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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Rhythmone | LSE:RTHM | London | Ordinary Share | GB00BYW0RC64 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 169.50 | 168.00 | 171.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMRTHM
RNS Number : 0719F
RhythmOne PLC
15 May 2017
RHYTHMONE PLC ANNOUNCES AUDITED
FULL YEAR FINANCIAL YEAR 2017 RESULTS
Company Returns to Full-Year Underlying Profitability led by 28% Growth of "Core" Revenues
London, England and San Francisco, CA - 15 May 2017 - RhythmOne plc (LSE AIM: RTHM, "Company" or "Group"), today reports audited results for the year ending 31 March 2017 ("FY2017" or "the Period"). The Company's FY2017 conference call will be webcast live at https://investor.rhythmone.com at 9:30AM BST; 4:30AM EST; 1:30AM PST.
Financial Highlights (Audited)
Hot Features
Premium
Year Year
ended ended
31 March 31 March
2017 2016
(audited) (audited) Change
% or
$000 $000 $
---------- ---------- --------
Operating
Metrics:
Total Revenue(1) 175,381 166,716 5%
Core Revenue(2) 149,025 116,058 28%
Non-Core Revenue(3) 26,356 50,658 (48%)
Adjusted
EBITDA(4) 1,386 (10,475) $11,861
Cash and Cash Equivalents,
and Marketable Securities 75,204 78,486 (4%)
Statutory
Metrics:
Revenue 149,025 116,058 28%
Loss from Continuing
Operations (14,029) (75,527) $61,499
Loss from Discontinued
Operations net of
Tax (4,761) (16,726) $11,965
Loss for
the year (18,790) (92,253) $73,463
Loss per share attributed
to RhythmOne Cents Cents Cents
---------- ---------- --------
Basic (4.45) (22.88) 18.43
Loss per share from
Continuing Operations
Basic (3.32) (18.73) 15.41
-- Completed transformational shift to Core mobile, video and programmatic products, resulting in a return to revenue growth and profitability(5) ;
-- Significant growth of Core mobile, video and programmatic products that has driven financial performance across key metrics:
- Total revenues(1) of $175.4M, 85% from Core products (FY2016: $166.7M, 70%) - Core product revenues up 28% to $149.0M (FY2016: $116.1M) - Adjusted EBITDA(4) improvement of $11.9M to $1.4M (FY2016: ($10.5M Loss) -- Strong half-on-half growth across key metrics: - H2 2017 total revenues(1) of $94.7M (H1 2017: $80.7M) - H2 2017 adjusted EBITDA(4) of $3.9M (H1 2017: ($2.5M Loss) -- Exited all Non-Core products - including sale of Prime Visibility Agency services business;
-- Completed the acquisition of Perk Inc., a mobile-first supply side rewards, engagement and content platform, enhancing the Company's base of unique, engaged audiences;
-- Invested approximately $5M in product development and capital expenses to strengthen and improve Core product lines;
-- Continued cost discipline, with Operating Expense from Continuing Operations before exceptional costs during the Period of $ $60.6 (FY2016: $73.4M), a decrease of more than 18%, or $12.8M over the previous year; and
-- Ended the Period with a strong, debt-free balance sheet with over $75.2M in cash and cash equivalents, and marketable securities;
Operational Highlights
-- RhythmOne platform now ranks #1 internationally and #2 in the US in quality as measured by Pixalate (February 2017), and #5 in volume as measured by comScore (February 2017), featuring within the top 5% of the competitive set;
-- Core operating KPIs for Continuing Operations for the Period are as follows:
Metric(6) H12016 H22016 FY2016 H12017 H22017 FY2017
----------- -------- -------- --------- -------- --------- ---------
Volume Billions 4,012.4 6,996.3 11,008.6 7,469.4 13,099.2 20,568.5
Desktop(7) % - - - 51.3 42.5 45.7
Mobile(7) % - - - 48.7 57.5 54.3
Fill Rate(8) % 1.69 0.62 1.01 0.58 0.31 0.41
Price(9) $/CPM 0.93 1.22 1.04 1.54 2.01 1.76
-- Core opportunity volume and price grew by 87% and 69% year-on-year, respectively;
-- Expanded into 15 new international markets, which collectively represent approximately 10% of Core programmatic revenues in the Fourth Quarter;
-- Enhanced proprietary brand safety technology ("RhythmGuard") through integrations with leading traffic quality partners, including Grapeshot, WhiteOps, Integral Ad Science, DoubleVerify and Moat, and ad quality partners, The Media Trust and RiskIQ;
-- Added 29 programmatic demand side partners, including marquee platforms such as AppNexus, Drawbridge and Opera Mediaworks;
-- Expanded programmatic supply relationships - adding 18 new partners including AppNexus, FreeWheel, MobFox, SwitchConcepts and Teads;
-- Forged or expanded direct relationships with major brands such as Honda, Nestle, Marzetti, Ford, Chipotle, McDonalds, US Air Force, DropBox, Square Inc., Delta Faucets, Ocean Spray, Vistaprint, Mai Jim, JetBlue, Whole Foods, Exxon Mobile, Autozone, ADP, Black & Decker and Capella University;
-- Signed over 450 publisher partners, including Lifebuzz, Arkadium, Krush, Cheetah mobile, Comicbook.com, Spanishdictionary.com, Daily Motion and Twitch; and
-- Integrated Perk's mobile apps and websites into the RhythmMax platform, enabling programmatic demand partners to access Perk's engaged user base.
Commenting on the results, S. Brian Mukherjee, CEO of RhythmOne, said:
"The fundamental re-structuring of our business that we set in motion over two years ago is now complete. We are delighted to report the achievement of our objectives for the year, marking a dramatic shift in the revenue, product and cost profile of the Company. Driven by programmatic growth, Core products now represent 85% of total revenues(1) , compared with 70% in FY2016. During the Period, the Company took critical steps to definitively exit all remaining Non-Core product lines that are no longer considered strategic to future growth. The exit of Non-Core products is expected to eliminate the volatility associated with falling and unpredictable revenue streams and, on a go forward basis, aligns Company resources and initiatives with dominant industry growth trends.
RhythmOne has grown into a significant, recognized digital advertising platform with massive scale, cutting edge technology and quality, differentiated supply. Based on current revenue dynamics, we expect our unified programmatic platform, RhythmMax, to be the principal driver of future Company growth. The platform now ranks #1 internationally and #2 in the US in quality according to Pixalate, Inc. and #5 in volume according to comScore, Inc. We are proud to have built and scaled what we believe is an industry-leading platform.
The significant steps we took in FY2017 to realign the business around our Core capabilities and achieve operational efficiency have set the stage for higher quality topline growth and continued profitability(5) in the coming Financial Year. In the Company's audited FY2017 financial statements, Core revenue is revenue from Continuing Operations, while Non-Core revenue is revenue from Discontinued Operations. The Company anticipates FY2018 to be a period of continued expansion, through both organic efforts and scale acquisitions, as opportunities to consolidate the industry proliferate."
Notes:
1. Total revenue is revenue from Core and Non-Core product lines. It comprises revenue recognized within both Continuing and Discontinued Operations.
2. Core revenue is revenue recognized within Continuing Operations in the audited financial statements.
3. Non-Core revenue is revenue recognized within Discontinued Operations in the audited financial statements.
4. This press release contains references to adjusted EBITDA and adjusted Loss for the Period attributable to equity holders of the parent. These financial measures do not have any standardized meaning prescribed by IFRS and are therefore referred to as non-GAAP measures. The non-GAAP measures used by RhythmOne may not be comparable to similar measures used by other companies. Adjusted EBITDA is defined as profit/(loss) for the year before finance income and expense, taxes, depreciation and amortisation, share based payment expense 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 trading activities prior to consideration of how the results are impacted by non-recurring costs, how the results are taxed in various jurisdictions, or how the results are affected by the accounting standards associated with the Group's share based payment expense.
5. On an adjusted EBITDA basis.
6. Comparative Core operating metrics are adjusted to include on-platform (RhythmMax) and off-platform (third-party) products.
7. Volume of transactions (ad requests) processed through the platform. Volumes are continuously optimized for performance and yield.
8. Proportion of the transaction volume monetized, which is impacted by seasonality and fluctuations in demand and supply.
9. Average price across all ad formats, expressed as Cost per Mille or Thousand Impressions.
Press Contacts for RhythmOne
Analyst and Investor Contact Financial Media Contacts
Dan Slivjanovski Edward Bridges / Charles
RhythmOne plc Palmer
FTI Consulting LLP
(UK) 020 3727 1000
Nomad and Broker for RhythmOne
Nick Westlake (Nomad) /
Lorna Tilbian / Mark Lander
Numis Securities Limited
(UK) 020 7260 1000
Overview
RhythmOne's operating objective for FY2017 was sustainable growth and a return to underlying profitability(5) , accomplished through a fundamental restructuring of the Company's product portfolio. Over the past two years, RhythmOne continued to invest in its Core strategic capabilities of mobile, video and programmatic trading. Concurrently, the Company fully exited Non-Core product lines that no longer are considered strategic to future growth. Importantly, the measured approach RhythmOne has taken to managing a reduction in the Non-Core cost basis ensures a neutral to net positive impact on expected future growth and profitability(5) .
Performance in FY2017 was led by strong growth in Core revenues and, in particular, programmatic trading. In FY2017, the Company showed a return to underlying profitability(5) , delivering approximately $1.4M in adjusted EBITDA(4) . The performance in the second half of the year was particularly strong, with H22017 delivering approximately $3.9M in adjusted EBITDA(4) , offsetting the adjusted EBITDA(4) loss of ($2.5M) in H12017. This performance was fueled by the rapid expansion of the Company's unified programmatic platform, RhythmMax. Programmatic revenues constitute the majority of Core revenues, which experienced an 87% increase in opportunity volume year-on-year. In addition, the Company integrated Perk Inc.'s mobile and web inventory into the RhythmMax platform, further driving programmatic revenue growth.
The Company's product investments during the Period were fully aligned with key industry growth vectors. Programmatic trading is now well established as the primary buying mechanism for digital advertising. Over 78% of digital display ad spend will be executed through programmatic channels in 2017, including $24B for mobile and $9B for video in 2017, according to eMarketer. This number is anticipated to grow to over 84% of spend by 2019 and the allocation of spend to mobile and video is projected to show a continued bias toward mobile and video in the future. The programmatic growth trend points to a significant shift in how online advertising is being bought and sold. No longer are advertisers buying ads on specific websites as a proxy for audience segments; rather, they are buying actual audiences, across connected devices and ad formats, based on measurable data and in real time.
These fundamental shifts are ushering the "second coming of ad tech". Within its Core focus, the Company has identified two key areas of investment and differentiation in order to drive ongoing growth within this new landscape that include:
1) Unified Programmatic Advertising Platform; and 2) Unique, Quality, Engaged Audiences at Scale
1) Unified Programmatic Advertising Platform
In FY2017, RhythmOne completed its unified, multi-channel, multi-format platform to access the Company's owned, controlled and extended advertising inventory. Since inception, the RhythmMax platform has consistently maintained one of the largest supply footprints in the industry, ranking as the #5 US platform by comScore as at February 2017 and #8 by Quantcast, as at March 2017 - making it one of the dominant ad tech platforms in the industry to access quality, cross-device, multi-format advertising inventory. A majority of the Company's supply sources is now aggregated and accessible through RhythmMax, providing advertisers with a complete and turnkey solution.
Moreover, the platform continues to meet and exceed performance benchmarks relative to volume, fill rate and pricing. Through RhythmMax, the Company has unified the entire supply side of the value chain, streamlining interactions between advertisers and consumers, and enhancing the efficiency and effectiveness of online advertising campaigns.
During the Period, RhythmOne integrated its platform with almost 50 industry-leading programmatic supply and demand partners, including marquee names such as AppNexus, Drawbridge and Opera Mediaworks. Demand-side integrations also continued to ramp, including expansion into 15 new international markets. Simultaneously, RhythmOne attracted new and repeat advertisers, such as Honda, Nestle, Marzetti, Ford, Chipotle, McDonalds, US Air Force, Dropbox, Square Inc., Delta Faucets, Ocean Spray, Vistaprint, Maui Jim, JetBlue, Whole Foods, Exxon Mobile, Autozone, ADP, Black & Decker and Capella University.
During FY2017, the Company continuously enhanced its proprietary brand safety filtering technology, RhythmGuard, which eliminates suspicious and underperforming traffic before it reaches the marketplace - improving ROI for advertisers and maximizing yield for quality publisher partners. According to a study released by the Association of National Advertisers ("ANA") in 2016, ad fraud is costing the US marketing and media industry an estimated $7.2 billion each year. An important area of innovation - RhythmOne took steps to package its supply based upon guaranteed KPIs that align with advertisers' campaign objectives. In this regard, the Company has developed private marketplace offerings guaranteeing viewable, verified inventory in order to drive premium demand.
Complementing its RhythmGuard brand safety initiative, RhythmOne also partnered with leading viewability and verification vendors, including White Ops, Integral Ad Science, DoubleVerify, Moat and Pixalate, whom the Company believes will be instrumental in helping to establish common standards for the industry. RhythmOne has contributed to shaping these standards through its work with OpenVV.org, membership in the Interactive Advertising Bureau ("IAB") and participation in the Trustworthy Accountability Group ("TAG") initiative. Equally, on the Demand side, the Company further enhanced its creative scanning and ad verification processes through integration with The Media Trust and RisqIQ, the two leading ad quality vendors. Complementing the significant scale, scope and reach of RhythmMax, brand safety has become one of the fundamental tenets of the platform. RhythmOne remains committed to providing the highest levels of quality assurance to its advertising partners as it seeks to maximize the return on digital advertising spend.
2) Unique Quality, Engaged Audiences at Scale
In addition to platform investments in RhythmMax, the Company sought to distinguish its supply footprint by offering unique owned, controlled and first-look audiences that are compelling to advertisers and brands. One of the key accomplishments in FY2017 in support of the audience initiative, was the acquisition Perk Inc. a mobile-first supply side rewards, engagement and content platform, in an all-stock transaction. During Q4, the Company integrated Perk's cross-device, owned and operated inventory into RhythmOne's unified programmatic platform, enhancing the quality and quantity of brand and performance-focused supply, and helping to further differentiate RhythmOne from other ad tech providers. Perk Inc. joins RhythmOne's other owned and operated properties, including All Music, SideReel and Celebified, which collectively serve as a critical beta platform to enhance quality and targeting algorithms for the Company's controlled and extended supply.
The Company also continued to develop several new tools and services to attract and retain quality, high-value publisher partners. Header bidding is one such tool. Also known as pre-bidding, header bidding is an increasingly popular programmatic technique that allows publishers to offer their inventory in advance to select partners, before putting it up for general auction through the ad server. By letting multiple, higher value demand sources bid on the same inventory at the same time instead of through a waterfall structure, publishers theoretically are able to increase their yield and better monetize their content. The Company has developed a header bidding solution that allows publishers to make RhythmOne one of their select demand partners, and plans to continue innovating in this area to offer video header bidding, and custom, server-to-server connections - improving the performance and profit potential of its header bidder solution.
Another pioneering initiative designed to enhance the experience for RhythmOne publishers is called Support Free Content. This initiative arose out of the need to recapture revenues lost due to ad blocking. Support Free Content helps publishers address ad blocking by offering consumers choice - gating their access to publisher content via a set of monetization options that range from subscription, to white listing within their ad-blocker, to downloading a browser extension that provides alternative avenues for monetization.
Finally, the Company's Advanced Creative Platform (ACP) allows for fast and easy development and production of highly customized video, rich media and native ad units. This scalable platform supports the latest industry standards (VAST, VPAID, and MRAID), and allows the Company to address increasing advertiser demands for transparent viewability and engagement metrics. As programmatic adoption continues to grow, RhythmOne believes that the ability to offer bespoke, high impact creative units within its platform, will be a key differentiator - and another proxy for unique inventory.
Market
According to eMarketer, online advertising continued to demonstrate strong growth in 2016, a trend that is expected to extend into 2017 and beyond. Today, worldwide digital ad spend accounts for 38% of total media ad spend, or approximately $224B of over $591B in total - and is projected to grow at a 15% CAGR over five years (2016-2020). This represents nearly 6 times the rate of population growth and exceeds the growth rate of virtually any other industry. By 2020, worldwide digital ad spend is expected to ramp significantly to $330B, which would equate to almost half (46%) of total media ad spend of over $724B.
Programmatic trading, or the automated buying, selling and fulfillment of ads using technology, is now the most common buying modality for display, mobile and video advertising. In the US, eMarketer estimates that programmatic display ad spend will reach $33B in 2017. This is projected to include $24B for mobile and $9B for video. Programmatic ad spending on mobile was more than twice the size of programmatic ad spending on desktop in 2016 ($18B vs. $7B), a ratio that is in-line with the overall state of the US digital ad industry. Moreover, video ads sold programmatically totaled approximately $6B in 2016, representing 60% of digital video spend overall. By 2019, that number is expected to climb to $13B and a 77% share.
Key sector trends of note include:
1. The majority of US digital display ad dollars (78%, $33B) will be spent through programmatic channels in 2017, and that share is expected to rise (84%, $46B) by 2019. Much of this growth is led by programmatic spend on mobile and video advertising. In 2016, mobile programmatic accounted for 75% of all mobile display ad spending. For video, 2016 marked the first year in which more than half of US digital video advertising was sold programmatically - accounting for 60% of total video ad spend. Within programmatic trading, there is a distinct and growing trend around "Direct" or "Private Marketplace" transactions, where advertisers can access select pockets of inventory for fixed premiums.
2. An overwhelming majority of Internet users consumes video. In the US, nearly two-thirds of the population views digital video. Concurrent with increased consumption, video advertising spend is projected to increase at 17% CAGR over the next five years. According to eMarketer, advertisers will spend $13 billion on video this year and that figure is projected to increase significantly by 2020, reaching an estimated $20 billion.
3. Smartphone and tablet use is surging - and advertising dollars are following suit. In 2017, 81% of US Internet users use a smartphone and 61% use a tablet. In line with this trend, mobile advertising spending in 2017 is expected to outpace desktop/laptop spending by $34 billion. Within mobile, video ad spending is projected to reach nearly $6.0 billion in 2017 (over 10% of total mobile spending).
4. Ad blocking in the US continues to be a concern for online advertisers. As at June, 2016 in the US, approximately 26% of people use ad blockers. The estimated impact of this trend on publishers is a potential revenue loss of between 10% and 50%. Publishers are employing a number of tactics to preserve monetization - serving more "native" ads that are delivered directly from publishers' content management systems so that they are harder to block, installing anti-ad blocking software and enabling pay walls to access content. Currently, the impact of ad blocking on RhythmOne's business has been minimal, since the Company only counts unblocked inventory in its opportunity set. However, ad blocking does highlight a larger trend - the need to establish a sustainable value exchange equation that is respectful of consumer choice, impactful for the advertiser, sustainable for the publisher and effective at scale, which makes the Company's investments in unique supply and publisher tools even more critical.
5. Ad fraud, viewability and verification continue to be top-of-mind for advertisers. The industry has taken critical steps to monitor internally and self-correct this issue. According to the ANA, ad fraud will cost $7.2B in 2016, up nearly $1B since 2015. Creating an environment for clean, trustworthy transactions is an industry imperative both for the supply and demand sides of the value chain. The Company's proprietary RhythmGuard brand safety technology has been a significant and differentiating asset, helping to ramp existing Demand sources and onboard new partners during the Period.
6. Another noteworthy trend is the rise of influencer and native advertising. Both of these advertising segments allow for brands to authentically connect with consumers, either through their social channels and communities, or as a more integrated part of the web experience. In 2017, native ad spending is anticipated to reach $22B, with the majority of that ($19B) occurring through mobile devices. There is also a significant opportunity to realize economies of scale by delivering these types of advertising programs programmatically. RhythmOne launched its RhythmInfluence offering during the Period, allowing the Company to participate in the growing spend associated with this channel. This offering taps into the Company's programmatic inventory for increased scale and efficiency.
7. Proprietary data segmentation is driving efficient audience targeting. The ability to marry third-party segments with a brand's first party data is one of the ways advertising technology platforms are seeking to differentiate themselves. According to the IAB, the number one topic that will command the lion's share of marketers' attention in 2017 is cross-channel measurement and attribution. One of the key benefits that RhythmOne provides is the ability to leverage data across its significant supply footprint, including data about viewability and verification across industries. The Company is looking to package this data as part of direct or private marketplace deals, providing a turnkey method for advertisers to access precisely targeted, performance-driving audiences.
8. The opportunity is global. Total worldwide digital ad spend is set to grow to $234B in 2017. Of that, 40% is being spent in the US ($83B). This leaves a significant opportunity for growth internationally, especially via programmatic advertising. This growth trajectory aligns with RhythmOne's plans to expand its programmatic offering. The Company launched the platform in 15 new international markets during the Period, with plans to add additional EU and APAC markets in FY2018.
9. Industry consolidation continues to increase with the "Second Coming of Ad Tech." Figures released by Ad Ops Insider reveal there were over 185 significant M&A transactions in the Media space from January-December 2016, with values ranging from $10M to $26B - including such large deals as AT&T (Time Warner), with Microsoft (LinkedIn) and Verizon (AOL and Yahoo!) being the most notable within the ad tech subsector. Industry consolidation represents a potential path to scale quickly. As parts of the ecosystem combine and the value chain is streamlined, there will be opportunities to augment the Company's ad tech platform and audience offering. One such opportunity arose in FY2017 which resulted in the acquisition of Perk Inc., a mobile-first supply side rewards and engagement platform. By integrating Perk's mobile apps and websites into its unified programmatic platform, the Company can offer additional quality, engaged audiences to advertisers - a significant differentiator. The Company will continue to consider such strategic opportunities as it looks to expand and deepen its demand and supply base, and strengthen its technology offering.
Technology & Products
Throughout the Period, RhythmOne continued to invest in products, platforms, research and development, with a focus on enhancing and expanding the Company's programmatic trading capabilities. The Company also invested in products and services to attract high-quality publishers - including its header bidder product as well as its Support Free Content monetization solution.
RhythmMax now provides a centralized platform to access cross-device, cross-format RhythmOne inventory across owned, controlled and extended supply sources. It also provides advertisers with flexibility in how they purchase, whether through traditional direct deals, private "walled garden" marketplaces with closed site lists, or via auction-based mechanisms - all of which use the OpenRTB (Real-Time Bidding) protocol. Through RhythmMax, advertisers can reach target audiences to achieve measurable ROI at their desired spend level through a single entry point.
To support this growth, RhythmOne has updated its international data centers and increased capacity (server and network) across its infrastructure. These integrations let agencies and brands access RhythmOne's global inventory on-demand. With programmatic trading gaining in prominence, RhythmOne's unified platform allows the Company to represent its inventory through automated trading channels in a highly efficient manner, at scale. However, the average fill rate of 0.41% during the period means that less than one half of one percent of this supply was monetized - representing a massive, captive and known growth opportunity, as additional demand integrations are completed. Importantly, high-value ad formats such as video, rich media and native, remain to be fully integrated and scaled, which could materially increase both fill rate and price.
RhythmOne also made critical enhancements to its RhythmGuard technology, including the development of automated creative scanning, ad quality verification processes and additional algorithms to measure the quality of video advertising. These protections help to increase transparency around supply and demand quality. The result is a highly differentiated marketplace proposition that allows the Company to enrich inventory made available to advertisers through its programmatic channels, and drive greater demand. Through RhythmMax, the Company can provide one of the cleanest sources of pre-filtered, verified and targetable inventory in the industry, at scale. 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. The Company ended FY2017 ranked #1 internationally and #2 in the US on Pixalate's Trusted Seller Index, featuring in the top 2% of industry peers globally.
On the supply side, RhythmOne developed several tools designed to attract and retain high-quality publisher and app developer partners. Specifically, the Company built and released header bidder functionality, which helps advertisers better monetize their inventory. The Company intends to continue to improve this functionality as it works with its publisher partners, and develop functionality for video header bidding, as well as server-to-server integrations. In addition, as part of the Company's Support Free Content initiative, RhythmOne built a tool that helps publishers address ad blocking by offering consumers choice - gating their access to publisher content via a tree of monetization options. In addition, the Company released a new version of its software development kit (SDK) for mobile app developers, allowing for easier installation and campaign management, as well as deeper reporting features. The SDK supports all standard video and rich media ad units and includes emerging viewability standards for both display and video.
Finally, RhythmOne also made enhancements to its Advanced Creative Platform (ACP), a self-serve utility that allows demand partners to dynamically build custom rich media ads. ACP allows for fast and easy development and production of highly customized video, rich media and native ad units. The platform supports the latest industry standards (VAST, VPAID, and MRAID), and allows the Company to meet advertiser demands for viewability data and detailed engagement metrics. ACP is expected to drive parallel revenue streams - a modest software-as-a-service (SaaS) revenue from demand partners that access the tool independently for ad production, and greater incremental media fees for advertisers that use the tool as a value-add platform within the RhythmOne programmatic marketplace.
These developments represent a significant step forward as the Company bundles its products and technology to better serve advertisers and publishers in a competitive and challenging marketplace, and continues to invest in capacity to drive future growth.
Integration and Operating Discipline
In line with its recent integration initiatives, the Company has fully integrated Perk Inc. into RhythmOne. The Company reduced its cumulative headcount to 320 from a peak of 360 directly following the acquisition. The Company continued to build a highly efficient and scalable programmatic trading platform, which was the principal driver of Core growth during the Period. Within Core, opportunity volume increased to over 20 trillion requests for the Period with limited capital investment.
Board Changes
During the Period, RhythmOne made a key change to its Board of Directors. Mr. Edward ("Ted") Hastings joined the Board as an Executive Director, bringing over 15 years' experience in building successful software, Internet and digital media companies.
Financial Results
During the Period, total revenue(1) was $175.4M, compared with $166.7M for FY2016. The Company saw strong growth in its Core revenue, increasing 28% year-on-year to $149.0M. This has been reported within Continuing Operations on the consolidated Income Statement. Non-Core revenue was $26.4M and has been reported within Discontinued Operations. The related businesses lines were either sold or exited as of 31 March 2017.
Cost of revenue relating to Continuing Operations increased to $98.5M in the current year, compared with $72.7M for the year ended 31 March 2016. This cost consists primarily of traffic acquisition and content partner charges that are directly attributable to revenue generated by the Company. During the year, the cost of revenue as a percentage of revenue increased due to a shift in product mix towards higher volume but lower margin products, which was in line with management expectations. The product mix shift supports management initiatives to transition more revenue toward programmatic trading, which will benefit from scale.
Operating expenses from Continuing Operations before exceptional cost decreased from $73.4M to $60.6M for the year ended 31 March 2017, and represented 41% of revenue (2016: 63%). The Company expects operating expenses as a percent of revenue from Continuing Operations to continue to decline with the ongoing investment in its programmatic trading platform, and to continue to maintain strong financial discipline.
The net loss for the year before income tax and before exceptional costs was $9.6M, down significantly from $30.0M in the prior year. The net loss for the year after exceptional costs was $18.8M compared with $92.3M - which included an impairment charge - the prior year. This was driven by Core revenue growth, tight operating cost management and significant impairment losses in FY16.
Exceptional costs for the year were $9.2M, of which $3.9M were related to Discontinued Operations and $5.2M related to Continuing Operations, comprised largely of potential acquisitions, restructuring and severance charges related to the Perk Inc. acquisition. Prior year exceptional costs were $65.3M and largely comprised of impairment to goodwill and intangible assets. At 31 March 2017 the Group had no impairment, with the assessment of goodwill and intangible assets due to the improved performance of the Group.
Management believes adjusted EBITDA(4) provides a better gauge of underlying profitability(5) and saw an increase of almost $12M year-on-year, ending at $1.4M for FY2017. This improvement was driven by second half growth with H22017 adjusted EBITDA(4) at $3.9M versus ($3.6M) adjusted EBITDA(4) in H2 2016, an improvement of $7.5M.
The Group has maintained a strong balance sheet and liquidity position with cash and cash equivalents, and marketable securities of $75.2M at 31 March 2017 compared with $78.5M at 31 March 2016, a decrease of $3.3M during the Period. Operating cash flows before movements in working capital were ($3.8M) compared with ($13.3M) the year prior. Net change in working capital was lower at ($6.6M) compared with ($10.4M) the prior year. The net change in working capital was driven by the acquisition of Perk Inc. in fiscal Q4 and the strong revenue growth in fiscal H22017. The balance sheet remains strong with continued disciplined cash management and improved product mix.
The principal risks and uncertainties affecting the Group remain largely unchanged since those disclosed in the Annual Report for the year ended 31 March 2016, with the notable additions of spend concentration among a small number of large, well-established constituents, and heightened possibility that branded content will appear alongside objectionable or inaccurate (fake) content.
Outlook
The Company anticipates continued revenue growth throughout Financial Year 2018, led by its programmatic capabilities. Specifically, RhythmMax is expected to be the primary engine for growth, facilitating the delivery of targeted, quality audiences, across devices and formats, at scale - globally. The industry is fast culminating in the "second coming of ad tech", characterized by fewer, dominant, better integrated players that are able to deliver sustainable value to both demand and supply sides of the value chain. The Company now has the unique combination of technology, talent and relationships in place to scale both organic and inorganic growth as the industry continues to evolve and consolidate.
In addition to organic growth, the Company also is assessing a number of strategic M&A opportunities across demand, audience, data science and performance segments of the ecosystem, as a means to fortify its programmatic base, and augment its scale, financial performance and long-term competitiveness. Based on diversified growth drivers, RhythmOne enters FY2018 in a confident position, with a product portfolio that is well aligned with industry growth trends.
RhythmOne plc
CONSOLIDATED INCOME STATEMENT
Results for the year to 31 March 2017
(in thousands, except per share amounts)
YEARED MARCH 31, YEARED MARCH 31,
2017 2016
------------------------------------- --------------------------------------
BEFORE BEFORE
EXCEPTIONAL EXCEPTIONAL EXCEPTIONAL EXCEPTIONAL
COSTS COSTS TOTAL COSTS COSTS TOTAL
$000'S $000'S $000'S $000'S $000'S $000'S
----------------------------- ------------ ------------ --------- ------------ ------------ ----------
REVENUE 149,025 - 149,025 116,058 - 116,058
Cost of revenue (98,478) - (98,478) (72,690) - (72,690)
Operating expenses (60,557) (5,245) (65,802) (73,415) (47,192) (120,607)
------------ ------------ --------- ------------ ------------ ----------
LOSS BEFORE TAX AND FINANCE
INCOME (EXPENSE) (10,010) (5,245) (15,255) (30,047) (47,192) (77,239)
Finance income 631 - 631 256 - 256
Finance expense (266) - (266) (198) - (198)
------------ ------------ --------- ------------ ------------ ----------
LOSS BEFORE INCOME TAXES (9,645) (5,245) (14,890) (29,989) (47,192) (77,181)
Tax recovery 861 - 861 1,654 1,654
------------ ------------ --------- ------------ ------------ ----------
LOSS FROM CONTINUING
OPERATIONS (8,784) (5,245) (14,029) (28,335) (47,192) (75,527)
Discontinued operations
Loss from discontinued
operation net of tax (827) (3,934) (4,761) 1,377 (18,103) (16,726)
------------ ------------ --------- ------------ ------------ ----------
NET LOSS (9,611) (9,179) (18,790) (26,958) (65,295) (92,253)
============ ============ ========= ============ ============ ==========
Cents Cents
----------------------------- ------------ ------------ --------- ------------ ------------ ----------
LOSS PER SHARE ATTRIBUTABLE
TO RHYTHMONE plc
Basic (4.45) (22.88)
========= ==========
Diluted (4.45) (22.88)
========= ==========
LOSS PER SHARE ATTRIBUTABLE TO
CONTINUING OPERATIONS
Basic (3.32) (18.73)
========= ==========
Diluted (3.32) (18.73)
========= ==========
RhythmOne plc
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Results for the year to 31 March 2017
(in thousands)
YEARED YEARED
MARCH 31, MARCH 31,
2017 2017
$000'S $000'S
------------------------------------ ----------- -----------
LOSS FOR THE YEAR (18,790) (92,253)
Items which might be potentially
reclassified to profit or loss:
Exchange difference on translation
of foreign operations 245 (34)
(Loss) / Gains on marketable
securities net of tax (27) 19
----------- -----------
TOTAL COMPREHENSIVE LOSS FOR
THE YEAR (18,572) (92,268)
=========== ===========
RhythmOne plc
CONSOLIDATED BALANCE SHEET
As at 31 March 2017
(in thousands)
AS AT AS AT
31 MARCH 31 MARCH
2017 2016
$000'S $000'S
---------------------------------- ---------- ----------
ASSETS
NON-CURRENT ASSETS
Goodwill 48,530 37,207
Intangible assets 37,971 24,200
Property, plant and equipment 4,556 3,358
Other receivables and restricted
cash 4,686 828
Deferred tax asset 19,271 19,208
Marketable securities 22,864 29,539
137,878 114,340
---------- ----------
CURRENT ASSETS
Trade receivables 41,470 22,825
Other receivables 3,433 2,422
Cash and cash equivalents 19,338 18,222
Marketable securities 33,002 30,725
97,243 74,194
---------- ----------
TOTAL ASSETS 235,121 188,534
---------- ----------
LIABILITIES
NON-CURRENT LIABILITIES
Deferred tax liability (3,863) (318)
Other payables (2,228) (1,679)
Provisions for liabilities and
charges (1,502) (5)
---------- ----------
(7,593) (2,002)
---------- ----------
CURRENT LIABILITIES
Trade and other payables (43,386) (29,894)
Provisions for liabilities and
charges (907) (700)
---------- ----------
(44,293) (30,594)
---------- ----------
TOTAL LIABILITIES (51,886) (32,596)
NET ASSETS 183,235 155,938
========== ==========
SHAREHOLDERS' EQUITY
Share capital 8,667 7,537
Share premium account 168,159 168,045
Shares to be issued 24 24
Share based compensation reserve 28,605 26,590
Currency translation reserve (8,591) (8,836)
Merger reserve 107,820 65,208
Accumulated other comprehensive
income (8) 19
Retained deficit (121,441) (102,649)
TOTAL EQUITY 183,235 155,938
========== ==========
RhythmOne plc
CONSOLIDATED CASH FLOW STATEMENT
Results for the year to 31 March 2017
(in thousands)
YEARED YEARED
MARCH 31, MARCH 31,
2017 2016
----------- -----------
$000'S $000'S
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
LOSS FOR THE YEAR (18,790) (92,253)
Adjustments for:
Taxation (861) (2,031)
Depreciation and amortization 10,208 26,180
Share based payments 2,015 4,415
Interest income (631) (256)
Interest expense 266 201
Impairment of goodwill - 50,322
Loss on sale of computer equipment 82 56
Loss on disposition of PVMG
assets 3,858 -
Foreign exchange gain 66 3
OPERATING CASH FLOWS BEFORE MOVEMENTS
IN WORKING CAPITAL (3,787) (13,363)
CHANGES IN OPERATING ASSETS AND
LIABILITIES
(Increase) / Decrease in trade
and other receivables (11,991) 18,350
Increase / (Decrease) in trade
and other payables 7,507 (14,891)
Increase / (Decrease) in provisions 1,704 (490)
(6,567) (10,394)
Income tax refund received 1,250 4,182
Income tax paid (1,065) -
NET CASH USED IN OPERATING ACTIVITIES (6,382) (6,212)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received 631 256
Purchase of property, plant
and equipment (2,394) (741)
Capitalization of internal development
charges (3,266) (4,353)
Purchase of marketable securities (631) (60,245)
Payment of deferred acquisition
consideration (499) (5,000)
Proceeds from the sale of property,
plant and equipment - 4
Proceeds on disposition of PVMG
assets 1,064 -
Proceeds of marketable securities 5,002 -
Acquisitions, net of cash acquired 10,229 -
NET CASH FROM / (USED IN) INVESTING
ACTIVITIES 10,136 (70,079)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net payments on finance lease (1,050) (1,080)
Interest payments (187) (198)
Payment of credit facility (1,507) -
Proceeds from issuance of shares 159 64
NET CASH USED IN FINANCING ACTIVITIES (2,585) (1,214)
----------- -----------
Net increase / (decrease) in
cash and cash equivalents 1,169 (77,505)
Beginning cash and cash equivalents 18,222 95,734
Effect of foreign exchange on
cash and cash equivalents (53) (7)ING CASH AND CASH EQUIVALENTS 19,338 18,222
=========== ===========
RhythmOne plc
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Results for the year to 31 March 2017
(in thousands)
SHARE
ORDINARY SHARE SHARES BASED CURRENCY RETAINED
TO
SHARE PREMIUM BE COMPENSATION TRANSLATION MERGER OTHER (DEFICIT)/ TOTAL
CAPITAL ACCOUNT ISSUED RESERVE RESERVE RESERVE RESERVES EARNINGS EQUITY
$000'S $000'S $000'S $000'S $000'S $000'S $000'S $000'S $000'S
--------------- --------- -------- -------- ------------- ------------ -------- --------- ----------- ---------
BALANCE AS
AT 31 MARCH
2015 7,502 168,008 1,686 22,175 (8,802) 63,554 - (10,426) 243,697
Net loss
for the year - - - - - - - (92,253) (92,253)
Other
comprehensive
loss - - - - (34) - 19 - (15)
---------
Total
comprehensive
loss for
the year - - - - (34) - 19 (92,253) (92,268)
Issue of
shares, net
of costs 35 37 (1,662) - - 1,654 - - 64
Credit to
equity for
Share based
payments - - - 4,415 - - - - 4,415
Tax movement
on share
options - - - - - - - 30 30
BALANCE AS
AT 31 MARCH
2016 7,537 168,045 24 26,590 (8,836) 65,208 19 (102,649) 155,938
Net loss
for the year - - - - - - - (18,790) (18,790)
Other
comprehensive
loss - - - - 245 - (27) - 218
Total
comprehensive
loss for
the year - - - - 245 - (27) (18,790) (18,572)
Issue of
shares, net
of costs 1,130 114 - - - 42,612 - (2) 43,854
Credit to
equity for
Share based
payments - - - 2,015 - - - - 2,015
BALANCE AS
AT 31 MARCH
2017 8,667 168,159 24 28,605 (8,591) 107,820 (8) (121,441) 183,235
========= ======== ======== ============= ============ ======== ========= =========== =========
RhythmOne plc
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. Basis of preparation
This consolidated financial information has been prepared in accordance with the EU adopted International Financial Reporting Standards (IFRSs), IFRS Interpretations Committee and those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The accounting policies adopted are consistent with those described in the Annual Report and Accounts 2016 which have not changed. The financial information set out in this document does not constitute statutory accounts for the years ended 31 March 2016 or 31 March 2017 but is derived from the Annual Report and Accounts 2017. The Annual Report and Accounts for 2016 have been delivered to the Registrar of Companies and the Annual Report and Accounts for 2017 will be delivered to the Registrar of Companies in due course. The auditors have reported on those accounts and have given an unqualified report which does not contain a statement under Chapter 3 of Part 16 of the Companies Act 2006. Full financial statements that comply with IFRSs are included in the Annual Report and Accounts 2017 which will be made available to shareholders in due course.
The Directors have considered the financial resources of the Group and the risks associated with doing business in the current economic environment and believe that the Group is well placed to manage these risks successfully. In doing this, the Board has prepared a business plan and cash flow forecast setting out key business assumptions, including the rate of revenue growth, discount rate, terminal growth rate and cost control. The Directors have considered these assumptions to be reasonable and that the Group has adequate resources to continue in operational existence for the foreseeable future being a period of no less than 12 months from the date of this announcement. Accordingly, they continue to adopt the going concern basis in preparing these financial statements.
2. Share-based payments
Included within operating costs are share based payments for the year ended 31 March 2017 was $2.0m (2016: $4.4m).
3. Taxation
The tax credit from Continued Operations for the year ended 31 March 2017 was $0.9M (2016: tax credit $1.7M).
4. Earnings per share
The calculation of the basic and diluted earnings per share is based on the following information.
YEAR YEAREDED
31-MARCH 31-MARCH
2017 2016
$'000 $'000
------------ ------------
(LOSS)/PROFIT
(Loss)/profit used in calculation
of basic and diluted earnings
per share (18,790) (92,253)
============ ============
(Loss)/profit used in calculation
of basic and diluted earnings
per share from continuing operations (14,029) (75,527)
============ ============
SHARES SHARES
------------ ------------
NUMBER OF SHARES
Weighted average number of shares
for the purpose of basic and
adjusted* basic earnings per
share 422,606,922 403,198,763
============ ============
Weighted average number of shares
for the purpose of diluted and
adjusted* diluted earnings per
share 422,606,922 403,198,763
============ ============
5. Goodwill
During the period, RhythmOne consolidated certain product, infrastructure, sales and marketing efforts under its trade name, RhythmOne. The Adkarma CGU was consolidated with RhythmOne resulting in the goodwill associated with AdKarma being reclassified to the RhythmOne CGU.
The key assumptions for the value in use calculations are those regarding the discount rates, revenue growth rates and terminal growth rate. The Group prepares cash flow forecasts derived from the most recent financial budgets approved by management for the next five years and extrapolates cash flows into perpetuity using a terminal growth rate. The cash flow forecasts were prepared using an average revenue growth rate of 6% per year for RhythmOne and 4.7% per year for Perk and an average expense decrease in the rate of 1.7% for RhythmOne and 3.8% for Perk respectively. The cash flows beyond the five year period are extrapolated into perpetuity using a terminal growth rate of 2% (2016: 2%). This rate is based on an estimated long-term growth rate for the industry and countries in which RhythmOne operates, and does not exceed the average long-term growth rate for the relevant markets based on the historical Consumer Price Index in the United States. The assumptions for growth rates are based on past experience of each CGU's trading performance and are consistent with industry analyst expectations. The assumptions used differ between CGU's, reflecting the differences in products, customers and suppliers between each CGU.
The pre-tax rate used to discount the forecast cash flows is 21.6% (2016: 19%) for all CGUs. Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGUs.
No reasonable changes in assumptions would lead to an impairment of the goodwill.
Goodwill:
As at Reclassifications As at
31 March and acquisition 31 March
2016 adjustments Reclassification 2017
$'000 $'000 $'000 $'000
---------- ------------------ ----------------- ----------
RhythmOne 21,086 10,000 31,086
PVMG 6,121 (6,121) - -
AdKarma 10,000 (10,000) -
Perk Inc 17,444 17,444
Total 37,207 11,323 - 48,530
========== ================== ================= ==========
6. Exceptional Costs from Continuing Operations
Large one-off acquisition and exceptional costs are separately identified and adjusted results are reviewed. The types of costs included within acquisition costs are those that are directly attributable to an acquisition, such as legal and accounting expenses, integration costs, severance costs and retention remuneration. The types of costs that are considered exceptional include goodwill impairment, accelerated charges related to change in intangible asset lives, severance costs and one-time integration charges.
Acquisition and exceptional costs:
Year Year
ended ended
31-Mar 31-Mar
2017 2016
$000's $000's
------- -------
Acquisition costs:
Severance and retention
costs 217 825
Onerous lease 917 -
Professional fees 1,301 309
-------------------------- ------- -------
Total acquisition
costs 2,435 1,134
Exceptional costs:
Goodwill impairment - 32,363
Change in intangible
assets lives - 12,027
Restructuring charges 2,042 595
Severance costs 768 1,073
-------------------------- ------- -------
Total exceptional
costs 2,810 46,058
Total acquisition
and exceptional costs 5,245 47,192
========================== ======= =======
7. Share capital
The Company has one class of ordinary share, which carries no right to fixed income.
During the current year 90,631,068 shares were issued, of which 88,235,410 shares related to the acquisition of Perk, 1,588,301 shares related to exercise of employee share options and 807,357 shares related to restricted stock units. (2016: 2,136,359 shares were issued, of which 512,877 shares related to the acquisition of Rhythm NewMedia Inc., 255,980 shares related to exercise of employee share options and 1,367,502 shares related to restricted stock units).
8. Shares to be Issued and Merger reserve
The shares to be issued reserve relates to shares that are expected to be issued to former Burst shareholders as part of the consideration who have not yet submitted the paperwork to effect the exchange of Burst shares for RhythmOne shares.
The merger reserve arises in business combinations where shares are issued for greater than 90% of consideration. The difference between the fair value and the nominal value of the shares transferred as consideration is taken to the merger reserve.
9. Related party transactions
Balances and transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.
The remuneration of the Directors, who are the Group's key management personnel, in accordance with IAS 24 Related Party Disclosures, is disclosed in the Directors' Remuneration Report in our Annual report.
There were no other related party transactions in either the current or prior year.
10. Discontinued Operations
On March 31, 2017, the Company discontinued its Non-Core business operations. This included ceasing the operations of its consumer business activities and the sale of certain assets and specific liabilities of Prime Visibility Media Group ("PVMG"). The results of these operations are presented as Discontinued Operations in the Group's Income Statement. The comparatives have been restated to show the Discontinued Operations separately from the Continued Operations. Management committed to a plan to discontinue Non-Core operations and sell certain assets and specific liabilities of PVMG and the disposals were finalized on March 31, 2017. Results of the Discontinued Operations for the periods presented are as follows:
YEARED MARCH YEARED MARCH
31, 2017 31, 2016
------------------------------------- -------------------------------------
Before Before
Exceptional Exceptional Exceptional Exceptional
Costs Costs Total Costs Costs Total
$000's $000's $000's $000's $000's $000's
-------------------------- ------------ ------------ --------- ------------ ------------ ---------
Revenue 26,356 - 26,356 50,658 - 50,658
------------ ------------ --------- ------------ ------------ ---------
Cost of revenue (13,779) - (13,779) (27,750) - (27,750)
Operating expenses (13,404) (76) (13,480) (21,904) (18,103) (40,007)
------------ ------------ --------- ------------ ------------ ---------
Loss before tax and
loss on other items (827) (76) (903) 1,003 (18,103) (17,100)
Other expense - - - - -
Finance expense - - - (3) (3)
Loss on disposition
of assets - (3,858) (3,858) - - -
------------ ------------ --------- ------------ ------------ ---------
Loss before income
taxes (827) (3,934) (4,761) 1,000 (18,103) (17,103)
Tax recovery / (expense) - - - 377 - 377
------------ ------------ --------- ------------ ------------ ---------
Profit/(loss) (827) (3,934) (4,761) 1,377 (18,103) (16,726)
============ ============ ========= ============ ============ =========
CENTS CENTS
-------------------------- ------------ ------------ --------- ------------ ------------ ---------
LOSS PER SHARE
BASIC (1.13) (4.15)
========= =========
DILUTED (1.13) (4.15)
========= =========
CASH FLOWS FROM / (USED IN) DISCONTINUED 31 MARCH 31 MARCH
OPERATIONS 2017 2016
--------- ---------
$000's $000's
------------------------------------------ --------- ---------
Net cash (used in) / from operating
activities (776) 5,439
Net cash from / (used in) investing
activities 948 (206)
Net cash (used in) financing
activities (438) (5,791)
Net cash (used in) discontinued
operations (266) (558)
========= =========
CONSIDERATION RECEIVED FOR SALE OF CERTAIN 31 MARCH
ASSETS AND SPECIFIC LIABILITIES OF PVMG 2017
---------
$000's
---------------------------------------------- ---------
Consideration received from the purchaser:
Cash consideration received 1,064
Deferred sales proceeds (a) 2,450
-----------
3,514
===========
DETAILS OF NET ASSETS AND LIABILITIES 31 MARCH
OF PVMG DISPOSED OF ARE AS FOLLOWS 2017
---------
$000's
--------------------------------------- -----------
Assets disposed of:
Prepaid expenses 14
Property and equipment 15
Intangible assets 922
Goodwill 6,121
-----------
7,072
===========
LOSS ON DISPOSITION OF ASSETS AND LIABILITIES 31 MARCH
OF PVMG 2017
---------
$000's
----------------------------------------------- ---------
Consideration received 3,514
Transaction costs (300)
Net assets of PVMG disposed
of (7,072)
---------
(3,858)
=========
31 MARCH
NET CASH INFLOW ON DISPOSAL OF PVMG 2017
---------
$000's
------------------------------------------- ---------
Consideration received, satisfied in cash 1,064
Transaction costs (300)
---------
764
=========
11. Business Combination
On January 19, 2017, the Company acquired 100% of the issued and outstanding shares of Perk Inc. ("Perk"), a Waterloo, Ontario, Canada based innovator in rewarded video for mobile devices for consideration of $43.7m. The acquisition accelerates the Company's strategy to build a unified programmatic platform with unique audiences of uniform quality at scale. Through Perk, RhythmOne plc gains access to a number of premium consumer mobile apps and web properties, adding exclusive inventory to the Company's supply side portfolio, as well as strategic demand relationships. The Company issued 88,235,410 of its common shares with a value of $43.7m in consideration for the acquisition.
The acquisition was accounted for using the acquisition method in accordance with IFRS 3, Business Combinations, with the results of operations consolidated with those of the Company effective January 19, 2017. Transaction costs of $0.9m were recorded in transaction costs within net loss.
The provisional allocation of the purchase price as follows is subject to change once management has finalized the acquisition accounting:
$000's
--------
PURCHASE CONSIDERATION
Consideration in the Company's
shares (88,235,410 common shares) 43,697
========
ASSETS
Current assets
Cash 10,229
Trade accounts receivable 10,255
Other receivables 1,753
Property plant and equipment 630
Software 99
Trade names and trademarks 5,400
Technology related assets 4,700
Customer relationships & user base 9,700
LIABILITIES
Current liabilities
Trade and other payables (9,058)
Term loans (832)
Provisions (300)
Income tax payable (953)
Term loans (675)
Deferred tax liabilities (4,695)
--------
PROVISIONAL FAIR VALUE OF NET IDENTIFIABLE
ASSETS AND LIABILITIES ASSUMED 26,253
--------
PROVISIONAL GOODWILL 17,444
========
This information is provided by RNS
The company news service from the London Stock Exchange
END
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