Rubicon Project Reports Third Quarter 2016 Results

Rubicon Project (NYSE: RUBI), which operates one of the largest advertising marketplaces in the world, today reported its results of operations for the third quarter ended September 30, 2016.

"We executed well against our key strategic drivers of mobile, video, orders and header bidding in the third quarter, delivering both top line and bottom line results that were within range of our guidance," said Frank Addante, CEO and Founder of Rubicon Project.

"As expected, Q3 was a challenging quarter for both our industry and our business in particular and we still have work to do to deliver the revenue growth that we know our business is capable of generating. We remain confident that the strength of our premium technology platform, our global marketplace and strong balance sheet uniquely position us to win in the market and we expect these strengths to propel our business to stronger long term growth in 2017."

Today, the Company also announced a workforce reduction of 125 employees, or approximately 19%, of its workforce. The Company expects to complete this action and incur pre-tax charges of approximately $4.0 million in cash expenditures for one-time employee-termination benefits during the fourth quarter of 2016. The reduction in force is expected to reduce future employee-related costs on an annual basis by approximately $18.0 million. In addition, the Company implemented non-headcount related operating expense cost control initiatives that it anticipates will provide additional savings of approximately $12.0 million annually, for a total of $30 million in annualized cost reductions.

This workforce reduction continues a comprehensive realignment of the business which the Company began in the second quarter of 2016 to focus on key growth areas, better match the Company's cost structure with its growth rate, and instill greater discipline around cost efficiency. These efforts have also resulted in the integration of the Company's global revenue teams through the combination of the buyer and seller sales organizations, as well as the integration of the product and engineering teams into one organization led by the recently named Chief Product and Engineering Officer.
Third Quarter 2016 Results Summary
(in millions, except per share amounts and percentages)
  Three Months Ended

September 30, 2016
 

September 30, 2015
  Change
GAAP revenue $65.8 $64.3 2%
Advertising spend (1) $242.8 $244.4 (1%)
Non-GAAP net revenue (1) $60.6 $57.9 5%
Take rate (4) 24.9% 23.7% 1 ppt
 
Net income (loss) (3) $3.5 ($3.0) N/A
Adjusted EBITDA (1) $15.3 $12.6 22%
Adjusted EBITDA margin (2) 25% 22% 4 ppt
Diluted income (loss) per share (3) $0.07 ($0.07) N/A
Non-GAAP earnings per share (1) $0.32 $0.23 39%
 

Balance Sheet:
  • The Company had cash and liquid assets of $193.2 million (including cash and cash equivalents of $154.3 million and marketable securities of $38.9 million) and was debt free as of September 30, 2016.

Definitions:
(1)   Advertising spend (previously referred to as managed revenue), non-GAAP net revenue, Adjusted EBITDA, and non-GAAP earnings per share 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) Adjusted EBITDA margin is calculated as Adjusted EBITDA divided by non-GAAP net revenue. Reconciliations for both net income (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."
(3) Net income, diluted income per share, and non-GAAP EPS for the third quarter of 2016 include a tax benefit of $5.6 million. Our outlook does not currently reflect a tax provision or benefit in future periods; however, our actual results may materially differ from these expectations.
(4) Take rate is an operational performance measure calculated 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 types, the implementation of new products, platforms and solution features, auction dynamics, competitive factors, and the overall development of the digital advertising ecosystem.
 
Q4 and Full Year 2016 Outlook    
Q4 2016 Full Year 2016
GAAP revenue $65 - $75 million $271 - $281 million
Non-GAAP net revenue (5) $60 - $68 million $249 - $257 million
Adjusted EBITDA (6) $10 - $18 million $59 - $67 million
Non-GAAP earnings per share (6) $0.08 - $0.16 $0.86 - $0.94
 

Additional Notes on Q4 and Full Year 2016 Outlook:
(5)   Non-GAAP net revenue is calculated as GAAP revenue less amounts we pay sellers that are included within cost of revenue for the portion of our revenue reported on a gross basis.
(6) We do not provide a reconciliation of our non-GAAP financial guidance for Adjusted EBITDA and non-GAAP earnings per share to the corresponding GAAP measures because the amount and timing of many future charges that impact these measures (such as asset impairment, amortization of future acquired intangible assets, acquisition-related charges, foreign exchange (gain) loss, net, stock-based compensation, and provision or benefit for income taxes) are variable, uncertain, or out of our control and therefore cannot be reasonably predicted without unreasonable effort, if at all. In addition, we believe such reconciliations could imply a degree of precision that might be confusing or misleading to investors.
 

Third Quarter 2016 Results Conference Call and Webcast:

The Company will host a conference call on November 2, 2016 at 1:30 PM (PT) / 4:30 PM (ET) to discuss the results for its third quarter of 2016.

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: 10088173
Webcast link:

http://investor.rubiconproject.com, under "Events and Presentations"
 

About Rubicon Project

Founded in 2007, Rubicon Project's mission is to keep the Internet free and open and fuel its growth by making it easy and safe to buy and sell advertising. Rubicon Project pioneered advertising automation technology to enable the world's leading brands, content creators and application developers to trade and protect trillions of advertising requests each month and to improve the advertising experiences of consumers. Rubicon Project is a publicly traded company (NYSE: RUBI) headquartered in Los Angeles, California.

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