Table of ~~our buyer offerings may be incorrect, and we may not realize a return from our investments in that area.~~Contents

We compete for demand with well-established companies that have technological advantages stemming from their experience in the market. We must continue to adapt and improve our demand technology to compete effectively, and buyers may not embrace our offering due to various factors, including the perception that competitors have superior technology or produce better results. Buyers’ efforts to optimize their supply paths have resulted in demands for transparency, inventory quality accountability, and longer payment terms. Some buyers are demanding access to data that we are restricted from sharing by our arrangements with sellers. Providing transparency to our buyers could negatively affect our sellers if buyers favor inventory that have lower fees. These

~~factors may make it difficult for us to increase our business with some buyers, cause some buyers to reduce their spending with us, and increase our costs of doing business.~~

We have invested heavily in our mobile technology, which poses additional risks that did not affect our legacy desktop display business. Mobile connected devices, their operating systems, Internet browsers, or content distribution channels, including those controlled by our competitors, may develop in ways that make it difficult for advertisements to be delivered to their users. Further, we rely upon relationships with third parties to provide our buyers with access to large numbers of mobile inventory sellers that utilize third-party technology to display ads. IfTo the extent our access to mobile inventory is limited by third-party technology or lack of direct relationships with mobile sellers, our ability to grow our business will be impaired.

Due to increased usage of mobile devices and resulting migration of advertising spending to mobile platforms, we have invested heavily in our mobile technology and are relying ~~to a significant degree~~ on our mobile offerings to fuel our continued growth. The mobile advertising market is growing and changing quickly, and technological, market, or regulatory developments could render our solution less competitive. Because mobile advertising uses different data-capture techniques and methods of recording payable transactions, caters to different buyer budgets, may require us to enter emerging markets in which we have less experience, including China and India, and involves development challenges imposed by differing technological requirements and standards, there can be no assurance that we will be successful in achieving our goals in this market. Moreover, buyers' spending to reach consumers through mobile advertising may evolve more slowly than expected, or not grow to levels we anticipate. Our mobile investment has been focused on real-time bidding of mobile impressions, and that market may not grow as we expect. Our mobile revenue growth depends to a significant degree on the success of our xAPI technology, which enables us to access inventory aggregated by third parties, and there can be no assurance that this technology will continue to work as anticipated, without costly bugs or errors. Our success in the mobile channel depends upon the ability of our technology solution to provide advertising for most mobile-connected devices, as well as the major operating systems or Internet browsers that run on them and the thousands of applications that are downloaded onto them. The design of mobile devices and operating systems, applications, or Internet browsers is controlled by third parties. These parties frequently introduce new devices and applications, and from time to time they may introduce new operating systems or Internet browsers or modify existing ones in ways that may significantly affect our business, such as by providing ad-blocking capabilities or by limiting access to Internet user data. Network carriers may also affect the ability to access specified content on mobile devices. IfTo the extent our solution is unable to work on these devices, operating systems, applications, or Internet browsers for any reason, our ability to generate revenue through mobile advertising ~~could be~~is significantly ~~impaired.~~

~~Our growth depends upon our ability to attract~~impaired, and retain buyers and sellers and increase business with them. Buyers and sellers are free to direct their spending and inventory to competing sources of inventory and demand, and large competitors with direct mobile user relationships and proprietary first-party user data have invested early and heavily in mobile advertising solutions, have many established relationships with mobile buyers and sellers that impairment may be ~~difficult for us~~material.

We expect mobile applications to ~~replicate, and may provide more compelling solutions than we do. Most~~be the largest driver of ~~the application providers selling inventory through~~ our ~~platform~~mobile business. Many mobile apps utilize software development kits, or SDKs, and other proprietary technology of third parties, such as aggregators, and it is those third parties, not the application providers themselves, that contract with us to provide exchange services to help monetize the inventory. IfDue to this consolidation, if our relationships with these third parties ~~terminate~~decline or ifare terminated, it may result in a larger than usual loss of access to mobile inventory. Any rapid and/or significant decline in the scale of these third parties' business with application providers is reduced, if these third parties develop their own solutions that render ours obsolete, or if the third parties' clients begin transacting directly between each other rather than through the third party, the amountavailability of mobile inventory ~~available through our platform, could rapidly and significantly decline, which in turn would~~can adversely affect our mobile advertising spend and growth prospects.

Fee issues have in the past and could in the future have a material adverse effect on our business.

A majority of our ~~advertising spend~~revenue comes from DSP buyers purchasing advertising inventory ~~in RTB transactions~~made available by sellers on our platform. Prior to eliminating our buyer fees on November 1, 2017, our proprietary auction algorithms included a buyer fee for use of our technology, and we typically charged buyers a variable price for real-time bidding impressions without specifying the amount or method of determining the fee that was included in the price. Buyers and sellers sometimes questioned our buyer fees, and we experiencedWe experience requests from buyers ~~and sellers~~ for discounts, fee concessions or revisions, rebates or other forms of consideration, refunds, and greater levels of pricing transparency and specificity, in some cases as a condition to maintain the ~~relationship. This could continue with respect~~relationship or to ~~historical~~increase the amount of advertising spend that the buyer ~~fees.~~sends to our platform. In addition, we charge fees to sellers for use of our technology, typically as a percentage of the cost of media, and we may decide to offer discounts or other pricing concessions in order to attract more inventory or demand, or to compete effectively with other providers that have different or lower pricing structures and may be able to undercut our pricing due to greater scale or other factors.

We also may face the risk that a buyer that is dissatisfied with the execution of a transaction on our platform could request a refund from us of the advertising spend on the transaction notwithstanding that we have only collected a fee on the transaction and may not have the ability to recover the full amount of spending associated with the transaction from the seller. Our revenue, take rate (our fee as a percentage of advertising spend), the value of our business, and the price of our stock could be adversely affected if we cannot maintain and grow our revenue and profitability through volume increases that compensate for price reductions, or if we are forced to make significant fee

concessions, rebates, or refunds, or if buyers reduce spending with us or sellers reduce inventory available through our exchange due to fee disputes or pricing issues.

Our take rates may be difficult to forecast and may decrease in future periods; any decrease in our take rates may result in a decrease in our revenue notwithstanding an increase in the amount of spend transacted through our platform.

We generate revenue through our platform on a transactional basis where we are paid by a publisher each time an impression is monetized on our platform. Typically, this fee is structured as a percentage of advertising spend that the publisher receives for its inventory. Our take rate varies by publisher and transaction type. For instance, our take rate tends to be lower for PMP transactions compared to open auction, and tends to be lower on CTV transactions compared to other channels. We may also negotiate lower take rates with large sellers to win additional business or share of inventory, in particular in CTV.

Even if we are able to accurately forecast the anticipated total advertising spend transacted by buyers across our platform, we may have limited visibility regarding the revenue we will generate because we do not control what publisher inventory is purchased by a buyer. For substantially all transactions executed through our platform, our revenue is recognized net of any inventory costs that we remit to sellers. As a result, a decrease in our take rate could cause our revenue to decrease notwithstanding an increase in the total spend transacted through our seller platform.

We have a history of losses and ~~we need to sustain and increase investment in our technology in order to be competitive, but~~ we face many risks that may prevent us from achieving or sustaining profitability in the future.

We reported net losses of ~~$61.8 million, $154.8~~$53.4 million and ~~$18.1~~$25.5 million during the years ended December 31, ~~2018, 2017,~~2020 and ~~2016,~~2019, respectively. As of December 31, ~~2018,~~2020, we had an accumulated deficit of ~~$315.6~~$394.5 million. During 2018, we were not able to sustain our earlier revenue growth and experienced significant declines in revenue and earnings for various reasons including our decisions to reduce and then eliminate our buyer fees. We have implemented strategic plans designed to ~~reverse~~improve our financial ~~declines~~performance and ~~return~~continue to ~~growth,~~increase revenue, and have taken steps to reduce unnecessary expenses and redirect spending to areas we expect to produce higher growth; however, these plans and steps may ultimately prove to be unsuccessful.

Notwithstanding these measures, and in light of the adoverall decline in advertising spend ~~growth~~ experienced in ~~2018,~~2020, revenue may continue to decrease due to competitive pressures, maturation of our business, or other factors, and additional cost-reduction measures may be required even as we must continue to increase investment in technology in response to industry

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developments and to retain competitiveness. We may not be able to ~~return to revenue~~sustain growth or to achieve or sustain profitability in the future.

We have encountered and will continue to encounter risks and difficulties frequently experienced by growing companies in rapidly evolving industries, including allocating and making effective use of our limited resources; achieving market acceptance of our existing and future solutions; competing against companies with greater financial and technical resources; recruiting; integrating, motivating, and retaining qualified employees; developing relationships with buyers and sellers; developing new solutions; integrating new technologies or companies we acquire; and establishing and maintaining our corporate infrastructure, including internal controls relating to our financial and information technology systems. We must improve our current operational infrastructure and technology to support significant growth and to respond to the evolution of our market and competitors' developments. Our business prospects depend in large part on our ability to:

grow our share of online and mobile advertising spending and the supply of advertising impressions available to us notwithstanding the growing share of digital advertising that is controlled by owned and operated sites (such as Facebook and Google);

~~return to revenue growth and positive cash flow before depleting our cash resources to the point that our ability to fund our cash cycle and invest in our business is impaired;~~

~~build and maintain our reputation for innovation and solutions that meet the evolving needs of buyers and sellers;~~

~~distinguish ourselves from the wide variety of solutions available in our industry;~~

~~maintain and expand our relationships with buyers and sellers;~~

~~respond to evolving industry standards and government regulations that impact our business, particularly in the areas of data collection and consumer privacy;~~

~~prevent or otherwise mitigate failures or breaches of security or privacy;~~

~~attract, hire, integrate and retain qualified employees;~~

~~effectively execute upon our international expansion plans;~~

~~evaluate new acquisition targets, and successfully integrate acquired companies' businesses and technologies;~~

~~maintain our cloud-based technology solution continuously without interruption 24 hours a day, seven days a week; and~~

anticipate and respond to varying product life cycles and new advertising solutions such as header bidding, regularly enhance our existing advertising solutions, and introduce new advertising solutions and pricing models on a timely basis, including by developing our capabilities in evolving areas of the business, such as mobile and video.

As a result of various factors, our operating results have in the past and may in the future fluctuate significantly, be difficult to predict, and fall below analysts' and investors' expectations.

Our operating results ~~may be~~are difficult to predict, particularly because we generally do not have long-term contracts with buyers or sellers. We have experienced significant variations in revenue and operating results from period to period, and operating results may continue to fluctuate and be difficult to predict due to a number of factors, including:

•seasonality in demand for digital ~~advertising;~~advertising, as many advertisers devote a disproportionate amount of their advertising budgets to the fourth quarter of the calendar year to coincide with increased holiday purchasing, and advertising inventory in the fourth quarter may be more expensive due to increased demand for advertising inventory;

•changes in pricing of advertising inventory or pricing for our solution and our competitors' offerings, including potential further reductions in our pricing and overall take rate as a result of competitive pressure, changes in supply, improvements in technology and extension of automation to higher-value inventory, uncertainty regarding

rate of adoption, changes in the allocation of demand spend by buyers, changes in revenue mix, auction dynamics, pricing discussions or negotiations with clients and potential clients, header bidding and other factors;

•diversification of our revenue mix to include new services, some of which may have lower pricing than our historic lower-value inventory business or may cannibalize existing business;

•the addition or loss of buyers or sellers;

•general economic conditions and the economic health of our current and prospective sellers and buyers;

•changes in the advertising strategies or budgets or financial condition of advertisers;

•the performance of our technology and the cost, timeliness, and results of our technology innovation efforts;

•advertising technology and digital media industry conditions and the overall demand for advertising, or changes and uncertainty in the regulatory environment for us or buyers or sellers, including with respect to privacy regulation;

•the introduction of new technologies or service offerings by our competitors and market acceptance of such technologies or services;

•the phasing out of third-party cookies throughout the industry;

•our level of expenses, including investment required to support our technology development, scale our technology infrastructure and business expansion efforts, including acquisitions, hiring and capital expenditures, or expenses related to litigation;

•the impact of changes in our stock price on valuation of stock-based compensation or other instruments that are marked to market;

•the effectiveness of our financial and information technology infrastructure and controls;

•geopolitical and social factors, such as concerns regarding negative, unstable or changing economic conditions in the countries and regions where we operate, global and regional recessions, political instability, and trade disputes;

•foreign exchange rate fluctuations; and

•changes in accounting policies and principles and the significant judgments and estimates made by management in the application of these policies and principles.

Because significant portions of our expenses are relatively fixed, variation in our quarterly revenue ~~could~~can cause significant variations in operating results and resulting stock price volatility from period to period. In order to minimize adverse effects of our price reductions on revenue, we must increase the inventory and advertising spend on our platform and add more high-value inventory, which requires ongoing investment that can adversely affect earnings and might ultimately be unsuccessful. Period-to-period comparisons of our historical results of operations are not necessarily meaningful, and historical operating results may not be indicative of future performance. If our revenue or operating results fall below the expectations of investors or securities analysts, or below any guidance we may provide to the market, the price of our common stock could decline substantially.

Risks Related to the Advertising Technology Industry, Market, and Competition

Our revenue and operating results are highly dependent on the overall demand for advertising. Factors that affect the amount of advertising spending, such as economic downturns, can make it difficult to predict our revenue and could adversely affect our business.

Our business depends on the overall demand for advertising and on the economic health of our current and prospective sellers and buyers. If advertisers reduce their overall advertising spending, our revenue and results of operations are directly affected. Various macro factors could cause advertisers to reduce their advertising budgets, including adverse economic conditions and general uncertainty about economic recovery or growth, particularly in North America and Europe, where we do most of our business, the occurrence of a pandemic or other health crisis, instability in political or market conditions generally,

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imposition of digital service taxes, and any changes in favorable tax treatment of advertising expenses and the deductibility thereof. Reductions in inventory due to loss of sellers ~~could~~ make our solution less robust and attractive to buyers.

~~Seasonal fluctuations in digital advertising activity could result in material fluctuations of our revenue, cash flows, operating results, and other key performance measures from period to period.~~

Our revenue, advertising spend, cash flow from operations, operating results, and other key performance measures may vary from quarter to quarter due to the seasonal nature of advertiser spending. For example, many advertisers devote a disproportionate amount of their advertising budgets to the fourth quarter of the calendar year to coincide with increased holiday purchasing, and advertising inventory in the fourth quarter may be more expensive due to increased demand for advertising inventory. As a result, any events that reduce the amount of advertising spend during the fourth quarter, or reduce the amount of inventory available to buyers during that period, could have a disproportionate adverse effect on our revenue and operating results for that fiscal year.

~~Failure to maintain our culture and institutional knowledge could jeopardize our innovation and operation effectiveness.~~

We have had significant attrition, including through workforce reductions, and it may become increasingly difficult to retain employees given concerns about our financial performance and significant reduction in the value of equity compensation resulting from the significant decline we have experienced in the market value of our common stock. Significant changes in our personnel

may make it difficult for us to maintain our institutional knowledge and corporate culture, which has materially contributed to our success in the past. If our culture and knowledge base are negatively affected, our ability to support our growth and innovation may diminish.

~~Risks Related to the Advertising Technology Industry, Market, and Competition~~

~~Market conditions are increasing the costs and risks of our operations.~~

Due to various factors, including header bidding, market pressure from the increasing share of the digital advertising economy absorbed by Google and Facebook, and demands by both buyers and sellers of digital advertising for increased efficiency and value throughout the ecosystem, business conditions are becoming more difficult for intermediary businesses like ours. We see this in various ways. Both demand and supply for digital advertising inventory outside the “walled garden” companies are becoming less unique, contributing to commodification of the business. Buyers and sellers are demanding more favorable trade terms, which puts pressure on our cash collections cycle and can require more of our cash to fund our payments, making it unavailable to invest in growth. Buyers increasingly require us to accept liability for inventory quality and sellers increasingly require us to accept liability for ad content, despite the fact that we are not in direct control of either. Increased buyer vigilance regarding non-human traffic and other inventory quality issues, and varying inconsistent methodologies for assessing inventory quality, are causing buyers increasingly to withhold payment for transactions they question. Buyers and sellers are increasingly insisting upon using their own data to resolve discrepancies in transaction counts more favorably to them, resulting in some revenue loss. These and similar trends increase the costs and risks of our operations and put pressure on our margins.

The digital advertising market is relatively ~~new, dependent on growth in various digital advertising channels, and vulnerable to adverse public perceptions and increased regulatory responses.~~new. If this market develops more slowly or differently than we expect, ~~or if issues encountered by other participants or the industry generally are imputed to or affect us,~~ our business, growth prospects and financial condition would be adversely affected.

While our core business of desktop display advertising has been used successfully for many years, marketing via new digital advertising channels, such as mobile and social media, out-of-home, and digital video advertising, are emerging and may evolve in unexpected ways, and ourOur future growth will be constrained if we are not able to adapt successfully to market evolution. In addition, the success of our efforts to advance new solutions for increased advertising automation will depend upon adoption of our solution by personnel at buyers and sellers in lieu of their traditional methods of order placement. It is difficult to predict adoption rates, demand for our solution, the future growth rate and size of the digital advertising solutions market or the entry of competitive solutions.

Further, the digital advertising industry is complex and evolving, and the relatively few publicly traded companies operating in the business tend to be small and new to the public markets. Consequently, the digital advertising industry may not be as widely followed or understood in the financial markets as more mature industries. The markets may not fully appreciate our particular place in the industry and our strengths and differentiating factors. Problems experienced by one industry participant (even private companies) or issues affecting a part of the industry have the potential to have adverse effects on other participants in the industry or even the entire industry. Emerging understanding of how the digital advertising industry operates has spurred privacy concerns and misgivings about exploitation of consumer information and prompted regulatory responses that limit operational flexibility and impose compliance costs upon industry participants.

Any expansion of the market for digital advertising solutions depends on a number of factors, including social and regulatory acceptance, the growth of the overall digital advertising market and the growth of specific sectors including social, mobile, video, and out-of-home as well as the actual or perceived technological viability, quality, cost, performance and value associated with emerging digital advertising solutions. If ~~demand for~~ digital ~~display advertising and adoption of automation~~marketing does not ~~continue to grow, or there is a reduction~~develop in demand for digital advertising caused by weakening economic conditions, decreases in corporate spending, quality, viewability, malware issues or other issues associated with buyers, advertising channels or inventory, negative perceptions of digital advertising, additional regulatory requirements, or other factors, or ifthe manner we ~~fail to develop or acquire capabilities to meet the evolving~~expect, our business and ~~regulatory requirements and needs of buyers and sellers of multi-channel advertising, our competitive position will~~financial condition would be ~~weakened.~~adversely affected.

We operate in an intensely competitive market that includes companies that have greater financial, technical and marketing resources than we do.

We face intense competition in the marketplace. We compete for advertising spending against competitors that, in some cases, are also buyers and/or sellers on our platform. We also compete for supply of advertising inventory against a variety of competitors. Some of our existing and potential competitors are better established, benefit from greater name recognition, may have offerings and technology that we do not have or have significantly more financial, technical, sales, and marketing resources than we do. In addition, some competitors, particularly those with greater scale or a more diversified revenue base and a broader offering,

~~may~~ have greater flexibility than we do to compete aggressively on the basis of price and other contract terms, or to compete with us by including in their product offerings services that we may not provide. Some competitors are able or willing to agree to contract terms that expose them to risks that might be more appropriately allocated to buyers or sellers of advertising (including inventory risk and the risk of having to pay sellers for unsold advertising impressions), and in order to compete effectively we might need to accommodate risks that could be difficult to manage or insure against. Some existing and potential buyers have their own relationships with sellers or are seeking to establish such relationships, and many sellers are investing in capabilities that enable them to connect more effectively directly with buyers. Our business ~~may suffer~~suffers to the extent that buyers and sellers purchase and sell advertising inventory directly from one another or through ~~other~~ intermediaries other than us, reducing the amount of advertising spend on our platform. In addition, as a result of solutions introduced by us or our competitors, our marketplace will experience disruptions and changes in business models, which may result in our loss of buyers or sellers. Our innovation efforts may lead us to introduce new solutions that compete with our existing solutions. New or stronger competitors may emerge through acquisitions and industry consolidation or through development of disruptive technologies. If our offerings are not perceived as competitively differentiated, we could lose clients, market share or be compelled to reduce our prices, making it more difficult to grow our business profitably.

There has been rapid evolution and consolidation in the advertising technology industry, and we expect these trends to continue, thereby increasing the capabilities and competitive posture of larger companies, particularly those that are already dominant in various ways, and enabling new or stronger competitors to emerge. For example, while we are investing to participate in the shift of digital advertising spending to mobile channels, the mobile advertising market is dominated by a relatively small number of large competitors with direct mobile user relationships and proprietary first-party user data. These competitors have invested early and heavily in mobile advertising solutions that may be more compelling than ours, and have many established relationships with buyers and sellers that may be difficult for us to replicate. Similar dynamics can be expected as growth in digital video advertising brings established broadcast and content companies into the digital advertising business.

As technology continues to improve and market factors continue to attract investment, competition and pricing pressure may increase and market saturation may change the competitive landscape in favor of larger competitors with greater scale and broader offerings, including those that can afford to spend more than we can to grow more quickly and strengthen their competitive position through innovation, development and acquisitions. In order to compete effectively, we may need to innovate, further differentiate our offerings, and expand the scope of our operations more quickly than would be feasible through our own internal efforts. However, because some capabilities may reside only in a small number of companies, our ability to accomplish necessary expansion through acquisitions may be limited because available companies may not wish to be acquired or may be acquired by larger competitors with the resources to outbid us, or we may need to pay substantial premiums to acquire those businesses. Our ability to make strategic acquisitions has also been hampered by the significant decline we have experienced in the value of our common stock, because our stock may not be viewed favorably as acquisition currency by an acquisition target, and the lower our stock price, the more dilution results from stock-based acquisitions.

Many buyers and sellers are large consolidated organizations that may need to acquire other companies in order to grow. Smaller buyers and sellers may need to consolidate in order to compete effectively. There is a finite number of large buyers and sellers in our target markets, and any consolidation of buyers or sellers may give the resulting enterprises greater bargaining power or result in the loss of buyers and sellers that use our platform, and thus reduce our potential base of buyers and sellers, each of which would lead to erosion of our revenue.

~~Acts~~As technology continues to improve and market factors continue to attract investment, competition and pricing pressure may increase and market saturation may change the competitive landscape in favor of larger competitors with greater scale and ~~other third parties~~broader offerings, including those that can ~~adversely affect~~afford to spend more than we can to grow more quickly and strengthen their competitive position. In addition, our ~~business.~~

~~Our revenue is vulnerable to acts by third parties that reduce the amounts of spending~~competitors or inventory available to us. For example, the amount of inventory available to independent platforms like us could be reduced as a result of decisions by Facebook to emphasize content viewable through its site or to favor friends-and-family type feeds over third-party properties, or decisions by Google to utilize its ad server advantages to outbid us and otherpotential competitors in open-market transactions. Similarly, decisions by buyers and sellers to transact directly rather than through us would tend to reduce both spending and inventory on our platform. Finally, nefarious, illegal, or disreputable acts by one or moremay adopt certain aspects of our ~~competitors could affect the reputation and trustworthiness of the ad tech industry as a whole,~~business model, which could ~~negatively affect~~reduce our ~~revenue because buyers~~ability to differentiate our solutions.

For all of these reasons, we may not be able to compete successfully against our current and ~~sellers could decide~~future competitors.

Risks Related to ~~focus their activities on larger, more established industry participants.~~Our Collection, Use and Disclosure of Data

Our business depends on our ability to collect and use data to deliver advertisements, and to disclose data relating to the performance of advertisements. Any limitation imposed on our collection, use or disclosure of this data could significantly diminish the value of our solution and cause us to lose sellers, buyers, and revenue. Consumer tools, regulatory restrictions and technological limitations all threaten our ability to use and disclose data.

The more informed advertising is about its audience, the more valuable it is. ~~Skywriting and highway billboards are examples of generalized advertising, casting a broad net across an undifferentiated audience in hopes of capturing a few of the~~

viewers the advertiser hopes to reach. "Contextual" advertising attempts to reach audiences based upon inferences about their interests drawn by, for example, what websites they visit or apps they use. Programmatic advertising ~~facilitated by the ad tech ecosystem,~~ enables more precise audience targeting ~~known as "behavioral" or "personalized" advertising. Behavioral~~based on the identity and actions of the user. Targeted advertising is generally more effective and valuable for buyers than ~~general or contextual~~other types of advertising, resulting in more revenue for ~~publishers.~~sellers. In order to ~~perform behavioral~~target advertising, we and our clients must be permitted to use data in a variety of ~~ways, as further set forth below.~~

As we process transactions through our solution, we are able to collect significant amounts of information about advertisements, their buyers and sellers, and the transactions themselves. This includes buyer and seller preferences and requirements for media and advertisement content and specifications such as placement, size and format; pricing of advertisements; and auction activity such as price floors, bid response behavior, and clearing prices. We also are able to collect certain information about users, including browser or device location and characteristics; online behavior; exposure to and interaction with advertisements; and inferential data about purchase intentions and preferences. We collect this data through various means, including from our own systems, pixels, web beacons, software development kits installed in mobile applications, and "cookies," which are small text files placed through an Internet browser on an Internet user's computer. Our sellers and buyers also may provide us with their proprietary data about users.

We aggregate this data over trillions of advertising impressions and analyze it in order to enhance our services, including the pricing, placement and scheduling of advertisements purchased by buyers across the advertising inventory provided by sellers. We also share this data, or analyses based upon the data, with clients as part of our services.ways. Our ability to collect, use, and share data about advertising purchase and sale transactions and user behavior and interaction with content is critical to the value of our services, and any limitation on our data practices could impair our ability to deliver effective solutions ~~that meet the needs of sellers and buyers of advertising, resulting in loss of volume and reduced pricing.~~to our clients. Any restriction on the types

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of data we ~~use to capture user or inventory information~~collect could make placement of advertising through our solution less valuable, with commensurate reductions in revenue.

Internet users can, with increasing ease, implement practices or technologies that may limit our ability, or that of our sellers, buyers and business partners, to collect ~~and use data to deliver advertisements,~~data. For example, users may delete or otherwise inhibit the effectiveness of our solution. First, cookies may easily be deleted or blocked by Internet users. All of the most commonly used Internet browsers allow Internet users to modify their browser settings to block first-party cookies (placed directly by the publisher or website owner that the user intends to interact with) or third-party cookies (placed by parties, like Rubicon Project, that have no direct relationship with the user), and some browsers, such as Safari and Firefox, may block third-party cookies by default. Most browsers also now support temporary privacy modes that allow the user to suspend, with a single click, the placement of new cookies or reading or updates of existing cookies. Many applications and other devices allow users to avoid receiving advertisements by paying for subscriptions or other downloads. Mobile devices based upon the Android and iOS operating systems limit the ability of cookies to track users while they are using applications other than their web browser on their device (and may, in the future, limit the use of the cookies used to collect data, including through their browser or mobile device identifiers for advertising). As a consequence, fewer of our cookies or sellers' cookies may be set in browsers or be accessible in mobile devices, which adversely affects our business. If our ability to use cookies or identifysettings. Internet users is limited, transactions occurring through our solution would be executed with less insight into activity that has taken place by the user, reducing the accuracy of buyers' decisions about which inventory to purchase for an advertising campaign. We may be required to develop or obtain additional technologies to compensate for the lack of cookie data, which could be time consuming to develop or costly to obtain, less effective than our current use of cookies, and subject to additional regulation.

~~Some Internet users~~ also download ~~free or paid~~ "ad blocking" software not only for privacy or security reasons, such as a desire to avoid being targeted for ads based upon location or online activity, but also to counteract the adverse effect advertisements can have on users' experience, including increased load times, data consumption, and screen overcrowding. Similar ad blocking technology has also recently emerged for mobile devices. Such ad blocking technology may preventthat prevents certain ~~third-party~~ cookies ~~or other tracking technologies,~~ from being stored on a ~~user's~~user’s computer or mobile ~~device. If more Internet users adopt these measures, our business could be harmed. Ad blocking technologies could have an adverse effect on our business if they reduce~~device, including to prevent the ~~volume or effectiveness (and therefore value)~~display of ~~advertising.~~targeted advertisements. In addition, ~~some ad blocking technologies block only ads~~most widely used web browsers allow users to send "Do Not Track" signals to indicate that they do not wish to have their web usage tracked, while many device manufacturers and operating systems are ~~targeted through use~~increasingly promoting features that allow users to disable the collection of third-party data, while allowing ads based on first-party data (i.e. data owned by the provider of the website or application being viewed). These ad blockers could place us at a disadvantage because we rely on third-party data, while large competitors have troves of first-party data they use to direct advertising. Other technologies allow ads that are deemed "acceptable," which could be defined in ways that place us or our clients at a disadvantage, particularly if such technologies are controlled or influenced by our competitors.data. Even if ad blockers do not ultimately have a material impact on our business, investor concerns about ad blockers could cause our stock price to decline.

Current versions of the most widely used web browsers allow users to send "Do Not Track" signals to indicate that they do not wish to have their web usage tracked. There is currently no definition of "tracking"In addition, new laws and no set of commonly accepted standards regarding how to respond to a "Do Not Track" preference, but if such standards are implemented, either by applicable law or industry self-regulation, they could impose significant requirements and limitations on our data collection. Some proposed standards

would allow first parties to continue to track users, even if the users have enabled the "Do Not Track" signal in their web browser, but would prevent third parties, like us, from any further tracking of such users across the Internet. Such a standard would place us at a significant competitive disadvantage compared to first-party data ownersregulations, such as large website operators, many of whom own or are developing or acquiring capabilities that compete with our solution. Even absent an industry standard, various government authorities have indicated an intent to implement some type of "Do Not Track" standard. Such legislation or regulation may affect ourthe GDPR and CCPA, restrict the ability to collect and process certain types of user data, including, in the case of GDPR, requiring user consent or ~~use~~another legal basis in order to collect or process personal data ~~collected through our platform when~~and, in the case of CCPA, giving the user a ~~user enables "Do Not Track,"~~right to opt out of the collection or processing of personal data. To the extent sellers are unable to obtain valid consent or otherwise provide a legal basis for collecting and ~~may also include a distinction between first-party and third-party collection and usage of~~processing personal data, ~~which may impact our~~it would impair the ability to compete in the marketplace. We may separately elect to respond to any such legislation by adopting a policy to discontinue profiling or web tracking in response to "Do Not Track" requests, and it is possible that we could in the future be prohibited from using non-personal consumer data by industry standards or state or federal legislation, which may diminish our ability to target and improvedeliver targeted advertisements ~~and the value of our services.~~on their inventory.

Further, much of the data we collect and use belongs to our buyers or sellers, and we receive their permission to use it. (Other data is subject to control by Internet users, either as a result of regulation or through choices such as behavioral advertising opt-outs or use of ad blocking technologies, as discussed below). We use data related to our buyers and sellers and their transactional activity on our platform to facilitate our services, but we must exercise care not to use this data in ways that provide unfair advantages to, or adversely affect, buyers or sellers. Although our sellers and buyers generally permit us to aggregate and use data from advertising placements, subject to certain restrictions, sellers or buyers might decide to restrict our collection or use of their data. There could be various reasons for this, including perceptions by buyers that their data can be used by sellers to extract higher prices for impressions, or perceptions by sellers that their data can be used by buyers to bid tactically to reduce pricing for impressions. Buyers and sellers may also request that we discontinue using data obtained from their transactions that has already been aggregated with other data. It would be costly and difficult, if not impossible, to comply with such requests. As consumers continue to increase their use of digital technology and to incorporate multiple devices into their lives, linking and using data across such devices will become increasingly important. Various challenges affect our ability to link data relating to discrete devices or browsers, including different technologies, increased user awareness and sensitivity regarding use of data about their device usage, and evolving regulatory and self-regulatory standards. These challenges may slow growth, and if we are not able to cope with these challenges as effectively as other companies, we will be competitively disadvantaged. Any limitation on our ability to collect data about user behavior and interaction with content could make it more difficult for us to deliver effective solutions that meet the needs of sellers and buyers.

If cookies are replaced by alternative tracking mechanisms, our performance may decline and we may lose buyers and revenue.

~~Some prominent sellers~~Industry participants in the advertising technology ecosystem have ~~announced intentions~~taken or may take action to ~~discontinue~~eliminate or restrict the use of cookies and other identifiers, and we expect the use of third-party cookies to ~~develop alternative methods and mechanisms for tracking web users. It~~be largely phased out by 2022. For instance, Google has announced plans to fully eliminate the use of third-party cookies, while Apple has further restricted the use of mobile identifiers on its devices. In the absence of third-party cookies, it is possible that these or other companies in our ecosystem may rely on proprietary algorithms or statistical methods to track web users without cookies, or may utilize log-in credentials entered by users, ~~into other web properties owned by these companies, such as their digital email services,~~ to track web usage, including usage across multiple devices, without cookies. Alternatively, such companies may build different and potentially proprietary user tracking methods into their widely-used web browsers.

~~If cookies~~ While these new identification solutions will likely provide some level of consistency and compatibility with our platform, they are ~~effectively replaced by proprietary alternatives, our continued reliance upon cookie-based methods may face negative consumer sentiment~~unreleased and ~~otherwise place us at a competitive disadvantage, compelling~~unproven, and will require substantial development and commercial changes for us to develop or license alternative proprietary tracking methodologies. Development would take time, potentially subjecting us to competitive disadvantages, and require substantial investment from us. Developmentsupport. There is also may not be commercially feasible given our relatively small size, the fact that development of such technologies may require technical skills that differ from our core engineering competencies, and the likelihoodfurther risk that the market would adopt solutions developed by larger competitors. Licensing new proprietary tracking mechanisms and data from companies that have developed them may not be viable for us for various reasons; creatorschanges will disproportionately benefit the owners of ~~such technology may compete with us and may offer to provide~~these platforms or the ~~technology to us only on unfavorable terms or not at all, and if proprietary web tracking standards are owned by sellers or browser operators~~large walled gardens that have access to ~~user information by virtue~~large amounts of their popular consumer-oriented websites or browsers and design their technology for use in conjunction with the types of user information collected from their websites or design their browser to disfavor third-party cookies, we may still be at a competitive disadvantage evenfirst party data. Even if ~~we license their technology.~~

If cookies are effectively replaced by open industry-wide tracking standards rather than proprietary standards, we may still incur substantial re-engineering costs to replace cookies with these new technologies. This may also diminish the quality or value of our services to buyers if such new technologies do not provide us with the quality or timeliness of the data that we currently generate from cookies.

Our belief that the elimination of third-party cookies will lead to an increased use of first-party publisher segments may be incorrect.

We believe that the elimination of third party cookies has the potential to shift the programmatic ecosystem from an identity model powered by buyers that are able to aggregate and target audiences through cookies to one enabled by sellers that have direct relationships with consumers and are therefore better positioned to obtain user data and consent for implementing first party identifiers. While we believe that our platform and scale position us well to provide the infrastructure and tools needed for a publisher-centric identity model to succeed, there is no guarantee that our efforts will lead to an increase of the use of first-party publisher segments in the ecosystem. It is also possible that the increased use of first-party publisher segments will disproportionately benefit sellers or the large walled gardens that have access to large amounts of first party data. Additionally, these changes could create some variability in our revenue across certain buyers or sellers, depending on the timing of changes and developed solutions, and even if there is an increase in the proliferation of first-party publisher segments, we may still incur substantial re-engineering costs to optimize our solution for use with such segments.

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Risks Related to Regulation

Legislation and regulation of digital businesses, including privacy and data protection regimes, could create unexpected additional costs, subject us to enforcement actions for compliance failures, or cause us to change our technology solution or business model, which may have an adverse effect on the demand for our solution.

Many local, state, federal, and international laws and regulations apply to the collection, use, retention, protection, disclosure, transfer, and other processing of data collected from and about consumers and devices, and the regulatory framework for privacy issues is evolving worldwide. Various U.S. and foreign governments, consumer agencies, self-regulatory bodies, and public advocacy groups have called for or implemented new regulation directed at the digital advertising industry in particular, and we expect to see an increase in legislation and regulation related to the collection and use of data to target advertisements and communicate with consumers—including the use of mobile device and cross-device data, geo-location data, anonymous Internet user data and unique device identifiers, such as IP address or mobile advertising identifiers—and the collection of data from apps and websites that are directed to children.consumers. Such legislation or regulation could affect the costs of doing business online and may adversely affect the demand for or the effectiveness and value of our solution. Some of our competitors may have more access to lobbyists or governmental officials and may use such access to effect statutory or regulatory changes in a manner that commercially harms us while favoring their solutions.

Various federal privacy bills have been introduced in the U.S. Congress recently and a number of ~~state legislatures,~~states, including California, have passed or are considering privacy bills. These regulations may place significant restrictions on the collection and use of certain types of data used for behavioral advertising. The FTC has issued guidance on how companies should apply privacy principles to tracking and delivering targeted advertisements to consumers across multiple devices. The FTC has also adopted revisions to the Children's Online Privacy Protection Act that expand liability for the collection of information (including certain ~~anonymous~~device information such as persistent identifiers) by operators of websites and other online services that are directed to children or that otherwise use (for certain purposes) information collected from or about children.

~~On June 28, 2018,~~Recently, California passed atwo privacy ~~law in~~laws broadly regulating business’ processing of personal information, the California Consumer Privacy Act of 2018 ("CCPA"), and the California Privacy Rights Act ("CPRA"). The CCPA, which ~~grants California residents certain rights with respect to their personal information. The CCPA~~went into effect on January 1, 2020, is the most comprehensive data privacy regulation to date in the United States, and could be the precursor to other similar legislation in other states or at the federal level. The CCPA ~~expands the definition of~~defines personal information ~~which~~in a way that captures the types of data that we collect, such as device identifiers and IP addresses. Under the CCPA, ~~businesses are required~~California residents have new privacy rights (including rights of access and deletion), which bear similarity to ~~grant expansive access, deletion and portability~~some of the data subject rights granted to ~~consumers in the United States, similar to those provided~~EU residents under the GDPR. In addition, the CCPA gives California residents the right to opt-out of the sale of their personal information or to opt in to such sales, in the case of data relating to minors). The CCPA defines "sale" broadly, which could be interpreted to include typical advertising technology activities; this opt-out right may impact the ability of ad tech companies to provide services to their customers. The law ~~may also impose burdensome storage and~~establishes a new privacy framework for covered businesses, imposing additional compliance obligations on ~~publishers~~sellers and ad tech companies. Interpretation of the requirements remains unclear due to ambiguities in the ~~recent passage~~regulations and a lack of enforcement actions to date. The California Attorney General issued final regulations implementing the ~~regulation.~~ CCPA that became enforceable in 2020. Additional modifications were subsequently proposed, though those modifications have yet to be finalized.

The ~~law is expected to~~recently-passed CPRA will take effect in ~~2020.~~January 2023 and will impose additional notice and opt out obligations on the digital advertising space, including an obligation to provide an opt-out for behavioral advertising. It will also give the Attorney General broad rule making authority to issue regulations that could have additional impacts on our business. The CPRA, like the CCPA, will cause us to incur additional compliance costs and may impose additional restrictions on us and on our industry partners.

The CCPA and CPRA may precipitate additional privacy regulation by federal, state and local governments, which may increase our compliance costs and strain our technical capabilities, and which may conflict with each other. If we are unable to comply with the CCPA, CPRA, or other related legislation in the future, we may be subject to regulatory or private investigations, and if we are unable to use information for behavioral advertising as we have in the past, our business could be materially affected.

In ~~addition,~~ the European ~~Union has adopted~~Economic Area ("EEA") and the United Kingdom ("UK"), the General Data Protection Regulation, Regulation (EU) 2016/~~679.~~679 ("GDPR"), has now been in effect for more than two years. A key feature of the GDPR is that it treats much of the end-user information that is critical to programmatic digital advertising as "personal data" and therefore subject to significant conditions and restrictions on its collection and use. Without this end-user information, the value of programmatic advertising inventory diminishes, resulting in lower demand and prices, and potentially less adadvertising spend and revenue for us and other industry participants. If European sellers react by choosing to monetize their content through non-advertising-based methods (such as paid subscriptions), or reduce use of personal data subject to the GDPR in order to reduce compliance cost and risk, the volume and value of impressions available through our exchange would decrease, with potentially significant adverse consequences for our business.

The GDPR also sets out higher potential liabilities for certain data protection violations and creates a greater compliance burden for us in the course of delivering our solution in ~~Europe (as outlined further below)~~Europe. Compliance stakes are high because penalties for violation of the law can reach up to the greater of 20 million Euros or 4% of total worldwide annual turnover (revenue). ~~The~~

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Moreover, the regulatory climate in Europe, in particular, has grown increasingly unfavorable ~~for advertising technology-based business. Regulators have expressed antipathy towards common technologies deployed in digital advertising~~ and we anticipate increased regulatory scrutiny on the digital advertising industry as a whole.

Further, many governments are restricting the transmission or storage of information about individuals beyond their national borders. Such restrictions could, depending upon their scope, limit our ability to utilize technology infrastructure consolidation, redundancy, and load-balancing techniques, resulting in increased infrastructure costs, decreased operational efficiencies and performance, and increased risk of system failure.

These laws and regulations are continually evolving, not always clear, and not always consistent across the jurisdictions in which we do business. Any failure to protect, and comply with applicable laws and regulations or industry standards applicable to, personal data or other data relating to consumers could result in enforcement action against us, including fines, imprisonment of our officers, and public censure, claims for damages by consumers and other affected individuals, damage to our reputation, and loss of goodwill. ~~This is particularly true given that~~

Recent rulings from the ~~FTC, Attorneys General~~Court of ~~various U.S. States and various international regulators (including numerous data protection authorities in~~Justice of the European ~~Union), have specifically cited~~Union invalidated the EU-U.S. Privacy Shield as ~~enforcement priorities certain practices that relate to digital advertising. Even~~a lawful means for transferring personal data from the ~~perception of concerns relating to our collection, use, disclosure, processing, and retention of data, including our security measures applicable~~European Union to the ~~data we collect, whether or not valid,~~United States; this introduces increased uncertainty and may ~~harm our reputation~~

(and the reputation of the digital advertising ecosystem) and inhibit adoption of our solution by current and future buyers and sellers. We are aware of ongoing lawsuits filed against, or regulatory investigations into, companies in the digital advertising industry concerning various alleged violations of consumer protection, data protection, and computer crime laws, asserting various privacy-related theories. Any such proceedings brought against us could hurt our reputation, forcerequire us to ~~spend significant amounts in defense of these proceedings, distract~~change our ~~management, increase our costs of doing business, adversely affect the demand for our services or the digital advertising industry at large,~~EEA and ultimately result in the imposition of monetary liability or restrictions on our ability to conduct our business. We may also be contractually liable to indemnify and hold harmless buyers or sellers from the costs or consequences of litigation or regulatory investigations resulting from using our services or from the disclosure of confidential information, which could damage our reputation among our current and potential sellers or buyers, require significant expenditures of capital and other resources and cause us to lose business and revenue.

~~Legal and compliance uncertainties resulting from effectiveness of the GDPR may result in substantial risk to our ad spend and revenue.~~

The GDPR, which became effective on May 25, 2018, has imposed significant new regulatory requirements that are applicable to us as well as our clients and competitors. As is frequently the case with transformative new laws, some critical elements of the GDPR are still unclear, and consistent regulatory guidance has yet to be developed, and established industry complianceUK data practices have yet to emerge. Compliance stakes are high because penalties for violation of the law can reach up to the greater of 20 million Euros or 4% of total worldwide annual turnover (revenue). Further, compliance is complicated by the potential for differing interpretation and enforcement of the GDPR by regulators in each of the EEA’s member states. The reach of the GDPR extends well beyond ad tech, but some observers believe that ad tech may become a special focus of enforcement due to the concerns many European privacy regulators have expressed about digital behavioral advertising.

If European publishers react by choosing to monetize their content through non-advertising-based methods (such as paid subscriptions), or reduce use of personal data subject to the GDPR in order to reduce compliance cost and risk, the volume and value of impressions available through our exchange would decrease, with potentially significant adverse consequences for our business. If we are subjected to regulatory investigations or private claims, we could face significant fines and losses, and our financial position could be materially affected. In addition, the GDPR permits some form of representative actions, which may be similar to class actions or collective actions in the United States. Allowing such representative actions may incentivize parties, organizations, and/or ~~advocates to pursue private legal action relating to data protection violations more aggressively.~~

rely on an alternative legally sufficient compliance measure.

The GDPR generally prohibits the transfer of personal data of EUEEA and UK subjects outside of the European Union and the UK to countries whose laws do not ensure an adequate level of protection, unless a lawful data transfer solution has been ~~implemented or~~implemented. On July 16, 2020, in a case known as "Schrems II," the Court of Justice of the European Union ("CJEU") ruled on the validity of two of the primary data transfer ~~derogation applies.~~solutions. The ~~Rubicon Project, Inc. is established in~~first method, EU-U.S. Privacy Shield operated by the ~~United States~~U.S. Department of ~~America~~Commerce, was declared invalid as a legal mechanism to transfer data from the EEA and ~~has~~UK to the U.S. As a result, despite the fact that we have certified ~~its~~our compliance to the ~~EU-US Privacy Shield. The~~EU-U.S. Privacy Shield, isthis mechanism can no longer be used as a ~~privacy framework that~~lawful means to transfer EEA and UK data to us in the ~~European Commission has declared provides "adequate" protection for personal data,~~U.S. For the time being, the Department of Commerce continues to operate the EU-U.S. Privacy Shield, however, and ~~this enables The Rubicon Project, Inc. to receive personal data lawfully from the EU for as long as it complies with the Privacy Shield. If The Rubicon Project, Inc. fails~~if we fail to comply with the Privacy Shield ~~(or with EU data protection rules more generally), it risks~~requirements, we risk investigation and sanction by ~~EU or US~~U.S. regulatory authorities, ~~include~~including the Federal Trade Commission. ~~Each such~~Such investigation could cost us significant time and resources, and could potentially result in fines, criminal prosecution, or other penalties.

~~Further, the Privacy Shield, as well as some alternative compliance measures that we may also use for extra-EU data transfers, such as EU Commission approved data export agreements called~~The second mechanism, Standard Contractual Clauses are facing legal and political challenges. For example, in July 2018, the EU Parliament called for the suspension of the EU-US Privacy Shield by September 1st, 2018, although this did not happen. Further, in Data Protection Commissioner v. Facebook and Maximillian Schrems, the question of whether Standard Contractual Clauses enable lawful transfers of personal data from the EU has been referred by the Irish High Court to the Court of Justice of the European Union. If these challenges successfully invalidate the Privacy Shield or the("SCCs"), an alternative ~~compliance measures~~transfer measure that we ~~currently rely on or may choose~~also offer to our EEA and UK customers for extra-EEA and UK data transfers, was upheld as a valid legal mechanism for transnational data transfer. However, the ruling requires that EEA and UK organizations seeking to rely on in the ~~future, it may take us significant time, resources,~~SCCs to export data out of the EEA and effort to restructure our business and/or rely on another legally sufficient compliance measure. Additionally, such an invalidation might affect our reputation with our clients, who may choose to work with businesses that do not rely on such compliance mechanismsUK to ensure ~~legal and regulatory compliance, such as EU-based companies or other competitors~~the data is protected to a standard that ~~do not need~~is "essentially equivalent" to that under the GDPR including, where necessary, by taking "supplementary measures" to protect the data. It remains unclear what "supplementary measures" must be taken to allow the lawful transfer of personal data to the United States, and it is possible that EEA and UK data protection authorities may determine that there are no supplementary measures that can legitimize data transfers from the EEA and the UK to the U.S. For the time being, we will rely on SCCs for transfers of EEA and UK personal data to the U.S. and explore what "supplementary measures" can be implemented to protect such personal data that is transferred to us in ~~order~~the United States. We may also need to ~~avoid~~restructure our data export practices as a result of Brexit. At the ~~above-identified risks~~end of 2020, European Union law ceased to apply to the UK, and ~~legal issues.~~

the UK and EU are currently working under a temporary cooperation agreement to establish rules governing the data flow between the UK and EEA.

The GDPR ~~imposes~~and changes in U.S. laws impose new requirements for end user consent ~~and legal basis for data processing~~or opt-out that are not yet well understood.

End-user consent to data collection through device access (including the placement of cookies) has been required for some time under the European Union Privacy and Electronic Communications Directive (Directive 2002/58/EC), commonly referred to as the "ePrivacy Directive," but the GDPR has added complexity and ~~risk.~~ risk regarding the obligations to obtain valid consent.

End-user consent is difficult for ad tech intermediaries like us to obtain because we do not have direct relationships with such end users, so we have historically relied upon ~~publishers~~sellers to obtain consent for use of our ~~technology under the ePrivacy Directive.~~technology. To the extent any seller does not adequately satisfy ~~their~~its consent obligations for our technology, we may face regulatory risk. Further, emerging regulatory guidance in the EU has challenged this method of

obtaining consent. To the extent we (and/or our buyers) are required to obtain or confirm consent directly from end users, our ability to use cookies or access devices within ~~the EEA~~applicable jurisdictions may become significantly restricted.

While simple click-through cookie banners on EU-based digital media properties had been the norm for ePrivacy Directive compliance, it may become more challenging to obtain valid consent from European end users because the GDPR will likely be interpreted to impose additional requirements applicable to end-user consents generally. In order to obtain valid consent, end users must be provided with increasingly granular data about cookies placed in the course of delivering an advertisement, including cookies placed by us, or by buyers using our technology. Providing this granular level of data may be difficult to do, considering user interface restrictions, and in some cases, may not be possible. Further, if consent mechanisms become too cumbersome or unwieldy, end users are more likely to decline. This may result in lower levels of users' consent for accessing of their devices and processing of their personal data. Without consent, our publishers may not attempt to monetize inventory associated with such end users at all, or pass that inventory to us without personal data, which will reduce the value of such inventory.

In 2018, IAB Europe released a tool, the Transparency and Consent Framework (the "TCF"), in order to assist ~~publishers,~~sellers, advertisers and advertising technology providers, with the process of obtaining consent from end users in accordance with the GDPR (and also to provide end users with greater transparency in the advertising chain). In order for a publisher to use this tool, it must implement a "consent management provider" (CMP) to notify end users about the vendors that may access their personal data and their intended uses. The CMP then generates a consent string to distribute information to vendors about the end user’s consent preferences. There is limited guidance regarding proper implementation of the tool and some ~~publishers~~sellers and ad tech providers may not be using the tool or interpreting consent signals correctly. The TCF continues to evolve and we will need to devote internal resources to support any additional requirements imposed by the TCF (and possibly other consent tools). It is ~~also~~ not yet clear whether the TCF (or any other) consent tool will be accepted by regulators as appropriate consent mechanisms. ~~Consent tool adoption remains~~

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In the US, some government regulators and privacy advocates have suggested creating a "Do Not Track" standard that would allow Internet users to express a preference, independent of cookie settings in their browser, not to have their online browsing activities tracked. "Do Not Track" has garnered renewed interest in light of the CCPA. The CCPA regulations contemplate browser-based or similar "do not sell" signals. Further, the CPRA contemplates the use of technical opt-outs for the sale and sharing of personal information for advertising purposes as well as to opt out of the use of sensitive information for advertising purposes.

Legal standards and regulatory guidance will continue to evolve. National regulators in the ~~early stages~~UK and ~~it is unclear whether~~EU are evolving their guidance on the ~~market will widely adopt one standard. Some buyers may decline to bid on impressions from~~use of advertising technologies and compliance with the ~~EEA due to ambiguity about their rights, or may only bid on impressions that are stripped of personal data~~GDPR and ~~converted to contextual advertising.~~ePrivacy Directive. This ~~will have the effect of reducing demand for and value of EEA impressions on our platform.~~

Large integrated purchasers of ad inventory like Google may also have an advantage in obtaining the consent they need directly from their end users. It is not clear whether Google will participate in the TCF. If Google chooses not to participate in the TCF, broad adoption of the TCF by publishersguidance may be ~~limited.~~

burdensome or inconsistent across countries, and present challenges to the way we operate. Some regulators are undertaking enforcement investigations into advertising technology companies, and the outcome of these investigations may present risks to our business.

As a result of all of the factors set forth above, our or our clients’ ability to ~~place or use third-party cookies or access mobile devices,~~serve target advertisements may become significantly impaired or complicated in certain jurisdictions. The EU is also expected to replace the ePrivacy Directive with the ePrivacy Regulation. Current drafts of the ePrivacy Regulation propose significant requirements around obtaining consent, and impose fines for violations that are materially higher than those imposed under the ePrivacy Directive.

ItIn Europe, it remains unclear whether certain legal bases for data processing are permitted for behavioral ~~advertising~~.

advertising.

The GDPR sets forth six alternative legal bases for processing personal data, but only two are relevant to ad tech: consent by the data subject and "legitimate interests," which means that "processing is necessary for the purposes of the legitimate interests pursued by the controller or by a third party, except where such interests are overridden by the interests or fundamental rights and freedoms of the data subject." We generally rely upon legitimate interests. There is minimal guidance on the factors that would override any legitimate interest for processing. Some EU regulators or courts may conclude that the processing of personal data for the purposes of behavioral advertising does not satisfy the legitimate interests of the controller, or that such interests do not outweigh the privacy rights of end users, even with respect to ad tech parties that only collect pseudonymous personal data. Unavailability of this basis for processing end users’ personal data would require us to obtain end-user consent for processing under the GDPR, which may not be possible for us, or other ad tech intermediaries, without changes to the ad tech business that would be difficult, time-consuming, expensive, and perhaps unattainable. These complexities are compounded by the ability of different national and state governmental authorities within the EU to adopt differing interpretative and enforcement approaches to the law.

Google currently relies on end-user consent as its legal basis for processing personal data, and has required its publishers and ad tech partners to obtain such end-user consent on behalf of Google. We are reliant upon third parties to obtain consent for Google in accordance with their policies. Consent is relatively easier for Google to obtain because of its direct relationships with end users and importance to publishers, but its practices may not translate well across the industry. If publishers are unable to obtain this consent our revenue and advertising spend could decline.

Legal uncertainty and industry unpreparedness may mean substantial disruption and inefficiency, demand constraints, and reduced inventory supply and value.

Some ~~publishers~~sellers may be unprepared to comply with evolving regulatory guidance under ~~the GDPR,~~US and foreign privacy laws, and therefore may remove personal data from their inventory before passing it into the bid stream, ~~at least temporarily. This will lower their inventory on~~which would reduce the value ~~scale from behavioral~~of the inventory to ~~contextual advertising, resulting in loss of ad spend and revenue for us.~~buyers. Even well-prepared ~~publishers~~sellers and buyers will be confronted with difficult choices and administrative and technical hurdles to implement their ~~GDPR~~privacy compliance programs and integrate with multiple other parties in the ecosystem. Further, compliance program design and implementation will be an ongoing processas understanding of the new law increases and industry compliance standards evolve. The resulting process friction could result in substantial inefficiency and loss of inventory and demand, as well as increased burdens upon our organization as we seek to assist clients and adapt our own technology and processes as necessary to comply with the law and adapt to industry practice. The uncertain regulatory environment caused by changes to privacy laws discussed in the ~~GDPR~~sections above may benefit large, integrated competitors like Google, Facebook, Comcast Verizon, AT&T and ~~Facebook,~~Amazon, which have greater compliance resources and can take advantage of their direct relationships with end users to secure consents from, and offer necessary choices to, end users that we and other intermediaries without direct user relationships are less able to obtain under current industry conditions.

We are subject to regulation with respect to political advertising, which lacks clarity and uniformity.

~~The UK's decision~~We are subject to ~~leave the European Union may add costs~~regulation with respect to political advertising activities, which are governed by various federal and ~~complexity to our compliance efforts.~~

The UK's decision to leave the European Union may add cost and complexity to our compliance efforts. If the UK leaves the EU with a "no deal" Brexit on March 29th, 2019, then additional compliance measures, such as Standard Contractual Clauses, may need to be implemented at very short notice to enable continuing transfers to our UK subsidiary company. Further, transfers from and processing of datastate laws in the ~~UK will become subject~~U.S., and national and provincial laws worldwide. Online political advertising laws are rapidly evolving and in certain jurisdictions we have compliance requirements with respect to UK data protection law, and we will also need to adapt separately to any new UK requirements. Complying with any new regulatory requirements could force us to incur substantial costs, impact how clients view our technology, or require us to change our business practices in a manner that could reduce our revenue or compromise our ability to effectively pursue our growth strategy.

~~The U.S. comprehensive tax reform bill of 2017 could adversely affect our business and financial condition.~~

On December 22, 2017, the U.S. government enacted comprehensive Federal tax legislation commonly referred to as the Tax Cuts and Jobs Act of 2017 ('"Tax Act"). The Tax Act, among other things, includes changes to U.S. federal tax rates, imposes future limitations on the deductibility of Research and Development expenditures and net operating loss carryforwards, allows for the expensing of capital expenditures, and puts into effect the migration from a worldwide system of taxation to a territorial system. We are continuing to evaluate the Tax Act and its requirements, as well as its application to our business and its impactpolitical ads delivered on our effective tax rate. Additionally, U.S. states' incorporation of these federal law changes, or portions thereof, into their tax codes may result in higher future state tax liabilities. The implementation by us of new practices and processes designed to comply with and benefit from, the Tax Act and its rules and regulations could require us to make substantial changes to our business practices, allocate additional resources, and increase our costs, which could negatively affect our business, results of operations and financial condition.

~~We generally do not have contractual privity with Internet users who view advertisements that we place, and~~platform. In some jurisdictions we may determine not ~~be able~~ to ~~disclaim liabilities from such Internet users or consumers.~~

~~Potential sources~~serve political advertisements due to uncertainty around these requirements and potential burdens of ~~liability to Internet users include malicious activities, such as~~compliance. In addition, our sellers may impose restrictions on receiving political advertising. The lack of uniformity and increasing compliance requirements around political advertising may adversely impact the ~~introduction~~amount of ~~malware into users' computers through advertisements served~~political advertising spent through our platform, and code that redirects users to sites other than the ones users sought to visit, potentially resulting in malware downloads or use charges from the redirect site. Sellers of advertisement space purchased throughincrease our solution often have terms of use in place with their users that disclaim or limit their potential liabilities to such users, or pursuant to which users waive rights to bring class-action lawsuits against the sellers related to advertisements. Certain of our competitors are also prominent sellers,operating and may be able to include protections in their website or application terms of use that also limit liability to users of their advertising services. We generally do not have terms of use in place with such users. As a consequence, we generally cannot disclaim or limit potential liabilities to such users through terms of use, which may expose us to greater liabilities than competing advertising networks that are also prominent sellers.

~~Changes in market standards applicable to our solution could require us to incur substantial additional development costs.~~

Market forces, competitors' initiatives, regulatory authorities, industry organizations, seller integration revisions, and security protocols are causing the emergence of demands and standards that are or could be applicable to our solution. We expect compliance with these kinds of standards to become increasingly important to buyers and sellers, and conforming to these standards is expected to consume a substantial and increasing portion of our development resources. If our solution is not consistent with emerging standards, our market position and sales could be impaired. If we make the wrong decisions about compliance with these standards,

~~or are late in conforming, or if despite our efforts our solution fails to conform, our offerings will be at a disadvantage in the market to the offerings of competitors that have complied.~~

~~The evolving concept of viewability involves competitive uncertainty and may cause us to incur additional costs and liability risk.~~

Viewability of digital advertising inventory is relevant to marketers because it represents a way of assessing the value of particular inventory as a means to reach a target audience. However, there is no consensus definition of viewability. Some approaches focus on whether an advertisement can be seen at all, and others focus on whether an advertisement that can be seen is actually seen, in whole or part, or for how long. Low viewability can be caused by various factors, including technical issues (e.g. device screen size, browser functionality and settings, web site load times), media design (e.g. below-the-fold or sub-page placements), and user behavior (e.g. the decision whether to scroll down a website or click on an advertisement or how long to watch a video). Non-viewability is a separate issue and may result, for example, from stacking ads so the one in the back is obscured, or serving ads into a single pixel space too small to be seen.

Aside from non-viewable inventory, which is generally well understood, various vendors and other industry participants advocate definitions and measurements of low viewability that are consistent with their technology or interests. We cannot predict whether consensus views will emerge, or what they will be. Nevertheless, some themes seem to have emerged:

Buyers of advertising inventory are increasingly using technology, often provided by third parties, to assess viewability of impressions for use as a bidding or purchasing criterion, or to determine value for purposes of determining pricing.

Assessment of viewability is imperfect, but technology can be expected to improve as data providers, DSPs, and buyers themselves develop viewability assessment tools and build viewability factors into their algorithms for bidding, purchasing, and pricing decisions.

~~Inventory viewability and value correlate. More viewable inventory is more valuable, and viewability of inventory increases in importance with the price paid for that inventory.~~

Viewability can be used as an inventory differentiator, by domain or on an impression level, with higher viewability generally associated with higher value and pricing, and lower viewability generally associated with lower value and pricing.

These themes are relevant to our business of facilitating fully informed purchase and sale of advertising, and the evolution of viewability standards may represent an opportunity to refine matching of supply and demand. However, incorporating viewability concepts fully into our business as they evolve will require us to incur additional costs to integrate relevant technologies and process additional information through our system. If we do not handle viewability well, we could be competitively disadvantaged.

In addition, inventory that is well differentiated on the basis of viewability will also be differentiated on the basis of value, with less viewable inventory valued lower. In this context, if we are not positioned to transact the higher viewability inventory competitively, our revenue and profitability could be adversely affected.

As we have experienced in the past, buyers could attempt to hold us responsible, and not to pay us, for impressions that do not satisfy their viewability requirements or expectations, and depending upon how viewability evolves, market practice or emerging regulation may require us to incur compliance costs, and ~~assume some responsibility for viewability of advertisements transacted through our solution. Divergent views of how~~subject us to ~~measure viewability and imperfect measurement technology could lead to disagreement, increasing risk of disputes, demands for refunds, and reputational harm.~~potential liability from regulatory agencies.

Failure to comply with industry self-regulation could harm our brand, reputation, and our business.

In addition to compliance with government regulations, we voluntarily participate in trade associations and industry self-regulatory groups that promulgate best practices or codes of conduct addressing privacy and the provision of digital advertising. ~~However, in the past, some of these guidelines have not comported with our business practices, making them difficult for us to implement.~~ If we encounter difficulties ~~in the future, or our opt-out mechanisms fail to work as designed, or if digital media users misunderstand our technology or our commitments with respect to~~abiding by these principles, we may be subject to negative publicity, as well as investigation and litigation by governmental authorities, self-regulatory bodies or other accountability groups, buyers, sellers, or other private parties. Any such action against us could be costly and time consuming, require us to change our business

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practices, divert management's attention and our resources, and be damaging to our reputation and our business. In addition, we could be adversely affected by new or altered self-regulatory guidelines that are inconsistent with our practices or in conflict with applicable laws and regulations in the United States and other countries where we do business. As a result of such inconsistencies or conflicts, or other business or legal considerations, we may choose not to comply with some self-regulatory guidelines. Additionally, as we expand geographically, we may begin to operate in jurisdictions that have self-regulatory groups in which we do not participate. If we fail to abide by or are perceived as not operating in accordance with applicable laws and regulations and industry best practices,practices.

~~or any industry guidelines or codes with regard to privacy or the provision of Internet advertising, our reputation may suffer and we could lose relationships with buyers and sellers.~~

~~Forecasts of market growth may prove to be inaccurate, and even if the market in which we compete achieves the forecasted growth, our business may not grow at similar rates, if at all.~~

We have in the past provided, and may continue to provide, forecasts related to our market, including forecasts relating to the expected growth in the digital advertising market and parts of that market as well as the forecasted trend towards automation of analog and print advertising markets. Growth forecasts are subject to significant uncertainty and are based on assumptions and estimates that may prove to be inaccurate. Moreover, the anticipation that the advertising industry will continue to shift from analog and print media to digital advertising at the rate forecasted may not come to fruition. Further, even if the market grows, we may not. Our plans to enter or increase our presence in various markets may not succeed for various reasons, including possible shortfall or misallocation of resources or superior technology development or marketing by competitors. Large competitors, principally Google and Facebook, have absorbed a large portion of recent growth in digital advertising spending and appear well positioned to continue to do so, making it more difficult for smaller companies like us to participate in market growth without taking share from competitors.

Risks Related to Our Relationships with Buyers and Sellers and Other Strategic Relationships

We rely on buyers and sellers to abide by contractual requirements and relevant laws, rules, and regulations when using our solution. The acts or omissions of buyers or sellers, or our own failure to meet advertising and inventory content standards and provide services that our buyers and sellers trust, could harm our brand and reputation and those of our partners, and negatively impact our business, financial condition and results of operations.

The buyers and sellers engaging in transactions through our platform impose various requirements upon each other, and they and the underlying advertisers are subject to regulatory requirements by governments and standards bodies applicable to their activities. Though we contractually require buyers and sellers to abide by relevant laws, rules and regulations, as well as restrictions by their counterparties, when transacting on our platform, we do not provide or control the content of the advertisements that we serve or the content of the websites providing the inventory, and there are many circumstances in which it is difficult or impossible for us to monitor or evaluate the compliance of our buyers and sellers. If buyers or sellers fail to abide by relevant laws, rules and regulations, or contract requirements, we could potentially face liability for such misuse.

In addition, both advertisers and inventory suppliers are concerned about being associated with content they consider inappropriate, competitive or inconsistent with their brands, or illegal, and they are hesitant to spend money or make inventory available, respectively, without some guarantee of brand security. Buyers increasingly require us to accept liability for inventory quality and sellers increasingly require us to accept liability for ad content. Consequently, our reputation depends in part on providing services that our buyers and sellers trust, and we have contractual obligations to meet content and inventory standards. We contractually prohibit the misuse of our platform by our buyers and sellers and actively monitor inventory against our quality guidelines. Despite such efforts, we may provide access to inventory that is objectionable to our buyers or serve advertising that contains objectionable content, which could harm our or our clients’ brand and reputation, decrease their trust in our platform, and negatively impact our business, financial condition and results of operations. Furthermore, we may receive public pressure to discontinue working with certain sellers or buyers on our platform.

Our contracts with buyers and sellers are generally not exclusive, may be terminated upon relatively short notice, and generally do not require minimum volumes or long-term commitments. If buyers or sellers representing a significant portion of the demand or inventory in our marketplace decide to materially reduce the use of our solution, we could experience an immediate and significant decline in our revenue and profitability and harm to our business.

Generally, our buyers and sellers are not obligated to provide us with any minimum volumes of business, may do business with our competitors as well as with us, may reduce or cancel their business with us or terminate our contracts without penalty, and may bypass us and transact directly with each other or through other intermediaries that compete with us. Accordingly, our business is highly vulnerable to changes in the macro environment, price competition, and development of new or more compelling offerings by our competitors, which could reduce business generally or motivate buyers or sellers to migrate to ~~competitors'~~competitors’ offerings.

Sellers and buyers may seek to change the terms on which they do business with us, or allocate their advertising inventory or demand to our competitors who provide advertising demand and supply to them on more favorable terms or whose offerings are considered more beneficial. Supply of advertising inventory is also limited for some sellers, such as special sites or new technologies, and sellers may request higher prices, fixed price arrangements or guarantees that we cannot provide as effectively as our competitors, or that would reduce the profitability of that business. In addition, sellers sometimes place significant restrictions on the sale of their advertising inventory, such as strict security requirements, limitations on data sharing, prohibitions on advertisements from specific advertisers or specific industries, and restrictions on the use of specified creative content or format. Finally, with the proliferation of header bidding, sellers' inventory is available for purchase through multiple exchanges ~~simultaneously, thereby reducing the number~~simultaneously. Buyers, in turn, are free to direct their spend to us or one or more of ~~ad impressions sold through~~ our ~~exchange even where we have historically had relationships with the seller.~~competitors, and increasingly are seeking price concessions, rebates, or other consideration to direct more spend towards us.

We serve many buyers and sellers, but certain large buyers and sellers have accounted for and will continue to account for a disproportionate share of business transacted through our solution. ~~Although we no longer earn revenue directly from buyers, as we ceased charging buyer fees in late 2017, in 2018~~In 2020 there were two buyers of advertising inventory that indirectly contributed to approximately 40% of revenue through their buying activity from sellers on our platform. Buyer and seller needs and plans can change quickly, and buyers or sellers may reduce volumes or terminate their arrangements with us, quickly and without penalty, for a variety of reasons, including financial issues or other changes in circumstances; development or acquisition by buyers or sellers of their own technologies that reduce their reliance upon us; the new offerings by or strategic relationships with our competitors; change or removal of personnel with whom we traditionally had relationships; opportunities for buyers and sellers to bypass us and deal directly with each other; change in control (including consolidations through mergers and acquisitions); adoption of header bidding solutions; or declining general economic conditions (including those resulting from dissolutions of companies). Technical issues affecting our systems or the systems of our larger buyers or sellers could also cause a decline in spending. As is typical in our industry, some of the largest buyers and sellers on our platform are also competitors, which could increase the risk that such companies could reduce their business with us. These factors make it important for us to expand and diversify our client relationships. The number of large media buyers and sellers in the market is finite, and it could be difficult for us to replace revenue loss from any large buyers or sellers whose relationships with us diminish or terminate. Just as growth in our inventory strengthens buyer activity in a network effect, loss of inventory or buyers could have the opposite effect.

Because we do not have long-term contracts, our future revenue may be difficult to predict and there is no assurance that our current buyers and sellers will continue to use our solution or that we will be able to replace lost buyers or sellers with new ones. If a buyer or group of buyers representing a significant portion of the demand in our marketplace, or a seller or group of sellers

representing a significant portion of the inventory in our marketplace decides to materially reduce use of our solutions, it could cause an immediate and significant decline in our revenue and profitability and harm to our business. In addition, loss of substantial inventory or demand could degrade our marketplace. Loss of major DSP sources of demand could adversely affect bid density or pricing in our auctions, and reduction in fees if we are not able to redirect inventory to other demand sources. Loss of important unique inventory could reduce fees from demand that cannot be shifted to other sellers and make it harder to differentiate ourselves from our competitors. The number of large media buyers and sellers in the market is finite, and it could

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be difficult for us to replace the losses from any buyers or sellers whose relationships with us diminish or terminate. Additionally, if we overestimate future usage, we may incur additional expenses in adding infrastructure without a commensurate increase in revenue, which would harm our profitability and other operating results.

Because of these factors, we seek to expand and diversify our client relationships. In particular, as part of our strategy to increase the volume of advertising inventory on our exchange, we are continuing relationships with aggregators of inventory and with large sources of supply that have their own monetization capabilities but also allow third parties to connect to their exchanges and bid on their inventory. These relationships represent additional risks in terms of inventory quality, transaction discrepancies, and collections, and may be less profitable because we may be required to compensate these partners or share the fees available for intermediaries in these transactions, and may incur higher serving costs relative to revenue.

We must provide value to both buyers and sellers of advertising without being perceived as favoring one over the other or being perceived as competing with them through our service offerings.

~~Buyers and sellers have different interests, with each trying to enhance its value in their transactions through use of data, requests that we adapt our solution to help them, and other means.~~ We are interposed between buyers and sellers, and to be successful, we must continue to find ways of providing value to both without being perceived as favoring one at the expense of the other. For example, our proprietary auction algorithms, which are designed to improve auction outcomes, influence the allocation and pricing of impressions and must do so in ways that add value to both buyers and sellers. Continued technological evolution in ~~our business results in~~ the availability and use of more data ~~more incisively~~ to inform buying and selling ~~decisions. Third-party~~decisions necessitates that we, as an intermediary, use data ~~analytics providers encourage this dynamic by offering products to buyers and sellers to attempt to swing transactional dynamics to their advantage at~~in a manner that complies with the expense of the other. We come under pressure to provide raw data to fuel these products and to facilitate their use by buyers and sellers on our platform. Unlike some competitors, who focus on serving either buyers or sellers, we must serve the interestsexpectations of both ~~meaning that we must exercise caution in use of data~~our seller and ~~may determine not to facilitate some data products, which could result in loss of business from clients that insist upon using such products.~~buyer clients. Furthermore, because new business models continue to emerge, we must constantly adapt our relationship with buyers and sellers and how we market ourselves to each. Consistent with our goal of connecting buyers and sellers, we ~~inevitably~~seek to grow ~~closer~~our connections to each, and we must take care that our deeper connections with buyers, on the one hand, or sellers, on the other hand, do not come at the expense of the other's interests. For example, our decision to default to a first-price auction dynamic for all our header bidding auctions could be perceived by some buyers as serving the interests of sellers by increasing amounts paid for inventory, while some sellers could view our Estimated Market Rate service, which is designed to reduce buyers’ first price bids while maintaining their win rates, as favoring buyers and reducing sellers' revenue. In addition, as our own capabilities evolve, we may be perceived by clients, particularly buyers, as competing with them. If we fail to balance our clients' interests appropriately, our ability to provide a full suite of services and our growth prospects may be compromised.

We rely on ~~buyers to use our solution~~technological intermediaries such as DSPs to purchase advertising on behalf of advertisers. Such buyers may have or develop high-risk credit profiles or pay slowly, which may result in credit risk to us or require additional working capital to fund our accounts payable. In addition, direct billing arrangements between buyers and sellers may result in unfavorable fee dynamics and increased working capital demands.

Generally, we invoice and collect from buyers the full purchase price for impressions they have purchased, retain our fees, and remit the balance to sellers. However, in some cases, we may be required or choose to pay sellers for impressions delivered before we have collected, or even if we are unable to collect, from the buyer of those impressions. There can be no assurances that we will not experience bad debt in the future, and write-offs for bad debt could have a materially negative effect on our results of operations for the periods in which the write-offs occur. In addition, we attempt to coordinate collections from our buyers so as to fund our payment obligations to our sellers. However, some buyers and sellers may require direct billing and collection arrangements between themselves, and some providers of header bidding wrappers or other downstream decisioning mechanisms in which we participate (such as Google EB) may control billing and collection for transactions we win through their platforms. When we collect from buyers and pay sellers, we are able to retain our fees from cash we collect before remitting balances to sellers. However, if we do not manage collections and payments, we will need to invoice clients for our fees, which may delay our collections and increase visibility and result in pressure for more transparent or lower fees. Further, growth and increased competitive pressure in the digital advertising industry is causing advertisers and buyers to become more demanding, resulting in overall increased focus by all industry participants on pricing, transparency, and cash and collection cycles. Some buyers have experienced financial pressures that have motivated them to slow the timing of their payments to us. If buyers slow their payments to us or our cash collections are significantly diminished as a result of these dynamics, our revenue and/or cash flow could be adversely affected and we may need to use working capital to fund our accounts payable pending collection from the buyers. This may result in additional costs and cause us to forgo or defer other more productive uses of that working capital.

Our sales efforts with buyers and sellers may require significant time and expense and may not yield the results we seek.

Attracting new buyers and sellers and increasing our business with existing buyers and sellers involves substantial time and expense, and we may not be successful in our efforts. We may spend substantial time and effort educating buyers and sellers about our offerings, including providing demonstrations and comparisons against other available solutions. This process can be costly and time-consuming, and is complicated by us having to spend time integrating our solution with software of buyers and sellers. Because our solution may be less familiar in some markets outside the United States, the time and expense involved with attracting, educating and integrating buyers and sellers in international markets may be even greater than in the United States. If we are not

successful in targeting, supporting and streamlining our sales processes, our ability to grow our business may be adversely affected. In addition, because of competitive market conditions and negotiating leverage enjoyed by large buyers and sellers, we are sometimes forced to choose between loss of business or contracting on terms that allocate more risk to us than we would prefer to accept.

We rely on buyers and sellers to abide by contractual requirements and relevant laws, rules, and regulations when using our solution, and legal claims or enforcement actions resulting from the actions of buyers or sellers could expose us to liabilities, damage our reputation, and be costly to defend.

The buyers and sellers engaging in transactions through our platform impose various requirements upon each other, and they and the underlying advertisers are subject to regulatory requirements by governments and standards bodies applicable to their activities. We assume responsibility for satisfying or facilitating the satisfaction of some of these requirements through the contracts we enter into with buyers and sellers. In addition, we may have responsibility for some acts or omissions of buyers or sellers transacting business through our solution under applicable laws or regulations or as a result of common law duties, even if we have not assumed responsibility contractually. These responsibilities could expose us to significant liabilities, perhaps without the ability to impose effective mitigating controls upon, or to recover from, buyers and sellers.

We contractually require our buyers and sellers to abide by relevant laws, rules and regulations, as well as restrictions by their counterparties, when transacting on our platform, and we generally attempt to obtain representations from buyers that the advertising they place through our solution complies with applicable laws and regulations and does not violate third-party intellectual property rights, and from sellers about the quality and characteristics of the impressions they provide. We also generally receive representations from buyers and sellers about their privacy practices and compliance with applicable laws and regulations, including their maintenance of adequate privacy policies that disclose and permit our data collection practices. Nonetheless, there are many circumstances in which it is difficult or impossible for us to monitor or evaluate their compliance. For example, we cannot control the content of buyers’ advertisements or sellers’ media properties, and we are often unable to determine exactly what information a buyer collects after an ad has been placed, and how the buyer uses any such collected information. If buyers or sellers fail to abide by relevant laws, rules and regulations, or contract requirements, when transacting over our platform, or after such a transaction is completed, we could potentially face liability for such misuse. Similarly, if such misconduct results in enforcement action by a regulatory body or other governmental authority, we could become involved in a potentially time-consuming and costly investigation or we could be subject to some form of sanction or penalty. We may not have adequate indemnity to protect us against, and our policies of insurance may not cover, such claims and losses.

Our business relationships expose us to risk of substantial liability for contract breach, violation of laws and regulations, intellectual property infringement and other losses, and our contractual indemnities and limitations of liability may not protect us adequately.

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Our agreements with sellers, buyers and other third parties typically obligate us 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 our own business operations, obligations and acts or omissions. However, under some circumstances, we agree 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 our business interposes us between buyers and sellers in various ways, buyers often require us to indemnify them against acts and omissions of sellers, and sellers often require us to indemnify them against acts and omissions of buyers. In addition, our agreements with sellers, buyers and other third parties typically include provisions limiting our liability to the counterparty and the counterparty's liability to us. 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.

We have limited ability to control acts and omissions of buyers and sellers or other third parties that could trigger our indemnity obligations, and our policies of insurance may not cover us for acts and omissions of others. Because we contract with many buyers and sellers and those contracts are individually negotiated with different scopes of indemnity and different limits of liability, it is possible that in any case our obligation to provide indemnity for the acts or omissions of a third party such as a buyer or seller may exceed what we are able to recover from that party. Further, contractual limits on our liability may not apply to our indemnity obligations, contractual limits on our counterparties' liability may limit what we can recover from them, and contract counterparties may be unable to meet their obligations to indemnify and defend us as a result of insolvency or other factors. Large indemnity obligations, or obligations to third parties not adequately covered by the indemnity obligations of our contract counterparties, could expose us to significant costs.

In addition to the effects on indemnity described above, the limitation of liability provisions in our contracts may, depending upon the circumstances, be too high to protect us from significant liability for our own acts or omissions, or so low as to prevent us from recovering fully for the acts or omissions of our counterparties.

Our solution relies on third-party open source software components. Failure to comply with the terms of the underlying open source software licenses could expose us to liabilities, and the combination of certain open source software with code that we develop could compromise the proprietary nature of our solution.

Our solution utilizes software licensed to us by third-party authors under "open source" licenses. The use of open source software may entail greater risks than the use of third-party commercial software, as open source licensors generally do not provide warranties or other contractual protections regarding infringement claims or the quality of the code. ~~Some open source licenses contain requirements that we make available source code for modifications or derivative works we create based upon the type of open source software we use.~~ If we combine our proprietary software with open source software in a certain manner, we could, under certain open source licenses, be required to release the source code of our proprietary software to the public. This would allow our competitors to create similar solutions with lower development effort and time and ultimately put us at a competitive disadvantage.

The terms of many open source licenses have not been interpreted by U.S. courts, and there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on us. Moreover, we cannot guarantee that our processes for controlling our use of open source software will be effective. If we are held to have breached the terms of an open source software license, we could be required to seek licenses from third parties to continue operating using our solution on terms that are not economically feasible, to re-engineer our solution or the supporting computational infrastructure to discontinue use of certain code, or to make generally available, in source code form, portions of our proprietary code.

Risks ~~Relating~~Related to Our Operations

~~Our reorganization and cost-control efforts might not assure profitability and may affect morale and make it difficult to retain employees or attract new ones.~~

We implemented a reduction in force affecting approximately 125 employees in November 2016 and, in the first quarter of 2017, we exited the intent marketing business and reorganized our management team. These steps were part of a larger effort we began earlier in 2016 to realign our business to address the needs of our clients and the evolving marketplace in which we operate, and to pursue our strategic priorities. Our strategic decisions to reduce and then eliminate our buyer fees contributed to a significant decline in our revenue and cash flow, which compelled us to pursue additional cost-reduction measures in 2018 in an ongoing effort to operate profitably; we implemented further headcount reductions of approximately 100 employees in the first quarter of 2018. We had previously scaled our organization in anticipation of continuing revenue growth in excess of the actual results we achieved, and the steps we took were intended to reduce our costs to align our organization and cost structure more appropriately to our current revenue and scale and to position us better to expand our investments in future growth areas including header bidding, mobile, video, and PMP. However, our cost reduction efforts do not assure our profitability. Additional cost reductions may be implemented in the future, and cost savings may be offset by future hiring or other costs to pursue strategic objectives. The reductions in force and management reorganization could adversely affect morale in our organization and our reputation as an employer, which could lead to the loss of valued employees and could make it more difficult for us to hire new employees in the future, and the reduction of our headcount could adversely affect our service delivery and make it more difficult for us to pursue new opportunities and initiatives in the future. The reduction in force, including our sales staff, also may make it difficult for us to execute on our strategy of increasing the amount of volume on our platform

Real or perceived errors or failures in the operation of our solution could damage our reputation and impair our sales.

We must operate our technology infrastructure without interruption to support the needs of sellers and buyers. Because our software is complex, undetected errors and failures may occur, especially when new versions or updates are made to our software or network infrastructure, or changes are made to sellers' or buyers' software interfacing with our ~~solution.~~solution, or as we further integrate Telaria's technologies with our own. Errors or bugs in our software, faulty algorithms, technical or infrastructure problems, or updates to our systems could lead to an inability to effect transactions or process data to place advertisements or price inventory effectively, cause the inadvertent disclosure of proprietary data, or cause advertisements to display improperly or be placed in proximity to inappropriate content. ~~Errors~~Such errors or bugs in our software have in the past, and may in the future, not be found until the software is in our live operating environment. For example, changes to our solution have in the past caused errors in the reporting and analytics applications for buyers, resulting in delays in their spending on our platform. Errors or failures ~~in our solution, even if caused by the implementation of changes by buyers or sellers to their systems,~~ could also result in negative publicity, disclosure of confidential information, damage to our reputation, loss of or delay in market acceptance of our solution, increased costs or loss of revenue, loss of competitive position, or claims by advertisers for losses sustained by them.

We may make errors in the measurement of transactions conducted through our solution, causing discrepancies with the measurements of buyers and sellers, which can lead to a lack of confidence in us and require us to reduce our fees or provide refunds to buyers and sellers. Alleviating problems resulting from errors in our software could require significant expenditures of capital and other resources and could cause interruptions, delays, or the cessation of our business.

Various risks could interrupt access to our network infrastructure or data, exposing us to significant costs and other liabilities.

Our revenue depends on the technological ability of our solution to deliver and measure advertising impressions, and the operation of our exchange and our ability to place impressions depend on the continuing and uninterrupted performance of our IT systems. Our platform operates on our data processing equipment that is housed in third-party commercial data centers that we do not control or on servers owned and operated by cloud-based service providers. We rely on multiple bandwidth providers, ~~which may leave us vulnerable~~multiple internet service providers, as well as content delivery network, or CDN providers, and domain name systems, or DNS providers, and mobile networks to ~~technical issues or outages that we cannot easily control or remedy.~~deliver video ads. In addition, our systems interact with systems of buyers and sellers and their contractors. Any damage to, or failure of, these systems could result in interruptions to the availability or functionality of our service. Moreover, the failure of our data center hosting facilities or any other third-party providers to meet our capacity requirements could result in interruptions in the availability or functionality of our solutions or impede our ability to scale our operations. All of these facilities and systems are vulnerable to interruption and/or damage from a number of sources, many of which are beyond our control, including, without limitation: (i) loss of adequate power or cooling and telecommunications failures; (ii) fire, flood, earthquake, hurricane, and other natural disasters; (iii) software and hardware errors, failures, or crashes; (iv) financial insolvency; and (v) computer viruses, malware, hacking, terrorism, and similar

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disruptive problems. In particular, intentional cyber-attacks present a serious issue because they are difficult to prevent and remediate and can be used to defraud our buyers and sellers and their clients and to steal confidential or proprietary data from us, our clients, or their users. Further, because our Los Angeles headquarters and San Francisco offices and our California data center sites are in seismically active areas, earthquakes present a particularly serious risk of business disruption. These vulnerabilities may increase with the complexity and scope of our systems and their interactions with buyer and seller systems.

The steps we take to mitigate this risk may not protect against all problems, and our ability to mitigate risks to related third-party systems is limited. In addition, we rely to a significant degree upon security and business continuity measures of our data center operators, which may be ineffective. Our disaster recovery and business continuity plans rely upon third-party providers of related services, and if those vendors fail us, we could be unable to meet the needs of buyers and sellers. Any steps we take to increase the reliability and redundancy of our systems may be expensive and may not be successful in preventing system failures. Any failures with our solution or delays in the execution of transactions through our system may result in the loss of advertising placements on impressions and, as a result, the loss of revenue. Our facilities would be costly to repair or replace, and any such efforts would likely require substantial time.

Buyers may attribute to us any technical disruption or failure in the performance of advertisements on sellers' digital media properties, harming our reputation and resulting in buyers seeking to avoid payment or demand future credits for disruptions or failures. If we are unable to operate our exchange and deliver advertising impressions successfully, our ability to attract potential buyers and sellers and retain and expand business with existing buyers and sellers could be harmed.

Malfunction or failure of our systems, or other systems that interact with our systems, or inaccessibility or corruption of data, could disrupt our operations and negatively affect our business and results of operations to a level in excess of any applicable business interruption insurance, result in potential liability to buyers and sellers, and negatively affect our reputation and ability to sell our solution.

Any breach of our computer systems or confidential data in our possession could expose us to significant expense and liabilities and harm our reputation.

We maintain our own confidential and proprietary information in our IT systems, and we control or have access to confidential, proprietary, and personal data belonging or related to buyers, sellers, and their clients and users, as well as vendors and business partners. Our clients and various third parties ~~also~~ have access to our confidential and proprietary information. There is no guarantee that inadvertent or unauthorized use or disclosure will not occur or that third parties will not gain unauthorized access to this data despite our efforts to protect this data.

~~We are subject to ongoing~~ Though we undertake robust security threats and breaches, computer malware, computer hacking attacks, and inadvertent transmission of computer viruses, which continue to increase in sophistication. Other harmful software code may occur on our systems or those of our clients, business partners, or information technology vendors. Security measures, undertaken by us, our vendors, and our buyers and sellers may be ineffective as a result of employee error, failure to implement appropriate processes and procedures, malfeasance, cyber-attacks, cyber-extortion or other intentional misconduct by computer hackers, "phishing" or other tactics to obtain illicit system access, or otherwise. Because techniques used to obtain unauthorized access or sabotage systems change frequently and generally are not identified until they are launched against a target, and because we typically are not able to control the efficacy of security measures implemented by our clients and vendors, we may be unable to anticipate these techniques or to implement adequate preventative or mitigation measures.

~~Though it is difficult to determine what harm may directly result from any specific interruption or breach,~~ any security incident could disrupt computer systems or networks, interfere with services to our sellers, buyers, or their clients, and result in unauthorized access to personally identifiable information, intellectual property, and other confidential business information owned by us or our buyers, sellers, or vendors. As a result, we could be exposed to legal claims and litigation, indemnity obligations, regulatory fines and penalties, contractual obligations, other liabilities, significant costs for remediation and re-engineering to prevent future occurrences, significant distraction to our business, and damage to our reputation, our relationships with buyers and sellers, and our ability to retain and attract new buyers and sellers. If personally identifiable information is compromised, we may be required to undertake notification and remediation procedures, provide indemnity, and undergo regulatory investigations and penalties, all of which can be extremely costly and result in adverse publicity.

~~Failure to maintain the brand security features of our solution could harm our reputation and expose us to liabilities.~~

It is important to sellers that the advertising placed on their media not conflict with existing seller arrangements and be of high quality, consistent with applicable seller standards and compliant with applicable legal and regulatory requirements. It is important to buyers that their advertisements are placed on appropriate media, in proximity with appropriate content, that the impressions for which they are charged are legitimate, and that their advertising campaigns yield their desired results. We use various measures, including proprietary technology, in an effort to store, manage and process rules set by buyers and sellers and to ensure the quality and integrity of the results delivered to sellers and buyers through our solution. If we fail to properly implement or honor rules established by buyers and sellers, or if our measures are not adequate, advertisements may be improperly placed through our platform, which can result in harm to our reputation as well as the need to pay refunds and other potential legal liabilities.

Failure to detect or prevent fraud, intrusion of malware through our platform into the systems or devices of our clients and their customers, or other actions that impact the integrity of our solution or advertisement performance, could cause sellers and buyers to lose confidence in our solution and expose us to legal claims, which would cause our business to suffer. If we terminate relationships with sellers as a result of our screening efforts, our volume of paid impressions may decline.

We have in the past, and may in the future, be subject to fraudulent and malicious activities undertaken by persons seeking to use our platform for improper purposes, including to divert or artificially inflate purchases by buyers through our platform, or to disrupt or divert the operation of the systems and devices of our clients and their customers to misappropriate information, generate fraudulent billings, stage hostile attacks, or for other illicit purposes. Examples of such activities include the use of bots or other automated or manual mechanisms to generate fraudulent impressions that are delivered through our platform, which could overstate the performance of advertising impressions. Such activities could also include the introduction of malware through our platform by persons seeking to commandeer, or gain access to information on, consumers' devices. We use proprietary and third party technology to identify non-human inventory and traffic, as well as malware, and we generally terminate relationships with parties that appear to be engaging in such activities, which may result in fewer paid impressions in the year the relationships are terminated than would have otherwise occurred. Despite our efforts, it can be difficult to detect fraudulent or malicious activity for various reasons. We do not own content and must rely in part on sellers and buyers for controls with respect to such activity. Perpetrators of fraudulent impressions and malware can be ingenious and change their tactics to adapt to preventative measures, requiring us to improve over time our processes for assessing the quality of sellers' inventory and controlling fraudulent activity. We may be restricted from employing certain anti-fraud detection technology. Fraudulent activity is more difficult for us to detect and police in inventory we access through third-party aggregators, because in those situations we do not connect directly to the publishers and their servers. We plan to increase our reliance on this type of inventory as part of our strategy to increase the volume of transactions on our platform, which could expose us to increased risk of fraudulent activity. If we fail to detect or prevent fraudulent or other malicious activity, we could face legal claims from clients and/or consumers and the affected advertisers may experience or perceive a reduced return on their investment or heightened risk associated with use of our solution, resulting in dissatisfaction with our solution, refusals to pay, refund demands, loss of confidence of buyers or sellers, or withdrawal of future business. We also face claims from sellers that we terminate because of known or perceived fraudulent activity, and any such claim could be material.

~~We are relying upon~~Failure to maintain the ~~ad classification technology we acquired from nToggle to help us increase the scale~~brand security features of our ~~business and compete for demand.~~

~~In July 2017, we purchased nToggle, which had developed ad classification and filtering technology. Our plan is to use the technology to filter bidstream data to help~~solution could harm our buyers more efficiently identify and purchase the inventory they are looking for, help our sellers monetize their inventory, and enable us to process ad requests more efficiently and achieve higher fill rates. As such, it is an important part of our strategic plans and is critical to our ability to increase the volume of transactional activity on our exchange significantly and in a cost-effective manner. We have invested substantially in continued development of the technology and the rollout of the classification and filtering capabilities to all of our buyers globally. The current version of the technology is designed to eliminate low-value traffic for each buyer, and increase the proportion of traffic that each buyer finds valuable, with the result that our traffic will be more valuable to our buyers than what they see from other exchanges. The technology requires additional development and its ongoing integration into our platform and implementation of the technology at scale in our services to our

clients will continue to require significant efforts. We may need to allocate more resources to integration and product development activities than originally anticipated, and these efforts may increase the short-term cost of the deployment until we can more tightly integrate the features into our core platform. While we believe that the technology will give us a significant advantage in filtering capabilities over our competitors, some of our competitors are larger and better funded than we are, can devote more resources to development of technologies like filtering than we can, and thus might develop similar or better capabilities faster than we can. We intend to provide nToggle’s technology to our DSPs without charging separately for it, so we do not currently expect to generate revenue directly from sale of filtering services based upon nToggle’s technology. Instead, we plan to rely upon positive effects from integration of nToggle’s technology into our operations, as described above, to recover our investment in the acquisition and help us return to growth and positive cash flow. However, the results we expect from the nToggle technology might not materialize, and we may not be able to recoup our investment in the technology, potentially resulting in adverse effects on our strategic plans and negative effects on our results of operations, cash flows, and financial condition from acquisition-related charges, amortization of intangible assets and asset impairment charges.

~~Any acquisitions we undertake may disrupt our business, adversely affect operations, dilute stockholders,~~reputation and expose us to ~~costs~~liabilities.

It is important to sellers that the advertising placed on their media not conflict with existing seller arrangements and ~~liabilities.~~

~~Acquisitions have been an~~be of high quality, consistent with applicable seller standards and compliant with applicable legal and regulatory requirements. It is important ~~element of our business strategy,~~to buyers that their advertisements are placed on appropriate media, in proximity with appropriate content, that the impressions for which they are charged are legitimate, and ~~we may pursue future acquisitions~~that their advertising campaigns yield their desired results. We use various measures, including proprietary technology, in an effort to ~~increase revenue, expand~~store, manage and process rules set by buyers and sellers and to ensure the quality and integrity of the results delivered to sellers and buyers through our ~~market position, add~~solution. If we fail to properly implement or honor rules established by buyers and sellers, or if our measures are not adequate, advertisements may be improperly placed through our platform, which can result in harm to our ~~service offering~~reputation as well as the need to pay refunds and ~~technological capabilities, respond~~other potential legal liabilities.

The evolving concept of viewability involves competitive uncertainty and may cause us to ~~dynamic market conditions, or for other strategic or financial purposes.~~incur additional costs and liability risk.

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Viewability of digital advertising inventory is relevant to marketers because it represents a way of assessing the value of particular inventory as a means to reach a target audience. However, there is no ~~assurance~~consensus definition of viewability. Some approaches focus on whether an advertisement can be seen at all, and others focus on whether an advertisement that ~~we will identify suitable acquisition candidates~~can be seen is actually seen, in whole or ~~complete any acquisitions~~part, or for how long. Low viewability can be caused by various factors, including technical issues (e.g. device screen size, browser functionality and settings, web site load times), media design (e.g. below-the-fold or sub-page placements), and user behavior (e.g. the decision whether to scroll down a website or click on ~~favorable terms,~~an advertisement or ~~at all. Further, any acquisitions~~how long to watch a video). Non-viewability is a separate issue and may result, for example, from stacking ads so the one in the back is obscured, or serving ads into a single pixel space too small to be seen.

If we do ~~complete would involve a number~~not handle viewability well, we could be competitively disadvantaged. In addition, inventory that is well differentiated on the basis of ~~risks, including~~viewability will be differentiated on the ~~following:~~basis of value, with less viewable inventory valued lower. In this context, if we are not positioned to transact the higher viewability inventory competitively, our revenue and profitability could be adversely affected.

~~The identification, acquisition, and integration of acquired businesses require substantial attention from management. The diversion of management's attention and any difficulties encountered~~As we have experienced in the ~~transition process~~past, buyers could ~~hurt our business.~~

~~The identification, acquisition,~~attempt to hold us responsible, and ~~integration of acquired businesses requires significant investment, including~~not to ~~determine which new service offerings we might wish to acquire, harmonize service offerings, expand management capabilities~~pay us, for impressions that do not satisfy their viewability requirements or expectations, and depending upon how viewability evolves, market ~~presence, and improve~~practice or ~~increase development efforts and technology features and functions.~~

The anticipated benefits from the acquisition may not be achieved, including as a result of loss of clients or personnel of the target, other difficulties in supporting and transitioning the target's clients, the inability to realize expected synergies from an acquisition, or negative culture effects arising from the integration of new personnel.

~~We may face difficulties in integrating the personnel, technologies, solutions, operations, and existing contracts of the acquired business.~~

We may fail to identify all of the problems, liabilities or other shortcomings or challenges of an acquired company, technology, or solution, including issues related to intellectual property, solution quality or architecture, income tax and other regulatory compliance practices, revenue recognition or other accounting practices, or employee or client issues.

To pay for future acquisitions, we could issue additional shares of our common stock or pay cash. Issuance of shares would dilute stockholders. Use of cash reserves could diminish our ability to respond to other opportunities or challenges. Borrowing to fund any cash purchase price would result in increased fixed obligations and could also include covenants or other restrictions that would impair our ability to manage our operations.

Acquisitions expose us to the risk of assumed known and unknown liabilities including contract, tax, and other obligations incurred by the acquired business or fines or penalties, for which indemnity obligations, escrow arrangements or insurance may not be available or may not be sufficient to provide coverage.

~~New business acquisitions can generate significant intangible assets that result in substantial related amortization charges and possible impairments.~~

The operations of acquired businesses, or our adaptation of those operations, may require that we apply revenue recognition or other accounting methodologies, assumptions, and estimates that are different from those we use in our current business, which could complicate our financial statements, expose us to additional accounting and audit costs, and increase the risk of accounting errors.

~~Acquired businesses may have insufficient internal controls that we must remediate, and the integration of acquired businesses~~emerging regulation may require us to ~~modify or enhance~~incur compliance costs and assume some responsibility for viewability of advertisements transacted through our ~~own internal controls, in each case resulting in increased administrative expense~~solution. Divergent views of how to measure viewability and ~~risk that we fail to comply with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002.~~

Acquisition of businesses based outside the United States would require us to operate in foreign languages and manage non-U.S. currency, billing, and contracting needs, comply with laws and regulations, including labor laws and privacy laws that in some cases may be more restrictive on our operations than laws applicable to our business in the United States.

~~Acquisitions can sometimes~~imperfect measurement technology could lead to disagreement, increasing risk of disputes, ~~with the former owners of the acquired company, which can result in increased legal expenses, management distraction~~demands for refunds, and ~~the risk that we may suffer an adverse judgment if we are not the prevailing party in the dispute.~~

The purchase price allocation for any acquisition we complete is generally not finalized until well after the closing of the acquisition, and any final adjustment to the valuation could change the fair values assigned to the assets and liabilities, resulting in a change to our consolidated financial statements, including a change to goodwill. Such change could be material.reputational harm.

If we fail to attract, motivate, train, and retain highly qualified engineering, marketing, sales and management personnel, our ability to execute our business strategy could be impaired.

We are a technology-driven company and it is imperative that we have highly skilled ~~mathematicians,~~ computer scientists, data scientists, engineers and engineering management to innovate and deliver our complex solutions. Increasing our base of buyers and sellers depends to a significant extent on our ability to expand our sales and marketing operations and activities, and our solution requires a sophisticated sales force with specific sales skills and specialized technical knowledge that takes time to develop. Appropriately qualified personnel can be difficult to recruit and retain. In addition, in international markets, we encounter staffing challenges that are unique to a particular country or region, such as recruiting and retaining qualified personnel in foreign countries and difficulty managing such personnel and integrating them into our culture. In particular, it may be difficult to find qualified sales personnel in international markets, or sales personnel with experience in emerging segments of the market. Skilled and experienced management is critical to our ability to achieve revenue growth, execute against our strategic vision and maintain our performance through the growth and change we anticipate.

Our success depends significantly upon our ability to recruit, train, motivate, and retain key technology, engineering, sales, and management personnel, and competition for employees with experience in our industry can be intense, particularly in California, New York, London and ~~London,~~Sydney, where our operations and the operations of other digital media companies are concentrated and where other technology companies compete for management and engineering talent. Other employers may be able to provide better compensation, more diverse opportunities and better chances for career advancement. These challenges could become more acute for us because our revenue and cash flow declines may contribute to concerns about our stability, and the decline we have experienced in the market value of our common stock reduces the perceived value of the equity compensation we offer and has left the stock options previously issued to our employees largely out of the money. Similarly, it may be difficult for us to recruit, train, motivate, and retain key technology, engineering, sales, and management personnel in light of the recent headcount reductions we have undertaken. None of our officers or other key employees have an employment agreement for a specific term, and any of such individuals may terminate his or her employment with us at any time.

In addition, in connection with the merger with Telaria the Company entered into certain retention compensation packages. As such agreements expire, it may be more difficult to retain such individuals or we may need to enter into new retention arrangements.

It can be difficult, time-consuming, and expensive to recruit personnel with the combination of skills and attributes required to execute our business strategy, and we may be unable to hire or retain sufficient numbers of qualified individuals in the markets where we do business or plan to do business. New hires require significant training and it may take significant time (often six months or more) before they achieve full productivity. As a result, we may incur significant costs to attract and retain employees, including significant expenditures related to salaries and benefits and compensation expenses related to equity awards before new hires contribute to sales or productivity, and we may lose new employees to our competitors or other companies before we realize the benefit of our investment in recruiting and training. Moreover, new employees may not be or become as productive as we expect, and we may face challenges in adequately or appropriately integrating them into our workforce and culture. At times we have experienced elevated levels of unwanted attrition, and as our organization grows and changes and competition for talent increases, this type of attrition may increase.

Our proprietary rights may be difficult to enforce, which could enable others to copy or use aspects of our solution without compensating us, thereby eroding our competitive advantages and harming our business.

Our success depends, in part, on our ability to protect proprietary methods and technologies that we develop or otherwise acquire, so that we can prevent others from using our inventions and proprietary information. Establishing trade secret, copyright, trademark, domain name, and patent protection is difficult and expensive. We rely on trademark, copyright, trade secret laws, confidentiality procedures and contractual provisions to protect our proprietary methods and technologies. Our patent program is relatively small, and while we have some issued patents and pending patent applications, valid patents may not be issued from our pending applications or we may choose to abandon applications, and the claims of our issued patents or the claims eventually allowed on any pending applications may not be sufficiently broad to protect our technology or offerings and services. Any issued

patents may be challenged, invalidated or circumvented, and any rights granted under these patents may not actually provide adequate defensive protection or competitive advantages to us. Additionally, the process of obtaining patent protection is expensive, time-consuming, and uncertain, and we may not be able to prosecute all necessary or desirable patent applications to successful conclusion at a reasonable cost or in a timely manner. Accordingly, despite our efforts, we may be unable to obtain adequate patent protection, or to prevent third parties from infringing upon or misappropriating our intellectual property.

Unauthorized parties may attempt to copy aspects of our technology or obtain and use information that we regard as proprietary, and the steps we take to protect our proprietary information may not prevent misappropriation of our technology and proprietary information or infringement of our intellectual property rights. Policing unauthorized use of our technology and intellectual property is difficult. We may be required to protect our intellectual property in an increasing number of jurisdictions, a process that is expensive and may not be successful or which we may not pursue in every location. Our competitors and others could attempt to capitalize on our brand recognition by using domain names or business names similar to ours, and we may be unable to prevent third parties from acquiring or using domain names and other trademarks that infringe on, are similar to, or otherwise decrease the value of our brands, trademarks or service marks. In addition, the laws of some foreign countries may not be as protective of intellectual property rights as those of the United States, and mechanisms for enforcement of our proprietary rights in such countries may be inadequate. It may be possible for unauthorized third parties to copy or reverse engineer aspects of our technology or otherwise obtain and use information that we regard as proprietary, or to develop technologies similar or superior to our technology or design around our

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proprietary rights, despite the steps we have taken to protect our proprietary rights.

From time to time, we may take legal action to enforce our intellectual property rights, protect our trade secrets, determine the validity and scope of the proprietary rights of others, or defend against claims of infringement. Such litigation could result in substantial costs and the diversion of limited resources, and might not be successful. If we are unable to protect our proprietary rights (including aspects of our technology solution) we may find ourselves at a competitive disadvantage.

We may be subject to intellectual property rights claims by third parties, which are costly to defend, could require us to pay significant damages and could limit our ability to use certain technologies and intellectual property.

Third parties may assert claims of infringement or misappropriation of intellectual property rights against us or buyers, sellers, or third parties with which we work; we cannot be certain that we are not infringing any third-party intellectual property rights, and we may have liability or indemnification obligations as a result of such claims. As a result of the information disclosure in required public company filings our business and financial condition are visible, which may result in threatened or actual litigation, including by competitors and other third parties.

Regardless of whether claims that we are infringing patents or infringing or misappropriating other intellectual property rights have any merit, these claims are time-consuming and costly to evaluate and defend, and can impose a significant burden on management and employees. The outcome of any claim is inherently uncertain, and we may receive unfavorable interim or preliminary rulings in the course of ~~litigation. There can be no assurances that favorable final outcomes will be obtained in all cases. We~~litigation, or we may decide to settle lawsuits and disputes on terms that are unfavorable to us. ~~Some~~We may also have no way of ~~our competitors have substantially greater resources than we do and are able to sustain the costs of complex~~remediating intellectual property ~~litigation to a greater degree~~violations, and ~~for longer periods of time than we could.~~

~~Although third parties may offer a license to their technology or intellectual property, the terms of any offered license may not be acceptable and the~~ failure to ~~obtain a license or the costs associated with any license~~do so could cause our business, results of operations or financial condition to be materially and adversely affected. In addition, some licenses may be non-exclusive, and therefore our competitors may have access to the same technology or intellectual property licensed to us. Alternatively, we may be required to develop non-infringing technology or to make other changes, such as to our branding, which could require significant effort and expense and ultimately may not be successful. Furthermore, a successful claimant could secure a judgment or we may agree to a settlement that prevents us from distributing certain products or performing certain services or that requires us to pay substantial damages, including treble damages if we are found to have willfully infringed such claimant's patents or copyrights. Claims of intellectual property infringement or misappropriation also could result in injunctive relief against us, or otherwise result in delays or stoppages in providing all or certain aspects of our solution.

~~We are subject to government regulations concerning our employees, including wage-hour laws and taxes.~~

We are subject to applicable rules and regulations relating to our relationship with our employees, including health benefits, sick days, unemployment and similar taxes, overtime and working conditions, equal pay, immigration status, and classification of employee benefits for tax purposes. Legislated increases in labor cost components, such as employee benefit costs, workers' compensation insurance rates, compliance costs and fines, as well as the cost of litigation in connection with these regulations, would increase our labor costs. Many employers nationally have been subject to actions brought by governmental agencies and private individuals under wage-hour laws on a variety of claims, such as improper classification of workers as exempt from

overtime pay requirements, failure to pay overtime wages properly, and failure to provide meal and rest breaks or pay for missed breaks, with such actions sometimes brought as class actions, and these actions can result in material liabilities and expenses. Federal and state standards for classifying employees under wage-hour laws differ and are often unclear or require application of judgment, and classification may need to be changed as employment duties evolve over time. We may mis-classify employees and be subject to liability as a result. Employment rules and regulations change rapidly, often as a result of macro trends, such as the #metoo movement, and we may not be able to adapt our practices in time to meet new regulatory obligations. If we become subject to employment litigation, such as actions involving wage-hour, overtime, break and working time, discrimination or relation, it may distract our management from business matters and result in increased labor costs.

Risks Related to Our International Business ~~Strategy~~Strategy.

Our international operations require increased expenditures and impose additional risks and compliance imperatives, and failure to successfully execute our international plans will adversely affect our growth and operating results.

We have ~~numerous~~ operations outside of North America, in ~~Northern and Southern Europe,~~the UK, EU, Australia, New Zealand, Japan, Singapore, and Brazil, and achievement of our international objectives will require a significant amount of attention from our management, finance, legal, analytics, operations, sales, and engineering teams, as well as significant investment in developing the technology infrastructure necessary to deliver our solution and maintain sales, delivery, support, and administrative capabilities in the countries where we operate. Attracting new buyers and sellers outside the United States may require more time and expense than in the United States, in part due to language barriers and the need to educate such buyers and sellers about our solution, and we may not be successful in establishing and maintaining these relationships. The data center and telecommunications infrastructure in some overseas markets may not be as reliable as in North America and Europe, which could disrupt our operations. In addition, our international operations will require us to develop and administer our internal controls and legal and compliance practices in countries with different cultural norms, languages, currencies, legal requirements, and business practices than the United States.

International operations also impose risks and challenges in addition to those faced in the United States, including management of a distributed workforce; the need to adapt our offering to satisfy local requirements and standards (including differing privacy policies and labor laws that are sometimes more stringent); laws and business practices that may favor local competitors; legal requirements or business expectations that agreements be drafted and negotiated in the local language and disputes be resolved in local courts according to local laws; the need to enable transactions in local currencies; longer accounts receivable payment cycles and other collection difficulties; the effect of global and regional recessions and economic and political instability; potentially adverse tax consequences in the United States and abroad; staffing challenges, including difficulty in recruiting and retaining qualified personnel as well as managing such a diversity in personnel; reduced or ineffective protection of our intellectual property rights in some countries; and costs and restrictions affecting the repatriation of funds to the United States.

One or more of these requirements and risks may make our international operations more difficult and expensive or less successful than we expect, and may preclude us from operating in some markets. There is no assurance that our international expansion efforts will be successful, and we may not generate sufficient revenue or margins from our international business to cover our expenses or contribute to our growth.

Operating in multiple countries requires us to comply with different legal and regulatory requirements.

Our international operations subject us to laws and regulations of multiple jurisdictions, as well as U.S. laws governing international operations, which are often evolving and sometimes conflict. For example, the Foreign Corrupt Practices Act ~~or FCPA,~~("FCPA"), and comparable foreign laws and regulations (including the U.K. Bribery Act) prohibit improper payments or offers of payments to foreign governments and their officials and political parties by U.S. and other business entities for the purpose of obtaining or retaining business. Other laws and regulations prohibit bribery of private parties and other forms of corruption. As we expand our international operations, there is some risk of unauthorized payment or offers of payment or other inappropriate conduct by one of our employees, consultants, agents, or other contractors, including by persons engaged or employed by a business we acquire, which could result in violation by us of various laws, including the FCPA. Safeguards we implement to discourage these practices may prove to be ineffective and violations of the FCPA and other laws may result in

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severe criminal or civil sanctions, or other liabilities or proceedings against us, including class action lawsuits and enforcement actions from the SEC, Department of Justice, and foreign regulators. Other laws applicable to our international business include local employment, tax, privacy, data security, and intellectual property protection laws and regulations, including restrictions on movement of information about individuals beyond national borders. In particular, as explained in more detail elsewhere in this report, the GDPR imposes substantial compliance obligations and increases the risks associated with collection and processing of personal data. In some cases, buyers and sellers operating in non-U.S. markets may impose additional requirements on our non-U.S. business in efforts to comply with their interpretation of their own or our legal obligations. These requirements may differ significantly from the requirements applicable to our business in the United States and may require engineering, infrastructure and other costly resources to accommodate, and may result in decreased operational efficiencies and performance. As these laws continue to evolve and we

expand to more jurisdictions or acquire new businesses, compliance will become more complex and expensive, and the risk of non-compliance will increase.

Compliance with complex foreign and U.S. laws and regulations that apply to our international operations increases our cost of doing business abroad, and violation of these laws or regulations may interfere with our ability to offer our solution competitively in one or more countries, expose us or our employees to fines and penalties, and result in the limitation or prohibition of our conduct of business.

~~We are subject to governmental export and import controls that could subject us to liability or impair our ability to compete in international markets.~~

Our operations are subject to U.S. export controls, specifically the Export Administration Regulations and economic sanctions enforced by the Office of Foreign Assets Control. These regulations limit and control export of encryption technology. Furthermore, U.S. export control laws and economic sanctions prohibit the shipment of certain products and services to countries, governments, and persons targeted by U.S. sanctions. We incorporate encryption technology into the servers that operate our solution. As a result of locating some servers in data centers outside of the United States, we must comply with these export control laws.

In addition, various countries regulate the import of certain encryption technology and have enacted laws that could limit our ability to deploy our technology or our clients' ability to use our solution in those countries. Changes in our technology or changes in export and import regulations may delay introduction of our solution or the deployment of our technology in international markets, prevent our clients with international operations from using our solution globally or, in some cases, prevent the export or import of our technology to certain countries, governments, or persons altogether. Any change in export or import regulations, economic sanctions or related legislation, shift in the enforcement or scope of existing regulations, or change in the countries, governments, persons, or technologies targeted by such regulations, could result in decreased use of our solution by, or in our decreased ability to export our technology to, international markets.

~~Fluctuations in the exchange rates of foreign currencies could result in currency transaction losses.~~

~~We currently have transactions denominated in various non-U.S. currencies, and may, in the future, have sales denominated in the currencies of additional countries.~~ In addition, we ~~incur a portion of our expenses in non-U.S. currencies,~~have recently received numerous inquiries from foreign regulators asking for information about the advertising technology generally and to the extent we need to convert currency to pay expenses, we are exposed to potentially unfavorable changes in exchange rates and added transaction costs. International transactions may be subject to unexpected regulatory requirements and other barriers. Any fluctuation in relevant currency exchange rates may negatively impact our business ~~financial condition~~specifically. These investigations are costly and ~~results of operations. We have not previously engaged in foreign currency hedging,~~time consuming to respond to and any effort to hedge our foreign currency exposure may not be effective due to lack of experience, unreasonable costs or illiquid markets. In addition, hedging may not protect against all foreign currency fluctuations and can result in losses.divert management attention.

Risks Related to Our Internal Controls and Finances

~~Failure~~If we fail to maintain an effective system of internal ~~controls could cause our investors to lose confidence~~control over financial reporting in ~~us and adversely affect~~ the ~~market price of our common stock. If our internal controls are not effective,~~future, we may not be able to accurately or timely report our financial condition or results ~~or prevent fraud.~~of operations. If our internal control over financial reporting is not effective, it may adversely affect investor confidence in us and the price of our common stock.

As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such internal control. Section 404 of the Sarbanes-Oxley Act ~~of 2002~~ requires that we ~~maintain~~evaluate and determine the effectiveness of our internal control over financial reporting ~~that meets applicable standards~~ and ~~report on the effectiveness of our internal controls over financial reporting and any material weaknesses we identify. When we are no longer an "emerging growth company," we will also need to~~ provide a ~~statement that our independent registered public accounting firm has issued an opinion~~management report on our internal control over financial reporting.

~~We may err~~Our platform system applications are complex, multi-faceted and include applications that are highly customized in ~~the design or operation of~~order to serve and support our ~~controls,~~clients, advertising inventory and ~~all internal control systems, no matter how~~data suppliers, as well designed and operated, can provide only reasonable assurance that the objectives of the control system are met. Because there are inherent limitations in all control systems, there can be no absolute assurance that all control issues have been or will be detected. We previously identified certain material weaknesses in our internal controls which were remediated during 2014. However, completion of remediation does not provide assurance that our remediated controls will continue to operate properly or thatas support our financial ~~statements will be free from error. There may be undetected material weaknesses in~~reporting obligations. We regularly make improvements to our ~~internal control over financial reporting, as a result of which we may not detect financial statement errors on a timely basis. Moreover, in~~platform to maintain and enhance our competitive position. In the future, we may implement new offerings and engage in business transactions, such as acquisitions, reorganizations or implementation of new information ~~systems that could~~systems. These factors require us to develop and ~~implement new~~maintain our internal controls, processes and reporting systems, and we expect to incur ongoing costs in this effort. We may not be successful in developing and maintaining effective internal controls, and any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could ~~negatively affect~~harm our ~~internal control over financial~~operating results or cause us to fail to meet our reporting obligations and may result in ~~material weaknesses.~~

a restatement of our financial statements for prior periods.

If we identify ~~new~~ material weaknesses in our internal control over financial reporting, ifwe will be unable to assert that our internal control over financial reporting is effective. If we are unable to ~~comply with the requirements of Section 404 in a timely manner, or, once required,~~assert that our internal control over financial reporting is effective, if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, or if we are unable to comply with the requirements of the Sarbanes-Oxley Act in a timely manner, then, we may be ~~unable, or be perceived as unable, to produce timely and reliable financial~~late with the filing of our periodic reports, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected. ~~As a result of such~~Such failures we could also ~~become~~ subject us to investigations by Nasdaq, the stock exchange on which our securities are listed, the SEC or other regulatory authorities, and ~~become subject~~ to litigation from ~~investors and~~ stockholders, which could harm our reputation, financial condition or divert financial and management resources from our core business.

Our accounting is complex, and relies upon estimates or judgments relating to our critical accounting policies. If our accounting is erroneous or based on assumptions that change or prove to be incorrect, our operating results could fall below the expectations of securities analysts and investors, resulting in a decline in our stock price.

The preparation of financial statements in conformity with generally accepted accounting principles in the United States, or GAAP, requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes, and also to comply with many complex requirements and standards. Various factors contribute to complexity in our accounting. For example, the recognition of our revenue is governed by certain criteria that determine whether we report revenue either on a gross basis, as a principal, or net basis, as an agent, depending upon the nature of the sales transaction. We have generally reported our revenue on a net basis because we are not the principal in our open market and orders transactions as conducted to date. However, from April 2015 through January 2017, we conducted an intent marketing business that included transactions reported on a gross basis, resulting in higher GAAP revenue and lower GAAP margins on a particular amount of advertising spend than for an equivalent level of advertising spend for which we report revenue on a net basis. We may have gross reporting for portions of our revenue in the future as a result of the evolution of our existing business practices, development of new products, acquisitions, or changes in accounting standards or interpretations, that in any case result in transactions with characteristics that dictate gross reporting. It is also possible that revenue reporting for existing business may change from gross to net or vice versa as a result of changes in contract terms or transaction mechanics. We may experience significant fluctuations in revenue in future periods depending upon, in part, the nature of our sales and our reporting of such revenue and related accounting treatment, without proportionate correlation to our underlying activity or net income. Any combination of net and gross revenue reporting would require us to make estimates and assumptions about the mix of gross and net-reported transactions based upon the volumes and characteristics of the transactions we think will make up the total mix of revenue in the period covered by the projection. Those estimates and assumptions may be inaccurate when made, or may be rendered inaccurate by subsequent circumstances, such as changing the characteristics of our offerings or particular transactions in response to client demands, market developments, regulatory pressures, acquisitions, and other factors. Even apparently minor changes in transaction terms from those initially envisioned can result in different accounting conclusions from those foreseen. In addition, we may incorrectly extrapolate from revenue recognition treatment of prior transactions to future transactions that we believe are similar, but that ultimately are determined to have different characteristics that dictate different revenue reporting treatment. These factors may make our financial reporting more complex and difficult for investors to understand, may make comparison of our results of operations to prior periods or other companies more difficult, may make it more difficult for us to give accurate guidance, and could increase the potential for reporting errors.

Further, our acquisitions have imposed purchase accounting requirements, required us to integrate accounting personnel, systems, and processes, necessitated various consolidation and elimination adjustments, and imposed additional filing and audit requirements. Ongoing evolution of our business, and any future acquisitions, will compound these complexities. Our operating results may be adversely affected if we make accounting errors or our judgments prove to be wrong, assumptions change or actual circumstances differ from those in our assumptions, or acquired assets become impaired, which could cause our operating results to fall below the expectations of securities analysts and investors or guidance we may have provided, resulting in a decline in our stock price and potential legal claims. Significant judgments, assumptions and estimates used in preparing our consolidated financial statements include those related to revenue recognition, stock-based compensation, purchase accounting, assessment of goodwill and long-lived assets for impairment, and income taxes.

~~Our tax liabilities may be greater than anticipated.~~

Tax laws are dynamic and subject to change as new laws are passed and new interpretations of the law are issued or applied. In addition, governmental tax authorities are increasingly scrutinizing the tax positions of companies. Many countries in the European Union, as well as a number of other countries and organizations such as the Organization for Economic Cooperation and Development, are actively considering changes to existing tax laws that, if enacted, could increase our tax obligations in countries where we do business. If the U.S. or other foreign tax authorities change applicable tax laws, our overall taxes could increase, and our business, financial condition or results of operations may be adversely impacted.

The U.S. and non-U.S. tax laws applicable to our business activities are subject to interpretation. We are subject to audit by the Internal Revenue Service and by taxing authorities of the state, local, and foreign jurisdictions in which we operate. Our tax obligations are based in part on our corporate operating structure, including the manner in which we develop, value, and use our intellectual property and sell our solution, the jurisdictions in which we operate, how tax authorities assess revenue-based taxes such as sales and use taxes, the scope of our international operations, and the value we ascribe to our intercompany transactions. Taxing authorities may challenge our tax positions and methodologies for valuing developed technology or intercompany arrangements, as well as our positions regarding jurisdictions in which we are subject to certain taxes, which could expose us to additional taxes and increase our worldwide effective tax rate. Any adverse outcomes of such challenges to our tax positions could result in additional taxes for prior periods, interest, and penalties, as well as higher future taxes. In addition, our future tax expense could increase as a result of changes in tax laws, regulations, or accounting principles, or as a result of earning income in jurisdictions that have higher tax rates. An increase in our tax expense could have a negative effect on our financial position and results of operations. Moreover, determining our provision (benefit) for income taxes and other tax liabilities requires significant estimates and judgment by management, and the tax treatment of certain transactions is uncertain. Although we believe we will make reasonable estimates and judgments, the ultimate outcome of any particular issue may differ from the amounts previously recorded in our financial statements and any such occurrence could materially affect our financial position and results of operations.

Our ability to use our net operating losses and tax credit carryforwards to offset future taxable income may be subject to certain limitations, which could result in higher tax liabilities.

Our ability to fully utilize our net operating loss and tax credit carryforwards to offset future taxable income may be limited.

At December 31, ~~2018,~~2020, we had U.S. federal net operating loss carryforwards, or NOLs, of approximately ~~$285.5~~$453.2 million, state NOLs of approximately ~~$167.0~~$280.0 million, foreign NOLs of approximately ~~$20.5~~$25.0 million, ~~federal~~and state research and development tax ~~credit carryforwards, or credit carryforwards, of approximately $10.2 million, state~~ credit carryforwards of approximately $8.0 million. A lack of future taxable income would adversely affect our ability to utilize these NOLs and credit carryforwards. In addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, and comparable state income tax laws, a corporation that undergoes an "ownership change" is subject to limitations on its ability to utilize its NOLs and credit carryforwards to offset future taxable income following the ownership change. As a result, future changes in our stock ownership, including because of issuance of shares of

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common stock in connection with acquisitions or other direct or indirect changes in our ownership that may be outside of our control, could result in limitations on our ability to fully utilize our NOLs and credit carryforwards. The Company had an ownership change on December 31, ~~2015~~2016 subjecting the federal and state NOLs to an annual ~~limitation.~~limitations that have expired. Additionally, the Company had an ownership change in January 2008 ~~and $2.3 million~~resulting in not material limitation of federal and state NOLs ~~are already subject to limitation~~ under Section 382 of the ~~Code. Additionally, approximately $3.4 million of our~~Code and comparable state income tax laws. Moreover, not material federal ~~NOLs~~ and ~~approximately $3.4 million of our~~ state NOLs were generated during the pre-acquisition period by corporations that we acquired, and thus those NOLs already are subject to limitation under Section 382 of the Code and comparable state income tax laws. Also, prior to the merger, Telaria acquired corporations with pre-acquisition NOLs that are subject to limitation under Section 382 of the Code and comparable state income tax laws.

In addition, the Company and Telaria both underwent ownership changes for tax purposes (i.e. a more than 50% change in stock ownership in aggregated 5% shareholders) on April 1, 2020 due to the Merger. As a result, the use of the Company’s total domestic NOL carryforwards and tax credits generated prior to the ownership change will be subject to annual use limitations under Section 382 and Section 383 of the Code and comparable state income tax laws. The Company believes that the ownership changes will not impact the ability to utilize substantially all of our NOLs and state research and development tax credits to the extent we generate taxable income that can be offset by such losses. The Company reasonably expects its federal research and development tax credits will not be recovered prior to expiration.

Also, depending on the timing and level of our taxable income, a portion of our NOLs ~~and credit carryforwards~~ may expire unutilized, which could prevent us from offsetting future taxable income we may generate by the amount of our NOLs and credit carryforwards generated in tax years beginning before December 31, ~~2017.~~2018. U.S. federal ~~net operating loss carryforwards~~NOLs generated for tax years beginning before December 31, ~~2017~~2018 can offset 100% of taxable income, however, these NOLs can only be carried forward for 20 years. U.S. federal ~~net operating loss carryforwards~~NOLs generated for tax years beginning after December 31, ~~2017~~2018 can offset 80% of taxable income, however, these NOLs can be carried forward indefinitely. We have recorded a full valuation allowance related to our NOLs, credit carryforwards, and other net deferred tax assets due to the uncertainty of the ultimate realization of the future benefits of those assets. To the extent we determine that all, or a portion of, our valuation allowance is no longer necessary, we will reverse the valuation allowance and recognize an income tax benefit in the reported financial statement earnings in that period. Once the valuation allowance is eliminated or reduced, its reversal will no longer be available to offset our current financial statement tax provision in future periods. Release of the valuation allowance would result in the recognition of certain net deferred tax assets and a decrease to income tax expense for the period the release is recorded. However, the exact timing and amount of the valuation allowance release are subject to change on the basis of the level of profitability that we are able to actually ~~achieve.~~achieve and the impact of Section 382.

The purchase price allocation for any acquisition we complete, including our merger with Telaria, is generally not finalized until one year after the closing of the acquisition, and any final adjustment to the valuation could have a material change on what is reported as the fair value assigned to the assets and liabilities.

The final purchase price allocation for any acquisition we complete, including our merger with Telaria that was completed on April 1, 2020, depends upon the finalization of asset and liability valuations, among other things. The valuation studies necessary to estimate the fair values of acquired assets and assumed liabilities and the related allocation of purchase price generally are not finalized until one year after the closing of the acquisition. Initially, we allocate the total estimated purchase price to the acquired assets and assumed liabilities based on preliminary estimates of their fair values. The final determination of these fair values is subsequently determined based upon the actual net tangible and intangible assets that existed on the closing date of the acquisition. Any final adjustment could change the fair values assigned to the assets and liabilities, resulting in a change to our consolidated financial statements, including a change to goodwill. Such change could be material.

We may require additional capital to support our business, and such capital might not be available on terms acceptable to us, if at all. Inability to obtain financing could limit our ability to conduct necessary operating activities and make strategic investments.

Various business challenges and opportunities may require additional funds, including the need to respond to competitive threats or market evolution by developing new solutions and improving our operating infrastructure through additional hiring or acquisition of complementary businesses or technologies, or both. In addition, we could incur significant expenses or shortfalls in anticipated cash generated as a result of unanticipated events in our business or competitive, regulatory, or other changes in our market, or longer payment cycles required or imposed by our buyers.

Our available cash and cash equivalents, any cash we may generate from operations, and our available line of credit under our credit facility may not be adequate to meet our capital needs, and therefore we may need to engage in equity or debt financings

to secure additional funds. We may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing on terms satisfactory to us when we require it or are unable to renew our credit facility when it matures or enter into a new one, our ability to continue to support our business growth and respond to business challenges could be significantly impaired, and our business may be adversely affected.

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If we do raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, ~~particularly due to the significant decline we have experienced in the market value of our common stock,~~ and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Any debt financing that we secure in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, including the ability to pay dividends. This may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. In addition, if we issue debt, the holders of that debt would have prior claims on the Company's assets, and in case of insolvency, the claims of creditors would be satisfied before distribution of value to equity holders, which would result in significant reduction or total loss of the value of our equity.

We intend to finance the cash portion of the SpotX acquisition consideration in part through the Term Loan Facility contemplated by the Commitment Letter. If we fail to satisfy the closing conditions set forth in the Commitment Letter or Goldman Sachs Bank USA is unable to perform its obligations under the Commitment Letter for any reason, we will be required to find other sources of capital to fund the acquisition of SpotX, which would exacerbate the risks described above.

Our credit facility subjects us to operating restrictions and financial covenants that impose risk of default and may restrict our business and financing activities.

We have a ~~$40.0~~$60.0 million credit facility with Silicon Valley ~~Bank, currently subject to a $10.0 million reserve that will be released if we maintain positive adjusted EBITDA for any trailing twelve-month period.~~Bank. Borrowings are secured by substantially all of our tangible personal property assets and all of our intangible assets are subject to a negative pledge in favor of Silicon Valley Bank. This credit facility is ~~and any replacement credit facility that we may secure will be,~~ subject to certain covenants and borrowing conditions, including those related to financial ratios and liquidity. If we fail to perform in accordance with covenants or to satisfy conditions, we may not be able to make borrowings under the ~~facility~~.facility. The credit facility is, and any replacement credit facility that we may secure will be, also subject to restrictions that limit our ability, among other things, to:

•dispose of or sell our assets;

•make material changes in our business or management;

•acquire, consolidate or merge with other entities;

•incur additional indebtedness;

•create liens on our assets;

•pay dividends;

•make investments;

•enter into transactions with affiliates; and

•pay off or redeem subordinated indebtedness.

These covenants may restrict our ability to finance our operations and to pursue our business activities and strategies. Our ability to comply with these covenants may be affected by events beyond our control. If a default were to occur and not be waived, such default could cause, among other remedies, all of the outstanding indebtedness under our loan and security agreement to become immediately due and payable. In such an event, our liquid assets might not be sufficient to meet our repayment obligations, and we might be forced to liquidate collateral assets at unfavorable prices or our assets may be foreclosed upon and sold at unfavorable valuations.

Our ability to renew our existing credit facility, which matures in September ~~2020,~~2022, or to enter into a new credit facility to replace or supplement the existing facility may be limited due to various factors, including the status of our business, global credit market conditions, and perceptions of our business or industry by sources of financing. In particular, it may be difficult to renew or replace our existing credit facility if we are not able to produce, or demonstrate a path to produce, positive cash flow. In addition, if credit is available, lenders may seek more restrictive covenants and higher interest rates that may reduce our borrowing capacity, increase our costs, and reduce our operating flexibility.

If we make borrowings under the facility and do not have or are unable to generate sufficient cash available to repay our debt obligations when they become due and payable, either upon maturity or in the event of a default, we may not be able to obtain additional debt or equity financing on favorable terms, if at all. Our inability to obtain financing may negatively impact our ability to operate and continue our business as a going concern.

Risks Related to the Securities Markets and Ownership of our Common Stock

The price of our common stock has been and may continue to be volatile and the value of an investment in our common stock could decline.

~~Technology stocks have historically experienced high levels of volatility.~~ The trading price of our common stock has fluctuated substantially and may continue to do so. These fluctuations could result in significant decreases in the value of an investment in our common stock. Factors that could cause fluctuations in the trading price of our common stock include the following:

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•announcements of new offerings, products, services or technologies, commercial relationships, acquisitions, or other events by us or our competitors;

•price and volume fluctuations in the overall stock market from time to time;

•significant volatility in the market price and trading volume of technology companies in general and of companies in the digital advertising industry in particular;

•fluctuations in the trading volume of our shares or the size of our public float;

•actual or anticipated changes or fluctuations in our results of operations;

•actual or anticipated changes in the expectations of investors or securities analysts, and whether our results of operations meet these expectations;

•issuance of research reports by analysts or investors;

•litigation involving us, our industry, or both;

•regulatory developments in the United States, foreign countries, or both;

•general economic conditions and trends;

•major catastrophic events;

•political uncertainty;

•breaches or system outages;

•departures of officers or other key employees; or

•an adverse impact on the company resulting from other causes, including any of the other risks described in this report.

In addition, if the market for advertising technology stocks or the stock market, in general, experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business. The trading price of our common stock might also decline in reaction to events that affect other companies in our industry even if these events do not directly affect us. ~~In the past, volatility in the market price of a company's securities has often resulted in securities litigation being brought against that company.~~ Declines in the price of our common stock, even following increases, may result in securities litigation against us, which would result in substantial costs and divert our management's attention and resources from our business.

As a result of the significant decline we have experienced in the market value of our common stock, we no longer represent a permissible investment under the policies of some institutional investors. Further, our declining financial performance and lack of a clear path to growth and profitability make our stock an undesirable investment to many investors. As the pool of investors for our stock decreases, it becomes more difficult to attract the demand needed to support increases in the price of our stock.

~~Our equity compensation and acquisition practices expose our stockholders to dilution.~~

We have relied and may continue to rely heavily upon equity compensation, and consequently our outstanding unvested equity awards represent substantial dilution to our stockholders. In addition, we have used our common stock as consideration for acquisitions of other companies, and we may use shares of our common stock or securities convertible into our common stock from time to time in connection with financings, acquisitions, investments, or other transactions. Any such issuance could result in substantial dilution to our existing stockholders and cause the trading price of our common stock to decline.

~~Our public float is still relatively small, increasing the risk that sales by significant holders could adversely affect the market price for our stock.~~

The average daily trading volume for our common stock during 2018 was 531,169 shares. In addition, we are relatively new to the public markets and not well known to many analysts, investors, and others who could influence demand for our shares. Further, because we are a relatively small company without an established history of profitability, the range of investors willing to invest in our shares may be relatively limited. As a result of these factors, our shares can be susceptible to sudden, rapid declines in price, especially when large blocks of shares are sold. Under our Insider Trading Policy, we impose trading blackouts during the period beginning on or about the fifteenth day of the last month of each quarter and ending after two trading days following the filing of our next Quarterly Report on Form 10‑Q or Annual Report on Form 10-K. All of our employees are limited to selling their

equity incentive plan shares during these open window periods. In addition, our employee restricted stock and restricted stock unit awards typically vest each May 15 and November 15, and are subject to automatic sale arrangements at those dates to cover taxes accruing on vesting. Finally, shares we issue as consideration for acquisitions may be subject to lock-up arrangements that expire in large numbers on certain dates. These insider trading windows, restricted stock vesting mechanics, and acquisition stock arrangements tend to concentrate selling into certain periods, and the resulting sales pressure can cause the trading price of our common stock to decline at those times. Sales of a substantial number of such shares, or the perception that such sales may occur, could cause our share price to fall or make it more difficult for investors to sell our common stock at a time and price that they deem appropriate, and could also impair our ability to raise capital through the sale of equity securities.

Competition for investors could adversely affect the price of our stock.

There are many companies in the advertising technology or "ad tech" space, but we are one of a relatively small portion of those companies that is publicly traded. Some of the other publicly traded ad tech companies are substantially larger than we are and have more diversified offerings, or may be perceived by investors as having greater stability or growth potential. Others may be focused on parts of the business that investors may view as more appealing. Ad tech or related advertising companies that are not yet public may become public, and publicly traded companies may enter the ad tech business through acquisitions. Increase in the number of publicly traded companies available to investors wishing to invest in ad tech may result in a decrease in demand for our shares, either because overall demand for ad tech investment does not increase commensurately with the increase in public companies in the ad tech space, or because we are not perceived as competitively differentiated or offering superior value compared to other such companies. Decrease in demand for our shares would result in suppressed growth, or decrease, in the value of our stock.

~~Our business could be negatively affected as a result of actions of activist stockholders.~~

Campaigns by stockholders to effect changes at publicly traded companies are sometimes led by investors seeking to increase short-term stockholder value through actions such as financial restructuring, increased debt, special dividends, stock repurchases or sales of assets or the entire company. The declines we have experienced in the market value of our common stock could increase the likelihood of an activist stockholder targeting our company. If we are targeted by an activist stockholder in the future, the process could be costly and time-consuming, disrupt our operations and divert the attention of management and our employees from executing our strategic plan. Additionally, perceived uncertainties as to our future direction as a result of stockholder activism or changes to the composition of our board of directors may lead to the perception of a change in the direction of our business, instability or lack of continuity, which may be exploited by our competitors, cause concern to current or potential buyers and sellers on our platform, who may choose to transact with our competitors instead of us, and make it more difficult to attract and retain qualified personnel.

If securities or industry analysts do not publish, or cease publishing, research or reports about us, our business or our market, if they publish ~~inaccurate~~negative evaluations of our stock, or ~~unfavorable research or reports about~~if we fail to meet the expectations of analysts, the price of our ~~business, our share price~~stock and trading volume could decline.

The trading market for our common stock ~~to some extent depends on~~will be influenced by the research and reports that industry or securities ~~or industry~~ analysts may publish about ~~us.~~us, our business, our market or our competitors. We do not have any control over these analysts, and their reports or ~~analyst~~analysts' consensus may not reflect our guidance, plans or expectations. If one or more of the analysts ~~who cover us downgrades~~covering our ~~shares or expresses a negative~~business issues an adverse opinion of our ~~business prospects,~~company because we fail to meet their expectations or otherwise, the price of our ~~share price~~stock could decline. ~~We have lost some analyst coverage as our financial performance has declined, and if we do not demonstrate revenue growth and a path to profitability, our remaining analysts may cease coverage.~~ If one or more of these analysts ~~decreases or ceases coverage of~~cease to cover our ~~company,~~stock, we could lose visibility in the ~~financial markets,~~market for our stock, which in turn could cause our ~~share~~stock price ~~or trading volume~~ to decline.

~~We do not intend to pay dividends for the foreseeable future and, consequently, investors' ability to achieve a return on their investment will depend on appreciation in the price of our common stock.~~

We have never declared or paid any dividends and we do not anticipate paying any cash dividends in the foreseeable future. In addition, our credit facility contains restrictions on our ability to pay dividends. As a result, investors may only receive a return on their investment in our common stock if the market price of our common stock increases.

Provisions of our charter documents and Delaware law may inhibit a potential acquisition of the company and limit the ability of stockholders to cause changes in company management.

Our amended and restated certificate of incorporation and amended and restated bylaws include provisions, as described below, that could delay or prevent a change in control of the company, and make it difficult for stockholders to elect directors who are not nominated by the current members of our board of directors or take other actions to change company management.

•Our certificate of incorporation gives our board of directors the authority to issue shares of preferred stock in one or more series, and to establish the number of shares in each series and to fix the price, designations, powers, preferences and relative, participating, optional or other rights, if any, and the qualifications, limitations, or restrictions of each

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series of the preferred stock without any further vote or action by stockholders. The issuance of shares of preferred stock may discourage, delay or prevent a merger or acquisition of the company by significantly diluting the ownership of a hostile acquirer, resulting in the loss of voting power and reduced ability to cause a takeover or effect other changes.

•

•Our certificate of incorporation provides that our board of directors is classified, with only one of its three classes elected each year, and directors may be removed only for cause and only with the vote of 66 2/3% of the voting power of stock outstanding and entitled to vote thereon. Further, the number of directors is determined solely by our board of directors, and because we do not allow for cumulative voting rights, holders of a majority of shares of common stock entitled to vote may elect all of the directors standing for election. These provisions could delay the ability of stockholders to change the membership of a majority of our board of directors.

•Our bylaws provide that until April 1, 2022, our board of directors shall be composed of four legacy Rubicon Project directors, four Telaria directors, and the Chief Executive Officer of the Company.

•²/₃% of the voting power of stock outstanding and entitled to vote thereon. Further, the number of directors is determined solely by our board of directors, and because we do not allow for cumulative voting rights, holders of a majority of shares of common stock entitled to vote may elect all of the directors standing for election. These provisions could delay the ability of stockholders to change the membership of a majority of our board of directors.

Under our bylaws, only the board of directors or a majority of remaining directors, even if less than a quorum, may fill vacancies resulting from an increase in the authorized number of directors or the resignation, death or removal of a director.

•Our certificate of incorporation prohibits stockholder action by written consent, so any action by stockholders may only be taken at an annual or special meeting.

•Our certificate of incorporation provides that a special meeting of stockholders may be called only by the board of directors. This could delay any effort by stockholders to force consideration of a proposal or to take action, including the removal of directors.

•Under our bylaws, advance notice must be given to nominate directors or submit proposals for consideration at stockholders' meetings. This gives our board of directors time to defend against takeover attempts and could discourage or deter a potential acquirer from soliciting proxies or making proposals related to an unsolicited takeover attempt.

•

•The provisions of our certificate of incorporation noted above may be amended only with the affirmative vote of holders of at least 66 2/3% of the voting power of all of the then-outstanding shares of the company's voting stock, voting together as a single class. The same two-thirds vote is required to amend the provision of our certificate of incorporation imposing these supermajority voting requirements. Further, our bylaws may be amended only by our board of directors or by the same percentage vote of stockholders noted above as required to amend our certificate of incorporation. These supermajority voting requirements may inhibit the ability of a potential acquirer to effect such amendments to facilitate an unsolicited takeover attempt.

•²/₃% of the voting power of all of the then-outstanding shares of the company's voting stock, voting together as a single class. The same two-thirds vote is required to amend the provision of our certificate of incorporation imposing these supermajority voting requirements. Further, our bylaws may be amended only by our board of directors or by the same percentage vote of stockholders noted above as required to amend our certificate of incorporation. These supermajority voting requirements may inhibit the ability of a potential acquirer to effect such amendments to facilitate an unsolicited takeover attempt.

Our board of directors may amend our bylaws by majority vote. This could allow the board to use bylaw amendments to delay or prevent an unsolicited takeover, and limits the ability of an acquirer to amend the bylaws to facilitate an unsolicited takeover attempt.

We are also subject to Section 203 of the Delaware General Corporation Law, which prohibits us from engaging in any business combination with an interested stockholder for a period of three years from the date the person became an interested stockholder, unless certain conditions are met. These provisions make it more difficult for stockholders or potential acquirers to acquire the company without negotiation and may apply even if some of our stockholders consider the proposed transaction beneficial to them. For example, these provisions might discourage a potential acquisition proposal or tender offer, even if the acquisition proposal or tender offer were to be at a premium over the then-current market price for our common stock. These provisions could also limit the price that investors are willing to pay in the future for shares of our common stock.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Our corporate headquarters are located in Los Angeles, California, where we occupy ~~facilities~~office space totaling approximately 47,000 square feet under a lease that expires inon April 30, 2021. We use these facilities for our principal administration, sales and marketing, technology and development, and engineering activities.

On November 20, 2020, we signed a new lease for our corporate headquarters in Los Angeles, California, where we will occupy office space totaling 38,754 square feet. Our lease begins in May 2021 and expires in April 2031.

We ~~also~~have two offices in New York under leases that expire in 2029 and 2030 that are approximately 26,664 square feet and 15,000 square feet, respectively, and lease additional offices and maintain data centers in other locations in North America,

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South America, Europe, Australia, and Asia. We believe that our current facilities are adequate to meet

our current needs, and that, if we require additional space, we will be able to obtain additional facilities on commercially reasonable terms.

Item 3. Legal Proceedings

We and our subsidiaries may from time to time be parties to legal or regulatory proceedings, lawsuits and other claims incident to our business activities and to our 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 our 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, we are 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 December 31, ~~2018.~~2020. However, based on our knowledge as of December 31, ~~2018,~~2020, we believe that the final resolution of such matters pending at the time of this report, individually and in the aggregate, will not have a material adverse effect upon our consolidated financial position, results of operations or cash flows.

On March 31, 2017, Guardian News & Media Limited ("Guardian") issued proceedings (the "Complaint") against us in the Chancery Division of the High Court of Justice in England & Wales. The Complaint alleged that we underpaid GuardianRefer to Note 17—"Commitments and Contingencies" for ~~inventory sold by Guardian through our platform as a result of the fact that we charged fees~~additional information related to buyers of that inventory. Guardian claimed we were precluded from charging buyer fees as a result of our contractual arrangements with Guardian and English agency law principles, as well as representations we allegedly made to Guardian. The Complaint claimed damages including loss of revenue, interest, and costs. On October 11, 2018, we and Guardian mutually agreed to resolve our dispute and the High Court proceedings have been discontinued. Though the terms of the settlement agreement are confidential, the settlement is immaterial to us from a financial standpoint. However, if we face similar claims from other clients or as a preventative measure, we might decide to make changes to our business practices that could have a material impact on our financial position.legal proceedings.

Item 4. Mine Safety Disclosures

Not applicable.

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PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock ~~has been~~was listed on the New York Stock Exchange, or the NYSE, ~~since~~from April 1, 2014 through June 8, 2020, under the symbol ~~"RUBI"~~"RUBI."

On June 8, 2020, the Company voluntarily delisted its common stock from the NYSE and commenced listing on The Nasdaq Global Select Market of The Nasdaq Stock Market LLC ("Nasdaq"). ~~Prior~~On June 30, 2020, the Company changed its name from "The Rubicon Project, Inc." to ~~our initial public offering, or IPO, there was no public market for our common stock.~~"Magnite, Inc." In connection with the name change, the Company changed its ticker symbol from "RUBI" to "MGNI."

Holders of Record

As of February ~~21, 2019,~~19, 2021, there were approximately 7662 holders of record of our common stock. The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees. This number of holders also does not include stockholders whose shares may be held in trust by other entities.

Dividend Policy

Recent Sales of Unregistered Securities

None.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

We presently have no publicly announced repurchase plan or program.

Upon vesting of most restricted stock units or stock awards, we are required to deposit minimum statutory employee withholding taxes on behalf of the holders of the vested awards. As reimbursement for these tax deposits, we have the option to withhold from shares otherwise issuable upon vesting a portion of those shares with a fair market value equal to the amount of the deposits we paid. Withholding of shares in this manner is accounted for as a repurchase of common stock.

~~Common stock~~ There were no repurchases during the quarter ended December 31, ~~2018 were as follows (in thousands, except per share amounts):~~

2020.

Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of a Publicly Announced Program Maximum Approximate Dollar Value that May Yet be Purchased Under the Program
October 1 – October 31, 2018 1
$ 3.41
—
$ —
November 1 – November 30, 2018 213
$ 4.62
—
$ —
December 1 – December 31, 2018 —
$ —
—
$ —
Stock Performance Graph

~~Use of Proceeds~~

~~In April 2014, we closed our IPO, whereby we sold 6,432,445 shares of common stock (including 1,015,649 shares sold pursuant~~This performance graph shall not be deemed "soliciting material" or to the underwriters' exercise of their over-allotment option), and the selling stockholders sold 1,354,199 shares of common stock. There has been no material change in the planned use of proceeds from our IPO as described in our final prospectus filedbe "filed" with the SEC ~~on April 2, 2014 pursuant to Rule 424(b)~~for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of ours under the Securities ~~Act.~~ Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

The following graph compares the cumulative total stockholder return on an initial investment of $100 in our common stock between December 31, 2015 and December 31, 2020, with the comparative cumulative total returns of the S&P 500 Index, Nasdaq,Internet Index, S&P Internet Select Industry Index and Russell 2000 Index over the same period. As previously discussed, we have not paid any cash dividends and, therefore, the cumulative total return calculation for us is based solely upon stock price appreciation (depreciation) and not reinvestment of cash dividends, whereas the data for the comparative indexes assumes reinvestments of dividends. The graph assumes our closing sales price on December 31, 2015 of $16.45 per share as the initial value of our common stock. The returns shown are based on historical results and are not necessarily indicative of, nor intended to forecast, future stock price performance.

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COMPARISON OF CUMULATIVE TOTAL RETURN

Item 6. Selected Financial Data

~~This section is not required~~The following selected consolidated financial data should be read in conjunction with Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the related notes appearing in Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.

The following table sets forth our selected consolidated historical financial and operating data for ~~smaller reporting companies.~~the periods indicated. The consolidated statements of operations data for the years ended December 31, 2020, 2019, and 2018 and the consolidated balance sheet data as of December 31, 2020 and 2019 have been derived from our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

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	Year Ended
	December 31, 2020		December 31, 2019		December 31, 2018		December 31, 2017		December 31, 2016

	(in thousands, except per share data)
Revenue	$	221,628	$	156,414	$	124,685	$	155,545	$	278,221
Expenses:
Cost of revenue	77,747		57,391		60,003		56,836		73,247
Sales and marketing	76,030		44,565		44,556		51,794		83,328
Technology and development	51,546		40,250		37,863		47,500		51,184
General and administrative	52,987		39,750		42,431		55,596		68,570
Restructuring and other exit costs	17,552		2,041		3,440		5,959		3,316
Impairment of intangible assets	—		—		—		4,585		23,473
Impairment of goodwill	—		—		—		90,251		—
Total expenses	275,862		183,997		188,293		312,521		303,118
Loss from operations	(54,234)		(27,583)		(63,608)		(156,976)		(24,897)
Other (income) expense:	(1,495)		(593)		(2,143)		(431)		(1,984)
Loss before income taxes	(52,739)		(26,990)		(61,465)		(156,545)		(22,913)
Provision (benefit) for income taxes	693		(1,512)		357		(1,762)		(4,860)
Net income (loss)	(53,432)		(25,478)		(61,822)		(154,783)		(18,053)
Net income (loss) per share attributable to common stockholders(1):
Basic	$	(0.55)	$	(0.48)	$	(1.23)	$	(3.17)	$	(0.39)
Diluted	$	(0.55)	$	(0.48)	$	(1.23)	$	(3.17)	$	(0.39)
Weighted-average shares used to compute net income (loss) per share attributable to common stockholders(1):
Basic	96,700		52,614		50,259		48,869		46,655
Diluted	96,700		52,614		50,259		48,869		46,655

(1)See Note 3 to our consolidated financial statements for a description of the method used to compute basic and diluted net income (loss) per share attributable to common stockholders.

Consolidated Balance Sheet Data


	At December 31
	2020		2019		2018		2017		2016

	(in thousands)
Cash and cash equivalents	$	117,676	$	88,888	$	80,452	$	76,642	$	149,423
Marketable securities, current and non-current	$	—	$	—	$	7,524	$	54,999	$	40,550
Accounts receivable, net	$	471,666	$	217,571	$	205,683	$	165,890	$	192,064
Property, equipment and internal use software development costs, net	$	39,841	$	39,720	$	48,057	$	60,127	$	52,768
Total assets	$	938,960	$	395,120	$	360,012	$	383,635	$	519,775
Total long-term liabilities	$	35,149	$	15,685	$	1,017	$	1,780	$	1,825
Total liabilities	$	557,347	$	283,184	$	241,999	$	219,024	$	220,262
Common stockholders' equity (deficit)	$	381,613	$	111,936	$	118,013	$	164,611	$	299,513

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the consolidated financial statements and the related notes to those statements included in Item 8 to this Annual Report on Form 10-K. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, beliefs, and expectations and that involve risks and uncertainties. Our actual results and the timing of events could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in "Item 1A. Risk Factors" and the "Special Note About Forward-Looking Statements."

Overview and Trends

~~We provide a technology solution to automate~~ See "Item 1. Business" for an overview of our business, the purchase and sale of digital advertising inventory for buyers and sellers. Our platform features applications and services for digital advertising inventory sellers, including websites, mobile applications, 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. 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 we manage on our platform. Our 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 methodologies, and allows advertising content to be presented to consumers through different channels. Our 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 ("RTB"), which includes (i) direct sale of premium inventory,~~industry in which we ~~refer~~operate, and important industry and business trends.

2020 Channel Trends

Sellers use our technology to ~~as private marketplace ("PMP"), and (ii) open auction bidding, which we refer to as open marketplace ("OMP"); and~~

~~that are displayed~~monetize their content across all digital channels, including CTV, mobile ~~web, mobile application,~~ and desktop, ~~as well as~~and each of these channels will continue to represent a meaningful portion of our revenue in future periods. We track the breakdown of revenue across ~~various out-of-home~~ channels ~~such as digital billboards.~~

We generate revenue from transactions where we provide a platform for the purchase and sale of digital advertising inventory. Digital advertising inventory is created when consumers access sellers’ content. Sellers provide digital advertising inventory to better understand how our clients are transacting on our platform, inwhich informs decisions as to business strategy and the ~~form~~allocation of advertising requests, or ad requests. When we receive ad requests from sellers, we send 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.resources and capital. The ~~volume of paid impressions measured~~following table presents revenue by channel and as a percentage of ~~ad requests is referred~~total revenue for the years ended December 31, 2020, 2019, and 2018.


	Revenue
	Year Ended
	December 31, 2020				December 31, 2019				December 31, 2018
	(in thousands, except percentages)
Channel:
CTV	$	34,319	15	%	$	—	—	%	$	—	—	%
Desktop	$	78,956	36		$	68,302	44		$	59,039	47
Mobile	$	108,353	49		$	88,112	56		$	65,646	53
Total	$	221,628	100	%	$	156,414	100	%	$	124,685	100	%

Each of these digital channels has its own industry growth rate, with CTV and mobile projected to ~~as fill rate. The price that buyers pay for each thousand paid impressions purchased is measured in units referred~~continue to ~~as CPM.~~

~~Industry Trends and Trends in Our Business~~

grow steadily, while desktop growth flattens. MAGNA's October 2020 Programmatic Market ~~Opportunities~~

~~The programmatic digital advertising market continues to experience growth. In September 2018, MAGNA~~forecast has estimated ~~that the global programmatic market (excluding search and social) will grow from $34 billion in 2018 to $60 billion by 2022, which represents a 15%~~ compound annual growth ~~rate~~rates from 2020 to 2024 for mobile and desktop at 18% and down 1%, respectively, and over ~~that period. Another important trend in~~ the digital advertising industry is the continued expansion of automated buying and selling of advertising inventory through new and developing channels, including mobile, which has market growth rates exceeding those of the desktop channel and issame period, eMarketer projected CTV to grow at a ~~critical area of operational focus for us. According to MAGNA estimates, mobile advertising was an $18 billion global market in 2018 that is expected to increase to $43 billion by 2022, producing a~~23% compound annual growth rate.

We believe that CTV will be our biggest growth driver in future periods, and following the SpotX Acquisition we expect CTV revenue to represent a significantly higher percentage of our overall revenue.

We expect our mobile business to grow at a higher rate ~~of 24%.~~

~~Consistent~~than desktop, consistent with industry trends and our mobile business is growing faster than desktop. Our mobile advertising spend increased $152.2 million, or 42%, for the year ended December 31, 2018, compared to the year ended December 31, 2017, while our desktop business increased only 1% during the same period.historical results. Our mobile business consists of two components, mobile web and mobile applications. Initially our mobile business ~~was built upon~~consisted primarily of mobile web, which is ~~more~~ similar to our desktop business,

~~and subject to many of the same market pressures as discussed below, and as a result has experienced lower growth in recent periods. Our~~ but our mobile application business ~~which is where we see~~has been the ~~greatest potential for~~ growth ~~has shown~~driver behind our mobile business, and prior to the COVID-19 pandemic showed growth rates in excess of industry projections. ~~Advertising spend~~We therefore expect our growth within mobile to come largely from our mobile applications ~~is approaching half of our mobile business.~~

~~The growth of automated buying and selling of advertising is also expanding into geographic markets outside of the United States,~~business and, in ~~some markets, the adoption rate of programmatic digital advertising is greater than~~particular, mobile video.

Lower industry growth rates in ~~the United States. We~~

~~attribute advertising spend~~desktop will make growing desktop revenue more challenging; however, in future periods we believe we will be able to ~~the geographic location of the seller on whose inventory the advertising spend was directed. Our~~

~~markets outside of the United States are more heavily built upon desktop display advertising than they are on mobile, and as such~~

~~are subject to the same factors impacting~~grow our desktop business ~~as described below. In addition, as programmatic advertising has~~

~~grown~~ in ~~markets outside~~excess of ~~the United States, we have seen more competitors enter those markets aggressively~~industry projections by capturing market share through SPO and ~~gain market~~

~~share. As a result~~expansion of these factors, the portion of our advertising spend attributed to markets outside the United States declined to 34% during the year ended December 31, 2018 from 39% during the same period in 2017. Another factor impacting our business is that a large share of the growth in digital advertising spending worldwide is being captured by owned and operated sites, such as Facebook, Google, and increasingly Amazon.

~~Macro Trends Impacting Desktop~~

These market factors present long-term growth opportunities; however, in the near term the industry-wide shift from desktop to mobile advertising has had an adverse impact on our business. In recent years, we have seen an industry-wide slowdown in the growth rate for traditional desktop advertising, and the growth rate for this portion of the market is expected to flatten in future years. According to MAGNA, programmatic desktop advertising is expected to grow at a 1% compound annual growth rate over the 2018-2022 period. This results from the market shift to mobile channels noted above. These trends are having a significant effect on our overall growth rate, because desktop advertising continues to be a significant part of our core business, representing 48% of advertising spend in 2018. As noted above, our advertising spend in desktop increased 1% during the year ended December 31, 2018 compared to the year ended December 31, 2017. In addition to the ongoing industry shift away from desktop to mobile, year-over-year growth inpublisher relationships. We expect our desktop business ~~is hampered further by the continued migration~~ to header bidding, which to date has been focused primarily on desktop display advertising inventory. While header bidding has increased competition for inventory, it also has made available to us significant amountsdecline as an overall percentage of ~~inventory that previously we were unable to access, and while~~ our ~~traditional desktop display business has remained relatively flat, our header bidding solution gained significant traction in 2017 and through 2018.~~

Header bidding is going through an additional technical evolution from the client side, which involves the browser running the auction, to a server-side solution, in which a server runs the auction and offers the potential for improved performance and speed. We believe that our investments in our client-side header bidding solution as well as server-side header bidding have the potential to improve our competitiveness in all marketsrevenue in future periods. However, we must continue to address certain technical and operational challenges, as described under "Risk Factors" in this Annual Report on Form 10-K, in order to realize our header bidding solution's full potential.

Because of these rapid developments in the industry, advertising spend from our traditional desktop display business has remained relatively flat and no longer can be relied upon to be the primary growth driver of our business. Our strategic focus is on growth areas—including mobile, video, PMPs, and header bidding—expect that ~~are expected to represent a majority of our advertising spend in future periods. However, despite our solid progress in mobile, our traditional desktop display business is expected to~~it will continue to represent a significant part of our ~~business~~revenue in the near term. Therefore, the ~~weight~~mix of our desktop ~~display~~ business will continue to have a ~~significant adverse~~negative effect on our overall growth ~~until our advertising spend mix has shifted more fully to growth areas.~~rate.

~~Year-Over-Year Revenue Decline~~Telaria Merger

~~Ad tech exchange intermediaries like us have experienced market demands~~On April 1, 2020, we completed the stock-for-stock merger with Telaria, Inc., a leading provider of CTV technology, which created a combined company offering a single partner for ~~transparency~~transacting CTV, desktop display, video, audio, and ~~reduced costs throughout the value chain. Throughout 2017,~~mobile inventory across all geographies and auction types. The combination of Magnite's programmatic scale and expertise with Telaria’s leadership in CTV technology and premium partnerships created what we ~~changed our revenue model in response to market pressures in an effort~~believe to be ~~more competitive in attracting demand~~the world’s largest independent sell-side advertising platform, with scale, capabilities, and ~~capturing supply. In late 2017, we made a strategic decision to reduce the fees we charged buyers in OMP waterfall transactions, and ultimately eliminated buyer fees in November 2017.~~

We have historically charged fees to both buyers and sellers in OMP transactions conducted on our exchange, consistent with the fact that we provide services to each. Traditionally, for OMP waterfall transactions, we ran a modified second price auction in which the clearing price was the greater of the second highest bid in the auction plus one cent or the applicable price floor. Our buyer fees were determined algorithmically and added to the clearing price to determine the price charged to the winning bidder. In traditional OMP waterfall transactions, available impressions are passed to different demand sources in a sequence determinedsolutions exceeding those offered by ~~the seller’s ad server, and when an impression~~competitors. As CTV viewership is passed to a particular demand source, that demand source is generally able to auction the impression with little or no competition. We saw the mix of OMP transactions conducted through the traditional ad server waterfall on our exchange decrease significantly while the percentage of header bidding transactions has increased in 2018.

Header bidding increases competition for ad inventory by exposing impressions simultaneously to multiple sources of demand in a competitive auction that, if successful, replaces the ad server waterfall. Each demand source in a header bidding auction generally conducts its own auction for the impression and then passes its winning bid to a “downstream” meta-auction in which the seller evaluates bids from all its demand sources, and generally the highest bid wins. This competition pushes auction clearing prices much closer to the winning first-price bid than OMP waterfall transactions. In order to be more competitive and give our buyers a better chance of winning the header bidding impressions on which they bid, we began charging lower buyer fees for header bidding transactions so that we could pass higher priced bids into the downstream auction. Based upon experience with this approach and client feedback, we began offering a modified first price auction dynamic in our header bidding solution without buyer fees in the fourth quarter of 2017. Subsequently, in an effort to capture more inventory for our buyers and deliver better monetization to our sellers, and to provide better transparency and predictability to all our clients, in early 2018 we made first price our default auction dynamic for header bidding transactions. This means that the first price or highest bid in our auction wins and that first price is passed to the downstream auction. Because buyers needed time to adapt their systems and bidding strategies to first-price auction dynamics and maximize advertising campaign returns and performance, or may prefer not to develop their own first price pricing algorithms, we built and implemented an optional feature at no additional cost, which we call Estimated Market Rate ("EMR"). This feature uses algorithms that monitor existing market conditions against our dataset of auction outcomes to look for opportunities to reduce the amount of the bid that we pass through to the downstream auction on behalf of our winning bidder, while maintaining high fill rates. This is intended to help buyers bid on digital advertising inventory consistent with market values while preserving demand and budget for sellers on our platform. In addition to increasing the rate at which buyers win in our auctions,growing rapidly and the ~~monetization~~pace of adoption is accelerating the shift of advertising budgets from linear television to CTV, the Telaria merger

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strategically positioned us to take advantage of this growth trend, and we believe that ~~that winning provides to sellers,~~CTV will be our ~~first price auction dynamic~~biggest growth driver in future periods.

Telaria Merger Costs Synergies and ~~EMR solution have contributed to higher CPMs for our header bidding inventory.~~

In November 2017, we ceased charging our additive buyer fees altogether. We do still charge access fees to allow buyers to connect to our system when their spending is too small to support the maintenance of their accounts, although such amounts are not significant. This strategic decision, as well as cost reductions noted below, has helped to support our objective to be a high volume, lower cost and transparent exchange. Most of our marketplace fees are negotiated with sellers as a percentage of the auction clearing price for sale of their inventory. In some cases, we reduce the buyer’s bid amount by the amount of our fee and pass the remainder as the bid to the seller. If the bid wins, we retain the amount of the bid reduction as our fee, which is referred to as net bidding. We do this at the discretion of sellers that allocate digital advertising inventory through a decisioning process that follows after our auction and incorporates other demand sources as well as our bids, and that prefer or require that we submit our bids to them net of our fees, so that our bid matches the amount we will owe them if we win. Net bidding amounts can vary across transactions depending upon various factors including inventory and auction characteristics and seller policies.

These pricing reductions were intended to address the market's demand for lower costs and to attract more inventory and spending to our platform. Lower pricing has caused our revenue to decline significantly in 2018 compared to 2017, even though ad spend grew. To return to revenue growth, we must continue to increase advertising spend on our platform. Increases in PMP and header bidding transactions as a percentage of the activity on our exchange could yield higher advertising spend despite lower take rates due to higher CPMs typically associated with PMP transactions, and from modified first-price auctions in header bidding transactions. However, in an increasingly competitive market in which buyers and sellers have many choices, it is not clear whether pricing reductions will result in increases in spending on our platform, or whether any spending increases will compensate fully for the reduction in pricing. We have seen significant increases in the volume of ad requests we receive, but the rate at which we win header bidding auctions is much lower than the rate at which we win waterfall transactions. As our business continues to rely on header bidding, which now represents approximately 80% of our revenue, we need to participate in more header bidding auctions and increase the fill rate in header bidding auctions to compensate for the decline in the number of waterfall transactions. Driving revenue growth in this situation is difficult to accomplish in a competitive market and requires accessing significantly greater inventory levels from our sellers and in turn processing more auctions. This growth in business volume requires adequate processing capacity as well as ongoing innovation to address evolving client needs, capture business, and improve our fill rate. Throughout 2018, we worked to increase advertising spend on our platform, through both higher transaction volumes and by increasing seller fees, to put us in a position to be able to grow our business and maintain our cash resources.

Other Expense Reduction Initiatives

In ~~addition~~connection with the Merger, we restructured certain areas of our operations during 2020. As part of those efforts, we achieved annual run rate cost synergies of over $20.0 million, mainly related to ~~strategic decisions made~~duplicative public company costs, vendor rationalization, overlapping general and administrative costs, and other operational streamlining. Employees of the merged company were functionally aligned under a unified leadership team and we reduced our headcount by approximately 8% of our combined workforce during 2020.

Given the significant impact resulting from the COVID-19pandemic, we instituted certain additional short-term actions during the second quarter, including compensation reductions, a hiring freeze, and deferment of certain capital expenditures. When we experienced a recovery in revenue in the third quarter, we reinstated compensation and removed certain of these temporary cost-cutting initiatives during the fourth quarter.

SpotX Acquisition

On February 4, 2021, we entered into a Stock Purchase Agreement (the "SpotX Purchase Agreement") with RTL to ~~reduce costs paid by~~acquire 100% of the issued and outstanding shares of capital stock of SpotX, Inc., a Delaware corporation ("SpotX"), for a purchase price equal to $560 million in cash plus 14 million shares of the Company’s common stock (the "SpotX Acquisition"). SpotX is one of the leading platforms shaping CTV and video advertising globally.We believe the acquisition will create the largest independent CTV advertising platform in the programmatic marketplace, making it easier for buyers to reach CTV audiences at scale from industry-leading streaming content providers, broadcasters, platforms and device manufacturers.Subject to receipt of regulatory approvals and satisfaction of customary closing conditions, the SpotX Acquisition is expected to close in the second quarter of 2021. The SpotX Acquisition will result in a significant increase in our ~~clients~~revenue, in particular in CTV and other video. Following the transaction, we expect CTV to represent a higher percentage of our overall revenue, and because CTV is largely transacted through PMPs, we also expect to see an increase in the percentage of PMP transactions transacted on our ~~platform while growing~~platform. If the SpotX Acquisition successfully closes, the acquisition would result in a substantial increase in related operating expenses, primarily associated with costs for personnel, payments to sellers for revenue ~~through transaction volume, we have also focused~~reported on ~~the cost structure of our business to enable us to compete more effectively. We must operate efficiently to relieve the pressure on our margins~~a gross basis, and ~~cash resources that has resulted from our price reductions and to compensate for the ongoing investments in technology and data processing capabilities required~~other ancillary costs to support the ~~increased volume~~business. We expect some of ~~transactions that our growth plans require. As part~~those increases to be offset by cost saving activities we plan to undertake. We are targeting in excess of ~~these efforts, during~~$35 million in run-rate operating cost synergies, with more than half of the synergies to be realized within the first ~~quarter~~year of 2018 we undertook measures to reduce headcount by approximately 100 people, or 19% of our workforce, and to reduce other operating costs. Our actions included reductions in administrative staff to bring our general and administrative operations into better alignment with

the current size of the business as well as in sales and technical personnel as a result of offshoring certain development functions, organizational delayering and restructuring, and reducing investment in unprofitable projects. We are continuously evaluating our costs and pursuing additional cost-control and efficiency opportunities, including increased automation, across all aspects of the Company.combined operations.

~~Uncertainty Resulting from GDPR~~

The European General Data Protection Regulation, or GDPR, added significant new regulatory requirements that are applicable to us as well as our clients and competitors. Some critical elements of the GDPR are still unclear, and there has not been time for consistent regulatory guidance to be developed, or for established industry compliance practices to emerge. In particular and despite being past the implementation date, uncertainty about the requirements regarding end-user consent, and diverging interpretations among sellers and buyers as to the adequacy of any consent that is obtained, could result in the removal of personal data from bid requests, which will lower the value of the impressions, resulting in reduced revenue and advertising spend for us. Until prevailing industry standards emerge, our revenue from European sellers could fluctuate from quarter to quarter.

Components of Our Results of Operations

We report our financial results as one operating segment. Our consolidated operating results, together with non-GAAP financial measures, are regularly reviewed by our chief operating decision maker, principally to make decisions about how we allocate our resources and to measure our consolidated operating performance.

Revenue

We generate revenue from the purchase and sale of digital advertising inventory through our platform. We also generate revenue from the fee we charge clients for use of our Demand Manager product, which generally is a percentage of the client's advertising spending on any advertising marketplace. We recognize revenue upon the fulfillment of our contractual obligations in connection with a completed transaction, subject to satisfying all other revenue recognition criteria. For substantially all transactions executed through our platform, we act as an agent on behalf of the publisher that is monetizing its inventory, and revenue is recognized net of any advertising inventory costs that we remit to sellers. With respect to certain revenue streams acquired in connection with the Merger with Telaria, we report revenue on a gross basis, based primarily on our determination that the Company acts as the primary obligor in the delivery of advertising campaigns for our buyer clients with respect to such transactions. The revenue that we recognized on a gross basis was less than 2% of total revenue in 2020. Our revenue recognition policies are discussed in more detail ~~within~~in Note 4 of the accompanying Notes to the Consolidated Financial Statements.

Expenses

We classify our expenses into the following categories:

Cost of Revenue. Our cost of revenue consists primarily of data center costs, bandwidth costs, ad protection costs, depreciation and maintenance expense of hardware supporting our revenue-producing platform, amortization of software costs for the development of our revenue-producing platform, amortization expense associated with acquired developed technologies, personnel costs, facilities-related costs, and ~~for transactions we have previously reported on a gross basis, the amounts we paid sellers.~~cloud computing costs. Personnel costs included in cost of revenue include salaries, bonuses, and stock-based compensation, ~~and employee benefit costs,~~ and are primarily attributable to personnel in our network operations group who support our platform. We capitalize costs associated with software that is developed or obtained for internal use and amortize the costs associated with our revenue-producing platform in cost of revenue over their estimated useful lives. We amortize acquired developed technologies over their estimated useful lives.

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Sales and Marketing. Our sales and marketing expenses consist primarily of personnel costs, including salaries, bonuses, and stock-based compensation, ~~and the sales bonuses paid to our sales organization,~~ as well as marketing expenses such as brand marketing, travel expenses, trade shows and marketing materials, professional services, and amortization expense associated with client relationships and backlog from our business acquisitions, and to a lesser extent, facilities-related costs and depreciation and amortization. Our sales organization focuses on increasing the adoption of our solution by existing and new buyers and sellers. We amortize acquired intangibles associated with client relationships and backlog from our business acquisitions over their estimated useful lives.

Technology and Development. Our technology and development expenses consist primarily of personnel costs, including salaries, bonuses, and stock-based compensation, ~~and bonuses,~~ as well as professional services associated with the ongoing development and maintenance of our solution, depreciation and amortization, and to a lesser extent, facilities-related costs and depreciation and amortization, including amortization expense associated with acquired intangible assets from our business acquisitions that are related to technology and development functions.costs. These expenses include costs incurred in the development, implementation, and maintenance of internal use software, including platform and related infrastructure. Technology and development costs are expensed as incurred, except to the extent that such costs are associated with internal use software development that qualifies for capitalization, which are then recorded as internal use software development costs, net, on our consolidated balance sheets. We amortize internal use software development costs that relate to our revenue-producing activities on our platform to cost of revenue and amortize other internal use software development costs to technology and development costs or general and administrative expenses, depending on the nature of the related project. We amortize acquired intangibles associated with technology and development functions from our business acquisitions over their estimated useful lives.

General and Administrative. Our general and administrative expenses consist primarily of personnel costs, including salaries, bonuses, and stock-based compensation, ~~and bonuses,~~ associated with our executive, finance, legal, human resources, compliance, and other administrative personnel, as well as accounting and legal professional services fees, facilities-related costs and depreciation and amortization, and other corporate-related expenses. General and administrative expenses also include amortization of internal use software development costs and acquired intangible assets from our business acquisitions over their estimated useful lives that relate to general and administrative functions.

~~Restructuring~~ Merger and ~~Other Exit~~Restructuring Costs. Our ~~restructuring~~merger and ~~other exit~~restructuring costs consist primarily of professional service fees associated with the merger and acquisition activities, including cash-based employee termination costs, ~~including~~ stock-based compensation charges associated with the Merger, and other restructuring activities, including facility ~~closure~~closures, relocation costs, and contract termination costs.

~~Impairment of Intangible Assets and Internal Use Software.~~ Our impairment charges are non-cash charges related to our intangible assets and internal use software. Certain events or changing circumstances that impact the value of our intangible assets may necessitate a valuation analysis, as described within "Critical Accounting Policies" and in Note 2 "Organization and Summary of Significant Accounting Policies" of the accompanying Notes to the Consolidated Financial Statements. If needed, an impairment is recorded to reduce the carrying amount of the assets to their estimated fair value in the period that the valuation analysis is performed.Other (Income) Expense

~~Impairment of Goodwill.~~ Goodwill impairment charges are non-cash expenses recognized to reduce the goodwill asset on our balance sheet. Certain events or changing circumstances that impact the value of our business may necessitate a valuation analysis, as described within "Critical Accounting Policies" and in Note 2 "Organization and Summary of Significant Accounting Policies" of the accompanying Notes to the Consolidated Financial Statements. If the estimated fair value of the Company is lower than its carrying amount, a goodwill impairment is recognized for the difference, up to the carrying amount of goodwill.

~~Other (Income), Expense~~

Interest (Income) Expense, Net. Interest income consists of interest earned on our cash equivalents and marketable securities. Interest expense is mainly related to our credit ~~facility and was insignificant for the years ended December 31, 2018 and 2017.~~facility.

Other Income. Other income consists primarily of rental income from commercial office space we hold under lease and have sublet to other tenants.

Foreign Currency Exchange (Gain) Loss, Net. Foreign currency exchange (gain) loss, net consists primarily of gains and losses on foreign currency transactions. We have foreign currency exposure related to our accounts receivable and accounts payable that are denominated in currencies other than the U.S. Dollar, principally the British Pound, Australian Dollar, Canadian Dollar, and ~~the~~ Euro.

Provision (Benefit) for Income Taxes

~~Provision (benefit) for~~ We are subject to income taxes ~~consists~~in the U.S. (federal and state) and numerous foreign jurisdictions. Tax laws, regulations, administrative practices, principles, and interpretations in various jurisdictions may be subject to significant change, with or without notice, due to economic, political, and other conditions, and significant judgment is required in evaluating and estimating our provision and accruals for these taxes. There are many transactions that occur during the ordinary course of ~~federal, state,~~business for which the ultimate tax determination is uncertain. Our effective tax rates could be affected by numerous factors, such as changes in our business operations, acquisitions, investments, entry into new businesses and ~~foreign income taxes and is primarily~~geographies, intercompany transactions, the ~~result of the domestic valuation allowance and the tax liability associated with foreign subsidiaries. Due to uncertainty as to the realization of benefits from the predominant portion~~relative amount of our ~~domestic and international net deferred tax assets,~~foreign earnings, including ~~net operating loss carryforwards and research and development tax credits,~~earnings being lower than anticipated in jurisdictions where we have ~~a full valuation allowance reserved against such net deferred~~lower statutory rates and higher than anticipated in jurisdictions where we have higher statutory rates, losses incurred in jurisdictions for which we are not able to realize related tax ~~assets. We intend to continue to maintain a full valuation allowance on~~benefits, the applicability of special tax regimes, changes in foreign currency exchange rates, changes in our stock price, changes in our deferred tax assets ~~until there is sufficient evidence to support the reversal of all or some portion of these allowances. Release of the~~and liabilities and their valuation, ~~allowance would result~~changes in the ~~recognition of certain net deferred~~laws, regulations, administrative practices, principles, and interpretations related to tax, assets and a decrease to income tax expense or recognition of a benefit for the period the release is recorded. However, the exact timing and amount of the valuation allowance release are subject to change on the basis of the level of profitability that we are able to achieve.

~~On December 22, 2017, the U.S. government enacted the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act includes significant~~including changes to the ~~U.S. corporate income~~global tax ~~system including the following: a federal corporate rate reduction from 34% to 21%; limitations on the deductibility~~framework, competition, and other laws and accounting rules in various jurisdictions.

Table of executive compensation and research and development expenditures; temporary immediate expensing of qualified property; the creation of new minimum taxes such as the base erosion anti-abuse tax (“BEAT”) and Global Intangible Low Taxed Income (“GILTI”) tax; and the transition of U.S. international taxation from a worldwide tax system to a modified territorial tax system, which resulted in a one time U.S. tax liability on those earning which had not previously been repatriated to the U.S. (the “Transition Tax”).Contents

The Tax Act imposes a Transition Tax on previously untaxed accumulated and current earnings and profits (“E&P”) of certain of our foreign subsidiaries. To determine the amount of the Transition Tax, we determined, among other things, the amount of post-1986 E&P of the relevant subsidiaries. We recorded a provisional Transition Tax of $0.6 million, which reduced our U.S. net deferred tax assets for the year ended December 31, 2017. We completed our analysis of the impact of U.S. tax reform during 2018, and for the year ended December 31, 2018, there was no change to the Transaction Tax recorded in the prior period.

The Tax Act requires certain GILTI income earned by controlled foreign corporations (“CFCs”) to be included in the gross income of the CFCs’ U.S. shareholder (for tax years beginning after December 31, 2017). For the year ended December 31, 2018, we have included a GILTI inclusion of $1.3 million, which was incorporated into the calculation of the tax provision.

Results of Operations

The following table sets forth our consolidated results of operations:


	Year Ended								Favorable/(Unfavorable) %
		December 31, 2020			December 31, 2019			December 31, 2018			2020 vs 2019			2019 vs 2018
	(in thousands)
Revenue			$	221,628		$	156,414		$	124,685		42	%		25	%
Expenses (1)(2):
Cost of revenue			77,747			57,391			60,003			(35)	%		4	%
Sales and marketing			76,030			44,565			44,556			(71)	%		—	%
Technology and development			51,546			40,250			37,863			(28)	%		(6)	%
General and administrative			52,987			39,750			42,431			(33)	%		6	%
Merger and restructuring costs			17,552			2,041			3,440			(760)	%		41	%
Total expenses			275,862			183,997			188,293			(50)	%		2	%
Loss from operations			(54,234)			(27,583)			(63,608)			(97)	%		57	%
Other (income) expense, net			(1,495)			(593)			(2,143)			152	%		(72)	%
Loss before income taxes			(52,739)			(26,990)			(61,465)			(95)	%		56	%
Provision (benefit) for income taxes			693			(1,512)			357			(146)	%		524	%
Net loss			$	(53,432)		$	(25,478)		$	(61,822)		(110)	%		59	%


(1) Stock-based compensation expense included in our expenses was as follows:
	Year Ended
		December 31, 2020		December 31, 2019		December 31, 2018
	(in thousands)
Cost of revenue		$	525	$	421	$	321
Sales and marketing		8,229		5,638		4,557
Technology and development		7,451		4,757		2,867
General and administrative		10,416		8,009		8,139
Merger and restructuring costs		1,870		—		398
Total stock-based compensation expense		$	28,491	$	18,825	$	16,282


(2) Depreciation and amortization expense included in our expenses was as follows:
	Year Ended
		December 31, 2020		December 31, 2019		December 31, 2018
	(in thousands)
Cost of revenue		$	34,879	$	30,345	$	33,306
Sales and marketing		13,313		537		586
Technology and development		454		573		882
General and administrative		602		671		564
Total depreciation and amortization expense		$	49,248	$	32,126	$	35,338

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Year Ended Favorable/(Unfavorable) %
December 31, 2018 December 31, 2017
(in thousands)
Revenue $ 124,685
$ 155,545
(20 )%
Expenses ⁽¹⁾⁽²⁾:

Cost of revenue 60,003
56,836
(6 )%
Sales and marketing 44,556
51,794
14 %
Technology and development 37,863
47,500
20 %
General and administrative 42,431
55,596
24 %
Restructuring and other exit costs 3,440
5,959
42 %
Impairment of intangible assets and internal use software —
4,585
100 %
Impairment of goodwill —
90,251
100 %
Total expenses 188,293
312,521
40 %
Loss from operations (63,608 ) (156,976 ) 59 %
Other income, net (2,143 ) (431 ) 397 %
Loss before income taxes (61,465 ) (156,545 ) 61 %
Provision (benefit) for income taxes 357
(1,762 ) NM
Net loss $ (61,822 ) $ (154,783 ) 60 %

~~NM - Not Meaningful~~

(1) Stock-based compensation expense included in our expenses was as follows:
Year Ended
December 31, 2018 December 31, 2017
(in thousands)
Cost of revenue $ 321
$ 404
Sales and marketing 4,557
4,582
Technology and development 2,867
4,034
General and administrative 8,139
9,924
Restructuring and other exit costs 398
1,560
Total stock-based compensation expense $ 16,282
$ 20,504

(2) Depreciation and amortization expense included in our expenses was as follows:
Year Ended
December 31, 2018 December 31, 2017
(in thousands)
Cost of revenue $ 33,306
$ 31,981
Sales and marketing 586
1,066
Technology and development 882
1,957
General and administrative 564
1,221
Total depreciation and amortization expense $ 35,338
$ 36,225

The following table sets forth our consolidated results of operations for the specified periods as a percentage of our revenue for those periods presented:


	Year Ended					Year Ended
	December 31, 2018		December 31, 2017				December 31, 2020		December 31, 2019		December 31, 2018
Revenue	100	%	100	%	Revenue		100	%	100	%	100	%
Cost of revenue	48		37		Cost of revenue		35		37		48
Sales and marketing	36		33		Sales and marketing		34		28		36
Technology and development	30		30		Technology and development		23		26		30
General and administrative	34		36		General and administrative		24		26		34
Restructuring and other exit costs	3		4
Impairment of intangible assets and internal use software	—		3
Impairment of goodwill	—		58
Merger and restructuring costs					Merger and restructuring costs		8		1		3
Total expenses	151		201		Total expenses		124		118		151
Loss from operations	(51	)	(101	)	Loss from operations		(24)		(18)		(51)
Other income, net	(1	)	—
Other (income) expense, net					Other (income) expense, net		—		(1)		(1)
Loss before income taxes	(50	)	(101	)	Loss before income taxes		(24)		(17)		(50)
Provision (benefit) for income taxes	—		(1	)	Provision (benefit) for income taxes		—		(1)		—
Net loss	(50	)%	(100)	%	Net loss		(24)	%	(16)	%	(50)	%

Comparison of the Years Ended December 31, ~~2018~~2020, 2019, and ~~2017~~2018

Revenue

Revenue ~~decreased $30.9~~increased $65.2 million, or ~~20%~~42%, for the year ended December 31, ~~2018~~2020 compared to the prior year. Our revenue growth was driven primarily by the Merger, completed on April 1, 2020, which contributed $60.1 million in revenue during the year ended December 31, 2020. On a per channel basis, CTV revenue increased $34.3 million, compared to the prior year ~~primarily due~~(all as a result of the Merger), while mobile revenue increased $20.2 million, or a 23%, compared to the ~~reduction~~prior year, and ~~then elimination~~desktop revenue increased $10.7 million, or 16%, compared to the prior year. Excluding the impact of the Merger, our ~~buyer fees~~revenue increased 3% year-over-year. Despite some recovery in ~~2017, market and competitive pressures, deceleration~~our revenue trends, beginning in ~~traditional desktop display spending, and header bidding dynamics as described above in "Industry Trends and Trends in Our Business".~~the third quarter of 2020, our overall annual revenue growth was significantly negatively affected by the impact of the COVID-19 pandemic.

Revenue increased $31.7 million, or 25%, for the year ended December 31, 2019 compared to the year ended December 31, 2018. Our revenue growth was driven primarily by ongoing increases in advertising spend transacted on our platform, particularly video and mobile advertising spend.

We expect revenue to increase in 2021 compared to 2020, with CTV as our primary growth driver. Our revenue is largely a function of the number of advertising transactions and the price, or CPM, at which the inventory is sold, which results in total advertising spend on our platform, and the take rate we charge for our services. Because pricing and take rate vary across publisher, channel and transaction type, our revenue is impacted by shifts in the mix of advertising spend ~~by transaction type and channel, changes in the fees we charge buyers and sellers for~~on our ~~services, and other factors such as changes in the market, our execution of the business, and competition. In addition to the decrease in revenue due to the elimination of buyer transaction fees,~~platform. For instance, an increase in PMP transactions as a percentage of the transactions on our platform could also result in reduced revenue, if not offset by increased ~~volume,~~advertising spend, because PMP transactions can carry lower ~~fees~~take rates than OMP transactions. ~~In late 2018, we began~~We believe that contributions to ~~see some pressure on desktop CPMs,~~revenue from PMPs, in particular with respect to CTV which ~~has now carried over~~is largely transacted through PMPs, will continue to ~~mobile CPMs,~~grow as a percentage of our total revenue. In general, we expect this shift will result in an overall increase in advertising spend through our platform due to both an increase in volume and average CPM which will be partially offset by a decrease in our average take rate.

Our revenue growth has been tempered, and may be negatively impacted in the future, by reductions in revenue resulting from the economic impact of ~~buyer pricing tools~~the COVID-19 pandemic. Refer to Item 1A. "Risk Factors" for additional information related to this risk factor and the impact from privacy initiatives, such as Apple’s ITP, that drive a higher mix of contextual versus behavioral impressions being sold. We believe that better pricing has helped advertising campaigns' return on investment and is driving significant increases in paid impressions, but it has decreased advertising spend and corresponding revenue, and could eliminate or reduce potential revenue growth in 2019. Industry dynamics are challenging due to market and competitive pressures and make it difficult to predict the near-term effect of our growth initiatives. While we anticipate long-term benefits from these initiatives, unless we are able to continue to increase advertising spendmay have on our ~~platform, through higher transaction volumes or higher transaction values or both, our revenue will continue to fluctuate and our growth may be limited.~~business.

Cost of Revenue

Cost of revenue increased ~~$3.2~~by $20.4 million, or 6%35%, for the year ended December 31, ~~2018~~2020 compared to the prior ~~year. The increase was~~year primarily due to the Merger. Cost of revenue includes an increase of ~~$3.6~~$11.8 million in data ~~center~~ and bandwidth expenses, ~~to support the increase in our transaction volume, as well as an increase of $1.3~~$4.5 million in depreciation and amortization, ~~expenses related~~and $2.0 in media costs.

Cost of revenue decreased $2.6 million, or 4%, for the year ended December 31, 2019 compared to the year ended December 31, 2018 mainly due to our continued ~~investment~~focus on infrastructure serving efficiency, which resulted in ~~our network technology infrastructure to keep up with impression demand.~~a decrease of $3.0 million in depreciation and amortization and a decrease of $1.0 million in data and bandwidth expenses. These ~~increases~~decreases were partially offset by ~~a $1.0~~an increase of $1.1 million ~~reduction~~ in ~~media costs related to the cessation of our intent marketing solution during the first quarter of 2017 and a $0.3 million decrease in personnel~~ad protection costs.

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We expect the cost of revenue to be higher in 2021 compared to 2020 in absolute dollars ~~in 2019 compared~~due primarily to ~~2018 as a result~~the increased amortization of ~~increased spending on data centers, serving~~intangible assets resulting from the Merger and higher cloud service costs ~~and technology~~ to ~~process~~support the ~~greater volumes~~growth of ~~data and transactions we will need to grow revenue.~~ our business.

Cost of revenue may fluctuate from quarter to quarter and period to period, on an absolute dollar basis and as a percentage of revenue, depending on revenue levels and the volume of transactions we process supporting those revenues, and the timing and amounts of depreciation and amortization of equipment and software.

Sales and Marketing

Sales and marketing expenses ~~decreased $7.2~~increased by $31.5 million, or ~~14%~~71%, for the year ended December 31, ~~2018~~2020 compared to the prior ~~year. The decrease is attributable~~year primarily due to ~~our 2017~~the Merger and ~~2018 cost reduction measures, including the realignment of our management team, primarily including a $3.9 million decrease~~associated increases in ~~personnel costs as well as decreases across~~amortization related to acquired intangibles and other ~~expenses necessary to support our reduced~~assets and increases in headcount. ~~In addition, certain sales~~Sales and marketing expenses ~~have decreased~~increased by $20.4 million related to personnel expenses and $12.8 million related to depreciation and amortization associated with the Merger. These increases were partially offset by a decrease in expenses of $2.4 million related to travel and industry events due to ~~our cost reduction measures, including subscription costs and travel-related costs, which collectively decreased $1.0 million in 2018.~~ the impact of the COVID-19 pandemic.

Sales and marketing ~~professional services costs also decreased $0.9 million~~expenses stayed flat for the year ended December 31, 2019 compared to ~~2017.~~the year ended December 31, 2018 primarily due to the benefit of the prior year's cost control initiatives.

We expect sales and marketing expenses to ~~remain relatively flat~~increase in ~~2019~~2021 compared to ~~2018~~2020 in absolute dollars primarily due to a full year of additional headcount costs and amortization of acquired intangible assets as ~~we continue to maintain reduced cost levels that were established~~a result of the Merger and ~~achieved in 2018, described below.~~ increased Travel and Entertainment expenses post COVID-19.

Sales and marketing ~~expense~~expenses may fluctuate quarter to quarter and period to period, on an absolute dollar basis and as a percentage of revenue, based on revenue levels, the timing of our investments and seasonality in our industry and business.

Technology and Development

Technology and development expenses ~~decreased~~increased by ~~$9.6~~$11.3 million, or ~~20%~~28%, for the year ended December 31, ~~2018~~2020 compared to the prior year, primarily due to ~~a decrease~~an increase of ~~$7.4~~$11.6 million in personnel costs as a result of ~~our 2017~~the increased headcount associated with the Merger.

Technology and ~~2018 cost control initiatives. In addition, depreciation and amortization~~development expenses ~~decreased $1.1~~increased by $2.4 million, or 6%, for the year ended December 31, 2019 compared to ~~2017~~the year ended December 31, 2018, primarily due to ~~the cessation~~an increase of ~~our intent marketing services offering and closure~~$3.0 million in personnel costs as a result of ~~our Toronto office in the first quarter of 2017.~~

~~We expect technology and development expense to increase slightly in 2019 compared to 2018 as we make a limited number of~~ strategic ~~and targeted~~ headcount additions to focus on the engineering aspect of our new developments, including ~~tools for~~Demand Manager and other initiatives.

We expect technology and development expenses to continue to increase in 2021 compared to 2020 in absolute dollars, primarily due to the additional headcount investment in our ~~sellers.~~ key growth opportunities.

The timing and amount of our capitalized development and enhancement projects may affect the amount of development costs expensed in any given period. As a percentage of revenue, technology and development expense may fluctuate from quarter to quarter and period to period based on revenue levels, the timing and amounts of ~~these investments,~~technology and development efforts, the timing and the rate of the amortization of capitalized projects and the timing and amounts of future capitalized internal use software development costs.

General and Administrative

General and administrative expenses ~~decreased~~increased by $13.2 million, or ~~24%~~33%, for the year ended December 31, ~~2018~~2020 compared to the prior ~~year. The~~year, primarily due to increases of $7.1 million in personnel expenses and $4.0 million in facilities related expenses, both primarily associated with the Merger. In addition, professional services increased by $3.0 million in professional services mainly attributed to the growth of the overall business as a result of the Merger. These increases were partially offset by a decrease ~~was~~in bad debt expense of $1.3 million.

General and administrative expenses decreased by $0.7 million, or 2%, for the year ended December 31, 2019 compared to the year ended December 31, 2018, primarily ~~attributable~~due to a ~~$7.4~~decrease of $1.2 million~~decrease~~ in personnel related expenses due to ~~a decrease in employee headcount as a result~~the benefit of ~~our 2017 and 2018~~prior year's cost control ~~initiatives, as well as decreases across other expenses necessary to support our reduced headcount.~~Professional service expenses also decreased $3.2 million, largely due to reduced legal fees and consultant services. General and administrative depreciation and amortization costs also decreased $0.7 million due to accelerated amortization of certain capitalized software assets in 2017.initiatives.

We expect general and administrative expenses to ~~decrease~~increase in ~~2019~~2021 compared to ~~2018 as~~2020 in absolute dollars primarily due to the ~~cost savings realized~~additional headcount and assuming a return to office work environment later in the ~~second half of 2018 have a larger impact on our expected results.~~ year.

General and administrative expenses may fluctuate from quarter to quarter and period to period based on the timing and amounts of ~~our investments and related~~ expenditures in our general and administrative functions as they vary in scope and scale over ~~periods which~~periods. Such fluctuations may not be directly proportional to changes in revenue.

~~Restructuring~~

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Merger and ~~Other Exit~~Restructuring Costs

We incurred merger and restructuring costs of $17.6 million and $2.0 million during the year ended December 31, 2020 and 2019, respectively, primarily related with the Merger. In 2020, these costs included professional fees of $9.9 million related to investment banking advisory, legal, and other ~~exit~~professional service fees, one-time cash-based employee termination benefit costs of $5.7 million, and non-cash stock-based compensation expense associated with double-trigger accelerations and severance benefits of $1.9 million. In 2019, these costs consisted of professional services associated with the Merger, which were all incurred during the fourth quarter.

Merger and restructuring costs increased by $15.5 million during the year ended December 31, 2020 compared to the prior year primarily due cash and non-cash acceleration and termination benefits, as referenced above, and increased professional services associated with the Merger and resulting restructuring activities.

During the year ended December 31, 2018, we incurred restructuring costs of $3.4 million for severance and other one-time employee termination benefits ~~during the year ended December 31, 2018~~ related to headcount reductions that were made in ~~the first quarter of 2018, as described below. For the year ended December 31, 2017, we incurred $6.0 million of restructuring and~~2018. These costs included one-time ~~termination benefits expenses, primarily in severance and one-time~~cash-based employee termination ~~benefits~~benefit costs of $3.0 million and ~~facility closure costs, as a result of the management restructuring and the costs~~non-cash stock-based compensation expenses associated with ~~the shut-down~~severance benefits of ~~our intent marketing services (see Note 14).~~

As$0.4 million. These headcount reductions were as part of ~~our on-going~~ evaluation of efficiency and implementation of cost-control measures. As part of these measures, ~~during the first quarter of 2018~~ we ~~undertook measures to reduce~~reduced headcount by approximately 100 people, or 19% of our workforce, and ~~to reduce~~reduced other operating costs. Our actions included reductions in administrative staff to bring our general and administrative operations into better alignment with the current size of the business, as well as in sales and technical personnel as a result of offshoring certain development functions, organizational delayering and restructuring, and reducing investment in unprofitable projects.

We ~~estimated~~expect merger and restructuring costs to increase in 2021 compared to 2020 in absolute dollars if the ~~2018 restructuring activities would result in annualized cash basis cost savings of approximately $24.0 million. For~~SpotX Acquisition successfully closes.

Other (Income) Expense, Net


	Year Ended
		December 31, 2020		December 31, 2019		December 31, 2018
	(in thousands)
Interest (income) expense, net		$	(50)	$	(789)	$	(988)
Other income		(3,665)		(285)		(766)
Foreign exchange (gain) loss, net		2,220		481		(389)
Total other (income) expense, net		$	(1,495)	$	(593)	$	(2,143)

Other income increased by $3.4 million during the year ended December 31, ~~2018, we met our target for operating expense reductions.~~

~~For the year ended December 31, 2017, we recognized expenses of $6.0 million as restructuring and other exit costs related~~2020 compared to the ~~cessation of our intent marketing solution, including~~prior year due to rental income for two real estate leases for which we sublease the ~~closure of the Toronto office, as well as the realignment of~~

~~the management team~~property to a ~~more cost-efficient structure. These expenses primarily related~~third parties. We expect rental income for real estate leases subleased to ~~one-time employee termination benefits,~~third parties to be approximately $3.8 million in 2021, $3.2 million in 2022 and ~~included $4.4~~2023, $3.0 million ~~of cash expenditures. Restructuring expenses of $5.1~~in 2024, and $0.3 million ~~were paid~~ in ~~2017, which included restructuring costs incurred~~2025, based on the subleases in ~~2016 and 2017 related to this restructuring plan. The remaining liability~~place as of December 31, ~~2017 was paid in 2018.~~2020.

~~Other (Income) Expense, Net~~

Year Ended
December 31, 2018 December 31, 2017
(in thousands)
Interest income, net $ (988 ) $ (908 )
Other income (766 ) (688 )
Foreign exchange (gain) loss, net (389 ) 1,165
Total other income, net $ (2,143 ) $ (431 )

Foreign exchange (gain) loss, net is impacted by movements in exchange rates ~~primarily the British Pound and the Euro relative to the U.S. Dollar,~~ and the amount of foreign currency-denominated receivables and payables, which are impacted by our billings to buyers and payments to sellers. The foreign currency ~~gain,~~loss, net during the year ended December 31, 2020 was primarily attributable to the currency movements between the British Pound, Australian Dollar, Canadian Dollar, and Euro relative to the U.S. Dollar. The foreign currency loss, net during the years ended December 31, 2019 and 2018 was primarily attributable to the ~~strengthening of the U.S. Dollar in relation to the Euro and~~currency movements between the British Pound ~~for foreign currency denominated transactions.~~and the Euro relative to the U.S. Dollar.

Provision (Benefit) for Income Taxes

We recorded an income tax expense of $0.7 million for the year ended December 31, 2020 compared to an income benefit of $1.5 million and income tax expense of $0.4 million for the ~~year~~years ended December 31, 2019 and 2018, ~~compared to an income~~respectively. The tax ~~benefit of $1.8 million~~expense for the ~~year~~years ended December 31, ~~2017. The tax provision for the year ended~~2020 and December 31, 2018 iswas primarily the result of the domestic valuation allowance and the tax liability associated with the foreign subsidiaries. The net tax benefit for the year ended December 31, 2019 was the result of a deferred tax liability associated with the RTKio acquisition, 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 foreign subsidiaries.

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Non-GAAP Financial Measures

In addition to our GAAP results, we review ~~certain~~Adjusted EBITDA, a non-GAAP financial ~~measures~~measure, to help us evaluate our business, measure our performance, identify trends affecting our business, establish budgets, measure the effectiveness of investments in our technology and development and sales and marketing, and assess our operational efficiencies. ~~These non-GAAP measures include advertising spend, non-GAAP net revenue, and~~ Adjusted EBITDA ~~which are~~is discussed immediately following the table below, along with the operational performance measure take rate. Although we historically provided advertising spend and take rate as key performance metrics on a quarterly basis, we have determined that we will share specific metrics in these areas on an annual basis going forward. These metrics were historically more important when we had GAAP revenue that was reported on both a gross and a net basis prior to early 2017. More recently, they were important given our removal of buyer fees in late 2017, which significantly lowered our take rate, and made it challenging to understand our business during that time of significant transition. Given that these informational needs are lessened, competitive sensitivities, and in particular given that the comparison year for the significant take rate changebelow. Revenue is ~~behind us, we believe now is an appropriate time to make this change. Revenue and other GAAP measures are~~ discussed under the headings "Components of Our Results of Operations" and "Results of ~~Operations".~~Operations."


	Year Ended
		December 31, 2020		December 31, 2019		December 31, 2018
	(in thousands)
Financial Measures and non-GAAP Financial Measures:
Revenue		$	221,628	$	156,414	$	124,685
Net loss		$	(53,432)	$	(25,478)	$	(61,822)
Adjusted EBITDA		$	43,065	$	25,694	$	(11,222)

Year Ended
December 31, 2018 December 31, 2017
(in thousands)
Financial Measures and non-GAAP Financial Measures:
Revenue $ 124,685
$ 155,545
Advertising spend $ 992,087
$ 837,221
Non-GAAP net revenue $ 124,685
$ 154,928
Net loss $ (61,822 ) $ (154,783 )
Adjusted EBITDA $ (11,222 ) $ (4,420 )
Operational Measure:
Take Rate % 12.6 % 18.5 %

~~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. We also use advertising spend for internal management purposes to assess market share of total advertising spending. As discussed above, we no longer expect to present our advertising spend on a quarterly basis beginning in 2019.

Our advertising spend may be influenced by demand for our services, the volume and characteristics of paid impressions, average CPM, our ability to fill ad 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 18% for the year ended December 31, 2018 compared to 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 EMR for our header bidding inventory.

~~The following table presents the reconciliation of revenue to advertising spend:~~

Year Ended
December 31, 2018 December 31, 2017
(in thousands)
Revenue $ 124,685
$ 155,545
Plus amounts paid to sellers⁽¹⁾
867,402
681,676
Advertising spend $ 992,087
$ 837,221

^{(1) Amounts paid to sellers for the portion of our revenue reported on a net basis for GAAP purposes.}

Our solution enables buyers and sellers to transact through desktop and mobile channels. The following tables present revenue and advertising spend in dollar terms by channel and as a percentage of total revenue or advertising spend for the years ended December 31, 2018 and 2017.

Revenue Advertising Spend
Year Ended Year Ended
December 31, 2018 December 31, 2017 December 31, 2018 December 31, 2017
(in thousands, except percentages)
Channel:
Desktop $ 59,039
47 % $ 84,327
54 % $ 477,900
48 % $ 475,258
57 %
Mobile 65,646
53
71,218
46
514,187
52
361,963
43
Total $ 124,685
100 % $ 155,545
100 % $ 992,087
100 % $ 837,221
100 %

~~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.

~~The following table presents a reconciliation of revenue to non-GAAP net revenue for the years ended December 31, 2018 and 2017.~~

Year Ended
December 31, 2018 December 31, 2017
(in thousands)
Revenue $ 124,685
$ 155,545
Less amounts paid to sellers⁽¹⁾

—
617
Non-GAAP net revenue $ 124,685
$ 154,928



~~(1)~~	~~Represents amounts paid to sellers included within cost of revenue.~~

Non-GAAP net revenue decreased in the current period compared to the prior year due to a lower take rate, as noted within "Industry Trends and Trends in Our Business", which was partially offset by the increase in advertising spend.

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 is~~ and will remain an element of our long-term incentive compensation package, although we exclude it as an expense ~~in Adjusted EBITDA~~ 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 ~~the write-down of~~ goodwill, intangible assets and/or long-lived ~~assets, although we exclude these charges as expenses in Adjusted EBITDA when evaluating our ongoing operating performance for a particular period.~~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 ~~fluctuation~~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), income (loss) from operations, or any other measure of financial performance calculated and presented in accordance with GAAP.

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The following table presents a reconciliation of net loss, the most comparable GAAP measure, to Adjusted EBITDA for the years ended December 31, ~~2018~~2020 and ~~2017.~~

Year Ended
December 31, 2018 December 31, 2017
(in thousands)
Net loss $ (61,822 ) $ (154,783 )
Add back (deduct):
Depreciation and amortization expense, excluding amortization of acquired intangible assets 32,153
31,443
   Amortization of acquired intangibles 3,185
4,782
   Stock-based compensation expense 16,282
20,504
Impairment of intangible assets and internal use software —
4,585
Impairment of goodwill —
90,251
   Acquisition and related items —
303
Interest income, net (988 ) (908 )
Foreign exchange (gain) loss, net (389 ) 1,165
Provision (benefit) for income taxes 357
(1,762 )
Adjusted EBITDA $ (11,222 ) $ (4,420 )

The decline in adjusted EBITDA for the year ended December 31, 2018 and our expectations for future adjusted EBITDA have been driven by the same factors that drove the changes in our GAAP metrics noted above.

~~Take Rate~~

Take rate is an operational performance measure calculated by dividing revenue (or for periods in which we have revenue reported on a gross basis, non-GAAP net revenue) by advertising spend. We review take rate for internal management purposes to assess the development of our marketplace with buyers and sellers. As discussed above, we no longer expect to present our take rate on a quarterly basis beginning in 2019.

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, our strategic pricing decisions, credits for discrepancies and other items, and the overall development of the digital advertising ecosystem.


	Year Ended
		December 31, 2020		December 31, 2019		December 31, 2018
	(in thousands)
Net income (loss)		$	(53,432)	$	(25,478)	$	(61,822)
Add back (deduct):
Depreciation and amortization expense, excluding amortization of acquired intangible assets		24,337		28,818		32,153
Amortization of acquired intangibles		24,911		3,308		3,185
Stock-based compensation expense		28,491		18,825		16,282


Merger and acquisition related items		15,682		2,041		—
Non-operational real estate expense (income), net		198		—		—
Interest (income) expense, net		(50)		(789)		(988)
Foreign exchange (gain) loss, net		2,220		481		(389)
Other non-operating (income) expense, net		15		—		—
Provision (benefit) for income taxes		693		(1,512)		357
Adjusted EBITDA		$	43,065	$	25,694	$	(11,222)

The significant declines in our take rates for the year ended December 31, 2018 compared to 2017 resulted primarily from the reduction and elimination of buyer fees as discussed above in "Industry Trends and Trends in Our Business—~~Take Rate Decline". Subsequent to the elimination of buyer fees, take rates have stabilized and increased slightly.~~

Liquidity and Capital Resources

Our principal sources of liquidity are our cash and cash equivalents, marketable securities, cash generated from operations, and our credit facility with Silicon Valley Bank ("SVB"). At December 31, ~~2018,~~2020, we had cash and cash equivalents of ~~$80.5~~$117.7 million, of which ~~$20.1~~$23.5 million was held in foreign currency cash ~~accounts, and marketable securities of $7.5 million.~~accounts. Our cash and marketable securities balances are affected by our results of operations, the timing of capital expenditures, which are typically greater in the second half of the year, and by changes in our working capital, particularly changes in accounts receivable and accounts payable. The timing of cash receipts from buyers and payments to sellers can significantly impact our cash flows from operating activities and our liquidity for, and within, any period presented. Our collection and payment cycle can vary from period to period depending upon various circumstances, including ~~seasonality.~~seasonality, and may be negatively impacted as a result of COVID-19.

On September ~~26, 2018,~~25, 2020, we amended and restated our loan and security agreement with SVB (the "Loan Agreement")~~, which was scheduled to expire on September 27, 2018.~~. The Loan Agreement provides a senior secured revolving credit facility of up to ~~$40.0~~$60.0 million with a maturity date of September ~~26,~~25, 2022. The Loan Agreement includes a letter of credit, foreign exchange and cash management facility with a sublimit up to $10.0 million, of which $6.3 million was utilized for letters of credit related to leases as of December 31, 2020. ~~The~~As of December 31, 2020, the amount available for borrowing aswas $53.7 million (net of ~~December 31, 2018 is $30.0 million due~~letters of credit).

Pursuant to ~~a $10.0 million reserve that will be released if we maintain positive Adjusted EBITDA for any trailing twelve-month period.~~

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. We may elect for advances to bear interest calculated by reference to prime or LIBOR. If we elect LIBOR, amounts outstanding under the amended credit facility bear interest at a rate per annum equal to LIBOR plus 2.50% if a streamline period applies or LIBOR plus 4.00% if a streamline period does not apply. If we elect prime, advances bear interest at a rate of prime plus 0.50% if a streamline period applies or 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 our 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 our assets. Subject to certain exceptions,~~ the Loan Agreement, restricts our 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, we are required ~~to maintain a lockbox arrangement where client payments received in the lockbox will immediately reduce the amounts outstanding on the credit facility.~~

~~The Loan Agreement requires us~~ to comply with financial covenants, ~~including~~measured quarterly, with respect to a minimum ~~Adjusted Quick Ratio~~liquidity ratio and ~~the achievement of certain Adjusted EBITDA targets. On a monthly basis, or~~maximum quarterly ~~if there were no advances outstanding during the calendar quarter, we~~cash burn. We are required to maintain a minimum ~~Adjusted Quick Ratio of: (i) 1.00 if~~liquidity ratio of at least 1.25 on 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 our Adjusted Quick Ratio is 1.05 or greater, a streamline period applies. As of December 31, 2018, our Adjusted Quick Ratio was 1.16, which is in compliance with the covenant requirement and is higher than the minimum Adjusted Quick Ratio required to qualify for a streamline period. We must also maintain trailing twelve month Adjusted EBITDA targets as of the endlast day 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.~~

~~The Loan Agreement also includes customary representations and warranties, affirmative covenants, and events of default, including events of default upon~~not exceed, on an absolute basis, a ~~change of control and material adverse change (as~~maximum quarterly cash burn for specific periods, as defined in the Loan ~~Agreement). Following an event~~Agreement. The Liquidity Ratio is defined as Cash and Cash Equivalents, plus Accounts Receivable, less Accounts Payable - Seller, divided by all obligations due to SVB, including all debt balances, interest, service fees, and unused credit line fees, net of ~~default, SVB would be entitled~~outstanding letters of credit as of the balance sheet date. Cash Burn is defined as Adjusted EBITDA less Capital Expenditures during the trailing periods as outlined in the Loan Agreement. The Loan Agreement defines Capital Expenditures as the current period unfinanced cash expenditures that are capitalized and amortized, including but not limited to ~~among other things, accelerate payment of amounts due under~~property and equipment and capitalized labor costs as they relate to internal use software development costs. December 31, 2020, the ~~credit facility and exercise all rights of a secured creditor.~~

Company was in compliance with its financial covenants. While we are currently in compliance with these covenants, this could change in the future depending on our operating results. At December 31, ~~2018,~~2020, we had no amounts outstanding under our Loan Agreement other than with ~~SVB.~~respect to letters of credit). Future availability under the credit facility is dependent on several factors, including the available borrowing base and compliance with future covenant requirements. See Note 18 of "Notes to Consolidated Financial Statements" for additional information regarding the Loan Agreement.

We believe our existing cash and cash equivalents, ~~and~~ investment balances, and available borrowings under our Loan Agreement will be sufficient to meet our working capital requirements for at least the next twelve months from the issuance of our financial statements. However, there are multiple factors that could impact our cash balances in the future. For example, we typically collect from buyers in advance of payments to sellers, and our collection and payment cycle can vary from period to period depending upon various circumstances, including seasonality. ~~Increases~~In addition, in ~~revenue earned directly from advertisers and agencies~~the event a buyer defaults on payment, we may cause the amount of receipts from buyers collected in advance of payments to sellers to decrease, because advertisers and agencies may pay slowly. Recently, some buyers have begun demanding longer termsstill be required to pay ~~us later and some~~ sellers ~~have begun demanding shorter terms~~for the inventory purchased even if we are unable to collect from ~~us earlier. We may not~~buyers. These challenges have been exacerbated by the ~~leverage to resist these demands given the competitive nature~~COVID-19 pandemic and resulting economic impact, as many of our ~~business. If this continues, more~~buyers are experiencing financial

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difficulties and liquidity constraints. In certain cases, buyers have been unable to timely make payments and we have agreed to revised payment schedules. To date, these actions have not had a material negative impact on our cash ~~will be required to fund our payment cycle~~flow or liquidity. At December 31, 2020, two buyers accounted for 33% and ~~therefore not available for other uses. Our~~12%, respectively, of consolidated accounts receivable. The future capital requirements and the adequacy of available funds will depend on many factors, including ~~those~~the duration and severity of the COVID-19 pandemic and its impact on buyers and sellers and factors set forth in Part I, Item 1A: "Risk Factors" of this Annual Report on Form 10-K.

~~Our ability~~We intend to ~~renew~~finance the cash portion of the SpotX Acquisition consideration in part from cash on our ~~existing credit facility, which matures~~balance sheet and in ~~September 2020, or to enter into a~~part through borrowings under certain proposed new credit ~~facility~~facilities. In connection with entering into the SpotX Purchase Agreement, we entered into the Commitment Letter, dated as of February 4, 2021, with Goldman Sachs Bank USA (the "Commitment Party"), pursuant to ~~replace~~which, subject to the terms and conditions set forth therein, the Commitment Party has committed to provide the senior secured Term Loan Facility in an aggregate principal amount of up to $560 million. If we fail to satisfy the closing conditions set forth in the Commitment Letter or ~~supplement~~ the ~~existing facility may~~Commitment Party is unable to perform its obligations under the Commitment Letter for any reason, we will be ~~limited due~~required to ~~various factors, including the status of our business, global credit market conditions, and perceptions of our business or industry by~~find other sources of ~~financing. In particular, it may be difficult~~capital to renew or replace our existing credit facility if we are not able to produce, or demonstrate a path to produce, positive cash flow. In addition, even if credit is available, lenders may seek more restrictive covenants and higher interest rates that may reduce our borrowing capacity, increase our costs, and reduce our operating flexibility.fund the acquisition of SpotX.

In the future, we may attempt to raise additional capital through the sale of equity securities or through equity-linked or debt financing arrangements. If we raise additional funds by issuing equity or equity-linked securities, the ownership of our existing stockholders will be diluted. If we raise additional financing by incurring indebtedness, we will be subject to increased

fixed payment obligations and could also be subject to restrictive covenants, such as limitations on our ability to incur additional debt, and other operating restrictions that could adversely impact our ability to conduct our business. Any future indebtedness we incur may result in terms that could be unfavorable to equity investors. Due to the economic uncertainty caused by the COVID-19 pandemic, the debt and equity markets have become less predictable and obtaining financing on favorable terms and at favorable rates has become more difficult.

An inability to raise additional capital could adversely affect our ability to achieve our business objectives. In addition, if our operating performance during the next twelve months is below our expectations, our liquidity and ability to operate our business could be adversely affected.

Cash Flows

The following table summarizes our cash flows for the periods presented:


	Year Ended
	December 31, 2020		December 31, 2019		December 31, 2018
	(in thousands)
Cash flows provided by (used in) operating activities	$	(12,065)	$	31,983	$	(22,686)
Cash flows provided by (used in) investing activities	32,636		(23,388)		27,947
Cash flows provided by (used in) financing activities	7,354		(205)		(1,279)
Effects of exchange rate changes on cash, cash equivalents and restricted cash	918		46		(172)
Change in cash, cash equivalents and restricted cash	$	28,843	$	8,436	$	3,810

Year Ended
December 31, 2018 December 31, 2017
(in thousands)
Cash flows provided by (used in) operating activities $ (22,686 ) $ 21,535
Cash flows provided by (used in) investing activities 27,947
(93,210 )
Cash flows used in financing activities (1,279 ) (1,380 )
Effects of exchange rate changes on cash, cash equivalents and restricted cash (172 ) 199
Change in cash, cash equivalents and restricted cash $ 3,810
$ (72,856 )

Operating Activities

Our cash flows from operating activities are primarily driven by revenues generated from advertising activity, offset by the cash costs of operations, and are significantly influenced by ~~increases or decreases~~the timing of and fluctuations in receipts from buyers and related payments to sellers. Our future cash flows will be diminished if we cannot increase our revenue levels and manage costs appropriately. Cash flows from operating activities have been further affected by changes in our working capital, particularly changes in accounts receivable and accounts payable. The timing of cash receipts from buyers and payments to sellers can significantly impact our cash flows from operating activities for any period presented.

~~For~~ During the year ended December 31, ~~2018,~~2020, net cash used in operating activities was ~~$22.7~~$12.1 million, compared to net cash provided by operating activities of ~~$21.5~~$32.0 million ~~for~~during the year ended December 31, ~~2017.~~2019 and net cash used in operating activities of $22.7 million during the year ended December 31, 2018. Our operating activities included our net losses of ~~$61.8~~$53.4 million, $25.5 million, and ~~$154.8~~$61.8 million for the years ended December 31, ~~2018~~2020 and ~~2017,~~2019, and 2018, respectively, which were offset by non-cash adjustments of $76.4 million, $51.5 million, and $51.3 million, respectively. In 2020, net changes in our working capital increased cash used in operating activities by $35.1 million, mainly driven by increased accounts receivable and $151.5 million, respectively. Non-cash adjustments for the year ended December 31, 2017 included $90.3 million and $4.6 million of impairment charges related to goodwill and intangible assets and internally developed software, respectively.accounts payable balances. In 2019, net changes in our working capital increased cash provided by operating activities by $5.9 million. In 2018, net changes in our working capital increased cash used in operating activities by $12.1 million. ~~Net cash provided by operating activities for 2017 was also increased by net changes in our working capital of $24.8 million.~~ The net changes in working capital for ~~both~~all periods presented are primarily due to the timing of cash receipts from buyers and the timing of payments to sellers.

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We believe that cash flows from operations will continue to be negatively impacted by our ongoing net losses and working capital needs.

Investing Activities

Our primary investing activities have consisted of ~~investments in, and maturities of, available-for-sale securities,~~ acquisitions of businesses, purchases of property and equipment, ~~and~~ capital expenditures to develop our internal use software in support of creating and enhancing our technology ~~infrastructure.~~infrastructure, and investments in, and maturities of, available-for-sale securities. Purchases of property and equipment and investments in internal use software development may vary from period-to-period due to the timing of the expansion of our operations, changes to headcount, and the cycles of our internal use software development. As we execute on our strategy to be a high volume, low cost advertising exchange, we are developing solutions to manage the growth of our digital advertising inventory volume more efficiently. We anticipate investment in internal use software development to increase compared to past years' investment levels as we continue to innovate new solutions on our platform. As the business continues to grow, we expect our investment in property and equipment to slightly increase compared to ~~2018.~~2020. Historically, a majority of our purchases in property and equipment have occurred in the latter half of the year in preparation for the peak volumes of the fourth quarter and early in the first quarter of the following year. We ~~anticipate investment~~expect those trends to continue, with higher levels of property and equipment spend in ~~internal use software development~~the latter half of next year compared to ~~remain relatively consistent with past years' investment levels as we continue to innovate new solutions on our platform.~~the first half of the year. Investments in, and maturities of, available-for-sale securities and acquisitions of businesses vary from period-to-period.

During the year ended December 31, ~~2018,~~2020, net cash provided by investing activities was ~~$27.9~~$32.6 million compared to net cash used inby investing activities of ~~$93.2~~$23.4 million during the year ended December 31, 2019 and net cash provided by investing activities of $27.9 million during the year ended December 31, 2018. During the year ended December 31, 2020, 2019, and 2018, we used cash for purchases of property and equipment of $14.3 million, $11.4 million, and $11.4 million, respectively, and used cash for investments in our internally developed software of $7.7 million, $8.5 million, and $8.5 million, respectively, The cash provided by investing activity for the year ended December 31, ~~2017.~~2020 included $54.6 million of cash and restricted cash acquired as part of the Merger. Net cash used in our investing activities in ~~2017~~2019 included ~~$38.6~~$11.0 million ~~of cash consideration, net of cash acquired,~~ to acquire ~~nToggle, Inc. in July 2017.~~RTK.io. For the ~~year~~years ended December 31, 2019 and 2018 we had net maturities of investments in available-for-sale securities of $7.5 million and $38.7 million, ~~compared to net purchases of available for sale securities of $14.2 million for the year ended December 31, 2017. The year ended December 31, 2018 also included~~respectively. In addition, we had cash inflows of $9.2 ~~million from sales of our available-for-sale securities. These cash inflows were offset by purchases~~

of property and equipment of $11.4 million and $32.4 million during 2018 and 2017, respectively, which included costs to integrate nToggle into our platform in 2017. We also made investments in our internally developed software of $8.5 million and $8.0 million during the year ended December 31, 2018 ~~and 2017, respectively.~~related to sales of available-for-sale securities.

Financing Activities

Our financing activities consisted of transactions related to the issuance of our common stock under our equity plans.

For the years ended December 31, 2020, 2019, and 2018 we provided net cash of $7.4 million, and ~~2017, we~~ used net cash of ~~$1.3~~$0.2 million, and ~~$1.4~~$1.3 million, respectively, for financing activities. Cash outflows from financing activities for the years ended December 31, ~~2018~~2020, 2019, and ~~2017~~2018 included payments of ~~$1.6~~$7.9 million, $1.8 million, and ~~$2.4~~$1.6 million, respectively, for income tax deposits paid in respect of vesting of stock-based compensation awards that were reimbursed by the award recipients through surrender of shares. Offsetting these outflows were cash inflows of ~~$0.3~~$15.2 million, $1.6 million, and ~~$0.6~~$0.4 million, from the issuance of common stock under the employee stock purchase plan and exercise of stock options for the years ended December 31, ~~2018~~2020, 2019, and ~~2017,~~2018, respectively.

Off-Balance Sheet Arrangements

We do not have any relationships with other entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities that have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. We did not have any other off-balance sheet arrangements at December 31, ~~2018~~2020 other than the short-term operating leases and the indemnification agreements described below.

Contractual Obligations and Known Future Cash Requirements

Our principal commitments consist of leases for our various office facilities, including our corporate headquarters in Los Angeles, California and ~~non-cancelable~~offices in New York, New York, and operating lease agreements, ~~with~~including data centers and cloud managed services that expire at various times through 2024. At December 31, 2018, expected future commitments relating to operating leases were $14.0 million. See Note 16 of "Notes to Consolidated Financial Statements" for our annual lease commitment for each of the next five years and thereafter.2030. In certain cases, the terms of the lease agreements provide for rental payments on a graduated basis.

We received rental income from subleases totaling ~~$0.8~~$3.7 million for the year ended December 31, ~~2018.~~2020.

~~There were~~The following table summarizes our future lease obligations, related sublease income, and other future payments due under non-cancelable agreements at December 31, 2020.

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	2021		2022		2023		2024		2025		Thereafter		Total
	(in thousands)
Lease liabilities associated with leases included Right of Use Assets as of December 31, 2020	$	11,653	$	8,392	$	7,428	$	6,740	$	3,551	$	11,403	$	49,167
Obligations for leases not included in Lease liabilities as of December 31, 2020	1,549		3,593		3,713		3,835		2,827		13,323		28,840
Operating sublease income	(3,814)		(3,245)		(3,194)		(3,042)		(253)		—		(13,548)
Other non-cancelable obligations	9,010		8,073		5,158		4,031		2,000		—		28,272
Total	$	18,398	$	16,813	$	13,105	$	11,564	$	8,125	$	24,726	$	92,731

Obligations for leases not included in the lease liabilities as of December 31, 2020 include commitments under agreements for an office lease for our new corporate headquarters in Los Angeles and a data center in Singapore which have not commenced as of December 31, 2020.

Other non-cancelable obligations include other agreements in the normal course of business, including an agreement for third-party cloud-managed services. As part of the agreement, we have a minimum commitment to pay $20.0 million over the course of five years, with no ~~significant changes~~annual minimum commitment. As of December 31, 2020, the Company's commitment is $18.0 million.

In addition, on February 4, 2021, we entered into a Stock Purchase Agreement with RTL US Holding, Inc., to purchase all of the issued and outstanding shares of capital stock of SpotX, a Delaware corporation and wholly owned subsidiary of RTL, for a purchase price equal to $560 million in cash ("Cash Consideration") and 14 million shares of the Company's common stock. The Cash Consideration is subject to customary working capital and other adjustments. We intend to finance the Cash Consideration in part from cash on our balance sheet and in part through borrowings under the Term Loan Facility. The funding of the Term Loan Facility provided for in the Commitment Letter is contingent on the satisfaction of customary conditions, including the execution and delivery of definitive documentation with respect to credit facilities in accordance with the terms set forth in the Commitment Letter and the consummation of the SpotX acquisition in accordance with the Purchase Agreement.

Our unrecognized tax benefits inchanges for the year ended December 31, ~~2018~~2020 resulted from a closed IRS audit and ~~we do not expect~~the Company's reasonable expectation that federal research and development credits will expire unutilized pursuant to ~~have any significant changes~~Section 383 of the Code, which allowed us to decrease our unrecognized tax benefit. The Merger with Telaria resulted in an increase to our unrecognized tax benefit for prior year taxes in foreign jurisdictions. The increase to unrecognized tax ~~benefits through December 31, 2019.~~benefit for the period is not material.

In the ordinary course of business, we enter into agreements with sellers, buyers, and other third parties pursuant to which we agree to indemnify buyers, sellers, vendors, lessors, business partners, lenders, stockholders, and other parties with respect to certain matters, including, but not limited to, 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 our own business operations, obligations, and acts or omissions. However, under some circumstances, we agree 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. These indemnity provisions generally survive termination or expiration of the agreements in which they appear. In addition, we have entered into indemnification agreements with our directors, executive officers and certain other officers that will require us, 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 demands for indemnification have been made as of December 31, ~~2018.~~2020.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.

We believe that the following assumptions and estimates have the greatest potential impact on our consolidated financial statements: (i) the determination of revenue recognition as net versus gross in our revenue arrangements, (ii) the determination of the estimated useful lives of internal-use software development costs, (iii) the recoverability of intangible asset and goodwill, (iv) assumptions used in the valuation models to determine the fair value of stock options and stock-based compensation expense, (v) the assumptions used in the valuation of acquired assets and liabilities in business combinations, and (vi) income taxes, including

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the realization of tax assets and estimates of tax liabilities. There have been no significant changes in our accounting policies or estimates from those disclosed in our audited consolidated financial statements and notes thereto for the years ended December 31, 2020 and 2019.

We believe that the accounting policies disclosed below include estimates and assumptions critical to our business and their application could have a material impact on our consolidated financial statements. In addition to these critical policies, our significant accounting policies are included within Note 2 of our "Notes to Consolidated Financial Statements" within this Annual Report on Form 10-K.

Revenue Recognition

We generate revenue from transactions where we provide a platform for the purchase and sale of digital advertising inventory. ~~Our advertising automation solution~~We also generate revenue from the fee we charge clients for use of our Demand Manager product, which generally is a ~~marketplace that includes~~percentage of the client's advertising spending on any advertising marketplace. Our platform dynamically connects sellers ~~of inventory (providers of websites, mobile applications and other digital media properties, and their representatives)~~ and buyers of advertising inventory ~~(including advertisers, agencies, agency trading desks, and demand-side platforms). This~~in a digital marketplace. Our 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 our 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 our platform. Digital advertising inventory is created when consumers access sellers’ content. Sellers provide digital advertising inventory to our platform in the form of advertising requests, or ad requests. When we receive ad requests from sellers, we send 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 our platform is referred to as advertising spend. We keep a percentage of that advertising spend as a fee, and remit the remainder to the seller. The fee that we retain from the gross advertising spend on our platform is recognized as revenue. The fee earned on each transaction is based on the pre-existing agreement we have with the seller and the clearing price of the winning bid. We recognize revenue upon fulfillment of our performance obligation to a client, which occurs at the point in time an ad renders and is counted as a paid impression, subject to a contract 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; we~~time. We have no arrangements with multiple performance obligations. We consider the following when determining if a contract exists (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.

WeThe determination of whether revenue should be reported on a gross or net basis is based on an assessment of whether we are acting as the principal or an agent in the transaction. In determining whether we are acting as the principal or an agent, we followed the accounting guidance for principal-agent considerations. Making such determinations involves judgment and is based on an evaluation of the terms of each arrangement, none of which are considered presumptive or determinative.

For substantially all transactions on our platform, we have determined that we do not act as the principal in the purchase and sale of digital advertising inventory because we are not the primary obligor as we do not have control of the digital advertising inventory and do not set prices agreed upon within the auction marketplace, and therefore we report revenue on a net basis. ~~In periods prior~~However, for certain transactions related to revenue streams acquired in connection with the ~~second quarter of 2017,~~Merger with Telaria, we ~~reported~~report revenue on a gross basis, based primarily on our determination that we act as the primary obligor in the delivery of advertising campaigns for ~~revenue~~buyers with respect to such transactions.

Internal Use Software Development Costs

We capitalize certain internal use software development costs associated with creating and enhancing internally developed software related to our ~~intent marketing solution,~~technology infrastructure. These costs include personnel and related employee benefits expenses for employees who are directly associated with and who devote time to software projects, and external direct costs of materials and services consumed in developing or obtaining the software. Software development costs that do not meet the qualification for capitalization, as ~~we determined that we acted~~further discussed below, are expensed as ~~the principal~~incurred and recorded in technology and development expenses in the ~~purchase~~results of operations.

Software development activities generally consist of three stages, (i) the planning stage, (ii) the application and ~~sale~~infrastructure development stage, and (iii) the post implementation stage. Costs incurred in the planning and post implementation stages of ~~digital advertising inventory.~~software development, including costs associated with the post-configuration training and repairs and maintenance of the developed technologies, are expensed as incurred. We ~~ceased offering our intent marketing solution after~~capitalize costs associated with software developed for internal use when the ~~first quarter~~planning stage is completed, management has authorized further funding for the completion of ~~2017, after which time, all of our revenues have been recorded on~~the project, and it is probable that the project will be completed and perform as intended. Costs incurred in the application and infrastructure development stages, including significant enhancements and upgrades, are capitalized. Capitalization ends once a ~~net basis.~~

~~Impairment of Long-Lived Assets, including Intangible Assets~~project is substantially complete and ~~Internal Use Capitalized Software Costs~~the software and technologies are ready for their intended purpose.

We ~~assess~~amortize internal use software development costs using a straight-line method over the ~~recoverability~~estimated useful life, commencing when the software is ready for its intended use. The straight-line recognition method approximates the manner in which the expected benefit will be derived.

Table of ~~our long-lived~~Contents

Valuation of Goodwill and Intangibles

The valuation of assets ~~when~~acquired in a business combination and asset impairment reviews require the use of significant estimates and assumptions. The acquisition method of accounting for business combinations requires us to estimate the fair value of assets acquired, liabilities assumed, and any noncontrolling interest in an acquired business to properly allocate purchase price consideration between assets that are depreciated or amortized and goodwill.

Long-lived assets, including property and equipment, long-term prepayments, and intangible assets, excluding goodwill, are reviewed for impairment whenever events or changes in circumstances indicate ~~their~~that the carrying ~~value~~amount of an asset may not be recoverable. ~~Such~~The evaluation is performed at the lowest level of identifiable cash flows independent of other assets. An impairment loss would be recognized when estimated undiscounted future cash flows generated from the assets are less than their carrying amount. Measurement of an impairment loss would be based on the excess of the carrying amount of the asset group over its fair value.

We evaluate goodwill annually or more frequently if events or changes in circumstances indicate that goodwill may ~~include: a significant adverse change in~~be impaired. In accordance with guidance related to impairment testing, we have the ~~extent~~option to first assess qualitative factors to determine whether or ~~manner in which a long-lived asset~~not it is ~~being used, significant adverse change in legal factors~~necessary to perform the quantitative goodwill impairment test. If the qualitative assessment option is not elected, or inif the ~~business climate~~qualitative assessment indicates that could affect the value of a long-lived asset, an accumulation of costs significantly in excess of the amount originally expected for the acquisition or development of a long-lived asset, current or future operating or cash flow losses that demonstrate continuing losses associated with the use of a long-lived asset, or a current expectation that,it is more likely than not that the fair value is less than its carrying amount, a ~~long-lived asset will~~quantitative analysis is then performed. The quantitative analysis, if performed, compares the estimated fair value of the Company with its respective carrying amount, including goodwill. If the estimated fair value of the Company exceeds its carrying amount, including goodwill, goodwill is considered not to be ~~sold~~impaired and no additional steps are necessary. If the fair value is less than the carrying amount, including goodwill, then an impairment adjustment must be recorded up to the carrying amount of goodwill.

Stock-Based Compensation

Compensation expense related to employee stock-based awards is measured and recognized on the fair value of the awards granted. We have granted awards to employees that vest based solely on continued service, or ~~otherwise disposed~~service conditions, awards that vest based on the achievement of ~~significantly before~~performance targets, or performance conditions, and awards that vest based on our stock price exceeding a peer index, or market conditions. The fair value of each option award containing service and/or performance conditions is estimated on the ~~end~~grant date using the Black-Scholes option-pricing model. The fair value of ~~its previously~~awards containing market conditions is estimated ~~useful life.~~using a Monte-Carlo lattice model. For service condition awards, stock-based compensation expense is recognized on a straight-line basis over the requisite service periods of the awards, which is generally four years. For performance condition and market condition awards, stock-based compensation expense is recognized using a graded vesting model over the requisite service period of the awards. For market condition awards, expense recognized is not subsequently reversed if the market conditions are not achieved.

Stock-based awards issued to non-employees are accounted for at fair value determined by using the Black-Scholes option-pricing model. We ~~perform impairment testing~~believe that the fair value of the stock options is more reliably measured than the fair value of the services received. The fair value of each non-employee stock-based compensation award is re-measured each period until a commitment date is reached, which is generally the vesting date.

Determining the fair value of stock-based awards at the ~~asset group level that represents~~grant date requires judgment. Our use of the ~~lowest level for~~Black-Scholes option-pricing model and Monte-Carlo lattice model requires the input of subjective assumptions such as the expected term of the option, the expected volatility of the price of our common stock, risk-free interest rates, the expected dividend yield of our common stock, and the fair value of our common stock. The assumptions used in our valuation models represent management’s best estimates. These estimates involve inherent uncertainties and the application of management’s judgment. If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future.

Business Combinations

The results of businesses acquired in a business combination are included in our consolidated financial statements from the date of acquisition. We allocate the purchase price of a business combination, which is the sum of the consideration provided, which may consist of cash, equity or a combination of the two, to the identifiable assets and liabilities of the acquired business at their acquisition date fair values. The excess of the purchase price over the amount allocated to the identifiable assets and liabilities, if any, is recorded as goodwill. Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates including the selection of valuation methodologies, estimates of future revenues and cash flows, discount rates and selection of comparable companies.

When we issue stock-based or cash awards to an acquired company’s stockholders, we evaluate whether the awards are ~~largely independent~~contingent consideration or compensation for post-business combination services. The evaluation includes, among other things, whether the vesting of the awards is contingent on the continued employment of the selling stockholder beyond the acquisition date. If continued employment is required for vesting, the awards are treated as compensation for post-acquisition services and recognized as expense over the requisite service period.

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We estimate the fair value of intangible assets acquired generally using a discounted cash flow approach, which includes an analysis of the future cash flows expected to be generated by the asset and the risk associated with achieving these cash flows. The key assumptions used in the discounted cash flow model include the discount rate that is applied to the forecasted future cash flows to calculate the present value of ~~other assets~~those cash flows and ~~liabilities. We assess recoverability~~the estimate of ~~a long-lived~~future cash flows attributable to the acquired intangible asset, ~~by determining whether the~~which include revenue, expenses and taxes. The carrying value of acquired working capital assets and liabilities approximates its fair value, given the ~~asset group~~short-term nature of these assets and liabilities.

Income Taxes

We are subject to income taxes in the U.S. and foreign jurisdictions. Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes.

Although we believe we have adequately reserved for our uncertain tax positions, no assurance can be ~~recovered through projected undiscounted cash flows over their remaining lives. If~~given that the ~~carrying value~~final tax outcome of ~~the asset group exceeds the forecasted undiscounted cash flows, an impairment loss is recognized, measured~~these matters will not be different. We adjust these reserves as facts and circumstances change, such as the ~~amount by which~~closing of a tax audit or the ~~carrying amount exceeds estimated fair value. An impairment loss~~refinement of an estimate. To the extent that the final tax outcome of these matters is ~~charged to operations~~different than the amounts recorded, such differences will affect the provision for income taxes and the effective tax rate in the period in which ~~management determines~~ such ~~impairment.~~determination is made.

The provision for income taxes includes the effect of reserve provisions and changes to reserves that are considered appropriate as well as the related net interest and penalties. In addition, we are subject to the continuous examination of our income tax returns by the Internal Revenue Services ("IRS") and other tax authorities which may assert assessments against us. We regularly assess the likelihood of adverse outcomes resulting from these examinations and assessments to determine the adequacy of our provision for income taxes.

Recently Issued Accounting Pronouncements

~~For~~ The information ~~regarding recent accounting pronouncements, refer to~~set forth under Note 2 ofto our "Notes to Consolidated Financial Statements" ~~within this Annual Report on Form 10-K.~~under the caption "Organization and Summary of Significant Accounting Policies" is incorporated herein by reference.

Item 7A. Quantitative and Qualitative Disclosure About Market Risk

~~This section~~ We have operations both in the United States and internationally, and we are exposed to market risks in the ordinary course of our business. These risks include primarily interest rate, foreign exchange, and inflation risks. The risks below may be further exacerbated by the effects of the COVID-19 pandemic on global macroeconomic and market conditions.

Interest Rate Fluctuation Risk

Our cash and cash equivalents consist of cash, money market funds, and commercial paper, with original maturities of three months or less. Our investments consist of repurchase agreements, U.S. government agency debt, and U.S. treasury debt. The primary objective of our investment activities is to preserve principal while maximizing income without significantly increasing risk. Because our cash, cash equivalents, and investments have a relatively short maturity, our portfolio’s fair value is relatively insensitive to interest rate changes. Our line of credit is at variable interest rates. We had no amounts outstanding under our credit facility at December 31, 2020. We do not ~~required for smaller reporting companies.~~believe that an increase or decrease in interest rates of 100 basis points would have a material effect on our operating results or financial condition. In future periods, we will continue to evaluate our investment policy relative to our overall objectives.

Foreign Currency Exchange Risk

We have foreign currency risks related to our revenue and expenses denominated in currencies other than the U.S. Dollar, principally the British Pounds, Australian Dollar, Canadian Dollar and Euro. The volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy. We have experienced and will continue to experience fluctuations in our net income (loss) as a result of transaction gains and losses related to translating certain cash balances, trade accounts receivable and payable balances and intercompany balances that are denominated in currencies other than the U.S. Dollar. The effect of an immediate 10% adverse change in foreign exchange rates on foreign-denominated accounts at December 31, 2020, including intercompany balances, would result in a foreign currency loss of approximately $3.1 million. In the event our non-U.S. Dollar denominated sales and expenses increase, our operating results may be more greatly affected by fluctuations in the exchange rates of the currencies in which we do business. At this time we do not, but we may in the future, enter into derivatives or other financial instruments in an attempt to hedge our foreign currency exchange risk. It is difficult to predict the impact hedging activities would have on our results of operations.

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Inflation Risk

We do not believe that inflation has had a material effect on our business, financial condition, or results of operations. If our costs were to become subject to significant inflationary pressures, we might not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition, and results of operations.

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Item 8. Financial Statements and Supplementary Data

~~The Rubicon Project, Inc.~~MAGNITE, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS




Report of Independent Registered Public Accounting Firm	6964
~~Report of Independent Registered Public Accounting Firm~~Consolidated Financial Statements:
Consolidated Balance Sheets		7067

~~Consolidated Financial Statements:~~
~~Consolidated Balance Sheets~~	71
Consolidated Statements of Operations	7268
Consolidated Statements of Comprehensive Income (Loss)		7369
Consolidated Statements of Stockholders' Equity		7470
Consolidated Statements of Cash Flows		7571
Notes to Consolidated Financial Statements		7673

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of ~~The Rubicon Project,~~Magnite, Inc.

~~Opinion~~Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance ~~sheet~~sheets of ~~The Rubicon Project,~~Magnite, Inc. and subsidiaries (the "Company") as of December 31, ~~2018,~~2020 and 2019, the related consolidated statements of operations, comprehensive ~~income (loss),~~loss, stockholders' equity, and cash flows for each of the ~~year~~three years in the period ended December 31, ~~2018,~~2020 and the related notes (collectively referred to as the "financial statements"). We also have audited the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, ~~2018,~~2020 and 2019, and the results of its operations and its cash flows for each of the ~~year~~three years in the period ended December 31, ~~2018,~~2020, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

As described in Management’s Report on Internal Control over Financial Reporting, management excluded from its assessment of internal control over financial reporting certain elements related to Telaria, Inc., which was acquired on April 1, 2020. The excluded elements of the Telaria business represented 25% of the Company’s revenue and 25% of the Company’s total assets as of and for the year ended December 31, 2020. Accordingly, our audit did not include the internal control over financial reporting for certain elements related to Telaria, Inc.

Basis for ~~Opinion~~Opinions

~~These~~The Company’s management is responsible for these financial statements, ~~are the responsibility~~for maintaining effective internal control over financial reporting, and for its assessment of the ~~Company's management.~~ effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on ~~the Company's~~these financial statements ~~based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB)~~ and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on ~~the effectiveness of~~ the Company’s internal control over financial ~~reporting. Accordingly, we express no such opinion.~~

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

~~/s/ Deloitte & Touche LLP~~

~~Los Angeles, CA~~

~~February 27, 2019~~

~~We have served as the Company's auditor since 2018.~~

~~REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~

~~To the Board of Directors and Stockholders of The Rubicon Project, Inc.~~

~~Opinion on the Financial Statements~~

~~We have audited the consolidatedbalance sheet of The Rubicon Project, Inc. and its subsidiaries(the “Company”) as ofDecember 31, 2017,and the relatedconsolidated statements of operations, comprehensive income (loss), stockholders’ equity (deficit) and cash flows for the year ended December 31, 2017,including the related notes (collectively referred to as the “consolidatedfinancial statements”).In our opinion, theconsolidatedfinancial statements present fairly, in all material respects, the financial position ofthe Company as of December 31, 2017, and the results of its operations and itscash flows for the year ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.~~

~~Basis for Opinion~~

~~These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s consolidated financial statements~~reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits ~~of these consolidatedfinancial statements~~ in accordance with the standards of the PCAOB. Those standards require that we plan and perform the ~~audit~~audits to obtain reasonable assurance about whether the ~~consolidated~~ financial statements are free of material misstatement, whether due to error or ~~fraud.~~fraud

, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the ~~consolidated~~ financial statements, whether due to error or fraud, and performing procedures ~~that~~to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the ~~consolidated~~financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the ~~consolidated~~financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our ~~opinion.~~opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Business Combinations – Telaria, Inc. Merger – Technology, Customer Relationships, and In-process Research and Development Intangible Assets — Refer to Note 10 to the financial statements

Critical Audit Matter Description

On April 1, 2020, the Company completed a stock for stock merger with Telaria, Inc. whereby each share of Telaria common stock issued and outstanding was converted into 1.082 shares of the Company’s common stock. This resulted in the issuance of 52,098,945 shares of the Company’s common stock. The Company accounted for the acquisition using the acquisition method of accounting for business combinations and the fair value of the purchase price of $287,417,460 was allocated to the assets acquired and liabilities assumed based on their respective fair values, including the technology, customer relationships, and in-process research and development intangible assets of $58,000,000, $36,300,000, and $8,030,000, respectively. Management estimated the fair value of technology, customer relationships, and in-process research and development intangible assets using a discounted cash flow approach, which included an analysis of future cash flows expected to be generated by each intangible asset. The fair value of the acquired technology and in-process research and development was valued using The Revenue Split Method. The Company used the Loss‐of‐Revenue and Income Method in its valuation of the existing Customer Relationships. The fair value determination of these intangible assets required management to make significant, subjective estimates and assumptions related to forecasted future cash flows and the selected discount rate.

We identified the aforementioned intangible assets as a critical audit matter because of the significant estimates and assumptions management makes to determine the fair value of these intangible assets. This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures, including the need to involve our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the forecasts of future cash flows and the selection of the discount rate for the technology, customer relationships, and in-process research and development intangible assets included the following, among others:

•We tested the effectiveness of controls over the valuation of intangible assets, including management’s controls over forecasts of future cash flows and the determination of the discount rate.

•We assessed the reasonableness of management’s forecasts of future cash flows by comparing the revenue and disaggregated cost projections to historical results, certain peer companies, third-party industry forecasts, as well as performing inquiries with certain members of management.

•With the assistance of our fair value specialists, we evaluated the valuation methodology used to determined fair value along with the reasonableness of the discount rate, including independently estimating the discount rate using a process consistent with generally accepted valuation practices.

•We evaluated whether the estimated future cash flows were consistent with evidence obtained in other areas of the audit.

Revenue — Highly Automated Systems to Process and Record Revenue - Refer to Note 4 to the financial statements.

Critical Audit Matter Description

The Company’s revenue consists of transaction-based fees and is made up of a significant volume of low-dollar transactions, sourced from multiple systems, databases, and other tools. Due to the fact that revenue transactions do not consist of the transfer of physical goods, but are web- or app-based, the processing and recording of revenue is highly automated and is based on contractual terms with advertisers and publishers. Because of the nature of the Company’s transaction-based fees, the Company uses automated systems to process and record its revenue transactions.

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We identified revenue as a critical audit matter because the of the information technology (IT)-dependent nature of the Company’s revenue stream and the significant audit effort required in performing our audit procedures, including involvement of professionals with expertise in IT to identify, test, and evaluate the Company’s systems, software applications, and automated controls related to the revenue cycle.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the Company’s systems to process revenue transactions included the following, among others:

•With the assistance of our IT specialists, we:

◦Identified the significant systems used to process revenue transactions and tested the effectiveness of general IT controls over the systems, including testing of user access controls, change management controls, and IT operations controls.

◦We tested the effectiveness of system interface controls and automated controls within the revenue process, as well as controls designed to ensure the accuracy and completeness of revenue.

•We tested the effectiveness of controls within the relevant revenue business processes, including those in place to reconcile the various systems to the Company’s general ledger.

•We evaluated recorded revenue and revenue trends and used data analytics to analyze transactional revenue data.

•We tested revenue for completeness and accuracy by confirming related accounts receivable selections.

•We performed a proof of cash reconciliation that reconciled cash to revenue and related revenue accounts.

/s/ ~~PricewaterhouseCoopers~~Deloitte & Touche LLP

Los Angeles, California February 24, 2021

~~March 14, 2018~~

We have served as the Company's auditor ~~from 2012 to~~ since2018.

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~~THE RUBICON PROJECT,~~MAGNITE, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

December 31, 2018 December 31, 2017
ASSETS
Current assets:
Cash and cash equivalents $ 80,452
$ 76,642
Marketable securities 7,524
52,504
Accounts receivable, net 205,683
165,890
Prepaid expenses and other current assets 6,882
9,620
TOTAL CURRENT ASSETS 300,541
304,656
Property and equipment, net 33,487
47,393
Internal use software development costs, net 14,570
12,734
Other assets, non-current 1,240
5,493
Intangible assets, net 10,174
13,359
TOTAL ASSETS $ 360,012
$ 383,635
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 239,678
$ 214,103
Other current liabilities 1,304
3,141
TOTAL CURRENT LIABILITIES 240,982
217,244
Other liabilities, non-current 1,017
1,780
TOTAL LIABILITIES 241,999
219,024
Commitments and contingencies (Note 16)

STOCKHOLDERS' EQUITY
Preferred stock, $0.00001 par value, 10,000 shares authorized at December 31, 2018 and 2017; 0 shares issued and outstanding at December 31, 2018 and 2017 —
—
Common stock, $0.00001 par value; 500,000 shares authorized at December 31, 2018 and 2017; 51,159 and 50,239 shares issued and outstanding at December 31, 2018 and 2017, respectively 1
—
Additional paid-in capital 433,877
418,354
Accumulated other comprehensive income (loss) (259)
41
Accumulated deficit (315,606)
(253,784)
TOTAL STOCKHOLDERS' EQUITY 118,013
164,611
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 360,012
$ 383,635


	December 31, 2020		December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	117,676	$	88,888

Accounts receivable, net	471,666		217,571
Prepaid expenses and other current assets	17,729		6,591
TOTAL CURRENT ASSETS	607,071		313,050
Property and equipment, net	23,681		23,667
Right of use lease asset	39,599		21,491
Internal use software development costs, net	16,160		16,053
Intangible assets, net	89,884		11,386
Goodwill	158,125		7,370
Other assets, non-current	4,440		2,103
TOTAL ASSETS	$	938,960	$	395,120
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	509,315	$	259,439
Lease liabilities - current portion	9,813		7,282
Other current liabilities	3,070		778
TOTAL CURRENT LIABILITIES	522,198		267,499
Lease liabilities - non-current portion	32,278		15,231
Deferred tax liability, net	199		0
Other liabilities, non-current	2,672		454
TOTAL LIABILITIES	557,347		283,184
Commitments and contingencies (Note 17)			0
0STOCKHOLDERS' EQUITY
Preferred stock, $0.00001 par value, 10,000 shares authorized at December 31, 2020 and December 31, 2019; 0 shares issued and outstanding at December 31, 2020 and December 31, 2019	0		0
Common stock, $0.00001 par value; 500,000 shares authorized at December 31, 2020 and December 31, 2019; 114,029 and 53,888 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively	2		1
Additional paid-in capital	777,084		453,064
Accumulated other comprehensive income (loss)	(957)		(45)
Accumulated deficit	(394,516)		(341,084)
TOTAL STOCKHOLDERS' EQUITY	381,613		111,936
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	938,960	$	395,120

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

~~THE RUBICON PROJECT,~~

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MAGNITE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

Year Ended
December 31, 2018 December 31, 2017
Revenue $ 124,685
$ 155,545
Expenses:
Cost of revenue 60,003
56,836
Sales and marketing 44,556
51,794
Technology and development 37,863
47,500
General and administrative 42,431
55,596
Restructuring and other exit costs 3,440
5,959
Impairment of intangible assets and internal use software —
4,585
Impairment of goodwill —
90,251
Total expenses 188,293
312,521
Loss from operations (63,608 ) (156,976 )
Other (income) expense:
Interest income, net (988 ) (908 )
Other income (766 ) (688 )
Foreign exchange (gain) loss, net (389 ) 1,165
Total other income, net (2,143 ) (431 )
Loss before income taxes (61,465 ) (156,545 )
Provision (benefit) for income taxes 357
(1,762 )
Net loss $ (61,822 ) $ (154,783 )
Net loss per share:
Basic and Diluted $ (1.23 ) $ (3.17 )
Weighted average shares used to compute net loss per share:
Basic and Diluted 50,259
48,869


	Year Ended
		December 31, 2020		December 31, 2019		December 31, 2018
Revenue		$	221,628	$	156,414	$	124,685
Expenses:
Cost of revenue		77,747		57,391		60,003
Sales and marketing		76,030		44,565		44,556
Technology and development		51,546		40,250		37,863
General and administrative		52,987		39,750		42,431
Merger and restructuring costs		17,552		2,041		3,440
Total expenses		275,862		183,997		188,293
Loss from operations		(54,234)		(27,583)		(63,608)
Other (income) expense:
Interest (income) expense, net		(50)		(789)		(988)
Other income		(3,665)		(285)		(766)
Foreign exchange (gain) loss, net		2,220		481		(389)
Total other (income) expense, net		(1,495)		(593)		(2,143)
Loss before income taxes		(52,739)		(26,990)		(61,465)
Provision (benefit) for income taxes		693		(1,512)		357
Net loss		$	(53,432)	$	(25,478)	$	(61,822)
Net loss per share:
Basic and Diluted		$	(0.55)	$	(0.48)	$	(1.23)

Weighted average shares used to compute net loss per share:
Basic and Diluted		96,700		52,614		50,259

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

~~THE RUBICON PROJECT,~~

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MAGNITE, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~INCOME (LOSS)~~LOSS

(In thousands)

Year Ended
December 31, 2018
December 31, 2017
Net loss $ (61,822 ) $ (154,783 )
Other comprehensive income (loss):
Unrealized gain (loss) on investments 27
(28 )
Foreign currency translation adjustments (327 ) 342
Other comprehensive income (loss) (300 ) 314
Comprehensive loss $ (62,122 ) $ (154,469 )


	Year Ended
		December 31, 2020		December 31, 2019		December 31, 2018
Net loss		$	(53,432)	$	(25,478)	$	(61,822)
Other comprehensive income (loss):
Unrealized gain (loss) on investments		0		2		27
Foreign currency translation adjustments		(912)		212		(327)
Other comprehensive income (loss)		(912)		214		(300)
Comprehensive loss		$	(54,344)	$	(25,264)	$	(62,122)

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

~~THE RUBICON PROJECT,~~

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MAGNITE, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

Common Stock Additional
Paid-In
Capital Accumulated Other
Comprehensive
Income (Loss) Accumulated
Deficit Total
Stockholders’
Equity
Shares Amount
Balance at December 31, 2016 49,378
$ —
$ 398,787
$ (273 ) $ (99,001 ) $ 299,513
Exercise of common stock options 106
—
394
—
—
394
Restricted stock awards, net (189 ) —
—
—
—
—
Issuance of common stock related to employee stock purchase plan 200
—
629
—
—
629
Issuance of common stock related to RSU vesting 1,273
—
—
—
—
—
Shares withheld related to net share settlement (529 ) —
(2,403 ) —
—
(2,403 )
Stock-based compensation —
—
20,947
—
—
20,947
Other comprehensive loss —
—
—
314
—
314
Net loss —
—
—
—
(154,783 ) (154,783 )
Balance at December 31, 2017 50,239
—
418,354
41
(253,784 ) 164,611
Exercise of common stock options 50
—
45
—
—
45
Restricted stock awards, net (156 ) —
—
—
—
—
Issuance of common stock related to employee stock purchase plan 174
—
314
—
—
314
Issuance of common stock related to RSU vesting 1,367
1
—
—
—
1
Shares withheld related to net share settlement (515 ) —
(1,638 ) —
—
(1,638 )
Stock-based compensation —
—
16,802
—
—
16,802
Other comprehensive loss —
—
—
(300 ) —
(300 )
Net loss —
—
—
—
(61,822 ) (61,822 )
Balance at December 31, 2018 51,159

$ 1

$ 433,877

$ (259 )
$ (315,606 )
$ 118,013


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance at Balance at December 31, 2017	50,239	$	0	$	418,354	$	41	$	(253,784)	$	164,611
Exercise of common stock options	50	—		45		—		—		45
Restricted stock awards, net	(156)	—		—		—		—		0
Issuance of common stock related to employee stock purchase plan	174	—		314		—		—		314
Issuance of common stock related to RSU vesting	1,367	1		—		—		—		1
Shares withheld related to net share settlement	(515)	—		(1,638)		—		—		(1,638)
Stock-based compensation	—	—		16,802		—		—		16,802
Other comprehensive loss	—	—		—		(300)		—		(300)
Net loss	—	—		—		—		(61,822)		(61,822)
Balance at Balance at December 31, 2018	51,159	$	1	$	433,877	$	(259)	$	(315,606)	$	118,013
Exercise of common stock options	285	—		588		—		—		588
Restricted stock awards, net	(182)	—		—		—		—		0
Issuance of common stock related to employee stock purchase plan	227	—		1,054		—		—		1,054
Issuance of common stock related to RSU vesting	2,858	—		—		—		—		0
Shares withheld related to net share settlement	(459)	—		(1,847)		—		—		(1,847)
Stock-based compensation	—	—		19,392		—		—		19,392
Other comprehensive income	—	—		—		214		—		214
Net loss	—	—		—		—		(25,478)		(25,478)
Balance at December 31, 2019	53,888	1		453,064		(45)		(341,084)		111,936
Exercise of common stock options	3,359	—		13,548		—		—		13,548

Issuance of common stock related to employee stock purchase plan	381	—		1,660		—		—		1,660
Issuance of common stock related to RSU vesting	5,126	—		—		—		—		0
Shares withheld related to net share settlement	(824)	—		(7,854)		—		—		(7,854)
Issuance of common stock associated with the Merger	52,099	1		275,772		—		—		275,773
Exchange of stock options and RSU related to Merger	—	—		11,646		—		—		11,646
Stock-based compensation	—	—		29,248		—		—		29,248
Other comprehensive loss	—	—		—		(912)		—		(912)
Net loss	—	—		—		—		(53,432)		(53,432)
Balance at December 31, 2020	114,029	$	2	$	777,084	$	(957)	$	(394,516)	$	381,613

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

~~THE RUBICON PROJECT,~~

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MAGNITE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Year Ended
December 31, 2018 December 31, 2017
OPERATING ACTIVITIES:
Net loss $ (61,822 ) $ (154,783 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization 35,338
36,225
Stock-based compensation 16,282
20,504
Impairment of intangible assets and internal use software —
4,585
Impairment of goodwill —
90,251
Loss on disposal of property and equipment 243
195
Provision for doubtful accounts 758
580
Accretion of available for sale securities (412 ) (276 )
Unrealized foreign currency gains, net (897 ) 970
Deferred income taxes (42 ) (1,564 )
Changes in operating assets and liabilities, net of effect of business acquisitions:
Accounts receivable (40,688 ) 26,051
Prepaid expenses and other assets 4,519
(224 )
Accounts payable and accrued expenses 26,612
(502 )
Other liabilities (2,577 ) (477 )
Net cash provided by (used in) operating activities (22,686 ) 21,535
INVESTING ACTIVITIES:
Purchases of property and equipment (11,433 ) (32,438 )
Capitalized internal use software development costs (8,507 ) (7,988 )
Acquisitions, net of cash acquired —
(38,610 )
Investments in available-for-sale securities (23,991 ) (95,224 )
Maturities of available-for-sale securities 62,650
81,050
Sales of available-for-sale securities 9,228
—
Net cash provided by (used in) investing activities 27,947
(93,210 )
FINANCING ACTIVITIES:
Proceeds from exercise of stock options 45
394
Proceeds from issuance of common stock under employee stock purchase plan 314
629
Taxes paid related to net share settlement (1,638 ) (2,403 )
Net cash used in financing activities (1,279 ) (1,380 )
EFFECT OF EXCHANGE RATE CHANGES ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH (172 ) 199
CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 3,810
(72,856 )
CASH, CASH EQUIVALENTS AND RESTRICTED CASH — Beginning of period 76,642
149,498
CASH, CASH EQUIVALENTS AND RESTRICTED CASH — End of period $ 80,452
$ 76,642
SUPPLEMENTAL DISCLOSURES OF OTHER CASH FLOW INFORMATION:
Cash paid for income taxes $ 379
$ 382
Cash paid for interest $ 46
$ 61
Capitalized assets financed by accounts payable and accrued expenses $ 6
$ 109
Capitalized stock-based compensation $ 520
$ 443


	Year Ended
	December 31, 2020		December 31, 2019		December 31, 2018
OPERATING ACTIVITIES:
Net loss	$	(53,432)	$	(25,478)	$	(61,822)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	49,248		32,126		35,338
Stock-based compensation	28,491		18,825		16,282


(Gain) loss on disposal of property and equipment	(22)		114		243
Provision for doubtful accounts	(138)		2,060		758
Accretion of available for sale securities	0		24		(412)
Non-cash lease expense	(784)		(209)		0
Deferred income taxes	789		(595)		(42)
Unrealized foreign currency gains, net	(1,161)		(823)		(897)
Changes in operating assets and liabilities, net of effect of business acquisitions:
Accounts receivable	(103,836)		(10,705)		(40,688)
Prepaid expenses and other assets	(10,095)		(51)		4,519
Accounts payable and accrued expenses	75,064		16,288		26,612
Other liabilities	3,811		407		(2,577)
Net cash provided by (used in) operating activities	(12,065)		31,983		(22,686)
INVESTING ACTIVITIES:
Purchases of property and equipment	(14,292)		(11,425)		(11,433)
Capitalized internal use software development costs	(7,667)		(8,463)		(8,507)
Acquisitions, net of cash acquired	54,595		(11,000)		0
Investments in available-for-sale securities	0		0		(23,991)
Maturities of available-for-sale securities	0		7,500		62,650
Sales of available-for-sale securities	0		0		9,228
Net cash provided by (used in) investing activities	32,636		(23,388)		27,947
FINANCING ACTIVITIES:
Proceeds from exercise of stock options	13,548		588		45
Proceeds from issuance of common stock under employee stock purchase plan	1,660		1,054		314
Taxes paid related to net share settlement	(7,854)		(1,847)		(1,638)
Net cash provided by (used in) financing activities	7,354		(205)		(1,279)
EFFECT OF EXCHANGE RATE CHANGES ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH	918		46		(172)
CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	28,843		8,436		3,810
CASH, CASH EQUIVALENTS AND RESTRICTED CASH — Beginning of period	88,888		80,452		76,642
CASH, CASH EQUIVALENTS AND RESTRICTED CASH — End of period	$	117,731	$	88,888	$	80,452

RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO CONSOLIDATED BALANCE SHEETS
Cash and cash equivalents	$	117,676	$	88,888	$	80,452
Restricted cash included in other asset, non-current	55		0		0
Total cash, cash equivalents and restricted cash	$	117,731	$	88,888	$	80,452

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

~~THE RUBICON PROJECT,~~

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MAGNITE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS-(Continued)

(In thousands)


	Year Ended
SUPPLEMENTAL DISCLOSURES OF OTHER CASH FLOW INFORMATION:	December 31, 2020		December 31, 2019		December 31, 2018
Cash paid for income taxes	$	1,614	$	291	$	379
Cash paid for interest	$	101	$	61	$	46
Capitalized assets financed by accounts payable and accrued expenses	$	42	$	141	$	6
Capitalized stock-based compensation	$	757	$	567	$	520
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities	$	2,036	$	13,533	$	0
Common stock and options issued for Merger	$	287,418	$	0	$	0

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MAGNITE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Nature of Operations

Company Overview

Magnite, Inc. ("Magnite" or the "Company"), formerly known as The Rubicon Project, Inc., ~~or Rubicon Project (the "Company"),~~ was formed ~~on April 20, 2007~~ in Delaware and began operations inon April 20, 2007. On April 1, 2020, Magnite completed a stock-for-stock merger ("Merger") with Telaria, Inc., ("Telaria"), a leading provider of connected television ("CTV") technology. The Company operates a sell side advertising platform that offers buyers and sellers of digital advertising a single partner for transacting globally across all channels, formats, and auction types. The Company is headquartered in Los Angeles, California.

On June 8, 2020, the Company voluntarily delisted its common stock from the New York Stock Exchange ("NYSE") and commenced listing on The Nasdaq Global Select Market of The Nasdaq Stock Market LLC ("Nasdaq"). On June 30, 2020, the Company changed its name from "The Rubicon Project, Inc." to "Magnite, Inc." In connection with the name change, the Company also changed its ticker symbol from "RUBI" to "MGNI." Magnite has its principal offices in Los Angeles, New York City, London, and Sydney, and additional offices in Europe, Asia, North America, and South America.

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 sellers of digital advertising ~~sellers, including~~inventory, or publishers, that own or operate websites, ~~mobile~~ applications, CTV channels, and other digital media properties, to manage and monetize 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. 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.~~at scale. The Company's clients include many of the world's leading ~~publishers of websites and mobile applications~~sellers and buyers of digital advertising inventory.

~~Advertising~~ Sellers monetize their inventory ~~takes different forms, referred~~through the Company’s platform by seamlessly connecting to as advertising units, is purchased and sold through different transactional methodologies, and allows advertising content to be presented to consumers through different channels. The Company's solution enablesa global market of integrated buyers ~~and sellers to purchase and sell:~~

~~a comprehensive range of advertising units, including display, audio and video;~~

that ~~are transacted~~transact through real-time bidding, ~~("RTB"),~~ which includes ~~(i)~~ direct sale of premium inventory ~~which the Company refers~~to a buyer, referred to as private marketplace, ~~("PMP"),~~ and ~~(ii)~~ open auction bidding, ~~which~~where buyers bid against each other in a real-time auction for the ~~Company refers~~right to purchase a publisher’s inventory, referred to as open ~~marketplace ("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 has been negatively impacted by rapid changes in~~marketplace. At the ~~ad tech industry, including demand by ad tech~~same time, buyers ~~for more efficiency and lower costs, changes in bidding technologies, and increased competition. In response~~leverage the Company’s platform to these challenges, the Company made significant reductions in fees charged to buyers during 2017 and in November 2017 eliminated its buyer fees altogether. The competitive pressures and reduced take rate resulted in lower revenue on an annual basis in 2018 compared to the prior year. In an effort to bring its costs into better alignment with reduced take rates, the Company has undertaken restructuring activities to reduce headcount and related operating costs, and has also reduced its capital expenditures. Unless and until the Company is able to compensate for the fee reductions and reduced margins by continuing to increasemanage their advertising spending ~~on its platform, or sufficiently reducing costs, it may not be able to grow its business~~ and ~~may continue to operate at a loss, depleting its cash resources~~reach their target audiences, simplify order management and ~~liquidity. If the Company continues to experience significant operating losses in the future, the Company may require additional liquidity to fund its operations.~~campaign tracking, obtain actionable insights into audiences for their advertising, and access impression-level purchasing from thousands of sellers.

Note 2—Organization and Summary of Significant Accounting Policies

Basis of Consolidation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, and include the operations of the Company and its wholly owned subsidiaries. All significant ~~inter-company~~intercompany transactions and balances have been eliminated in consolidation.

Reclassifications

Amounts for merger and restructuring costs incurred in the year ended December 31, 2019 have been reclassified to conform to the presentation for the year ended December 31, 2020 consolidated statements of operations. Reclassifications consist of $2.0 million from general and administrative expenses to merger and restructuring costs in the consolidated statement of operations for the year ended December 31, 2019. These expenses were related to professional services associated with the Merger with Telaria. The Merger with Telaria was announced during December 2019, during which period the Company was incurring such expenses; however, the Company did not separately present the expenses in the 2019 consolidated statement of operations.

Segments

Management has determined that the Company operates as ~~one~~1 segment. The Company’s chief operating decision maker reviews financial information on an aggregated and consolidated basis, together with certain operating and performance measures principally to make decisions about how to allocate resources and to measure the Company’s performance.

Use of Estimates

The preparation of 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. Due to the economic

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uncertainty as a result of the COVID-19 pandemic, it has become more difficult to apply certain assumptions and judgments into these estimates. The extent of the impact of COVID-19 pandemic on the Company's operational and financial performance will depend on future developments, which are highly uncertain and cannot be predicted, including but not limited to, the duration and spread of the pandemic, its severity, including any resurgence, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update its estimates, judgments, or revise the carrying value of its assets or liabilities. These estimates may change, as new events occur and additional information is obtained, and are recognized in the consolidated financial statements as soon as they become known. Actual results could differ

materially from these estimates.

On an ongoing basis, management evaluates its estimates, primarily those related to: (i) revenue recognition criteria, including the determination of revenue reporting as net versus gross in the Company’s revenue arrangements, (ii) accounts receivable and allowances for doubtful accounts, (iii) the useful lives of intangible assets, internal use software development costs, and property and equipment, (iv) valuation of long-lived assets and their recoverability, including goodwill, (v) the realization of tax assets and estimates of tax liabilities, (vi) assumptions used in valuation models to determine the fair value of stock-based awards, (vii) fair value of financial instruments, (viii) the recognition and disclosure of contingent liabilities, and (ix) the assumptions used in valuing acquired assets and assumed liabilities in business combinations.

These estimates are based on historical data and experience, as well as various other factors that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Estimates relating to the estimated useful lives of internal-use software development costs, assumptions used in the valuation models to determine the fair value of stock options and stock-based compensation expense, business combinations, ~~as well as the recoverability~~estimated useful lives of long-lived assets, recoverability of intangible assets and goodwill, the assumptions used in the valuation of acquired assets and liabilities in business combinations, and income taxes, including the realization of tax assets and estimates of tax liabilities. require the selection of appropriate valuation methodologies and models, and significant judgment in evaluating ranges of assumptions and financial inputs. Actual results may differ materially from those estimates under different assumptions or circumstances.

Revenue Recognition

On January 1, 2018, the Company adopted Accounting Standards Update 2014-09—Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09") using a modified retrospective approach applied to all contracts that generated revenue in the preceding year. The adoption of this guidance did not have an impact on the amount or timing of revenue recognized by the Company.

The Company generates revenue from transactions where it provides a platform for the purchase and sale of digital advertising ~~inventory between~~inventory. The Company also generates revenue from the fee it charges clients for use of its Demand Manager product, which generally is a percentage of the client's advertising spending on any advertising marketplace. The Company's platform dynamically connects sellers and buyers ~~and sellers~~ of advertising ~~inventory.~~ inventory in a digital marketplace. The Company's solution incorporates proprietary machine-learning algorithms, sophisticated data processing, high-volume storage, detailed analytics capabilities, and a distributed infrastructure.Digital advertising inventory is created when consumers access sellers’ content. Sellers provide digital advertising inventory to ~~our~~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 ~~with~~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 a contract 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; the~~The Company ~~has no~~does not have arrangements with multiple performance obligations. The Company considers the following when determining if a contract exists (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 evaluates whether it acts as the principal in the purchase and sale~~determination of ~~digital advertising inventory to determine~~ whether revenue should be reported on a gross or net ~~basis. The~~basis is based on an assessment of whether the Company ~~has determined that it does not act~~is acting as the principal or an agent 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.transaction. In ~~periods prior to the second quarter of 2017,~~determining whether the Company ~~reported revenue on a gross basis for revenue associated with its intent marketing solution, as the Company determined that it acted~~is acting as the principal inor an agent, the ~~purchase~~Company follows the accounting guidance for principal-agent considerations. Making such determinations involves

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judgment and ~~sale of digital advertising inventory. The Company ceased offering its intent marketing solution after the first quarter of 2017, after which time, all~~is based on an evaluation of the ~~Company’s revenues have been recorded on a net basis. See Note 4 for additional disclosure~~terms of ~~our revenue policies and disaggregated presentation~~each arrangement, none of ~~our revenues.~~which are considered presumptive or determinative.

Expenses

The Company classifies its expenses into the following ~~seven~~ categories:

Cost of Revenue. The Company's cost of revenue consists primarily of data center costs, bandwidth costs, ad protection costs, depreciation and maintenance expense of hardware supporting the Company's revenue-producing platform, amortization of software costs for the development of the Company's revenue-producing platform, amortization expense associated with acquired developed technologies, personnel costs, facilities-related costs, and ~~facilities-related~~cloud computing costs. For intent marketing transactions conducted in the first quarter of 2017 in which the Company was the principal and reported revenues on a gross basis, cost of revenue also included amounts the Company paid to sellers for their inventory. Personnel costs included in cost of revenue include salaries, bonuses, and stock-based compensation, ~~and employee benefit costs,~~ and are primarily attributable to personnel in the Company's network operations group who support the Company's platform. The Company capitalizes costs associated with software that is developed or obtained for internal use and amortizes the costs associated with its revenue-producing platform in cost of revenue over their estimated useful lives. The Company amortizes acquired developed technologies over their estimated useful lives.

Sales and Marketing. The Company's sales and marketing expenses consist primarily of personnel costs, including ~~stock-~~

~~based~~salaries, bonuses, and stock-based compensation, ~~and sales bonuses paid to the Company's sales organization,~~as well as marketing expenses such as brand marketing, travel expenses, trade shows and marketing materials, professional services, and amortization expense associated with client relationships and backlog from the Company's business acquisitions and, to a lesser extent, facilities-related costs and depreciation and amortization. The Company's sales organization focuses on increasing the adoption of the Company's solution by existing and new buyers and sellers. The Company amortizes acquired intangibles associated with client relationships and backlog from its business acquisitions over their estimated useful lives.

Technology and Development. The Company's technology and development expenses consist primarily of personnel costs, including salaries, bonuses, and stock-based compensation, ~~and bonuses,~~ and professional services associated with the ongoing development and maintenance of the Company's solution, depreciation and amortization, and, to a lesser extent, facilities-related costs and depreciation and amortization, including amortization expense associated with acquired intangible assets from the Company's business acquisitions that are related to technology and development functions.costs. These expenses include costs incurred in the development, implementation and maintenance of internal use software, including platform and related infrastructure. Technology and development costs are expensed as incurred, except to the extent that such costs are associated with internal use software development that qualifies for capitalization, which are then recorded as internal use software development costs, net on the Company's consolidated balance ~~sheet.~~sheets. The Company amortizes internal use software development costs that relate to its revenue-producing activities on the Company's platform to cost of revenue and amortizes other internal use software development costs to technology and development costs or general and administrative expenses, depending on the nature of the related project. The Company amortizes acquired intangibles associated with technology and development functions from its business acquisitions over their estimated useful lives.

General and Administrative. The Company's general and administrative expenses consist primarily of personnel costs, including salaries, bonuses, and stock-based compensation, ~~and bonuses,~~ associated with the Company's executive, finance, legal, human resources, compliance, and other administrative personnel, as well as accounting and legal professional services fees, facilities-related costs and depreciation and amortization, and other corporate-related expenses. General and administrative expenses also include amortization of internal use software development costs and acquired intangible assets from the Company's business acquisitions over their estimated useful lives that relate to general and administrative ~~functions and changes in fair value associated with the liability-classified contingent consideration related to acquisitions.~~functions.

~~Restructuring~~ Merger and ~~Other Exit~~Restructuring Costs. The Company's merger and restructuring ~~and other exit~~ costs ~~are cash and non-cash charges consisting~~consist primarily of professional service fees associated with Merger and acquisition activities, and of cash-based employee termination costs and stock-based compensation charges associated with Merger or restructuring activities, and of other restructuring activities, including facility ~~closure~~closures and relocation ~~costs, and contract termination~~ costs.

~~Impairment of Intangible Assets and Internal Use Software.~~ The Company's impairment charges are non-cash charges related to its intangible assets. Intangible assets are reviewed for impairment indicators at least annually and whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable. Refer to the "Intangible Assets" policy within this footnote for additional information regarding the determination of impairment charges related to intangible assets.

~~Impairment of Goodwill.~~ The Company's goodwill impairment charges are non-cash charges related to its goodwill asset. Goodwill is tested annually for impairment during the fourth quarter or more frequently if events or changes in circumstances indicate that goodwill may be impaired. Refer to the "Goodwill" policy within this footnote for additional information regarding the determination of goodwill impairment charges.

Stock-Based Compensation

Compensation expense related to employee stock-based awards is measured and recognized in the consolidated financial statements based on the fair value of the awards granted. The Company ~~has~~ granted ~~restricted stock~~ awards ~~restricted stock units, and stock option awards~~to employees that vest based solely on continued service, or service conditions, ~~to employees~~awards that vest based on the achievement of performance targets, or performance conditions, and ~~non-employees.~~awards that vest based on our stock price exceeding a peer index, or market conditions. The fair value of each ~~share-based~~option award containing service and/or performance conditions is ~~based~~estimated on the ~~Company's~~ grant date ~~common share price for restricted stock awards and restricted stock units and is estimated~~ using the Black-Scholes option-pricing ~~model for stock option awards.~~model. The fair value of awards containing market conditions is estimated using a Monte-Carlo lattice model. For service condition awards, stock-based compensation expense is recognized on a straight-line basis over the requisite service periods of the awards, ~~or the vesting period,~~ which is generally four years. For performance condition and market condition awards, stock-based compensation expense is recognized using a graded vesting model over the requisite service period of the awards. For market condition awards, expense recognized is not subsequently reversed if the market conditions are not achieved.

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Stock-based awards issued to non-employees are accounted for at fair value determined by using the Black-Scholes option-pricing model. We believe that the fair value of ~~July 1, 2018,~~ the ~~Company prospectively adopted ASU 2018-07—Stock Compensation (Topic 718)~~ ~~("ASU 2018-07"), which updated~~stock options is more reliably measured than the ~~treatment~~fair value of ~~non-employee share-based awards to conform with~~ the ~~existing guidance under Accounting Standards Codification Topic 718, Compensation—Stock Compensation~~ ~~that was already applicable to share-based awards granted to employees. Prior to this adoption, the Company remeasured the~~services received. The fair value of each non-employee stock-based compensation award is re-measured each period until a commitment date ~~was~~is reached, which ~~was~~is generally the vesting date. As of the adoption date, the fair value of existing unvested awards held by non-employees was determined based on the adoption date fair value, which will be recognized over the remaining service period. For employees that transition into a non-employee contractor relationship with the Company subsequent to the adoption date their existing awards will continue to be recognized at the original grant date fair value. There was no impact to the Company's consolidated financial statements resulting from the adoption of ASU 2018-07.

The assumptions and estimates used in the Black-Scholes pricing model are as follows:

Fair Value of Common Stock. The fair value of common stock is based on the closing price of the Company's common stock as reported on the ~~New York Stock Exchange, or the~~ NYSE on the ~~date of grant.~~grant date.

Risk-Free Interest Rate. The Company bases the risk-free interest rate used in the Black-Scholes option-pricing model on the yields of U.S. Treasury securities with maturities appropriate for the term of stock option awards.

Expected Term. For employee options that contain service conditions, the Company applies the simplified approach, in which the expected term of an award is presumed to be the mid-point between the vesting date and the expiration date of the award. The expected term of employee stock options that contain performance conditions represents the weighted-average period that the stock options are estimated to remain outstanding.

Volatility. ~~Because~~For grants issued in periods in which the Company ~~does~~did not have significant trading history for the Company’s common stock, the Company ~~determines~~determined the price volatility based on the historical volatilities of a publicly traded peer group based on daily price observations over a period equivalent to the expected term of the stock option grants. For those grants issued in periods in which the Company has sufficient history, the computation of the expected volatility assumption is based on the historical volatility of the Company’s common stock.

Dividend Yield. The dividend yield assumption is based on the Company’s history and current expectations of dividend payouts. The Company has never declared or paid any cash dividends on its common stock and does not anticipate paying any cash dividends in the foreseeable future, so the Company used an expected dividend yield of ~~zero.~~0.

Determining the fair value of stock-based awards using a pricing model requires judgment. The Company’s use of the Black-Scholes option-pricing model requires the input of subjective assumptions such as the expected term of the award, the expected volatility of the price of the Company’s common stock, risk-free interest rates, and the expected dividend yield of the Company’s common stock. The assumptions used in the Company’s valuation model represent management’s best estimates. These estimates involve inherent uncertainties and the application of management’s judgment. If factors change and different assumptions are used, the Company’s stock-based compensation expense could be materially different in the future.

Due to the full valuation allowance provided on its net deferred tax assets, the Company has not recorded any tax benefit attributable to stock-based awards for the years ended December 31, ~~2018~~2020, 2019, and ~~2017.~~2018.

Income Taxes

Deferred income tax assets and liabilities are determined based upon the net tax effects of the differences between the Company’s consolidated financial statement carrying amounts and the tax basis of assets and liabilities and are measured using the enacted tax rate expected to apply to taxable income in the years in which the differences are expected to be reversed.

A valuation allowance is used to reduce some or all of the deferred tax assets if, based upon the weight of available evidence, it is more likely than not that those deferred tax assets will not be realized. The Company has established a full valuation allowance to offset its domestic net deferred tax assets due to the uncertainty of realizing future tax benefits from the net operating loss carryforwards and other deferred tax assets.

The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized. The Company recognizes interest and penalties accrued related to its uncertain tax positions in its income tax provision (benefit) in the consolidated statements of operations.

The Tax Cuts and Jobs Act (“the Tax Act”) was enacted in December 2017. The Tax Act significantly changes U.S. tax law by, among other things, lowering U.S. corporate income tax rates, implementing a territorial tax system and imposing a one-time transition tax on deemed repatriated earnings

Table of foreign subsidiaries. The Tax Act reduces the U.S. corporate income tax rate from 34% to 21%, effective January 1, 2018. The Company recognized the impact of the revaluation of deferred tax balances and the provisional impact related to the one-time transition tax in its consolidated financial statements for the year ended December 31, 2017. The Company completed its analysis of the impact of U.S. tax reform during 2018 in accordance with the SAB 118 measurement period and there were no changes to the amounts recorded.Contents

Capital Stock

The Company has authorized capital stock of 500,000,000 shares of common stock and 10,000,000 shares of preferred stock. The Company has issued common stock, which is included in outstanding common stock on the Company's Consolidated Balance Sheets. The Company has not issued any shares of its preferred stock subsequent to the Company's IPO and does not have any preferred stock outstanding.

The Company is required to reserve and keep available out of its authorized but unissued shares of common stock such number of shares sufficient to ~~effect any of the Company's contingent consideration liabilities and~~affect the conversion of all shares granted and available for grant under the Company’s stock award plans. The number of shares of the Company's stock reserved for these purposes at December 31, ~~2018~~2020 was ~~18,094,154.~~27,882,222.

The board of directors is authorized to establish, from time to time, the number of shares to be included in each series of preferred stock, and to fix the designation, powers, privileges, preferences, and relative participating, optional or other rights, if any, of the shares of each series of preferred stock, and any of its qualifications, limitations or restrictions.

Net Income (Loss) Per Share Attributable to Common Stockholders

Basic net income (loss) per share of common stock is calculated by dividing the net income (loss) by the weighted-average number of shares of common stock outstanding. Diluted income (loss) per share attributable to common stockholders adjusts the basic weighted-average number of shares of common stock outstanding for the effect of potentially dilutive securities during the period. Potentially dilutive securities consist of stock options, restricted stock awards, restricted stock units, potential shares issued under the Company's Employee Stock Purchase Plan ("ESPP"), shares held in escrow and potential shares issuable as part of contingent consideration as a result of business combinations. For purposes of this calculation, potentially dilutive securities are excluded from the calculation of diluted net income (loss) per share if their effect is anti-dilutive.

Comprehensive Income (Loss)

Comprehensive income (loss) encompasses all changes in equity other than those arising from transactions with stockholders, and consists of net income (loss), unrealized gains (losses) on investments and foreign currency translation adjustments.

Cash, Cash Equivalents, and Marketable Securities

The Company invests excess cash primarily in money market funds, corporate debt securities, and highly liquid debt instruments of the U.S. government and its agencies. The Company classifies investments held in money market funds as cash equivalents because the money market funds have weighted-average maturities at the date of purchase of less than 90 days. Investments held in U.S. government and agency bonds and corporate debt securities with stated maturities of less than one year are classified as short-term investments included in marketable securities and prepaid expenses and other current assets. Investments held in U.S. government and agency bonds and corporate debt securities with stated maturities of over a year are classified as long-term investments included in other assets, non-current on the Company’s consolidated balance sheets, as the Company does not expect to redeem or sell these securities within one year from the balance sheet date.

The Company determines the appropriate classification of investments in marketable securities at the time of purchase and reevaluates such designation at each balance sheet date. The Company classifies and accounts for the Company’s marketable securities as available-for-sale, and as a result carries the securities at fair value and reports the unrealized gains and losses in the consolidated statements of comprehensive income (loss) and as a component of stockholders’ equity. The Company determines any realized gains or losses on the sale of marketable securities on a specific identification method, and the Company records such gains and losses as a component of other income, net on the Company’s consolidated statements of operations.

Restricted Cash

The Company classifies certain restricted cash balances within prepaid expenses and other current assets on the consolidated balance sheets based upon the term of the remaining restrictions. At December 31, ~~2018 and 2017~~2020, the Company had norestricted cash of $0.1 million, and at December 31, 2019, the Company had 0 restricted cash.

Accounts Receivable Allowance for Doubtful Accounts

Accounts receivable are recorded at the invoiced amount, are unsecured, and do not bear interest. The allowance for doubtful accounts is based on the best estimate of the amount of probable credit losses in existing accounts receivable. The allowance for doubtful accounts is determined based on historical collection experience and the review in each period of the status

of the then-outstanding accounts receivable, while taking into consideration current client information, subsequent collection history

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and other relevant data. The Company reviews the allowance for doubtful accounts on a quarterly basis. Account balances are charged off against the allowance when the Company believes it is probable the receivable will not be recovered. The Company’s allowance for doubtful accounts was approximately $1.3 million and $0.5 million at December 31, 2018 and 2017, respectively. During the years ended December 31, 2018 and 2017, the Company wrote-off $0.6 million and $0.7 million, respectively, of accounts receivable.

Property and Equipment, Net

Property and equipment are recorded at historical cost, less accumulated depreciation and amortization. Depreciation is computed using the straight-line method based upon the estimated useful lives of the assets. The estimated useful lives of the Company’s property and equipment are as follows:


		Years
		~~Years~~
Computer equipment and network hardware	3
Furniture, fixtures and office equipment		5 to 7
Leasehold improvements		Shorter of useful life or life of lease
Computer equipment under ~~capital leases~~right-of-use finance arrangements		Shorter of useful life or life of lease

Repair and maintenance costs are charged to expense as incurred, while renewals and improvements are capitalized. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in the Company’s results of operations.

Internal Use Software Development Costs

The Company capitalizes certain internal use software development costs associated with creating and enhancing internally developed software related to the Company’s technology infrastructure. These costs include personnel and related employee benefits expenses for employees who are directly associated with and who devote time to software projects, and external direct costs of materials and services consumed in developing or obtaining the software. Software development costs that do not meet the qualification for capitalization, as further discussed below, are expensed as incurred and recorded in technology and development expenses in the results of operations.

Software development activities generally consist of three stages, (i) the planning stage, (ii) the application and infrastructure development stage, and (iii) the post implementation stage. Costs incurred in the planning and post implementation stages of software development, including costs associated with the post-configuration training and repairs and maintenance of the developed technologies, are expensed as incurred. The Company capitalizes costs associated with software developed for internal use when the planning stage is completed, management has authorized further funding for the completion of the project, and it is probable that the project will be completed and perform as intended. Costs incurred in the application and infrastructure development stages, including significant enhancements and upgrades, are capitalized. Capitalization ends once a project is substantially complete and the software and technologies are ready for their intended purpose. Internal use software development costs are amortized using a straight-line method over the estimated useful life of three years, commencing when the software is ready for its intended use. The straight-line recognition method approximates the manner in which the expected benefit will be derived.

The Company does not transfer ownership of its software, or lease its software, to third parties.

Capitalized Costs Incurred in Cloud Computing Arrangements

Cloud computing arrangements, such as software as a service and other hosting arrangements, are evaluated for capitalized implementation costs in a similar manner as capitalized software development costs. If a cloud computing arrangement includes a software license, the software license element of the arrangement is accounted for in a manner consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the service element of the arrangement is accounted for as a service contract. The Company capitalized certain implementation costs for its cloud computing arrangements that are service contracts, which are included within prepaid expenses and other current assets and other assets, non-current within the consolidated balance sheet. The Company amortizes capitalized implementation costs in a cloud computing arrangement over the life of the service contract.

Intangible Assets

Intangible assets primarily consist of acquired developed technology, client relationships, and non-compete agreements resulting from business combinations, which are recorded at acquisition-date fair value, less accumulated amortization. The Company determines the appropriate useful life of its intangible assets by performing an analysis of expected cash flows of the acquired assets. Intangible assets are amortized over their estimated useful lives using a straight-line method, which approximates the pattern in which the economic benefits are consumed.

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The Company’s intangible assets are being amortized over their estimated useful lives as follows:


		Years
Developed technology		~~Years~~5
~~Developed technology~~In-process research and development		3 to 5
~~Client~~Customer relationships		~~2.5 to 3~~
~~Non-compete agreements~~	2 to 3
Backlog		0.75
Non-compete agreements		2
Other intangible assets		10.25 to 1.5

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The following are the components of the provision (benefit) for income taxes for the years ended December 31, ~~2018~~2020, 2019, and ~~2017:~~2018:

Year Ended
December 31, 2018 December 31, 2017
(in thousands)
Current:
Federal $ (23 ) $ (140 )
State 41
78
Foreign 388
(250 )
Total current provision 406
(312 )
Deferred:
Federal —
(1,877 )
State 2
288
Foreign (51 ) 139
Total deferred benefit (49 ) (1,450 )
Total provision (benefit) for income taxes $ 357
$ (1,762 )


	Year Ended
	December 31, 2020		December 31, 2019		December 31, 2018
	(in thousands)
Current:
Federal	$	(144)	$	(153)	$	(23)
State	15		28		41
Foreign	1,117		281		388
Total current provision	988		156		406
Deferred:
Federal	9		(762)		0
State	(12)		(174)		2
Foreign	(292)		(732)		(51)
Total deferred benefit	(295)		(1,668)		(49)
Total provision (benefit) for income taxes	$	693	$	(1,512)	$	357

The Company recorded an income tax expense of ~~$0.4~~$0.7 million for the year ended December 31, ~~2018 and~~2020 compared to an income tax benefit of ~~$1.8~~$1.5 million and income tax expense of $0.4 million for the ~~year~~years ended December 31, ~~2017.~~2019 and 2018, respectively. The tax ~~provision~~expense for the ~~year~~years ended December 31, 2020 and December 31, 2018 iswas primarily the result of the domestic valuation allowance and the tax liability associated with the foreign subsidiaries.

~~During the fourth quarter of 2017, the Company recorded a~~ The tax ~~deduction of $145.8 million and increased its valuation allowance by a corresponding amount, resulting in no net tax~~ benefit ~~related to a worthless stock deduction generated by the Company's exit from its intent marketing business activities in Canada.~~

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 the following: a federal corporate rate reduction from 34% to 21%; limitations on the deductibility of executive compensation and research and development (“R&D”) expenditures; temporary immediate expensing of qualified property; the creation of new minimum taxes such as the base erosion anti-abuse tax (“BEAT”) and Global Intangible Low Taxed Income (“GILTI”) tax; and the transition of U.S. international taxation from a worldwide tax system to a modified territorial tax system, which resulted in a one time U.S. tax liability on those earning which had not previously been repatriated to the U.S. (the “Transition Tax”).

The Tax Act imposes a Transition Tax on previously untaxed accumulated and current earnings and profits (“E&P”) of certain of our foreign subsidiaries. To determine the amount of the Transition Tax, the Company determined, among other things, the amount of post-1986 E&P of the relevant subsidiaries. The Company recorded a provisional Transition Tax of $0.6 million, which reduced its U.S. net deferred tax assets for the year ended December 31, ~~2017. We completed our analysis~~2019 was the result of a deferred tax liability associated with the ~~impact~~RTKio acquisition, the release of ~~U.S. tax reform during 2018, and for the year ended December 31, 2018, there was no~~a foreign valuation allowance resulting from a change to a cost-plus arrangement for a foreign subsidiary, the ~~Transaction Tax recorded in the prior period.~~

The Tax Act also reduced the U.S. corporate tax rate from 34% to 21%, effective January 1, 2018. Consequently, the Company recorded a decrease to its tax effected U.S. net deferred tax assets of $31.6 million, with a corresponding decrease to the U.S.domestic valuation allowance, ~~for the year ended December 31, 2017 as a result of re-measuring net deferred tax assets at the new lower corporate tax rate of 21%.~~

The Tax Act requires certain GILTI income earned by controlled foreign corporations (“CFCs”) to be included in the gross income of the CFCs’ U.S. shareholder (for tax years beginning after December 31, 2017). For the year ended December 31, 2018, the Company has included a GILTI inclusion of $1.3 million, which was incorporated in the calculation ofand the tax ~~provision.~~liability associated with foreign subsidiaries.

Set forth below is a reconciliation of the components that caused the Company’s provision (benefit) for income taxes to differ from amounts computed by applying the U.S. Federal statutory rate of 21% for the ~~year~~years ended December 31, ~~2018~~2020, 2019, and ~~34% for the year ended December 31, 2017:~~2018:


	Year Ended
	December 31, 2020		December 31, 2019		December 31, 2018
U.S. federal statutory income tax rate	21.0	%	21.0	%	21.0	%
State income taxes, net of federal benefit	(0.2)	%	(0.1)	%	(0.1)	%
Foreign income (loss) at other than U.S. rates	(0.5)	%	(4.3)	%	0	%
Stock-based compensation expense	11.4	%	3.5	%	(5.3)	%
Meals and entertainment	(0.1)	%	(0.9)	%	(0.4)	%
Debt cancellation	0	%	0	%	(1.2)	%
Other permanent items	(1.1)	%	(1.2)	%	(0.5)	%
Change in valuation allowance	(19.5)	%	(7.5)	%	(14.1)	%
Sec 162(m) officers compensation	(12.7)	%	(6.3)	%	0	%
Provision to return adjustments	0.4	%	1.4	%	0	%
Effective income tax rate	(1.3)	%	5.6	%	(0.6)	%

Year Ended
December 31, 2018 December 31, 2017
U.S. federal statutory income tax rate 21.0 % 34.0 %
State income taxes, net of federal benefit (0.1 )% — %
Foreign income (loss) at other than U.S. rates — % 0.2 %
Stock-based compensation expense (5.3 )% (3.8 )%
Meals and entertainment (0.4 )% (0.1 )%
Goodwill impairment — % (19.0 )%
Research and development tax credits — % 0.8 %
Debt cancellation (1.2 )% — %
Worthless stock — % 31.7 %
Other permanent items (0.5 )% (0.5 )%
Change in valuation allowance (14.1 )% (22.0 )%
Tax rate change; U.S. tax reform — % (20.2 )%
Effective income tax rate (0.6 )% 1.1 %

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Set forth below are the tax effects of temporary differences that give rise to a significant portion of the deferred tax assets and deferred tax liabilities as of December 31, ~~2018~~2020 and ~~2017~~:2019:

December 31, 2018 December 31, 2017
(in thousands)
Deferred Tax Assets:
Accrued liabilities $ 916
$ 2,648
Stock-based compensation 2,623
3,685
Net operating loss carryovers 76,098
65,648
Tax credit carryovers 13,206
13,494
Other 1,053
1,502
Total deferred tax assets 93,896
86,977
Less valuation allowance (90,959 ) (81,767 )
Deferred tax assets, net of valuation allowance 2,937
5,210
Deferred Tax Liabilities:
Fixed assets (2,352 ) (3,864 )
Intangible assets (152 ) (955 )
Other —
—
Total deferred tax liabilities (2,504 ) (4,819 )
Net deferred tax assets (liability) $ 433
$ 391


	December 31, 2020		December 31, 2019
	(in thousands)
Deferred Tax Assets:
Accrued liabilities	$	1,568	$	1,396
Lease liabilities	8,943		0
Stock-based compensation	3,559		3,666
Net operating loss carryovers	117,707		75,853
Tax credit carryovers	4,882		13,055
Other	1,263		1,537
Total deferred tax assets	137,922		95,507
Less valuation allowance	(109,992)		(93,611)
Deferred tax assets, net of valuation allowance	27,930		1,896
Deferred Tax Liabilities:
Fixed assets	(824)		(570)
Intangible assets	(18,584)		(298)
Right of use lease asset	(8,283)		0
Total deferred tax liabilities	(27,691)		(868)
Net deferred tax assets (liability)	$	239	$	1,028

The change in valuation allowance for the years ended December 31, 2020, 2019, and 2018 was $16.4 million, $2.7 million, and ~~2017 was~~ $9.2 million, ~~and $42.3 million,~~ respectively.

At December 31, ~~2018,~~2020, the Company had U.S. federal net operating loss carryforwards, or NOLs, of approximately ~~$285.5~~$453.2 million, which will begin to expire in 2027. At December 31, ~~2018,~~2020, the Company had state NOLs of approximately ~~$167.0~~$280.0 million, which will begin to expire in 2027. At December 31, ~~2018,~~2020, the Company had foreign NOLs of approximately ~~$20.5~~$25.0 million, which will begin to expire in 2026. At December 31, ~~2018, the Company had federal research and development tax credit carryforwards, or credit carryforwards, of approximately $10.2 million, which will begin to expire in 2027. At December 31, 2018,~~2020, the Company had state research and development tax credits of approximately $8.0 million, which carry forward indefinitely. No amounts for any federal or state research and development tax credits for the year ended December 31, ~~2018~~2019 or December 31, 2020 are included herein.

On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), in response to the COVID-19 pandemic. The CARES Act is meant to infuse negatively affected companies with various tax cash benefits to ease the impact of the COVID-19 pandemic. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer-side social security payments, and net operating loss carryback periods. The Company has determined the tax implications of the CARES Act will not be material. To date, the Company has not taken advantage of any relief under the Cares Act. On December 27, 2020, President Trump signed into law the Consolidated Appropriations Act, 2021 ("CAA"). The CAA is meant to provide additional relief and support to those impacted by the COVID-19 pandemic. The CAA includes provisions relating to payroll tax deferrals, family leave, and a five-year extension of a myriad of tax provisions that were set to expire. The company is evaluating the potential tax implications of the CAA on the Company for 2021. In addition, various foreign jurisdictions where the Company has activity have enacted or are considering enacting a variety of measures. The Company has not received any relief that will impact its tax liabilities. The Company is monitoring new legislation and evaluating the potential tax implications of these measures globally.

~~Utilization~~Pursuant to Section 382 of ~~certain NOLs and credit carryforwards may be subject to an annual limitation due to ownership change limitations set forth in~~ the Internal Revenue Code, the Company and Telaria, Inc. both underwent ownership changes for tax purposes (i.e. a more than 50% change in stock ownership in aggregated 5% shareholders) on April 1, 2020 due to the Merger. As a result, the use of ~~1986, as amended, or~~the Company’s total domestic NOL carryforwards and tax credits generated prior to the ownership change will be subject to annual use limitations under Section 382 and 383 of the Code and comparable state income tax laws. ~~Any future annual limitation may result in~~The Company believes that the ~~expiration~~ownership change will not impact its ability to utilize substantially all of its NOLs and ~~credit carryforwards before utilization. A~~state research and development carryforward tax credits to the extent it will generate taxable income that can be offset by such losses. The Company reasonably expects its federal research and development carryforward tax credits will not be recovered prior ~~ownership change and certain acquisitions resulted in the Company having NOLs subject~~ to ~~insignificant annual limitations.~~expiration.

Additionally, for tax years beginning after December 31, 2017, the Tax Cuts and Jobs Act limits the NOL deduction to 80% of taxable income, repeals carryback of all NOLs arising in a tax year ending after 2017, and permits indefinite carryforward for all such NOLs. NOL’s arising in a tax year ending in or before 2017 can offset 100% of taxable income, are available for carryback, and expire 20 years after they arise.

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At December 31, ~~2018,~~2020, unremitted earnings of the subsidiaries outside of the United States were approximately ~~$7.6~~$22.1 million, on which the Company previously recorded a transition tax of ~~$0.6 million, as discussed above.~~$3.3 million. The Company’s intention is to indefinitely reinvest these earnings outside the United States. Upon distribution of those earnings in the form of a dividend or otherwise, the Company would be subject to withholding taxes payable to various foreign countries and, potentially, various state taxes. The amounts of such tax liabilities that might be payable upon actual repatriation of foreign earnings, after consideration of corresponding foreign tax credits, are not material.

The following table summarizes the activity related to the unrecognized tax benefits (in thousands):

Amount
(in thousands)
Balance as of December 31, 2016 $ 5,027
Increases related to 2017 tax positions 619
Decreases related to prior year tax positions —
Balance as of December 31, 2017 5,646
Increases related to current year tax positions —
Decreases related to current year tax positions —
Decreases related to prior year tax positions (929 )
Balance as of December 31, 2018 $ 4,717


	Amount
	(in thousands)
Balance as of December 31, 2018	$	4,717
Increases related to current year tax positions	0
Decreases related to current year tax positions	0
Increases related to prior year tax positions	3
Balance as of December 31, 2019	4,720

Decreases related to prior year tax positions	(2,294)
Increases related to prior year tax positions	788
Balance as of December 31, 2020	$	3,214

Interest and penalties related to the Company’s unrecognized tax benefits accrued at December 31, ~~2018~~2020, 2019, and ~~2017~~2018 were not material.

Due to the net operating loss carryforwards, the Company's United States federal and a majority of its state returns are open to examination by the Internal Revenue Service and state jurisdictions for all years since inception. For ~~Australia, Brazil,~~ Canada, ~~Germany, Italy,~~ Japan, ~~Singapore,~~the Netherlands, and the United Kingdom, all tax years remain open for examination by the local country tax authorities, ~~while~~ for France only ~~2014~~2017 forward are open for ~~examination. During the first quarter of 2017, the Internal Revenue Service ("IRS") commenced an~~ examination, ~~of the~~for Singapore 2016 and forward are open for examination, and for Australia, Brazil, and Germany, tax years 2015 ~~tax year. During 2018, the Company received an IRS Letter 1226 indicating no change to the 2015 tax return as filed~~ and ~~concluded the~~forward are open for examination.

The Company does not expect its uncertain income tax positions to have a material impact on its consolidated financial statements within the next twelve months.

Note 16—Leases

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 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 the business in the near term. The lease terms of the Company’s operating leases generally range from 1.0 year to 10.0 years, and the weighted average remaining lease term of leases included in the lease liability is 6.2 years as of December 31, 2020.

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. Because most of the Company's leases do not provide an implicit rate of return, the Company uses the incremental borrowing rate it would be subject to on borrowings from its available revolving debt agreement based on the information available at the lease commencement date in determining the present value of lease payments. As of December 31, 2020, a weighted average discount rate of 5.00% has been applied to the remaining lease payments to calculate the lease liabilities included within the consolidated balance sheet.

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For the year ended December 31, 2020, the Company recognized $13.4 million of lease expense under ASC 842, which included operating lease expenses associated with leases included in the lease liability and ROU asset on the consolidated balance sheet. In addition, for the year ended December 31, 2020, the Company recognized expenses of $20.4 million of cloud-based services related to data centers and $1.0 million of lease expense related to short-term leases that are not included in the ROU asset or lease liability balances.

For the year ended December 31, 2019, the Company recognized $7.8 million of lease expense under ASC 842, which included operating lease expenses associated with leases included in the lease liability and ROU asset on the consolidated balance sheet. In addition, for the year ended December 31, 2019, the Company recognized expenses of $10.0 million of cloud-based services related to data centers and $1.2 million of lease expense related to short-term leases that are not included in the ROU asset or lease liability balances.

For the year ended December 31, 2018, the Company recognized rental expenses of $19.7 million under ASC 840, which included expenses related to short-term leases, and also included certain non-lease components including variable capacity related expenses for cloud-based services related to data centers of $7.1 million.

The maturity of the Company's lease liabilities associated with leases included in the lease liability and ROU asset were as follows as of December 31, 2020 (in thousands):


Fiscal Year
2021	$	11,653
2022	8,392
2023	7,428
2024	6,740
2025	3,551
Thereafter	11,403
Total lease payments (undiscounted)	49,167
Less: imputed interest	(7,076)
Lease liabilities—total (discounted)	$	42,091

The Company also received rental income of $3.7 million, $0.3 million, and $0.8 million for real estate leases for which it subleases the property to a third party during the year ended December 31, 2020, 2019, and 2018, respectively. Rental income is included in other income in the consolidated statement of operations.

In addition to the lease liabilities included in these consolidated financial statements at December 31, 2020, during the three months ended December 31, 2020, the Company entered into agreements for an office lease for its corporate headquarters in Los Angeles and a data center in Singapore which have not commenced as of December 31, 2020, therefore, not included in the lease liability on the balance sheet. The Company has future commitments totaling $23.2 million over the course of 10 years for the office lease and $5.6 million over the course of four years for the data center in Singapore.

Note 17—Commitments and Contingencies

~~Operating Leases~~Commitments

The Company has commitments under non-cancelable operating leases for facilities, certain equipment, and its managed data center ~~facilities. Total rental expenses were $12.6 million and $12.7 million for~~facilities (Note 16).

In addition, during the ~~years~~year ended December 31, ~~2018 and 2017, respectively. Additionally, expenses~~2020, the Company entered into an agreement for ~~cloud-based services related~~third-party cloud-managed services. As part of the agreement, the Company has a minimum commitment to ~~data centers were $7.1~~pay $20.0 million ~~and $4.9 million for~~over the course of five years, ~~ended December 31, 2018 and 2017, respectively.~~with no annual minimum commitment. As of December 31, ~~2018 and~~2020, the Company's commitment is $18.0 million.

As of December 31, ~~2017,~~2020 and 2019, the Company had ~~$2.9~~$6.3 million and $2.5 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 following table summarizes the Company's future minimum lease payments under non-cancelable operating leases and related sublease income at December 31, 2018:~~

2019 2020 2021 2022 2023 Total
(in thousands)
Operating lease expense $ 6,773
$ 3,880
$ 1,734
$ 1,019
$ 597
$ 14,003
Operating sublease income (285 ) (194 ) (194 ) (194 ) (145 ) (1,012 )
Total $ 6,488

$ 3,686

$ 1,540

$ 825

$ 452

$ 12,991

Guarantees and Indemnification

The Company’s agreements with sellers, buyers, and other third parties typically obligate itthe Company 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

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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 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 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 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 December 31, ~~2018.~~2020. However, based on management’s knowledge as of December 31, ~~2018,~~2020, 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 consolidated financial position, results of operations or cash flows.

On March 31, 2017, Guardian News & Media Limited ("Guardian") issued proceedings (the "Complaint") against the Company in the Chancery Division of the High Court of Justice in England & Wales. The Complaint alleged that the Company underpaid Guardian for digital advertising inventory sold by Guardian through the Company's platform as a result of the fact that the Company charged fees to buyers of that inventory. Guardian claimed the Company was precluded from charging buyer fees as a result of the contractual arrangements with Guardian and English agency law principles, as well as representations it allegedly made to Guardian. The Complaint claimed damages including loss of revenue, interest, and costs. On October 11, 2018, the Company and Guardian mutually agreed to resolve their dispute and the High Court proceedings have been discontinued. Though the terms of the settlement agreement are confidential, the settlement is immaterial to the Company from a financial standpoint.

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 ~~17—~~18—Debt

On September ~~26, 2018,~~25, 2020, the Company amended and restated its loan and security agreement with Silicon Valley Bank ("SVB") (the "Loan Agreement"), which was scheduled to expire on September ~~27, 2018.~~26, 2020. The Loan Agreement provides a senior secured

revolving credit facility of up to ~~$40.0~~the lesser of $60.0 million and 85% of eligible accounts receivable, with a maturity date of September ~~26, 2020.~~25, 2022. The Loan Agreement includes a letter of credit, foreign exchange and cash management facility with a sublimit up to $10.0 million, of which $6.3 million was utilized for letters of credit related to leases as of December 31, 2020 (see Note 17). As of December 31, 2020, the amount available for borrowing ~~as of December 31, 2018~~ is ~~$30.0 million due to a $10.0 million reserve that will be released if the Company maintains positive Adjusted EBITDA for any trailing twelve-month period.~~$53.7 million. 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 LIBOR plus ~~2.50% if~~2.25%, with LIBOR having a ~~streamline period applies or LIBOR plus 4.00% if a streamline period does not apply.~~floor of 3.5%. If the Company elects prime, advances bear interest at a rate of prime plus ~~0.50% if~~0.25%, with prime having a ~~streamline period applies or prime plus 2.00% if a streamline period does not apply. A streamline period is any period during which an event~~floor 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.~~3.5%.

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~~The Company is required to maintain a lockbox arrangement where clients payments received in the lockbox will ~~immediately reduce~~be deposited daily into the ~~amounts outstanding on the credit facility.~~Company's operating bank accounts.

The Loan Agreement requires the Company to comply with financial covenants, ~~including~~measured quarterly, with respect to a minimum ~~Adjusted Quick Ratio~~liquidity ratio and ~~the achievement of certain Adjusted EBITDA targets. On a monthly basis, or~~maximum quarterly ~~if there were no advances outstanding during the calendar quarter, the~~cash burn. The Company is required to maintain a minimum liquidity ratio of at least 1.25 on the last day of each quarter and not exceed, on an absolute basis, a maximum quarterly cash burn for specific periods, as defined in the Loan Agreement. The Liquidity Ratio is defined as Cash and Cash Equivalents, plus Accounts Receivable, less Accounts Payable - Seller, divided by all obligations the Company has to pay to SVB, including all debt balances, interest, service

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fees, and unused credit line fees, net of outstanding letters of credit as of the balance sheet date. Cash Burn is defined as Adjusted ~~Quick Ratio of: (i) 1.00 if~~EBITDA less Capital Expenditures during the trailing ~~six month adjusted EBITDA is $0 or less, or (ii) 0.90 if~~periods as outlined in the ~~trailing six month adjusted EBITDA is greater than $0. If~~Loan Agreement. The Loan Agreement defines Capital Expenditures as the ~~Company’s Adjusted Quick Ratio is 1.05 or greater, a streamline~~current period ~~applies.~~unfinanced cash expenditures that are capitalized and amortized, including but not limited to property and equipment and capitalized labor costs as they relate to internal use software development costs. As of December 31, 2018, 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 December 31, 2018,2020, the Company was in compliance with ~~the Adjusted EBITDA covenant.~~its financial covenants.

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 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 December 31, ~~2018,~~2020, there were no0 amounts outstanding under the Loan ~~Agreement.~~Agreement (other than with respect to the letters of credit). Future availability under the credit facility is dependent on several factors including the available borrowing base and compliance with future covenant requirements.

Note ~~18—~~19—Related Party Transactions

~~As of December 31, 2018 and 2017, there were no holders of more than 10% of the Company’s outstanding common stock that were considered to be related parties.~~ During the years ended December 31, ~~2018~~2020, 2019, and ~~2017,~~2018, the Company did not enter into any transactions with ~~any~~its related parties or affiliates of its related ~~parties.~~parties requiring disclosure pursuant to the applicable rules of the Financial Accounting Standards Boards or the U.S. Securities and Exchange Commission.

Note ~~19—~~20—Quarterly Financial Data (Unaudited)

The following tables set forth ~~our~~the Company's quarterly consolidated statements of operations data for each of the eight quarters in the two-year period ended December 31, ~~2018. We have~~2020. The Company has prepared the quarterly unaudited consolidated statements of operations data on a basis consistent with the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. In the opinion of management, the financial information in these tables reflects all adjustments, consisting only of normal recurring adjustments, which management considers necessary for a fair statement of this data. This information should be read in conjunction with the audited consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. The results of historical periods are not necessarily indicative of the results for any future period.


	Three Months Ended
	Mar. 31, 2019		June 30, 2019		Sept. 30, 2019		Dec. 31, 2019		Mar. 31, 2020		June 30, 2020		Sept. 30, 2020		Dec. 31, 2020
	(in thousands, except per share amounts)
Revenue	$	32,416	$	37,870	$	37,642	$	48,486	$	36,295	$	42,348	$	60,982	$	82,003
Expenses:
Cost of revenue	15,116		15,085		13,869		13,321		14,003		21,545		$	21,031	21,168
Sales and marketing	10,592		11,519		11,040		11,414		11,269		20,029		$	21,761	22,971
Technology and development	9,716		9,839		10,293		10,402		10,693		13,063		$	13,562	14,228
General and administrative	10,280		10,027		9,121		10,322		9,127		15,780		$	13,314	14,766
Merger and restructuring costs	0		0		0		2,041		1,930		12,493		$	2,254	875
Total expenses	45,704		46,470		44,323		47,500		47,022		82,910		$	71,922	74,008
Income (loss) from operations	(13,288)		(8,600)		(6,681)		986		(10,727)		(40,562)		$	(10,940)	7,995
Other (income) expense, net	(34)		(403)		(562)		406		(851)		(1,722)		$	(871)	1,949
Income (loss) before income taxes	(13,254)		(8,197)		(6,119)		580		(9,876)		(38,840)		$	(10,069)	6,046
Provision (benefit) for income taxes	(708)		84		55		(943)		(201)		288		$	446	160
Net income (loss)	$	(12,546)	$	(8,281)	$	(6,174)	$	1,523	$	(9,675)	$	(39,128)	$	(10,515)	$	5,886
Net income (loss) per share:
Basic	$	(0.24)	$	(0.16)	$	(0.12)	$	0.03	$	(0.18)	$	(0.36)	$	(0.10)	$	0.05
Diluted	$	(0.24)	$	(0.16)	$	(0.12)	$	0.03	$	(0.18)	$	(0.36)	$	(0.10)	$	0.05
Weighted-average shares used to compute net income (loss) per share:
Basic	51,577		52,358		53,023		53,473		54,866		108,530		110,416		112,746
Diluted	51,577		52,358		53,023		59,595		54,866		108,530		110,416		124,376

Three Months Ended
Mar. 31, 2017 June 30, 2017 Sept. 30, 2017 Dec. 31, 2017 Mar. 31, 2018 June 30, 2018 Sept. 30, 2018 Dec. 31, 2018
(in thousands, except per share amounts)
Revenue $ 46,015
$ 42,922
$ 35,211
$ 31,397
$ 24,876
$ 28,648
$ 29,729
$ 41,432
Expenses:
Cost of revenue 14,688
13,698
12,985
15,465
14,783
15,044
14,687
15,489
Sales and marketing 14,628
12,529
12,503
12,134
12,257
11,135
10,654
10,510
Technology and development 12,753
12,044
11,580
11,123
10,494
9,245
9,299
8,825
General and administrative 15,080
14,355
13,644
12,517
12,544
11,441
9,355
9,091
Restructuring and other exit costs 4,338
1,621
—
—
2,466
974
—
—
Impairment of intangible assets and internally developed software —
—
—
4,585
—
—
—
—
Impairment of goodwill —
—
90,251
—
—
—
—
—
Total expenses 61,487

54,247

140,963

55,824

52,544

47,839

43,995

43,915
Loss from operations (15,472 )
(11,325 )
(105,752 )
(24,427 )
(27,668 )
(19,191 )
(14,266 )
(2,483 )
Other (income) expense, net (7 ) 84
(150 ) (358 ) 73
(1,281 ) (558 ) (377 )
Loss before income taxes (15,465 )
(11,409 )
(105,602 )
(24,069 )
(27,741 )
(17,910 )
(13,708 )
(2,106 )
Provision (benefit) for income taxes 375
146
(2,031 ) (252 ) 75
74
84
124
Net loss $ (15,840 )
$ (11,555 )
$ (103,571 )
$ (23,817 )
$ (27,816 )
$ (17,984 )
$ (13,792 )
$ (2,230 )
Net loss per share:
Basic and diluted $ (0.33 ) $ (0.24 ) $ (2.11 ) $ (0.48 ) $ (0.56 ) $ (0.36 ) $ (0.27 ) $ (0.04 )
Weighted-average shares used to compute net loss per share:
Basic and diluted 48,332
48,783
49,055
49,293
49,692
50,071
50,513
50,746

100

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Note 21—Subsequent Events

On February 4, 2021, the Company entered into a Stock Purchase Agreement (the "Purchase Agreement") with RTL to purchase all of the issued and outstanding shares of capital stock of SpotX, Inc., (SpotX"), a Delaware corporation and wholly owned subsidiary of RTL, for a purchase price equal to $560 million in cash ("Cash Consideration") and 14 million shares of the Company's common stock. The Cash Consideration is subject to customary working capital and other adjustments. The board of directors of the Company has approved the transactions contemplated by the Purchase Agreement. The transactions are not subject to approval by the stockholders of the Company.

The Purchase Agreement includes customary representations, warranties and covenants of the parties, including covenants with respect to actions taken prior to the closing and cooperation with respect to seeking regulatory approvals.

The Company intends to finance the Cash Consideration in part from cash on its balance sheet and in part through borrowings under certain proposed new credit facilities. In connection with entering into the Purchase Agreement, the Company entered into the Commitment letter, dated as of February 4, 2021, with Goldman Sachs Bank USA (the "Commitment Party"), pursuant to which, subject to the terms and conditions set forth therein, the Commitment Party has committed to provide a senior secured term loan facility in an aggregate principal amount of up to $560 million. The funding of the Term Loan Facility provided for in the Commitment Letter is contingent on the satisfaction of customary conditions, including the execution and delivery of definitive documentation with respect to credit facilities in accordance with the terms set forth in the Commitment Letter and the consummation of the SpotX acquisition in accordance with the Purchase Agreement.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

~~Not applicable.~~None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives of ensuring that information we are required to disclose in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures, and is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. There is no assurance that our disclosure controls and procedures will operate effectively under all circumstances. Based upon the evaluation described above, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, ~~2018,~~2020, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the three months ended December 31, ~~2018~~2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial ~~reporting.~~reporting, except as noted below.

On April 1, 2020, we completed the Merger with Telaria. See Note 10 of "Notes to Consolidated Financial Statements" for more information. We are currently integrating Telaria into our operations and internal control processes. As we complete this integration, we are analyzing, evaluating, and where necessary, making changes in control and procedures related to the Telaria business, which we expect to complete within one year after the date of acquisition. Pursuant to the SEC’s guidance that an assessment of a recently acquired business may be omitted from the scope of an assessment in the year of acquisition, the scope of our assessment of the effectiveness of our internal controls over financial reporting at December 31, 2020 excludes Telaria to the extent that they are not yet integrated into our internal controls environment.

Management's Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act).

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Our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in "Internal Control - Integrated Framework" (2013) issued by the Committee of Sponsoring Organizations of the

Treadway Commission.

As permitted by the Securities and Exchange Commission, companies are allowed to exclude acquisitions from their assessment of internal control over financial reporting during the first year of an acquisition. During the quarter ended June 30, 2020, the Company acquired Telaria, Inc.. Pursuant to applicable rules, because the Company has not yet fully incorporated the internal controls and procedures of the acquired entity into the Company's internal control over financial reporting, management excluded certain elements related to the acquired business from its assessment of the effectiveness of internal control over financial reporting as of December 31, 2020. The excluded elements of the Telaria business represented 25% of the Company's revenue and 25% of the Company’s total assets as of and for the year ended December 31, 2020.

Based on this evaluation, management concluded that the Company's internal control over financial reporting was effective as of December 31, ~~2018.~~2020. Deloitte & Touche LLP has independently assessed the effectiveness of our internal control over financial reporting and its report is included under "Item 8. Financial Statements and Supplementary Data."

Inherent Limitations on Effectiveness of Controls

Management recognizes that a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud or error, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Item 9B. Other Information

~~Not applicable.~~None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information required by Item 10 will be included in our Proxy Statement for the ~~2019~~2021 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, ~~2018,~~2020, or the ~~2019~~2021 Proxy Statement, under the headings "Proposal 1—Election of Directors," ~~"Section~~"Delinquent Section 16(a) ~~Beneficial Ownership Reporting Compliance,~~Reports," (if applicable) and "Corporate Governance" and is incorporated herein by reference.

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Item 11. Executive Compensation

The information required by Item 11 will be included in the ~~2019~~2021 Proxy Statement under the headings "Executive Officers" and "Executive Compensation" and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by Item 12 will be included in the ~~2019~~2021 Proxy Statement under the heading "Common Stock Ownership of Certain Beneficial Owners and Management" and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by Item 13 will be included in the ~~2019~~2021 Proxy Statement under the headings "Certain Relationships and Related Person Transactions" and "Director Independence" and is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

The information required by Item 14 will be included in the ~~2019~~2021 Proxy Statement under the heading "Proposal 2—Ratification of the Selection of Deloitte & Touche LLP as Independent Registered Public Accounting Firm" and is incorporated herein by reference.

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PART IV

Item 15. Exhibits, Financial Statement Schedules

(a) We have filed the following documents as part of this Annual Report on Form 10-K:

1. Consolidated Financial Statements



Report of Independent Registered Public Accounting Firm			6964
Consolidated Balance Sheets			7167
Consolidated Statements of Operations			7268
Consolidated Statements of Comprehensive Income (Loss)			7369
Consolidated Statements of Stockholders' Equity			7470
Consolidated Statements of Cash Flows			7571
Notes to Consolidated Financial Statements			7673

2. Financial Statement Schedules

No financial statement schedules are provided because the information called for is not required or is shown in the financial statements of the notes thereto.

3. Exhibits

EXHIBIT INDEX



Number						Description
2.1						Agreement and Plan atof Merger, dated ~~July 11, 2017,~~as of December 19, 2019, by and among ~~the Registrant, Caviar Acquisition~~The Rubicon Project, Inc., Madison Merger Corp., ~~nToggle,~~and Telaria, Inc.~~, Shareholder Representative Services LLC, solely in its capacity as the initial Holder Representative thereunder, and certain persons delivering joinder agreements therewith~~ (incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed with the Commission on ~~July 17, 2017)~~December 20, 2019).†
~~3.1~~2.2						Stock Purchase Agreement, dated as of February 4, 2021, by and between Magnite, Inc., RTL US Holdings, Inc., and solely for certain sections therein, RTL Group S.A.. (incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed with the Commission on February 5, 2021).†
3.1						Sixth Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant's Quarterly Report on Form 10-Q filed with the Commission on May 15, 2014).
3.2						Certificate of Amendment to the Sixth Amended and Restated ~~Bylaws~~Certificate of ~~the Registrant~~Incorporation of Magnite, Inc., dated June 30, 2020 (incorporated by reference to Exhibit 3.1 to the Registrant's ~~Current~~Quarterly Report on Form ~~8-K~~10-Q filed with the Commission on ~~April 8, 2016)~~August 10, 2020).
~~10.1+~~3.3						Fourth Amended and Restated Bylaws of Magnite, Inc., dated June 30, 2020 (incorporated by reference to Exhibit 3.4 to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on August 10, 2020).
4.1*						Description of Securities
10.1+						The Rubicon Project, Inc. 2007 Stock Incentive Plan and forms of agreements for employees thereunder (incorporated by reference to Exhibit 10.1 to the Registrant's Registration Statement on Form S-1/A filed with the Commission on March 20, 2014).
10.2+						The Rubicon Project, Inc. 2014 Equity Incentive Plan, as amended and restated (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the Commission on April 8, 2016).
10.3+						Form of Stock Option Grant Notice and Award Agreement for Employees under The Rubicon Project, Inc. 2014 Equity Incentive Plan (incorporated by reference to Exhibit 10.2(B) to the Registrant's Annual Report on Form 10-K filed with the Commission on March 6, 2015).
10.4+						Form of Restricted Stock Unit Grant Notice and Award Agreement for Employees under The Rubicon Project, Inc. 2014 Equity Incentive Plan (incorporated by reference to Exhibit 10.2(C) to the Registrant's Annual Report on Form 10-K filed with the Commission on March 6, 2015).

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10.5+		Form of Stock Option Grant Notice and Award Agreement for Non-Employee Directors under The Rubicon Project, Inc. 2014 Equity Incentive Plan (incorporated by reference to Exhibit 10.2(D) to the Registrant's Annual Report on Form 10-K filed with the Commission on March 6, 2015).
10.6+		Form of Restricted Stock Unit Grant Notice and Award Agreement for Non-Employee Directors under The Rubicon Project, Inc. 2014 Equity Incentive Plan (incorporated by reference to Exhibit 10.2(E) to the Registrant's Annual Report on Form 10-K filed with the Commission on March 6, 2015).
10.7+	Form Market Stock Award Notice and Award Agreement under The Rubicon Project, Inc. 2014 Equity Incentive Plan (incorporated by reference to Exhibit 10.7 to the Registrant’s Annual Report on Form 10-K filed with the Commission on March 4, 2016).



~~10.8+~~	The Rubicon Project, Inc. 2014 Employee Stock Purchase Plan, as amended and restated on July 26, 2018 (incorporated by reference to Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q filed with the Commission on November 7, 2018).
~~10.9+~~10.8+		Form of Enrollment Agreement under The Rubicon Project, Inc. 2014 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.3(B) to the Registrant's Annual Report on Form 10-K filed with the Commission on March 6, 2015).
~~10.10+~~	The Rubicon Project, Inc. 2014 Inducement Grant Equity Incentive Plan, as amended and restated (incorporated by reference to Exhibit 10.2 to the Registrant's Current Report on Form 8-K filed with the Commission on April 8, 2016).
~~10.11+~~10.09+		~~Form of Restricted Stock Unit Grant Notice under The Rubicon Project,~~Telaria, Inc. ~~2014 Inducement Grant~~2013 Equity Incentive Plan, as amended (incorporated by reference to Exhibit ~~4.7~~99.2 to the ~~Registrant's~~Registrants’ Registration Statement on Form S-8, ~~filed with the Commission on December 19, 2014).~~dated April 9, 2020)
~~10.12+~~10.10		Form of Stock Option Grant Notice under The Rubicon Project, Inc. 2014 Inducement Grant Equity Incentive Plan (incorporated by reference to Exhibit 4.8 to the Registrant's Registration Statement on Form S-8 filed with the Commission on December 19, 2014).
~~10.13+~~	Form of Restricted Stock Grant Notice under The Rubicon Project, Inc. 2014 Inducement Grant Equity Incentive Plan (incorporated by reference to Exhibit 4.9 to the Registrant's Registration Statement on Form S-8 filed with the Commission on December 19, 2014).
~~10.14+~~	The Rubicon Project, Inc. 2015 Executive Cash Incentive Plan (incorporated by reference to Exhibit A to the Registrant's Definitive Proxy Statement on Schedule 14A filed with the Commission on April 2, 2015).
~~10.15+~~	Executive Employment Agreement, dated May 4, 2007, between adMonitor, Inc. and Frank Addante, as amended December 14, 2007 (incorporated by reference to Exhibit 10.4 to the Registrant's Registration Statement on Form S-1 filed with the Commission on February 4, 2014).
~~10.16+~~	Agreement, dated August 16, 2017, by and between Frank Addante and the Registrant (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the Commission on August 22, 2017).
~~10.17~~	Second Amended and Restated Loan and Security Agreement, dated as of September ~~26, 2018, by and among~~25, 2020, between Silicon Valley Bank, ~~the Registrant, Rubicon Project~~Magnite, Inc., Magnite Hopper, Inc., Magnite Bell, Inc. and ~~Rubicon Project Bell,~~Magnite CTV, Inc. (incorporated by reference to Exhibit 10.1 to the ~~Registrant's~~Registrant’s Quarterly Report on Form 10-Q, ~~filed with the Commission on~~dated November ~~8, 2018)~~9, 2020).
~~10.18~~10.11+		Stock Pledge Agreement, dated October 3, 2013, by and between Silicon Valley Bank and the Registrant (incorporated by reference to Exhibit 10.15 to the Registrant's Registration Statement on Form S-1 filed with the Commission on February 4, 2014).
~~10.19~~	First Amendment to Stock Pledge Agreement, dated July 29, 2015, by and between Silicon Valley Bank and the Registrant (incorporated by reference to Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q filed with the Commission on August 5, 2015).
~~10.20~~	Stock Pledge Agreement, dated as of July 29, 2015, by and between Silicon Valley Bank and Rubicon Project Unlatch, Inc. (incorporated by reference to Exhibit 10.4 to the Registrant's Quarterly Report on Form 10-Q filed with the Commission on August 5, 2015).
~~10.21~~	Second Amendment to Stock Pledge Agreement, dated as of September 26, 2018, by and between Silicon Valley Bank and the Registrant (incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q filed with the Commission on November 8, 2018.
~~10.22+~~	Form of Indemnification Agreement between the Registrant and each of its directors and executive officers (incorporated by reference to Exhibit 10.17 to the Registrant's Registration Statement on Form S-1/A filed with the Commission on March 20, 2014).
~~10.23+~~10.12+		Form of Executive Severance and Vesting Acceleration Agreement by and between the Registrant and certain of its executive officers (incorporated by reference to Exhibit ~~10.18~~10.23 to the ~~Registrant's Registration Statement on~~Registrants Form ~~S-1~~10-K filed with the Commission on February ~~4, 2014)~~27, 2020).
~~10.24+~~10.13+		Form of Amendment No. 1 to Executive Severance and Vesting Acceleration Agreement by and between the Registrant and certain of its executive officers (incorporated by reference to Exhibit 10.1 to the Registrant Quarterly Report on Form 10-Q filed with the Commission on August 5, 2015).
~~10.25+~~	Executive Employment Agreement between the Registrant and Michael Barrett, dated March 16, 2017 (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the Commission on March 22, 2017).


10.14+
~~10.26+~~	Executive Severance and Vesting Acceleration Agreement between the Registrant and Michael Barrett, dated March 16, 2017 (incorporated by reference to Exhibit 10.2 to the Registrant's Current Report on Form 8-K filed with the Commission on March 22, 2017).
~~10.27~~10.15+		~~Sublease,~~Executive Severance and Vesting Acceleration Agreement between the Registrant and Aaron Saltz, dated ~~January 9, 2013, by and between Fox Interactive Media, Inc. and the Registrant~~April 1, 2020 (incorporated by reference to Exhibit ~~10.19~~10.3 to the ~~Company's Registration Statement on Form S-1 filed with the Commission on February 4, 2014).~~
~~16.1~~	~~Letter of PricewaterhouseCoopers LLP dated August 23, 2018 to the SEC regarding statements included in Current~~Registrant's Quarterly Report on Form ~~8-K (incorporated by reference to Exhibit 16.1 to the Registrant's Current Report on Form 8-K~~10-Q filed with the Commission on August ~~23, 2018)~~10, 2020).
21.110.16		Office Lease between BRE HH Property Owner LLC and Magnite, Inc., dated November 20, 2020
21.1		List of Subsidiaries (incorporated by reference to Exhibit 21.1 of ~~The Rubicon Project, Inc.~~the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 9, 2020)
23.1*		Consent Consent of Deloitte & Touche LLP. Deloitte & Touche LLP.
23.231.1		~~Consent~~Certification of ~~PricewaterhouseCoopers LLP.~~
31.1*	Certification of Principal Executive Officer Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Executive Officer Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification Certification of Principal Financial Officer Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Principal Financial Officer Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32*(1)		Certification of the Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. of the Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.ins *		XBRL Instance Document- the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.sch *		XBRL Taxonomy Schema Linkbase Document
101.cal *		XBRL Taxonomy Calculation Linkbase Document
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101.lab *		XBRL Taxonomy Label Linkbase Document
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104		Cover Page Interactive Data File - (formatted as Inline XBRL and contained in Exhibit 101)

Table of Contents

* Filed herewith

+ Indicates a management contract or compensatory plan or arrangement


†	† Certain schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. ~~The Company agrees to furnish supplemental copies of any of the omitted schedules upon request by the Securities and Exchange Commission.~~

⁽¹⁾

The information in this exhibit is furnished and deemed not filed with the Securities and Exchange Commission for purposes of section 18 of the Exchange Act of 1934, as amended (the "Exchange Act"), and is not to be incorporated by reference into any filing of The Rubicon Project, Inc. under the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

(1) The information in this exhibit is furnished and deemed not filed with the Securities and Exchange Commission for purposes of Section 18 of the Exchange Act of 1934, as amended (the "Exchange Act"), and is not to be incorporated by reference into any filing of Magnite, Inc. under the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

Item 16. Form 10-K Summary

None.

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.



	~~THE RUBICON PROJECT,~~MAGNITE, INC. (Registrant)
		/s/ David Day
		David Day
		Chief Financial Officer (Principal Financial Officer)
Date February ~~27, 2019~~24, 2021

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:



Name			Title	Date
/s/ Michael Barrett			President, Chief Executive Officer and Director (Principal Executive Officer)	February ~~27, 2019~~24, 2021
Michael Barrett
/s/ David Day			Chief Financial Officer (Principal Financial ~~Officer )~~Officer)	February ~~27, 2019~~24, 2021
David Day
/s/ ~~Blima Tuller~~Shawna Hughes			Chief Accounting Officer (Principal Accounting Officer)	February ~~27, 2019~~24, 2021
~~Blima Tuller~~Shawna Hughes
/s/ ~~Frank Addante~~Paul Caine			Director	February ~~27, 2019~~24, 2021
~~Frank Addante~~Paul Caine
/s/ Robert J. Frankenberg			Director	February ~~27, 2019~~24, 2021
Robert J. Frankenberg
/s/ ~~Sumant Mandal~~Sarah P. Harden			Director	February ~~27, 2019~~24, 2021
~~Sumant Mandal~~Sarah P. Harden
/s/ Doug Knopper			Director	February 24, 2021
Doug Knopper
/s/ Rachel Lam			Director	February 24, 2021
Rachel Lam
/s/ James Rossman			Director	February 24, 2021
James Rossman
/s/ Robert F. Spillane			Director	February ~~27, 2019~~24, 2021
Robert F. Spillane
/s/ Lisa L. Troe			Director	February ~~27, 2019~~24, 2021
Lisa L. Troe
~~/s/ Lewis W. Coleman~~	~~Director~~	~~February 27, 2019~~
~~Lewis W. Coleman~~



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
~~Los Angeles, CA~~	90094
(Address of principal executive offices, including zip code)

Registrant's telephone number, including area code:
	~~(310) 207-0272~~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, $0.00001~~stock, par value $0.00001 per share		MGNI		~~New York Stock Exchange~~Nasdaq Global Select Market

Securities registered pursuant to Section 12(g) of the Act:
		None



Class						Outstanding as of February ~~21, 2019~~19, 2021
Common Stock, $0.00001 par value						~~51,734,264~~115,570,100



~~Related Section~~		~~Documents~~
~~III~~		~~Definitive Proxy Statement to be filed pursuant to Regulation 14A on or before April 30, 2019~~


	Year Ended
	December 31, 2020		December 31, 2019		December 31, 2018
	(in thousands)
Allowance for doubtful accounts, Beginning Balance	$	3,400	$	1,340	$	500
Allowance for doubtful accounts, Merger-assumed	1,033		0		0
Write-offs	(3,054)		(3,282)		(815)
Increase (decrease) in provision for expected credit losses	870		5,328		1,285
Recoveries of previous write-offs	111		14		370
Allowance for doubtful accounts, December 31	$	2,360	$	3,400	$	1,340


				Page No.
Special Note About Forward-Looking Statements				4

Part I
Item 1.		~~Page~~Business		~~No.~~7
Item 1A.		~~Special Note About Forward-Looking Statements~~Risk Factors		318

~~Part I~~
Item 1.1B.	~~Business~~Unresolved Staff Comments		442
Item ~~1A.~~2.		~~Risk Factors~~Properties		1742
Item ~~1B.~~3.		~~Unresolved Staff Comments~~Legal Proceedings		4943
Item 2.4.		~~Properties~~Mine Safety Disclosures		4943
~~Item 3.~~		~~Legal Proceedings~~		50
~~Item 4.~~Part II		~~Mine Safety Disclosures~~		50

~~Part II~~
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		5144
Item 6.		Selected Financial Data		5145
Item 7.		Management's Discussion and Analysis of Financial Condition and Results of Operations		5247
Item 7A.		Quantitative and Qualitative Disclosures About Market Risk		6761
Item 8.		Financial Statements and Supplementary Data		6863
Item 9.		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		102
Item 9A.		Controls and Procedures		102
Item 9B.		Other Information		103

Part III
Item 10.		Directors, Executive Officers and Corporate Governance		103
Item 11.		Executive Compensation		103
Item 12.		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		~~103~~104
Item 13.		Certain Relationships and Related Transactions, and Director Independence		~~103~~104
Item 14.		Principal Accountant Fees and Services		~~103~~104

Part IV
Item 15.		Exhibits, Financial Statement Schedules		~~104~~105
Item 16.		Form 10-K Summary		~~106~~107
Signatures				~~107~~108


•	~~Perishable Inventory.~~ A user’s visit to a website or mobile application creates a unique opportunity to reach the user by inserting advertisements into one or more of the impressions designed into the website or mobile application. In order to generate revenue for a seller these impressions must be filled before the page content loads.


•	~~Complex Impression-Level Matching.~~ Sellers aim to sell impressions in order to generate revenue while enhancing the users’ experience and preserving the sellers’ brand. Buyers seek to purchase impression-level inventory to improve targeting of specific audiences and return on investment for their advertising spending.


•	~~Fragmented Buyer and Seller Base.~~ ~~There is an enormous number and variety of buyers and sellers of digital advertising.~~


•	~~Consumer Experience Concerns.~~ ~~Consumers prefer digital advertising experiences that are relevant to their personal interests, non-intrusive, and do not detract from or slow down their enjoyment of digital content.~~


•	~~Lack of Standardized Ad Formats and Data.~~ ~~An available advertising impression can vary based on a number of factors, such as seller, ad format, screen size, pricing mechanism, content type, and audience demographic. It is~~


•	~~Diverse Technology Demands.~~ Even as advertising is shifting from traditional to digital media, a shift is underway within the digital advertising ecosystem from desktop to mobile channels. Desktop and mobile digital advertising involve different challenges and rely upon different technologies, requiring significant technological capabilities and innovation.


•	~~Increasing Privacy Demands.~~ Privacy protection is becoming increasingly important to regulators, technology platforms, web and mobile browser applications and users on a regional and global basis, requiring constant adaptation to comply with legal and self-regulatory requirements while effectively matching buyers and sellers of inventory.


•	~~Integrated Solution for Digital Advertising Needs.~~ ~~We provide sellers with a single web-based interface that serves as their central location to manage, analyze, and enhance digital advertising spending from hundreds of different buyers.~~


•	~~Header Bidding.~~ We provide our own header bidding solutions to sellers to use as a platform for aggregating demand, and also to integrate with third-party header bidding solutions to provide demand to our sellers that use those third-party solutions as their header bidding platform.


•	~~Private Marketplaces.~~ ~~Sellers can use our PMP capabilities to augment their own internal sales operations through better matching and pricing and process automation.~~


•	~~Inventory Allocation.~~ ~~We offer a solution that helps sellers to increase revenue across advertising types and sales channels by allocating inventory efficiently between direct and indirect demand.~~


•	~~Significantly Streamlined Sales, Operations, and Finance Workflow.~~ Our platform streamlines the management of digital advertisement sales by aggregating demand and providing a suite of software applications that automate the process of making inventory available for sale.


•	~~Security for Brand and User Experience.~~ ~~Our platform is designed to enable sellers to implement guidelines specifying what advertising content may not be shown on the seller’s website or mobile application.~~


•	~~Advanced Reporting and Analytics and Actionable Insights.~~ ~~We provide a robust set of reporting features that sellers can use to analyze the vast array of data we collect for them.~~


•	~~Consolidated Payments.~~ We provide consolidated billing and collection for sellers that would otherwise be required to dedicate additional resources to cost-effectively manage financial relationships with a large base of buyers.


•	~~Protective Screening.~~ We employ measures to protect sellers and users from malware (software that can infect computers with malicious software), check advertisements delivered through our solution for the presence of malicious or questionable activity or characteristics, and gather technical attributes to inform our matchmaking process.


•	~~Vantage.~~ ~~We provide an extension for Web browsers that lets sellers monitor ads served in context on their sites, providing insight, diagnostic applications, and ad-quality controls.~~


•	~~Creative Approval API.~~ Our platform includes a programmatic interface that sellers can use to retrieve a comprehensive set of individual advertising creatives that have bid or served on their sites, and instruct our delivery systems to approve or reject those creatives for future impressions.


•	~~Private Marketplaces.~~ ~~Through our PMP capabilities, we enable buyers to access exclusive high-value inventory in a more controlled environment than in the open marketplace.~~


•	~~Bid Stream Filtering.~~ We provide technology to help buyers shape real-time bidding requests, optimize traffic, and reduce the number of duplicates and irrelevant or undesired bid requests they must process. This helps buyers find the inventory they are looking for more efficiently and reduces their data processing costs.


•	~~Bid Reduction.~~ Buyers participating in header bidding auctions, which we conduct on a first-price basis, may use our EMR technology, which uses our market data and proprietary algorithms to help buyers bid on advertising inventory consistent with market rates.


•	~~Flexible Access to Inventory.~~ Our platform allows buyers to purchase advertising inventory in their preferred manner, whether by OMP or PMP. Our solution also has the flexibility to allow buyers to integrate their purchases on our platform through their existing buying technologies or to buy directly through our platform.


•	~~Simplified Order Management and Campaign Tracking.~~ By eliminating most manual steps, our applications enable buyers to manage their digital campaigns efficiently and effectively, and significantly reduce the time it would otherwise take to execute their digital advertising programs.


•	~~Transparency and Control Over Advertising Spending.~~ Our platform is designed to let buyers know and control where their dollars are being spent. Buyers can easily navigate through our interface to choose the list of sellers they want to purchase inventory from and see an indicative price range that they should expect to pay.


•	~~Inventory Quality.~~ We provide systems and processes to detect and minimize questionable inventory, such as non-human traffic and pirated content, and to enable labeling of inventory made available for sale so that buyers can make their own decisions about what meets the specific standards of campaigns they are running.


•	~~PubCheq.~~ We maintain a comprehensive database of all inventory reviewed by internal systems and teams that powers a global blacklist that blocks fraudulent or otherwise problematic seller properties and users from entering the Rubicon Project marketplace and identifies non-human traffic that is fraudulently consuming advertising spend.


•	~~Header Bidding.~~We will invest in continued improvement in our header bidding capabilities, including through support of open-source wrapper technologies that eliminate exchange bias, expand support for major third-party header bidding technologies and additional formats to maximize access to inventory supply, and develop enhanced customer service capabilities.


•	~~Private Marketplace.~~ ~~We will continue to invest in our PMP solution, which we believe is well-positioned to take advantage of increased industry demand for PMP transactions.~~


•	~~Video.~~ We plan to expand our video presence by continuing to drive growth with header bidding, new formats and stronger measurement and targeting capabilities, and providing monetization service for over-the-top ("OTT") and connected television content providers as they migrate increasingly to programmatic monetization of their advertising inventory.