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BLINKX PLC BUSINESS UPDATE

Company Updates on Trading, Products and Integration Efforts for H12016
 

London, England and San Francisco, CA. — 24 August 2015 — blinkx plc (“blinkx” or “the Company”) today provides a trading and business update for the half-year ending 30 September 2015 (“H12016” or “the Period”), in advance of its Annual General Meeting.

As outlined during its FY2015 full-year results, H12016 has been a period of integration and investment for blinkx.   In summary, the Company began to rationalize its operations and product portfolio and accelerated investments in its (“Core”) strategic capabilities of Mobile, Video and Programmatic Trading. The Company also began to refactor, divest and exit historical product lines that are considered (“Non-Core”) to future growth, including certain Desktop products, services and technologies, which continue to decline.  Based on preliminary results, performance for the first Quarter of FY2016 was in line with expectations, led by strong growth in Core revenues.  However, early second Quarter trading has been below expectations to date and the Company now expects an Operating loss in H12016. Management has taken decisive steps to manage the Group’s cost structure to reflect the changing revenue and profitability profile of its product mix, and expects a return to profitability, as its Core products continue to ramp and offset declines in Non-Core products.

Product Update

The launch of the RhythmOne (“1R”) Programmatic platform has been the predominant development focus during the Period.  The 1R platform is designed to let advertisers access quality mobile, desktop, video and display inventory at scale, through a single unified interface.  The platform is unique in the industry in its approach to traffic filtering and quality assurance, employing proprietary brand safety technology that blocks fraudulent or suspicious traffic before it reaches the marketplace. The investment we have made in this model significantly increases the quality of inventory available to demand partners, while providing an efficient, transparent channel for cross-screen targeting and audience reach. In addition, the ongoing development of the Company’s filtering technology on the platform lets supply partners verify their audiences in advance of the campaign, thereby improving yield and monetization rates. Through the 1R platform, the Company can provide one of the cleanest sources of pre-filtered, verified and targetable inventory in the industry at scale.  These capabilities make the platform strategically important to key ecosystem partners, including Mobile and Cable Carriers, Web, Video and App Developers, Content Publishers, Trading Desks, Agencies and Marketers.

Launched in Q12016, the Core 1R operating system is now fully operational.  During the Period, the platform ramped from a standing start to processing well over 25 billion queries per day, easily ranking within the top 10 platforms globally by transaction volume. The platform is now integrated with over a dozen of the 40 largest programmatic partners globally, with several others underway and targeted for completion over the next 6 to 12 months.  With the Company’s Programmatic platform established and growing, blinkx accelerated its investments in the Core Mobile, Video and Programmatic product lines, which continue to demonstrate strong sector-wide growth.

Integration Update

Integration efforts during the Period have been focused on eight key areas: Products, Technology, Operations, Marketing, Sales, Finance, Legal, and Human Resources.  These actions were specifically designed to support growth and sustained profitability of the Company’s Core initiatives and redeploy or consolidate its Non-Core operations and staff.  The Company streamlined its product portfolio into four categories to address Publishers, Content Partners, Advertisers and its Platform Infrastructure.  Technology efforts focused on building the 1R Platform, while the operations infrastructure was consolidated from 14 legacy and acquired datacenters into five globally distributed datacenters.  The Company also launched the unified 1R trade brand and consolidated four Sales teams into one, distributed across five primary US sales hubs.   By year-end FY2016, the Company expects to reduce its headcount to c325 from a peak of over 425 Employees and Contractors and consolidate its offices from 21 to 11 globally.

Trading Update

Based on preliminary, unaudited results, performance for the first Quarter of FY2016 was in line with expectations, with the growth in Mobile, Video and Programmatic (“Core”) revenues balancing declines in the traditional (“Non-Core”) revenues, as anticipated. Early second Quarter trading, however, has been below expectations.  The mid-summer months are seasonally slow and provide a false baseline for forecasting, which was further decreased by industry wide traffic supply and quality initiatives this year.   In addition, third-party calendars that are outside the Company’s control led to unexpected delays in completing key Programmatic integrations.  While the Company expects these integrations to accelerate, Core product gains are unlikely to offset the decline in Non-Core revenues in the Period. Furthermore, due to early stage unit economics and scale, the profitability of Core product lines will not match that of the Non-Core product lines during the remainder of the Period.  Based on these trends, seasonality and the ongoing product mix shift, blinkx now expects H12016 results to be in the following broad ranges:

  • H1 revenues between $85M and $95M;
  • H1 adjusted* EBITDA loss between ($5M) and ($8M)
  • H1 cash balance between $82M and $85M

For the remainder of the Period, blinkx expects its Core product lines to continue to ramp with increasing profitability, and to help offset a majority of the decline in Non-Core revenues.  The cash balance above anticipates operational losses of c$5M to $8M, with c$4M for strategic, one-time investments in the Core product lines and c$2M for restructuring during the Period.  Core product lines now constitute approximately two-thirds of revenues, up from 30% in H12015.  Based on our most recent estimates, Core revenues for the Period are projected to grow in excess of c75% year-on-year, to at least $55M from $31M in H12015, as Mobile, Video and Programmatic trading capture a growing share of industry-wide advertising spend.  In contrast, Non-Core product lines are projected to decline by c60%, to $30M from a H12015 baseline of $75M.  These opposing growth rates match widely observed industry trends. 

As a result of these industry trends and the Company’s product rationalization and integration efforts, blinkx also took cost reduction measures that will eliminate an estimated $10M in annualized operating costs.  These cost savings are in addition to the $10M in baseline cost savings already achieved during the previous 12 months.  For the remainder of the Financial Year, the Company expects Core revenues to continue to ramp and Non-Core revenues to stabilize at around 25% of total revenues.  With the above cost actions and trends, the Company expects to return to profitability over the next 6 to 12 months, minimizing operational cash needs.  In H22016, the Company expects cash use for investing activities of c$6M for deferred acquisition consideration and c$2m in potential scale investments to accelerate Core product growth.   Given the ongoing Industry and Company transitions, blinkx will keep investors apprised of its progress through regular quarterly updates for the remainder of the financial year.   

S. Brian Mukherjee, CEO of blinkx commented, “While we are obviously disappointed with the projected financial performance for the Period, the team has worked exceptionally hard in a year of significant change to consolidate the Company’s operations and launch an industry-leading and highly differentiated Programmatic platform, with unique and unified mobile, video and display capabilities.  We are encouraged by the response of clients and partners to the RhythmOne launch and expect growth of our Core product lines to bring a return to profitability as we complete demand side integrations and monetize the transactional scale we have engineered.  The 1R platform is fundamental to our vision to connect Audiences and Brands through premium digital Content across Devices at scale.”

Non-GAAP Measures

  • This press release contains references to adjusted* EBITDA.  This financial measure is not a measure that has any standardized meaning prescribed by IFRS and is therefore referred to as a non-GAAP measure. The non-GAAP measures used by blinkx may not be comparable to similar measures used by other companies.
  • Adjusted* EBITDA is defined as profit for the year attributable to equity holders of the parent before interest, taxes, depreciation and amortization, stock based compensation expense, and acquisition and exceptional costs. Management believes that this measure is a useful supplemental metric as it provides an indication of the results generated by the Company’s principal business activities prior to consideration of how the results are impacted by one time exceptional charges, how the results are taxed in various jurisdictions, or how the results are affected by the accounting standards associated with the Group’s stock based compensation plan.
     

For further information please contact:

Analyst and Investor Contact
Dan Slivjanovski
blinkx plc
(US) 415 655 1450

Financial Media Contacts
Edward Bridges/Charles Palmer
FTI Consulting
(UK) 020 3727 1000

NOMAD for blinkx plc
Charles Lytle/Christopher Wren
Citigroup Global Markets Limited
(UK) 020 7986 9756

Joint Broker for blinkx plc
Lorna Tilbian/Mark Lander/Nick Westlake
Numis Securities Limited
(UK) 020 7260 1000


About blinkx

blinkx (LSE AIM: BLNX) is an Internet media company that connects consumers and brands through premium content online. Founded in the UK in 2004, blinkx pioneered Internet Video Search using its patented COncept Recognition Engine (CORE). This technology leverages speech recognition, text and image analysis to deeply understand the meaning and context of video content to generate improved search relevancy for consumers and a brand safe environment for advertisers. Today, blinkx is a broad digital media technology, distribution and monetization platform that connects consumers, advertisers and content across four screens. Through its partnerships with hundreds of media companies, including ABC, NBC, Conde Nast, Reuters and Bloomberg, blinkx has indexed and search enabled millions of hours of video content. blinkx powers video search, discovery or monetization on thousands of online properties including Lycos, ABC, CBS and Fox Sports.  blinkx is headquartered in San Francisco, California with offices worldwide. For more information please visit www.blinkx.com.