Somoto Ltd. (TASE: SMTO), an Israeli global software company specializing in Internet marketing, video and mobile advertising, and providing distribution for content and applications to the PC, Android, and Mobile iOS environment has reported on its estimates for its preliminary results for the second quarter of 2018, which have not been audited and have not been reviewed. In the estimates of the company's management, total revenue in the second quarter of 2018 is expected to be within the range of $13.3-13.6 million. The company also expects EBITDA to be within the range of $3.0-3.2 million in this quarter, representing about 23% of revenue compared with about 18% in the first quarter of 2018.
The average forecast for the range reflects a rise of about 14% in the company's revenue compared with the first quarter of 2018. The rise in EBITDA stems mainly from a return to operational profitability in the video ad sector and was achieved despite expenditure of about $2.7 million for sales and marketing expenses regarding the distribution of the company's products via online ad networks in the app distribution sector, where expenses were recorded as they arose and revenue accruing over time.
The video ad sector returned to profitability, due to completion of the management's comprehensive streamlining plan that was carried out and included adapting the expenses framework and focusing on more profitable areas of activity. As part of video advertising activities, the company began operating in a new area of activity - Connected TV, which in the future the company's management estimates will be an important engine of growth for Somoto, due to a growing transition to using smart digital TV, that allows installing existing business and technological ad models in computers and mobiles while providing major value to advertisers and ad space owners. This sector, the company's management estimates has also received a boost from growing viewing of TV content on tablets and cellular devices as personal TV screens as well as from content producers who over times have lowered the cost of content and made it more conveniently accessible for consumption on every platform.
The balance of cash and value of cash including restricted cash at the end of the quarter stood at about $15 million and the net balance after deducting corporate banking credit was about $9.3 million, a decline of about $1.4 million compared with the net balance of about $10.7 million as of March 31, 2018. The company continues to create significant positive cash flows from routine operations. In this half, the company even made payments of about $2.5 million for payments based on meeting targets regarding the acquisition of Meme Video as well as about $4.0 million for buying back shares and distributing dividends of about $16.7 million and total payments amounted to about $8.4 million. In the second quarter of 2018, payments for dividends and for buying back shares worth about $4.8 million, so that without these payments in this quarter, the cash balance between the first quarter and the second quarter would have increased by about $3.4 million.
The company adopted a policy of distributing a significantly expanded dividend compared with its previous policy in a way that strives to distribute a 50% higher dividend than operating profit before EBITDA reductions. Implementing the new policy of dividend distribution will come after publication of the quarterly report for the period ending June 30, 2018, and regarding the company's operational results for 2018.
Sales and marketing expenses mainly include expenses for distributing the company's products via online advertising networks. In the second quarter of 2018, these expenses amounted to about $2.7 million due to continuing advertising via existing and new campaigns. It should be mentioned that the aforementioned expenses are credited to profit and loss on the date that recorded revenue was created over the period. Somoto CEO and CFO Assaf Itshayek said, "We are delighted to report preliminary results that demonstrate the continue trend of growth during recent quarters and express activities that we implemented. During the second quarter, we succeeded in returning the video ad sector to profitability as we estimated would happen. In addition, as part of this sector, we began to operate during this quarter in the Connected TV advertising sector where it is possible to realize focused advertising models as we d in our core activity. The sector currently already provides revenue and profits and we expect that it will bring an important contribution to the company's results. In addition, to the start of activities in this sector, the company continues to invest in developing and marketing an innovative platform for video advertising. It is important to mention that we are committed to creating value for our shareholders and since the start of the year we have distributed $16.7 million as a dividend and implemented buyback of shares worth about $4.0 million as well as declaring the expansion of our dividend policy. We are working to continue growth in our areas of activity while placing emphasis on improvement of profitability and creating a significant cash flow. Looking ahead, due to high liquidity, positive cash flow and strategic growth for the company, we continue to examine the acquisition of synergetic activities in interfacing areas to our core activity with the aim of creating value for our shareholders."
Published by Globes [online], Israel business news - www.globes-online.com - on July 18, 2018
© Copyright of Globes Publisher Itonut (1983) Ltd. 2018