TubeMogul Inc. Sales Rise 21% Ahead of Acquisition by Adobe

Image source: TubeMogul.

TubeMogul (TUBE) posted a respectable 21% increase in sales in the third quarter, but its results were overshadowed by news that software maker Adobe Systems (ADBE -0.43%) will be acquiring the advertising company at a sizable premium.

TubeMogul results: The raw numbers

YOY = year over year. Data source: TubeMogul Q3 2016 earnings press release.

What happened with TubeMogul this quarter?

Total spend -- essentially the amount that customers spend through TubeMogul's platform, including the cost of media purchases and TubeMogul's fees -- rose 34% year over year to $138.3 million.

Spend on TubeMogul's Platform Direct offering, which provides software that advertisers can use to run their own digital ad campaigns, increased 38% to $103 million, representing 75% of total spend. And spend on the company's Platform Services offering, which allows advertisers to specify objectives and have TubeMogul's team execute the campaign on their behalf, rose 23% to $35 million.

In turn, this growth in spend helped to drive a 21% year-over-year rise in revenue to $56.1 million.

"Programmatic TV spend nearly tripled year over year, while other cross-screen channels such as social, display, and mobile continued to see strong adoption," said CEO Brett Wilson in a press release. "As brand advertisers are increasingly seeking to consolidate their spend on a single platform, TubeMogul's focus on cross-screen planning and automating channels beyond video is positioning us well to win new brands globally."

Still, TubeMogul remains unprofitable. Operating loss increased to $11.1 million, compared with $3 million in Q3 2015. Net loss also widened, increasing to $12.4 million from $3.8 million in the year-ago period.

Looking forward

Far outweighing the company's third-quarter results, however, was the announcement that Adobe will be acquiring TubeMogul for approximately $540 million net of cash and debt. TubeMogul stock soared more than 80% on the news, surging to a level slightly below Adobe's $14 offering price.

Adobe intends to integrate TubeMogul into its Marketing Cloud platform, thereby creating "the first end-to-end independent advertising and data management solution that spans TV and digital formats." 

"With the acquisition of TubeMogul, Adobe will give customers a 'one-stop shop' for video advertising, providing even more strategic value for our Adobe Marketing Cloud customers," said Adobe executive Brad Rencher in a press release.

TubeMogul's Wilson added: "The combination of Adobe Marketing Cloud with TubeMogul's software creates a uniquely comprehensive platform that will help marketers always know what's working -- and act on it. We're thrilled to call Adobe home and believe this will be a great move for our clients, team, and shareholders."

The deal is expected to close by the end of February.