Image source: TubeMogul. 

Shares of TubeMogul (NASDAQ:TUBE) are down more than 40% year to date. Will the losses continue after the company reports third-quarter results on Monday, or are better days ahead? A lot depends on how well the business has performed. Here's a closer look at what TubeMogul had achieved over the trailing 12 months: 

MetricQ2 2015Q1 2015Q4 2014Q3 2014
Revenue $45.4 million $30.3 million $36.1 million $27.4 million
Earnings from continuing operations ($1.3 million) ($7.1 million) ($4 million) ($1.7 million)
Adjusted EPS ($0.04) ($0.24)  ($0.14) ($0.06)
Cash from operations ($6.2 million) ($9.3 million) $0 ($10.3 million)

Source: S&P Capital IQ.  

As you can see, TubeMogul's growth isn't exactly linear. Nor are profits in the company's immediate future. Investments in the underlying platform for programmatic buying of brand advertising for online video and a growing number of television networks is management's priority at the moment, as Chief Financial Officer and Chief Operating Officer Paul Joachim said in September, at Citigroup's most recent Global Technology Conference:

At the beginning of this year, we talked about making an incremental investment of $10 million against primarily PTV. We have other initiatives, but fundamentally, it was Programmatic Television. This was hiring engineers, and also, there was dead work that had to be done as well as adding some subject matter experts to the team. We've stayed on course with that as that's ramped throughout the year. But just to put a dollar figure around it, that's how we've framed it. And it has largely been around making the workflow more seamless, making the data work better. And in the end, it's driving value, but those are the parameters we've put around it. 

The investments come as platform providers seek to control and sell more ad inventory on their own. Alphabet isa good example. Recently the company unveiled plans to force advertisers to use Google software in order to bid on and secure YouTube ad space, a move that could alienate brand owners that were already aiming to diversify.

"If you look at the amount of spend, which is how much our clients are spending through our software, less than 5% and declining was spent on YouTube. And it's been on decline for a while," S&P Capital IQ reports Joachim as saying. Whether that's good or bad for TubeMogul's business isn't clear at this point, especially when you look at the key year-over-year growth rates:

TubeMogul Growth RatesQ2 2015Q1 2015Q4 2014Q3 2014
Revenue 58.2% 37.6% 63.7% 111.7%
Earnings from continuing operations Not material Not material Not material Not material
Adjusted EPS Not material Not material Not material Not material
Cash from operations Not material Not material Not material  Not material 

Source: S&P Capital IQ.

Lumpy revenue growth isn't uncommon for small-cap businesses, and TubeMogul commands just $433 million in market cap as of this writing. Growing that requires momentum in each of these three areas:

  1. Fast-growing spend on the TubeMogul platform. Here, "spend" refers to the total dollar value committed to advertising purchased through TubeMogul's platform. Second-quarter total spend rose 72% year-over-year to $105 million. Consistent or accelerating gains in this category is key since TubeMogul is a transactional business that takes a fee for arranging ad buys.  
  2. More direct deals. And yet not all ad buys are equal. TubeMogul is making a concerted effort to work directly with more brands, eliminating fee-collecting agencies or platforms and keeping more of the profit from arranging a deal. TubeMogul categorizes this business as Platform Direct. As of the second quarter, the company was serving 386 brands in this way -- up from 283 in last year's second quarter. 
  3. Advances in programmatic television. TubeMogul's allure is its ability to programmatically reach audiences on any screen. From computer to smartphone to television, the company aims to deliver highly targeted video ads wherever they'll resonate best with the intended audience. The $10 million investment Joachim spoke of at the Citi conference is aimed at making good on this commitment. Last month's hiring of former ad agency executive Todd Gordon to lead PTV efforts is in the same spirit. 

"Todd is an industry leader that has been at the forefront of making traditional advertising more automated and data-driven," said CEO and co-founder Brett Wilson in a press release announcing Gordon's appointment.

We'll hear more about his plans -- and TubeMogul's progress -- when the company reports Q3 results on Monday, Nov. 9, after the market closes.

Tim Beyers would feel more like a tube mogul if he had more time to make videos. He's also a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission and owned GOOG and GOOGL shares at the time of publication. Check out Tim's web home and portfolio holdings or connect with him on Google+Tumblr, or Twitter, where he goes by @milehighfool.

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