www.cxense.com
9 November 2018
Cxense ASA – Q3 2018
www.cxense.com
Sector
Product
Value proposition
Customers
Data processing footprint
Offices
Share ticker
2
Cxense at a glance
Software-as-a-Service (SaaS)
Data Management and Personalization Software
Real-time audience insight, increased online engagement and digital
revenue growth
~190 publishers and ecommerce companies
2bn devices, 19bn sessions per quarter
Oslo (HQ), Berlin, Samara, New York, Buenos Aires, Tokyo, Singapore
OSE:CXENSE
www.cxense.com
Data is your most valuable resource
The future of Media, Marketing and eCommerce
3
1-1
Personalization
Present
Targeted
2010s
Digital
2000s
Mass
Marketing
1990s
www.cxense.com4
We enable customers with a leading DMP with intelligent personalization
Data fusion Track behavior and integrate with
internal/external data sources to get a 360
view of each user
Data intelligenceEnrich known data with AI modelling to create
rich user profiles and segments
Data activationReal-time 1:1 personalization
Data driven ROI
Content Subscriptions
Products
Advertising
Web
Apps
CRM
Commerce
Panel
Survey
3rd party
Gender – Age
Location
Look-alike
Behavior
CRM data
Device
Subscription
propensity
Interests
Deterministic data AI modelled data
www.cxense.com
ROI increase for both Publishers and Advertisers
Without targeting
• Ad is shown to 200k high income and 800K low income
• Publisher gets 10 000€
• The advertiser’s cost for reaching high income is50€ CPM (10/200*1000)
With premium segment
• Ad is shown to 750K high income and 250K low income
• Publisher get 13 000€
• The advertiser’s cost for reaching high income is 17€ CPM (13/750*1000)
Premium segments provide ad targeting to AI modelled audiences such as ”High income”, “Children 7-12y”, “Automotive”, “Health/fitness”
Example
• An advertiser wants to promote a product to the “high income” segment, with an impression goal of 1 million
• 10€ CPM* without targeting / 13€ CPM* with premium segments
• Distribution of high/low income audience on publisher is 20% / 80%
• Prediction accuracy for the “high income” segment is 75%
5 * CPM = Cost per mille (cost per thousand impressions)
www.cxense.com
3.4
4.0
Q1'1
2
Q2'1
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Q3'1
2
Q4'1
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Q1'1
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Q2'1
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Q3'1
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Q4'1
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Q1'1
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Q2'1
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Q3'1
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Q4'1
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Q1'1
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Q2'1
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Q3'1
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Q4'1
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Q1'1
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Q2'1
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Q3'1
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Q4'1
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Q1'1
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Q2'1
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Q3'1
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Q4'1
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Q1'1
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Q2'1
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Q3'1
8
• Growth for core DMP and Personalization segment
• 19% YoY and 3% sequentially
• 15 new contracts including leading Asian media companies Singapore Press Holdings, Mainichi and Star Media Group
• High churn driven by loss of one large customer
• New leadership team, including CTO, CPO and CCO, successfully onboarded
• New CFO hired (starting December 2018)
• 80% reported gross margin, up 1 pp from Q2 2018
• Adjusted EBITDA of USD -0.47 million compared to USD -2.1 million in Q3 2017
• Reported EBITDA impacted by Enreach integration costs
• Positive cash flow in the quarter
• Cash position of USD 4.4 million, up 8% from end of Q2 2018, driven by working capital movements
• Funded through break-even with ongoing churn improvement program and cost reductions
• The new Conversion Engine and DMP features strengthens pipeline
• Positive outlook for new sales in Q4
Quarterly revenue development
USD million
Data Management and Personalization license revenues
Consulting revenues
6
Q3 2018 highlights
www.cxense.com
Financials
7
www.cxense.com
Last recurring revenue Churn New Revenue New recurring revenue
Upsell
existing customers
New customers
Lost customers
Cxense’s SaaS recurring revenue business model
Illustrative
8
Building recurring revenue base to drive growth
www.cxense.com
3.4
4.0
0.9
0.70.1
0.70.4
Q3'17 Q3'18
Core business grew 19% Y/Y
Core business: DMP & Personalization
• Growth in core on demand from publishers and marketers
• 19% y/y net growth from;
• +45% gross organic growth from new revenue
• +4% from acquired growth
• -5% contribution from other
• -25% reduction from lost recurring revenue (churn)
• Customer retention a key priority
• Non-core business:
• Advertising divestment ongoing
• Video portfolio to remain in Cxense as bids came in below expected future cash flow
Advertising
DMP &
Personalization
5.1
Video
5.1
Revenues
USD million
9
Core
Non
coreMporium
www.cxense.com
282
366 335
316
229
(92)
(187)(219)
(199)
(253)
190 179
116 117
(25)
Q3'17 Q4'17 Q1'18 Q2'18 Q3'18
Lost QRR Net new QRRNew QRR
*Full recurring revenue value of contracts closed and terminated in the period. For comparison to effect in reported figures see appendix.
Q3 sales update
• Closed 15 new contracts for DMP and Personalization
• New QRR of USD 229 thousand
• 32% of new QRR was from upsell to existing customers
• 9 average sales reps in Q3 (11.5 in Q2)
• Sales efficiency down 7% Q/Q due to seasonal effects
• 10 sales reps at end of October
• Lost QRR of USD 253 thousand
• 1/3 of churn related to one customer, a subsidiary having to implement a group-wide solution
DMP & Personalization – new and lost quarterly recurring revenue (QRR) – value of closed an terminated contracts in the period*
USD thousand
10
Strong sales efficiency – high churn driven by one large customer loss
1/3 related to
one customer
www.cxense.com
Singapore Press Holdings is home to some of Asia's most
influential and well-known publications.
SPH will implement Conversion Engine to grow subscription
revenues
Star Media Group is one of the largest media companies in
Malaysia
Star Media Group has decided to use the Cxense DMP with
Intelligent Personalization to help transform their raw data into
valuable resource
11
Selected contracts signed in Q3 2018
Mainichi Shimbun is one of the largest publishing companies in
Japan
Mainichi will upgrade Cxense DMP and implement Conversion
Engine to grow subscription revenues
www.cxense.com
74% 74%77%
80% 81%
79%
80%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018
Gross margin development
% of Revenue
• Q3’18 gross margin of 80%
• Increase of 1 ppt from Q2’18
• Cxense invested in a second EU data center in Q2’18
• Adds 33% core hosting capacity – 83% gross margin
potential compared to current 80%
• Simplifies GDPR compliance, enabling Cxense to offer EU-
only hosting
• Improved redundancy setup with 4 instead of 3 data
centers
Potential with
new DC: 83%
12
Gross margin increase in Q3Long term margin improvement potential
www.cxense.com13
Adjusted EBITDA increase – on track to realize integration cost synergies
• Sequential adjusted EBITDA improvement as a result of gross
margin increase and integration cost synergies
• Q3’18 adjusted EBITDA of USD -0.5 million, adjusted for 0.7 million
integration cost and non-IFRS adjustments
• USD 0.4 million integration and office cost provisions
• USD 0.3 million share based payments and one-off receivable
write-down
• On track to achieve targeted integration cost synergies
• Adjusted OPEX down 6% Q-o-Q
• More than half of the targeted ~10% reduction by end of
Q1’19 realized
Key figures
USD 1,000 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018
DMP & Intelligent personalization 3,357 3,617 3,816 3,875 3,993
SaaS Non-Core 1,699 1,530 1,423 1,243 1,077
Revenues 5,055 5,148 5,239 5,118 5,070
Gross margin 77% 80% 81% 79% 80%
OPEX 7,476 5,074 4,661 4,544 5,230
Non-IFRS OPEX adjustments (1,464) (253) (215) 259 (723)
OPEX adjusted 6,012 4,821 4,446 4,803 4,507
EBITDA (3,567) (931) (420) (518) (1,191)
EBITDA adjusted (2,103) (678) (204) (777) (468)
www.cxense.com
• USD 4.4 million of cash at period end, up 8% from Q2’18
• Driven by reduction of working capital after build-up in previous
quarter
• Funded through break-even with ongoing churn improvement
program and the integration cost synergies
14
Positive cash flow in Q3’18
Cash flow summary
www.cxense.com
Operations and strategy
15
www.cxense.com
Sharpen technology vision
• Focus on core product growth
• Strengthened product offering in areas with clear customer traction
• Enreach (13 joint cases before acquisition)
• Conversion Engine (WSJ collaboration)
• Extended machine learning capabilities
CEO – One year at Cxense New and profitable growth trajectory
Refine go-to-market model
• Global rollout of Conversion Engine and Enreach
• Same product offering in all regions
• Customer retention increase through:
• Larger accounts
• Better implementations
New and profitable growth trajectory
16
New leadership team
• International experience from relevant companies
• Fresh perspectives and strengthened competencies
• Agile, customer-driven product development
• B2B solution sales
• Improved execution power
www.cxense.com
May June July August September October November
Commercialization of Conversion Engine generating revenue
Customer driven development and commercialization of Cxense Conversion Engine
Proven, world-class solution developed with
The Wall Street Journal
2017
WSJ re-invents its
pay model with new
user-centric solution
based on Cxense
software
20182016
WSJ wins Axel
Springer paid
content award for
pioneering digital
subscriptions
Strong market
interest and several
leads in pipeline
Conversion Engine
officially introduced
as standalone
service
First publisher signs
up for Conversion
Engine
Productizing v2 of
Conversion Engine
for general
availability
17
www.cxense.com
Core market
Adjacent market
opportunities
DMP for Publishers / Ad networks
Content Recommendation Engines
Global Intelligence Platforms
Digital Marketing Software
E-commerce
~0.7
~3.8
~5.8
33
2,300
16%
17%
18%
16%
23%
Market size
USD billion
Growth
CAGR
Segment
Description
18
Our offering targets high-growth markets
Sources: Markets&Markets.com, Marketprognis.com, Persistence Market Research, Forrester
www.cxense.com
Growth opportunities beyond Publishing
Solid core offering:
1. DMP for Publishers
2. Personalization for Publishers
RETAIN
DEVELOP
Existing products New products
HOW TO WIN
Pu
blis
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igita
l M
ark
etin
g
WH
ER
E T
O P
LA
Y
5
8
7
6
4
3
2
1
Recent product extensions:
3. New DMP capabilities (Enreach)
4. Subscription optimization (Conversion Engine)
Unrealized market extensions:
5. Conversion optimization for marketers*
* Industries with long-lasting customer relationships to be approached first, e.g. telecom, finance, gaming/entertainment, other memberships
6. DMP for data alliances
7. DMP for media agencies
8. DMP for marketers*
MONETIZE
Personalization
DMP
19
www.cxense.com
Cxense is well positioned for the data alliances growthLarger deals with network opportunities
Shared among all
Shared bilaterally
Private
Common data alliance architecture Example customers
20
www.cxense.com
Strong, international leadership team
Christian P. HalvorsenChief Executive Officer
Pankaj Saharan Chief Technology Officer
David GosenChief Commercial Officer
Ben GrahamChief Product Officer
Jørgen EvjenChief Financial Officer
Elisabeth Monrad-HansenVP of Human Resources
21
www.cxense.com
Summary and outlook
22
www.cxense.com23
• Growth for core DMP and Personalization segment
• Adjusted EBITDA of USD -0.47 million and positive cash flow
• Funded through break-even with ongoing churn improvement program and cost reductions
• New leadership team successfully onboarded
• The new Conversion Engine and DMP features strengthens pipeline
• Positive outlook for new sales in Q4
Summary and outlook
www.cxense.com
Appendix
www.cxense.com
https://www.cxense.com/insights-lab/obstacle-opportunity-cxense-commitment-gdpr
Cxense welcomes changing regulatory environment and the General Data Protection Regulation (GDPR)
25
• EU regulation implemented on 25
May 2018
• Strengthened data protection for all
EU and EEA citizen
No financial impact from GDPR so far
1st party data DMPs, such as Cxense,
strengthened over 3rd party data DMPs
since implementation of GDPR
www.cxense.com
USD 1,000 (unaudited) Q3-12 Q4-12 Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18
Total SaaS revenues 674 736 840 993 1,090 2,650 3,568 3,442 3,530 3,590 3,301 2,954 4,183 5,291 5,467 5,381 5,511 5,654 5,209 5,077 5,055 5,148 5,239 5,118 5,070
Where of Advertising 301 384 384 369 374 1,762 2,439 2,202 2,074 2,046 1,558 1,347 1,920 1,847 1,900 1,448 1,216 1,159 911 861 678 525 407 325 326
Total DMP and Personalization
revenue (old segm.) 373 352 456 624 716 888 1,129 1,240 1,456 1,544 1,743 1,607 2,263 3,444 3,566 3,933 4,295 4,495 4,299 4,215 4,378 4,622 4,802 4,754 4,715
Where of consulting 276 197 210 234 362 161 246 481 293 377 348 278 318 269 367 265 245 212 185
Where of license 373 352 456 624 716 888 853 1,043 1,246 1,310 1,381 1,446 2,017 2,963 3,273 3,556 3,947 4,217 3,981 3,946 4,011 4,357 4,557 4,542 4,530
Video revenue 967 1,001 1,230 1,224 1,297 1,033 896 875 864 840 801 722
Where of consulting 272 37 115 136 114 73 69 55 43 55 72 55
Where of license 695 964 1,115 1,088 1,183 960 827 820 821 785 729 667
Mporium 74 148 142 136 185 141 132 136 131 146 141 147 77 -
Where of consulting 42
Where of license 76 148 142 136 143 141 132 136 131 146 141 147 77 -
Total DMP and Personalization
revenue (CORE) 373 352 456 624 716 888 1,129 1,240 1,456 1,544 1,743 1,533 2,115 2,335 2,429 2,518 2,930 3,066 3,130 3,188 3,357 3,617 3,816 3,875 3,993
Where of consulting - - - - - - 276 197 210 234 362 161 246 209 256 220 212 164 245 200 312 222 190 140 130
Where of license 373 352 456 624 716 888 853 1,043 1,246 1,310 1,381 1,370 1,869 2,126 2,173 2,298 2,718 2,902 2,885 2,988 3,045 3,395 3,626 3,736 3,863
growth q/q -11 % -6 % 30 % 37 % 15 % 24 % 27 % 10 % 17 % 6 % 13 % -12 % 38 % 10 % 4 % 4 % 16 % 5 % 2 % 2 % 5 % 8 % 5 % 2 % 3 %
growth y/y 17 % 49 % 92 % 152 % 148 % 99 % 103 % 74 % 54 % 24 % 45 % 51 % 39 % 64 % 39 % 31 % 29 % 27 % 15 % 18 % 22 % 22 % 19 %
26
Core business – historical revenue development
www.cxense.com27
Closed and terminated in the period – USD thousand Effect in reported figures – USD thousand
New QRR Lost QRR
282
366335
316
229
(92)
(187)
(219)(199)
(253)
Q3'17 Q4'17 Q1'18 Q2'18 Q3'18
235
408437 434
381
(206)(182)
(274) (262)
(138)
Q3'17 Q4'17 Q1'18 Q2'18 Q3'18
*Includes USD 48k in acquired revenue (Enreach)
*
Closed and notified terminated compared to P&L effectDMP & Personalization – new and lost quarterly recurring revenue (QRR)
www.cxense.com28
SaaS segment – P&L
USD 1,000 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018
IFRS IFRS IFRS IFRS IFRS IFRS IFRS IFRS IFRS
SaaS segment
DMP with Intelligent Personalization (CORE) 2,930 3,066 3,130 3,188 3,357 3,617 3,816 3,875 3,993
Advertising (Non-core) 1,216 1,159 911 861 678 525 436 364 355
mporium (Non-core) 141 132 136 131 146 141 147 77 -
Video (Non-core) 1,224 1,297 1,033 896 875 864 840 801 722
Revenues total 5,511 5,654 5,209 5,077 5,055 5,147 5,239 5,118 5,070
Cost of sales 1,252 1,195 1,361 1,321 1,146 1,005 997 1,091 1,031
Gross profit 4,259 4,460 3,848 3,756 3,909 4,143 4,242 4,027 4,039
Gross margin % 77 % 79 % 74 % 74 % 77 % 80 % 81 % 79 % 80 %
Personnel 4,141 4,574 4,402 5,826 5,305 3,018 2,505 2,474 2,931
Other OPEX 1,772 2,258 2,088 2,284 2,170 2,056 2,156 2,070 2,299
OPEX 5,913 6,832 6,490 8,110 7,476 5,074 4,661 4,544 5,230
EBITDA (1,654) (2,374) (2,642) (4,354) (3,567) (931) (420) (518) (1,191)
Non-IFRS adjustment of OPEX level
Share-based payment costs 149 191 244 239 (32) (18) (4) 39 115
Share-based social costs provision
Commission accrual reversals (343)
Restructuring costs and provisions 1,280 164 411
Office moving costs 210 (21) 0 140 103 60
Extraordinary/special 32 585 24 3
One-off provision for doubtful debt 84 142 (2) 137
Transaction costs 78 79 103 58 52 1 77 47
R&D refund (167)
Total reported OPEX adjustment items 226 397 358 882 1,464 253 215 (259) 723
OPEX adjusted 5,686 6,435 6,132 7,228 6,012 4,821 4,446 4,803 4,507
EBITDA adjusted (1,428) (1,977) (2,284) (3,472) (2,103) (678) (204) (777) (468)
Capitalized operating expense (496) (891) (507) (507) (557) (268) (226) (365) (421)
EBITDA adjusted with capitalization add back (1,924) (2,868) (2,791) (3,980) (2,660) (946) (431) (1,142) (889)
www.cxense.com29
Revenue bridge for SaaS- and core DMP and personalization segment
Quarterly figures (unaudited) Total revenue DMP and personalization revenue
USD 1,000 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018
Revenue in previous quarter 5,077 5,055 5,147 5,239 5,118 3,188 3,357 3,617 3,816 3,875
New recurring license revenue effect 243 468 491 357 333 235 408 437 337 333
Acquired recurring license revenue - - - 97 48 - - - 97 48
Divested recurring license revenue - (93) (183) - - - - - - -
Churn effect (333) (240) (292) (429) (315) (206) (182) (274) (262) (138)
Change in service revenue 97 (102) (21) (33) (27) 111 (89) (33) (50) (10)
Change in other variables (121) 69 33 (49) (30) (56) 106 35 (20) (48)
Currency effect 92 (10) 64 (63) (57) 85 17 34 (44) (66)
Revenue this quarter 5,055 5,147 5,239 5,118 5,070 3,357 3,617 3,816 3,875 3,993
Accumulated currency effect, reversed (95) (85) (149) (86) (29) (60) (77) (111) (67) (1)
Outbound revenue currency adjusted 4,960 5,062 5,090 5,033 5,041 3,297 3,540 3,705 3,807 3,992
Q3 run-rate adjustments
Full effect of contracts closed until 02 November 2018 (Core) 226
Full effect of known churn until 02 November (Core) (326)
DMP & Personalization run-rate revenue after adjustments 3,893
Number of closed contracts in the quarter* 29 30 18 22 15 26 26 18 22 15
Whereof new customers* 19 12 11 12 6 18 12 11 12 6
Whereof upsell* 10 18 7 10 9 8 14 7 10 9
Full QRR effect of contracts notified closed in the period 306 429 335 316 229 282 366 335 316 229
Full QRR effect of contracts notified lost in the period (215) (221) (335) (221) (442) (92) (187) (219) (199) (253)
Net 91 208 (0) 95 (213) 191 179 115 117 (25)
*Restated to include only license revenue contracts. Previously also included service and consulting contracts. In Q3 2018, number of new contracts were 15 license contracts and 2 service and consulting contracts
www.cxense.com30
New contracts reflect demand for core offering
• Closed 15 new contracts on Data Management & Personalization
• QRR of USD 229 thousand
• 9 average sales reps., lower sales efficiency on seasonal effects
• 60% of contracts were upsell on existing customers
23
37
30
22
26 26
18
22
15
9
14 1412
11
14 19 14
15
Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18
# new SaaS contracts for DMP and Personalization segment
Average QRR per new contract (USD k)
# of new core contracts and average contract size*
*Restated to include only license revenue contracts. Previously also included service and consulting contracts. In Q3 2018, number of new contracts were 15 license contracts and 2 service and consulting contracts