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11/14/18 12:45 pm EST

Press Release

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Rubicon Project Reports Third Quarter 2018 Results

Advertising Spend Growth Rate Accelerates

LOS ANGELES, Nov. 07, 2018 (GLOBE NEWSWIRE) -- Rubicon Project (NYSE: RUBI), the global exchange for advertising, today reported its results of operations for the third quarter of 2018.

Recent Highlights

  • Revenue was $29.7 million for Q3 2018, up 4% from Q2 2018
  • Ad spend(1) growth was up 24% in Q3 2018 compared to Q3 2017
  • Q4 2018 year over year revenue expected to grow over 20%
  • Q4 2018 year over year ad spend is expected to grow approximately 20%
  • Take rate(2) increased to 12.3% in Q3 2018 and is expected to approach 13% in Q4 2018
  • Programmatic video and audio drove significant year-over-year growth in ad spend
  • Mobile ad spend in Q3 2018 grew 45% year over year and represented 55% of total ad spend
  • Desktop ad spend in Q3 2018 grew 6% year over year
  • Company achieves cost reduction expense target
  • Net loss(3) was $13.8 million, or loss per share(3) of $0.27, compared to net loss of $103.6 million, or loss per share of $2.11 for the third quarter of 2017 (which included impairment of goodwill).
  • Adjusted EBITDA(1) was a negative $1.4 million, compared to adjusted EBITDA loss of $2.3 million for the third quarter of 2017.
  • Non-GAAP loss per share(1) was $0.18, compared to $0.14 non-GAAP loss per share for the third quarter of 2017.

“We are pleased to post accelerating ad spend growth this quarter, and expect more than 20% year over year revenue growth in Q4. Video, audio and mobile, combined with growth in desktop are helping us start to generate overall market share gains,” said Michael G. Barrett, President and CEO of Rubicon Project. “Our strong focus on transparency and inventory quality, along with our strong value proposition as a leading diversified independent exchange, positions us for continued growth and much improved financial performance with the positive leverage we have in our business.”

                     
Third Quarter 2018  Results Summary                    
(in millions, except per share amounts and percentages)                    
  Three Months Ended   Nine Months Ended
  September 30,
2018
  September 30,
2017
  Change
Favorable/
(Unfavorable)
  September 30,
2018
  September 30,
2017
  Change
Favorable/
(Unfavorable)
Revenue $29.7   $35.2   (16)%   $83.3   $124.1   (33)%
Advertising spend(1) $242.2   $195.0   24%   $690.9   $591.0   17%
Non-GAAP net revenue(1) $29.7   $35.2   (16)%   $83.3   $123.5   (33%)
Take rate(2) 12.3%   18.1%   (6 ppt)   12.1%   20.9%   (9 ppt)
Net loss ($13.8)   ($103.6)   87%   ($59.6)   ($131.0)   54%
Adjusted EBITDA(1) ($1.4)   ($2.3)   37%   ($21.1)   $1.8   nm
Adjusted EBITDA margin(3) (5%)   (6%)   1 ppt   (25%)   1%   (26 ppt)
Basic and diluted loss per share ($0.27)   ($2.11)   87%   ($1.19)   ($2.69)   56%
Non-GAAP loss per share(1) ($0.18)   ($0.14)   (29)%   ($0.89)   ($0.40)   (123%)


Definitions:
(1 ) Non-GAAP net revenue, Adjusted EBITDA, non-GAAP loss per share, and advertising spend are non-GAAP financial measures. Please see the discussion in the section called "Non-GAAP Financial Measures" and the reconciliations included at the end of this press release.
(2 ) Take rate is an operational performance measure calculated as revenue (or for periods in which we have revenue reported on a gross basis, as non-GAAP net revenue) divided by advertising spend. Reconciliations for revenue to both advertising spend and non-GAAP net revenue are included at the end of this press release. For further discussion, please see "Non-GAAP Financial Measures." We review take rate for internal management purposes to assess the development of our marketplace with buyers and sellers. Our take rate (and our fees, which drive take rate) can be affected by a variety of factors, including the terms of our arrangements with buyers and sellers active on our platform in a particular period; the scale of a buyer's or seller's activity on our platform; mix of inventory or transaction types; the implementation of new products; platforms and solution features; auction dynamics; negotiations with clients; header bidding; competitive factors and our strategic pricing decisions, including strategic fee reductions we implemented during the first half of 2017 and elimination of our buyer transaction fees as of November 1, 2018 and additional fee reductions or alternative pricing models we may implement in the future; and the overall development of the digital advertising ecosystem.
(3 ) Adjusted EBITDA margin is calculated as Adjusted EBITDA divided by revenue (or for periods in which we have revenue reported on a gross basis, by non-GAAP net revenue). Reconciliations for both net loss to Adjusted EBITDA and revenue to non-GAAP net revenue are included at the end of this press release. For further discussion, please see "Non-GAAP Financial Measures."
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Third Quarter 2018 Results Conference Call and Webcast:

The Company will host a conference call on November 7, 2018 at 1:30 PM (PT) / 4:30 PM (ET) to discuss the results for its third quarter of 2018.

Live conference call  
Toll free number: (844) 875-6911 (for domestic callers)
Direct dial number: (412) 902-6511 (for international callers)
Passcode: Ask to join the Rubicon Project conference call
Simultaneous audio webcast: http://investor.rubiconproject.com, under "Events and Presentations"
   
Conference call replay  
Toll free number: (877) 344-7529 (for domestic callers)
Direct dial number: (412) 317-0088 (for international callers)
Passcode: 10124885
Webcast link: http://investor.rubiconproject.com, under "Events and Presentations"
   

About Rubicon Project
Founded in 2007, Rubicon Project is one of the world’s largest advertising exchanges. The company helps websites and apps thrive by giving them tools and expertise to sell ads easily and safely. In addition, the world’s leading agencies and brands rely on Rubicon Project’s technology to execute tens of billions of advertising transactions each month. Rubicon Project is an independent, publicly traded company (NYSE:RUBI) headquartered in Los Angeles, California.

Note: The Rubicon Project and the Rubicon Project logo are registered service marks of The Rubicon Project, Inc.

Forward-Looking Statements:

This press release and management's prepared remarks during the conference call referred to above include, and management's answers to questions during the conference call may include, forward-looking statements, including statements based upon or relating to our expectations, assumptions, estimates, and projections. In some cases, you can identify forward-looking statements by terms such as "may," "might," "will," "objective," "intend," "should," "could," "can," "would," "expect," "believe," "design," "anticipate," "estimate," "predict," "potential," "plan" or the negative of these terms, and similar expressions. Forward-looking statements may include, but are not limited to, statements concerning our anticipated financial performance, including, without limitation, revenue, advertising spend, non-GAAP net revenue, non-GAAP loss per share, profitability, net income (loss), Adjusted EBITDA, earnings per share, and cash flow; our belief that we will achieve positive adjusted EBITDA in the fourth quarter of 2018; strategic objectives, including focus on header bidding, mobile, video, and private marketplace opportunities; investments in our business; development of our technology; introduction of new offerings; the impact of our acquisition of nToggle and its traffic shaping technology on our business; the effects of our cost reduction initiatives; scope and duration of client relationships; the fees we may charge in the future; business mix and expansion of our mobile, video and private marketplace offerings; sales growth; client utilization of our offerings; our competitive differentiation; our market share and leadership position in the industry; market conditions, trends, and opportunities; consumer reach; certain statements regarding future operational performance measures including ad requests, fill rate, paid impressions, average CPM, take rate, and advertising spend; and factors that could affect these and other aspects of our business. These statements are not guarantees of future performance; they reflect our current views with respect to future events and are based on assumptions and estimates and subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from expectations or results projected or implied by forward-looking statements. These risks include, but are not limited to: our ability to grow and to manage any growth effectively; our ability to develop innovative new technologies and remain a market leader; our ability to attract and retain buyers and sellers and increase our business with them; our vulnerability to loss of, or reduction in spending by, buyers; our reliance on large sources of advertising demand; our ability to maintain and grow a supply of digital advertising inventory from sellers; the effect on the advertising market and our business from difficult economic conditions; the freedom of buyers and sellers to direct their spending and inventory to competing sources of inventory and demand; our ability to use our solution for purchase and sale of higher value digital advertising inventory and to expand the use of our solution by buyers and sellers utilizing evolving digital media platforms; our ability to introduce new offerings and bring them to market in a timely manner, and otherwise adapt in response to client demands and industry trends, including shifts in digital advertising growth from desktop to mobile channels and from display to video formats; the increased prevalence of header bidding and its effect on our competitive position; our header bidding solution not resulting in revenue growth and causing infrastructure strain and added cost; uncertainty of our estimates and expectations associated with new offerings, including header bidding, private marketplace, mobile, video, guaranteed audience solutions, and traffic shaping; declined fees and take rate and the need to grow through advertising spend increases rather than fee increases; our ability to compensate for a reduced take rate by increasing the volume and/or value of transactions on our platform; our vulnerability to the depletion of our cash resources as revenue declines with the reduction in our take rate and as we incur additional investments in technology required to support the increased volume of transactions on our exchange; our ability to support our growth objectives with reduced resources from our cost reduction initiatives; our ability to raise additional capital if needed; our limited operating history and history of losses; our ability to continue to expand into new geographic markets; increased prevalence of ad-blocking technologies and browsers that block cookies or otherwise allow users to limit ad tracking; the slowing growth rate of online digital display advertising; the growing percentage of online and mobile advertising spending captured by owned and operated sites (such as Facebook and Google); the effects, including loss of market share, of increased competition in our market and increasing concentration of advertising spending, including mobile spending, in a small number of very large competitors; the effects of consolidation in the ad tech industry, such as AT&T's acquisition of AppNexus; acts of competitors and other third parties that can adversely affect our business; our ability to differentiate our offerings and compete effectively in a market trending increasingly toward commodification, transparency, and disintermediation; requests for discounts, fee concessions or revisions, rebates, refunds, favorable payment terms and greater levels of pricing transparency and specificity; potential adverse effects of malicious activity such as fraudulent inventory and malware; the effects of seasonal trends on our results of operations; costs associated with defending intellectual property infringement and other claims; our ability to attract and retain qualified employees and key personnel; our ability to identify future acquisitions of or investments in complementary companies or technologies and our ability to consummate the acquisitions and integrate such companies or technologies; and our ability to comply with, and the effect on our business of, the European General Data Protection Regulation, the California Consumer Privacy Act, and other evolving legal standards and regulations, particularly concerning data protection and consumer privacy and evolving labor standards.

We discuss many of these risks and additional factors that could cause actual results to differ materially from those anticipated by our forward-looking statements under the headings "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and elsewhere in filings we have made and will make from time to time with the Securities and Exchange Commission, or SEC, including our Annual Report on Form 10-K for the year ended December 31, 2017 and subsequent Quarterly Reports on Form 10-Q. These forward-looking statements represent our estimates and assumptions only as of the date made. Unless required by federal securities laws, we assume no obligation to update any of these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated, to reflect circumstances or events that occur after the statements are made. Without limiting the foregoing, any guidance we may provide will generally be given only in connection with quarterly and annual earnings announcements, without interim updates, and we may appear at industry conferences or make other public statements without disclosing material nonpublic information in our possession. Given these uncertainties, investors should not place undue reliance on these forward-looking statements. Investors should read this press release and the documents that we reference in this press release and have filed or will file with the SEC completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

Non-GAAP Financial Measures:

This press release includes information relating to advertising spend, non-GAAP net revenue, Adjusted EBITDA, non-GAAP net loss, and non-GAAP loss per share, which are financial measures that have not been prepared in accordance with GAAP. These non-GAAP financial measures are used by our management and board of directors, in addition to our GAAP results, to understand and evaluate our performance and trends, to prepare and approve our annual budget, and to develop short- and long-term plans and performance objectives. Management believes that these non-GAAP financial measures provide useful information about our core results and thus are appropriate to enhance the overall understanding of our past performance and our prospects for the future.

These non-GAAP financial measures are not intended to be considered in isolation from, as substitutes for, or as superior to, the corresponding financial measures prepared in accordance with GAAP. You are encouraged to evaluate these adjustments, and review the reconciliation of these non-GAAP financial measures to their most comparable GAAP measures, and the reasons we consider them appropriate. It is important to note that the particular items we exclude from, or include in, our non-GAAP financial measures may differ from the items excluded from, or included in, similar non-GAAP financial measures used by other companies. See "Reconciliation of revenue to advertising spend and revenue to non-GAAP net revenue," "Reconciliation of net loss to Adjusted EBITDA," "Reconciliation of net loss to non-GAAP net loss" and "Reconciliation of GAAP loss per share to non-GAAP loss per share" included as part of this press release.

Advertising Spend:

We define advertising spend as the total volume of spending between buyers and sellers transacted on our platform. Advertising spend does not represent revenue reported on a GAAP basis. Tracking our advertising spend facilitates comparison of our results to the results of companies in our industry that report GAAP revenue on a gross basis. We also use advertising spend for internal management purposes to assess market share of total advertising spending.

Our advertising spend may be influenced by demand for our services, the volume and characteristics of paid impressions, average CPM, our ability to fill bid requests, the nature and amount of fees we charge, and other factors such as changes in the market, our execution of the business, and competition.

Advertising spend may fluctuate due to seasonality. In the past, we have experienced higher advertising spend during the fourth quarter of a given year because many buyers devote a disproportionate amount of their advertising budgets to this period of the year to coincide with increased holiday purchasing. Buyers' focus on the fourth quarter generates more bidding activity on our platform, which may drive higher volumes of paid impressions, average CPM, or both. Our advertising spend grew 24% for the three months ended September 30, 2018 compared to the same period in 2017. The increase in advertising spend was driven by higher ad request volumes and an increase in the CPMs generated from our auctions. The increase in CPMs was driven by increased bidding activity on our platform, the value of the inventory that we made available to buyers, including PMP, mobile and video inventory that typically carries higher pricing, and auction dynamics, including the implementation of first price auctions and Estimated Market Rate ("EMR") for our header bidding inventory. In January 2018, we made first price our default auction dynamic for header bidding transactions.

Non-GAAP Net Revenue:

We define non-GAAP net revenue as GAAP revenue less amounts we pay sellers, where the amounts paid are included within cost of revenue for the portion of our revenue reported on a gross basis. The portion of our revenue reported on a gross basis was attributable to intent marketing services, which no longer generated revenue after the first quarter of 2017. Historically, non-GAAP net revenue was a useful measure in assessing the performance of our business in periods for which our revenue included revenue reported on a gross basis, because it showed the operating results of our business on a consistent basis without the effect of differing revenue reporting (gross vs. net) that we applied under GAAP across different types of transactions, and facilitated comparison of our results to the results of companies that report all of their revenue on a net basis. Revenue from intent marketing services in the first quarter of 2017 created the difference between our non-GAAP net revenue and our GAAP revenue for that period. We ceased offering our intent marketing solution in the first quarter of 2017, so for subsequent periods non-GAAP net revenue is the same as GAAP revenue, as there is no longer a reconciling item between GAAP and non-GAAP net revenue. Non-GAAP net revenue is presented for comparative purposes as the first quarter of 2017 still included the intent marketing solution reconciling item.

A potential limitation of non-GAAP net revenue is that other companies may define non-GAAP net revenue differently, which may make comparisons difficult.

Non-GAAP net revenue is influenced by the volume and characteristics of advertising spend and our take rate. The revenue we have reported on a gross basis was associated with our intent marketing business. Because we exited that business in the first quarter of 2017, we do not expect to report any revenue on a gross basis after the first quarter of 2017 unless and until we change our business practices, develop new products, or make an acquisition, in each case with characteristics that require gross reporting.

Adjusted EBITDA:

We define Adjusted EBITDA as net income (loss) adjusted to exclude stock-based compensation expense, depreciation and amortization, amortization of acquired intangible assets, impairment charges, interest income or expense, and other cash and non-cash based income or expenses that we do not consider indicative of our core operating performance, including, but not limited to foreign exchange gains and losses, acquisition and related items, and provision (benefit) for income taxes. We believe Adjusted EBITDA is useful to investors in evaluating our performance for the following reasons:

  • Adjusted EBITDA is widely used by investors and securities analysts to measure a company’s performance without regard to items such as those we exclude in calculating this measure, which can vary substantially from company to company depending upon their financing, capital structures, and the method by which assets were acquired.

  • Our management uses Adjusted EBITDA in conjunction with GAAP financial measures for planning purposes, including the preparation of our annual operating budget, as a measure of performance and the effectiveness of our business strategies, and in communications with our board of directors concerning our performance. Adjusted EBITDA may also be used as a metric for determining payment of cash incentive compensation.

  • Adjusted EBITDA provides a measure of consistency and comparability with our past performance that many investors find useful, facilitates period-to-period comparisons of operations, and also facilitates comparisons with other peer companies, many of which use similar non-GAAP financial measures to supplement their GAAP results.

Although Adjusted EBITDA is frequently used by investors and securities analysts in their evaluations of companies, Adjusted EBITDA has limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of our results of operations as reported under GAAP. These limitations include:

  • Stock-based compensation is a non-cash charge and will remain an element of our long-term incentive compensation package, although we exclude it as an expense when evaluating our ongoing operating performance for a particular period.

  • Depreciation and amortization are non-cash charges, and the assets being depreciated or amortized will often have to be replaced in the future, but Adjusted EBITDA does not reflect any cash requirements for these replacements.

  • Impairment charges are non-cash charges related to goodwill, intangible assets and/or long-lived assets.

  • Adjusted EBITDA does not reflect non-cash charges related to acquisition and related items, such as amortization of acquired intangible assets and changes in the fair value of contingent consideration.

  • Adjusted EBITDA does not reflect cash and non-cash charges and changes in, or cash requirements for, acquisition and related items, such as certain transaction expenses and expenses associated with earn-out amounts.

  • Adjusted EBITDA does not reflect changes in our working capital needs, capital expenditures, or contractual commitments.

  • Adjusted EBITDA does not reflect cash requirements for income taxes and the cash impact of other income or expense.

  • Other companies may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

Our Adjusted EBITDA is influenced by fluctuations in our revenue and the timing and amounts of our investments in our operations. Adjusted EBITDA should not be considered as an alternative to net income (loss), operating loss, or any other measure of financial performance calculated and presented in accordance with GAAP.

Non-GAAP Net Income (Loss) and Non-GAAP Earnings (Loss) per Share:

We define non-GAAP earnings (loss) per share as non-GAAP net income (loss) divided by non-GAAP weighted-average shares outstanding. Non-GAAP net income (loss) is equal to net income (loss) excluding stock-based compensation, impairment charges, cash and non-cash based acquisition and related expenses, including amortization of acquired intangible assets, transaction expenses, expenses associated with earn-out amounts, and foreign currency gains and losses. In periods in which non-GAAP net income (loss) is positive, non-GAAP weighted-average shares outstanding used to calculate non-GAAP earnings (loss) per share includes the impact of potentially dilutive shares. Potentially dilutive shares consist of stock options, restricted stock awards, restricted stock units, potential shares issued under the Employee Stock Purchase Plan, each computed using the treasury stock method, shares held in escrow, and potential shares issued as part of contingent consideration as a result of business combinations. We believe non-GAAP earnings (loss) per share is useful to investors in evaluating our ongoing operational performance and our trends on a per share basis, and also facilitates comparison of our financial results on a per share basis with other companies, many of which present a similar non-GAAP measure. However, a potential limitation of our use of non-GAAP earnings (loss) per share is that other companies may define non-GAAP earnings (loss) per share differently, which may make comparison difficult. This measure may also exclude expenses that may have a material impact on our reported financial results. Non-GAAP earnings (loss) per share is a performance measure and should not be used as a measure of liquidity. Because of these limitations, we also consider the comparable GAAP measure of net income (loss).

       
THE RUBICON PROJECT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(unaudited)
       
  September 30, 2018   December 31, 2017
ASSETS      
Current assets:      
Cash and cash equivalents $ 82,354     $ 76,642  
Marketable securities 14,486     52,504  
Accounts receivable, net 155,328     165,890  
Prepaid expenses and other current assets 8,781     9,620  
TOTAL CURRENT ASSETS 260,949     304,656  
Property and equipment, net 33,884     47,393  
Internal use software development costs, net 14,432     12,734  
Other assets, non-current 879     5,493  
Intangible assets, net 10,971     13,359  
TOTAL ASSETS $ 321,115     $ 383,635  
LIABILITIES AND STOCKHOLDERS' EQUITY      
Current liabilities:      
Accounts payable and accrued expenses $ 199,385     $ 214,103  
Other current liabilities 2,806     3,141  
TOTAL CURRENT LIABILITIES 202,191     217,244  
Other liabilities, non-current 1,172     1,780  
TOTAL LIABILITIES 203,363     219,024  
STOCKHOLDERS' EQUITY      
Common stock 1      
Additional paid-in capital 431,294     418,354  
Accumulated other comprehensive income (loss) (167 )   41  
Accumulated deficit (313,376 )   (253,784 )
TOTAL STOCKHOLDER'S EQUITY 117,752     164,611  
TOTAL LIABILITITES AND STOCKHOLDERS' EQUITY $ 321,115     $ 383,635  
               


               
THE RUBICON PROJECT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(unaudited)
               
  Three Months Ended
  Nine Months Ended
  September 30,
2018
  September 30,
2017
  September 30,
2018
  September 30,
2017
Revenue $ 29,729     $ 35,211     $ 83,253     $ 124,148  
Expenses (1)(2):                              
Cost of revenue 14,687     12,985     44,514     41,371  
Sales and marketing 10,654     12,503     34,046     39,660  
Technology and development 9,299     11,580     29,038     36,377  
General and administrative 9,355     13,644     33,340     43,079  
Restructuring and other exit costs         3,440     5,959  
Impairment of goodwill     90,251         90,251  
Total expenses 43,995     140,963     144,378     256,697  
Loss from operations (14,266 )   (105,752 )   (61,125 )   (132,549 )
Other (income) expense:              
Interest income, net (232 )   (269 )   (777 )   (664 )
Other income (206 )   (123 )   (626 )   (502 )
Foreign exchange (gain) loss, net (120 )   242     (363 )   1,093  
Total other income, net (558 )   (150 )   (1,766 )   (73 )
Loss before income taxes (13,708 )   (105,602 )   (59,359 )   (132,476 )
Provision (benefit) for income taxes 84     (2,031 )   233     (1,510 )
Net loss $ (13,792 )   $ (103,571 )   $ (59,592 )   $ (130,966 )
Net loss per share:              
Basic and Diluted $ (0.27 )   $ (2.11 )   $ (1.19 )   $ (2.69 )
Weighted average shares used to compute net loss per share:              
Basic and Diluted 50,513     49,055     50,095     48,726  
                       

(1)  Stock-based compensation expense included in our expenses was as follows:

  Three Months Ended   Nine Months Ended
September 30,
2018
  September 30,
2017
  September 30,
2018
  September 30,
2017
Cost of revenue $ 72     $ 115     $ 256     $ 295  
Sales and marketing 1,187     1,115     3,530     3,524  
Technology and development 691     1,122     2,163     3,178  
General and administrative 1,910     2,294     6,669     7,631  
Restructuring and other exit costs         398     1,560  
Total stock-based compensation expense $ 3,860     $ 4,646     $ 13,016     $ 16,188  
                               
   
(2)  Depreciation and amortization expense included in our expenses was as follows: 
   
  Three Months Ended   Nine Months Ended
  September 30,
2018
  September 30,
2017
  September 30,
2018
  September 30,
2017
Cost of revenue $ 8,271     $ 7,221     $ 24,785     $ 23,645  
Sales and marketing 141     135     455     888  
Technology and development 215     615     683     1,612  
General and administrative 140     207     432     1,009  
Total depreciation and amortization expense $ 8,767     $ 8,178     $ 26,355     $ 27,154  
                               

 

               
THE RUBICON PROJECT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
   
  Nine Months Ended
  September 30, 2018   September 30, 2017
OPERATING ACTIVITIES:      
Net loss $ (59,592 )   $ (130,966 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:      
Depreciation and amortization 26,355     27,154  
Stock-based compensation 13,016     16,188  
Impairment of goodwill     90,251  
Loss on disposal of property and equipment 149     269  
Provision for doubtful accounts 217     482  
Accretion of available for sale securities (374 )   (163 )
Unrealized foreign currency gains, net (206 )   372  
Deferred income taxes     (1,453 )
Changes in operating assets and liabilities, net of effect of business acquisitions:      
Accounts receivable 10,318     58,876  
Prepaid expenses and other assets 2,919     (1,315 )
Accounts payable and accrued expenses (14,415 )   (49,972 )
Other liabilities (939 )   (510 )
Net cash provided by (used in) operating activities (22,552 )   9,213  
INVESTING ACTIVITIES:      
Purchases of property and equipment (5,474 )   (14,554 )
Capitalized internal use software development costs (6,569 )   (6,127 )
Acquisitions, net of cash acquired     (38,610 )
Investments in available-for-sale securities (23,991 )   (66,419 )
Maturities of available-for-sale securities 55,650     67,650  
Sales of available-for-sale securities 9,228      
Net cash provided by (used in) investing activities 28,844     (58,060 )
FINANCING ACTIVITIES:      
Proceeds from exercise of stock options 45     391  
Proceeds from issuance of common stock under employee stock purchase plan 143     444  
Taxes paid related to net share settlement (658 )   (2,067 )
Net cash used in financing activities (470 )   (1,232 )
EFFECT OF EXCHANGE RATE CHANGES ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH (110 )   186  
CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 5,712     (49,893 )
CASH, CASH EQUIVALENTS AND RESTRICTED CASH — Beginning of period 76,642     149,498  
CASH, CASH EQUIVALENTS AND RESTRICTED CASH — End of period $ 82,354     $ 99,605  
SUPPLEMENTAL DISCLOSURES OF OTHER CASH FLOW INFORMATION:      
Cash paid for income taxes $ 272     $ 348  
Cash paid for interest $ 46     $ 46  
Capitalized assets financed by accounts payable and accrued expenses $ 3     $ 2,065  
Capitalized stock-based compensation $ 394     $ 338  

 

                               
THE RUBICON PROJECT, INC. 
RECONCILIATION OF REVENUE TO ADVERTISING SPEND AND REVENUE TO NON-GAAP NET REVENUE
(In thousands)
(unaudited)
   
  Three Months Ended   Nine Months Ended
  September 30,
2018
  September 30,
2017
  September 30,
2018
  September 30,
2017
Revenue $ 29,729     $ 35,211     $ 83,253     $ 124,148  
Plus amounts paid to sellers(1) 212,442     159,808     607,603     466,802  
Advertising spend $ 242,171     $ 195,019     $ 690,856     $ 590,950  
                               
  Three Months Ended   Nine Months Ended
  September 30,
2018
  September 30,
2017
  September 30,
2018
  September 30,
2017
Revenue $ 29,729     $ 35,211     $ 83,253     $ 124,148  
Less amounts paid to sellers reflected in cost of revenue(2)             633  
Non-GAAP net revenue $ 29,729     $ 35,211     $ 83,253     $ 123,515  
                               
(1) Amounts paid to sellers for the portion of our revenue reported on a net basis for GAAP purposes.
(2) Amounts paid to sellers for the portion of our revenue reported on a gross basis for GAAP purposes.
 

 

                               
THE RUBICON PROJECT, INC.
RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA
(In thousands)
(unaudited)
   
  Three Months Ended   Nine Months Ended
  September 30,
2018
  September 30,
2017
  September 30,
2018
  September 30,
2017
Net loss $ (13,792 )   $ (103,571 )   $ (59,592 )   $ (130,966 )
Add back (deduct):              
Depreciation and amortization expense, excluding amortization of acquired intangible assets 7,971     7,021     23,967     23,633  
Amortization of acquired intangibles 796     1,157     2,388     3,521  
Stock-based compensation expense 3,860     4,646     13,016     16,188  
Impairment of goodwill     90,251         90,251  
Acquisition and related items     268         268  
Interest income, net (232 )   (269 )   (777 )   (664 )
Foreign exchange (gain) loss, net (120 )   242     (363 )   1,093  
Provision (benefit) for income taxes 84     (2,031 )   233     (1,510 )
Adjusted EBITDA $ (1,433 )   $ (2,286 )   $ (21,128 )   $ 1,814  
                               

 

                               
THE RUBICON PROJECT, INC.
RECONCILIATION OF NET LOSS TO NON-GAAP NET LOSS
(In thousands)
(unaudited)
   
  Three Months Ended   Nine Months Ended
  September 30,
2018
  September 30,
2017
  September 30,
2018
  September 30,
2017
Net loss $ (13,792 )   $ (103,571 )   $ (59,592 )   $ (130,966 )
Add back (deduct):              
Acquisition and related items, including amortization of acquired intangibles 796     1,425     2,388     3,789  
Stock-based compensation expense 3,860     4,646     13,016     16,188  
Impairment of goodwill     90,251         90,251  
Foreign exchange (gain) loss, net (120 )   242     (363 )   1,093  
Tax effect of Non-GAAP adjustments (1) (35 )   (79 )   (64 )   (88 )
Non-GAAP net loss $ (9,291 )   $ (7,086 )   $ (44,615 )   $ (19,733 )
                               
(1) Non-GAAP net loss includes the estimated tax impact from the expense items reconciling between net loss and non-GAAP net loss.

 

                                 
THE RUBICON PROJECT, INC.
RECONCILIATION OF GAAP LOSS PER SHARE TO NON-GAAP LOSS PER SHARE
(In thousands, except per share amounts)
(unaudited)
   
   
  Three Months Ended   Nine Months Ended
  September 30,
2018
  September 30,
2017
  September 30,
2018
  September 30,
2017
GAAP net loss per share (1):              
Basic and Diluted $   (0.27 )   $ (2.11 )   $ (1.19 )   $ (2.69 )
Diluted $   (0.27 )   $ (2.11 )   $ (1.19 )   $ (2.69 )
               
Non-GAAP net loss (2) $   (9,291 )   $ (7,086 )   $ (44,615 )   $ (19,733 )
               
Reconciliation of weighted-average shares used to compute net loss per share to non-GAAP weighted average shares outstanding:              
Weighted-average shares used to compute net loss per share: 50,513     49,055     50,095     48,726  
Dilutive effect of weighted-average common stock options, RSAs, and RSUs(3)              
Dilutive effect of weighted-average escrow shares              
Dilutive effect of weighted-average ESPP(3)              
Non-GAAP weighted-average shares outstanding 50,513     49,055     50,095     48,726  
Non-GAAP loss per share $   (0.18 )   $ (0.14 )   $ (0.89 )   $ (0.40 )
   
(1) Calculated as net loss divided by basic weighted-average shares used to compute net loss per share as included in the consolidated statement of operations.
(2)  Refer to reconciliation of net loss to non-GAAP net loss.
(3)  In most periods in which net income is positive, the weighted-average shares used to compute diluted earnings per share are equal to the weighted-average shares used to compute basic loss per share and already include the dilutive effect of common stock options, RSAs, RSUs, acquisition related contingent and escrow shares, and ESPP using the treasury stock method.
 

 

                                                       
THE RUBICON PROJECT, INC.
REVENUE AND ADVERTISING SPEND BY CHANNEL
(In thousands, except percentages)
(unaudited)
   
   
  Revenue   Advertising Spend
  Three Months Ended   Three Months Ended
  September 30, 2018   September 30, 2017   September 30, 2018   September 30, 2017
               
  (in thousands, except percentages)
Channel:                              
Desktop $ 12,481     42 %   $ 16,881     48 %   $ 109,317     45 %   $ 103,325     53 %
Mobile 17,248     58     18,330     52     132,854     55     91,694     47  
Total $ 29,729     100 %   $ 35,211     100 %   $ 242,171     100 %   $ 195,019     100 %
   
  Revenue   Advertising Spend
  Nine Months Ended   Nine Months Ended
  September 30, 2018   September 30, 2017   September 30, 2018   September 30, 2017
               
  (in thousands, except percentages)
Channel:                              
Desktop $ 40,453     49 %   $ 68,956     56 %   $ 346,404     50 %   $ 345,481     58 %
Mobile 42,800     51     55,192     44     344,452     50     245,469     42  
Total $ 83,253     100 %   $ 124,148     100 %   $ 690,856     100 %   $ 590,950     100 %
                                                       

  

Investor Relations Contact
Nick Kormeluk
(949) 500-0003
nkormeluk@rubiconproject.com

Media Contact
Ben BillingsleyBroadsheet Communicationspress@rubiconproject.com

Source: The Rubicon Project, Inc.