and print are big, big chunks of spend that are both larger than online and video are right now. So, if you dig into this and say, okay, well how -- let’s talk about our advertising spend. Interestingly advertising very much 80-20 rule or more so. There are 25 spenders that spend about $70 billion in advertising then you get to the fortune 500; now it is about 80% of that $230 million and then there are tens of thousands of spenders that take you from 80% to 100%.

Our focus is to right hand side, not the left hand side because branding is really dominated by those top big spenders. And if I show you the top 25 spenders and here they are in a list, they -- I think you recognize, these are all the people you recognize as heavy television spenders, right? So, these are people that have a predominant amount of their branding spend, gain, the advertising spend against branding.

And so you treat these as a cohort like good analysts, you can take these guys. And let’s take a look at these companies as to understand how they are performing, something as here’s how they’re doing, right? On average, over the last five years that company as a cohort has 3.6% annual growth rate and a 7% net income growth rate. And as I said, this is summary of things. But we believe this puts us a CMO and any of those big companies in a very, very difficult position because the CMO is basically under pressure to spend less, help drive the bottom line, and deliver more. Right? Deliver better results, help drive the top line. That little statement creates an upheaval in brand marketing towards digital. So, what do we provide and ad tech provide? Measurable ROI, real time data, transparency around spending and where your ads run, and the ability for clients to actually control what they do from a dashboard on their desktop. That is really the cause of and driver of what we focus on this concept of brand performance.

Brand performance is simply spending moving from buying placement; I’m spending my money on a Super Bowl ad; I’m buying a TV commercial; I’m buying a page in xyz magazine. And instead spending your money to buy brand outcomes and those outcomes being heavily optimizable, so that you can run a flywheel on that and do better and better and better, be smarter and smarter about where that $120 billion in the U.S. is spent every year.

As you think about the slide John showed earlier about, our two growth drivers, we think it’s exactly related to what’s going on inside Tremor Video, and exactly related to that what’s going on outside in the big world. We’ve got these high function buying units. It’s all about real time brand performance optimization; it’s about innovating and driving that sort of hey, how do we start to push the top line and make our top line better and better.

And then you’ve got programmatic. The programmatic has always been code for efficiency, how I do it more scalably, how I do it more cheaply? And obviously our programmatic platform revenue has been growing very rapidly. And our strategy has always been that the two are very closely related. And that what we want to do is drive more customers to self service, and we want to build more capabilities, innovation capabilities that we’ve developed, largely in our higher function buying platform that Lauren will talk about later, into our platforms, so that those clients can leverage more and more of those capabilities on their self service basis. It comes back to the question we consistently get about financial margin and it’s really understanding difference between the words optimization and workflow; so many people get caught up in workflow as a driver. And workflow is one of the focuses of what we do. But I fundamentally believe that at least in video, workflow is a 1 or 2x maybe a 3x kind of opportunity, because you hear it all the time. The upfront work, I don’t need a better upfront tool to buy television right down.

We hear people talk about, well, my site is sold out. So, you can’t help me because my site sold out. And in a workflow environment, basically that means your take rate’s going down. Every time you renew that contract, you are going to get less because your value add isn’t that strong. Let’s contrast that with optimization. Optimization we believe is a 10x and we think about our high function buying is basically a take rate stabilizer. So, optimization, and you will see through the example we are going to show you today, we believe is the ability to take higher than average take rates or margins consistently. And so doing that in high function buying as well as being able to optimize into our platforms, we believe will drive superior margins over time.

So, it all sounds so easy, right? You take all the marketing funnel and you get down below placements with driving pure awareness and you do all that and you have to do that across all these different screens and now there’re television screens coming. And suddenly you realize that it’s not so easy, because while we’ve created products for consideration like our engagement products or perception like our brand lift product or intent like our share shift product or our offscreen product for all the different screens that actually run on most other companies can’t do that. Certainly agencies can’t do that, absolutely publically can’t do that, so we add a lot of value in the market. Now, I want to talk for a minute on the different components of how we do that.

Our offscreen optimization is really about again omnichannel for branding, letting our algorithm make the decision on a real time basis of where the ad should run, currently covering desktop video, mobile video and connected devices. So, you tell us what you want to achieve and the technology does the work on a real time basis, and that’s our focus. And what you’ll see happen over time is we’re purposely moving to additional screens. I talked about addressable TV for example. Addressable TV is interesting us because we believe we can get data that can help us optimize, so we can augment are offscreen product and add additional screen there. Social video is interesting to us because it opens up new pockets of inventory where advertisers want to run. But importantly again it’s not -- we’re not putting a dashboard with five buttons and you can plan each one independently. You essentially come to us and say, I want to achieve lift; I want to increase my market share, the technology optimizes. I make decision on a real time basis to allow you achieve that and then shares with you that learning on a real time basis too so you can monitor how that’s going.

If you think about how hard it is then to take costs per engagement pricing or brand lift or viewability and craft it into all screen that’s like the nirvana of what I’m talking about. Because you’re really saying I can optimize towards a goal across any screen that exists on a real time basis. Again, we don’t regularly share this but that’s 18% of our revenue -- our spend I should say in basically year 2015. 18% of our spend but everything we do is optimized, both to a KPI and an outcome other than a placement. So engagement, viewability, completion of brand lift across all screens. I think that’ s pretty extraordinary. And it’s obviously if you can see from the slide I’m on right now, it’s double the percent that existed in 2014.

I talked about the whole goal here is not only be able to do sort of managed service basically but to drive these capabilities increasingly into the platform. And so when you think about our DSP on buyer platform, if you stand here, sure there’re other people like us who can buy on a CTR conversion on a time spent basis, but look at the orange box. The orange box essentially allows you to start to bid for engagement; it’s for brand performance, bid for viewable completion rate. These are things that are very proprietary to what we do. And we believe while some buyers value them right now and others may value them in the future, these are relevant to all buyers as the world continues to progress, and more and more CMOs have to address that issue of spend less and get more.

And so fundamentally, we solved this problem, and we solved this problem today. As I said, 18% of our revenues driven across both these right now. And Tremor is absolutely the innovator on brand performance optimization for video.

The second I want to talk about is our business model and how it has evolved to become the premium video market place, essentially connecting buyers and sellers with two platforms rather than just focusing on one or the other. To do that, I think it’s valuable to just remind everyone. And I’m on the slide that says digital video ad ecosystem.

How our business works, right? So, clients spend money, they spend money through agencies or trading desks. Publishers have content, great content, great shows, and all the different formats that content is created and assumed today. And essentially there are buyer platforms, there are seller platforms, and there have been exchanges between the two. And Tremor’s now aligned to do all three. We’ve customers who use us solely as a buyer platform, customers who use us solely as a seller platform, and customers that use all three. And importantly, within the exchange now, we’re live, active and scaling rapidly across the three types of transactions that can occur. RTB, real time bidding, private market places, so sometimes invite only, with respect to either buyers or sellers, more contained environment and a programmatic direct which the automaton of a transaction between one specific buyer and one specific seller. And importantly, as we show on those other logs, there’re other people in different parts of this too, but Tremor’s in a pretty unique position, doing all three. I’ll speak to that more in a minute.

As I said, think about our business as a seller platform and buyer platform and the video exchange connecting it all together to get one, open, independent marketplace. And I think as you think about our marketplace, there’re truly two sides but it’s two sides of one marketplace. Talking a little bit more about the seller platform. I think as you’ve seen that we’ve made a lot of progress in terms of the scale and growth of our seller platform, both from a revenue standpoint as well as from a client adoption standpoint. We consider that to be very, very strategic. When we started 2015, we talked about how we’ve worked with premium sellers for years, how we believe that we could translate that into a premium pole position with them in the software business. I think we’ve largely done that. We’re continuing to work hard at that and we’re continuing to work hard at that but we’re in a great position; that’s important. We think this is winner take most at least opportunity, which means we want to do it. And so, we’re focused on being the number one player globally from a sell side platform standpoint and we’re well on our way I believe.

The buyer platform, our focus -- we don’t actually see that as a winner take most. It’s actually we believe, agencies and clients will use multiple products depending on their particular needs for that particular campaign or that particular client. And so focusing our efforts, as I talked before and the brand performance capabilities that we think are an important part of what every CMO, what every agency needs to use is absolutely our strategy. We want to be one of the few winners on that side. But there is an interplay between the two as well, right? So, being a seller platform allows us to create unique inventory opportunities that when we go and sell a buyer platform into an agency or client, we can market those inventory opportunities as one of the things we bring to the table to sell that adoption through.

And vice versa when we talk to sellers, one of the things we bring to them is the fact that beyond the great platform and software, we have preparatory demand, incremental spend, we can brand package into the relationship as we’ve historically done with some of the big names, you know that we’ve worked with. It’s very purposefully been done in an open way, so that the sell and the buy side operate independently. And as I said, clients can use one or the other or both and transact any way they want. It puts us in a position where if you’re buyer, you’re seller, you’re a managed service or self services, there is no reason to say no to us because we don’t have the products that you need; our products right now span the market.

And the strategy here is very much to become an integral part of the infrastructure from a programmatic standpoint. We very much believe and we’ll talk about our partners later in the presentation but we believe that we win when our partners win. And so we’ve aligned the company to be in a position where we just win more from a business standpoint and that’s been very important in terms of driving this growth rate going forward.

Again and again, video and display, aren’t they similar? Actually they’re not similar. And I think it’s important because you hear a lot of legacy display, ad tech companies or display companies talk about how they’re going to get into video. And we believe fundamentally, we haven’t seen one yet. And there’re legacy display companies that are going to have a very difficult time getting into and scaling video for all the things I’ve mentioned up to now, in terms of the fact that it’s very difficult whether it’s top of the funnel, bottom funnel, the KPIs are very different around brand versus clicks or the fact just that supply is much more scarce. And dealing with that supply is a different sort of an animal than in the display world.

We are the first purpose-built brand video platform that wasn’t started as a display platform from the get go. We were built for video from the beginning and we think that differentiates us from a product standpoint.

And so competitively, when you look at that, I think this is always a top one to think about how you take great companies, because I believe they’re all great companies and line them up in a way that just helps differentiate where they are. We’re talking about $100 billion market. there can be many winners here, not just one. So, the way we think about it is buying and selling display and video and really looking at where you fall out on and that. Tremor clearly is in a position now where we work equally and easily with both buyers and sellers. But we’re purely focused on video and increasingly doing that on a programmatic basis.

There are companies that do that in display space, do both buying and selling but most of the other players tend to do one or the other. So, lo and behold, they’ve become big partners. So, we’re big partners with the Trade desk and TubeMogul et cetera. So, I think that creates partnership opportunities for us from that standpoint, but it also means that Tremor from a video standpoint right now is in a very unique place versus the composition.

And so, I am going to wrap up this section just remind you on a couple of key differentiators. There is many should be familiar with, so we just talked about that video and branding focus is just so important to what we do. We have never strayed from it. There is no story about how we started doing this and now we do this. It’s always been about video, it’s always been working towards tapping this opportunity. Brand performance optimization, how it’s super, super hard, but we’ve actually got 18% of our spend, running into that optimization of screens against actions in a funnel right and that’s increasing.

There is leverage we get form both buy and the sell side that opportunity there we service clients whether they want to fuller sell for managed service, we believe strongly that every product we build should be built to the sell service spec. But clients in general are not ready for that yet and so we have a whole system set to support them across that, so they eventually get their success with. We’re transparent; we’ve always been transparent about where the ads run and things like that but now with the self service platforms, we’re transparent around economics and spending and pricing and things like that.

Then the last thing is independent. I think independent is really important because I think people misconstrue independents. Well, independent, you can either work with the buy or the sell side, you can’t work with both because if you do work with both, then you’re not independent. I think we very effectively work with both independently. The key thing about independents is we don’t have an O&O. We don’t sit there at the end of the day and say when we run an agency ourselves, so what do we do versus other agencies or work with or we have our own website or our own definition and how does that? So, in essence, without an O&O, not being owned by a publisher, being an independent public capital, well capitalized company, we have no conflicts with our clients. And it’s really aided us in terms of bringing partners on and the growth we’ve been seeing.

So, with that I’m going to keep things rolling. So, I think minimally until we get through the Adam and Lauren sections, so we can have some questions there. And potentially, all the way to the end, we’ll see how it goes in terms of questions after that. So, I very much want to introduce Lauren Wiener, who is our President of Buyer Platforms to take you through our Buyer Platforms.

Lauren Wiener

Thank you, Bill. If anybody is sitting in the uncomfortable chairs in the back wants to move up to the front table, I can tell you these chairs are bit more comfortable. So, make yourselves at home. I’m Lauren Wiener, as Bill mentioned, I’m President of the Buyer Platforms. I’ve been at Tremor Video since 2012 and prior to that ran the digital group for Meredith Corporation, where I was a customer of Tremor Video.

Tremor Video’s buyer platform enables customers to buy brand effective video advertising on any screen, anywhere they want. We’ve distinguished ourselves in the marketplace with some very important differentiators. We’re the leader in brand advertising optimization. We have deep analytics and sophisticated targeting capabilities. We’ve an open platform and we have a proven track record delivering results for the largest marketers across the diverse range of industries.

Over the next 15 minutes, I’ll take you through our differentiators in more detail. Unlike other buyer platforms built for display and direct response, our seasoned engineering team built Tremor Video’s buyer platform with a brand funnel in mind. Our clients can transact across the funnel anywhere they want to meet their goal; and whether they are looking for awareness, engagement, conversion, they know that their dollars are being spent on brand safe and frost-free content.

Another key differentiator for Tremor Video’s buyer platform is that we offer a full spectrum of buying models. So, an easy way to understand this is that in managed service, Tremor Video trades and optimizes via the platform for our clients. And we bear the risk and the operational responsibility to deliver on their goals in full. Other end of the spectrum over there is self-service where the client uses our platform and does the trading himself. In this case, the client is on the hook for delivery to all campaign goals, and in another words, they have all the control on the accountability, they also have all of the risk and the operational burden.

Tremor Video has a proven track record in the industry as a first mover and the innovator. For the past decade, we’ve been pioneering technology based solutions to new customer demands. In 2009, we were the first to launch cost per engagement in response to clients looking for a more accountable model to trend. In this model, we serve attractive ads and the marketer only pays when the consumer engages with the ad. We followed up shortly thereafter with the brand lift model where the marketer pays when the consumer increases their purchase intent. We call these products higher function as Bill mentioned earlier and they are at the forefront of innovation in our platform.

Two years ago in response to marketer frustration around reaching consumers at scale and the increasingly fragmented viewer landscape, Tremor Video developed an all-screen solution, which allows clients to efficiently and effectively buy video advertising across screens. Unlike other cross-screen solutions that require guesswork as to which screen or audience performs best, our patented decisioning technology optimizes campaign in real time to the best performing audiences across all devices based on the marketer’s KPI. And in addition, we provide aggregate reach and frequency metrics across all screens. The immediate demand for this product has been tremendous. Since becoming available on April 2004, our clients have spent a $125 million with us on all-screen video.

Another of our first to market products, social affinity, utilizes insights from over 275 million social media engagers on Twitter and Facebook to target consumers with specific passion points. As our technology monitors performance against campaign goals, we can model in real time and increase to reach the consumer segments that are important to our campaign. This is a far more sophisticated way of targeting than a straight demographic segment. And our customers in a diverse range of industries from travel and entertainment to restaurants and CPG, have been taking great advantage of this capability that scales our reach. In fact 250 social affinity campaigns have run through the platform since we launched last year.

Our most recent technology innovation ProximityPlus targets consumers on their phones based on their geo location. By tracking 23 million tagged mobile users with between 100 to 300 data points per day, we enable clients to tap into more precise but still non-PII consumer behavior, like where they’re going, for how long and how often. We know the difference between someone who has passed Subway walking their dog and someone who is spending time in a store. Most of their location based targeting is flawed because it relies on lat and long coordinates. It can deviate up to tens of miles and cannot provide color on how long consumers spent in a location. By analyzing dwell time in real world locations, ProximityPlus provides and authentic picture of intent and behavior and enables our tech to create more than 500 highly targeted audience segment as detailed as weekly Subway visitors across all screens.

In our platform, buyers can select outcomes like demo, engagement, completion and more, and pay only for guaranteed results. We can offer this type of buying precisely because our technology was built to drive brand effectiveness and has been machine learning for 10 years on how to optimize to the desired outcome.

Our customers have responded extremely positively to our mode of buying. In fact, outcome based buying accounts for more than 50% of campaign running through the platform at any time. As video demand increases, buyers continue to look for high performing inventory. Having spent the last decade collecting and analyzing data in the video ecosystem, our platform is extremely adept at identifying inventory that will deliver against specific criteria and KPIs, which we can now package up and make available via private marketplaces. In a last 12 months, we worked with advertisers to enable more than 150 private marketplaces.

A big industry pain point as traders move to self-service is the scarcity of premium inventory at scale. As a result, traders have increasingly been setting up private marketplaces directly with premium clients, which in turn has created a lot of complexity and manual work for them. It’s become a huge headache for traders to manage the deals using spreadsheets and to figure out how to optimize their performance. Tremor Video developed Deal Manager to automate the process of discovering and enabling private deals, allowing traders to more seamlessly manage their direct programmatic deals in the same platform with our open option buys. Tremor Video is an open platform.

Unlike wall gardens that force customers to work with data or supply partners chosen by the seller, we integrate with any third party and technology providers who are important to our customers. This flexible architecture enables buyers to utilize any blend of first and third party data they desire to maximize campaign effectiveness, as well as to use the optimization and verification partners of their choice to ensure brand safety and track viewability.

We were pleased to be rated a strong performer out of the gate in Forrester’s most recent Video DSP Wave. Forrester’s rating was based on a combination of customer feedback and index series of interviews with the management team and a deep evaluation of the buyer platform. Forrester concluded that Tremor Video’s buyer platform was well suited to serving the needs of brand advertisers with particular strength in its audience forecasting and inside optimization. Our customers further rated our higher function capabilities such as brand lift and our attribution measurement capabilities highly. As we continue to innovate in 2016, areas of focus will include expanding our TV and international capabilities in the buyer platform.

Our buyers are diverse and we take a unique approach to each of these customer segments. With agency holding companies, we develop comprehensive partnerships and we land MSAs. With agencies, we focus on high-value, higher function products that guarantee results. With Trading Desk, we focus on activating MSAs by setting up traders to conduct real-time bidding and private marketplace within our buyer platform. And brand advertisers are increasingly playing an active role in advertising technology decisions, even as they continue to use the agency that handle the workload.

Like many tech companies, we have a dual structure with an agency strategy team that focuses on large agency partnerships and a seasoned vertical sales team that provides category expertise and best practice case studies to both clients and agencies. The deep relationships we’ve built over the years have led to continual recognition from the market. We partner with 93 of the top 100 brand advertisers across 12 major categories. Our expertise in utilizing video as a driver of brand effectiveness, combined with our knowledgeable vertical teams have lead to an 85% retention rate.

While companies in display are seeing shrinkages in CPMs, our buyer platform business has had stable CPMs. As Bill mentioned, video was valued differently from display, which can be attributed both to the scarcity as inventory but also to the important and value brand based on quality environment for their video advertising.

And now, I’m going to take you through two brief case studies that showcase some of our higher function products and have driven significant success in the buyer platform. So, in this case study, the large department retailer saw huge value from leveraging ProximityPlus targeting across every device combined with all-stream video to engage hard-to-reach consumers at the right time. In one use case, they used location and well-timed data to drive impulse purchases of their cosmetics and fragrance products by targeting potential consumers when they were in range of a retail store. This resulted in nearly 3x increase in spending to our platform in 2015, mostly to our large upfront deal.

And in the second case study, this CPG client utilized Tremor Video’s social affinity product to precision target their audience based on their behaviors and passion points rather than their previous blunt method of targeting just on age and gender. The was looking to reach consumers at their personal care products such as razors. For men, they focused on men who had an affinity for business publication such as the Wall Street Journal and Business Insider to find men who shave daily. And for their female products, they did a tie-in with a major motion picture focus on women with an affinity towards the movie and similar movies. They had a very compelling return on their investment. For every dollar they spent with us, they saw a return of $2.21 in incremental sales. And the campaign also drove a 12.5% increase in penetration, 77% of which was from new consumers.

So in conclusion, our buyer platform has been gaining traction through our key differentiators around brand performance optimization, these analytics and targeting capabilities, and our extensive integrations for key partners. This past year, we saw a 66% growth in customers to a total of 750.

So, thank for your time. And now, I’m going to turn it over to my colleague who runs the seller platform, Adam Lichstein.

Adam Lichstein

Thank you, Lauren. I am Adam Lichstein, I lead our seller platform business. And as you know, we’ve always had very close relationships with publishers but with the launch of the seller platform over the last year has really transformed in each of those relationships, so I’m going to cover why we’re so excited about that transformation and it gives us even greater opportunity for growth.

When we think about the success of the product launch over the past year, I think it’s really a function of three ingredients. The first is that we have the benefit of seeing how programmatic buying evolved. Programmatic may have started as open auction bidding, but it’s evolved into things like private marketplaces and automated guarantee deals. Our team had the benefit of seeing that evolution and building a platform from the start that supported all programmatic types of buying.

The second big ingredient is that we brought in a new team, a great product and engineering team focused exclusively on building a new video programmatic solution. They were not tied to an existing product. They had a clean slate on which to build. And lastly, based on our existing customer relationships, we had great access to publishers. We were able to go in and ask them what would you like to see in programmatic solution. And we took that feedback and in early 2015 rolled out a fantastic product.

So, this is why were so excited about what our programmatic platform brings to our sellers. If you think about the Y axis that’s how video consumption has changed over time, and the years are actually when we were supporting these devices. So, we’ve grown with our clients as video consumption has changed. And if I take a case study of publishers such as Warner Brothers that we have been working with for years, we started working with Warner Brothers supporting the desktop monetization and as their business of evolve into mobile, video and CTV devices, Xbox and Roku, we moved with them. So, we’ve been moving with them, supporting them with Tremor Video demand for years. And with the launch of the programmatic platform, we are now able to support everything on the X axis, which is really how video advertising is transacted. So, the scope of what we are able to do with Warner Brothers, has changed dramatically over the past year where we were limited in the first column, we are now the exclusive partner for Warner Brothers for all programmatic transactions. And that’s created a huge opportunity with Warner Brothers as well as all of our other sellers.

For all of the change in our platform and the ongoing development, we still remain 100% focused on video. That’s our sweet spot; that’s where the market is going; and we see tremendous opportunity there. We talked about all the devices that we support and how we’ve grown with our publishers there but we’ve also grown in terms of formats that we work with. Out-stream is a great example. You may know of it as native, [ph] it’s a video ad that’s outside of a video player and that allows us to go to content creator sites that may have great content but not a lot of video and bring video monetization to them. OTC is another greatest development in our platform. We were able to work with companies that have live streaming linear content and IT based environment and help them monetize that inventory. Our partnership with DISH for their Sling initiative is a great example of that.

So, when we look at the market, the seller market today, these are the four big buckets of partners that we are speaking with. And I’m just going to touch on each of them briefly, but they all offer huge opportunities across large markets. The first are our publishers, you are probably very familiar with, familiar TV brand and they have large sales teams but are increasingly being pushed into this programmatic market. They see that dollars being transacted programmatically and they are looking for solution that’s going to allow them to participate in that market but with the control that they need. And as I said, they’ve been very intellectual in helping us design our platform.

Second bucket, premium web, this is also a premium TV like content but may have been created for the web initially. These companies probably don’t have a sales force at all and they are looking to us and our platform as their so means of monetization. DramaFever is a great example of a company that we partnered with very early on. Our team identified it having great content, great video content, which we know is somewhat scarce. And we’ve been the monetization platform with them for years and it is recently acquired by Warner Brothers. So, I think you will start to see the blending of those content types and companies.

Mobile and gaming has been big opportunity more recently. We’ve seen a lot of apps who are traditionally turning to cost per install or CPI advertising saying wait a second, we don’t want to send our consumers to another approximately; we want to keep them in our approximately. And we think brand advertising is a great way to monetize that experience.

And lastly, content aggregators. These are really companies that are providing a service to content owners. They can be anyone from a video player to an MVPD. And as part of that relationship, they have the ability to modify content. They’re great partners for us because they bring scale and we’re a great partner for them because of the flexibility of the system, as I’ll show you in a few minutes.

Regardless of who we’re speaking with, these are the things that resonate with them. Any great seller platform has to be great technology, fast, has to bring great demand to the table and also really understand what sellers are looking for, how they operate, what kind of control they want. And next few slides, I’ll go into a little bit more detail about each of these.

The other point that Bill talked about earlier, we really see the differentiator for us the independents. And for us that means, we do not have owned and operated content. We are not competing with our sellers on the platform. Our job is to bring in as much demand as possible and help them make as much money as we can.

So, getting into a few just quick examples of how the platform is designed. This is a screen shot of how a publisher can segment their inventory and control how their inventory is presented in the exchange. And it allows the publisher within one seat to represent different brands, different devices within that brand, and even different ad placements within that device. So, it’s extremely granular. And each level the publisher can control their price floors, what information they want to share with the market, has a block list and then report back at each of those levels. This is an example of creative review, and this is something we heard from sellers who really are concerned about what is the consumer experience on this site, what appears. We have given them the ability to go into an interface to actually see and review the creative before it appears on their site.

And best in class software and the fact that we just built this with a great team really, I mean speed. And this has been a big differentiator for us in the market. We’ve all experienced, waiting for content to load, waiting for an ad to load, and we hear from our clients that having that ad appear quickly and seamlessly is incredibly important. It’s important for the consumer experience but also from making sure they can monetize as well as possible. And this is a screen shot, it’s just a portion of a waterfall, a hierarchy that a seller can set up in a platform. And the speed of our platform allows a seller to have a very complex hierarchy where they can have multiple demand sources competing for that impression in real time and we can run through that waterfall so quickly that we don’t delay the ad response. And we see this as a huge differentiator in the market and as a result for much better monetization for our sellers.

On a related note, real time reporting, this is something we rolled out about six months ago and saw great response where our competitors were often reporting on a daily basis and sometimes that reporting wasn’t accurate. Real time reporting allows the seller to go in and within seconds see if the deal is working change of price floor and immediately see the impact on yield. So we’ve seen great response from our sellers for talking about real time reporting.

And lastly, demand, two big buckets of demand coming into our platform. We have the benefits Lauren, and a demand side and that’s a big differentiator for us. All the sellers that we speak to, the first question right is what kind of demand you bring. So, we have a great differentiator in the demand team. And in addition to that we’re working with multiple other demand partners and I’ll give a little bit more detail on that on the next slide.

Our revenue model with our sellers is a rev share and we are transparent in the pricing. So, we do not pick a tax from the buy side from buyers coming into the platform. We share the full bid price with our sellers and we’re completely transparent about that, unlike some of our competitors.

Here are few of the demand partners that we’re working with. And this is again big shift in our business over the last year and something that we’re very excited about. Previously, we were not taking demand from any of these third party DSPs and demand platform, and now they’re all integrated via server integration. We have a team that speaks to them on a daily basis and asks them what are you looking for, making sure we’re bringing the right supply to them and as a result we’re tapping into all their demand. So, this is a big change for us in how we operate.

The other advantage of being a buyer and having demand platform is that we know what buyers are looking for. And this is an example of setting up PMPs, Private Market Places, going from a very few, a handful in January to a 150, 160 by the end of the year. This is our team curating inventory, saying I know what buyers want; I’m going to help them find it. It might be a viewability package, it might be a particular demographic, or curating that experience and really helping to connect buyers and sellers.

So, as I said, we started at the beginning of this year, we had started onboarding publishers December, January of 2015; by year end, we were 348 seats; saw a huge success with both our existing seller base and bringing new sellers on to the platform we think there is tremendous opportunity to grow revenue with our existing base, as well as on ongoing pipeline in those four segments that I shared earlier. And the other big area for growth we’ve seen and continue to believe is that is international having a platform that’s scalable and robust has allowed us to roll out into other markets much faster than we would have continue to play. And a great example of this is our acquisition of TVN in Q3 TVN was headquartered in based Australia with offices in Sydney, Melbourne and Singapore and they had all the premium relationships in the market.

They were running their business on competitive seller platform and we closed the deal over the next two to three months migrated all those relationships onto our platform within a few months we had both a great team in the region and we had access to all the premium relationships. So we see TVN as a great model for growth in other regions we’ll continue to grow organically both in that region and elsewhere so we think we have a great model that we can replicate elsewhere in the world.

So, where we are today as we feel right about the opportunity in front of us we think there is a huge opportunity on the sell side and as Bill said as the winner takes all we think we’re extremely well positioned to have for the market it's very hard to move into video from display, we’ve not seen a lot of new entrance in the market, many of our competitors have been acquired their focus has become more and more internal and we see that we hear from our sellers that they are looking for someone that’s focused on their business and their business alone and we have the best in class product. So we think all these things really set us up well and it's a great opportunity for growth on the sell side of the business. Thank you.

Bill Day

Good, so real time so to the call if you don’t, so we’re not going to take a break, we’re going to go quickly through John Walsh who can speak to technology and then John Regan to John Rego and the financial model and our sort of long-term financial model comment. So I’ll take the -- I’ll entertain any questions if you have questions with the business part that I spoke to earlier or Adam or Lauren’s part otherwise I sort of search for -- where this pick the momentum and right through the rest of the presentation and then how about doing questions then obviously. So with that then I am going to introduce John Walsh who is our CTO.

John Walsh

Thank you, Bill. Good afternoon everyone. As Bill mentioned I am John Walsh I recently joined the company well over four months ago as our CTO responsible for our product strategy, engineering and technical operations. It has been the short four months but I am thrilled with the decision to be here. The company has terrific people combined with a strong DNA for building scalable products while maintaining a strong focus on customer success. Part of Tremor that most of last 15 years that member of the executive team for public health companies. Most notably I was Senior Vice President for Engineering and Operations at Constant Contact as far as instrumental and growing the customer base from 8,000 to terrific almost 500,000 customers and scale in the engineering team from 100 to just south of 350 people.

So let’s jump into this presentation. As Bill mentioned our mission is to bring the five certainly defined with regard to brand marketing where I am going to is give you some insight into our sites. We’ll talk first about the demand side platform. During the video advertising products we less identified the most effective video that maximizes the advertisers target, KPIs and CPM. We have to do 50,000 transactions per second within 40 milliseconds of bid request will go through three stages, private section, data enrichments, and lastly our proprietary optimizer and its efforts to achieve the campaign goals. The end result of the process is due to the bid or not bid let’s fill through those spaces a little bit.

Bid requests are initiated by our SSP partners while this should be filtered up front our quality is trust but verified. We partner with industry recognized vendors to minimize fraud to pinpoint end-user location and target spot-free publishers. And lastly we respect an individual’s choice to opt out. In order to achieve the best targeting results we augment the information received via the bid request past performance for repeat visitors is incorporated into our existing process. We also attempt to link a consumer across multiple devices in creating a unified persona. For example a few visitor pages via your mobile device will aggregate the user profile across your work, home and other mobile devices you may have. In addition to our own first party data we perform cookie matching with information we receive from our third-party data management partners.

The role of the optimizer is complex, it is simple, excuse me, the role of the optimizer is complex and its role is to decide whether to bid or not, how much to bid and which video best deals performance against the KPI. This KPI should be quick engagement level completion rates are good as this viewability metrics. The optimizer appears to campaign targets around demographics and ensures that money is spent evenly over the duration of the campaign. Viewer signals are analyzed to deliver the superior target. The optimizer is dynamic. It's constantly getting feedback on campaign performance, and adapts accordingly. Our optimizer uses 16 signals in the course of its targeting. Signals are inputs to help describe the end-user almost like a finger print. Some signals are very objective like time a day, day a week, user location, browser type and OS type. And others are defined as a result of the data enrichment phase. Signals play a significant role in our decision process.

If we get down and more towards bowels of the optimizer, there really of two parts, there's the modelling component, and the decisioning. We have a team of data scientists that builds to maintain a dynamic model. This model looks at our campaign inventory and performs content category analysis to define expected outcomes. Using machine learning the model is continually updated based on bid response and end user engagement. The second part is the decisioning phase, in this phase we apply the varied signals against the model to predict which video will yield the highest ROI and the optimal price culminating in the generation of a bid response. It's a compact system, in the course of a day it processes over 850 million rules and decisioning.

So, let's look at a more practical example, every campaign goes through three things. Additionally it learns, it learns by experimenting with a small portion of inventory and tries to figure out which signal is the most dominant. Regardless of spent, it'll quickly focus on delivering towards the KPI, and you can see here the orange line quickly getting up towards our target of 76% all within 24 hours. Once it's done the learning, it'll focus on maximizing the KPI and then on reducing the cost. The majority of the campaign will then remain as its operating level where we have high performance on the KPI and optimal performance on the cost.

Now let's switch over to our supply side. Some SSPs conduct the auction within the context of a publisher's page. A plug-in is downloaded into the browser and the client is responsible for the orchestration of the bidding process. This model is inherently slower due to the need to download and launch the plug-in, combines the network latencies between the client browser and the participating DSPs. There is also eventual integration complexity for the publisher as the communication is much more complex. Our supply platform is built on a modern technology set. Communication between the publisher and our platform is minimal and all orchestration of the auction gets managed in the cloud by Tremor.

Low latency connections to the DSP result in significantly faster ad survey. In fact our auctions typically close within 300 milliseconds. Speed is crucial in improving the customer experience and the likelihood the video will be displayed. Our seller platform adheres religiously to the open RTB 2.2 standard. We support all bidding formats as defined by IAB. These include automated guarantees, unreserved fixed price, and invitation only auctions and open auctions. Supporting all these formats makes partnering and integrating with Tremor an easy option. And as Adam pointed out our platform was build with scalability and real time reporting, as core tenants of its architecture.

Here we take a quick look, when the product was launched in the beginning of 2015 and you can see the scale that has achieved over that period of time from less than 10 billion records per month to approximately over 90 billion plus towards the end of the year. For the number of transactions per second we formed, whether it be a 50,000 bid requests or almost 200,000 requests through our SSP per minute. So, the speed which we operate for the bidding speed of 40 milliseconds to the auction speed of 300 milliseconds, so the amount of data we have, we have almost 6.6 terabytes we process daily and we've got almost 64 terabytes of data in our reporting card. It's clear we're operating at scale.

However it's more than just scale, we build a platform and we make sure it's open. We've partnered with all the major SSPs, DSPs and DMPs in the marketplace. In closing, I want to leave you with these thoughts about our strength. It's our optimizer, finding the right video, for the right person, at the right time, at the right KPI, at the right price, that's the seller component of the optimizer. Adam mentioned it, I've touched on as well, speed is crucial, giving that great experience to the end users and being very proactive on winning bids. We provide an open platform both on demand and supply side, with over 50 different partners we are integrated into. The real-time reporting, it's critical to be able to have real-time information to make those timely decisions on how your campaign performed and adjust very quickly. And lastly, on scalability, I believe our products are well positioned to handle the growth we anticipate in the coming years. Thank you.

With that, I will as John Rego to come up.

John Rego

Okay. So, I'm John Rego, Chief Financial Officer. I've been here now exactly six months. Today is my six month anniversary. When I first got here, I spent the first month digging really deep into year's worth of data because it was available. And it was pretty interesting to do that, because what I found was a few things, once that the business really is transforming. In fact, when I look at the business today, it looks really different from the business that went public in 2013 a really different business and we showed you in Q3, programmatic and higher-function buying it's growing exponentially, whilst our traditional media is in decline. But I'd point out that while those first two businesses are growing, they are growing much faster than the traditional media business is declining and because of that of revenues and total spend continues to soar.

The product mix is shifting, which causes the blended take rate to decrease principally driven by programmatic, but somewhat mitigated by higher take rates in our higher-function products. Overall the gross profits are continuing to expand. And that's something about that mix is that we're also starting to see significant operating leverage in our business, spend per employee is trending up and due to the fact that now approximately 75% of our overhead is fixed, overhead as a percentage of spend is on the decline. And that makes me really comfortable that we can achieve EBITDA margins of 10% to 15% as measured again total spend over the next couple of years.

We're on Slide 116 by the way, if you are on the phone. This Slide as it illustrates the mix shift impact on take rate, even though the mix is changing, you'll see that revenues continue to increase and as the mix shift stabilizes, I believe, so will the take rate. So I want to be really clear here, we are not expecting a precipitous decline in our take rate, it will come down a bit more and then we take pronounced there, so once we are stable on mix, we are stable on take rate. To the right, please note that well over 80% of total spend is now driven by programmatic and higher function buying. And if you just take a look to the left, that's really a big change from where we were a year ago.

Here's an interesting cohort analysis, it shows that our existing customers are spending more each year. The largest bars are the customers from 2012 and prior. 2013 and 2014 cohort hasn't performed as well but that's when the Company really started its transition from an ad network to an ad tech company. But I think once that transformation really took place, you can see that the 2015 cohort which is in orange is really moving rather nicely and it's going to be driving significant growth. So, interesting that the existing customers keep buying and keep buying more and then we've a growth driver on top of that, which I think, is essential.

Unidentified Analyst

I think Arizona.

John Rego

Yes sir.

Unidentified Analyst

I mean so why have you not been able to go, obviously something happened in '15 hence the orange, if the white and dark gray haven't really moved, is that meaning why not go back to those customers and got to take a look, we got these new things?

John Rego

I think firstly with the orange, I mean the orange is that's the programmatic really coming full force in '15, of course for a lot of growth.

Unidentified Analyst

So what's the overlap between customers? Is it the same customers using different partners?

John Rego

Yes, I think that's right. I think, what I'd say is essentially, if you go to the buy side of the business, then we're getting lot of traction from customers with much greater salability than customers that are coming on in '15 than '14 or '13. Where do the '14, '13 guys go, in competing platforms and they are embedded in [Multiple Speakers] decision but we believe that overtime we'll get some of them off, and we'll certainly have a better sort of graduating class coming out of '15 than we've had for last two years and we'll continue to work on the partner customers in the '14 and '13 category. That, as John said, I think ably, that was a transitional period of time for the Company.

Unidentified Analyst


John Rego

So moving at Slide 119 now, operating leverage. Spend per head is clearly on the rise then I show you that we're a laser focused on our overheads, headcount is really relatively flat for the past six quarters, as you can see. To the right tab, you can see that expenses are fairly flat as well. So we've relatively fixed overhead and continue to top line growth. We've really clear path and really clear visibility to profitability, that's the point of it. To view the final view as it gathers and leverage that we see clearly Q4 was a breakout quarter with 67 million but the trend is moving in the right direction, which in this case would be downward sloping to the right so we are starting to see operating leverage and we are seeing things scale a bit.

I wanted to spend a quick moment on liquidity and capital resources we are quite liquid and we are approaching cash flows neutral when you look at the financial statements for 2015 and with the cash flow and particular cash flow that we have one time CapEx related to the creditors you are sitting in and we did an acquisition. Putting at a site we see that our cash burn is actually drizzling and they are pretty much going to be cash neutral in 2016. So we have a really strong cash position with $50 million I think an equally strong working capital position. That's something as production time facility of $32.5 million that we've never capped so that's about $100 million of liquidated debt quite frankly that will enable us to continue our investment in growth.

So if I was going to build the brand new model how I look at the business, so I had total brand new model and hopefully you will too so let's get a take a look at some things. As you saw earlier today from Bill’s slide video is expected to expand over the next several years and quite frankly I think we are going to certainly get our share of that to such I believe we can grow our by at least 30% annually going forward. GAAP revenue and gross profits is reasonably growing by 20% to 25% once the accounting change look alike fitting to the numbers and just a little part of these and math issues with that accounting change, but once we are normalized let's say 20% to 25% feel to that is right to me.

We do see the path of profitability where we are just looking at operating leverage, so we can target even margins as a percentage of its total strength in the 10% to 15% range. I am on Slide 123 if you are on the phone. The business mix is shifting we keep saying it, it is real as we look to the great principles component of spend we believe that over the next three to five years that this composition will weigh most heavily towards the programmatic followed by higher function buying and also the way I think that legacy business will go to zero, it is not zero yet but it's getting there.

Okay we are laser focused on the G&A and we believe that we are going to continue to see strong leverage that I stated previously I will say it one more time about 75% of our overhead is fixed at this point and our headcount is relatively stable there are no plans to adversely increased our headcount so with such we are going to project a continuous decline in the overall categories as a percentage of spend, while I do this kind of table for you guys this is our tax based expenses only so there no depreciation on that number and there is no stock-based compensation on that number so it's easier to get to cash flow.

Okay so in summary the business is transforming, the spend fix shifting with programmatic becoming the largest part of our business and followed thereafter by high function buying. We think we can grow spend by at least 30% a year and once the impact of the accounting change normalizes we could see a sustained revenue growth of 20% to 25%. Operating expenses still continue to diminish as a percentage of spend which leads us to believe that we can in the very near-term sustain EBITDA margins of 10% to 15% of spend and now I believe we can grow them from there. So that's how I would look at modelling right?

With that well I'll just turn it back to Bill for closing remarks.

Bill Day

Great, thank you. So to capitalize and I think [indiscernible] hoping that creates a lots of transparencies of that how would take you that business out where we see the opportunities I want to speak for a minute about the growth strategy for the company. I mean in figures again the growth strategy isn’t so much sensitized funding the existing operation, it's how we think our existing operations have actually to accelerate them further from that standpoint. And the growth strategy is based was breakdown to the four big initiatives we are building on. The high function buying box expense is the part of our company that we’re focused on and I think you can take away and I think John Walsh presentations that are put out and cap one that it gated on the standpoint, so we've created box. I think that's not a calling first left to have a door and sit back long reference social affinities you've referenced for our proximity plus and so always innovating there we think there is a ROI there it is what going to deliver ongoing to superior take rates and margins compared to other parts of the industry from that standpoint and so leveraging that data continue to expand and be the principle innovator and leader in high functions buys very, very important to us in that standpoint.

The second thing is increasing the adoption of buyer and seller platforms I think Jason has some question what happened to those two years, look we want to get those people back, we want to get them using our platform it is like sitting in the buyer platform isn’t so much one wins one looses there can be agencies in these local platform so you just have turn to adopt their five using more part what they do, in concert with some other platforms that use right now our ability to infuse again that high function buying expertise into the platform is relatively unique and it's a big focus for us right now I think we think it's why we will take more people in software platforms in the future, but clearly the biggest growth driver driving that -- the tremendous growth rate in the marketplace right now is programmatic. So we are very focus and continue to drive more and more programmatic adoption in greater and greater programmatic usage of our products.

I talked for a while at all screen have not just the thing that all screen, the great product across the three strings that is optimizes right now. But I am talking right how television starts to fit into this. And being a little bit circumspect on television we think it's parts of television that are data driven are the ones that are most interesting and so I think I reference one addressable television and seeing an area we find very, very interest because we can use that optimization framework and apply it against it we have seen all state as Lauren mentioned $125 million essentially in Q2 of 2014 is still growing very, very rapidly. We take big client nerve over there in terms of helping them run their business. And we see the ability only double down on that by adding more capabilities, more screens that unify all that seems to want it optimize solution for them. So that’s very important to us. The TV strategy will absolutely fit within the overall off screen strategy for the company.

And it accelerating global expansion, whether why as I said we think they are under estimating the growth opportunities for the U.S. market clearly non-U.S. markets are becoming more important from that standpoint. And so you have seen us taken action there right what Adam referenced I think very nicely, they are how successful the TV and acquisition had for us it takes V check for us to expand now further in the Southeast Asia. We announced in 2015 opening that office in front do business in Brazil and find interesting parts of South America and we are starting to focus more and more on. We will announce soon a new Managing Director in UK and a renewed effort into Central Europe for the UK as well. So we believe that global is really important part of what we are doing. So we just have number of things and again funded by the factory of the strong balance sheet now to really go ahead and track all the drive the growth rates even higher than and the sort of organic growth rate we are seeing right now.

So in summary first and foremost it's been almost two hours, so for people on the phone or people here, we really appreciate your time coming over really excited about telling the story and have a sometime we spend and take a fundamental re-visit to how we are doing, what we do, the products we have that sort of thing and your time is valuable. So we appreciate it very much. Take away I think Tremor Video is a software company, right not a medium company, it's a software company. And they relative statistic and data is on a segment the segment supported by fact exist and I will share with you the software company is focused on video ad effects it's what we do move by the way, it is really hard to do. Oh, by the way it's really important in terms of how this marketplace is playing out the Tremor is very well position that kept one because of that we believe that we can scale to many times of the scale in terms of spend of revenue that we operate as right now and that's got a fair excited from that standpoint.

And that's competitively we are well differentiated as the premium video marketplace we have a unique position in market focus on video working with those buyers and sellers and again I am bullish on the space I think there will be a number of winners, but I think we are well positioned to own a big chunk of the category and succeed based on that differentiation and so with that now we’re going to open up any Q&A later on business stop again or while for John on the model economic model any of those.

Unidentified Analyst

I want to start off with one from the optimizer standpoint and you had mentioned you are putting certain fees of certain sources of data can you talk a little bit how much of that is first party and which of that is third party or kind of pressure that as we think that's a pivotal point in and if you look at some time we like pretty other the same 85% of my data is less than until it's really fresh I can target really thankfully but it's gotten be fresh and it's gotten first party so has the trajectory changed around the efficacy of that IDC from these guys?

Unidentified Company Representative

[Multiple Speakers] I think the first thing to understand about the company is the company has always generated principle data through our interaction so in getting that jump through the signal those signals are release, I think that we detect through been part of the video players and that's very fresh by that [indiscernible] video and in some cases it's been and that view, the viewer and what we've been watching recently in the last few days because what we are watching currently isn’t an advertising opportunity but what is consumed in the last three hours or three days is absolutely making an target for some of that people who are looking to run as right now what we done what happened with more recently that John wise we have opened up our so that's great we have internal data capabilities those data can to our valuable we are doing an increasingly product stream but how we bring in partners that bring data like a blue tie but the lot of that from that standpoint and I knew less about their about its principally done by clients to our first party relationships that they want to execute through their partners. John you have anything to add or?

John Rego

No I think makes this far on the data actually fresh right. So we don’t set the monthly sales from these guys when we’re working with them closely and cost of getting refresh of our data making sure our information is fresh and then we keep repeat visitors a day as they never come back after a fair time they age out and everything is around having most relevant information to really also help towards the targeting or as repeat targeting or cross targeting those all become very viable components but you need that good data and data is king in this whole targeting and everything else.

Unidentified Company Representative

And I just like to add with our higher function comments we were partnering with someone else one of the key criteria is freshness relevant to accuracy of the data and for example with our partner with ProximityPlus we’re getting 100 to 300 datapoints per day on 22 million users so it's extremely fresh and the same thing with social affinity product the data that we’re getting from Twitter is extremely fresh. So it will be the key focus for us as we’re looking to much better precision target than our competitors out there.

Unidentified Analyst

So are you willing to say what percent of spend is coming from buyer versus seller right now you have that program got out?

Unidentified Company Representative

We did it with programmatic [Multiple Speakers] it's a little bit driven as well by the fact that we’re seeing the other thing that [indiscernible] I’ll say there are buyers we’re talking to right now the U.S. classes we think that there is a buyer who are actually interested in using our seller platform and there are sellers and many publishers who actually drive audience to it so they’re talking about or they’re using our buyer platform, and so there isn’t some practical reasons as well why we started two sides of one coin.

Unidentified Analyst

And then I guess [indiscernible] kind of dig into like your long-term numbers you put out for the market size the other time what you’re guiding both for the quarter and for the year I mean and then you have to be big quarter I understand 52% growth in the third and the fourth quarter you’re guiding so much slower growth rate both for the first quarter and for the full year. I think that obviously suggest regarding based on the visibility you have and the business is having seasonal [indiscernible]. Do you think you get to a point where you have an updated asset you have really business really good visibility [indiscernible] okay with really 62 do you think that there is a market going fully in percent and we’ve got the confidence to guide at that range and versus we’re guiding in 20% to 25% just because whatever you’re seeing in the [indiscernible] indicators. So it’ll be my open ended question.

Unidentified Company Representative

So you will get open ended answer the market is changing so fast right now and so forth zero to 50 million, and 50 million and 60 million we’re growing it really high so we think as we learn a bit more [indiscernible].

Unidentified Company Representative

And I think as John referenced there is a change in accounting there is something that need to display through on revenue effect and mix that we want to see play through and then I think we have got, we have increasingly good visibility into spend and feel very confident around spend as I said last earnings as we’ve historically been think of our start really revenue no now called spend we’ve got 21%, 22% lower and we felt like with the additional programmatic we could accelerate past 30%. And so we feel good about spend being a 30% or for greater eventually so year-over-year out into the right and so the question then is where our mix goes and how that guides revenue and gross profit from that point and I think we’ll get better and better at having good visibility as well to do more than that.

I look outside and see the agency world being one of the pretty choppy in 2015 so we’re little bit cautious just at the start of 2016 and so it's my expectation and inside the watching and mix shift stabilize now we really do believe that the medium that works will not go in but it will become [indiscernible] pretty quickly and the other two will tend to grow in tandem this year as opposed to one out stripping the other because they’re both large scale revenue drivers and with that all we’ll have a better ability to take spending visibility and translate it down further deeper in ’16.

Unidentified Analyst

When you say tandem you don’t mean to say growth rate?

Unidentified Company Representative

Not necessarily but with respect to having this greater visibility.

Unidentified Analyst

Well, last one and then I’ll turn [indiscernible] shift to mobile that resulted in lower CPM and so that becomes a mix shift drag?

Unidentified Company Representative

Yes, we haven’t seen that in fact while we didn’t release it now we’ll say that our CPMs and mobile has been and has for many-many-many quarters in either the same as non-mobile or higher and again you think about it with 18% of revenue being driven off of a foundation all screen in both ends either it's a [indiscernible] pricing that’s particularly through a mobile adoption of our mobile targeting and outcome based pricing is very-very strong. So we’re driving new CPM there very strong high function buying penetration mobile is as strong or stronger than desktop and that’s helped us better. So we don’t at the time see any mix shift risk on that particular issue.

Unidentified Analyst

[Indiscernible] based on the GAAP there is non-GAAP place on a spend basis is there a significant differential between on the [indiscernible] on the programmatic with respect to buyers or sellers? And then in turn how is that differentiate from the non-programmatic breaking the line down at gross profit?

Unidentified Company Representative

Do you want me to take that or you want…

Unidentified Company Representative

You start off.

Unidentified Company Representative

Yes, I mean so we don't release take rates on an individual basis based on a line of business, we believe our take rates are competitive to other ones that you've seen reported by other companies or higher from that standpoint so certainly in line with or higher from that standpoint. In general programmatic is a take rate that is less than 50% right I mean sort of be in some cases and so I think the strategy I think is not so much how you maximize take rates in a world where you want to take a lot-lot more scale to $1 billion plus of spend and how do you do that in a construct where you can justify the highest take rate compared to the market first one.

And secondly and John spent a lot of time talking about how you inject that technologies in your bids and to allow you to run your business efficiently, so you don't need to hire to the moon and you can keep operating expense under control and thus have a high profit model. We believe we're well underway to doing that, we've strong take rates right now, the balance we're doing higher function buying and programmatic is good, buy side and sell side is good and the ability to as I said participate in more and more parts of the transaction allows you take a little bit more from each part and to aggregate that into a strong take rate, at the same time we are unique I think in the ad-tech space that our headcounts have essentially been flat for six quarters. And what does that mean, what it means inherently is it means that we use our technology to drive more and more yield per employee and it allows us to basically I think thrive in environment, where even over time take rates are down a bit because of the scale of the business is in. I hope that's helpful.

Unidentified Analyst

Yes, that's helpful [Multiple Speakers].

Unidentified Company Representative

So, when you look at John how [indiscernible] you guys [indiscernible] plan in 2016 how that will [indiscernible] when you think about just [indiscernible] nature of programmatic, so then the initial on-boarding of the relativity new clients with a new product they are trying to become familiar with. Is there some level of incremental sales marketing that comes from year one and two of these platforms that over time they should become a lot more self-sufficient that [Multiple Speakers].

Unidentified Company Representative

Yes, that's actually [indiscernible] and trying to do better job repeating question for you on the phone, the question is about how the scale is out operating expenses with respect to self-service. We are clearly in a period right now where it's early in self-service, you are sort of paying the price of training and getting people up to speed or you are running a managed service for clients from that standpoint. A big component of John's assumption when you look at how the percent of spent, so that itself the market as the percent of spent goes down overtime, it's because we believe that support factor goes down overtime. The cost of selling, so either a new customer or supporting an existing customer goes down because they become increasingly driven by controlling and running the console on their own. And what's important in that is then the financials an awful lot like a software company, right, where you have a higher gross margin, we believe that net revenue becomes a more and more interesting when you think about the business from that perspective. OpEx is predominantly driven by development of the software you have a high EBITDA margin then because of the recurring nature of the relationship.

Unidentified Analyst

I was just wondering, how you guys are thinking about cost device attribution, it seems particularly important for brand advertising but you show someone an ad on mobile and then they convert on the desktop a month later, however the client defines conversion, how do you guys get credit for that without -- like login across all devices or anything like that?

Unidentified Company Representative

Well, so we were -- I think everybody is working on just right now, because it's an obvious relevant component to what we do at all-screen. Well as all-screen is at this moment what's the best place to run the ad so that we maximize the impact towards your goals and your point is okay and how months down or three weeks or weeks or whatever down the road, do you sort of keep track across all the devices in terms of the attribution aspect to it. Every I think piece of all people are working on just right now, there is a determinant that is probabilistic, sort of component to making that decision and the probabilistic is a stronger -- stronger than the determinant, meaning that the real data is not as broad and is more sparse than people want, and this sort of statistically driven data has to be a big component to us. We do this as part of what we do right now and as part of I would say our open strategy, we need to look to partner with companies to help us do that further. I think in branding obviously we believe very strongly that attribution should drive further and further down the funnel. We don't have brand marketers that are necessarily banging on the table that they have to understand every dollar and how it's spent specifically to yield a sale but they want to be more and more scientific and so we have to be able to do that not only on one device, but we have to be able to do across devices, it's not simple and it's going to take a while to fully do that. With that, oh, we have got some more. We have some more.

Unidentified Company Representative

We have more absolutely.

Unidentified Analyst

So, I'm assuming you don't want to tell us what percent of spend was self-service in the fourth quarter, right?

Unidentified Company Representative


Unidentified Analyst

So, we go to that orange line, is it, can we guess that I think big chunk of that, a big chunk of the new business was self-service focused? Is that reasonable?

Unidentified Company Representative

[Multiple Speakers] I guess what I said to help is I think we are early, I think that the industry [indiscernible] very so straight forward on.

Unidentified Analyst

[Indiscernible] number of sales.

Unidentified Company Representative

Yes, I mean, it just like -- and I don't think that's fair, by the way, meaning that I don't think we have to feel like them, we have to drive clients to self-service. I'm aware about company, without [naming games] because there was no one you would think of, for one big client they were telling me it took them two years to get full self-service, you're talking about impacting both the workflow and big dollars involved here. So, we are set up well to thrive wherever we stay on that continuum, clearly, through, you want to design the software to drive self-service but if we need to help them. I mean I think many clients using our platforms right now are somewhere in between, some are just doing few things, many are lagging and they are checking things, they are making decisions, we do the rest.

Unidentified Analyst

So, are you being more like a dashboard as opposed to actually execution?

Unidentified Company Representative

But we've absolute [indiscernible] clients, so all they [Multiple Speakers].

Unidentified Analyst

They wanted to do it sequentially.

Unidentified Company Representative

Yes, because essentially the person sitting here and one of our other office and using exact same products, turning the dials in a way that they can turn.

Unidentified Analyst

And it's not even -- you are certainly saying it, its learning curve issue, not a take rate issue?

Unidentified Company Representative

It's not a take rate issue. I think in the end clients are saying very carefully that they know they can drive a lower take rate on the self-service model, but what operating expense because they have to assume to do that, I think as Lauren pointed out about risk that they have assumed, what competencies they need to hire and then you play that against also, what is a business model, I think lot of agencies see this, this is game part of business and the future and so they need to take that more over self-service do it themselves attribute and we know one of our big partners is very self-service from an agency standpoint and some of the sellers as well, very self-service from that standpoint. So I think what we know, see from market, at some point will we release it, perhaps but I think clearly in each case every quarter more customers will move further down that continuum and that's going to happen for the next several years. I don't think that get solved in a quarter or two. I think that's a reality where we are in the overall process.

Unidentified Analyst

And just few more on, when you think about programmatic TV, I mean does the initial take rate on that come out very small?

Unidentified Company Representative

So, I think we have a different view because again, you didn't hear me once today, actually use the term programmatic TV because I think again, our particular company and what we do for clients, we are focused on that expect of the TV and linear ecosystem that we think are data rich. And that might be different than some of the other companies.

Unidentified Analyst

So, when you say, like OTT.

Unidentified Company Representative

That will be [indiscernible] programmatic, I can say with that part of basically leveraging like IT based top position from that standpoint and so -- and again it's an excellent question because it is harder than slide I showed talking about optimization versus workflow. In the end, I'm pointing the Company to focusing on subsets of the market that are really right for optimization, because I believe our optimization will allow the highest capture rates, higher take rate, the best economics item, to your point, as opposed to just focusing on workflow. Workflow, I guess you can make it up on volume but I think the take rates can be relative [indiscernible].

Unidentified Analyst

So, that's why you guys might not be involved in some of the stuff that [indiscernible] working on now, programmatic TV because it's largely workflow driven?

Unidentified Company Representative

Yes, and [indiscernible] and then we have greater aptitude or their investment is on the way. And our point has been always to partner with those guys. I would love to partner -- so far example, some of those guys will use us as a seller platform or a supply source, as part of what they do as we think about our sales platform, where that goes and how we inject more inventory into that that could be interesting from there.

Unidentified Analyst

And last question, will you say like what percent of your seller inventory is actually purchased by your buyer side, so it's like how much does it crisscross, maybe like on spend?

Unidentified Company Representative

With that, how much -- not exactly I'm not even sure I know it is material. They crossover well, every -- so to understand, we have entirely embedded our seller inventory and our buyer together, so Tremor -- the buyer has the seat if he will on our SSP. Tremor goes to market competing for inventory against other DSPs we bring in as partners and then they compete for inventory in a fairly open market while the only exception will be, we can still have a small set of customers, that don't want to take their inventory to market on a programmatic way, so they work with only Tremor but the rest of the inventory at this point gets sold in a very open and honest way [indiscernible].

Unidentified Analyst

Just to make sure and understand, I'm asking, you're saying that your buyer product is buying majority of these seller inventory that is what I was asking so 100% into the 100 unit on your seller price, what percentage as roughly into the Tremor buyer versus the open?

Unidentified Company Representative

Not a majority by material, right so it's not 5% not 50%, we're one of the bigger buyers but it is a much more evolved marketplace than that and a mature marketplace, we have other buyers that are big buyers now and we've been able to scale within that, so I believe it is a good place because we diversify away from that early stage situation we talked about, any other questions?

Unidentified Analyst

Few questions are remaining, first of all, with respect to seasonality and in programmatic, so as you see introduction that were impacted, is there any reduction in to the non-investment fee, on going forward and second question would be TVN -- assume that TVN was the majority of the [indiscernible]?

Unidentified Company Representative

Yes, so I'll start to answer this sort of backwards TVN was a component of that that product to plan so exactly and we've been pretty open and look in some cases at this point it is better to find a great acquisition like a TVN than go into market and build from scratch, build from scratch and take that time and risk factor around doing that so it's a win, win to find another deal like that don’t be surprise that we don’t tell you that were doing additional deals like that open up margins. Your first question again, just remind me.

Unidentified Analyst


Unidentified Company Representative

Actually it's early to say as it given the 1.5 years of expertise it's little hard to say that I think when we study someone the other people purpose of they can say that so were optimistic that will see similar which is that expands the little more constant rather than for herky-jerky for that standpoint but fundamentally still the expense coming for client the client has certain initiatives that they find that a few things was back to school that doesn’t change where it's programmatic non programmatic how they invest the business they still have things in the real world they need to achieve and so our believe has been continued programmatically built in so they can more easily turn money on or off that depends getting the number of clients and number of migrations dramatically increased so this is the first of it, diversity across that so one does regard and other ones [indiscernible] together I think if you look the guys have renew programmatic longer they 10 to 12 that's aims up being a stickier solution and it ends up be in a more continuous solution in terms of spending in growth.

Unidentified Analyst

So Jason has recommended this adjacent to the tail, when you look at that 115 marketplaces can you help us refer as around and you cannot talk this but is it down the marketplaces are in place now people are looking at I mean learning at it sort of do you need to do more growing there or is it just the mitigation profit you get growth and private market places just going from increasing volumes now.

Unidentified Company Representative

In fact there are I think the scale is going to existing market relations get where we believe that fire installers sellers we want to interact on a ongoing basis it's automation and some things as an existing relationships on that new relationships and then there is no reason I would turn off and overtime then it will grow more and more in this scale and at the same point I've been the 150 I'm very proud of it it's early days and that number to be tax in terms of the scale and then probably has been active some of the guys have been doing as longer. And so we think it provides growth opportunities selling to more clients. But PMP, private marketplace, will be I think the predominant share of overall video because I think people will get the supply and demand we've been on the sellers are more cautious about how they bring their supply.

And market they don’t want to in any case just put it out for everybody they want to set rules around it and so that some of they may participate in multiple prime markets well they said different rules for different buyers and so given all of that and if our platform first of all handles that complexity beautifully, as John said does it very quickly so that we turn as quickly and scale very well but given that and we think private marketplace will be the big the private marketplace today has been built off the split technology so it really has the metallic group video lot of the work we can do and it is making product marketplace work for proprietors and you can install the video and I think moves in our plan.

Unidentified Analyst

I think were some more present pretty much as in great time just going big picture question as if not you see that in aspect we have seen that people want more and more self service and this investors want more and more self service, but company gives us say that as there is more complexity there is more mobile more programmatic TV there is more connected devices clients speed agencies advance aren’t able to handle that complexity on their own and are you seeing that in your conversations with your clients it sounds why there is the entering towards going towards terms of?

Unidentified Company Representative

Yes I think isn’t there number of factor that will play we deal with our higher function mind in fact we [indiscernible] that the programmatic self services you said because we're constantly innovated I think any client in one of the top programmatic self service has to be pemmican as down something that's a little lower function then it's completing edge if you will because it can't do as the leading edge so leading edge really speaks to the more of the sweet part of the company that ends us position where we can hopefully take the best of completing edge and drilled it into the self service capabilities.

So it leaves the technology isn’t doing inhibitor so you are adopting you can make your own decision that as an agency and our seller has delivered the economics of paying a bit more and basically outsourcing some of the management and strategy or internalizing entity for in hiring a staff or things like that and how that [indiscernible] energizing we can't control all of that I said the company up so when the matter of the rate of market goes weaken do well but our the big thing to takeaway here is we are working we are hard to run the technology from self service platform so in some technology alone is entering to that.

Unidentified Company Representative

Do you think that maybe just it bifurcate by client side or it's obviously like the biggest advertise there is some scale of themselves so they can have the break about cohort like and then you will have like they just like [indiscernible] certain level as going to need to level spend above the certain level going to handle I think that's the factor I think existence of first party gainer and how end points are litters and is a factor in some of the clients in terms of whether they go self in term of candidates spending more I think get the self service path and it expects I think the industry amount is bigger the economics of the industry itself drive certain buyers are very cost conscious and price conscious and if price is your first factor I think they'll turn to ingest the platform in a self service basis, faster and more sort of outcome will become the bigger factor than the bleeding edge matters more and more and that's when you'll use it. And in the end even the guys who are very proponent you know outspoken proponents of the self service model, we find still conducts other parts of the business on [indiscernible] I want to get to the two last questions, and then we'll wrap it. Go ahead.

Unidentified Analyst

Is there any way you could talk about a concentration of spend on the buyer platform, those two MSAs the bulk of that or any way you could talk about buying spender type or vertical, and then on the -- I think you said 750 customers. And I'm guessing that was you know rapid growth covered some new, you anticipate future growth coming from adding a lot of advertisers or growing the wallet share?

Unidentified Company Representative

Yes, so I think, I always answer the diversification question concentration on a sort of financial governance which is we have none. No concentration at all as defined from an accounting standpoint, even with the additional [indiscernible] factor we still tend to be very-very diverse as Lauren referenced, so that's good. The second question was -- remind me again.

Unidentified Analyst

Future growth.

Unidentified Company Representative

Oh yes. We'll continue to grow clients, I think that's definitely true but as I said in that 80-20 rule the key thing for the company is deepening its spend per client so while -- you know I think that's the big lever again versus the small lever will be yes, sure we do business with 93 of the couple hundreds, of course we want to deal with the other seven, but how we're doing with the 93 we do business with right now and how do we do more business from them and being in the business right now again with a buy side platform and a sell side platform manager with self service we have definitely seen clients who we're doing business with, they went away because we didn't have the product they needed in 2013 and 2014, but now even because of our open framework they work with a competitor but we're a partner with that competitor or they come back to adopt our platform over some of their business. We're winning those clients back as now we're doing business with them. So I think they'll be both but predominantly driving the spend for clients.

Unidentified Company Representative

If I could just answer that one, it is another way that video is very different than display, in display we do largely targeting PR, you'll see companies in this wide world that what's I drew my companies and my client base from 1500. For us we really on the direct side of the business are targeting the largest TV centers that would be the folks that are moving in the video across screen and a truncated performer largest print side they've already moved their money. So these guys, these are the big names, these are the GMs and the Fords and the Macys, the Home Depots, these are the big names that you know and as Bill mentioned they're very concentrated, they're very large, and it's much more efficient to really target those than to try to call on other ones. Where a lot of the growth in the numbers of clients came from is as you grow programmatic and in particular with a lot of our agencies where we have a universal deal ID set up, they can tunnel lot of smaller clients through the same deal IDs that they can funnel a large client, and that's what you'll see a lot of the growth coming from. But as Bill mentioned the big dollars are really about the share of wallet as we migrate from spending on that big screen to across all the screens.

Unidentified Analyst

Yes, that's the whole question so on your buyer side revenue model, as I said you had a campaign, that you're able to sort these leads more efficiently, is that something that flows to your top-line or deal that flows to more CTs or client definite when it comes to your gross profit dollars, and then how's going to change in a self service model?

Unidentified Company Representative

So, in the classic sense of a buyers paying us a cost per engagement -- the cost per engagement -- I mean the other way to think about it really is the TrueView unit that you see on YouTube for example right it’s a sort of like performance based model from that standpoint so really I think Tremor's video, YouTube do this a lot. This the benefit flows to us in terms of gross margin when we do an excellent job, we deliver engagements to the client, the client's happy to get that [indiscernible] there're people who are spending time with their ad, we can afford on all that, but if we can do that as increasing margin the benefit flows to us. But as you saw I think from the change side of the show we've also build engagement as a factor, bidding factor in our buy-side platforms. And so in that scenario all that you're paying us a tick rate but all the benefit of increasing productivity flows to you the buyer in that scenario and that's the difference between self service and managed service in a nutshell.

Unidentified Analyst

And another one on kind of the data modelling side, absolutely my last, when you guys are looking at you know everyone call it the same third-party [indiscernible] and then your clients are [indiscernible] on first, you guys are on first party data. How do you guys model it differently or you know treat it differently to optimize for different things you know versus say your competitors and then do you see on the sell side after they do business is there synergy between doing up more versus [indiscernible] data on your own in terms of IDs in the result, things like that?

Unidentified Company Representative

I mean I can give you a high level again there, and again one of the first things the company did going back a year is finding again what that can test your model and kind of relation model that we use, and so it’s always been part of what we do, it’s not, and the fact that we entered all these publishers in a very deep way through that player allows us access to make decisions on the signal that John showed you the list of signals that it's sort of unique to us you combine that then with first party data because we’re not we don’t have first party data we’re partnered the people our first party data and that can be a very interesting combination some times and other times I think what we show through the activation in our platform is that the first party data actually for the particular campaign isn’t particularly impactful and there are other signals that can do that better. Is that John any way you want to add to that?

John Rego

No I think it's pretty much at [indiscernible] because we will -- I don’t know how do it a lot differently than our competition in that regard because it's all tied in the deep of the whole optimize now the signals coming and how we used to very [indiscernible] data sources help the targeting we also look at the repeat visitors the engagement of how that user was and also what this actually get back in the whole bidding process when launch rate felt with the [indiscernible].

Unidentified Company Representative

So I think from our side it's not so much been a source of first party data the ability to take that first party data and then integrate it with the data that we find through analyzing the actual user experiences on the other targeting and then being able to really optimize against whichever one is performing better, so we’re not holding the one or the other we can mix the two together is what works really well in the campaigns that we used to see now.

Unidentified Analyst

Can you talk about addressable TV a little bit more about what really needs to happen and to make it more like [indiscernible] and what sort of part data you’re using [indiscernible] data [indiscernible]?

Unidentified Company Representative

It tends to set top box data you’re right in terms of how [indiscernible] talk about [indiscernible] I think it's in terms of the players and we think about the way the world is playing out and think about addressable television we obviously have talked about the relationship we have with DISH we see OTT has a very interesting poling of the [indiscernible] part of what they do there is also an addressable component based on their subscriber base to have right now so whether it's satellite or you’ve got the cable set top cable companies I think whether it's the MVPDs like a DISH or a DIRECTV, Verizon with FiOS, or Comcast with the new cable boxes there coming out these are incredibly digitally driven systems and so they start to have the data not so much to take it down to a personal level but they’re still talking about household at least the device level within the household basis from that standpoint to start to optimize, starting to have a world where we can live next to one another but see different ads in our house watching the same program at the same time because of something about you and I and are different from that standpoint.

And I think that’s the key thing from that standpoint is injecting ourselves into that ecosystem so there are impediments with respect to the warming was differently than digital IP world right now, the players are different, the SSPs if you will are a little different than the SSPs in the digital world, the data providers are different but the data provider is tend to be the big company. So we seek to do business with the big companies because we think we bring things to the table that help them and they clearly have data that help us do that optimization. And so I think again there is a reason that there was [indiscernible] global talked about $500 million of spend going to $10 billion by the 2020 it's going to take some time to try to make that happen and it's a good news for video ad-tech in general is programmatic is halfway or third of the way through it major growth Phase and so we and I think other players are going to benefit from that for a number of years and in that time frame you’re going to start to see digital television start to play a bigger and bigger component as well it's the classic growth opportunity where there is a many layers that flow out from that standpoint.

So I am not down on television just a question as I said I mean I don’t think it's necessarily the biggest growth driver we have this year but we’re investing in and we have the luxury of being able to basically take the capital position that John talked about and instead of funding the operations which are now cash flow breakeven or et cetera and certainly had work into investing in areas where we think we’ll fund future growth on a continuous basis so we continue to talk about 30% spend year after year.

Well one of our goals was to be on time and I think we’ve done that. So again thanks everyone thanks everyone on the phone for our first Investor Day and we really appreciate it. Thank you so much.

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