Beleaguered ad-tech company Rocket Fuel announces more than 100 layoffs as it seeks to reduce costs by $30 million
Rocket Fuel will report a net loss of $39.6 million in the three months to March 31, according to preliminary Q1 documents filed at the US Securities and Exchange Commission on Tuesday. Revenue was at $104.3 million in the period, up 40% on the prior year, while the company reported non-GAAP net revenue of $58.8 million, an increase of 32%.
The ad-tech company says in addition to its layoffs, it will be reducing operating expenses in most categories including facilities leasing costs, outside services costs. The company's engineering and R&D departments will be unaffected. The layoffs are expected to be completed during the second quarter of 2015, while the other cost-cutting measures will continue during the remainder of the year.
What remains unclear is what will happen to the recruitment drive aimed at building out a sales team focused on working with advertising agencies Rocket Fuel hinted at in its last earnings call.
However, this was an initiative being led by the company's former CEO George John, who has now stepped back from that role, although he remains as chairman.
Monte Zweben, Rocket Fuel's interim CEO, said in a statement announcing the efficiency program: "We are taking proactive steps to improve Rocket Fuel's financial model, and our team is focused and committed as we quickly implement these needed efficiency actions. The company expects the operational efficiency program to reduce costs by approximately $30 million annually and position us to achieve our goal of positive non-GAAP adjusted EBITDA for 2015."
Non-GAAP adjusted EBITDA is estimated to be a loss of $13.6 million in the first quarter.
Rocket Fuel CFO Dave Sankaran said in the SEC filing: "Our preliminary first quarter non-GAAP adjusted EBITDA results came in significantly ahead of our prior guidance range, reflecting the initial impact of our focus on controlling costs and optimizing our financial model. With strategic efficiency programs in place, we expect to see continued improvement in our operating results in the coming quarters."
The company is working hard to pick itself up from a Financial Times report that implied ads served using its technology for Mercedes were viewed by more fraudster robots than humans. It is also awaiting the outcome of several class action lawsuits filed against the company, following its announcement in August last year that it was lowering its revenue guidance for the full year. The suits claim the company disseminated false and misleading statements to investors and have yet to enter the courtroom. Rocket Fuel denies the allegations.
Since then, Rocket Fuel has launched a new product called "Traffic Scanner" for all the market to use to check whether their ad campaigns are being served to "suspect" traffic, which it hopes will raise awareness of the ad fraud problem. Andrew Goode, COO of content verification and ad fraud detection service Project Sunblock, told Business Insider last year that Rocket Fuel had been "among the most proactive businesses in attempting to tackle this issue."
And in September last year Rocket Fuel acquired data management platform and demand-side platform [x+1] for roughly $230 million in cash and stock. It hopes the acquisition will improve its tech offer versus competitors - something it calls "Marketing That Learns."