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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM 10-Q
__________________
  (Mark One)

  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
 
Commission File Number: 001-36384
__________________
THE RUBICON PROJECT, INC.
(Exact name of registrant as specified in its charter)
 __________________
Delaware
 
 
20-8881738
(State or other jurisdiction of incorporation or organization)
 
 
(I.R.S. Employer Identification No.)
 
 
 
 
12181 Bluff Creek Drive,
4th Floor
Los Angeles,
CA
 
90094
 
(Address of principal executive offices, including zip code)
 
 
 
 
Registrant's telephone number, including area code:
 
(310)
207-0272
 
_
______________

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common stock, par value $0.00001 per share
RUBI
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes    No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes    No   
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
 
 
 
 
Non-accelerated filer
Smaller reporting company
 
 
 
 
 
 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).   Yes  No
Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date.
Class
 
Outstanding as of July 24, 2019
Common Stock, $0.00001 par value
 
52,990,930


Table of Contents

THE RUBICON PROJECT, INC.
QUARTERLY REPORT ON FORM 10-Q
 
TABLE OF CONTENTS
 
 
Page No.
Part I.
Item 1.
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
Part II.
Item 1.
Item 1A.
Item 2.
Item 6.
 

2

Table of Contents

PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
THE RUBICON PROJECT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
(unaudited)
 
June 30, 2019
 
December 31, 2018
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
86,111

 
$
80,452

Marketable securities

 
7,524

Accounts receivable, net
178,025

 
205,683

Prepaid expenses and other current assets
5,901

 
6,882

TOTAL CURRENT ASSETS
270,037

 
300,541

Property and equipment, net
24,340

 
33,487

Right-of-use lease asset
14,497

 

Internal use software development costs, net
15,257

 
14,570

Intangible assets, net
8,589

 
10,174

Other assets, non-current
2,117

 
1,240

TOTAL ASSETS
$
334,837

 
$
360,012

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable and accrued expenses
$
213,157

 
$
239,678

Lease liabilities, current
6,826

 

Other current liabilities
531

 
1,304

TOTAL CURRENT LIABILITIES
220,514

 
240,982

Lease liabilities, non-current
8,516

 

Other liabilities, non-current
179

 
1,017

TOTAL LIABILITIES
229,209

 
241,999

Commitments and contingencies (Note 10)


 


STOCKHOLDERS' EQUITY
 
 
 
Preferred stock, $0.00001 par value, 10,000 shares authorized at June 30, 2019 and December 31, 2018; 0 shares issued and outstanding at June 30, 2019 and December 31, 2018

 

Common stock, $0.00001 par value; 500,000 shares authorized at June 30, 2019 and December 31, 2018; 52,984 and 51,159 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively
1

 
1

Additional paid-in capital
442,353

 
433,877

Accumulated other comprehensive loss
(293)

 
(259)

Accumulated deficit
(336,433)

 
(315,606)

TOTAL STOCKHOLDERS' EQUITY
105,628

 
118,013

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
334,837

 
$
360,012


The accompanying notes to unaudited condensed consolidated financial statements are an integral part of these statements.


3

Table of Contents

THE RUBICON PROJECT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(unaudited)
 
Three Months Ended
 
Six Months Ended
 
June 30, 2019
 
June 30, 2018
 
June 30, 2019
 
June 30, 2018
Revenue
$
37,870

 
$
28,648

 
$
70,286

 
$
53,524

Expenses:
 
 
 
 
 
 
 
Cost of revenue
15,085

 
15,044

 
30,201

 
29,827

Sales and marketing
11,519

 
11,135

 
22,111

 
23,392

Technology and development
9,839

 
9,245

 
19,555

 
19,739

General and administrative
10,027

 
11,441

 
20,307

 
23,985

Restructuring and other exit costs

 
974

 

 
3,440

Total expenses
46,470

 
47,839

 
92,174

 
100,383

Loss from operations
(8,600
)
 
(19,191
)
 
(21,888
)
 
(46,859
)
Other (income) expense:
 
 
 
 
 
 
 
Interest income, net
(214
)
 
(274
)
 
(407
)
 
(545
)
Other income
(46
)
 
(210
)
 
(188
)
 
(420
)
Foreign exchange (gain) loss, net
(143
)
 
(797
)
 
158

 
(243
)
Total other income, net
(403
)
 
(1,281
)
 
(437
)
 
(1,208
)
Loss before income taxes
(8,197
)
 
(17,910
)
 
(21,451
)
 
(45,651
)
Provision (benefit) for income taxes
84

 
74

 
(624
)
 
149

Net loss
$
(8,281
)
 
$
(17,984
)
 
$
(20,827
)
 
$
(45,800
)
Net loss per share:
 
 
 
 
 
 
 
Basic and Diluted
$
(0.16
)
 
$
(0.36
)
 
$
(0.40
)
 
$
(0.92
)
Weighted average shares used to compute net loss per share:
 
 
 
 
 
 
 
Basic and Diluted
52,358

 
50,071

 
51,969

 
49,883


The accompanying notes to unaudited condensed consolidated financial statements are an integral part of these statements.


 

4

Table of Contents

THE RUBICON PROJECT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(unaudited)
 
Three Months Ended
 
Six Months Ended
 
June 30, 2019
 
June 30, 2018
 
June 30, 2019

June 30, 2018
Net loss
$
(8,281
)
 
$
(17,984
)
 
$
(20,827
)
 
$
(45,800
)
Other comprehensive income (loss):
 
 
 
 
 
 
 
Unrealized gain on investments

 
16

 
2

 
6

Foreign currency translation adjustments
(128
)
 
(338
)
 
(36
)
 
(124
)
Other comprehensive loss
(128
)
 
(322
)
 
(34
)
 
(118
)
Comprehensive loss
$
(8,409
)
 
$
(18,306
)
 
$
(20,861
)
 
$
(45,918
)

The accompanying notes to unaudited condensed consolidated financial statements are an integral part of these statements.




5

Table of Contents

 

THE RUBICON PROJECT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
(unaudited)
 
Common Stock 
 
Additional
Paid-In
Capital
 
Accumulated  Other
Comprehensive
Income (Loss)
 
Accumulated
Deficit
 
Total
Stockholders’
Equity
 
Shares
 
Amount
 
Balance at December 31, 2017
50,239

 
$

 
$
418,354

 
$
41

 
$
(253,784
)
 
$
164,611

Exercise of common stock options
9

 

 
6

 

 

 
6

Issuance of common stock related to RSU vesting
51

 

 

 

 

 

Shares withheld related to net share settlement
(19
)
 

 
(40
)
 

 

 
(40
)
Stock-based compensation

 

 
4,689

 

 

 
4,689

Other comprehensive income

 

 

 
204

 

 
204

Net loss

 

 

 

 
(27,816
)
 
(27,816
)
Balance at March 31, 2018
50,280

 

 
423,009

 
245

 
(281,600
)
 
141,654

Exercise of common stock options
40

 

 
39

 

 

 
39

Restricted stock awards, net
(156
)
 

 

 

 

 

Issuance of common stock related to employee stock purchase plan
89

 

 
143

 

 

 
143

Issuance of common stock related to RSU vesting
779

 
1

 

 

 

 
1

Shares withheld related to net share settlement
(282
)
 

 
(618
)
 

 

 
(618
)
Stock-based compensation

 

 
4,751

 

 

 
4,751

Other comprehensive income

 

 

 
(322
)
 

 
(322
)
Net loss

 

 

 

 
(17,984
)
 
(17,984
)
Balance at June 30, 2018
50,750

 
$
1

 
$
427,324

 
$
(77
)
 
$
(299,584
)
 
$
127,664

 
Common Stock 
 
Additional
Paid-In
Capital
 
Accumulated  Other
Comprehensive
Income (Loss)
 
Accumulated
Deficit
 
Total
Stockholders’
Equity
 
Shares
 
Amount
 
Balance at December 31, 2018
51,159

 
$
1

 
$
433,877

 
$
(259
)
 
$
(315,606
)
 
$
118,013

Exercise of common stock options
76

 

 
251

 

 

 
251

Restricted stock awards, net
(182
)
 

 

 

 

 

Issuance of common stock related to RSU vesting
1,171

 

 

 

 

 

Shares withheld related to net share settlement
(459
)
 

 
(1,835
)
 

 

 
(1,835
)
Stock-based compensation

 

 
4,514

 

 

 
4,514

Other comprehensive income

 

 

 
94

 

 
94

Net loss

 

 

 

 
(12,546
)
 
(12,546
)
Balance at March 31, 2019
51,765


1


436,807


(165
)

(328,152
)

108,491

Exercise of common stock options
79

 

 
132

 

 

 
132

Issuance of common stock related to employee stock purchase plan
118

 

 
477

 

 

 
477

Issuance of common stock related to RSU vesting
1,022

 

 

 

 

 

Shares withheld related to net share settlement

 

 
(12
)
 

 

 
(12
)
Stock-based compensation

 

 
4,949

 

 

 
4,949

Other comprehensive income

 

 

 
(128
)
 

 
(128
)
Net loss

 

 

 

 
(8,281
)
 
(8,281
)
Balance at June 30, 2019
52,984


$
1


$
442,353


$
(293
)

$
(336,433
)

$
105,628


The accompanying notes to unaudited condensed consolidated financial statements are an integral part of these statements.

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THE RUBICON PROJECT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
 
Six Months Ended
 
June 30, 2019
 
June 30, 2018
OPERATING ACTIVITIES:
 
 
 
Net loss
$
(20,827
)
 
$
(45,800
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
Depreciation and amortization
16,814

 
17,588

Stock-based compensation
9,164

 
9,156

Loss on disposal of property and equipment
16

 
120

Provision for doubtful accounts
966

 
215

Accretion of available-for-sale securities
24

 
(318
)
Non-cash lease expense
(379
)
 

Unrealized foreign currency (gains) losses, net
777

 
(766
)
Deferred income taxes
(752
)
 

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
26,831

 
12,342

Prepaid expenses and other assets
593

 
2,351

Accounts payable and accrued expenses
(27,567
)
 
(15,287
)
Other liabilities
(127
)
 
(691
)
Net cash provided by (used in) operating activities
5,533

 
(21,090
)
INVESTING ACTIVITIES:
 
 
 
Purchases of property and equipment
(2,212
)
 
(1,216
)
Capitalized internal use software development costs
(4,160
)
 
(4,817
)
Investments in available-for-sale securities

 
(23,991
)
Maturities of available-for-sale securities
7,500

 
41,150

Sales of available-for-sale securities

 
6,086

Net cash provided by investing activities
1,128

 
17,212

FINANCING ACTIVITIES:
 
 
 
Proceeds from exercise of stock options
383

 
45

Proceeds from issuance of common stock under employee stock purchase plan
477

 
143

Taxes paid related to net share settlement
(1,847
)
 
(658
)
Net cash used in financing activities
(987
)
 
(470
)
EFFECT OF EXCHANGE RATE CHANGES ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH
(15
)
 
(47
)
CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
5,659

 
(4,395
)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH — Beginning of period
80,452

 
76,642

CASH, CASH EQUIVALENTS AND RESTRICTED CASH — End of period
$
86,111

 
$
72,247

SUPPLEMENTAL DISCLOSURES OF OTHER CASH FLOW INFORMATION:
 
 
 
Cash paid for income taxes
$
145

 
$
167

Cash paid for interest
$
25

 
$
30

Capitalized assets financed by accounts payable and accrued expenses
$
118

 
$
712

Capitalized stock-based compensation
$
299

 
$
284

Operating lease right-of-use assets obtained in exchange for new operating lease liabilities
$
3,237

 
$

The accompanying notes to unaudited condensed consolidated financial statements are an integral part of these statements.

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THE RUBICON PROJECT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1—Organization and Summary of Significant Accounting Policies
Company Overview
The Rubicon Project, Inc., or Rubicon Project (the "Company"), was formed on April 20, 2007 in Delaware and began operations in April 2007. The Company is headquartered in Los Angeles, California.
The Company provides a technology solution to automate the purchase and sale of digital advertising inventory for buyers and sellers. The Company's platform features applications and services for digital advertising sellers, including websites, mobile applications and other digital media properties, and their representatives, to sell their digital advertising inventory; applications and services for buyers, including advertisers, agencies, agency trading desks, and demand side platforms, or DSPs, to buy digital advertising inventory; and a marketplace over which such transactions are executed. In the second quarter of 2019, the Company announced the beta program for Demand Manager, which helps sellers effectively monetize their advertising inventory by making it easier to deploy, configure, and optimize Prebid-based header bidding solutions. Prebid is a free and open source suite of software products designed by advertising community developers to enable publishers to implement header bidding on their websites and from within their apps. Together, these features power and enhance a comprehensive, transparent, independent advertising marketplace that brings buyers and sellers together and facilitates intelligent decision making and automated transaction execution for the digital advertising inventory managed on the Company's platform. The Company's clients include many of the world's leading publishers of websites and mobile applications and buyers of digital advertising inventory.
Advertising inventory takes different forms, referred to as advertising units, is purchased and sold through different transactional methods, and allows advertising content to be presented to consumers through different channels. The Company's solution enables buyers and sellers to purchase and sell:
a comprehensive range of advertising units, including display, audio, and video;
that are transacted through real-time bidding, which includes (i) direct sale of premium inventory, which the Company refers to as private marketplace, or PMP, and (ii) open auction bidding, which the Company refers to as open marketplace, or OMP; and
that are displayed across digital channels, including mobile web, mobile application, and desktop, as well as across various out-of-home channels, such as digital billboards.
Risks and Uncertainties
The Company operates in the rapidly changing advertising industry and has faced demands by ad tech buyers for more efficiency and lower costs, changes in bidding technologies, and increased competition. The Company has adjusted its pricing model, which has reduced margins, and has lowered its expense structure to address these changes in the industry, resulting in net operating losses. The Company continues to incur net operating losses, despite having increased revenues and reduced costs. The Company must continue to increase revenues and/or manage costs in order to compensate for reduced margins, or it may not be able to grow its business and may continue to operate at a loss, depleting its cash resources and liquidity. If the Company continues to experience significant operating losses in the future, the Company may require additional liquidity to fund its operations.
Basis of Presentation and Summary of Significant Accounting Policies
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles, or GAAP, for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of the results for the interim period presented have been included. Operating results for the six months ended June 30, 2019 are not necessarily indicative of the results that may be expected for any future interim period, the year ending December 31, 2019, or for any future year.
The condensed consolidated balance sheet at December 31, 2018 has been derived from the audited financial statements at that date, but does not include all of the disclosures required by GAAP. The accompanying condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto for the year ended December 31, 2018 included in its 2018 Annual Report on Form 10-K.
The Company adopted Accounting Standards Codification Topic 842 ("ASC 842")—Leases on January 1, 2019 using a modified retrospective approach. The adoption of this standard impacted only the financial statements included as of June 30, 2019 and for the three and six months ended June 30, 2019. See below for additional information regarding the Company's adoption of ASC 842. Aside from the adoption of ASC 842, there have been no significant changes in the Company's accounting policies from

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those disclosed in its audited consolidated financial statements and notes thereto for the year ended December 31, 2018 included in its Annual Report on Form 10-K.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported and disclosed financial statements and accompanying footnotes. Actual results could differ materially from these estimates.
Adoption of ASC 842
On January 1, 2019, the Company adopted ASC 842, which requires the recognition of the right-of-use assets, or ROU assets, and related lease liabilities on the balance sheet using a modified retrospective approach. The consolidated financial statements related to periods prior to January 1, 2019 were not restated, and continue to be reported under ASC Topic 840—Leases ("ASC 840"), which did not require the recognition of operating lease liabilities on the balance sheet. As a result, the consolidated financial statements related to periods prior to January 1, 2019 are not entirely comparative with current and future periods. As permitted under ASC 842, the Company elected several practical expedients that permit the Company to not reassess (1) whether existing contracts are or contain a lease, (2) the classification of existing leases, and (3) whether previously capitalized costs continue to qualify as initial indirect costs. In addition, the Company has elected not to recognize short-term leases on our balance sheet, nor separate lease and non-lease components for our data center leases. In addition, we utilized the portfolio approach to group leases with similar characteristics and did not use hindsight to determine lease term.
In addition to the leases previously reported under ASC 840, the Company also reviewed its data center agreements to identify non-lease components that should not be included in the lease liability and lease expense under ASC 842. Certain fixed non-lease components of data center leases, primarily fixed minimum power commitments, have been included in the lease liability and ROU asset as the Company has elected the practical expedient for its data centers to not separate the lease and non-lease components; however, variable components have not been included. For identified leases, the Company used its incremental borrowing rate to discount the related future payment obligations as of January 1, 2019 to determine its lease liability as of adoption. As of the adoption date, the Company recognized a lease liability of $15.6 million and a corresponding ROU asset of $14.3 million; there was no equity impact from the adoption. The difference between the lease liability and the ROU asset primarily represents the existing deferred rent liabilities balances before adoption, resulting from historical straight-lining of operating leases, which was effectively reclassified upon adoption to reduce the measurement of the ROU asset.
The Company records rent expense for operating leases, including leases of office locations, data centers, and equipment, on a straight-line basis over the lease term. The straight-line calculation of rent expense includes rent escalations on certain leases, as well as lease incentives provided by the landlords, including payments for leasehold improvements and rent-free periods. The Company begins recognition of rent expense on the commencement date, which is generally the date that the asset is made available for use. The lease liability is included in lease liabilities, current and lease liabilities, non-current within the condensed consolidated balance sheet, which are reduced as lease related payments are made. The ROU asset is amortized on a periodic basis over the expected term of the lease. See Note 11 for additional information.
Recent Accounting Pronouncements
Under the Jumpstart Our Business Startups Act, or the JOBS Act, the Company meets the definition of an emerging growth company. The Company has irrevocably elected to opt out of the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act.
In March 2019, the Financial Accounting Standards Board issued ASU 2019-01—Leases (Topic 842): Codification Improvements ("ASU 2019-01"), which clarifies certain topics around lease guidance. One of the provisions of ASU 2019-01 pertains to the Company as it updates existing guidance by explicitly allowing an exception to transition disclosures typically required, while adopting ASC 842. Under this guidance, entities that have adopted ASC 842 are not required to provide identical disclosures for the comparative previous year period in the year of adoption. ASU 2019-01 is required to be adopted concurrently with the adoption of ASC 842, and as such, the Company adopted ASU 2019-01 during the first quarter of 2019.


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Note 2—Net Income (Loss) Per Share
The following table presents the basic and diluted net loss per share:  
 
Three Months Ended
 
Six Months Ended
 
June 30, 2019
 
June 30, 2018
 
June 30, 2019
 
June 30, 2018
 
(in thousands, except per share data)
Basic and Diluted EPS:
 
 
 
 
 
 
 
Net loss
$
(8,281
)
 
$
(17,984
)
 
$
(20,827
)
 
$
(45,800
)
Weighted-average common shares outstanding
52,369

 
50,443

 
52,004

 
50,346

Weighted-average unvested restricted stock
(11
)
 
(372
)
 
(35
)
 
(463
)
Weighted-average common shares outstanding used to compute net loss per share
52,358

 
50,071

 
51,969

 
49,883

Basic and diluted net loss per share
$
(0.16
)
 
$
(0.36
)
 
$
(0.40
)
 
$
(0.92
)

The following weighted-average shares have been excluded from the calculation of diluted net loss per share attributable to common stockholders for each period presented because they are anti-dilutive:
 
Three Months Ended
 
Six Months Ended
 
June 30, 2019
 
June 30, 2018
 
June 30, 2019
 
June 30, 2018
 
(in thousands)
 
(in thousands)
Options to purchase common stock
605

 
18

 
559

 
27

Unvested restricted stock awards
5

 
301

 
24

 
244

Unvested restricted stock units
3,818

 
1,434

 
3,282

 
1,401

ESPP
28

 
36

 
28

 
49

Total shares excluded from net loss per share
4,456

 
1,789

 
3,893

 
1,721


Note 3—Revenues
The Company generates revenue from transactions where it provides a platform for the purchase and sale of digital advertising inventory. The Company’s advertising automation solution is a marketplace for sellers of digital advertising inventory (providers of websites, mobile applications and other digital media properties, and their representatives) and buyers of digital advertising inventory (including advertisers, agencies, agency trading desks, and demand-side platforms). This solution incorporates proprietary machine-learning algorithms, sophisticated data processing, high-volume storage, detailed analytics capabilities, and a distributed infrastructure. Together, these features form the basis for the Company’s automated advertising solution that brings buyers and sellers together and facilitates intelligent decision-making and automated transaction execution for the digital advertising inventory managed on the Company's platform. Digital advertising inventory is created when consumers access sellers’ content. Sellers provide digital advertising inventory to the Company’s platform in the form of advertising requests, or ad requests. When the Company receives ad requests from sellers, it sends bid requests to buyers, which enable buyers to bid on sellers’ digital advertising inventory. Winning bids can create advertising, or paid impressions, for the seller to present to the consumer.
The total volume of spending between buyers and sellers on the Company’s platform is referred to as advertising spend. The Company keeps a percentage of that advertising spend as a fee, and remits the remainder to the seller. The fee that the Company retains from the gross advertising spend on its platform is recognized as revenue. The fee earned on each transaction is based on the pre-existing agreement between the Company and the seller and the clearing price of the winning bid. The Company recognizes revenue upon fulfillment of its performance obligation to a client, which occurs at the point in time an ad renders and is counted as a paid impression, subject to an underlying agreement existing with the client and a fixed or determinable transaction price. Performance obligations for all transactions are satisfied, and the corresponding revenue is recognized, at a distinct point in time when an ad renders. The Company does not have arrangements with multiple performance obligations. The Company considers the following when determining if a contract exists under which the performance obligations have been satisfied: (i) contract approval by all parties, (ii) identification of each party’s rights regarding the goods or services to be transferred, (iii) specified payment terms, (iv) commercial substance of the contract, and (v) collectability of substantially all of the consideration is probable.
The Company has determined that it does not act as the principal in the purchase and sale of digital advertising inventory because it does not have control of the digital advertising inventory and does not set prices agreed upon within the auction marketplace, and therefore reports revenue on a net basis.

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Payment terms are specified in agreements between the Company and the buyers and sellers on its exchange platform. The Company generally bills buyers at the end of each month for the full purchase price of impressions filled in that month. The Company recognizes volume discounts as a reduction of revenue as they are incurred. Specific payment terms may vary by agreement, but are generally seventy-five days or less. The Company's accounts receivable are recorded at the amount of gross billings to buyers, net of allowances for the amounts the Company is responsible to collect. The Company's accounts payable related to amounts due to sellers are recorded at the net amount payable to sellers (see Note 5). Accordingly, both accounts receivable and accounts payable appear large in relation to revenue reported on a net basis.
The following table presents our revenue by channel for the three and six months ended June 30, 2019 and 2018:
 
Three Months Ended
 
Six Months Ended
 
June 30, 2019
 
June 30, 2018
 
June 30, 2019
 
June 30, 2018
 
(in thousands, except percentages)
Channel:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Desktop
$
16,588

 
44
%
 
$
13,663

 
48
%
 
$
31,809

 
45
%
 
$
27,972

 
52
%
Mobile
21,282

 
56

 
14,985

 
52

 
38,477

 
55

 
25,552

 
48

Total
$
37,870


100
%

$
28,648


100
%

$
70,286


100
%

$
53,524


100
%
The following table presents our revenue disaggregated by geographic location, based on the location of the Company's sellers:
 
Three Months Ended
 
Six Months Ended
 
June 30, 2019
 
June 30, 2018
 
June 30, 2019
 
June 30, 2018
 
(in thousands)
 
(in thousands)
United States
$
25,790

 
$
18,966

 
$
47,276

 
$
34,470

International
12,080

 
9,682

 
23,010

 
19,054

Total
$
37,870

 
$
28,648

 
$
70,286

 
$
53,524


Note 4—Fair Value Measurements
Recurring Fair Value Measurements    
Fair value represents the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Observable inputs are based on market data obtained from independent sources. The fair value hierarchy is based on the following three levels of inputs, of which the first two are considered observable and the last one is considered unobservable:
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 – Unobservable inputs.
The table below sets forth a summary of financial instruments that are measured at fair value on a recurring basis at June 30, 2019:
 
Total
 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable Inputs 
(Level 3)
 
(in thousands)
Cash equivalents
$
13,377

 
$
13,377

 
$

 
$


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Table of Contents

The table below sets forth a summary of financial instruments that are measured at fair value on a recurring basis at December 31, 2018:
 
Total
 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable Inputs 
(Level 3)
 
(in thousands)
Cash equivalents
$
13,692

 
$
13,692

 
$

 
$

U.S. Treasury, government and agency debt securities
$
7,524

 
$
7,524

 
$

 
$


At June 30, 2019 and December 31, 2018, cash equivalents of $13.4 million and $13.7 million, respectively, consisted of money market funds and commercial paper, with original maturities of three months or less. The carrying amounts of cash equivalents are classified as Level 1 or Level 2 depending on whether or not their fair values are based on quoted market prices for identical securities that are traded in an active market. Corporate debt securities (which are included in marketable securities on the balance sheet) with fair values derived from similar securities rather than based on quoted market prices for identical securities, are classified as Level 2 as well. The fair values of the Company's U.S. treasury, government and agency debt securities are based on quoted market prices and classified as Level 1, and are included within marketable securities.
Note 5—Other Balance Sheet Amounts
Investments in marketable securities as of December 31, 2018 consisted of the following:
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(in thousands)
Available-for-sale—short-term:
 
 
 
 
 
 
 
U.S. Treasury, government and agency debt securities
$
7,526

 
$

 
$
(2
)
 
$
7,524


The Company had no available-for-sale securities as of June 30, 2019. For the three and six months ended June 30, 2019, there were no realized gains (losses) and there were no unrealized holding gains (losses) reclassified out of accumulated other comprehensive loss into the condensed consolidated statements of operations for the sale of available-for-sale investments. For the three and six months ended June 30, 2018, the Company sold $6.1 million of available-for-sale investments, on which the realized gains were de minimis and there were no unrealized holding gains (losses) reclassified out of accumulated other comprehensive loss into the condensed consolidated statements of operations.
Accounts payable and accrued expenses included the following:
 
June 30, 2019
 
December 31, 2018
 
(in thousands)
Accounts payable—seller
$
202,463

 
$
230,423

Accounts payable—trade
4,849

 
3,122

Accrued employee-related payables
5,845

 
6,133

Total
$
213,157

 
$
239,678


There was no restricted cash as of June 30, 2019 and December 31, 2018.


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Note 6—Intangible Assets
The Company’s intangible assets as of June 30, 2019 and December 31, 2018 included the following:
 
June 30, 2019
 
December 31, 2018
 
(in thousands)
Amortizable intangible assets:
 
 
 
Developed technology
$
16,878

 
$
16,878

Non-compete agreements
690

 
690

Trademarks
20

 
20

Total identifiable intangible assets, gross
17,588

 
17,588

Accumulated amortization—intangible assets:
 
 
 
Developed technology
(8,301
)
 
(6,888
)
Non-compete agreements
(678
)
 
(506
)
Trademarks
(20
)
 
(20
)
Total accumulated amortization—intangible assets
(8,999
)
 
(7,414
)
Total identifiable intangible assets, net
$
8,589

 
$
10,174


Amortization of intangible assets for the three months ended June 30, 2019 and 2018 was $0.8 million for both periods, and $1.6 million for both the six months ended June 30, 2019 and 2018. The estimated remaining amortization expense associated with the Company's intangible assets was as follows as of June 30, 2019:
Fiscal Year
Amount
 
(in thousands)
Remaining 2019
$
1,425

2020
2,826

2021
2,826

2022
1,512

2023

Thereafter

Total
$
8,589


Note 7—Stock-Based Compensation
The Company’s equity incentive plans provide for the grant of equity awards, including non-statutory or incentive stock options, restricted stock awards ("RSAs"), and restricted stock units ("RSUs"), to the Company's employees, officers, directors, and consultants. The Company's board of directors administers the plans. Outstanding options vest based upon continued service at varying rates, but generally over four years from issuance with 25% vesting after one year of service and the remainder vesting monthly thereafter. RSAs and RSUs vest at varying rates, typically approximately 25% vesting after approximately one year of service and the remainder vesting semi-annually thereafter, but with certain retention grants vesting 50% on each of the first and second anniversaries of the grant date. Options, RSAs, and RSUs granted under the plans accelerate under certain circumstances for certain participants upon a change in control, as defined in the governing plan. An aggregate of 4,444,960 shares remained available for future grants at June 30, 2019 under the plans.

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Stock Options
A summary of stock option activity for the six months ended June 30, 2019 is as follows:

Shares Under Option
 
Weighted- Average Exercise Price
 
Weighted- Average Contractual Life
 
Aggregate Intrinsic Value

(in thousands)
 
 
 
 
 
(in thousands)
Outstanding at December 31, 2018
3,488

 
$
7.06

 
 
 
 
Granted
1,184

 
$
4.98

 
 
 
 
Exercised
(156
)
 
$
2.46

 
 
 
 
Expired
(35
)
 
$
14.13

 
 
 
 
Forfeited
(73
)
 
$
2.62

 
 
 
 
Outstanding at June 30, 2019
4,408

 
$
6.68

 
7.45 years
 
$
6,829

Exercisable at June 30, 2019
2,340

 
$
8.69

 
6.07 years
 
$
2,720


The total intrinsic values of options exercised during the six months ended June 30, 2019 was $0.6 million. At June 30, 2019, the Company had unrecognized employee stock-based compensation expense relating to nonvested stock options of approximately $5.2 million, which is expected to be recognized over a weighted-average period of 2.9 years. The weighted-average grant date fair value per share of stock options granted during the six months ended June 30, 2019 was $2.85. Total fair value of options vested during the six months ended June 30, 2019 was $1.0 million.
The Company estimates the fair value of stock options that contain service and/or performance conditions using the Black-Scholes option pricing model. The weighted-average input assumptions used by the Company were as follows:
 
Three Months Ended
 
Six Months Ended
 
June 30, 2019
 
June 30, 2018
 
June 30, 2019
 
June 30, 2018
Expected term (in years)
N/A
 
N/A
 
6.1

 
6.1

Risk-free interest rate
N/A
 
N/A
 
2.51
%
 
2.66
%
Expected volatility
N/A
 
N/A
 
60
%
 
57
%
Dividend yield
N/A
 
N/A
 
%
 
%

Restricted Stock Awards
A summary of RSA activity for the six months ended June 30, 2019 is as follows:
 
Number of Shares
 
Weighted-Average Grant Date Fair Value
 
(in thousands)
 
 
Nonvested shares of restricted stock awards outstanding at December 31, 2018
197

 
$
12.06

Granted

 
$

Canceled
(182
)
 
$
11.92

Vested
(10
)
 
$
13.84

Nonvested shares of restricted stock awards outstanding at June 30, 2019
5

 
$
13.49


The aggregate fair value of restricted stock with service conditions that vested during the six months ended June 30, 2019 was $0.1 million. At June 30, 2019, the Company had unrecognized stock-based compensation expense for RSAs with service conditions of $0.1 million, which is expected to be recognized over a weighted-average period of 0.9 years.

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Restricted Stock Units
A summary of RSU activity for the six months ended June 30, 2019 is as follows:
 
Number of Shares
 
Weighted-Average Grant Date Fair Value
 
(in thousands)
 
 
Nonvested restricted stock units outstanding at December 31, 2018
6,100

 
$
3.56

Granted
4,668

 
$
4.68

Canceled
(288
)
 
$
3.58

Vested
(2,193
)
 
$
3.39

Nonvested restricted stock units outstanding at June 30, 2019
8,287

 
$
4.24


The weighted-average grant date fair value per share of RSUs granted during the six months ended June 30, 2019 was $4.68, which included 1.6 million RSUs that vest 50% annually over two years. The aggregate fair value of RSUs that vested during six months ended June 30, 2019 was $11.2 million. At June 30, 2019, the intrinsic value of nonvested RSUs was $52.7 million. At June 30, 2019, the Company had unrecognized stock-based compensation expense relating to nonvested RSUs of approximately $29.8 million, which is expected to be recognized over a weighted-average period of 2.5 years.
Employee Stock Purchase Plan
In November 2013, the Company adopted the Company's 2014 Employee Stock Purchase Plan ("ESPP"). The ESPP is designed to enable eligible employees to periodically purchase shares of the Company's common stock at a discount through payroll deductions of up to 10% of their eligible compensation, subject to any plan limitations. At the end of each six-month offering period, employees are able to purchase shares at a price per share equal to 85% of the lower of the fair market value of the Company's common stock on the first trading day of the offering period or on the last trading day of the offering period. Offering periods generally commence and end in May and November of each year.
As of June 30, 2019, the Company has reserved 2,001,256 shares of its common stock for issuance under the ESPP. The ESPP has an evergreen provision pursuant to which the share reserve will automatically increase on January 1st of each year in an amount equal to 1% of the total number of shares of capital stock outstanding on December 31st of the preceding calendar year, although the Company’s board of directors may provide for a lesser increase, or no increase, in any year.
Stock-Based Compensation Expense
Total stock-based compensation expense recorded in the condensed consolidated statements of operations was as follows:  
 
Three Months Ended
 
Six Months Ended
 
June 30, 2019
 
June 30, 2018
 
June 30, 2019

June 30, 2018
 
(in thousands)
 
(in thousands)
Cost of revenue
$
106

 
$
77

 
$
198

 
$
184

Sales and marketing
1,459

 
1,158

 
2,804

 
2,343

Technology and development
1,166

 
623

 
2,225

 
1,472

General and administrative
2,064

 
2,402

 
3,937

 
4,759

Restructuring and other exit costs

 
352

 

 
398

Total stock-based compensation expense
$
4,795

 
$
4,612

 
$
9,164

 
$
9,156


Note 8—Restructuring and Other Exit Costs
As part of its on-going efforts to control costs and create efficiencies, the Company undertook restructuring events in 2018 to streamline operations, prioritize resources for growth initiatives and increase profitability. Restructuring and other exit costs of $1.0 million and $3.4 million were incurred during the three and six months ended June 30, 2018, respectively, related to severance and one-time termination benefit costs.

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The following table summarizes restructuring and other exit cost activity for the six months ended June 30, 2018 (in thousands):
Accrued restructuring and other exit costs at January 1, 2018
$

Restructuring and other exit costs
3,440

Cash paid for restructuring and other exit costs
(2,561
)
Non-cash stock-based compensation for restructuring and other exit costs
(398
)
Accrued restructuring and other exit costs at June 30, 2018
$
481


As of December 31, 2018, the Company had $0.1 million accrued restructuring and other exit costs remaining. No restructuring and other exit costs were incurred during the three and six months ended June 30, 2019, and all remaining accrued costs associated with the 2018 restructuring events were paid in the first quarter of 2019.
Note 9—Income Taxes
In determining quarterly provisions for income taxes, the Company uses the annual estimated effective tax rate applied to the actual year-to-date income. The Company's annual estimated effective tax rate differs from the statutory rate primarily as a result of state taxes, foreign taxes, nondeductible stock option expenses, and changes in the Company's valuation allowance.
The Company recorded an income tax expense of $0.1 million and an income tax benefit of $0.6 million for the three and six months ended June 30, 2019, respectively, and income tax expenses of $0.1 million for both the three and six months ended June 30, 2018. The tax provision for the three and six months ended June 30, 2019 is primarily the result of the release of a foreign valuation allowance resulting from a change to a cost plus arrangement for a foreign subsidiary, the domestic valuation allowance, and the tax liability associated with the foreign subsidiaries.
On December 22, 2017, the U.S. government enacted the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act includes significant changes to the U.S. corporate income tax system including a federal corporate rate reduction from 34% to 21%. For additional information and a discussion of the impact of the Tax Act on the Company, refer to Note 15 of the "Notes to Consolidated Financial Statements" within our Annual Report on Form 10-K for December 31, 2018.
Due to uncertainty as to the realization of benefits from the Company's domestic and certain international deferred tax assets, including net operating loss carryforwards and research and development tax credits, the Company has a full valuation allowance reserved against such assets. The Company intends to continue to maintain a full valuation allowance on the deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances.
There were no material changes to the Company's unrecognized tax benefits in the six months ended June 30, 2019, and the Company does not expect to have any significant changes to unrecognized tax benefits through the end of the fiscal year. Because of the Company's history of tax losses, all years remain open to tax audit.
Note 10—Commitments and Contingencies
Commitments
As of June 30, 2019 and December 31, 2018, the Company had $3.7 million and $2.9 million, respectively, of letters of credit associated with office leases available for borrowing, on which there were no outstanding borrowings as of either date. The Company also has operating lease agreements, discussed in more detail in Note 11.
Guarantees and Indemnification
The Company’s agreements with sellers, buyers, and other third parties typically obligate it to provide indemnity and defense for losses resulting from claims of intellectual property infringement, damages to property or persons, business losses, or other liabilities. Generally, these indemnity and defense obligations relate to the Company’s own business operations, obligations, and acts or omissions. However, under some circumstances, the Company agrees to indemnify and defend contract counterparties against losses resulting from their own business operations, obligations, and acts or omissions, or the business operations, obligations, and acts or omissions of third parties. For example, because the Company’s business interposes the Company between buyers and sellers in various ways, buyers often require the Company to indemnify them against acts and omissions of sellers, and sellers often require the Company to indemnify them against acts and omissions of buyers. In addition, the Company’s agreements with sellers, buyers, and other third parties typically include provisions limiting the Company’s liability to the counterparty, and the counterparty’s liability to the Company. These limits sometimes do not apply to certain liabilities, including indemnity obligations. These indemnity and limitation of liability provisions generally survive termination or expiration of the agreements in which they appear. The Company has also entered into indemnification agreements with its directors, executive officers, and certain other officers that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers, or employees. No material demands have been made upon the Company to provide

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indemnification under such agreements and there are no claims that the Company is aware of that could have a material effect on the Company’s condensed consolidated financial statements.
Litigation
The Company and its subsidiaries may from time to time be parties to legal or regulatory proceedings, lawsuits and other claims incident to their business activities and to the Company’s status as a public company. Such routine matters may include, among other things, assertions of contract breach or intellectual property infringement, claims for indemnity arising in the course of the Company’s business, regulatory investigations or enforcement proceedings, and claims by persons whose employment has been terminated. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. Consequently, management is unable to ascertain the ultimate aggregate amount of monetary liability, amounts which may be covered by insurance or recoverable from third parties, or the financial impact with respect to such matters as of June 30, 2019. However, based on management’s knowledge as of June 30, 2019, management believes that the final resolution of these matters known at such date, individually and in the aggregate, will not have a material adverse effect upon the Company’s condensed consolidated financial position, results of operations or cash flows.
Employment Contracts
The Company has entered into severance agreements with certain employees and officers. The Company may be required to pay severance and accelerate the vesting of certain equity awards in the event of involuntary terminations.
Note 11—Lease Obligations
The Company adopted ASC 842 as of January 1, 2019. As part of the implementation, the Company recognized its lease liabilities, including the current and non-current portions, within its condensed consolidated balance sheet as of the adoption date, which represents the present value of the Company’s obligation related to the estimated future lease payments. The Company also recognized a right-of-use asset, or ROU asset, which represents the right to use the leased asset over the period of the lease. The ROU asset was calculated as the lease liability less any asset or liability balances that existed at the time of adoption.
The lease term is generally specified in the lease agreement, however certain agreements provide for lease term extensions or early termination options. To determine the period for the estimated future lease payments, the Company evaluates whether it is reasonably certain that it will exercise the option at the commencement date and periodically thereafter. Certain data center lease agreements include one year extension options or month-to-month extension options, and one or more of these extensions have been assumed for each lease that the Company believes to be an integral part of our business in the near term. The lease terms of the Company’s operating leases generally range from one year to seven years, and the weighted average remaining lease term of leases included in the lease liability is 3.1 years as of June 30, 2019.
To determine the estimated future lease payments, the Company reviews each of its lease agreements to identify the various payment components. For real estate and equipment leases, the Company includes only the actual lease components in its determination of future lease payments, and for its data center leases, includes both the fixed lease and non-lease components in the estimated future lease payments. This typically includes a fixed minimum power commitment that is included in the data center agreements, but it does not include any variable or usage-based additional charges. Once the estimated future lease payments are determined, the Company uses a discount rate to calculate the present value of the future lease payments. As of June 30, 2019, a weighted average discount rate of 5.20% has been applied to the remaining lease payments to calculate the lease liabilities included within the condensed consolidated balance sheet. This represents the incremental borrowing rate the Company would be subject to on borrowings from its available revolving debt agreement (See Note 12).
For the three and six months ended June 30, 2019, the Company recognized $1.8 million and $3.6 million, respectively, of lease expense under ASC 842, which included operating lease expenses associated with leases included in the lease liability and ROU asset on the condensed consolidated balance sheet. In addition, for the three and six months ended June 30, 2019, the Company recognized $0.2 million and $0.4 million, respectively, of lease expense related to short-term leases that are not included in the ROU asset or lease liability balances. For the three and six months ended June 30, 2018, the Company recognized rental expenses of $3.3 million and $6.5 million, respectively, under ASC 840, which included expenses related to short-term leases, and also included certain non-lease components including variable capacity related expenses at the data centers. The Company also received rental income of $46.2 thousand and $0.2 million for real estate leases for which it subleases the property to a third party during the three months ended June 30, 2019 and 2018, respectively, and $0.2 million and $0.4 million for the six months ended June 30, 2019 and 2018, respectively.

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The maturity of the Company's lease liabilities were as follows (in thousands):
Fiscal Year
 
Remaining 2019
$
3,808

2020
6,795

2021
3,043

2022
1,096

2023
809

Thereafter
1,046

Total lease payments (undiscounted)
16,597

Less: imputed interest
(1,255
)
Lease liabilities—total (discounted)
$
15,342


In addition to the leases included in these condensed consolidated financial statements, the Company entered into lease agreements for office locations in New York and New Jersey during the first half of 2019 that have not yet commenced as of June 30, 2019. The Company anticipates the recognition of approximately $9 million additional lease liabilities related to the New York and New Jersey leases when the properties are made available to the Company for use, which is expected to occur in the third quarter of 2019.

Note 12—Debt
In September 2018, the Company amended and restated its loan and security agreement with Silicon Valley Bank (the "Loan Agreement"). The Loan Agreement provides a senior secured revolving credit facility of up to $40.0 million with a maturity date of September 26, 2020. The Company incurred $0.1 million of debt issuance fees that were capitalized and are being amortized over the term of the Loan Agreement.
An unused revolver fee in the amount of 0.15% per annum of the average unused portion of the revolver line is charged and is payable monthly in arrears. The Company may elect for advances to bear interest calculated by reference to prime or LIBOR. If the Company elects LIBOR, amounts outstanding under the amended credit facility bear interest at a rate per annum equal to (a) LIBOR plus 2.50% if a streamline period applies or (b) LIBOR plus 4.00% if a streamline period does not apply. If the Company elects prime, advances bear interest at a rate of (a) prime plus 0.50% if a streamline period applies or (b) prime plus 2.00% if a streamline period does not apply. A streamline period is any period during which an event of default does not exist and the Company's Adjusted Quick Ratio (as defined in the Loan Agreement) is at least 1.05 for each day in the preceding month.
The Loan Agreement is collateralized by security interests in substantially all of the Company's assets. Subject to certain exceptions, the Loan Agreement restricts the Company's ability to, among other things, pay dividends, sell assets, make changes to the nature of the business, engage in mergers or acquisitions, incur, assume or permit to exist, additional indebtedness and guarantees, create or permit to exist, liens, make distributions or redeem or repurchase capital stock, or make other investments, engage in transactions with affiliates, make payments with respect to subordinated debt, and enter into certain transactions without the consent of the financial institution. If a streamline period is not in effect, the Company is required to maintain a lockbox arrangement where clients payments received in the lockbox will immediately reduce the amounts outstanding on the credit facility.
The Loan Agreement requires the Company to comply with financial covenants, including a minimum Adjusted Quick Ratio and the achievement of certain Adjusted EBITDA targets. On a monthly basis, or quarterly if there were no advances outstanding during the calendar quarter, the Company is required to maintain a minimum Adjusted Quick Ratio of: (i) 1.00 if the trailing six month Adjusted EBITDA is $0 or less, or (ii) 0.90 if the trailing six month Adjusted EBITDA is greater than $0. If the Company’s Adjusted Quick Ratio is 1.05 or greater, a streamline period applies. As of June 30, 2019, the Company's Adjusted Quick Ratio was 1.16, which is in compliance with its covenant requirement and is higher than the minimum Adjusted Quick Ratio required to qualify for a streamline period. The Company must also maintain the following trailing twelve month Adjusted EBITDA targets as of the end of each quarter as follows: (1) September 30, 2018 through June 30, 2019 Adjusted EBITDA must be within 20% of the Adjusted EBITDA projections that were delivered to Silicon Valley Bank; (2) September 30, 2019 Adjusted EBITDA of $1 or greater; and (3) December 31, 2019 and thereafter, Adjusted EBITDA of $5.0 million or greater. As of June 30, 2019, the Company was in compliance with the Adjusted EBITDA covenant.
The Loan Agreement also includes customary representations and warranties, affirmative covenants, and events of default, including events of default upon a change of control and material adverse change (as defined in the Loan Agreement). Following an

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event of default, SVB would be entitled to, among other things, accelerate payment of amounts due under the credit facility and exercise all rights of a secured creditor.
As of June 30, 2019, there were no amounts outstanding under the Loan Agreement. Future availability under the credit facility is dependent on several factors including the available borrowing base and compliance with future covenant requirements.


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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
This Quarterly Report on Form 10-Q and related statements by the Company contain 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 loss per share, profitability, net income (loss), Adjusted EBITDA, earnings per share, and cash flow; strategic objectives, including focus on header bidding, mobile, video, Demand Manager, and private marketplace opportunities; investments in our business; development of our technology; introduction of new offerings; the impact of transparency initiatives we may undertake; the impact of our 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; user reach; certain statements regarding future operational performance measures including ad requests, fill rate, paid impressions, average CPM, take rate, and advertising spend; benefits from supply path optimization; 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 continue to grow and to manage our 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 and aggregators of advertising inventory;
our ability to maintain and grow a supply of advertising inventory from sellers and to fill the increased inventory;
the effect on the advertising market and our business from difficult economic conditions or uncertainty;
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 to purchase and sell higher value advertising 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 and the introduction and market acceptance of Demand Manager;
the increased prevalence of header bidding and its effect on our competitive position;
uncertainty of our estimates and expectations associated with new offerings, including header bidding, private marketplace, mobile, video, Demand Manager, and traffic shaping;
lower 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 and increasing our fill rate;
our vulnerability to the depletion of our cash resources as we incur additional investments in technology required to support the increased volume of transactions on our exchange and development of new offerings;
our ability to support our growth objectives with reduced resources from our cost reduction initiatives;
our ability to raise additional capital if needed and/or renew our working capital line of credit;
our limited operating history and history of losses;
our ability to continue to expand into new geographic markets;
our ability to adapt effectively to shifts in digital advertising;
increased prevalence of ad-blocking or cookie-blocking technologies;
the slowing growth rate of desktop display advertising;
the growing percentage of online and mobile advertising spending captured by owned and operated sites (such as Facebook, Google, and Amazon);

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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;
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;