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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
__________________
FORM 10-K
__________________
FORM
10-K/A
(Amendment No. 1)
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
December 31, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission File Number:
001-36384
__________________
MAGNITE, INC.
(Exact name of registrant as specified in its charter)
 __________________
Delaware
20-8881738
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
12181 Bluff Creek
6080 Center Drive,
4th Floor
Los Angeles,
CA 90045
90094
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code:
310207-0272
_
Registrant’s telephone number, including area code:
______________
310
207-0272
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Trading
Symbol(s)
Name of each exchange
on which registered
Common stock, par value $0.00001 per share
MGNI
MGNI
Nasdaq Global Select Market
Securities registered pursuant to Section 12(g) of the Act:
None
 __________________
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.      Yes        No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.      Yes      No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.      Yes      No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    
  Yes      No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company, or an emerging growth company. See the definitions of "large“large accelerated filer," "accelerated” “accelerated filer," "smaller” “smaller reporting company," and "emerging“emerging growth company"company” in Rule
12b-2
of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Act).    
  Yes      No
As of June 30, 2020, the aggregate market value of shares held by
non-affiliates
of the registrant (based on the closing sales price of such shares on the Nasdaq Global Select Market on June 30, 2020) was approximately $646.3 million.
Indicate the number of shares outstanding of each of the registrant'sregistrant’s classes of common stock, as of the latest practicable date.
Class
Outstanding as of February 19, 2021
Common Stock, $0.00001 par value
115,570,100


DOCUMENTS INCORPORATED BY REFERENCE: ToREFERENCE
None.

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EXPLANATORY NOTE
On February 25, 2021, Magnite, Inc. (the “Company”) filed its Annual Report on Form
10-K
for the extent herein specifically referenced infiscal year ended December 31, 2020 (the “Original Form
10-K”).
This Amendment No. 1 (the “Amendment”) amends Part III, portionsItems 10 through 14 of the Registrant's definitive Proxy Statement forOriginal Form
10-K
to include information previously omitted from the Original Form
10-K
in reliance on General Instruction G(3) to Form
10-K.
As a result of an administrative calendar oversight, the Company did not file a proxy statement involving the election of directors or an amendment to the Original Form 10-K before April 30, 2021, Annual General Meetingas required by the instructions. Accordingly, Part III of Shareholdersthe Original Form
10-K
is hereby amended as set forth below.
In addition, as required by Rule
12b-15
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), new certifications by our principal executive officer and principal financial officer are filed as exhibits to be filed this Amendment under Item 15 of Part IV hereof, which has been restated in its entirety.
Except as stated herein, this Amendment does not reflect events occurring after the filing of the Original Form
10-K
with the Securities and Exchange Commission pursuanton February 25, 2021 and no attempt has been made in this Amendment to Regulation 14A. See Part III.

modify or update other disclosures as presented in the Original Form
10-K.


Table of Contents
MAGNITE, INC.
FORM
10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2020
TABLE OF CONTENTS
Page
No.
Part I
Item 10.
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Part II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Part III
Item 10.1
Item 11.
6
Item 12.
3
Item 13.
3
Item 14.
36
Item 15.
37
40

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PART III
Item 10. Directors, Executive Officers and Corporate Governance
DIRECTORS
The table below lists the nine members of our board of directors and their committee assignments. A summary of the background for each nominee and continuing director is set forth after the table. These background summaries include the specific experience, qualifications, attributes, and/or skills that contributed to our board’s conclusion that the person should serve as a director of the company.
Committee Assignments
Name
Age
(1)
Position
Audit
Compensation
Nominating &
Governance
Member
Since
Paul Caine
57Chairman of the BoardApril 2020
Michael G. Barrett
58CEO and DirectorMarch 2017
Robert J. Frankenberg
74Lead DirectorXApril 2014
Sarah P. Harden
49DirectorXJuly 2019
Doug Knopper
60DirectorChairXApril 2020
Rachel Lam
53DirectorXXApril 2020
James Rossman
55DirectorXXApril 2020
Robert F. Spillane
70DirectorXChairApril 2014
Lisa L. Troe
59DirectorChairXFebruary 2014
(1)
As of May 4, 2021
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Director Nominees – Class I
Robert J. Frankenberg
joined our board of directors in connection with our initial public offering in April 2014. Mr. Frankenberg has owned NetVentures, a management consulting and investment firm focused on the high-tech industry, since 1996. He served on the board of directors of public company Nuance Communications from March 2000 to June 2018. He previously served as a member of the boards of directors of public companies Polycom from October 2013 to September 2016, Wave Systems from December 2011 to June 2015 and National Semiconductor until October 2011. He also serves on the board of Veracity Networks, the Sundance Institute and Western Governor’s University (WGU) Development. Prior to its sale in 2004, Mr. Frankenberg chaired Kinzan, a leading provider of Internet services platforms. Mr. Frankenberg was the chairman, president, and CEO of Encanto Networks from June 1997 to July 2000 when the company’s major business was sold to Avaya. Encanto was a leading provider of eBusiness software and services to small business. From April 1994 to August 1996, Mr. Frankenberg was the Chairman/CEO of Novell, a networking software company. Prior to Novell, Mr. Frankenberg was the Vice President & Group General Manager of Hewlett-Packard’s Personal Information Products Group, responsible for HP’s personal computer, server, networking, office software, calculator, and consumer product lines. Mr. Frankenberg joined Hewlett-Packard in 1969 as a manufacturing technician, later became a design engineer, software designer, project manager, engineering and marketing executive, and general manager. He became a corporate vice president in 1990 and general manager of the Personal Information Products Group in 1991. He served in the US Air Force from 1965 to 1969. Mr. Frankenberg previously served on various other boards, including for America OnLine (AOL), and holds several computer design patents. He brings to the board a deep knowledge of software, computer networks and systems, business operations, the technology industry, and public company governance and board service.
Sarah P. Harden
joined our board of directors in July 2019. Ms. Harden brings more than two decades of experience in digital media, entertainment and
direct-to-consumer
video to the Company’s Board. Since January 2018, Ms. Harden has served as the Chief Executive Officer of Reese Witherspoon’s media company Hello Sunshine. Prior to that, Ms. Harden held executive-level positions at Otter Media/The Chernin Group from 2013 to 2018, including President and Executive Vice President. Ms. Harden previously served as board member of privately held ESPN-Star Sports, Star China Media and The Moby Group and as a board director overseeing successful acquisitions and exits of private portfolio companies including Crunchyroll, Fullscreen, Roosterteeth, McBeard, Stagebloc and minority-invested company DLVR. Ms. Harden received her MBA from Harvard Business School and graduated with honors with a B.A. in international relations from The University of Melbourne. Ms. Harden brings to the board extensive experience leading and growing digital video, media and entertainment companies.
James Rossman
 has been a member of our board of directors since April 2020. He previously served as a member of Telaria’s board from January 2011 until April 2020, and served as Chairman of Telaria’s board from August 2012 to May 2013. Mr. Rossman currently serves as an Operating Partner at Silver Lake. From November 2012 to April 2018, he served as Special Advisor to General Atlantic, a global growth equity firm. From April 2009 to June 2012, he served in various roles at AKQA Inc., a digital services company, including President and Chief Operating Officer. From April 2001 to March 2009, Mr. Rossman served in several roles at Digitas, Inc., an integrated advertising agency and a member of the Publicis Groupe, S.A. (as of 2007), including as Chief Operating Officer. Mr. Rossman received a B.A. in economics from Trinity College and an M.M.M. from the Kellogg School of Management at Northwestern University. Mr. Rossman brings significant experience in operating and managing media agencies and advertising technology companies.
Incumbent Directors – Class II
Michael G. Barrett
has been a member of our board of directors and has served as our Chief Executive Officer since March 2017. Mr. Barret has also served as our President since March 2017, except for the period from April 2020 to June 2020. Mr. Barrett has served as the President of Ichabod Farm Ventures LLC, an investment company that he founded, since December 2012. From January 2014 to December 2015, he served as President and Chief Executive Officer of Millennial Media, Inc. From July 2012 to December 2012, Mr. Barrett served as Global Chief Revenue Officer and Executive Vice President at Yahoo! Inc. Prior to Yahoo!, from January 2012 to July 2012, Mr. Barrett served as Director at Google Inc., where he led the integration efforts following Google’s acquisition of AdMeld Inc., a global supply side platform solution for premium publishers. Mr. Barrett previously served as Chief Executive Officer at
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AdMeld from November 2008 to December 2011. Mr. Barrett also held senior positions at AOL, Fox Interactive Media and Disney Online. Mr. Barrett served on the board of directors of Media Math, a demand-side platform, from January 2013 to April 2020. Mr. Barrett brings to the board extensive experience in digital advertising and advertising technology, as well as significant executive management expertise.
Rachel Lam
has been a member of our board of directors since April 2020. She previously served as a member of Telaria’s board since May 2013. Ms. Lam is the
Co-Founder
and Managing Partner of Imagination Capital, an early stage venture capital firm founded in 2017. From 2003 to 2017, Ms. Lam served as Group Managing Director of the Time Warner Investments Group, the strategic investing arm of Time Warner Inc. She managed Time Warner’s investments in numerous digital media companies, and served on the board of directors of privately held Maker Studios and Bluefin Labs prior to their sales to the Walt Disney Company and Twitter, respectively. Ms. Lam currently serves on the board of directors of The Center for Reproductive Rights. Ms. Lam received a B.S. in industrial engineering and operations research from U.C. Berkeley and an M.B.A. from Harvard Business School. Ms. Lam brings to the board extensive experience investing in early and late stage digital media and technology companies, as well experience in banking and mergers and acquisitions.
Robert F. Spillane
joined our board of directors in connection with our initial public offering in April 2014. From 1998 to 2017, Mr. Spillane was a Managing Principal at DigaComm, L.L.C., a private investment firm that leads early-stage venture capital transactions, primarily involving companies in technology and digital media. Mr. Spillane was formerly a Principal and President and CEO of the investment group DM Holdings, Inc., which was formed in 1991 to acquire Donnelley Marketing, Inc. from The Dun and Bradstreet Corporation. Donnelley Marketing was a leading direct marketing and information services company. Mr. Spillane served as President and CEO, and on the board of directors of Donnelley Marketing, Inc. Prior to joining DM Holdings, Mr. Spillane was the Executive Vice President of Diamandis Communications, Inc., then a leading consumer magazine publisher, formed in 1987 in a leveraged buyout of CBS Magazines from CBS Inc., and also served as a member of the Diamandis board of directors from 1987 to 1990. Prior to Diamandis, Mr. Spillane held various executive positions with CBS, Inc., including Senior Vice President Group Publisher, Vice President of Circulation, Vice President General Manager of the CBS Special Interest Magazine Group, and Vice President Sales and Marketing of Fawcett Books. His
ten-year
career at CBS culminated in service from 1985 to 1987 as Senior Vice President, Publishing of CBS Magazines. In that capacity, he was directly responsible for 10 magazines. From 1972 to 1977, Mr. Spillane held various positions with Chesebrough Ponds, Inc. Mr. Spillane also served on the board of directors of TVSM, Inc., a private media company, from 1992-1998. Mr. Spillane brings to the board expertise in the publishing and advertising businesses, as well as significant experience with operations and mergers and acquisitions.
Incumbent Directors – Class III
Paul Caine
has been a member and Chairman of our board of directors since April 2020. He previously served as the
non-executive
Chairman of Telaria from January 1, 2020 until April 2020 and as a member of Telaria’s board of directors from June 2014 until April 2020. He served as Telaria’s executive Chairman from July 2017 to December 31, 2019 and Telaria’s Interim Chief Executive Officer from February 2017 to July 2017 and as the
non-executive
Chairman of the Board from July 2016 to February 2017. Mr. Caine has served as President, On Location at Endeavor Group Holdings, Inc. since January 2020. Mr. Caine has served as the Chairman and Executive Director of the Board of Engine Group, a global marketing company, since January 2018, and as CEO and Founder of PC Ventures, LLC, an investment and advisory firm since August 2017. Mr. Caine served as the Chief Global Revenue Officer for Bloomberg Media from June 2014 to July 2016. From April 2013 to January 2014 he served as Chief Executive Officer and a member of the board of directors of WestwoodOne, Inc., the largest independent national audio media company in the U.S. From 1989 to 2013, Mr. Caine served in various capacities at Time Inc., including Executive Vice President, Chief Revenue Officer and Group President Time Inc. from January 2011 until April 2013, Executive Vice President, President and Group Publisher, Style & Entertainment Group from January 2010 to January 2011, and President, Style & Entertainment Group from January 2008 to January 2010. From 2007 to 2011, Mr. Caine served on the board of directors of Nexcen Brands, Inc., a strategic brand management company with a focus on retail franchising, where he served as a member of the audit and governance committees. Mr. Caine received a B.A. in Telecommunications with a minor in Business from Indiana University. Mr. Caine brings to the board expertise in branding and multi-media advertising sales and marketing, as well extensive experience serving on the boards of directors of public and private companies.
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Doug Knopper
 has been a member of our board of directors since April 2020. He previously served as a member of Telaria’s board of directors from October 2018 until April 2020. Mr. Knopper is the
Co-Founder
of FreeWheel Media, Inc. and served as its
Co-Chief
Executive Officer from February 2007 to September 2017. FreeWheel, which was acquired by Comcast in 2014, provides a technology platform for the management and monetization of digital television advertising. Prior to founding FreeWheel, Mr. Knopper served as the Chief Executive Officer of BitPass Inc. from 2005 to 2007 and as Senior Vice President/General Manager of DoubleClick Inc. from 2000 to 2005. Mr. Knopper received a B.A. from the University of Michigan and an M.B.A from Georgetown University. Mr. Knopper brings to the board deep expertise and business relationships in digital video advertising and CTV, as well as experience founding, building and leading advertising technology companies.
Lisa L. Troe
has been a member of our board of directors since February 2014. She is a Senior Managing Director of Athena Advisors LLC, a business advisory firm she
co-founded
in 2014. From 2005 through 2013, Ms. Troe was a Senior Managing Director at FTI Consulting, Inc. (NYSE: FCN), a global business advisory firm. From 1995 through 2005, Ms. Troe served on the staff of the U.S. Securities and Exchange Commission’s Pacific regional office, including seven years as an Enforcement Branch Chief and six years as the Regional Chief Enforcement Accountant. Ms. Troe is a director of Stem, Inc. (NYSE: STEM), a technology driven provider of energy storage systems management services that employs a proprietary
AI-enabled
software platform to optimize the value of energy savings by automatically switching between battery power, onsite generation and grid power. Ms. Troe is a director of HireRight GIS Group Holdings LLC, which provides employers with global background screening and other workforce solutions. Ms. Troe has served as a director on private company boards in multiple industries and as an independent member of a special litigation committee of a public gaming industry manufacturing company. Ms. Troe’s career includes accounting positions in public and private companies and with a Big Four public accounting firm. She is a National Association of Corporate Directors Board Leadership Fellow, CERT certified in cybersecurity by SEI of Carnegie Mellon University, a member of NACD and other professional organizations, and a CPA. Ms. Troe brings to the board an extensive background in public company governance and oversight, enterprise risk management, and public company accounting, financial reporting and disclosure. She has diverse experience with a wide range of industries, allowing her to bring additional perspective to our board.
EXECUTIVE OFFICERS
The table below sets forth certain information regarding our executive officers as of May 4, 2021.
Name
Age
Position
Michael G. Barrett
59Chief Executive Officer and Director
David L. Day
59Chief Financial Officer
Katie Evans
35Chief Operating Officer
Shawna Hughes
43Chief Accounting Officer and Chief People Officer
Thomas Kershaw
53Chief Technology Officer
Joseph Prusz
43Chief Revenue Officer
Aaron Saltz
40General Counsel and Secretary
Adam Soroca
48Head of Global Buyer Team
Michael G. Barrett.
See above for Mr. Barrett’s biography.
David L. Day
has served as our Chief Financial Officer since May 2016 and served as our Chief Accounting Officer from March 2013 to August 2017. From May 2011 to March 2013, Mr. Day served as the Chief Accounting Officer at ReachLocal, Inc., a public company servicing small and
medium-sized
businesses as their digital ad agency. Prior to that, Mr. Day provided finance and accounting-related consulting services to technology and telecommunications companies and was
co-founder
of SignJammer Corporation, a
start-up
in the
out-of-home
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advertising market, from 2008 to 2011. His career also includes experience as Vice President of Finance for Spot Runner, a technology-based ad agency for small and
medium-sized
business, Senior Vice President of Finance for Yahoo! Search Marketing, Senior Vice President of Finance and Corporate Controller of Overture, and public accounting experience with PricewaterhouseCoopers and Arthur Andersen.
Thomas Kershaw
has served as our Chief Technology Officer since October 2016. Previously, Mr. Kershaw served as Director of Product Management of Google from March 2013 to October 2016, and Senior Vice President and General Manager of the Iconectiv business unit of Ericsson, a communications technology company, from March 2008 to March 2013. Mr. Kershaw has also held executive positions at VeriSign, Clarent Corporation and Unisys, and was Chief Technical Officer of SS8 Networks.
Aaron Saltz
has served as our General Counsel and Corporate Secretary since April 1, 2020. Previously, Mr. Saltz served as General Counsel of Telaria from November 2015 to April 2020 and as Vice President, Associate General Counsel from January 2013 to October 2015. Prior to Telaria, Mr. Saltz worked as an attorney in the mergers & acquisitions department of Skadden, Arps, Slate, Meagher & Flom LLP from 2005 to 2013. Mr. Saltz holds a B.A. from Cornell University and a J.D. from the Harvard Law School.
Katie Evans
has served as our Chief Operating Officer since September 2020. From April 1, 2020 through August 2020, Ms. Evans served as the Company’s General Manager, CTV. Previously, she served as Senior Vice President and Chief Operating Officer of Telaria from March 2017 to April 2020 and as Senior Vice President, Strategy & Operations, from November 2015 to March 2017. Ms. Evans holds a B.S. in Business Administration from the University of Richmond.
Joseph Prusz
has served as our Chief Revenue Officer since December 2017 and is responsible for maintaining and growing our revenue stream across all formats, channels, and inventory types. Prior to that, since joining the company in September 2008, Mr. Prusz had various roles of increasing responsibility in our sales department, including leading the Americas region and serving as Head of Mobile.
Adam Soroca
has served as our Head of Global Buyer Team since our acquisition of nToggle, Inc. in July 2017. Mr. Soroca
co-founded
nToggle in September 2014 and served as its Chief Executive Officer and a member of the board of directors until nToggle’s sale to the company. Prior to founding nToggle, Mr. Soroca was the chief product officer at Millennial Media (via acquisition of Jumptap) from November 2013 to July 2014, where he oversaw the global product and operations teams. Prior to Millennial Media, from June 2005 to November 2013, Mr. Soroca was the chief product officer and a founding leadership team member at Jumptap, the leading mobile programmatic and audience platform. Mr. Soroca serves as an advisor at CoachUp, Inc., viisights and Chalk Digital. He pioneered bringing both audience data (DMP) and programmatic capabilities (DSP) to the mobile industry. He is a digital advertising entrepreneur and inventor, holding over 90 awarded patents spanning mobile advertising and search techniques.
Shawna Hughes
has served as our Chief Accounting Officer since June 2020 and as our Chief People Officer since January 2021. From July 2018 through the closing of the Company’s merger with Telaria in April 2020 she served as Head of Global Human Resources. From 2015 to 2018, she served as Vice President of People Operations. Prior to joining the Company, from June 2007 to November 2015, Ms. Hughes served in the roles of Senior Director of International Accounting, Director of Revenue Accounting, and Director of Diversity and Inclusion at Concur Technologies, Inc. Ms. Hughes holds a Bachelor of Science in International Business from George Fox University and a Master of Accounting from the University of Notre Dame and is a Certified Public Accountant.
Our executive officers are elected by, and serve at the discretion of, our board of directors. There are no family relationships among any of our directors or executive officers.
DELINQUENT SECTION 16(a) REPORTS
Section 16(a) of the Exchange Act requires our directors, executive officers, and persons who beneficially own more than ten percent of our common stock to file reports on Forms 3, 4 and 5 with the SEC concerning their ownership of, and transactions in, our common stock.
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To our knowledge, based solely on our review of the copies of such reports furnished to us and on the representations of the reporting persons, all of these reports were timely filed for the fiscal year ended December 31, 2020, except that: (i) a report on Form 4 for Blima Tuller, our former Chief Accounting Officer, relating to a restricted stock unit grant made on February 1, 2020 was filed late on February 20, 2020, and (ii) reports on Form 4 for each of our
non-management
directors relating to annual restricted stock unit grants made on July 8, 2020 were filed late on July 16, 2020.
Code of Business Conduct and Ethics
Our board of directors has adopted a Code of Business Conduct and Ethics that applies to each of our directors, officers and employees. The full text of our Code of Business Conduct and Ethics is posted on the “Corporate Governance” section of our Investor Relations website at
http://investor.magnite.com
. We intend to post any amendment to our Code of Business Conduct and Ethics, and any waivers of the Code for directors and executive officers, on the same website to the extent required by rules adopted by the SEC and Nasdaq.
CORPORATE GOVERNANCE
There are no material changes to the procedures by which security holders may recommend nominees to the Company’s board of directors.
Audit Committee
The audit committee is responsible for, among other things, providing assistance to the board of directors in fulfilling its oversight responsibilities regarding the integrity of our financial statements, our compliance with applicable legal and regulatory requirements, the integrity of our financial reporting processes, including our systems of internal accounting and financial controls, the performance of our internal audit function and our independent registered public accounting firm, and our financial policy matters. The audit committee approves the services performed by our independent registered public accounting firm and reviews their reports regarding our accounting practices and systems of internal control over financial reporting, as applicable. The audit committee also oversees the audit efforts and confirms the independence of our independent registered public accounting firm. Our board of directors has determined that each member of our audit committee satisfies the financial literacy requirements of the SEC and Nasdaq, and that each of Ms. Troe, Ms. Lam, Mr. Rossman and Mr. Spillane qualifies as an “audit committee financial expert,” as defined in the SEC rules.
Item 11. Executive Compensation
DIRECTOR COMPENSATION
Each member of our board of directors who is not employed by us or any of our subsidiaries, referred to as a
non-employee
director, is compensated for service on our board through a combination of annual cash retainers and equity awards. For purposes of our director compensation program, a
non-employee
director is a member of our board who is not, and has not been within the previous 180 days, either an employee of ours or any of our subsidiaries or a consultant performing material services to us or any of our subsidiaries. In order to align the interests of
non-employee
directors and stockholders, equity awards constitute a majority of total director compensation.
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Directors are reimbursed for travel, food, lodging and other expenses directly related to their activities as directors, such as attendance at board or committee meetings. Directors are also entitled to the protection provided by their indemnification agreements and the indemnification provisions in our certificate of incorporation and bylaws, and they receive coverage under a director and officer insurance policy that we maintain.
2020 Market Assessment
In early 2020, in connection with the merger with Telaria, the compensation committee engaged Semler Brossy to perform a comprehensive review of
non-employee
director pay to ensure the programs were competitive and reflective of the larger, combined company going forward. Following the close of the merger in April 2020, the following changes were made: the membership cash retainer was increased to $50,000 (from $30,000) and the Chairman retainer for Mr. Caine’s role as
non-employee
Chairman was established at an additional $50,000 for his leadership role.
Annual Cash Fees
For 2020, directors received annual cash retainer fees as described in the table below for board and committee service. The fees are paid in four equal quarterly advance installments and prorated for any partial year of board service.
Position
  
Retainer ($)
 
Board Member
   50,000(1) 
Audit Committee Chair
   20,000 
Compensation Committee Chair
   12,500 
Nominating & Governance Committee Chair
   7,500 
Audit Committee Member
   10,000 
Compensation Committee Member
   5,000 
Nominating & Governance Committee Member
   3,500 
Board Chairman
   50,000 
Lead Director
   15,000 
(1)
As noted above, effective April 1, 2020, the board member cash retainer was increased to $50,000.
Equity Awards
Equity compensation for
non-employee
directors consists of (i) an initial equity award with a calculated value of $375,000 for each newly-elected or appointed
non-employee
director, and (ii) annual awards with a calculated value of $125,000. For 2020, equity awards for directors consisted solely of restricted stock units covering a number of shares determined by dividing the calculated value of the award by the closing price of a share of our common stock on the grant date.
The initial equity award is granted on the date of appointment to the board or attainment of
non-employee
director status, unless the board or compensation committee specified another issuance date. Annual equity awards are issued on the date of each annual meeting or the date of attainment of
non-employee
director status. If no intervening annual meeting has been held, annual equity awards will be granted on a date specified by the
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compensation committee that is at least 30 calendar days after the first anniversary of the prior year’s annual meeting. The first annual award for
non-employee
directors who join the board at any time other than the date of an annual meeting is subject to proration for the partial year of service ending on the date of the next annual meeting.
Initial equity awards vest, subject to continued board service, in three equal annual increments, on the first, second, and third anniversaries of the date of commencement of board service or attainment of
non-employee
director status or, if earlier, upon (but effective immediately prior to) the occurrence of a change in control of Magnite. Annual equity awards vest, subject to continued board service, on the first anniversary of the date of grant or, if earlier, upon the occurrence of either (1) a change in control of Magnite (effective immediately prior thereto) or (2) the first regular annual meeting occurring in the year immediately following the year in which such annual equity awards were granted. In addition, if a
non-employee
director ceases board service for any reason other than removal for cause before vesting in full of equity awards, then the director’s awards vest with respect to a
pro-rata
portion of the underlying shares (up to but not exceeding the number of unvested shares remaining subject to such awards) determined based upon the period of board service. Vesting of equity awards will cease, and unvested equity awards will lapse, upon a recipient’s removal for cause from board service.
Director Equity Retention Guidelines
Under equity retention guidelines implemented by the board in April 2016, each director is required to accumulate within five years from the later of the date the guidelines were implemented and the date of commencement of service for a new director, and thereafter to retain for the duration of board service, an amount of equity equal to five times the director’s base board cash compensation. Equity that counts toward the ownership requirement includes: (1) shares owned outright by the director or beneficially owned by the director by virtue of being held by a member of the director’s immediate family members residing in the same household or in a trust for the benefit of the director or his or her immediate family residing in the same household; (2) shares held in qualified plans or IRAs; (3) vested shares (or vested restricted stock units) deemed to be held in
non-qualified
plans; (4) the
in-the-money
portion of vested stock options (but not unvested stock options); and (5) unvested time-based restricted shares (or restricted stock units). Until the minimum level of company equity is achieved, a director is prohibited from selling or otherwise transferring beneficial ownership of more than
one-half
of: (a) the vested
after-tax
shares of our common stock obtained as a result of the vesting of any restricted stock or restricted stock unit award made after implementation of the equity retention guidelines; or (b) the shares of our common stock subject to the vested portion of any stock option award made after implementation of the equity retention guidelines, net of any shares surrendered or sold to cover exercise price and/or income tax resulting from the exercise.
2020 Director Compensation Table
The following table sets forth all compensation provided to our
non-employee
directors for 2020. The compensation for Mr. Barrett, our Chief Executive Officer, is described in the “Executive Compensation” section below. Mr. Barrett did not receive any compensation for his services as a director in 2020. In April 2020, the compensation committee approved a temporary 30% base salary reduction for the Board Cash Retainer in response to COVID-19 and the associated reduction in our workforce and cost-cutting initiatives. The Board Cash Retainers were reinstated in October 2020.
Name
  
Fees Earned
or Paid in
Cash ($)
(1)
   
Stock
Awards($)
(2)(3)
   
Option
Awards ($)
(2)(4)
   
Total ($)
 
Frank Addante
(5)
   —      —      —      —   
Paul Caine
(6)
  $85,000   $125,000    —     $210,000 
Lewis W. Coleman
(7)
   —      —      —      —   
Robert Frankenberg
  $59,500   $125,000    —     $184,500 
Sarah P. Harden
  $46,750   $125,000    —     $171,750 
Doug Knopper
(6)
  $56,100   $125,000    —     $181,100 
Rachel Lam
(6)
  $53,975   $125,000    —     $178,975 
James Rossman
(6)
  $55,250   $125,000    —     $180,250 
Robert F. Spillane
  $57,375   $125,000    —     $182,375 
Lisa L. Troe
  $62,475   $125,000    —     $187,475 
(1)
Consists of annual board retainer and fees for service as Chairman, a committee chair, committee member, or Lead Director, as the case may be. See the narrative disclosure above for a description of such fees.
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(2)
In accordance with the rules of the SEC, these amounts represent the aggregate grant date fair value of the stock awards and option awards granted to the
non-employee
directors during the fiscal year computed in accordance with ASC 718. Our equity awards valuation approach and related underlying assumptions for awards granted in 2020 are described in Note 2 “Organization and Summary of Significant Accounting Policies—Stock-Based Compensation” and Note 13 “Stock-Based Compensation” to the Consolidated Financial Statements in our Annual Report on Form
10-K.
The reported amounts do not necessarily reflect the value that may be realized by the
non-employee
director with respect to the awards, which will depend on future changes in stock value and may be more or less than the amount shown.
(3)
Stock awards consist of an annual award of 18,436 restricted stock units granted on July 8, 2020 to each director serving on our board at such time, with an aggregate grant date fair market value as described in footnote 2 of $125,000. As of December 31, 2020, the aggregate number of shares of our common stock covered by unvested stock awards held by each of our
non-employee
directors was as follows:
Frank Addante
—  
Paul Caine
18,436
Lewis W. Coleman
—  
Robert J. Frankenberg
18,436
Sarah P. Harden
56,200
Doug Knopper
18,436
Rachel Lam
18,436
Robert F. Spillane
18,436
Lisa L. Troe
18,436
James Rossman
18,436
(4)
As of December 31, 2020, the aggregate number of shares of our common stock covered by stock options held by each of our
non-employee
directors was as follows:
Frank Addante
—  
Paul Caine
—  
Lewis W. Coleman
—  
Robert J. Frankenberg
86,500
Sarah P. Harden
—  
Doug Knopper
—  
Rachel Lam
—  
Robert F. Spillane
86,500
Lisa L. Troe
86,500
James Rossman
36,066
(5)
Mr. Addante resigned from the Board effective April 1, 2020, at the closing of the Telaria Merger.
(6)
Ms. Lam and Messrs. Caine, Knopper and Rossman were appointed to the Board effective April 1, 2020, at the closing of the Telaria Merger.
(7)
Mr. Coleman resigned from the Board effective April 1, 2020, at the closing of the Telaria Merger.
Compensation Committee Interlocks and Insider Participation
Ms. Harden and Messrs. Knopper, Rossman, Frankenberg, Coleman and Spillane served on the company’s compensation committee during the last completed fiscal year. At the closing of our merger with Telaria on April 1, 2020, Mr. Knopper and Mr. Rossman were appointed to the board of directors and commenced service on the compensation committee, Mr. Spillane ceased serving as a member of the compensation committee and Mr. Coleman resigned as a member of the board of directors and member of the compensation committee. None of the
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members of the compensation committee is or has at any time been an officer or employee of the company. There are no interlocking relationships (and there were no such interlocking relationships during 2020) between our board of directors, executive officers or the compensation committee, on the one hand, and the board of directors, executive officers or the compensation committee of any other company, on the other hand.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Introduction
This Compensation Discussion and Analysis describes the compensation arrangements we had for 2020 with our “named executive officers,” as determined under the rules of the SEC and identified in the summary compensation table below.
Part IV
Name
Item 15.
Item 16.
Signatures
Michael G. Barrett
108
President and Chief Executive Officer
David L. Day
Chief Financial Officer
Thomas Kershaw
Chief Technology Officer
Katie Evans
Chief Operating Officer
Adam L. Soroca
Head of Global Buyer Team
2
Executive Summary
Financial and Business Highlights.
In 2020
,
we continued to demonstrate strong financial and strategic operational performance, building upon significant work in
re-calibrating
and accelerating the business over the past several years. Notable results include:
Increased revenue by over +40% to $221.6M (compared to $156.4M in 2019);

SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS; SUMMARY OF RISK FACTORS
ThisImproved our profitability and expanded our margins, including a significant increase in our adjusted EBITDA to $43.1M (compared to an adjusted EBITDA of $25.7M in 2019) (see page 54 of our Annual Report on Form 10-K and related statements by the Company contain forward-looking statements, including statements based upon or relatingOriginal Form
10-K
for a reconciliation of net income (loss) to our expectations, assumptions, estimates, and projections. In some cases, you can identify forward-looking statements by terms such as "may," "might," "will," "objective," "intend," "should," "could," "can," "would," "expect," "believe," "design," "anticipate," "estimate," "predict," "potential," "plan" oradjusted EBITDA);
Completed the negative of these terms, and similar expressions. Forward-looking statements may include, but are not limited to, statements concerning the proposed acquisition of SpotX, Inc. ("SpotX," and such proposed acquisition the "SpotX Acquisition") or the anticipated benefits thereof; completion of the proposed SpotX Acquisition on anticipated terms and timing; statements concerning the potential impacts of the COVID-19 pandemic on our business operations, financial condition, and results of operations and on the world economy; our anticipated financial performance; anticipated benefits or effects related to our completed merger with Telaria Inc. ("Telaria" and such merger the "Merger"); strategic objectives, including our focus(closed on connected television ("CTV"), mobile, video, header bidding, Demand Manager, identity solutions, and private marketplace opportunities; investments in our business; development of our technology; industry growth rates for ad-supported CTV and the shift in video consumption from linear TV to CTV; introduction of new offerings; the impact of transparency initiatives we may undertake; the impact of our traffic shaping technology on our business; the effects of our cost reduction initiatives; scope and duration of client relationships; the fees we may charge in the future; business mix and expansion of our CTV, mobile, video, and private marketplace offerings; sales growth; client utilization of our offerings; our competitive differentiation; our market share and leadership position in the industry; market conditions, trends, and opportunities; certain statements regarding future operational performance measures including ad requests, fill rate, paid impressions, average CPM, take rate, and advertising spend; benefits from supply path optimization; and other statements that are not historical facts. These statements are not guarantees of future performance; they reflect our current views with respect to future events and are based on assumptions and estimates and subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from expectations or results projected or implied by forward-looking statements.
Risks that our business face include, but are not limited to, the following:
we may not complete the acquisition of SpotX or realize the anticipated benefits of the SpotX Acquisition;
our proposed financing of the SpotX Acquisition will significantly increase our leverage, which may put us at risk of defaulting on our debt obligations and limit our ability to conduct certain activities;
the completion of the SpotX Acquisition will result in dilution to our stockholders;
the severity, magnitude, and duration of the COVID-19 pandemic, including impacts of the pandemic and of responses to the pandemic by governments, business and individuals on our operations, personnel, buyers, sellers, and on the global economy and the advertising marketplace;
our vulnerability to the depletion of cash resources as a result of impacts of the COVID-19 pandemic;
our CTV spend may grow more slowly than we expect if industry growth rates for ad supported CTV are not accurate, if CTV sellers fail to adopt programmatic advertising solutions or if we are unable to maintain or increase access to CTV advertising inventory;
we may not realize the anticipated benefits of the Merger;
we may be unsuccessful in our Supply Path Optimization efforts;
our ability to introduce new offerings and bring them to market in a timely manner, and otherwise adapt in response to client demands and industry trends;
uncertainty of our estimates and expectations associated with new offerings;
lack of adoption and market acceptance of our Demand Manager solution;
our technology development efforts may be inefficient or ineffective, or not keep pace with competitors;
we must increase the scale and efficiency of our technology infrastructure to support our growth;
the emergence of header bidding has increased competition from other demand sources and may cause infrastructure strain and added costs;
our access to mobile inventory may be limited by third-party technology or lack of direct relationships with mobile sellers;
we may experience lower take rates, which may not be offset by increase in the volume of ad requests, improvements in fill-rate, and/or increases in the value of transactions through our platform;
the impact of requests for discounts, fee concessions, rebates, refunds or favorable payment terms;
our history of losses, and the fact that in the past our operating results have and may in the future fluctuate significantly, be difficult to predict, and fall below analysts' and investors' expectations;
the effect on the advertising market and our business from difficult economic conditions or uncertainty;
the effects of seasonal trends on our results of operations;
3

we operate in an intensely competitive market that includes companies that have greater financial, technical and marketing resources than we do;
the effects of consolidation in the ad tech industry;
the growing percentage of online and mobile advertising spending captured by closed “walled gardens” (such as Google, Facebook, Comcast, and Amazon);
our ability to differentiate our offerings and compete effectively to combat commodification and disintermediation;
potential limitations on our ability to collect or use data as a result of consumer tools, regulatory restrictions and technological limitations;
the development and use of new identity solutions as a replacement for third-party cookies and other identifiers may disrupt the programmatic ecosystem and cause the performance of our platform to decline;
the industry may not adopt or may be slow to adopt the use of first-party publisher segments as an alternative to third-party cookies;
our ability to comply with, and the effect on our business of, evolving legal standards and regulations, particularly concerning data protection and privacy;
our ability to comply with industry self-regulation;
failure by us or our clients to meet advertising and inventory content standards could harm our brand and reputation and those of our partners;
our ability to attract and retain buyers and sellers of digital advertising inventory and increase our business with them;
the freedom of buyers and sellers to direct their spending and inventory to competing sources of inventory and demand;
the ability of buyers and sellers to establish direct relationships and integrations without the use of our platform;
our reliance on large aggregators of advertising inventory, and the concentration of CTV among a small number of large sellers that enjoy significant negotiating leverage;
our ability to 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;
our reliance on large sources of advertising demand, including demand side platforms ("DSPs") that may have or develop high-risk credit profiles or fail to pay invoices when due;
we may be exposed to claims from clients for breach of contracts;
errors or failures in the operation of our solution, interruptions in our access to network infrastructure or data, and breaches of our computer systems;
our ability to ensure a high level of brand safety for our clients and to detect "bot" traffic and other fraudulent or malicious activity;
our ability to access inventory with high viewability and completion rates;
the use of our net operating losses and tax credit carryforwards may be subject to certain limitations;
the possibility of adjustments to the purchase price allocation and valuation relating to the Merger;
our ability to raise additional capital if needed;
volatility in the price of our common stock;
the impact of negative analyst or investor research reports;
our ability to attract and retain qualified employees and key personnel;
costs associated with enforcing our intellectual property rights or defending intellectual property infringement and other claims;
failure to successfully execute our international growth plans; and
our ability to identify future acquisitions of or investments in complementary companies or technologies and our ability to consummate the acquisitions and integrate such companies or technologies.
We discuss many of these risks and additional factors that could cause actual results to differ materially from those anticipated by our forward-looking statements under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," and elsewhere in this report and in other filings we have made and will make from time to time with the Securities and Exchange Commission, or SEC, including Quarterly Reports on Form 10-Q for 2021. These forward-looking statements represent our estimates and assumptions only as of the date of the report in which they are included. Unless required by federal securities laws, we assume no obligation to update any of these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated, to reflect circumstances or events that occur after the statements are made. Without limiting the foregoing, any guidance we may provide will generally be given only in connection with quarterly and annual earnings announcements, without interim updates, and we may appear at
4

industry conferences or make other public statements without disclosing material nonpublic information in our possession. Given these uncertainties, investors should not place undue reliance on these forward-looking statements.
Investors should read this Annual Report on Form 10-K and the documents that we reference in this report and have filed or will file with the SEC completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
NOTE REGARDING THIRD-PARTY INFORMATION
This Annual Report on Form 10-K includes data that we obtained from industry publications and third-party research, surveys and studies. While we believe the industry publications and third-party research, surveys and studies are reliable, we have not independently verified such data. Such third-party data and our internal estimates and research are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in "Item 1A. Risk Factors" in this Annual Report on Form 10-K. These and other factors could cause results to differ materially from those included in this report.

5

PART I
Item 1. Business
Overview
Magnite, Inc., formerly known as The Rubicon Project, Inc. ("we," or "us"), provides technology solutions to automate the purchase and sale of digital advertising inventory.
On April 1, 2020, we completed a stock-for-stock merger with Telaria, Inc 2020), a leading provider of connected television ("CTV") technology, creating whatCTV technology; and
Completed the acquisition of SpotX, Inc. (closed on April 30, 2020), a leading platform shaping CTV and video advertising globally. Following the Telaria Merger and SpotX acquisition, we believe isthat we are the world'sworld’s largest independent omni-channel sell-side advertising platform, offering a single partner for transacting globally across all channels, formats and auction types.
On February 4, 2021, we entered into a Stock Purchase Agreement (the "SpotX Purchase Agreement") with RTL US Holding, Inc. ("RTL") to acquire 100% of the issuedtypes, and outstanding shares of capital stock of SpotX, Inc., a Delaware corporation, for a purchase price equal to $560 million in cash plus 14 million shares of the Company’s common stock. SpotX is one of the leading platforms shaping CTV and video advertising globally.We believe the acquisition will create the largest independent programmatic 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.The SpotX Acquisition is subject
Compensation Highlights.
Our compensation programs are designed to receiptsupport creation of regulatory approvalsstockholder value while maintaining our ability to recruit and satisfactionretain personnel. For 2020, the compensation committee took the following actions:
Approved increases to base salary or target cash incentive opportunities for named executive officers to reflect the larger scope and responsibilities after the closing of customarythe Telaria transaction and to provide better internal parity;
Approved annual long-term incentive grant values that were closer to competitive market levels of the larger combined company and awarded an additional retention-focused equity grant to Ms. Evans shortly following the closing conditionsof the Telaria transaction to recognize the criticality of her role in our success going forward;
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Implemented a performance-based equity program for the CEO’s grant in 2020 based on three-year relative total shareholder return (TSR) against the Russell 2000 index; the program requires being above median (55
th
percentile) to earn target payout and is expectedcapped at 100% payout if share price is negative during the performance period;
Due to closethe closing of the Telaria transaction in Q2 2020, the compensation committee implemented a bifurcated cash incentive program that included two separate
six-month
performance periods; this design allowed the compensation committee to establish
mid-year
goals for the combined company for the second half of the year; the full year cash incentive payouts were slightly below target (approximately 87% of target) driven by a significantly below target first half of the year due to the impact of the
COVID-19
pandemic (29.6% of target) and an above target second half of the year (144.4% of target).
CEO Pay and Performance (2017-2020).
The compensation committee’s pay actions during Mr. Barrett’s tenure reflect his leadership, deep industry experience, and a recognition that he was the right chief executive to lead the company through the successful execution of the business turn-around and leading the next phase of growth
.
Since joining in March 2017, Mr. Barrett has executed several strategic objectives, including removing
buy-side
fees and embracing open source and transparency, shifting the business towards header bidding, developing Demand Manager for publishers, and completing the merger with Telaria, and more recently acquiring SpotX;
The market’s response to these accomplishments continue to result in significantly outpacing the growth from other
ad-tech
peers and the Russell 2000; at the end of December 2020, we generated the following annualized returns for stockholders:
+56% (versus +10% for the Russell 2000) from March 2017 (Mr. Barrett’s hire date) through December 31, 2020;
+240% (versus +18% for the Russell 2000) from January 2, 2020 through December 31, 2020
In 2020, Mr. Barrett’s target pay levels increased to $4.1 million (from $3.7 million in 2019) which is based on Mr. Barrett’s base salary, target cash incentive amount and the grant date fair value of his equity awards to (i) recognize the stellar overall company performance through 2019 under Mr. Barrett’s leadership and (ii) provide a target total pay opportunity more closely in line with competitive market levels after the combination with Telaria and increased scope of Mr. Barrett’s role with a scaled company
2020 Compensation Actions in Response to
COVID-19.
In April 2020, the compensation committee approved a temporary 30% base salary reduction for the CEO and a temporary 30% Board Cash Retainer reduction for our Board of Directors in response to
COVID-19
and the associated reduction in our workforce and cost cutting initiatives. The CEO’s base salary and Board Cash Retainers were reinstated in October 2020 after our business had largely recovered from the initial effects of
COVID-19.
The compensation committee will continue to monitor and assess the impact of the global pandemic and may take action (if appropriate) to ensure outcomes align with overall performance, shareholder experience, and our underlying compensation philosophy. No other adjustments or modifications were made to the company’s incentive programs as a result of the
COVID-19
pandemic.
Consideration of 2020 Say on Pay Vote.
At our 2020 annual meeting of stockholders, stockholders showed support for our executive compensation program, with 91.6% of the votes cast approving the compensation paid to our named executive officers. After considering the results of the fiscal 2020
Say-on-Pay
advisory vote, the compensation committee determined that our practices remained appropriate. The Magnite compensation committee values the perspectives of our stockholders and continues to consider the results of
Say-on
-Pay
votes and stockholder feedback when reviewing our executive compensation program.
Executive Compensation Governance
. Our executive compensation program includes a number of features intended to reflect best practices in the second quartermarket and help ensure that the program reinforces our stockholders’ interests. These features are described in more detail below in this Compensation Discussion and Analysis and include the following:
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Table of 2021.Contents
Our platform features applications
What We Do:
What We Don’t Do:
✓  Provide a significant portion of CEO pay that is
“at-risk”
(87% of 2020 target direct compensation was based on financial or share price performance) (with target direct compensation determined based on the CEO’s annual base salary, target cash incentive amount, and the grant date fair value of his equity awards)
✓  Utilize a formulaic incentive structure in our annual incentive program and limit the use of discretion, as well as limit the maximum annual incentive payment to 150% of the target amount
✓  Maintain an ownership and holding requirement policy to encourage alignment with stockholders
✓  Incorporate performance-based equity for our CEO based on outperforming the market
✓  Employ a clawback policy to allow the company to recover any performance-based compensation later proven unearned
✓  Retain an independent compensation consultant to advise the compensation committee
✓  Consider feedback from stockholders as part of the compensation committee’s annual program review
×  No single-trigger change in control benefits
×  No
gross-ups
for change in control benefits
×  No discounted stock options or option
re-pricings
×  No excessive perquisites
×  No hedging of our equity securities
Executive Compensation Philosophy and servicesObjectives
The compensation committee conducts an annual review of our executive compensation program to help ensure that: (1) the program is designed to align the interests of our named executive officers with our stockholders’ interests by rewarding performance that is tied to creating stockholder value; and (2) the program provides a total compensation package for sellerseach of digital advertising inventory, or publishers,our named executive officers that ownwe believe is competitive and operate CTV channels, applications, websitesnecessary to attract and other digital media properties, to manage and monetize their inventory; applications and services for buyers, including advertisers, agencies, agency trading desks, and demand side platforms, ("DSPs"), to buy digital advertising inventory; and a transparent, independent marketplace that brings buyers and sellers together and facilitates intelligent decision making and automated transaction execution at scale. Our clients include many of the world’s leading buyers and sellers of digital advertising inventory. Our platform processes over 6 trillion ad requests per month allowing buyers access to a global, scaled, independent alternative to "walled gardens," who both own and sell inventory and maintain control on the demand side.retain talent.
We provideaccomplish these objectives by providing a full suite of tools for sellers to control their advertising businesstotal compensation package that includes three main components: base salary, annual performance-based cash awards and protect the consumer viewing experience. These controls are particularly important to CTV sellers who need to ensure a TV-like viewing and advertising experience for consumers.
Buyers leverage our platform to manage their advertising spending and reach their target audiences on brand-safe premium inventory, simplify order management and campaign tracking, obtain actionable insights into audiences for their advertising, and access impression-level purchasing from thousands of sellers.long-term equity-based awards. We believe that in order to attract and retain top executives, we need to provide them with compensation levels that reward their continued service. Some of the elements, such as base salaries and annual cash awards, are paid out on a short-term or current basis. Other elements, such as equity awards that are subject to multi-year vesting schedules and benefits provided upon certain terminations of employment, are paid out on a long-term basis. We believe this mix of short- and long-term elements allows us to achieve our scale, platform features,goals of attracting, retaining and omni-channel offering makesmotivating our top executives. We also, in certain cases, provide our named executive officers with certain relocation and other benefits in connection with their joining us.
In structuring executive compensation packages, the compensation committee considers how each component promotes retention and motivates performance. Base salaries, severance and other termination benefits are primarily intended to attract and retain highly qualified executives. These elements of our executive compensation program are generally not dependent on performance. Annual cash bonus opportunities provide further incentives to achieve performance goals specified by the compensation committee and long-term equity awards provide incentives to help create value for our stockholders and continue employment with us through specified vesting dates.
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Payment of our annual performance-based cash awards is solely contingent upon the achievement of financial performance metrics. The amount of compensation ultimately received for these awards varies with our annual financial performance, thereby providing additional incentives to achieve short-term or annual goals that we believe will maximize stockholder value over the long term.
We believe that by providing a significant portion of our named executive officers’ total compensation package in the form of equity-based awards, we are able to create an essential partnerincentive to build stockholder value over the long-term and more closely align the interests of our named executive officers to those of our stockholders. Our annual equity awards to the named executive officers for buyers.2020 consisted of performance shares (for the CEO only), stock options and restricted stock unit awards, which generally only vest if the executive remains employed with us through the vesting date.
Compensation Determination Process
The Company is headquarteredcompensation committee considers, determines, reviews, and revises all components of each named executive officer’s compensation. It may not delegate that responsibility. The compensation committee also has oversight of and consults with management regarding executive and
non-executive
employee compensation plans and programs, including administration of our equity incentive plans.
The compensation committee retains an independent executive compensation consultant, Semler Brossy Consulting Group, referred to as Semler Brossy, to provide input, analysis, and consultation about our executive compensation. During 2020, Semler Brossy’s work with the compensation committee included analysis, advice, and recommendations on total compensation philosophy; peer groups and market assessment and analysis; compensation program design, including program goals, components, and metrics; equity usage and allocation; compensation trends in Los Angeles, California with a presencecomparable business sectors and in New York, New York. We operate our business on a worldwide basis, with an established operating presence in North America, Australiathe general marketplace for senior executives; regulatory factors; and Europe,the compensation of the chief executive officer and a developing presence in Asia and South America. Our non-U.S. subsidiaries and operations perform primarily sales, marketing, and service functions.

COVID-19 Pandemic Impactthe other named executive officers, including advice on the Businessdesign of cash-based and equity-based compensation.
The COVID-19 pandemic
Semler Brossy reports directly and resulting global disruptions negatively affected our revenue, results of operations, cash flows, and financial condition. Our business depends on the overall demand for advertising and on the economic health of our current and prospective sellers and buyers. In responsesolely to the pandemiccompensation committee and associated economic challenges, a significant numberperforms compensation consulting services for the compensation committee at its request. Semler Brossy is not engaged to perform services directly for our management. The compensation committee has concluded that no conflict of advertisers, in particularinterest exists with respect to certain categoriesits engagement of advertisingSemler Brossy nor are there other factors that were particularly impactedwould adversely impact Semler Brossy’s independence in advising the compensation committee under applicable SEC and Nasdaq rules. The compensation committee reached this conclusion after considering the following six factors, as well as Semler Brossy’s views regarding its independence and other information the compensation committee deemed relevant: (i) the provision of other services to us by Semler Brossy; (ii) the amount of fees received from us by Semler Brossy, as a percentage of the total revenue of Semler Brossy; (iii) the policies and procedures of Semler Brossy that are designed to prevent conflicts of interest; (iv) any business or personal relationship of the Semler Brossy consultants with a member of the compensation committee; (v) any of our stock owned by the pandemicSemler Brossy consultants; and resulting stay-at-home orders, reduced(vi) any business or personal relationship of the Semler Brossy consultants or Semler Brossy with any of our executive officers.
Executive officers do not propose or seek approval for, or have any decision-making authority with respect to, their advertising budgets, resultingown compensation. The chief executive officer makes recommendations to the compensation committee on the base salary, annual incentive cash targets, and equity awards for each named executive officer other than himself, based on his assessment of each executive officer’s performance during the year and other factors, including compensation survey data and input from Semler Brossy.
Performance reviews for the chief executive officer and other named executive officers include factors that may vary depending on the role of the individual officer, including strategic capability—how well the executive officer identifies and develops relevant business strategies and plans; execution—how well the executive officer executes strategies and plans; and leadership capability—how well the executive officer leads and develops the organization and its people. The compensation committee conducts an annual performance review of the chief executive officer to evaluate the company’s performance, his performance and the performance of the management team and considers this review in determining the chief executive officer’s base salary, annual performance-based cash incentive target, and equity awards.
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We have engaged in discussions regarding our compensation philosophy with several of our large stockholders, and we intend to engage in further compensation-related discussions from time to time at such stockholders’ request. Additionally, at our 2021 annual meeting, stockholders will have an overall decreaseopportunity to cast an advisory vote to approve the compensation programs of our named executive officers, referred to as the
Say-On-Pay
Vote.
Peer Group Compensation Assessment
The compensation committee works with Semler Brossy periodically to select a peer group of companies in advertising spend through our platform comparedindustry to assist the committee in making its compensation decisions. Although the compensation committee reviews and discusses the peer company compensation data provided by Semler Brossy to help inform its decision-making process, the compensation committee does not set compensation levels at any specific level or percentile against the peer group data. The peer company data is only one point of information taken into account by the compensation committee in making compensation decisions.
In July 2019, and prior to the announced Telaria transaction, the compensation committee, with assistance from Semler Brossy, reviewed peer group companies and determined that for 2020 several peers were too large and had substantially different market multiples than the legacy Rubicon Project organization at the time. The assessment led to the removal of five companies (AppFolio, Five, Qualys, QuinStreet and Quotient Technology) and the addition of three new companies (Cardlytics, EverQuote and Fluent). The added companies were selected based on several criteria, including being similar in size, favoring companies based in California or New York, and having a reasonably comparable business.
Fiscal 2020 Peer Group
Cardlytics, Inc.
Marchex, Inc.TechTarget, Inc.
ChannelAdvisor Corporation
MobileIron, Inc.Telaria Inc.
Digital Turbine, Inc.
Model N, Inc.Telenav, Inc.
EverQuote, Inc.
PROS Holdings, Inc.The Trade Desk, Inc..
Fluent, Inc..
SPS CommerceTrueCar, Inc.
Leaf Group Ltd.
Synacor, Inc.Varonis Systems
In early 2020, and following the announcement of the Telaria transaction, Semler Brossy determined that the peer group (excluding Telaria) continued to remain appropriate when establishing 2020 pay levels due to balanced relative positioning around median on several key metrics and recommended that the committee
re-assess
the peer group in July 2020 to reflect the
go-forward
combined company.
Current Executive Compensation Program Elements
The current elements of our executive compensation program are:
base salaries;
annual performance-based cash awards;
equity-based incentive awards; and
certain additional employee benefits.
We strive to achieve an appropriate mix between the various elements of our compensation program to meet
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our compensation objectives and philosophy; however, we do not apply any rigid allocation formula in setting our named executive officers’ compensation, and we may make adjustments to this approach for various positions after giving due consideration to prevailing circumstances.
As discussed throughout this Compensation Discussion and Analysis, the compensation policies and programs applicable to our pre-COVID expectations. This decrease was particularly pronounced throughnamed executive officers reflect our emphasis on aligning the interests of our executive officers with our stockholders’ interests in enhancing our value over the long term. Applying this philosophy, a significant portion of overall compensation opportunities offered to our named executive officers is in the form of (i) equity-based compensation with a value directly linked to our stock price and (ii) annual performance-based cash awards contingent upon achievement of measurable financial objectives.
Base Salaries
Base salaries for our named executive officers are designed to be competitive when compared with similarly situated executives within our peer group, and are based on a variety of factors, including level of responsibility, performance, and the recommendations of the chief executive officer for named executive officers other than the chief executive officer. Base salaries are reviewed annually or at the time of promotion or other changes in responsibilities. In determining whether to award base salary increases, the compensation committee considers our overall business outlook, our budget, the executive’s individual performance, historical compensation, market compensation levels for comparable positions, internal pay equity, and other factors, including any retention concerns.
After consideration of the data from the peer group described above and the other factors described in the preceding paragraph, the compensation committee increased incumbent named executive officers’ base salaries in March 2020 which are described in the table below. Mr. Kershaw received a +17.6% increase to reflect the increased scale of his role and responsibility for the combined
go-forward
entity and Mr. Soroca received a +15.4% increase based on market positioning and a desire to achieve better internal pay equity amongst other peers.
Name
  
2019 Annual
Base Salary
   
2020 Annual
Base Salary
   
Percent Increase
(%)
Michael Barrett
  $515,000   $550,000   6.8%
David Day
  $400,000   $430,000   7.5%
Thomas Kershaw
  $425,000   $500,000   17.6%
Katie Evans
  $390,000   $400,000   2.6%
Adam Soroca
  $325,000   $375,000   15.4%
Annual Performance-Based Cash Awards
Our named executive officers are eligible to receive cash incentive payments under our Executive Cash Incentive Plan, referred to as the Executive Bonus Plan, which is administered by our compensation committee. The amount of cash incentive payments under the Executive Bonus Plan is determined based upon the achievement of
pre-established
corporate financial objectives that the compensation committee believed were challenging yet achievable.
For 2020, given that the Telaria Merger occurred in Q2 2020, and considering challenges setting goals during initial integration, the compensation committee approved a bifurcated structure for the 2020 Executive Bonus Plan with independent goals set for each of the first half of the fiscal year where we experienced a significant decline in our revenues compared to our expectations. Our revenue trends improved significantly during(“1H20”) and second half of the third and fourth quartersfiscal year (“2H20”). The first half of 2020, as our revenue returned1H20, was measured from January to positive growth.
In addition to the United States, we have personnel and operations in the United Kingdom, Canada, France, Australia, New Zealand, Germany, Italy, Japan, Singapore, and Brazil, and eachJune of these countries has been affected by the pandemic and taken measures to try to contain it. Our global workforce maintained a work from home policy2020. The named executive officers were measured against legacy Rubicon Project 1H20 targets (or legacy Telaria 1H2020 targets for the entirety of the second quarter through year-end 2020 and this policy is expected to continue in the foreseeable future for the majority of our employees. We believe that our employees have been able to work productively during the time period in which our global offices have been shut down. However, to the extent we have extended work from home requirements, or that work patterns are permanently altered, it is unclear how productivity may be impacted in the long-term. We intend to approach returning to our
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officesMs. Evans), with caution and to prioritize the safety and health of our employees, while following the guidance set by local authorities and our landlords.
The economic health of our current and prospective buyers also impacts the collectability of our accounts receivable. Although our liquidity has not been significantly affected by the effects of COVID-19 to date, any downturn in economic conditions in the future may severely impact our liquidity as we may need additional time to collect from buyers, which may impact our ability to pay sellers.
Due to the substantial uncertainties associated with the COVID-19 pandemic, the extent to which the pandemic (and actions taken in response to it by governments, businesses, and individuals) will ultimately impact our business is currently unknown, and depends on various factors, many of which are outside of our control. Refer to Item 1A. "Risk Factors" for additional information related to this risk.

Industry Trends
Continued Shift Toward Digital Advertising
Consumers are rapidly shifting their viewing habits towards digital mediums and expect to be able to consume content seamlessly across multiple devices, including computers, tablets, smartphones, and CTVs whenever and wherever they want. Several factors, including the availability of high-speed broadband and mobile network infrastructure, penetration of internet-connected devices, a proliferation of online content sellers and a behavioral shift towards online and on demand viewing are driving robust growth in digital content consumption. The shift to digital has created opportunities for buyers and sellers of advertising inventory to improve return on advertising investment by using data to more accurately target and measure campaigns. As digital content consumption continues to proliferate, we believe the percentage of advertising dollars spent through digital channels will continue to grow.
Automation of Buying and Selling
Due to the size and complexity of the advertising ecosystem and purchasing process, manual processes cannot effectively manage digital advertising inventory at scale. In addition, both buyers and sellers are demanding more transparency, better controls and more relevant insights from their advertising inventory purchases and sales. This has created a need for software solutions, known as programmatic advertising, that automate the process for planning, buying, selling and measuring digital advertising across screens. Programmatic buying enables the use of real-time bidding technology that allows for the dynamic purchase and sale of advertising inventory on an impression-by-impression basis, which includes direct sale of premium inventory to a buyer, which we refer to as private marketplace ("PMP"), and open auction bidding, where buyers bid against each other in real-time auction for the right to purchase a publisher's inventory, which we refer to as open marketplace ("OMP"). Programmatic transactions complement a publisher’s direct sales force by enabling them to automate their sales process and improve workflow capabilities to increase productivity. These transactions also create additional revenue opportunities by enabling buyers and sellers to directly communicate and share data to deliver more valuable targeted advertising. Programmatic has become the dominant method of transacting for desktop and mobile inventory and we expect it to continue to grow as a percentage of CTV advertising.
Convergence of TV and Digital
We expect CTV to be a significant driver of our revenue growth. CTV refers to the viewing of digital content on internet connected televisions, including through stand-alone streaming devices, gaming consoles and smart TV operating systems.
CTV viewership is growing rapidly and the pace of adoption is accelerating the transition of linear television to CTV programming. According to a November 2020 poll conducted by the Interactive Advertising Bureau, approximately 60% of US advertisers planned to shift ad dollars from linear TV to either CTV or OTT in 2021. eMarketer forecasted that advertisers will spent an additional $1.16 billion on programmatic CTV video ads in 2020 compared with 2019, and incremental spending in 2021 will increase to $2.37 billion. The adoption of CTV has disrupted the traditional linear TV distribution model, as eMarketer estimates that approximately 31.2 million U.S. households have "cut-the-cord" (i.e., canceled a pay TV service and continued without it) as of the end of 2020, and this number is expected to increase to close to 50% of all U.S. households by the end of 2024. This disruption has created new options for consumers and new economic opportunities for content sellers to compete with traditional linear TV.
Despite the growth in CTV viewership, the CTV advertising market, in particular programmatic advertising, is still in its early stages. Historically, the largest streaming applications have been subscription-based, and CTV sellers with ad-supported models have been slower to adopt programmatic solutions compared to desktop and mobile sellers due to a variety of technical and business reasons.
As the number of CTV channels continues to proliferate, we believe that ad-supported models or hybrid models that rely on a combination of subscription fees and advertising revenue will continue to gain traction. Furthermore, as the CTV
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market continues to mature, we believe that a greater percentage of CTV advertising inventory will be sold programmatically, similar to trends that occurred in desktop and mobile.
Although the COVID-19 pandemic caused temporary headwinds related to demand challenges, we believe that the pandemic and resulting shelter-in-place orders have accelerated these positive long-term CTV trends. With people spending more time at home, we have seen a large increase in viewership on CTV. This increase in viewership has the potential to create long-term changes in viewing habits. Many CTV providers have committed to significant increases in investment in quality content, which we believe will further drive increases in viewership. At the same time, macroeconomic challenges are driving consumers away from pay subscriptions towards ad supported models. Prolonged macroeconomic challenges may lead CTV advertisers and sellers to more readily embrace programmatic advertising as they look to create economic efficiencies and reduce costs.
We believe that as streaming continues to become mainstream and ad supported models become more prevalent, brand advertisers that look to engage with streaming viewers will continue to shift their budgets from linear to CTV. As such, we expect CTV to be a significant driver of our revenue growth for the foreseeable future. We expect the pending acquisition of SpotX to further fuel this growth.
Identity Solutions
A number of participants in the advertising technology ecosystem have taken or are expected to take action to eliminate or restrict the use of third-party cookies and other primary identifiers that have historically been used to deliver targeted advertisements. For instance, Google has announced plans to fully eliminate the use of third-party cookies by January 2022, while Apple has further restricted the use of mobile identifiers on its devices. 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. 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, and we are already enabling sellers to create audience segments with their first-party data. In addition to actively working with sellers to develop solutions that could leverage their first party data, we are leading efforts through Prebid.org, with industry support, to create standardized open identity solutions that ensure a smooth transition to a cookieless environment, and offer an alternative to proprietary solutions. Prebid.org is an independent organization that we co-founded, which is dedicated to promoting fair, transparent open source solutions for the programmatic ecosystem. We are also participating in the Wc3 Web standards initiatives, which are being led by Google Chrome, to create anonymized advertising segments. We have contributed several product and design ideas to this process and expects to start production prototypes in the first half bonus payout based on H1 results. The second half of 2021. Finally, we are also actively supporting single sign-on initiatives such as Universal ID 2.0 (UID) and other industry efforts.
We support industry privacy initiatives and believe that2020, 2H20, was measured from July to December 2020 with goals set in July 2020 based on combined company results. The company did not make any adjustments to the next generationcash incentive program or outcomes due to
COVID-19
but did consider the impact of identity solutions need to be open and ubiquitous, with consumer privacy, transparency and control at the core. We further believe that these solutions will ultimately lead to greater trust and consumer confidence in digital advertising, which will be positive
COVID-19
when establishing goals for the advertising ecosystem in the long term. In the short term, however, these changes could create some variability in our revenue across certain buyers or sellers, depending on the timing of changes and developed solutions.
Supply Path Optimization
Supply Path Optimization ("SPO") refers to efforts by buyers to consolidate the number of vendors with which they work to find the most effective and cost-efficient paths to procure media. SPO is important to buyers because it can increase the proportion of their advertising ultimately spent on working media, with the goal of increasing return on their advertising spending, and can help them gain efficiencies by reducing the number of vendors with which they work in a complex ecosystem. We believe we are well positioned to benefit from SPO in the long run as a result of our transparency, our broad and unique inventory supply across all channels and formats, including CTV, buyer tools, such as traffic shaping that reduce the cost of working with us, and our brand safety measures.
Header Bidding and Data Processing
Header bidding is a programmatic technique by which sellers offer inventory to multiple ad exchanges and supply side platforms, such as our platform, simultaneously. Header bidding has been rapidly adopted in recent years in the desktop and mobile channels, and while the rise and rapid adoption of header bidding increased revenue for sellers, it has also created new challenges and technical complexities. Header bidding has led to a significant increase in the number of ad impressions to be processed and analyzed through our platform as well as by DSPs, which can lead to increased costs if not properly addressed.2H20.
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We have invested
In March 2020, the compensation committee approved modest increases to target annual bonuses for Mr. Day and Mr. Kershaw in technology solutionsorder to help manage the increased infrastructure costs of header-bidding while increasing our access to valuable seller inventory.

How We Generate Revenue
We generate revenue from the use of our platform for the purchase and sale of digital advertising inventory. We also generate revenue from the fee we charge clients for use of our Demand Manager product, which generally is a percentagebetter internally align members of the client's advertising spending on any advertising marketplace.senior leadership team. The increases to target annual bonuses, effective April 1, 2020, were as follows:
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 volume of paid impressions
Name
  
2019 Annual
Target
% of Base Salary
  
2020 Annual
Target
% of Base Salary
 
Michael Barrett
   100  100
David Day
   65  70
Thomas Kershaw
   65  70
Katie Evans
   75  75
Adam Soroca
   70  70
1H20 legacy Rubicon Project performance was measured as a percentage of ad requests isagainst two financial goals: revenue and adjusted EBITDA less capital expenditures, referred to as fill rate.capex, with each goal given equal weight. 2H20 Magnite performance was measured against three financial goals: revenue (weighted 35%), CTV revenue (weighted 15%) and adjusted EBITDA less capex (weighted 50%). The price that buyers pay for each thousand paid impressions purchased is measured in units referredcompensation committee chose these financial metrics because they represent objectively determinable financial targets and focused the company on goals important to as CPM, or cost per thousand.
The total volumeMagnite’s success after the transaction. For a description 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 remithow we calculate adjusted EBITDA, see 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 between us and the seller and the clearing price
“Non-GAAP
Financial Measures” section of the winning bid. We also refer to revenue divided by advertising spend as our take rate.

Magnite: Competitive Strengths of Our Platform. Key competitive strengths of our platform include:
Leadership in CTV
Our platform has been strategically built to meet the unique requirements of CTV sellers. Many of these sellers have their roots in linear television and it is important that established business practices in television advertising can be translated to programmatic CTV advertising. For instance, our "ad-pod" feature provides long-form content sellers with a tool analogous to commercial breaks in traditional linear television, so that they can request and manage several ads at once from different demand sources, in a single ad-pod. In addition, we provide dynamic ad insertion to serve live streaming events, audio normalization tools to control for the volume of an ad relative to content, frequency capping to avoid exposing viewers to repetitive ad placements, and creative review so that a publisher can review and approve the ad units being served to its properties.
We have invested significant time and resources cultivating relationships with CTV sellers and have built a specialized team of CTV experts across our engineering and sales functions to support our clients and evangelize the benefits of CTV advertising. In addition, for certain larger CTV sellers, we may build custom features or functionality to help drive deeper adoption.
Scaled Omni-Channel Platform
We offer a scaled omni-channel platform that brings value to both buyers and sellers of ad inventory. For buyers, we offer a single omni-channel partner to reach target audiences globally across all channels, including CTV, mobile, desktop, and digital out-of-home, and formats, including video, display, and audio. For sellers, we partner as a one stop shop where they can sell digital advertising across all of their properties, regardless of device or format, and gain instant access to the world’s largest automated digital advertising buyers with the flexibility to sell their advertising inventory in an automated fashion on an impression-by-impression basis. We believe large numbers of diverse sellers on our platform attract more buyers and vice versa, resulting in a self-reinforcing network effect that adds value for all our clients and creates a stickier platform solution.
Private Marketplace Solutions
A significant portion of premium inventory is purchased and sold through PMPs, in particular with respect to CTV. Some sellers will continue to rely on their own sales forces for sales of premium inventory, but will benefit from automation to better price, match, and place campaigns, and to automate manual operations such as ad trafficking, quality assurance, and billing and collections. Our capabilities support sales functions rather than replacing them, which eliminates friction in the sales process. Buyers and sellers can also leverage their first-party data assets and third-party data assets in our platform to increase the value of sellers' inventory and the precision of buyers' targeting efforts.
Big Data Analytics and Machine-Learning Algorithms; Bid Filtering
A core aspect of our value proposition is our big data and machine-learning platform that is able to discover unique insights from our massive data repositories. Our systems collect and analyze a myriad of information such as historical clearing prices, bid responses, buyer preferences, ad formats , user location, buyer audience preferences, how many ads the user has
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seen, browser or device information, and sellers’ first party data about users. Our access to data puts us in a unique position to develop differentiated insights to help both buyers and sellers. Our solution is constantly self-improving as we process more volume and accumulate more data, which in turn helps make our machine-learning algorithms more intelligent and contributes to higher-quality matching between buyers and sellers. This data also fuels our bid filtering technology, allowing us to more aggressively block traffic that is not likely to monetize. We believe that our traffic optimization coupled with bid filtering improves return on investment for buyers and increases revenue for sellers, which in turn attracts more buyers and sellers to our platform creating a dual network effect that makes our platform stickier. These capabilities also help us manage the costs associated with the high volumes of ad requests we receive.
Identity Solutions
We offer identity solutions that help buyers and sellers create better matches and increase advertising ROI and the value of the underlying impression.Our tools enable sellers to create audience segments based on first-party data, which makes their advertising inventory more valuable to buyers looking to achieve specific campaign goals.In addition, our technology is integrated with a number of third party data, attribution and identity vendors, allowingbuyers and sellers to leverage these solutions directly through our platform without the need for multiple vendor contracts.
Header Bidding and Demand Manager Solutions
We are integrated with all of the major header-bidding standards, including Prebid.org, which we co-founded, as well as the solutions offered by Google and Amazon. We believe the various header bidding alternatives we offer, our buyer reach and scale, our buying efficiency, and our machine-learning capabilities put us in a strong position to compete for seller impressions monetized through header-bidding solutions, and we expect these header bidding solutions to deliver a meaningful volume of impressions. We have also launched Demand Manager, a software solution that helps desktop and mobile sellers manage all of their header-bidding advertising inventory, regardless of who wins the impression, for a fee based on a percentage of that advertising spending. We believe that adoption and proliferation of these tools will further strengthen our relationship with sellers and contribute to our future revenue growth.
Transparency and Controls
We generate revenue each time an impression is monetized on our platform based on a simple and transparent fee structure established with our publisherpartners, and do not collect any fees directly from buyers.Our clients direct the sale and management of ad inventory through our platform, including the ability to define supply hierarchies and demand tiers, set minimum price floors, and establish advertiser and category level blocked and allowed lists.We provide sellers with detailed analytics, which allows them to effectively monitor buying patterns and make real-time changes to take advantage of market dynamics and maximize their yield.
Self-Service Model
We offer a self-service model that lets sellers access our platform without extensive involvement by our personnel.This model allows us to scale efficiently and grow our business at a faster pace than the growth of our sales and support organization. As a result, we are able to achieve a high degree of operating leverage, which positions our business for growing profitability.
Buyer Tools
We have a suite of buyer tools designed to improve ROI for buyers and help them meet their campaign strategies.Our Direct Connect offering allows agency holding companies and major brands to create their own private label marketplaces and establish direct connections with sellers through our platform, while our custom auction packages provide buyers with a versatile and cost effective way of curating and targeting open market inventory based on categories such as audience, context, and viewability.In addition, our innovative bid shading technology, Estimated Market Rate, helps buyersbid more effectively in a first price auction environment.
Independence
We are fully aligned with the interests of our publisher clients. Unlike some large industry participants, we do not have our own media properties that compete for advertising spending with our sellers. Therefore, we are agnostic and have no preference towards delivering demand to any specific publisher.In addition, because we do not offer a demand side platform, we are able to avoid inherent conflicts of interest that exist when serving both the buy- and sell-side.

Magnite: Growth Strategies. The key elements to our long-term growth strategy include:
Focus on CTV
We expect CTV to be the biggest driver of our growth. As streaming video continues to become mainstream and ad-supported models become more prevalent, we believe brand advertisers will continue to shift their budgets from linear
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television to CTV. We plan to invest significant resources in technology, sales and support related to our CTV growth initiatives. Consistent with this growth objective, on February 4, 2021, we entered into an agreement to acquire SpotX, a leading platform shaping CTV and video advertising globally. We expect the pending SpotX Acquisition to accelerate our CTV growth.
Supply Path Optimization
As described above, SPO refers to efforts by buyers to consolidate the number of vendors with which they work to find the most effective and cost-efficient paths to procure media. We believe we are well positioned to benefit from SPO due to the factors described above and that it presents an opportunity for us to capture market share and increase the volume of advertising spend on our platform. To capitalize on SPO opportunities, we have invested in our buyer focused sales team to pursue more direct relationships with advertisers and agencies.
Identity Solutions
As described above, 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. As the largest independent supply side platform, we believe we are well positioned to take a leadership position in driving open identity solutions that will benefit buyers and sellers on our platform.
Increase Efficiencies on our Exchange
We aim to increase the operational efficiency of our platform, so as to enable buyers and sellers to achieve their campaign and monetization objectives in a cost-effective manner. Our solution is constantly self-improving as we process more volume and accumulate more data, which in turn helps make our machine-learning algorithms more intelligent and contributes to higher quality matching between buyers and sellers. We are continuing to invest in traffic optimization and bid filtering technology to allow us to monetize a higher proportion of the ad requests on our platform, which reduces costs for us as well as the process costs for buyers. We believe these cost savings make our platform more attractive to buyers, which in turn improves revenue opportunities for sellers.
Increasing Seller Inventory
In order to increase the transaction volume on our platform we are continuously looking to add new high quality sellers to our platform. In addition, we are seeking to expand our existing relationships with sellers to increase our share of their inventory, in particular in the CTV and OTT space where inventory is controlled by fewer sellers. Our plan for increasing our inventory volumes includes establishing and deepening our direct relationships with sellers, including through custom integrations, expanding our seller tools, capitalizing on our omni-channel capabilities and leveraging our header bidding integrations, including through Demand Manager.
Expand our International Footprint, Especially in Asia and South America
With established operating presence in North America, Australia and Europe, and a developing presence in Asia and South America, we serve buyers and sellers on a global basis. We plan to continue to expand our international presence and make additional investments in sales, marketing and infrastructure to support our long-term growth and to position ourselves for expected increases in the penetration of programmatic advertising globally. We expect programmatic advertising to grow at different rates in different geographic markets, and are constantly evaluating new markets with a strategy to use our existing infrastructure and adjacent sales offices or by expanding our infrastructure footprint and placing personnel directly in those markets.
Continue to Innovate and Enhance our Platform
We are working on a number of platform innovations and enhancements designed to improve the value to our clients. We intend to invest in new features that facilitate the creation of first-party publisher segments, improve upon our traffic optimization and bid filtering, enhance our brand safety controls, and help sellers to optimize their yield. For example, we recently launched the open beta of Unified Decisioning, which gives sellers the tools and controls to define when and how direct sold and programmatic demand should compete. The solution works alongside all major ad servers so that the optimal ad set is chosen taking into consideration both direct and programmatic deal priority and yield while ensuring publisher’s business rules, including frequency capping and competitive separation, are enforced.

Technology and Development
To support a majority of our non-CTV transactions, we have developed a globally distributed infrastructure hosted at data centers in the U.S., Europe, and Asia that run our proprietary software. Our CTV transactions run primarily on a cloud-based infrastructure. These two approaches optimize the type of traffic we handle - hosted data centers for high-frequency, low-
11

latency transactions and cloud-supported for lower frequency transactions subject to more volatile viewing patterns, for example CTV prime-time viewing spikes.
Our approach supports the volume, diversity, and complexity of buyers’ bidding patterns, which increases market liquidity. Bid efficiency algorithms provide bid prediction (i.e., which buyers are most likely to bid on a given impression) and throttling (i.e., the volume of bid requests a given buyer can process), to improve infrastructure load and execute transactions efficiently by only sending bid requests to those buyers of advertising inventory who can handle the volume and are likely to respond.
This infrastructure is supported by real-time data pipelines, a system that quickly moves volumes of data generated by our business into reporting and machine-learning systems that allow usage both internally and by buyers and sellers. It also is supported by a 24-hour Network Operations Center, which provides failure protection by monitoring and rerouting traffic in the event of equipment failure or network performance issues between buyers and our marketplace, and our core technology and development team, which is responsible for the design, development, operation, and maintenance of our platform, and employs an agile development process that emphasizes frequent, iterative, and incremental development cycles.
We believe that continued investment in our platform, including its technologies and functionalities, is critical to our success and long-term growth.

Sales and Marketing
We market our solution to buyers and sellers through a global sales teams that operate from various locations around the world. These teams leverage market knowledge and expertise to demonstrate the benefits of advertising automation and our solution to buyers and sellers. We deploy a professional services team with each seller integration to assist sellers in getting the most value from our solution. Our client services teams work closely with clients to support campaigns. Our buyer team focuses on the unique challenges and priorities of buyers and is separately managed in order to properly represent this important client group. Our marketing initiatives are focused on managing our brand, increasing market awareness, and driving advertising spend to our platform. We often present at industry conferences, create custom events, and invest in public relations. In addition, our marketing team advertises online, in print, and in other forms of media, creates case studies, sponsors research, writes whitepapers, publishes marketing collateral, generates blog posts, and undertakes client research studies.

Competition
Our industry is highly competitive. Overall digital advertising spending is highly concentrated in a small number of very large companies that have their own inventory, including Google, Facebook, Comcast, Verizon, AT&T and Amazon, with which we compete for digital advertising inventory and demand. These companies are formidable competitors due to their huge resources and direct user relationships, and will become even more dominant as third-party cookie use decreases. Despite the dominance of large companies, there is still a large addressable market that is highly fragmented and includes many providers of transaction services with which we compete, including supply side platforms, or SSPs, and advertising exchanges. As we introduce new offerings, as our existing offerings evolve, or as other companies introduce new products and services, we may be subject to additional competition. 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. There are many ways for buyers and sellers of digital advertising inventory to connect and transact, including directly and through many other exchanges, and buyers are increasingly demanding more transparency and lower transaction costs and establishing relationships directly with sellers of advertising inventory, which puts significant pressure on us. Our offering must remain competitive in scope, ease of use, scalability, speed, data access, price, inventory quality, brand security, customer service, identity protection and other technological features that help sellers monetize their inventory and buyers increase the return on their advertising investment. While our industry is evolving rapidly and becoming increasingly competitive, we believe that our solution enables us to compete favorably on these factors. In addition, we believe we enjoy a number of competitive strengths, as further detailed above.

Human Capital: Our Team and Culture
Our team draws from a broad spectrum of experience, including data science, machine-learning algorithms, infrastructure, software development, and from experienced leadership on the seller and buyer sides, including CTV, mobile
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and video. In addition to the United States, we have personnel and operations in the United Kingdom, Canada, France, Australia, New Zealand, Germany, Italy, Japan, Singapore, and Brazil in order to service buyers and sellers on a global scale.
Culture
We strive to build a culture that is high-performing and results-oriented while emphasizing transparency, collaboration and innovation. Our recruitment team seeks individuals that are committed to seeing the big picture and being catalysts of change. We ask our employees to empower others, make a difference and ensure our company is an exciting place to work, not just a "job."
Diversity, Equity and Inclusion
Our Magnify Council is focused on enhancing diversity, equity and inclusion. Our objectives, through the support of the Magnify Council, are to create "the best" employee experience, continually deploy programs to develop diverse talent, and support external partners that emphasize the global promotion of diversity, equity and inclusion.
Talent Retention
We reward team and individual excellence and are committed to creating an exceptional workplace environment in which we seek feedback from our employees in annual engagement surveys. We believe in continual feedback on performance. Our employees set goals at a regular cadence throughout the year and managers provide achievement ratings. Additionally, we routinely analyze voluntary employee turnover to understand and address trends. We give equity to our employees to promote alignment and ownership.
Employee Wellness and Safety
Due to the COVID-19 pandemic, our global workforce maintained a work from home policy for the entirety of the second, third, and fourth quarters of 2020 and is expected to continue in the foreseeable future for the majority of our employees. We believe that our employees have been able to work productively during the time period in which our global offices have been shut down. However, we recognize that stressful circumstances require us to provide additional care for our employees. In 2020, we introduced quarterly mental health days, deployed a global employee assistance program, and a digital platform with access to live classes and discussions supporting wellness.
Conduct
We are committed to promoting high standards of honest and ethical business conduct and compliance in alignment with our cultural values. We do not tolerate harassment or discrimination. Our employees are required to take annual harassment and discrimination training as well as acknowledge our Code of Business and Ethics Policy.
As of December 31, 2020, we had 569 full-time employees.

Our Intellectual Property
Our proprietary technologies are important and we rely upon trade secret, trademark, copyright, and patent laws in the United States and abroad to establish and protect our intellectual property and protect our proprietary technologies.
We have several issued patents and pending patent applications, some of which may ultimately be abandoned if we determine that the cost of prosecution or maintenance does not justify the utility of receiving the patent. None of these patents has been litigated and we are not licensing any of the patents, and we do not believe that any individual patent or patent application is material to our business. Their importance to our business is uncertain and there are no guarantees that any of the patents will serve as protection for our technology or market in the United States or any other country in which an application has been filed.
We register certain domain names, trademarks and service marks in the United States and in certain locations outside the United States. We also rely upon common law protection for certain trademarks. We generally enter into confidentiality and invention assignment agreements with our employees and contractors, and confidentiality agreements with parties with whom we conduct business, in order to limit access to, and disclosure and use of, our proprietary information. We also use measures
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designed to control access to our technology and proprietary information. We view our trade secrets and know-how as a significant component of our intellectual property assets, which we believe differentiate us from our competitors.
Any impairment of our intellectual property rights, or any unauthorized disclosure or use of our intellectual property or technology, could harm our business, our ability to compete and our operating results.

Client Dynamics
Sellers
Sellers own or operate media properties, websites and applications through which advertisements can be delivered to consumers as they navigate across screens. Sellers use our platform to monetize and manage their advertising inventory.
While we work with many clients, a relatively small number of them provide a large share of the unique user audiences accessible by buyers. This is particularly true in CTV, where sellers tend to be larger and more sophisticated compared to other online sellers. Given the limited number of CTV sellers, we are focused on building deeper, long-term strategic partnerships with these clients through a full-service business development strategy. We have invested significant resources in identifying and cultivating these relationships and our sales executives and account managers often serve a consultative role within a client’s sales organization to help establish best practices and evangelize the benefits of programmatic CTV advertising. This team is further supported by our product and engineering team with deep technical expertise, and for larger clients, we may build out custom features or functionality to help drive deeper adoption of our platform.
In the mobile channel, most of the application providers that make inventory available through our platform utilize system development kits ("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 help monetize the inventory. Termination or diminution of our relationships with these third parties could result in a material reduction of the amount of mobile inventory available through our platform. We encourage application developers to use our own SDK when appropriate, but it is difficult to displace existing SDKs.
Buyers
On the buy-side of our business, while demand for advertising inventory is very distributed, spending by advertisers and agencies on digital advertising inventory has historically been channeled through technological intermediaries, principally DSPs.
These DSPs are directly connected to our technology through server-to-server integrations and are responsible for bidding on and purchasing advertising inventory on our platform pursuant to master service agreements. We have relationships with almost all of these major DSPs, and because there are relatively few of them, each of these relationships is important to us and represents a source of demand that could be difficult for us to replace.
We maintain close relationships with DSPs to maximize the amount of spend being transacted through our platform. For instance, our sales team collaborates with DSPs to create custom private marketplaces that fit specific targeting criteria for a given campaign and our team of technical account managers continually monitors DSP bidding activities and provides recommendations that inform their trading practices.
While the DSP is directly responsible for purchasing advertising inventory, the overall direction of an advertising campaign is typically determined by the advertiser or advertising agency that has engaged the DSP. For certain private marketplace transactions, the specific parameters of a campaign may be negotiated directly with the advertiser or agency without involvement of a DSP. Accordingly, in order to increase the amount of spend transacted on our platform, and in furtherance of our SPO efforts, we also maintain close relationships directly with brand advertisers and agencies.

Geographic Scope of Our Operations
The growth of programmatic advertising is expanding into geographic markets outside of the United States, and in some markets, the adoption rate of programmatic digital advertising is greater than in the United States. We face staffing challenges, including difficulty in recruiting, retaining, and managing a diverse and distributed workforce across time zones, cultures, and languages. We must also adapt our practices to satisfy local requirements and standards (including differing privacy requirements that are sometimes more stringent than in the U.S.), and manage the effects of global and regional recessions and economic and political instability. Transactions denominated in various non-U.S. currencies expose us to potentially unfavorable changes in exchange rates and added transaction costs. Foreign operations expose us to potentially adverse tax consequences in the United States and abroad and costs and restrictions affecting the repatriation of funds to the
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United States. For detailed information regarding our revenue and property and equipment, net by geographical region, see Note 4 and Note 7 of the "Notes to Consolidated Financial Statements."

Regulation
Our business is highly susceptible to emerging privacy regulations and oversight concerning the collection, use and sharing of data. Data protection authorities in a number of territories have expressed a desire to focus on the advertising technology ecosystem. In particular, this scrutiny has focused on the use of technology (including "cookies") to collect or aggregate information about Internet users’ online browsing activity. Because we, and our clients, rely upon large volumes of such data, it is essential that we monitor developments in this area domestically and globally, and engage in responsible privacy practices.
We do not collect information, such as name, address, or phone number, that can be used directly to identify a real person, and we take steps not to collect and store such information. Instead, we rely on IP addresses, geo-location information, and persistent identifiers about Internet users and do not attempt to associate this data with other data that can be used to identify real people. This type of information is considered "personal" in some jurisdictions or otherwise may be the subject of future legislation or regulation. The definition of personal data varies by country, and continues to evolve in ways that may require us to adapt our practices to avoid violating laws or regulations related to the collection, storage, and use of consumer data. As a result, our technology platform and business practices must be assessed regularly in each country in which we do business.
There are also a number of specific laws and regulations governing the collection and use of certain types of consumer data relevant to our business. For example, the Children’s Online Privacy Protection Act ("COPPA"), imposes restrictions on the collection and use of data about users of child-directed websites. With respect to COPPA, we have taken various steps to implement a system that: (i) flags seller-identified child-directed sites to buyers, (ii) limits advertisers’ ability to serve personalized advertisements on child-directed sites, (iii) helps limit the types of information that our advertisers have access to when placing advertisements on child-directed sites, and (iv) limits the data that we collect and use on such child-directed sites.
The use and transfer of personal data in the European Economic Area ("EEA") member states and the United Kingdom (“UK”) is currently governed by the General Data Protection Regulation (the "GDPR"). The GDPR sets out higher potential liabilities for certain data protection violations and establishes significant new regulatory requirements resulting in a greater compliance burden for us in the course of delivering our solution in the EEA and UK. While data protection authorities have started to clarify certain requirements under GDPR, significant uncertainty remains as to how the regulation will be applied and enforced.
In addition to the GDPR, a number of new privacy regulations will or have already come into effect. The California legislature passed the California Consumer Privacy Act ("CCPA") in 2018, which became effective January 1, 2020. This law imposes new obligations on businesses that handle the personal information of California residents. The obligations imposed require us to maintain ongoing significant resources for compliance purposes. Certain requirements remain unclear due to ambiguities in the drafting of or incomplete guidance. Adding to the uncertainty facing the ad tech industry, a new law, titled the California Privacy Rights Act ("CPRA") recently passed as a ballot initiative in California and will impose additional notice and opt out obligations on the digital advertising space. This law, which will take effect in January 2023, will cause us to incur additional compliance costs and impose additional restrictions on us and on our industry partners. These ambiguities and resulting impact on our business will need to be resolved over time. In addition, other privacy bills have been introduced at both the state and federal level. Certain international territories are also imposing new or expanded privacy obligations. In the coming years, we expect further consumer privacy regulation worldwide.
Further, the European Union is expected to replace the EU ePrivacy Directive governing the use of technologies to collect consumer information with the ePrivacy Regulation. Current drafts of the ePrivacy Regulation impose fines for violations that are materially higher than those imposed under the ePrivacy Directive.
The GDPR also prohibits the transfer of personal data of EU and UK subjects outside of the EEA and the UK, unless the party exporting the data from the EU or UK implements a compliance mechanism designed to ensure that the receiving party will adequately protect such data. We have historically relied on certain compliance mechanisms that have since been invalidated, and had to shift our business practices to rely on other legally sufficient compliance measures. However, guidance on exactly what measures must be taken to allow the lawful transfer of personal data to the United States remains unclear. While we will interpret the guidance and continue to explore the additional measures that can be implemented to protect personal data that is transferred to us in the United States, we remain subject to regulatory enforcement by data protection authorities located in the EU, UK and the United States. By relying on these compliance measures, we risk becoming the subject of regulatory investigations in any of the individual jurisdictions in which we operate. Each such investigation could cost us significant time and resources, and could potentially result in fines, criminal prosecution, or other penalties. Further, to the extent any new guidance emerges to these compliance measures, it could further invalidate our approach to data export from
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the EEA and UK. It may take us significant time, resources, and effort to restructure our business and/or rely on another legally sufficient compliance measure.
Additionally, our compliance with our privacy policies and our general consumer privacy practices are also subject to review by the Federal Trade Commission, which may bring enforcement actions to challenge allegedly unfair and deceptive trade practices, including the violation of privacy policies and representations therein. Certain State Attorneys General may also bring enforcement actions based on comparable state laws or federal laws that permit state-level enforcement. Outside of the United States, our privacy and data practices are subject to regulation by data protection authorities and other regulators in the countries in which we do business.
Beyond laws and regulations, we are members of self-regulatory bodies that impose additional requirements related to the collection, use, and disclosure of consumer data, including the Internet Advertising Bureau ("IAB"), the Digital Advertising Alliance, the Network Advertising Initiative, and the Europe Interactive Digital Advertising Alliance. Under the requirements of these self-regulatory bodies, in addition to other compliance obligations, we provide consumers with notice via our privacy policy about our use of cookies and other technologies to collect consumer data, and of our collection and use of consumer data to deliver personalized advertisements. We allow consumers to opt-out from the use of data we collect for purposes of behavioral advertising through a mechanism on our website, linked through our privacy policy as well as through portals maintained by some of these self-regulatory bodies. Some of these self-regulatory bodies have the ability to discipline members or participants, which could result in fines, penalties, and/or public censure (which could in turn cause reputational harm). Additionally, some of these self-regulatory bodies might refer violations of their requirements to the Federal Trade Commission or other regulatory bodies.
Until prevailing compliance practices standardize, the impact of worldwide privacy regulations on our business and, consequently, our revenue could be negatively impacted.
For additional information regarding regulatory risks to our business, see "Item 1A. Risk Factors."

Seasonality
Our advertising spend, revenue, cash flow from operations, Adjusted EBITDA, operating results, and other key operating and financial measures may vary from quarter to quarter due to the seasonal nature of buyer spending. For example, many buyers devote a disproportionate amount of their advertising budgets to the fourth quarter of the calendar year to coincide with increased holiday purchasing. We expect our revenue, cash flow, operating results and other key operating and financial measures to fluctuate based on seasonal factors from period to period and expect these measures to be higher in the fourth quarters than in other quarters.

Working Capital Requirements
Our revenue is generated from advertising spend transacted on our platform using our technology solution. 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. We attempt to coordinate collections from our buyers so as to fund our payment obligations to our sellers. However, in some cases, we may be required 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. Any such 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, growth and increased competitive pressure in the digital advertising industry are causing 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 challenge some details of our invoices or to slow the timing of their payments to us. In addition, although our liquidity has not been significantly affected by the effects of COVID-19 to date, any downturn in economic conditions in the future may severely impact our liquidity as we may need additional time to collect from buyers, which may impact our ability to pay sellers. 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 buyers. This may result in additional cash expenditures and cause us to forgo or defer other more productive uses of that working capital.

Available Information
The Company is subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and accordingly files Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements, and related amendments and other information with the U.S. Securities and Exchange Commission, or the SEC, pursuant to Sections 13(a) and 15(d) of the Exchange Act. Information filed by the Company with the SEC is
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available free of charge on the Company’s website at investor.magnite.com as soon as reasonably practicable after such materials are filed with or furnished to the SEC.

Item 1A. Risk Factors
Investing in our common stock involves a high degree of risk, including the risks described below, each of which may be relevant to decisions regarding an investment in or ownership of our stock. The occurrence of any of these risks could have a significant adverse effect on our reputation, business, financial condition, revenue, results of operations, growth, or ability to accomplish our strategic objectives, and could cause the trading price of our common stock to decline. You should carefully consider the risks set forth below and the other information contained in this report, including our consolidated financial statements and related notes and Management'sManagement Discussion and Analysis of Financial Condition and Results of Operations before making investment decisions related to our common stock. However, this report cannot anticipate and fully address all possible risks of investing in our common stock, the risks of investing in our common stock may change over time, and additional risks and uncertainties that we are not aware of, or that we do not consider to be material, may emerge. Accordingly, you are advised to consider additional sources of information and exercise your own judgment in addition to the information we provide.
Risks Related to the Proposed Acquisition of SpotX
We may not complete the acquisition of SpotX or complete the acquisition within the time frame we anticipate. Failure to complete the acquisition could have material adverse effects on us.
The completionPart II, Item 7 of the acquisition is subjectcompany’s Annual Report on Form
10-K.
The compensation committee retains the discretion to a number of customary closing conditions, including, among other things, the absence of certain legal impediments and the expiration or termination of the required waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, which make the completion and timing of the acquisition uncertain. The failure to satisfy all of the required conditions could delay the completion of the acquisition for a significant period of time or prevent it from occurring at all. There can be no assurance that the conditions to the completion of the acquisition will be satisfied or waived or that the acquisition will be completed.
If the acquisition is not completed, we may be materially adversely affected and, without realizing any of the benefits of having completed the acquisition, will be subject to a number of risks, including the following:
the market price of our common stock could decline;
we could be liable for damages incurred or suffered by the seller of SpotX in specified circumstances;
if the SpotX Purchase Agreement is terminated and our board seeks another acquisition, our stockholders cannot be certain that we will be able to find a party willing to enter into a transaction on terms equivalent to or more attractive than the terms of the SpotX Purchase Agreement;
time and resources, financial and other, committed by our management to matters relating to the acquisition could otherwise have been devoted to pursuing other beneficial opportunities;
we may experience negative reactions from the financial markets or from our customers, suppliers or employees; and
we will be required to pay certain costs relating to the acquisition, such as legal, accounting, financial advisory and printing fees, whether or not the acquisition is completed.
In addition, if the acquisition is not completed, we could be subject to litigation related to any failure to complete the acquisition or related to any enforcement proceeding commenced against us to perform our obligations under the SpotX Purchase Agreement. Because our obligations under the SpotX Purchase Agreement are not conditioned on our receipt of or ability to obtain financing, there is a risk we could be liable for damages to the seller of SpotX or subject to litigation or enforcement proceedings even in circumstances where our inability to close the transaction is due to a failure to timely obtain financing on the terms contemplated by the Commitment Letter (discussed below) or at all. Any of these risks could materially and adversely impact our ongoing business, financial condition, financial results and stock price.
Similarly, delays in the completion of the acquisition could, among other things, result in additional transaction costs, loss of revenue or other negative effects associated with delay and uncertainty about completion of the acquisition and could materially and adversely impact our ongoing business, financial condition, financial results and stock price following the completion of the acquisition.
We may not be able to achieve anticipated cost savings or other anticipated benefits of our acquisition of SpotX.
The success of the acquisition will depend, in part, on our ability to successfully integrate SpotX with our business and realize the anticipated benefits, including synergies, cost savings, innovation and technological opportunities and operational efficiencies from the acquisition in a manner that does not materially disrupt existing customer, supplier and employee relations and does not result in decreased revenues due to losses of, or decreases in use of our solutions by, buyers and sellers of
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advertising inventory. If we are unable to achieve these objectives within the anticipated time frame, or at all, the anticipated benefits may not be realized fully or at all, or may take longer to realize than expected, and the value of our common stock may decline. We may fail to realize some or all of the anticipated benefits of the acquisition if the integration process takes longer than expected or is more costly than expected. The integration of SpotX with our business may result in material challenges, including, without limitation:
managing a larger, more complex business;
maintaining employee morale and retaining key management and other employees;
retaining existing business and operational relationships, including customers, suppliers and employees and other counterparties, as may be impacted by contracts containing consent and/or other provisions that may be triggered by the acquisition, and attracting new business and operational relationships;
consolidating corporate and administrative infrastructures and eliminating duplicative operations, including unanticipated issues in integrating information technology, communications and other systems;
coordinating geographically separate organizations; and
unforeseen expenses or delays associated with the acquisition.
Many of these factors will be outside of our control, and any one of them could result in delays, increased costs, decreases in the amount of expected revenues or cost synergies, and other adverse impacts, which could materially affect our financial position, results of operations and cash flows.
Due to legal restrictions, we are currently permitted to conduct only limited planning for the integration of SpotX following the acquisition. The actual integration may result in additional and unforeseen expenses, and the anticipated benefits of the integration plan may not be realized on a timely basis, if at all.
Our proposed financing of the acquisition of SpotX will significantly increase our leverage, which may put us at greater risk of defaulting on our debt obligations and limit our ability to conduct necessary operating activities, make strategic investments, respond to changing market conditions, or obtain future financing on favorable terms.
We intend to finance the cash portion of the SpotX acquisition consideration in part through borrowings under certain proposed new credit facilities. In connection with the SpotX Purchase Agreement, we entered into a commitment letter (the "Commitment Letter" pursuant to which, subject to the terms and conditions set forth therein, Goldman Sachs Bank USA has committed to provide a senior secured term loan facility in an aggregate principal amount of up to $560 million (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 SpotX Purchase Agreement.
The completion of the Term Loan Facility, if at all, would significantly increase our indebtedness and require us to comply with certain financial metrics and restrictive covenants. The increased leverage could adversely affect our business and operating results by:
making it more difficult for us to make payments on our indebtedness and comply with applicable financial metrics and covenants;
requiring us to use a substantial portion of our cash flow to pay interest and principal, which reduces the amount available for operations, distributions, acquisitions and capital expenditures;
making us more vulnerable to economic and industry downturns and reducing our flexibility to respond to changing business and economic conditions;
requiring us to agree to less favorable terms, including higher interest rates, in order to incur additional debt, and otherwise limiting our ability to borrow for operations, working capital or to finance acquisitions in the future; or
limiting our flexibility in conducting our business, which may place us at a disadvantage compared to competitors with less debt or debt with less restrictive terms.
We may be able to incur substantial additional indebtedness in the future, subject to the restrictions governing our existing indebtedness, which would further exacerbate the leverage risks described above.
If the acquisition of SpotX is completed, our current stockholders will generally have a reduced ownership and voting interest after the acquisition.
Our stockholders currently have the right to vote to elect our directors and on other matters affecting the company. Immediately after the completion of the acquisition, each of our stockholders will remain a stockholder, but with a percentage ownership that will be smaller than such stockholder’s percentage ownership as of immediately prior to the acquisition. As a result of this reduced ownership percentage, our stockholders will generally have less voting power after the acquisition than they did prior to the acquisition.
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If the acquisition of SpotX is completed, the seller of SpotX will own a substantial portion of our outstanding common stock, and their interests may not always coincide with the interests of the other holders.
If the acquisition of SpotX is completed, the seller of SpotX, RTL or an affiliate of RTL designated pursuant to the SpotX Purchase Agreement, will receive 14 million shares of our common stock, subject to certain adjustments. As a result, RTL may have significant influence over all matters presented to our stockholders for approval, including election and removal of our directors and change in control transactions. The interests of RTL may not always coincide with the interests of the other holders of our common stock. As part of the SpotX Purchase Agreement, RTL has agreed to abide by certain standstill covenants with respect to us and our securities for a period of three years following the closing of the transaction.
Completion of the acquisition of SpotX may trigger change in control or other provisions in agreements to which SpotX is a party, which may have an adverse impact on our business and results of operations following completion of the acquisition.
The completion of the acquisition may trigger change in control and other provisions in certain agreements to which SpotX is a party. If SpotX and we are unable to negotiate waivers of those provisions, counterparties may exercise their rights and remedies under the agreements, including terminating the agreements or seeking monetary damages or equitable remedies. Even if we are able to negotiate consents or waivers, the counterparties may require a fee for such waivers or seek to renegotiate the agreements on terms less favorable to us. Any of the foregoing or similar developments may have an adverse impact on our business and results of operations following completion of the acquisition, including by diminishing or making it more difficult for us to realize some or all of the anticipated benefits of the acquisition, or by increasing the costs to us of completing the acquisition.
Any acquisitions we undertake may disrupt our business, adversely affect operations, dilute stockholders, and expose us to costs and liabilities.
Acquisitions have been an important element of our business strategy, and we may pursue future acquisitions in an effort to increase revenue, expand our market position, add to our service offering and technological capabilities, respond to dynamic market conditions, or for other strategic or financial purposes. However, there is no assurance that we will identify suitable acquisition candidates or complete any acquisitions on favorable terms, or at all. Further, any acquisitions we do complete, including, if completed, our acquisition of SpotX, would involve a number of risks, which may include the following:
the identification, acquisition, and integration of acquired businesses require substantial attention from management. The diversion of management's attention and any difficulties encountered in the transition process could hurt our business;
the identification, acquisition, and integration of acquired businesses requires significant investment, including to determine which new service offerings we might wish to acquire, harmonize service offerings, expand management capabilities and market presence, and improve 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 organizational cultural 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, regulatory or other legal, 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;
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acquired businesses may have insufficient internal controls that we must remediate, and the integration of acquired businesses may require us to modify or enhance our own internal controls, in each case resulting in increased administrative expense and risk that we fail to comply with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act");
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; and
acquisitions can sometimes lead to disputes with the former owners of the acquired company, which can result in increased legal expenses, management distraction and the risk that we may suffer an adverse judgment if we are not the prevailing party in the dispute.

Risks Related to COVID-19
The recent COVID-19 pandemic and spread of COVID-19 has impacted and may have material adverse effects on our business, financial position, results of operations and/or cash flows.
Our business has been impacted and may be materially adversely impacted by the effects of the COVID-19 pandemic. In addition to the United States, we have personnel and operations in the United Kingdom, Canada, France, Australia, New Zealand, Germany, Italy, Japan, Singapore, and Brazil, and each of these countries has been affected by the pandemic and taken measures to try to contain it. These measures have impacted and may further impact our workforce and operations, and the operations of our sellers and buyers.
The COVID-19 pandemic has in the short-run and may over the longer term adversely affect the economies and financial markets of many countries. Adverse economic conditions and general uncertainty about economic recovery or growth, particularly in North America and Europe, where we conduct most of our business, has caused advertisers to significantly reduce, their advertising budgets. Our business depends on the overall demand for advertising and on the economic health of our current and prospective sellers and buyers. As a result of advertisers significantly reducing their overall advertising spending, our revenue and results of operations have been directly affected. Though our revenue trends improved and stabilized in the second half of 2020, there can be no assurance that these trends will continue.
In addition, the economic health of our current and prospective buyers impacts the collectability of our accounts receivable. Although our liquidity has not been significantly affected by the effects of COVID-19 to date, any prolonged downturn in economic conditions in the future may severely impact our liquidity as we may need additional time to collect from buyers, which may impact our ability to pay sellers.
The degree to which the COVID-19 pandemic and responses thereto impacts our results 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. Although the full magnitude of the impact of the COVID-19 pandemic on our business and operations remains uncertain, the spread of COVID-19 and the imposition of related public health measures and travel and business restrictions has and is expected to continue to adversely impact our forecasted business, financial condition, operating results and cash flows.
Additional or unforeseen effects from the COVID-19 pandemic and the resulting economic distress could implicate or amplify many of the other risks discussed below.

Risks Related to Our Business, Growth Prospects and Operating Results
If CTV advertising spend grows more slowly than we expect our operating results and growth prospects could be harmed.
The growth of our platform is dependent, in part, on the continued growth in CTV advertising spend. Growth in the CTV advertising market is dependent on a number of factors, including the pace of cord-cutting (the replacement of tradition linear TV for CTV streaming), the continued proliferation of digital content and CTV providers, the adoption of ad-supported models by CTV sellers in lieu of, or in addition to, subscription models, and an acceleration in the shift of ad dollars from traditional linear TV to CTV to keep pace with changing viewership habits. If the market for ad-supported CTV develops more slowly than we expect or fails to develop as a result of these or other factors, our operating results and growth prospects could be harmed.
If CTV sellers fail to adopt programmatic advertising solutions, or adopt such solutions more slowly that we expect, our operating and growth prospects could be harmed.
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As digital advertising has continued to scale and evolve, the amount of advertising being bought and sold programmatically has increased dramatically. Despite the opportunities created by programmatic advertising, CTV sellers have been slower to adopt programmatic solutions compared to desktop and mobile video sellers. Many CTV sellers have backgrounds in cable or broadcast television and have limited experience with digital advertising, and in particular programmatic advertising. For these sellers, it is extremely important to protect the quality of the viewer experience to maintain brand goodwill and ensure that online advertising efforts do not create sales channel conflicts or otherwise detract from their direct sales force. In this regard, programmatic advertising presents a number of potential challenges, including the ability to ensure that ads are brand safe, comply with business rules around competitive separation, are not overly repetitive, are played at the appropriate volume and do not cause delays in load-time of content. Our platform was designed to address these challenges and we have invested significant time and resources cultivating relationships with CTV sellers to establish best practices and evangelize the benefits of programmatic CTV.
While we believe that programmatic advertising will continue to grow as a percentage of overall CTV advertising, there can be no assurances that CTV sellers will adopt programmatic solutions or the speed at which they may adopt such solutions. Any such failure or delay in adoption could negatively impact our finance results and growth prospects.
We may not be able to maintain or increase access to the CTV advertising inventory monetized through our platform on terms acceptable to us.
Our success requires us to maintain and expand our access to premium and unique advertising inventory. We do not own or control the ad inventory upon which our business depends and do not own or create content. Sellers are generally not required to offer a specified level of inventory on our platform, and we cannot be assured that any publisher will continue to make their ad inventory available on our platform. Sellers may seek to change the terms on which they offer inventory on our platform, including with respect to pricing, or may elect to make advertising inventory available to our competitors who offer more favorable economic terms. Furthermore, sellers may enter into exclusive relationships with our competitors, which preclude us from offering their inventory.
These risks are particularly pronounced with CTV sellers. CTV inventory is highly sought after, and unlike desktop or mobile advertising, which may come from disparate sources, CTV inventory tends to be concentrated on a smaller number of larger sellers that enjoy significant negotiating leverage. This dynamic has been exacerbated by consolidation in the industry, as a number of digital-first CTV sellers have been acquired by larger established television and media brands. In some instances, consolidation may result in the loss of business with an existing client (for example, if an acquiror has a preferred relationship with one of our competitors or has a proprietary solution). As a result of this concentration, the loss of a CTV client may result in a significant decrease in the amount of CTV inventory available through our platform. Any decrease in our ability to access CTV inventory could negatively impact our results, as we view CTV revenue as a key differentiator and driver for our growth.
We may not be able to achieve anticipated benefits of the merger with Telaria.
The success of the Merger will depend, in part, on our ability to successfully combine and integrate our business with Telaria, and realize the anticipated benefits, including synergies, cost savings, innovation and technological opportunities and operational efficiencies from the Merger in a manner that does not materially disrupt existing customer, supplier and employee relations and does not result in decreased revenues due to losses of, or decreases in use of our solutions by, buyers and sellers of advertising inventory. If the combined company is unable to achieve these objectives within the anticipated time frame, or at all, the anticipated benefits may not be realized fully or at all, or may take longer to realize than expected, and the value of the combined company common stock may decline. The combined company may fail to realize some or all of the anticipated benefits of the Merger if the integration process takes longer than expected or is more costly than expected. The integration of the two companies may result in material challenges, including, without limitation:
managing a larger, more complex combined business;
maintaining employee morale and retaining key management and other employees;
retaining existing business and operational relationships, including customers, suppliers and employees and other counterparties, as may be impacted by contracts containing consent and/or other provisions that may be triggered by the Merger, and attracting new business and operational relationships;
consolidating corporate and administrative infrastructures and eliminating duplicative operations, including unanticipated issues in integrating information technology, communications and other systems;
coordinating geographically separate organizations; and
unforeseen expenses or delays associated with the Merger.
    Many of these factors will be outside of our control, and any one of them could result in delays, increased costs, decreases in the amount of expected revenues or cost synergies, and other adverse impacts, which could materially affect the combined company’s financial position, results of operations and cash flows.

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We may be unsuccessful in our Supply Path Optimization efforts.
SPO refers to efforts by buyers to consolidate the number of vendors with which they work to find the most effective and cost-efficient paths to procure media. There are a number of criteria that buyers use to evaluate supply partners. While we believe we are well positioned to benefit from supply path optimization in the long run as a result of our transparency, our pricing tools, which reduce the overall cost of working with us, our broad and unique inventory supply across all channels and formats, buyer tools such as traffic shaping that reduce the cost of working with us, and our brand safety measures, we compete for demand with a number of well-established companies, and buyers have not always embraced our offering due to various factors, including the perception that competitors have superior technology or produce better results.
We must continue to adapt and improve our offerings to win buyers’ business. In order to achieve increased advertising spend, we may negotiate discounts to our seller fees with agencies and advertisers, and we have increasingly been receiving requests from buyers for discounts, rebates, or similar incentives to move more advertising spending to our platform. We believe that because our business has many fixed costs, increases in advertising spend volume create opportunity to disproportionately improve net income, even with increased seller fee discounts. However, our results could be negatively impacted if our advertising spend increases and cost leverage is not adequate to compensate for discounted fees.
Our Demand Manager service requires significant upfront investments, has a long on-boarding and ramp-up period, and may not be successful.
In 2019 we announced a new offering called Demand Manager. Demand Manager helps sellers effectively monetize their advertising inventory through configuration tools and analytics to make it easier to deploy, configure, and optimize Prebid-based header bidding solutions. Before clients are able to begin using Demand Manager, we expend a significant amount of time and costs in the initial setup and implementation, and we do not recognize revenue from Demand Manager clients until we commence services, often after an additional initial trial period. The pace of adoption of Demand Manager depends on the features and capabilities provided by our solution, as well as acceptance and expansion of the underlying Prebid-based header bidding solutions, which we do not control. While we anticipate long-term revenue growth from Demand Manager, there can be no assurance that we will be able to add additional clients to our service or expand the inventory managed by current clients and thus grow revenue.
We made a strategic decision to eliminate our buyer fees in 2017, which at the time accounted for a significant percentage of our revenue.
In response to increasing market pressure and in an effort to be more competitive, on November 1, 2017 we eliminated buyer transaction fees. Buyer transaction fees represented approximately 49% of our revenue for the first ten months of 2017, which is the period during which we charged buyer fees in 2017. Consequently, the elimination of our buyer transaction fees has had a severe adverse effect on our revenue and margins. In order to adjust for the elimination of these fees, we refocused our business on growing advertising spend through increased volume of transactions and operating with increased efficiencies. These initiatives included investments in bid shaping and bid filtering technology that has allowed us to improve our fill rate, or the percentage of ad requests on our platform that are monetized.
Though we’ve taken steps to significantly increase advertising spend on our platform, we may not succeed in continuing to increase transaction volume or improve fill rates. To the extent we are unable to compensate for our price reductions by continuing to increase advertising spend on our platform, our revenue will decline, we will not be able to grow our business, our cash resources may be depleted, and we may be forced to seek additional capital to support our business and operations. If we are required to cut costs further in order to remain competitive, we may have difficulty identifying and implementing significant additional cost reduction measures without adversely impacting our operations and our ability to provide competitive services to our clients.
Our technology development efforts may be inefficient or ineffective, which may impair our ability to attract buyers and sellers.
We face intense competition in the marketplace and are confronted by rapidly changing technology, evolving industry standards and consumer needs, regulatory changes, and the frequent introduction of new solutions by our competitors to which we must adapt and respond. Our future success will depend in part upon our ability to enhance our existing solution and to develop and introduce competing new solutions in a timely manner with features and pricing that meet changing client and market requirements. Our solutions are complex and can require a significant investment of time and resources to develop, test, introduce, and enhance. These activities can take longer than we expect. We schedule and prioritize our development efforts according to a variety of factors, including our perceptions of market trends, client requirements, and resource availability; however, we may encounter unanticipated difficulties that require us to re-direct, scale back, or modify our efforts. If development of our solution becomes significantly more expensive due to changes in regulatory requirements or industry practices, or other factors, we may find ourselves at a disadvantage to larger competitors with more resources to devote to development. These factors place significant demands upon our engineering organization, require complex planning, and can result in acceleration of some initiatives and delay of others. We have expanded our use of outsourced software development,
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which may put the company at greater risk with respect to our technology development because we may have less control over the performance of outside programmers and we may be at greater risk of losing their services. To the extent we do not manage our development efforts efficiently and effectively, we may fail to produce solutions that respond appropriately to the needs of buyers and sellers, and competitors may more successfully develop responsive offerings. If our solution is not competitive, buyers and sellers can be expected to shift their business to competing solutions. Buyers and sellers may also resist adopting our new solutions for various reasons, including reluctance to disrupt existing relationships and business practices or to invest in necessary technological integration.
The emergence of header bidding has increased competition from other demand sources and may cause infrastructure strain and added cost.
In the mobile and desktop channels, sellers have embraced header bidding, a technology solution by which impressions that would have previously been exposed to different potential sources of demand in a sequence dictated by ad server priorities are instead available for concurrent competitive bidding by demand sources. This can help sellers increase revenue by exposing their inventory to more bidders, thereby allocating more inventory to demand sources that value it most highly. While header bidding has the potential to increase our access to inventory that otherwise would have been allocated first to other exchanges, thus increasing our revenue opportunity, it has also resulted in a number of challenges for our business. First, some sellers with which we have had direct relationships may choose not to integrate with us as a header-bidding demand source, in which case we will have less opportunity to access their advertising inventory through our platform. Second, certain sources of demand, including owners of the header bidding solutions, may be prioritized by sellers in their header bidding implementation, leaving us at a competitive disadvantage in the auction. Third, just as header bidding allows us to compete with demand sources that would previously have been above us in sellers' ad server sequences, it exposes us to additional competition by demand sources that, prior to the emergence of header bidding, might have been below us in the sellers' ad server sequences or otherwise unable to compete effectively for inventory. Lastly, header-bidding has vastly increased the volume of ad requests that need to be processed and analyzed through our system, resulting in increased infrastructure costs.
If we are unable improve the efficiency and effectiveness of our current header bidding solution and installations we may not fully offset these increased infrastructure costs, and we will not be able to take full advantage of the opportunities made available through current header bidding technology to access a larger addressable market and increase our revenue by capturing a greater share of inventory. In addition, our success in monetizing impressions through header-bidding solutions is dependent on the interoperability of our platform with proprietary header-bidding solutions, some of which are owned by our competitors. As a result, we may be susceptible to evolution in technology and changes in business practices by the owners of such header-bidding solutions that we cannot predict.
While header-bidding technologies have not been largely adopted by CTV sellers, such solutions or similar solutions geared towards unifying demand may become more prevalent in the future. If we are not able to effectively adapt our technology to such solutions or if their adoption results in increased competition for CTV inventory, we may have reduced opportunities or it may be more costly to monetize this inventory, which would negatively affect our results.
We must increase the scale and efficiency of our technology infrastructure to support our growth and transaction volumes.
Our technology must scale to process the increased ad requests on our platform. Additionally, for each individual advertising impression created when a user visits a website or uses an application where our auctions technology is integrated, our technology must send bid requests to appropriate buyers, receive and process their responses, select a winner, and, increasingly, integrate with downstream decisioning systems. It must perform these transactions end-to-end within milliseconds. We must continue to increase the capacity of our platform to support our high-volume strategy, to cope with increased data volumes and parties resulting from header bidding and an increasing variety of advertising formats and platforms, and to maintain a stable service infrastructure and reliable service delivery. To the extent we are unable, for cost or other reasons, to effectively increase the capacity of our platform, continue to process transactions at fast enough speeds, and support emerging advertising formats or services preferred by buyers, our revenue will suffer. We expect to continue to invest in our platform to meet increasing demand. Such investment may negatively affect our profitability and results of operations.
Our belief that there is significant and growing demand for private marketplace solutions may be inaccurate, and we may not realize a return from our investments in that area.
We believe there is significant and growing demand for PMPs, and we have made significant investments to meet that demand and grow our market share of PMPs. Currently, the majority of CTV transactions are executed through PMPs and we expect PMPs to grow as a percentage of revenue in mobile and desktop as well. PMPs may involve lower fees than we can charge for OMP, which may not be fully offset by anticipated higher CPMs. In some cases, we have experienced fee pressure as we have built out our PMP offering, and we expect this fee pressure to increase as more competitors, including new entrants as well as sellers themselves, build their own technology and infrastructure to enable PMPs. Even if the market for these solutions develops as we anticipate, and our buyers and sellers embrace our offerings, the positive effect of our PMP offerings on our results of operations may be offset or negated if PMPs cannibalize our open marketplace transaction volumes, by similar offerings from our competitors, or through other adverse developments.
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We have invested heavily in our mobile technology, which poses additional risks that did not affect our legacy desktop display business. To 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 on our mobile offerings to fuel our continued growth. 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. To 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 is significantly impaired, and that impairment may be material.
We expect mobile applications to be the largest driver of our 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. Due to this consolidation, if our relationships with these third parties decline or are terminated, it may result in a larger than usual loss of access to mobile inventory. Any rapid and/or significant decline in the availability of mobile inventory 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 revenue comes from DSP buyers purchasing advertising inventory made available by sellers on our platform. We experience requests from buyers 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 or to increase, the amount of advertising spend that the buyer sendsany bonus otherwise payable to our platform. In addition, we charge fees to sellers for use of our technology, typicallyexecutive officers based on such factors 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. 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 face many risks that may prevent us from achieving or sustaining profitability in the future.
We reported net losses of $53.4 million and $25.5 million during the years ended December 31, 2020 and 2019, respectively. As of December 31, 2020, we had an accumulated deficit of $394.5 million. We have implemented strategic plans designed to improve our financial performance and continue to 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 overall decline in advertising spend experienced in 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 industryit deems appropriate.
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developments1H20 Annual Bonus Targets and to retain competitiveness. We may not be able to sustain growth or to achieve or sustain profitability in the future.Payout
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 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, 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 can cause significant variations in operating results and resulting stock price volatility from period to period. 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 make our solution less robust and attractive to buyers.
The digital advertising market is relatively new. If this market develops more slowly or differently than we expect, our business, growth prospects and financial condition would be adversely affected.
Our 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. 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 digital marketing does not develop in the manner we expect, our business and financial condition would be 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, 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 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 suffers to the extent that buyers and sellers purchase and sell advertising inventory directly from one another or through intermediaries other than us, reducing the amount of advertising spend on our platform. 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. 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.
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. In addition, our competitors or potential competitors may adopt certain aspects of our business model, which could reduce our ability to differentiate our solutions.
For all of these reasons, we may not be able to compete successfully against our current and future competitors.

Risks Related to 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. Programmatic advertising enables more precise audience targeting based on the identity and actions of the user. Targeted advertising is generally more effective and valuable for buyers than other types of advertising, resulting in more revenue for sellers. In order to target advertising, we and our clients must be permitted to use data in a variety of 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 to our clients. Any restriction on the types
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of data we 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 data. For example, users may delete or block the use of the cookies used to collect data, including through their browser or mobile device settings. Internet users may also download "ad blocking" software that prevents certain cookies from being stored on a user’s computer or mobile device, including to prevent the display of targeted advertisements. In addition, 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 increasingly promoting features that allow users to disable the collection of 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.
In addition, new laws and regulations, such as the 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 another legal basis in order to collect or process personal data and, in the case of CCPA, giving the user a 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 processing personal data, it would impair the ability to deliver targeted advertisements 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. 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. 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.
Industry participants in the advertising technology ecosystem have taken or may take action to eliminate or restrict the use of cookies and other identifiers, and we expect the use of third-party cookies to 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, 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. While these new identification solutions will likely provide some level of consistency and compatibility with our platform, they are unreleased and unproven, and will require substantial development and commercial changes for us to support. There is also further risk that the changes will disproportionately benefit the owners of these platforms or the large walled gardens that have access to large amounts of first party data. Even 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. 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 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 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.
Recently, California passed two privacy 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 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 defines personal information in a way that captures the types of data that we collect, such as device identifiers and IP addresses. Under the CCPA, California residents have new privacy rights (including rights of access and deletion), which bear similarity to some of the data subject rights granted to 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 establishes a new privacy framework for covered businesses, imposing additional compliance obligations on sellers and ad tech companies. Interpretation of the requirements remains unclear due to ambiguities in the regulations and a lack of enforcement actions to date. The California Attorney General issued final regulations implementing the CCPA that became enforceable in 2020. Additional modifications were subsequently proposed, though those modifications have yet to be finalized.
The recently-passed CPRA will take effect in 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 the European Economic Area ("EEA") and the United Kingdom ("UK"), the General Data Protection Regulation, Regulation (EU) 2016/679 ("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 advertising 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. 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).
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Moreover, the regulatory climate in Europe, in particular, has grown increasingly unfavorable 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.
Recent rulings from the Court of Justice of the European Union invalidated the EU-U.S. Privacy Shield as a lawful means for transferring personal data from the European Union to the United States; this introduces increased uncertainty and may require us to change our EEA and UK data practices and/or rely on an alternative legally sufficient compliance measure.
The GDPR generally prohibits the transfer of personal data of EEA 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. 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 solutions. The first method, EU-U.S. Privacy Shield operated by the U.S. Department of Commerce, was declared invalid as a legal mechanism to transfer data from the EEA and UK to the U.S. As a result, despite the fact that we have certified our compliance to the EU-U.S. Privacy Shield, this mechanism can no longer be used as a lawful means to transfer EEA and UK data to us in the U.S. For the time being, the Department of Commerce continues to operate the EU-U.S. Privacy Shield, however, and if we fail to comply with the Privacy Shield requirements, we risk investigation and sanction by U.S. regulatory authorities, including the Federal Trade Commission. Such investigation could cost us significant time and resources, and could potentially result in fines, criminal prosecution, or other penalties.
The second mechanism, Standard Contractual Clauses ("SCCs"), an alternative transfer measure that we 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 the SCCs to export data out of the EEA and UK to ensure the data is protected to a standard that 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 the United States. We may also need to restructure our data export practices as a result of Brexit. At the end of 2020, European Union law ceased to apply to the UK, and 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 and changes in U.S. laws impose new requirements for end user consent 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 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 sellers to obtain consent for use of our technology. To the extent any seller does not adequately satisfy 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 applicable jurisdictions may become significantly restricted.
In 2018, IAB Europe released a tool, the Transparency and Consent Framework (the "TCF"), in order to assist 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). There is limited guidance regarding proper implementation of the tool and some 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 not yet clear whether the TCF (or any other) consent tool will be accepted by regulators as appropriate consent mechanisms.
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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 UK and EU are evolving their guidance on the use of advertising technologies and compliance with the GDPR and ePrivacy Directive. This guidance may be 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 serve target advertisements may become significantly impaired or complicated in certain jurisdictions.
In Europe, it remains unclear whether certain legal bases for data processing are permitted for behavioral 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.
Legal uncertainty and industry unpreparedness may mean substantial disruption and inefficiency, demand constraints, and reduced inventory supply and value.
Some sellers may be unprepared to comply with evolving regulatory guidance under US and foreign privacy laws, and therefore may remove personal data from their inventory before passing it into the bid stream, which would reduce the value of the inventory to buyers. Even well-prepared sellers and buyers will be confronted with difficult choices and administrative and technical hurdles to implement their privacy compliance programs and integrate with multiple other parties in the ecosystem. Further, compliance program design and implementation will be an ongoing process as 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 sections above may benefit large, integrated competitors like Google, Facebook, Comcast Verizon, AT&T and 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.
We are subject to regulation with respect to political advertising activities, which are governed by various federal and state laws in the 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 political ads delivered on our platform. In some jurisdictions we may determine not to serve political advertisements due to uncertainty around these requirements and potential burdens of 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 amount of political advertising spent through our platform, increase our operating and compliance costs, and subject us to 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. If we encounter difficulties 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.

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’ 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. Buyers, in turn, are free to direct their spend to us or one or more of our 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. 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. 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.
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 the availability and use of more data to inform buying and selling decisions necessitates that we, as an intermediary, use data in a manner that complies with the expectations of both our seller and 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 seek to grow 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. 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 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. 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.
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. 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.
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. 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 Related to Our Operations
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, changes are made to sellers' or buyers' software interfacing with our 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. Such errors or failures 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, multiple internet service providers, as well as content delivery network, or CDN providers, and domain name systems, or DNS providers, and mobile networks to 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. 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 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. Though we undertake robust security measures, 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 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. 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.
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.
The evolving concept of viewability involves competitive uncertainty and may cause us to 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 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.
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 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 to measure viewability and imperfect measurement technology could lead to disagreement, increasing risk of disputes, demands for refunds, and 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 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 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 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. 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. 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. 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, or we may decide to settle lawsuits and disputes on terms that are unfavorable to us. We may also have no way of remediating intellectual property violations, and failure to do so could cause our business, results of operations or financial condition to be materially and adversely affected.

Risks Related to Our International Business 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 operations outside of North America, in 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 ("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. In addition, we have recently received numerous inquiries from foreign regulators asking for information about the advertising technology generally and our business specifically. These investigations are costly and time consuming to respond to and divert management attention.

Risks Related to Our Internal Controls and Finances
If we fail to maintain an effective system of internal control over financial reporting in the future, we may not be able to accurately or timely report our financial condition or results 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 requires that we evaluate and determine the effectiveness of our internal control over financial reporting and provide a management report on our internal control over financial reporting.
Our platform system applications are complex, multi-faceted and include applications that are highly customized in order to serve and support our clients, advertising inventory and data suppliers, as well as support our financial reporting obligations. We regularly make improvements to our 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. These factors require us to develop and 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 harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods.
If we identify material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal control over financial reporting is effective. If we are unable to 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 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. Such failures could also subject us to investigations by Nasdaq, the stock exchange on which our securities are listed, the SEC or other regulatory authorities, and to litigation from stockholders, which could harm our reputation, financial condition or divert financial and management resources from our core business.
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, 2020, we had U.S. federal net operating loss carryforwards, or NOLs, of approximately $453.2 million, state NOLs of approximately $280.0 million, foreign NOLs of approximately $25.0 million, and state research and development tax 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, 2016 subjecting the federal and state NOLs to annual limitations that have expired. Additionally, the Company had an ownership change in January 2008 resulting in not material limitation of federal and state NOLs under Section 382 of the Code and comparable state income tax laws. Moreover, not material federal and 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 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, 2018. U.S. federal NOLs generated for tax years beginning before December 31, 2018 can offset 100% of taxable income, however, these NOLs can only be carried forward for 20 years. U.S. federal NOLs generated for tax years beginning after December 31, 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 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, 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 $60.0 million credit facility with Silicon Valley 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 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. 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 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.
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. 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.
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.
If securities or industry analysts do not publish, or cease publishing, research or reports about us, our business or our market, if they publish negative evaluations of our stock, or if we fail to meet the expectations of analysts, the price of our stock and trading volume could decline.
The trading market for our common stock will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. We do not have any control over these analysts, and their reports or analysts' consensus may not reflect our guidance, plans or expectations. If one or more of the analysts covering our business issues an adverse opinion of our company because we fail to meet their expectations or otherwise, the price of our stock could decline. If one or more of these analysts cease to cover our stock, we could lose visibility in the market for our stock, which in turn could cause our stock price to decline.
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.
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.
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 office space totaling approximately 47,000 square feet under a lease that expires on 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 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, 2020. However, based on our knowledge as of December 31, 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.
Refer to Note 17—"Commitments and Contingencies" for additional information related to 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 was listed on the New York Stock Exchange, or the NYSE, from April 1, 2014 through June 8, 2020, under the symbol "RUBI."
On June 8,In July 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"). 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 changed its ticker symbol from "RUBI" to "MGNI."
Holders of Record
    As of February 19, 2021, there were approximately 62 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
    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.
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 reimbursementcompensation committee determined that 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. There were no repurchases during the quarter ended December 31, 2020.
Stock Performance Graph
This performance graph shall not be deemed "soliciting material" or to be "filed" with the SEC 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 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

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Item 6. Selected Financial Data
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 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, 2020December 31, 2019December 31, 2018December 31, 2017December 31, 2016
(in thousands, except per share data)
Revenue$221,628 $156,414 $124,685 $155,545 $278,221 
Expenses:
Cost of revenue77,747 57,391 60,003 56,836 73,247 
Sales and marketing76,030 44,565 44,556 51,794 83,328 
Technology and development51,546 40,250 37,863 47,500 51,184 
General and administrative52,987 39,750 42,431 55,596 68,570 
Restructuring and other exit costs17,552 2,041 3,440 5,959 3,316 
Impairment of intangible assets— — — 4,585 23,473 
Impairment of goodwill— — — 90,251 — 
Total expenses275,862 183,997 188,293 312,521 303,118 
Loss from operations(54,234)(27,583)(63,608)(156,976)(24,897)
Other (income) expense:(1,495)(593)(2,143)(431)(1,984)
Loss before income taxes(52,739)(26,990)(61,465)(156,545)(22,913)
Provision (benefit) for income taxes693 (1,512)357 (1,762)(4,860)
Net income (loss)(53,432)(25,478)(61,822)(154,783)(18,053)
Net income (loss) per share attributable to common stockholders(1):
Basic$(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):
Basic96,700 52,614 50,259 48,869 46,655 
Diluted96,700 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
20202019201820172016
(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
    See "Item 1. Business" for an overview of our business, the industry in which we operate, and important industry and business trends.

2020 Channel Trends
Sellers use our technology to monetize their content across all digital channels, including CTV, mobile and desktop, 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 channels to better understand how our clients are transacting on our platform, which informs decisions as to business strategy and the allocation of resources and capital. The following table presents revenue by channel and as a percentage of total revenue for the years ended December 31, 2020, 2019, and 2018.
Revenue
Year Ended
December 31, 2020December 31, 2019December 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 continue to grow steadily, while desktop growth flattens. MAGNA's October 2020 Programmatic Market forecast has estimated compound annual growth rates from 2020 to 2024 for mobile and desktop at 18% and down 1%, respectively, and over the same period, eMarketer projected CTV to grow at 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 than desktop, consistent with industry trends and our historical results. Our mobile business consists of two components, mobile web and mobile applications. Initially our mobile business consisted primarily of mobile web, which is similar to our desktop business, but our mobile application business has been the growth driver behind our mobile business, and prior to the COVID-19 pandemic showed growth rates in excess of industry projections. We therefore expect our growth within mobile to come largely from our mobile applications business and, in particular, mobile video.
Lower industry growth rates in desktop will make growing desktop revenue more challenging; however, in future periods we believe we will be able to grow our desktop business in excess of industry projections by capturing market share through SPO and expansion of publisher relationships. We expect our desktop business to decline as an overall percentage of our revenue in future periods. However, we expect that it will continue to represent a significant part of our revenue in the near term. Therefore, the mix of our desktop business will continue to have a negative effect on our overall growth rate.
Telaria Merger
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 transacting CTV, desktop display, video, audio, and 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 believe to be the world’s largest independent sell-side advertising platform, with scale, capabilities, and solutions exceeding those offered by competitors. As CTV viewership is growing rapidly and the 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 CTV will be our biggest growth driver in future periods.
Telaria Merger Costs Synergies and Other Expense Reduction Initiatives
In 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 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 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 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. 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 reported on a gross basis, and other ancillary costs to support the business. We expect some of those increases to be offset by cost saving activities we plan to undertake. We are targeting in excess of $35 million in run-rate operating cost synergies, with more than half of the synergies to be realized within the first year of combined operations.

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 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 cloud computing costs. Personnel costs included in cost of revenue include salaries, bonuses, and stock-based compensation, 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, 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, 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. 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, 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.
    Merger and Restructuring Costs. Our merger and restructuring costs consist primarily of professional service fees associated with the merger and acquisition activities, including cash-based employee termination costs, stock-based compensation charges associated with the Merger, and other restructuring activities, including facility closures, relocation costs, and contract termination costs.
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.
    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 Euro.
    Provision (Benefit) for Income Taxes
    We are subject to income taxes 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 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 geographies, intercompany transactions, the relative amount of our foreign earnings, including earnings being lower than anticipated in jurisdictions where we have 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 benefits, the applicability of special tax regimes, changes in foreign currency exchange rates, changes in our stock price, changes in our deferred tax assets and liabilities and their valuation, changes in the laws, regulations, administrative practices, principles, and interpretations related to tax, including changes to the global tax framework, competition, and other laws and accounting rules in various jurisdictions.    
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Results of Operations
    The following table sets forth our consolidated results of operations:
Year EndedFavorable/(Unfavorable) %
December 31, 2020December 31, 2019December 31, 20182020 vs 20192019 vs 2018
(in thousands)
Revenue$221,628 $156,414 $124,685 42 %25 %
Expenses (1)(2):
Cost of revenue77,747 57,391 60,003 (35)%%
Sales and marketing76,030 44,565 44,556 (71)%— %
Technology and development51,546 40,250 37,863 (28)%(6)%
General and administrative52,987 39,750 42,431 (33)%%
Merger and restructuring costs17,552 2,041 3,440 (760)%41 %
Total expenses275,862 183,997 188,293 (50)%%
Loss from operations(54,234)(27,583)(63,608)(97)%57 %
Other (income) expense, net(1,495)(593)(2,143)152 %(72)%
Loss before income taxes(52,739)(26,990)(61,465)(95)%56 %
Provision (benefit) for income taxes693 (1,512)357 (146)%524 %
Net loss$(53,432)$(25,478)$(61,822)(110)%59 %
(1) Stock-based compensation expense included in our expenses was as follows:
Year Ended
December 31, 2020December 31, 2019December 31, 2018
(in thousands)
Cost of revenue$525 $421 $321 
Sales and marketing8,229 5,638 4,557 
Technology and development7,451 4,757 2,867 
General and administrative10,416 8,009 8,139 
Merger and restructuring costs1,870 — 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, 2020December 31, 2019December 31, 2018
(in thousands)
Cost of revenue$34,879 $30,345 $33,306 
Sales and marketing13,313 537 586 
Technology and development454 573 882 
General and administrative602 671 564 
Total depreciation and amortization expense$49,248 $32,126 $35,338 
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    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
December 31, 2020December 31, 2019December 31, 2018
Revenue100 %100 %100 %
Cost of revenue35 37 48 
Sales and marketing34 28 36 
Technology and development23 26 30 
General and administrative24 26 34 
Merger and restructuring costs
Total expenses124 118 151 
Loss from operations(24)(18)(51)
Other (income) expense, net— (1)(1)
Loss before income taxes(24)(17)(50)
Provision (benefit) for income taxes— (1)— 
Net loss(24)%(16) %(50) %
Comparison of the Years Ended December 31, 2020, 2019, and 2018
    Revenue
    Revenue increased $65.2 million, or 42%, for the year ended December 31, 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 (all as a result of the Merger), while mobile revenue increased $20.2 million, or a 23%, compared to the prior year, and desktop revenue increased $10.7 million, or 16%, compared to the prior year. Excluding the impact of the Merger, our revenue increased 3% year-over-year. Despite some recovery in our revenue trends, beginning in 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 on our 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 advertising spend, because PMP transactions can carry lower take rates than OMP transactions. We believe that contributions to revenue from PMPs, in particular with respect to CTV which is largely transacted through PMPs, will continue to 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 the COVID-19 pandemic. Refer to Item 1A. "Risk Factors" for additional information related to this risk factor and the impact it may have on our business.
    Cost of Revenue
    Cost of revenue increased by $20.4 million, or 35%, for the year ended December 31, 2020 compared to the prior year primarily due to the Merger. Cost of revenue includes an increase of $11.8 million in data and bandwidth expenses, $4.5 million in depreciation and amortization, 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 focus on infrastructure serving efficiency, which resulted in a decrease of $3.0 million in depreciation and amortization and a decrease of $1.0 million in data and bandwidth expenses. These decreases were partially offset by an increase of $1.1 million in ad protection costs.
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    We expect the cost of revenue to be higher in 2021 compared to 2020 in absolute dollars due primarily to the increased amortization of intangible assets resulting from the Merger and higher cloud service costs to support the growth of 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 increased by $31.5 million, or 71%, for the year ended December 31, 2020 compared to the prior year primarily due to the Merger and associated increases in amortization related to acquired intangibles and other assets and increases in headcount. Sales and marketing expenses 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 the impact of the COVID-19 pandemic.
Sales and marketing expenses stayed flat for the year ended December 31, 2019 compared to 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 increase in 2021 compared to 2020 in absolute dollars primarily due to a full year of additional headcount costs and amortization of acquired intangible assets as a result of the Merger and increased Travel and Entertainment expenses post COVID-19.
Sales and marketing 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 increased by $11.3 million, or 28%, for the year ended December 31, 2020 compared to the prior year, primarily due to an increase of $11.6 million in personnel costs as a result of the increased headcount associated with the Merger.
Technology and development expenses increased by $2.4 million, or 6%, for the year ended December 31, 2019 compared to the year ended December 31, 2018, primarily due to an increase of $3.0 million in personnel costs as a result of strategic headcount additions to focus on the engineering aspect of our new developments, including 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 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 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 increased by $13.2 million, or 33%, for the year ended December 31, 2020 compared to the prior 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 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 due to a decrease of $1.2 million in personnel related expenses due to the benefit of prior year's cost control initiatives.
    We expect general and administrative expenses to increase in 2021 compared to 2020 in absolute dollars primarily due to the additional headcount and assuming a return to office work environment later in the year.
General and administrative expenses may fluctuate from quarter to quarter and period to period based on the timing and amounts of expenditures in our general and administrative functions as they vary in scope and scale over periods. Such fluctuations may not be directly proportional to changes in revenue.
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    Merger and 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 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 related to headcount reductions that were made in 2018. These costs included one-time cash-based employee termination benefit costs of $3.0 million and non-cash stock-based compensation expenses associated with severance benefits of $0.4 million. These headcount reductions were as part of evaluation of efficiency and implementation of cost-control measures. As part of these measures, we reduced headcount by approximately 100 people, or 19% of our workforce, and reduced other operating costs. Our actions included reductions in administrative staff to bring our general and administrative operations into better alignment with the current size of the business, as well as in sales and technical personnel as a result of offshoring certain development functions, organizational delayering and restructuring, and reducing investment in unprofitable projects.
We expect merger and restructuring costs to increase in 2021 compared to 2020 in absolute dollars if the SpotX Acquisition successfully closes.
    Other (Income) Expense, Net
Year Ended
December 31, 2020December 31, 2019December 31, 2018
(in thousands)
Interest (income) expense, net$(50)$(789)$(988)
Other income(3,665)(285)(766)
Foreign exchange (gain) loss, net2,220 481 (389)
Total other (income) expense, net$(1,495)$(593)$(2,143)
    Other income increased by $3.4 million during the year ended December 31, 2020 compared to the prior year due to rental income for two real estate leases for which we sublease the property to a third parties. We expect rental income for real estate leases subleased to third parties to be approximately $3.8 million in 2021, $3.2 million in 2022 and 2023, $3.0 million in 2024, and $0.3 million in 2025, based on the subleases in place as of December 31, 2020.
Foreign exchange (gain) loss, net is impacted by movements in exchange rates 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 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 currency movements between the British Pound 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 years ended December 31, 2019 and 2018, respectively. The tax expense for the years ended December 31, 2020 and December 31, 2018 was 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 Adjusted EBITDA, a non-GAAP financial 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. Adjusted EBITDA is discussed immediately following the table below. Revenue is discussed under the headings "Components of Our Results of Operations" and "Results of Operations."
Year Ended
December 31, 2020December 31, 2019December 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)
    Adjusted EBITDA
    We define Adjusted EBITDA as net income (loss) adjusted to exclude stock-based compensation expense, depreciation and amortization, amortization of acquired intangible assets, impairment charges, interest income or expense, and other cash and non-cash based income or expenses that we do not consider indicative of our core operating performance, including, but not limited to foreign exchange gains and losses, acquisition and related items, and provision (benefit) for income taxes. We believe Adjusted EBITDA is useful to investors in evaluating our performance for the following reasons:
Adjusted EBITDA is widely used by investors and securities analysts to measure a company’s performance without regard to items such as those we exclude in calculating this measure, which can vary substantially from company to company depending upon their financing, capital structures, and the method by which assets were acquired.
Our management uses Adjusted EBITDA in conjunction with GAAP financial measures for planning purposes, including the preparation of our annual operating budget, as a measure of performance and the effectiveness of our business strategies, and in communications with our board of directors concerning our performance. Adjusted EBITDA may also be used as a metric for determining payment of cash incentive compensation.
Adjusted EBITDA provides a measure of consistency and comparability with our past performance that many investors find useful, facilitates period-to-period comparisons of operations, and also facilitates comparisons with other peer companies, many of which use similar non-GAAP financial measures to supplement their GAAP results.
Although Adjusted EBITDA is frequently used by investors and securities analysts in their evaluations of companies, Adjusted EBITDA has limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of our results of operations as reported under GAAP. These limitations include:
Stock-based compensation is a non-cash charge and will remain an element of our long-term incentive compensation package, although we exclude it as an expense when evaluating our ongoing operating performance for a particular period.
Depreciation and amortization are non-cash charges, and the assets being depreciated or amortized will often have to be replaced in the future, but Adjusted EBITDA does not reflect any cash requirements for these replacements.
Impairment charges are non-cash charges related to goodwill, intangible assets and/or long-lived assets.
Adjusted EBITDA does not reflect non-cash charges related to acquisition and related items, such as amortization of acquired intangible assets and changes in the fair value of contingent consideration.
Adjusted EBITDA does not reflect cash and non-cash charges and changes in, or cash requirements for, acquisition and related items, such as certain transaction expenses and expenses associated with earn-out amounts.
Adjusted EBITDA does not reflect changes in our working capital needs, capital expenditures, or contractual commitments.
Adjusted EBITDA does not reflect cash requirements for income taxes and the cash impact of other income or expense.
Other companies may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.
    Our Adjusted EBITDA is influenced by fluctuations in our revenue and the timing and amounts of our investments in our operations. Adjusted EBITDA should not be considered as an alternative to net income (loss), 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, 2020 and 2019.
Year Ended
December 31, 2020December 31, 2019December 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 assets24,337 28,818 32,153 
Amortization of acquired intangibles24,911 3,308 3,185 
Stock-based compensation expense28,491 18,825 16,282 
Merger and acquisition related items15,682 2,041 — 
Non-operational real estate expense (income), net198 — — 
Interest (income) expense, net(50)(789)(988)
Foreign exchange (gain) loss, net2,220 481 (389)
Other non-operating (income) expense, net15 — — 
Provision (benefit) for income taxes693 (1,512)357 
Adjusted EBITDA$43,065 $25,694 $(11,222)
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, 2020, we had cash and cash equivalents of $117.7 million, of which $23.5 million was held in foreign currency cash 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, and may be negatively impacted as a result of COVID-19.
    On September 25, 2020, we amended and restated our loan and security agreement with SVB (the "Loan Agreement"). The Loan Agreement provides a senior secured revolving credit facility of up to $60.0 million with a maturity date of September 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. As of December 31, 2020, the amount available for borrowing was $53.7 million (net of letters of credit).
Pursuant to the Loan Agreement, we are required to comply with financial covenants, measured quarterly, with respect to a minimum liquidity ratio and maximum quarterly cash burn. We are 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 due to SVB, including all debt balances, interest, service fees, and unused credit line fees, net of 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 property and equipment and capitalized labor costs as they relate to internal use software development costs. December 31, 2020, the 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, 2020, we had no amounts outstanding under our Loan Agreement other than with 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, 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. In addition, in the event a buyer defaults on payment, we may still be required to pay sellers for the inventory purchased even if we are unable to collect from buyers. These challenges have been exacerbated by the COVID-19 pandemic and resulting economic impact, as many of our 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 flow or liquidity. At December 31, 2020, two buyers accounted for 33% and 12%, respectively, of consolidated accounts receivable. The future capital requirements and the adequacy of available funds will depend on many factors, including 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.
We intend to finance the cash portion of the SpotX Acquisition consideration in part from cash on our balance sheet and in part through borrowings under certain proposed new credit 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 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 $560 million. If we fail to satisfy the closing conditions set forth in the Commitment Letter or the Commitment Party is unable to perform its obligations under the Commitment Letter for any reason, we will be required to find other sources of capital to fund the acquisition of SpotX.
In the future, we may attempt to raise additional capital through the sale of equity securities or through equity-linked or debt financing arrangements. If we raise additional funds by issuing equity or equity-linked securities, the ownership of our existing stockholders will be diluted. If we raise additional financing by incurring indebtedness, we will be subject to increased fixed payment obligations and could also be subject to restrictive covenants, such as limitations on our ability to incur additional debt, and other operating restrictions that could adversely impact our ability to conduct our business. Any future indebtedness we incur may result in terms that could be unfavorable to equity investors. Due to the economic uncertainty caused by the COVID-19 pandemic, the debt and equity markets have become less predictable and obtaining financing on favorable terms and at favorable rates has become more difficult.
    An inability to raise additional capital could adversely affect our ability to achieve our business objectives. In addition, if our operating performance during the next twelve months is below our expectations, our liquidity and ability to operate our business could be adversely affected.
Cash Flows
The following table summarizes our cash flows for the periods presented:
Year Ended
December 31, 2020December 31, 2019December 31, 2018
(in thousands)
Cash flows provided by (used in) operating activities$(12,065)$31,983 $(22,686)
Cash flows provided by (used in) investing activities32,636 (23,388)27,947 
Cash flows provided by (used in) financing activities7,354 (205)(1,279)
Effects of exchange rate changes on cash, cash equivalents and restricted cash918 46 (172)
Change in cash, cash equivalents and restricted cash$28,843 $8,436 $3,810 
    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 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.
    During the year ended December 31, 2020, net cash used in operating activities was $12.1 million, compared to net cash provided by operating activities of $32.0 million during the year ended December 31, 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 $53.4 million, $25.5 million, and $61.8 million for the years ended December 31, 2020 and 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 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. The net changes in working capital for 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 acquisitions of businesses, purchases of property and equipment, capital expenditures to develop our internal use software in support of creating and enhancing our technology 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 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 expect those trends to continue, with higher levels of property and equipment spend in the latter half of next year compared to the first half of the year. Investments in, and maturities2020, legacy Rubicon Project achieved revenue of available-for-sale securities and acquisitions of businesses vary from period-to-period.
During the year ended December 31, 2020, net cash provided by investing activities was $32.6 million compared to net cash used by investing activities of $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$65.6 million and $11.4 million, respectively, and used cash for investmentsAdjusted EBITDA less capex of ($0.68 million), resulting 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, 2020 included $54.6 million of cash and restricted cash acquired as part of the Merger. Net cash used in our investing activities in 2019 included $11.0 million to acquire RTK.io. For the 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, respectively. In addition, we had cash inflows of $9.2 million during the year ended December 31, 2018 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 used net cash of $0.2 million, and $1.3 million, respectively, for financing activities. Cash outflows from financing activities for the years ended December 31, 2020, 2019, and 2018 included payments of $7.9 million, $1.8 million, and $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 $15.2 million, $1.6 million, and $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, 2020, 2019, and 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, 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 offices in New York, New York, and operating lease agreements, including data centers and cloud managed services that expire at various times through 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 $3.7 million for the year ended December 31, 2020.
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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20212022202320242025ThereafterTotal
(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, 20201,549 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 obligations9,010 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 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 changes for the year ended December 31, 2020 resulted from a closed IRS audit and the Company's reasonable expectation that federal research and development credits will expire unutilized pursuant to 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 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, 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. We also generate revenue from the fee we charge clients for use of our Demand Manager product, which generally is aweighted payout percentage of the client's advertising spending on any advertising marketplace. Our platform dynamically connects sellers and buyers of advertising inventory in a digital marketplace. Our 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 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 have no arrangements with multiple performance obligations. We consider the following when determining if a contract exists (i) contract approval by all parties, (ii) identification29.61% 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 determination of whether revenue should be reported on a gross or net basis is based on an assessment of whether we are actingnamed executive officers’ target annual bonuses for 1H20 (other than Ms. Evans), 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.follows:
    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. However, for certain transactions related to revenue streams acquired in connection with the Merger with Telaria, we 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 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 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. We capitalize 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.
We amortize internal use software development costs using a straight-line method over the 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.
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Valuation of Goodwill and Intangibles
The valuation of assets 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 that the carrying amount of an asset may not be recoverable. 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 be impaired. In accordance with guidance related to impairment testing, we have the option to first assess qualitative factors to determine whether or not it is necessary to perform the quantitative goodwill impairment test. If the qualitative assessment option is not elected, or if the qualitative assessment indicates that it is more likely than not that the fair value is less than its carrying amount, a 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 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 service conditions, awards that vest based on the achievement of 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 grant date using the Black-Scholes option-pricing 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, 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 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 grant date requires judgment. Our use of the 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 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 those cash flows and the estimate of future cash flows attributable to the acquired intangible asset, which include revenue, expenses and taxes. The carrying value of acquired working capital assets and liabilities approximates its fair value, given the 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 given that the final tax outcome of these matters will not be different. We adjust these reserves as facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes and the effective tax rate in the period in which such 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
    The information set forth under Note 2 to our "Notes to Consolidated Financial Statements" under the caption "Organization and Summary of Significant Accounting Policies" is incorporated herein by reference.

Item 7A. Quantitative and Qualitative Disclosure About Market Risk
    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 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

MAGNITE, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Consolidated Financial Statements:
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income (Loss)
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of Magnite, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Magnite, Inc. and subsidiaries (the "Company") as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive loss, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 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, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 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 Opinions
The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the 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 these financial statements and an opinion on the Company’s internal control over financial 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 in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or 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 financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the 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 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 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/ Deloitte & Touche LLP
Los Angeles, California February 24, 2021
We have served as the Company's auditor since2018.
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MAGNITE, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
December 31, 2020December 31, 2019
ASSETS
Current assets:
   Cash and cash equivalents$117,676 $88,888 
   Accounts receivable, net471,666217,571
   Prepaid expenses and other current assets             17,7296,591
TOTAL CURRENT ASSETS607,071313,050
Property and equipment, net23,68123,667
Right of use lease asset39,59921,491
Internal use software development costs, net16,16016,053
Intangible assets, net89,88411,386
Goodwill158,1257,370 
Other assets, non-current4,440 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 portion9,8137,282
   Other current liabilities3,070778
TOTAL CURRENT LIABILITIES522,198267,499
Lease liabilities - non-current portion32,27815,231
Deferred tax liability, net1990
Other liabilities, non-current2,672454
TOTAL LIABILITIES557,347283,184
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, 201900
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
Additional paid-in capital        777,084453,064
Accumulated other comprehensive income (loss)(957)(45)
Accumulated deficit(394,516)(341,084)
TOTAL STOCKHOLDERS' EQUITY381,613111,936
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$938,960 $395,120 
The accompanying notes to consolidated financial statements are an integral part of these statements.

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MAGNITE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
 Year Ended
December 31, 2020December 31, 2019December 31, 2018
Revenue$221,628 $156,414 $124,685 
Expenses:
Cost of revenue77,747 57,391 60,003 
Sales and marketing76,030 44,565 44,556 
Technology and development51,546 40,250 37,863 
General and administrative52,987 39,750 42,431 
Merger and restructuring costs17,552 2,041 3,440 
Total expenses275,862 183,997 188,293 
Loss from operations(54,234)(27,583)(63,608)
Other (income) expense:
Interest (income) expense, net(50)(789)(988)
Other income(3,665)(285)(766)
Foreign exchange (gain) loss, net2,220 481 (389)
Total other (income) expense, net(1,495)(593)(2,143)
Loss before income taxes(52,739)(26,990)(61,465)
Provision (benefit) for income taxes693 (1,512)357 
Net loss$(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 Diluted96,700 52,614 50,259 
The accompanying notes to consolidated financial statements are an integral part of these statements.


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MAGNITE, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
Year Ended
December 31, 2020December 31, 2019December 31, 2018
Net loss$(53,432)$(25,478)$(61,822)
Other comprehensive income (loss):
Unrealized gain (loss) on investments27 
Foreign currency translation adjustments(912)212 (327)
Other comprehensive income (loss)(912)214 (300)
Comprehensive loss$(54,344)$(25,264)$(62,122)
The accompanying notes to consolidated financial statements are an integral part of these statements.



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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
SharesAmount
Balance at Balance at December 31, 201750,239 $$418,354 $41 $(253,784)$164,611 
Exercise of common stock options50 — 45 — — 45 
Restricted stock awards, net(156)— — — — 
Issuance of common stock related to employee stock purchase plan174 — 314 — — 314 
Issuance of common stock related to RSU vesting1,367 — — — 
Shares withheld related to net share settlement(515)— (1,638)— — (1,638)
Stock-based compensation— — 16,802 — — 16,802 
Other comprehensive loss— — — (300)— (300)
Net loss— — — — (61,822)(61,822)
Balance at Balance at December 31, 201851,159 $$433,877 $(259)$(315,606)$118,013 
Exercise of common stock options285 — 588 — — 588 
Restricted stock awards, net(182)— — — — 
Issuance of common stock related to employee stock purchase plan227 — 1,054 — — 1,054 
Issuance of common stock related to RSU vesting2,858 — — — — 
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, 201953,888 453,064 (45)(341,084)111,936 
Exercise of common stock options3,359 — 13,548 — — 13,548 
Issuance of common stock related to employee stock purchase plan381 — 1,660 — — 1,660 
Issuance of common stock related to RSU vesting5,126 — — — — 
Shares withheld related to net share settlement(824)— (7,854)— — (7,854)
Issuance of common stock associated with the Merger52,099 275,772 — — 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, 2020114,029

$

$777,084 

$(957)

$(394,516)

$381,613 
The accompanying notes to consolidated financial statements are an integral part of these statements.
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MAGNITE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended
December 31, 2020December 31, 2019December 31, 2018
OPERATING ACTIVITIES:
Net loss$(53,432)$(25,478)$(61,822)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization49,248 32,126 35,338 
Stock-based compensation28,491 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 securities24 (412)
Non-cash lease expense(784)(209)
Deferred income taxes789 (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 expenses75,064 16,288 26,612 
Other liabilities3,811 407 (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 acquired54,595 (11,000)
Investments in available-for-sale securities(23,991)
Maturities of available-for-sale securities7,500 62,650 
Sales of available-for-sale securities9,228 
Net cash provided by (used in) investing activities32,636 (23,388)27,947 
FINANCING ACTIVITIES:
Proceeds from exercise of stock options13,548 588 45 
Proceeds from issuance of common stock under employee stock purchase plan1,660 1,054 314 
Taxes paid related to net share settlement(7,854)(1,847)(1,638)
Net cash provided by (used in) financing activities7,354 (205)(1,279)
EFFECT OF EXCHANGE RATE CHANGES ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH918 46 (172)
CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH28,843 8,436 3,810 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH — Beginning of period88,888 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-current55 
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.
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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, 2020December 31, 2019December 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 $
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 $
Common stock and options issued for Merger$287,418 $$
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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., was formed in Delaware and began operations on 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 inventory, or publishers, that own or operate websites, applications, CTV channels, and other digital media properties, to manage and monetize their inventory; applications and services for buyers, including advertisers, agencies, agency trading desks, and demand side platforms, to buy digital advertising inventory; and a transparent, independent marketplace that brings buyers and sellers together and facilitates intelligent decision making and automated transaction execution at scale. The Company's clients include many of the world's leading sellers and buyers of digital advertising inventory.
    Sellers monetize their inventory through the Company’s platform by seamlessly connecting to a global market of integrated buyers that transact through real-time bidding, which includes direct sale of premium inventory to a buyer, referred to as private marketplace, and open auction bidding, where buyers bid against each other in a real-time auction for the right to purchase a publisher’s inventory, referred to as open marketplace. At the same time, buyers leverage the Company’s platform to manage their advertising spending and reach their target audiences, simplify order management and 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 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 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, 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. 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 of advertising 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 the Company's platform in the form of advertising requests, or ad requests. When the Company receives ad requests from sellers, it sends bid requests to buyers, which enable buyers to bid on sellers’ digital advertising inventory. Winning bids can create advertising, or paid impressions, for the seller to present to the consumer.
The total volume of spending between buyers and sellers on the Company's platform is referred to as advertising spend. The Company keeps a percentage of that advertising spend as a fee, and remits the remainder to the seller. The fee that the Company retains from the gross advertising spend on its platform is recognized as revenue. The fee earned on each transaction is based on the pre-existing agreement between the Company and the seller and the clearing price of the winning bid. The Company recognizes revenue upon fulfillment of its performance obligation to a client, which occurs at the point in time an ad renders and is counted as a paid impression, subject to a contract existing with the client and a fixed or determinable transaction price. The Company 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 determination of whether revenue should be reported on a gross or net basis is based on an assessment of whether the Company is acting as the principal or an agent in the transaction. In determining whether the Company is acting as the principal or an agent, the Company follows the accounting guidance for principal-agent considerations. Making such determinations involves
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judgment and is based on an evaluation of the terms of each arrangement, none of which are considered presumptive or determinative.
Expenses
The Company classifies its expenses into the following 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 cloud computing costs. Personnel costs included in cost of revenue include salaries, bonuses, and stock-based compensation, 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 salaries, bonuses, and stock-based compensation, 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 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. 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 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, 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.
    Merger and Restructuring Costs. The Company's merger and restructuring costs 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 closures and relocation costs.
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 granted awards to employees that vest based solely on continued service, or service conditions, awards that vest based on the achievement of 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 grant date using the Black-Scholes option-pricing 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, 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 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.
    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 NYSE on the 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. For grants issued in periods in which the Company did not have significant trading history for the Company’s common stock, the Company 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 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, 2020, 2019, and 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.
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    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 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, 2020 was 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, 2020, the Company had restricted 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.
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
Computer equipment and network hardware3
Furniture, fixtures and office equipment5 to 7
Leasehold improvementsShorter of useful life or life of lease
Computer equipment under right-of-use finance arrangementsShorter 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 technology5
In-process research and development3 to 5
Customer relationships2 to 3
Backlog0.75
Non-compete agreements2
Other intangible assets0.25 to 1.5
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. Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset, a significant change in the extent or manner in which an asset is used, or any other significant adverse change that would indicate that the carrying amount of an asset or group of assets may not be recoverable. For intangible assets used in operations, impairment losses are only recorded if the asset’s carrying amount is not recoverable through its undiscounted, probability-weighted future cash flows. The Company measures the impairment loss based on the difference between the carrying amount and estimated fair value.
    Impairment of Long-Lived Assets including Internal Use Capitalized Software Costs
    The Company assesses the recoverability of its long-lived assets when events or changes in circumstances indicate their carrying value may not be recoverable. Such events or changes in circumstances may include: a significant adverse change in the extent or manner in which a long-lived asset is being used, significant adverse change in legal factors or in the business climate 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, more likely than not, a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. The Company performs impairment testing at the asset group level that represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. The Company assesses recoverability of a long-lived asset by determining whether the carrying value of the asset group can be recovered through projected undiscounted cash flows over their remaining lives. If the carrying value of the asset group exceeds the forecasted undiscounted cash flows, an impairment loss is recognized, measured as the amount by which the carrying amount exceeds estimated fair value. An impairment loss is charged to operations in the period in which management determines such impairment.
Business Combinations
    The results of businesses acquired in a business combination are included in the Company’s consolidated financial statements from the date of acquisition. The Company allocates 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 the Company issues stock-based or cash awards to an acquired company’s stockholders, the Company evaluates whether the awards are 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.
    The Company estimates 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 those cash flows and the estimate of future cash flows attributable to the acquired intangible asset, which include revenue, expenses and taxes. The carrying value of acquired working capital assets and liabilities approximates its fair value, given the short-term nature of these assets and liabilities.
    Acquisition-related transaction costs are not included as a component of consideration transferred, but are accounted for as an expense in the period in which the costs are incurred.
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    Goodwill
    Goodwill represents the excess of the aggregate fair value of the consideration transferred in a business combination over the fair value of the assets acquired, net of liabilities assumed. Goodwill is not amortized, but is subject to impairment testing conducted annually during the fourth quarter or more frequently if events or changes in circumstances indicate that goodwill may be impaired.
    In accordance with guidance related to impairment testing, the Company has the option to first assess qualitative factors to determine whether or not it is necessary to perform the quantitative goodwill impairment test. If the qualitative assessment option is not elected, or if the qualitative assessment indicates that it is more likely than not that the fair value is less than its carrying amount, a 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 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.
    The Company operates as a single operating segment and has identified a single reporting unit.
Operating and Finance Leases
    On January 1, 2019, the Company adopted ASU 2016-02—Leases (Topic 842), ("ASC 842"), which requires the recognition of the right-of-use assets, or ROU assets, and related lease liabilities on the balance sheet using a modified retrospective approach. The consolidated financial statements related to periods prior to January 1, 2019 were not restated, and continue to be reported under ASC Topic 840—Leases ("ASC 840"), which did not require the recognition of operating lease liabilities on the balance sheet. As a result, the consolidated financial statements related to periods prior to January 1, 2019 are not entirely comparative with current and future periods. As permitted under ASC 842, the Company elected several practical expedients that permit the Company to not reassess (1) whether existing contracts are or contain a lease, (2) the classification of existing leases, and (3) whether previously capitalized costs continue to qualify as initial indirect costs. In addition, the Company has elected not to recognize short-term leases on the balance sheet, nor separate lease and non-lease components for data center leases. In addition, the Company utilized the portfolio approach to group leases with similar characteristics and did not use hindsight to determine lease term. The finance lease classification under ASC 842 includes leases previously classified as capital leases under ASC 840.
In addition to the leases previously reported under ASC 840, the Company also reviewed its data center agreements to identify non-lease components that should not be included in the lease liability and lease expense under ASC 842. Certain fixed non-lease components of data center leases, primarily fixed minimum power commitments, have been included in the lease liability and ROU asset as the Company has elected the practical expedient for its data centers to not separate the lease and non-lease components; however, variable components have not been included. For identified leases, the Company used its incremental borrowing rate to discount the related future payment obligations as of January 1, 2019 to determine its lease liability as of adoption. As of the adoption date, the Company recognized a lease liability of $15.6 million and a corresponding ROU asset of $14.3 million; there was no equity impact from the adoption. The difference between the lease liability and the ROU asset primarily represents the existing deferred rent liabilities balances before adoption, resulting from historical straight-lining of operating leases, which was effectively reclassified upon adoption to reduce the measurement of the ROU asset.
    The Company records rent expense for operating leases, including leases of office locations, data centers, and equipment, on a straight-line basis over the lease term. The straight-line calculation of rent expense includes rent escalations on certain leases, as well as lease incentives provided by the landlords, including payments for leasehold improvements and rent-free periods. The Company begins recognition of rent expense on the commencement date, which is generally the date that the asset is made available for use. The lease liability is included in lease liabilities, current and lease liabilities, non-current within the consolidated balance sheet, which are reduced as lease related payments are made. The ROU asset is amortized on a periodic basis over the expected term of the lease (see Note 16).
    Prior to January 1, 2019, assets and liabilities under capital lease were recorded at the lesser of present value of aggregate future minimum lease payments, including estimated bargain purchase options, or the fair value of the asset under lease. Assets under capital lease were amortized using the straight-line method over the estimated useful lives of the assets.
Fair Value of Financial Instruments
    The carrying amounts of the Company's cash equivalents, accounts receivable, accounts payable, accrued expenses, and seller payables approximate fair value due to the short-term nature of these instruments. Certain assets of the Company are recorded at their fair value, using the fair value hierarchy, on a recurring basis, and other assets and liabilities, including goodwill and intangible assets are subject to measurement at fair value on a non-recurring basis if they are deemed to be impaired as a result of an impairment review (see Note 5).
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Concentration of Risk
    Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash, cash equivalents, restricted cash and accounts receivable. Cash and cash equivalents maintained with financial institutions exceed applicable federally insured limits.
    Accounts receivable include amounts due from buyers with principal operations primarily in the United States. The Company performs ongoing credit evaluations of its buyers.
At December 31, 2020, two buyers accounted for 33% and 12% respectively, of consolidated accounts receivable. At December 31, 2019, two buyers accounted for 23% and 17%, respectively, of accounts receivable.
    The Company recognizes revenue from its contracts with sellers. No seller of advertising inventory accounted for 10% or more of revenue during the years ended December 31, 2020, 2019, and 2018.
At December 31, 2020 one seller of adverting inventory accounted for 18% of accounts payable, and at December 31, 2019, no seller of advertising inventory comprised 10.0% or more of accounts payable.
Foreign Currency Transactions and Translation
    Transactions in foreign currencies are translated into the functional currency of the applicable entity at the rates of exchange in effect at the date of the transaction. Foreign exchange gains or losses were included in foreign exchange (gain) loss, net in the accompanying consolidated statements of operations. To the extent that the functional currency is different from the U.S. Dollar, the financial statements have then been translated into U.S. Dollars using period-end exchange rates for assets and liabilities and average exchange rates for the results of operations. Foreign currency translation gains and losses are included as a component of accumulated other comprehensive income (loss) on the consolidated balance sheet.
    Recently Adopted Accounting Standards
    In June 2016, the FASB issued ASU 2016-13—Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). This guidance requires entities to use a current expected credit loss methodology to measure impairments of certain financial assets and to recognize an allowance for its estimate of lifetime expected credit losses. The main objective of this update is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company adopted ASU 2016-13 as of January 1, 2020. The standard did not have a material impact on its consolidated financial statements.
    In August 2018, the FASB issued ASU 2018-13—Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement ("ASU 2018-13"), to streamline the disclosure requirements of ASC Topic 820—Fair Value Measurement. ASU 2018 removes certain disclosure requirements, including the valuation process for Level 3 fair value measurements, and adds certain quantitative disclosures around Level 3 fair value measurements. This ASU is effective for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period, with early adoption permitted. The provisions of ASU 2018-13 are required to be adopted retrospectively, with the exception of disclosure of the range and weighted average of significant unobservable inputs used to develop Level 3 measurements, which can be adopted prospectively. The Company adopted ASU 2018-13 as of January 1, 2020. The standard did not have a material impact on its consolidated financial statements and related disclosures.
    In August 2018, the FASB issued ASU 2018-15—Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract ("ASU 2018-15"). ASU 2018-15 was issued to clarify the requirements of ASC 350-40—Intangibles—Goodwill and Other—Internal-Use Software ("ASC 350-40"). The ASU clarifies that implementation, setup and other upfront costs related to cloud computing agreements ("CCA") should be accounted for under ASC 350-40. ASC 2018-15will require companies to capitalize certain costs incurred when purchasing a CCA that is a service. Under the new guidance, companies will apply the same criteria for capitalizing implementation costs in a CCA service as they would for internal-use software. The capitalized implementation costs will generally be expensed over the term of the service arrangement and the related assets will be assessed for impairment using the same model applied to long-lived assets. This ASU is effective for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period, with early adoption permitted. ASU 2018-15 can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company adopted ASU 2018-15 as of January 1, 2020 on a prospective basis. The standard did not have a material impact on its consolidated financial statements and related disclosures.
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Recent Accounting Pronouncements Not Yet Adopted
    In December 2019, the FASB issued ASU 2019-12—Simplifying the Accounting for Income Taxes ("ASU 2019-12") . ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to general principles in Topic 740 and clarifies and amends existing guidance for clarity and consistent application. This guidance is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2020 including interim reporting periods within those fiscal years. Early adoption is permitted. The Company is evaluating the impact of adopting this new accounting guidance on its consolidated financial statements and related disclosures but the impact is not expected to be material.
In January 2020, the FASB issued ASU 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) ("ASU 2020-01"), which clarifies the interaction of the accounting for equity securities under Topic 321, the accounting for equity method investments in Topic 323, and the accounting for certain forward contracts and purchased options in Topic 815. This guidance is effective for fiscal years beginning after December 15, 2020, including interim reporting periods within those fiscal years. Early adoption is permitted, including early adoption in an interim period, The Company does not expect the adoption of this guidance to have a material impact on the Company's consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU "2020-06"), which simplifies the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments. This guidance also eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method. This guidance is effective for fiscal years beginning after December 15, 2021, including interim reporting periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company does not expect the adoption of this guidance to have a material impact on the Company's consolidated financial statements.
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force) and the SEC did not or are not expected to have a material impact on our present or future consolidated financial statements.
Note 3—Net Income (Loss) Per Share
    The following table presents the basic and diluted net loss per share:
Year Ended
December 31, 2020December 31, 2019December 31, 2018
Basic and Diluted EPS:
Net loss$(53,432)$(25,478)$(61,822)
Weighted-average common shares outstanding96,70052,63450,602
Weighted-average unvested restricted shares0(20)(343)
Weighted-average common shares outstanding used to compute net loss per share96,70052,61450,259
Basic and diluted net loss per share$(0.55)$(0.48)$(1.23)
The following weighted-average shares have been excluded from the calculation of diluted net loss per share attributable to common stockholders for each period presented because they are anti-dilutive:
Year Ended
December 31, 2020December 31, 2019December 31, 2018
(in thousands)
Options to purchase common stock2,317 793 128 
Unvested restricted stock awards13 218 
Unvested restricted stock units4,713 4,211 2,029 
Unvested performance awards40 
ESPP50 34 55 
Total shares excluded from net loss per share7,120 5,051 2,430 
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Note 4—Revenues
    For substantially all transactions on the Company's platform, the Company reports revenue on a net basis as it does not act as the principal in the purchase and sale of digital advertising inventory because it does not have control of the digital advertising inventory and does not set prices agreed upon within the auction marketplace. However, for certain transactions related to revenue streams acquired in connection with the Merger with Telaria, the Company reports revenue on a gross basis, based primarily on its determination that the Company acts as the primary obligor in the delivery of advertising campaigns for buyers with respect to such transactions. For the year ended December 31, 2020, revenue reported on a gross basis was less than 2% of total revenue.
    The following table presents our revenue by channel for the years ended December 31, 2020 and 2019:
Year Ended
December 31, 2020December 31, 2019December 31, 2018
Channel:
CTV$34,319 15 %$%$%
Desktop78,956 36 68,302 44 59,039 47 
Mobile108,353 49 88,112 56 65,646 53 
Total$221,628 100 %$156,414 100 %$124,685 100 %
    The following table presents the Company's revenue disaggregated by geographic location, based on the location of the Company's sellers:
Year Ended
December 31, 2020December 31, 2019December 31, 2018
(in thousands)
United States$161,570 $108,385 $83,020 
International60,058 48,029 41,665 
Total$221,628 $156,414 $124,685 
Payment terms are specified in agreements between the Company and the buyers and sellers on its exchange platform. The Company generally bills buyers at the end of each month for the full purchase price of impressions filled in that month. The Company recognizes volume discounts as a reduction of revenue as they are incurred. Specific payment terms may vary by agreement, but are generally seventy-five days or less. The Company's accounts receivable are recorded at the amount of gross billings to buyers, net of allowances for the amounts the Company is responsible to collect. The Company's accounts payable related to amounts due to sellers are recorded at the net amount payable to sellers (see Note 11). Accordingly, both accounts receivable and accounts payable appear large in relation to revenue reported on a net basis.
Accounts receivable are recorded at the invoiced amount, are unsecured, and do not bear interest. The allowance for doubtful accounts is reviewed quarterly, requires judgment, and is based on the best estimate of the amount of probable credit losses in existing accounts receivable. The Company reviews the status of the then-outstanding accounts receivable on a customer-by-customer basis, taking into consideration the aging schedule of receivables, its historical collection experience, current information regarding the client, subsequent collection history, and other relevant data, in establishing the allowance for doubtful accounts. Accounts receivable is presented net of an allowance for doubtful accounts of $2.4 million at December 31, 2020, and $3.4 million at December 31, 2019. Accounts receivable are written off against the allowance for doubtful accounts when the Company determines amounts are no longer collectible.
The Company reviews the associated payable to sellers for recovery of buyer receivable allowance and write-offs; in some cases, the Company can reduce the payable to sellers. The reduction of seller payables related to recovery of uncollected buyer receivables is netted against allowance expense. The contra seller payables related to recoveries were $1.5 million and $0.9 million as of December 31, 2020 and December 31, 2019, respectively.

The following is a summary of activity in the allowance for doubtful accounts for the years ended December 31, 2020, 2019 and 2018, respectively:
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Year Ended
December 31, 2020December 31, 2019December 31, 2018
(in thousands)
Allowance for doubtful accounts, Beginning Balance$3,400 $1,340 $500 
Allowance for doubtful accounts, Merger-assumed1,033 
Write-offs(3,054)(3,282)(815)
Increase (decrease) in provision for expected credit losses870 5,328 1,285 
Recoveries of previous write-offs111 14 370 
Allowance for doubtful accounts, December 31$2,360 $3,400 $1,340 
During the year ended December 31, 2020, 2019 and 2018, the provision for expected credit losses associated with accounts receivable and the offset by increases of contra seller payables related to recoveries of uncollected buyer receivables resulted in a net amount of bad debt each year. During the year ended December 31, 2020, the provision for expected credit losses associated with accounts receivable of $0.9 million was offset by increases of contra seller payables related to recoveries of uncollected buyer receivables of $1.0 million, which resulted in $0.1 million of bad debt recoveries. During the year ended December 31, 2019, the provision for expected credit losses associated with accounts receivable of $5.3 million was offset by increases of contra seller payables related to recoveries of uncollected buyer receivables of $4.1 million, which resulted in bad debt expense of $1.2 million. During the year ended December 31, 2018, the provision for expected credit losses associated with accounts receivable of $1.3 million was offset by increases of contra seller payables related to recoveries of uncollected buyer receivables of $0.5 million, which resulted in bad debt expense of $0.8 million.
Note 5—Fair Value Measurements
Recurring Fair Value Measurements
    Fair value represents the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Observable inputs are based on market data obtained from independent sources. The fair value hierarchy is based on the following three levels of inputs, of which the first two are considered observable and the last one is considered unobservable:
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 – Unobservable inputs.
The table below sets forth a summary of financial instruments that are measured at fair value on a recurring basis at December 31, 2020:
TotalQuoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs 
(Level 3)
(in thousands)
Cash equivalents$7,868 $7,868 $$
The table below sets forth a summary of financial instruments that are measured at fair value on a recurring basis at December 31, 2019:
TotalQuoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs 
(Level 3)
(in thousands)
Cash equivalents$13,501 $13,501 $$
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At December 31, 2020 and 2019, cash equivalents of $7.9 million and $13.5 million, respectively, consisted of money market funds and commercial paper, with original maturities of three months or less. The carrying amounts of cash equivalents are classified as Level 1 or Level 2 depending on whether or not their fair values are based on quoted market prices for identical securities that are traded in an active market. Corporate debt securities (which are included in marketable securities on the balance sheet) with fair values derived from similar securities rather than based on quoted market prices for identical securities, are classified as Level 2 as well. The fair values of the Company's U.S. treasury, government and agency debt securities are based on quoted market prices and classified as Level 1, and are included within marketable securities.
There were no transfers between Level 1 and Level 2 fair value measurements during the years ended December 31, 2020 and 2019.

Note 6—Investments
The Company had 0 investments in marketable securities at December 31, 2020 and December 31, 2019.
During the year ended December 31, 2019, $7.5 million of available-for-sale investments matured, on which the realized gains were de minimis and there were no unrealized holding gains (losses) reclassified out of accumulated other comprehensive loss into the consolidated statements of operations. The Company had 0 sales of available-for-sale investments in 2019.
During the year ended December 31, 2018, the Company sold $9.2 million of available-for-sale investments, on which the realized gains were de minimis and there were no unrealized holding gains (losses) reclassified out of accumulated other comprehensive loss into the consolidated statements of operations. In addition, during the year ended December 31, 2018, the Company had net maturities of investments in available-for-sale securities of $38.7 million.

Note 7—Property and Equipment
    Major classes of property and equipment were as follows:
December 31, 2020December 31, 2019
(in thousands)
Purchased software$1,255 $1,254 
Computer equipment and network hardware115,740 105,491 
Furniture, fixtures and office equipment2,289 1,896 
Leasehold improvements2,738 1,589 
Gross property and equipment122,022 110,230 
Accumulated depreciation(98,341)(86,563)
Net property and equipment$23,681 $23,667 
    Depreciation expense on property and equipment totaled $16.0 million, $21.3 million, and $25.0 million for the years ended December 31, 2020, 2019, and 2018, respectively. There were 0 impairment charges to property and equipment for the years ended December 31, 2020, 2019, and 2018.
    At December 31, 2020 and 2019, the Company had $39.6 million and $21.5 million of ROU assets and 0 property and equipment under finance leases.
    The Company's property and equipment, net by geographical region was as follows:
December 31, 2020December 31, 2019
(in thousands)
United States$13,504 $14,546 
International10,177 9,121 
Total$23,681 $23,667 

Note 8—Internal Use Software Development Costs
    Internal use software development costs were as follows:
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December 31, 2020December 31, 2019
(in thousands)
Internal use software development costs, gross51,277 $45,156 
Accumulated amortization(35,117)(29,103)
Internal use software development costs, net$16,160 $16,053 
    During the years ended December 31, 2020, 2019, and 2018, the Company capitalized $9.2 million, $9.0 million, and $9.0 million, respectively, of internal use software development costs. Amortization expense was $8.3 million, $7.5 million, and $7.2 million for the years ended December 31, 2020, 2019, and 2018, respectively. In the years ended December 31, 2020, 2019, and 2018, amortization expense included the write-off of software development costs of $0.1 million, $0.5 million, and $0.5 million, in the respective periods, related to the abandonment of the associated projects. Based on the Company’s internal use software development costs at December 31, 2020, excluding projects that are not yet complete and not yet ready for their intended use with a value of $0.4 million, estimated amortization expense of $7.8 million, $5.6 million, $2.2 million, and $0.1 million is expected to be recognized in 2021, 2022, 2023, and 2024 respectively.
    There were 0 impairment charges to internal use software development costs for the year ended December 31, 2020, 2019 and 2018 with the exception of the write-offs mentioned above.

Note 9—Goodwill, Intangible Assets, and Capitalized Costs Incurred in Cloud Computing Arrangements
    Details of the Company’s goodwill were as follows:
December 31, 2019
(in thousands)
Beginning balance at December 31, 2018$
Additions from the acquisition of RTKio (Note 10)7,370 
Ending balance at December 31, 20197,370 
Additions for Merger with Telaria (Note 10)150,755 
Ending balance at December 31, 2020$158,125 
    The Company’s intangible assets as of December 31, 2020 and 2019 included the following:
December 31, 2020December 31, 2019
(in thousands)
Amortizable intangible assets:
Developed technology$77,658 $19,658 
Customer relationships37,950 1,650 
In-process research and development8,030 
Non-compete agreements70 70 
Trademarks20 
Total identifiable intangible assets, gross123,708 21,398 
Accumulated amortization—intangible assets:
Developed technology(21,905)(9,823)
Customer relationships(11,877)(162)
Non-compete agreements(42)(7)
Trademarks(20)
Total accumulated amortization—intangible assets(33,824)(10,012)
Total identifiable intangible assets, net$89,884 $11,386 
    Amortization of intangible assets for the years ended December 31, 2020, 2019, and 2018 was $24.9 million, $3.3 million, and $3.2 million, respectively. During the year ended December 31, 2020 and 2019, the Company wrote off fully amortized intangible assets with a historical cost of $1.1 million and $0.7 million, respectively. During the year ended December 31, 2018, the Company had 0 write-offs of fully amortized intangible assets.
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    The estimated remaining amortization expense associated with the Company's intangible assets was as follows as of December 31, 2020:
Fiscal YearAmount
(in thousands)
2021$31,048 
202226,342 
202313,941 
202413,757 
20254,238 
Thereafter558 
Total$89,884 
    The Company adopted ASU 2018-15 as of January 1, 2020 on a prospective basis and as a result, the Company capitalized certain costs associated with cloud computing arrangements and will recognize the costs over the length of the service arrangements, which generally are three years. During the year ended December 31, 2020, the Company capitalized $0.9 million related to cloud computing arrangements. These costs are related to arrangements for infrastructure as a service, platform as a service, and software as a service. Capitalized costs associated with these arrangements as of December 31, 2020 are included within prepaid expenses and other current assets and other assets, non-current within the consolidated balance sheet in the amounts of $0.7 million and $0.2 million, respectively. The amortization of these agreements were insignificant for the year ended December 31, 2020.
The Company's qualitative assessment in the fourth quarter of 2020 did not indicate that it is more likely than not that the fair value of its goodwill, intangible assets, and other long-lived assets is less than the aggregate carrying amount.

Note 10—Business Combinations
2019 Acquisition—RTK.io
    On October 21, 2019, the Company completed the acquisition of RTK.io for total purchase consideration of $11.4 million, which includes cash paid of $11.0 million, cash acquired of $0.6 million, and a working capital adjustment of $0.2 million. RTK.io is a leading provider of tools and services that bring simplicity and control to header bidding for sellers. RTK’s solution is built on Prebid, the same open source framework as Demand Manager, the header bidding solution the Company launched in May 2019. The primary reason for the acquisition was to acquire technology, know-how, and personnel that will enable the Company to extend its Demand Manager product portfolio and client base. The financial results of RTK.io have been included in the Company's consolidated financial statements since the date of the acquisition.
    The major classes of assets and liabilities to which the Company allocated the purchase price were as follows as of the acquisition date:    
Amount
(in thousands)
Cash and cash equivalents$553 
Accounts receivable2,441 
Prepaid and other assets50 
Intangible assets4,520 
Goodwill7,370 
Total assets acquired14,934 
Accounts payable and accrued expenses2,450 
Deferred tax liability, net1,089 
Total liabilities assumed3,539 
Total net assets acquired$11,395 
    The following table summarizes the components of the acquired intangible assets and estimated useful lives (in thousands, except for estimated useful life) as of the acquisition date:
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Performance Goal
Amount
Metric

Weight
Estimated Useful Life
Threshold
(50% payout)
Target
(100%
payout)
Maximum

(150% payout)
1H 2020

Actual Result
Developed technology
Revenue
$2,780 505 years$62.2 million$82.9 million$103.6 million$65.6 million
(59.22%payout)
Customer relationships
Adjusted EBITDA less Capital Expenditures
1,650 502 years
Non-compete agreements70 ($6.39 million)2 years
Trademark & trade name$0.5 million20 $14.88 million< 0.5 years
Total intangible assets acquired($4,520 0.68 million)
(0% payout)
Name
  
1H20
Bonus
Target
   
1H 20 Bonus

% Earned
  
1H20

Bonus Paid
 
Michael Barrett
  $266,250    29.61 $78,837 
David Day
  $140,250    29.61 $41,528 
Thomas Kershaw
  $156,250    29.61 $46,266 
Katie Evans
  $150,000    29.61 $44,415 
Adam Soroca
  $121,875    29.61 $36,087 
Ms. Evans did not earn incentive compensation for H120 per the terms of her incentive plan (which was established by the Telaria compensation committee prior to the merger and based on achievement of Telaria standalone results). The intangible assets are amortized on a straight-line basis, which approximatescompensation committee determined that it would be appropriate for Ms. Evans to receive the pattern in whichsame 29.61% payout for 1H20 as members of the economic benefits are consumed, over their estimated useful lives. Amortization of developed technology is included in cost of revenue, amortization related to customer relationships is included in sales and marketing, amortization related to non-compete agreements is included in sales and marketing or technology and development, dependingexecutive team that were on the natureRubicon Project H120 plan in order to have consistency in payouts across the senior executive team.
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Table of Contents
2H20 Annual Bonus Targets and Payout
In February 2021, the employee's job function, and amortization related to trademark and trade name is included in general and administrative.
    Goodwill resulting from the acquisition was primarily attributable to acquired workforce, an increase in development capabilities, increased offerings to clients, and enhanced opportunities for growth and innovation. The acquired intangibles and goodwill resulting from the RTK.io acquisition are not amortizable for tax purposes. Pro forma results of operations were not significant to the consolidated results of operations.
    The Company does not track RTK.io's expenses on a stand-alone basis, and as a result, the determination of RTK.io post-acquisition operating results on a stand-alone basis was impracticable. The post-acquisition revenue, expenses, and pro forma results of operations were not significant to the consolidated results of operationscompensation committee determined that for the years ended December 31, 2020 and 2019.
2020 Merger—Telaria
    On April 1, 2020, (the "Acquisition Date"), the Company completed the Merger with Telaria. Upon completionsecond half of the Merger, each share of Telaria common stock issued and outstanding was converted into 1.082 shares of Magnite common stock. As a result, the Company issued 52,098,945 shares of Magnite common stock. In connection with the Merger, Magnite also assumed Telaria’s 2013 Equity Incentive Plan, as amended; 2008 Stock Plan, as amended; and the ScanScout, Inc. 2009 Equity Incentive Plan, as amended.
As of the Acquisition Date, former holders of Telaria common stock owned approximately 48% and pre-merger holders of Magnite common stock owned approximately 52% of the common stock of the combined company on a fully diluted basis.
The Merger was accounted for using the acquisition method of accounting in accordance with Accounting Standards Codification, referred to as ASC 805, Business Combinations. Magnite management determined that Magnite was the acquiror for financial accounting purposes. In identifying Magnite as the accounting acquiror, management considered the structure of the transaction and other actions contemplated by the merger agreement, relative outstanding share ownership and market values, the composition of the combined company’s board of directors, the relative size of Magnite and Telaria, and the designation of certain senior management positions of the combined company.
In accordance with ASC 805, the Company recorded the acquisition based on the fair value of the consideration transferred and then allocated the purchase price to the identifiable assets acquired and liabilities assumed based on their respective fair values as of the Acquisition Date. The excess of the value of consideration transferred over the aggregate fair value of those net assets was recorded as goodwill. Any identified definite lived intangible assets will be amortized over their estimated useful lives and any identified intangible assets with indefinite useful lives and goodwill will not be amortized but will be tested for impairment at least annually or more frequently when certain indicators are present. 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.
Management's purchase price allocation is preliminary and subject to change pending finalization of tax attributes and tax related liabilities. Under the acquisition method of accounting for business combinations, if the Company identifies changes to acquired deferred tax asset ("DTA") valuation allowances or liabilities related to uncertain tax positions during the measurement period, and they are related to new information obtained about facts and circumstances that existed as of the acquisition date, those changes are considered a measurement-period adjustment, and the Company will record the offset to goodwill. The Company records all other changes to DTA valuation allowances and liabilities related to uncertain tax positions in current- period income tax expense.
During the three months ended December 31, 2020, the Company adjusted the preliminary purchase price allocationachieved revenue of $143.0 million, CTV revenue of $26.4 million and Adjusted EBITDA less capex of $28.6 million, resulting in a weighted payout percentage of 144.46% of each named executive officers’ target bonuses for Telaria based on updated fair values associated with the acquired intangibles. Changes in projected revenues and costs increased the technology and customer relationships intangible while lengthened timeline for software development reduced in process research and development projects value. Except for the valuation related changes in intangible assets and adjustments to acquisition related2H20, as follows:
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tax accruals and deferred tax liabilities, adjustments to the fair value of opening balance sheet acquired assets and assumed liabilities resulted in minimal changes and refinements by management as of, and for the year-ended, December 31, 2020.
For purposes of measuring the estimated fair value, where applicable, of the assets acquired and the liabilities assumed, the Company applied the guidance in ASC 820, Fair Value Measurement, which establishes a framework for measuring fair value. In accordance with ASC 820, fair value is an exit price and is defined as "the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date." Under ASC 805, acquisition-related transaction costs and acquisition-related restructuring charges are not included as components of consideration transferred but are accounted for as expenses in the period in which the costs are incurred.
As part of the Merger, existing outstanding restricted stock units of Telaria common stock and stock options to purchase common stock of Telaria were exchanged for 1.082 restricted stock units of the Company and options to purchase the Company's common stock, respectively. The fair value of stock options exchanged on the date of the Merger attributable to pre-acquisition services was recorded as purchase consideration. The fair value of the restricted stock units and stock options exchanged on the date of the Merger attributable to post-acquisition services will be recorded as additional stock-based compensation expense in the Company's consolidated statements of operations over their remaining requisite service (vesting) periods.
The following table summarizes the total purchase consideration (in thousands):
Shares of Magnite common stock$274,604 
Fair value of stock-based awards exchanged11,646 
Acceleration of single trigger equity awards, converted1,168 
Total purchase consideration$287,418 
    The purchase consideration for the acquisition included 52,008,316 shares of the Company's common stock with a fair value of approximately $274.6 million, based on the Company's stock price as reported on the NYSE on the Acquisition Date. The fair value of stock options and restricted stock units exchanged on the Acquisition Date attributable to pre-acquisition services of approximately $10.4 million and $1.2 million, respectively, have been recorded as purchase consideration. In addition, the Company recorded additional purchase consideration associated with acceleration of 90,629 shares of common stock issued associated with single-trigger equity awards in the amount of $1.2 million.
The fair value of stock options and restricted stock units exchanged on the Acquisition Date attributable to post-acquisition services of $4.7 million and $12.2 million, respectively, will be recorded as additional stock-based compensation expense on the Company's consolidated statement of operations over their remaining requisite service (vesting) periods.
The fair value of the purchase price was allocated to the identifiable assets acquired and liabilities assumed based upon their estimated fair values as of the date of the acquisition as set forth below:
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Cash and cash equivalents$51,848 
Accounts receivable, net150,924 
Prepaid expenses and other current assets3,054 
Property and equipment, net1,814 
Right-of-use lease asset26,627 
Intangible assets103,410 
Restricted cash2,747 
Other assets, non-current369 
Deferred tax assets, non-current103 
Goodwill150,755 
Total assets acquired491,651 
Accounts payable and accrued expenses172,751 
Lease liabilities - current portion5,322 
Deferred revenue11 
Other current liabilities365 
Lease liabilities - non-current portion23,323 
Other liabilities, non-current194 
Deferred tax liability2,267 
Total liabilities assumed204,233 
Total purchase price$287,418 
The Company believes the amount of goodwill resulting from the purchase price allocation is primarily attributable to expected synergies from assembled workforce, an increase in development capabilities, increased offerings to customers, and enhanced opportunities for growth and innovation. Goodwill will not be amortized but instead will be tested for impairment at least annually or more frequently if certain indicators of impairment are present. In the event that goodwill has become impaired, the Company will record an expense for the amount impaired during the quarter in which the determination is made. The acquired intangibles and goodwill resulting from the Merger are not amortizable for tax purposes.
The following table summarizes the components of the intangible assets and estimated useful lives as of the Acquisition Date (dollars in thousands):
Performance Goal
Estimated Useful Life
Metric

Weight
Threshold
(50% payout)
Target
(100% payout)
Maximum

(150%
payout)
2H 2020

Actual Result
Technology
Revenue
$58,000 35%5 years$83.4 million$111.2 million$139 million$143.0 million
(150% payout)
In-process research and development
CTV Revenue
8,030 15%4.7 years*$18.2 million$24.3 million$36.5 million$26.4 million
(113% payout)
Customer relationships
Adjusted EBITDA less Capital Expenditures
36,300 50%2.5 years$(11.9 million)$(2.9) million$7.15 million$28.6 million
(150% payout)
Name
  
2H20
Bonus Target
   
2H20
Bonus

% Earned
  
2H20

Bonus
Paid
 
Michael Barrett
  $275,000    144.46 $397,265 
David Day
  $150,500    144.46 $217,412 
Thomas Kershaw
  $175,000    144.46 $252,805 
Katie Evans
  $150,000    144.46 $216,690 
Adam Soroca
  $131,250    144.46 $189,604 
Equity-Based Awards
2020 Annual Equity Awards
We grant equity-based compensation to our named executive officers in order to attract, retain and reward our executives and strengthen the mutuality of interests between our named executive officers and stockholders. The compensation committee annually determines the form and amount of equity-based incentives granted to executives. In making its determinations, the compensation committee considers factors such as peer group market data, recommendations from Semler Brossy, the executive’s and our performance in the last year and the results achieved by the executive, the executive’s base salary, target annual incentive opportunity and prior grants of equity awards, and the compensation committee’s view regarding the future potential of long-term contributions of the executive. Recommendations of the chief executive officer are also taken into consideration for our named executive officers other than the chief executive officer.
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In April 2020, each of our named executive officers received an annual equity grant. The number of stock options, RSUs and PSUs granted to each of our named executive officers for 2020 is set forth in the table below:
Name
  
Number of Stock
Options Granted
   
Number of
RSUs Granted
   
Target Number
of PSUs
Granted
 
Michael Barrett
   231,568    175,992    146,341 
David Day
   115,784    153,993    —   
Thomas Kershaw
   115,784    153,993    —   
Katie Evans
   69,470    92,396    —   
Adam Soroca
   84,908    112,928    —   
If our stock price were not to increase, the stock options will not deliver any economic value because the options have an exercise price equal to our stock price on the date of grant and our equity incentive plans prohibit stock option repricing. The stock options and RSUs vest over four years to provide an additional retention incentive. In determining the size of the 2020 annual awards for all named executive officers, the compensation committee calibrated award values to encourage equity ownership and ensure a stable leadership team through the legacy Rubicon Project and Telaria Merger; specifically, the compensation committee (i) considered the increased scope of the executives’ roles following the close of the merger and increased scale of Magnite and (ii) sought to continue to deliver annual equity grant values close to market level for 2020.
For 2020, the compensation committee determined that a portion of Mr. Barrett’s annual equity grant would be made in the form of PSUs that would vest based on our TSR for the three-year period beginning on the grant date of the award relative to the TSRs of the companies in the Russell 2000 index over the same period. The Russell 2000 was chosen as the TSR comparator group because the compensation committee believes this index represents a reasonable investment alternative for shareholders considering investing in our business while requiring stable and robust performance outcomes. This PSU award, which was granted in April 2020 and has a target of 146,341 stock units, represented approximately 30% of the total fair value of Mr. Barrett’s equity award for 2020 (as determined as of the grant date in accordance with generally accepted accounting principles). The award is eligible to vest between 0% and 150% of the target number of units subject to the award based on the performance schedule below:
Backlog880 0.75 years
Trademarks200 0.25 years
Total intangible assets acquired$103,410 
* In-process research and development consists
Magnite Relative TSR Ranking vs. Russell 2000 Index
Vesting % of 2 projects with a weighted-average useful life
Target Number
of 4.7 years. Amortization begins once associated projects are completed and it is determined the projects have alternative future use.PSUs
80
th
Percentile or Higher
150%
55
th
Percentile
100%
20
th
Percentile
25%
Below 20
th
Percentile
0%
The fairvesting percentage will be interpolated on a linear basis between the levels stated in the chart above. Additionally, in the event Magnite’s TSR for the performance period is negative, the vesting percent of shares is capped at 100% of target shares. In approving the award, the compensation committee believed it would enhance the performance-based nature of our executive compensation program and further align Mr. Barrett’s interests with those of our stockholders.
2020 Merger Retention Award Granted to Ms. Evans
Upon the close of the Telaria Merger in April 2020, Ms. Evans was granted a special
one-time
share-based retention award with a target value of the acquired technology$700,000 (102,662 RSUs) that vests in two equal installments on each of April 1, 2021 and in-process research and developmentApril 1, 2022, subject to continued service. Ms. Evans’ role as Chief Operating Officer was valued using The Revenue Split Method. This methodology included allocating future revenue projectionscritical to the existing technologiessuccessful integration of legacy Rubicon Project and applying decay ratesTelaria and the success of the business going forward. In addition to serving a retentive purpose, the equity grant aimed to motivate and incentivize Ms. Evans in continuing to deliver value to stockholders through the integration of legacy Rubicon Project and Telaria.
Other Employee Benefits and Perquisites
We have generally not offered extensive benefits or other compensation programs to our named executive officers, apart from employee benefits made available generally to our employees such as participation in Magnite’s 401(k) plan and eligibility to receive a company match, and health and welfare benefit programs. Mr. Day is eligible for up to $30,000 in annual reimbursement for the use of a car service for transportation between his home and our headquarters for the purpose of allowing Mr. Day to devote his lengthy commute time to work duties.
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Employment Arrangements
We have entered into an employment agreement with Mr. Barrett and offer letters with each of our other named executive officers. Each of the named executive officers serves on an
at-will
basis and the employment agreement and offer letters do not have a specified term. The employment agreement and offer letters provide for a base salary, eligibility to receive an annual performance bonus, and eligibility to participate in employee benefit or group insurance plans maintained from time to time by us.
Severance Agreements
We are also party to Executive Severance and Vesting Acceleration Agreements, referred to as the severance agreements, with each of our named executive officers that provide for severance and other termination benefits upon certain qualifying terminations of employment. These severance agreements are intended to provide economic protection so that an executive can remain focused on our business without undue personal concern in the event that his position is eliminated or, in some cases, significantly altered by us, which we believe is particularly important in light of the executives’ leadership roles at Magnite. The compensation committee believes that providing severance or similar benefits is common among similarly situated executives in our industry generally and remains important in recruiting and retaining key executives.
The prospect of a change in control of Magnite can also cause significant distraction and uncertainty for executive officers and, accordingly, the compensation committee believes that appropriate discount rateschange in control protections are important tools for aligning executives’ interests with those of our stockholders by allowing our executive officers to focus on strategic transactions that reflectmay be in the respective intangible asset's relative risk profile when comparedbest interest of our stockholders without undue concern regarding the effect of such transactions on their continued employment. Accordingly, the severance agreements also provide for enhanced severance payments and accelerated vesting of equity awards if the executives’ employment is terminated in connection with or following a change in control of Magnite.
In December 2019, in connection with the approval of the merger agreement between our legacy entities Rubicon Project and Telaria, our board of directors approved the modification of the severance agreements to other intangible assetsprovide that if the executive officer had been terminated in connection with or within 13 months following the closing of the merger between legacy Rubicon Project and Telaria, the executive officer would be entitled to the enhanced change in control severance under the severance agreements.
For more information regarding the potential payments and benefits that would be provided to our named executive officers in connection with certain terminations of their employment (including terminations in connection with a change in control) on the last business day of fiscal year 2020, please see “Potential Payments upon Termination or Change in Control” below.
We do not provide our executives with tax
“gross-up”
payments in connection with a termination of their employment and/or a change in control of Magnite.
Tax Considerations
Section 162(m) of the federal tax laws generally prohibits a publicly held company from deducting compensation paid to a current or former named executive officer that exceeds $1 million during the tax year. Certain awards granted before November 2, 2017 that were based upon attaining
pre-established
performance measures that were set by the company’s compensation committee under a plan approved by the company’s stockholders, as well as consideringamounts payable to former executives pursuant to a written binding contract that was in effect on November 2, 2017, may qualify for an exception to the risk associated with the overall business.
At the Acquisition Date, Telaria had existing Customer Relationships. To the extent that future cash flows$1 million deductibility limit. As one of the business would be negatively affectedfactors in its consideration of compensation matters, the compensation committee notes this deductibility limitation. However, the compensation committee has the flexibility to take any compensation-related actions that it determines are in the absence of these relationships, they would be deemed to have economic value. The Company used the Loss‐of‐Revenue and Income Method in its valuationbest interests of the existing Customer Relationships. This method attempts to quantify the scenario whereby the owner loses the right to the intangible assetcompany and the resulting losses of revenue and income. Under this analysis, the value of the cash flows with the intangible asset is compared to the value of the cash flows without the intangible asset and the difference represents the value of the intangible asset. This methodology included applying a discount rate and the expected timing it would take to further enhance customer relationships.
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The fair value of the backlog was based on the Excess Earnings Model, taking into consideration the existing contracts as of the Acquisition Date and the respective cost to complete the servicing of the existing agreements. The resulting stream of after tax earnings were discounted to present value by applying an appropriate discount rate for the asset. The discount rate was selected based on the intangible asset’s relative risk profile when compared to the other intangible assets as well as the discount rate for the overall business.
Intangible assets are generally amortized on a straight-line basis, which approximates the pattern in which the economic benefits are consumed, over their estimated useful lives. Amortization of developed technology is included in cost of revenues and the amortization of customer relationships, backlog, and trademarks is included in sales and marketing expenses in the consolidated statement of operations. Once the projects associated with acquired in-process research and development are completed, amortization willour stockholders, including awarding compensation that may not be included in cost of revenues in the consolidated statement of operations. The intangible assets generated in the Merger are not tax deductible.
As such, as part of the Merger, deferred tax liabilities of $24.0 million were established related to the acquired intangible assets, which were fully offset by the estimated income tax effect of the partial release of Telaria's valuation allowance. The deferred tax liability was calculated based on an estimated combined tax rate of 23.3%.
The Company recognized approximately $17.6 million of acquisition related costs during the year ended December 31, 2020 (see Note 14). In addition, as part of the Merger, the Company acquired Telaria's U.S. federal NOLs of approximately $126.1 million and state NOLs of approximately $87.6 million. Pursuant to Section 382 of the Internal Revenue Code, Telaria, Inc. underwent an ownership changedeductible for tax purposes. As a result, the use of the NOLs will be subject to annual Section 382 use limitations. The Company believes the ownership change will not impact the Company's ability to utilize substantially all of the NOLs to the extent it generates taxable income thatThere can be offset by such losses.no assurance that any compensation will in fact be deductible.
Unaudited Pro Forma Information
The following table provides unaudited pro forma information as if Telaria had been merged with the Company as of January 1, 2019. The unaudited pro forma information reflects adjustments for additional amortization resulting from the fair value adjustments to assets acquired and liabilities assumed, adjustments for alignment of accounting policies, and transaction expenses as if the Merger occurred on January 1, 2019. The pro forma results do not include any anticipated cost synergies or other effects of the integration merged companies. Accordingly, pro forma amounts are not necessarily indicative of the results that actually would have occurred had the acquisition been completed on the dates indicated, nor is it indicative of the future operating results of the combined company.
Year Ended
December 31, 2020December 31, 2019
Pro Forma Revenue$236,666 $224,452 
Pro Forma Net Loss$(64,030)$(78,585)
During the year ended December 31, 2020, post-Merger revenue on a stand-alone basis for Telaria was $60.1 million. During the year ended December 31, 2020, due to the process of integrating the operations of Telaria into the operations of the Company, the determination of Telaria's post-Merger operating results on a standalone basis was impracticable.

Note 11—Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses included the following:
December 31, 2020December 31, 2019
(in thousands)
Accounts payable—seller$492,605 $247,891 
Accounts payable—trade4,268 4,822 
Accrued employee-related payables12,442 6,726 
Total$509,315 $259,439 
 
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Table of Contents
Recoupment Policy
Note 12—Accumulated Other Comprehensive Income (Loss)
The componentsOur board or the compensation committee shall, in circumstances it deems appropriate, require return to us of accumulated other comprehensive income (loss) were as follows (in thousands):
Unrealized Gain (Loss) on Investments, net of taxForeign Currency TranslationAccumulated Other Comprehensive Income (Loss)
Balance at December 31, 2017$(29)$70 $41 
Other comprehensive income (loss)27 (327)(300)
Balance at December 31, 2018(2)(257)(259)
Other comprehensive income212 214 
Balance at December 31, 2019(45)(45)
Other comprehensive loss(912)(912)
Balance at December 31, 2020$$(957)$(957)

Note 13—Stock-Based Compensation
    In connection with its IPO, the Company implemented itsexcess portion of any payment made to an employee pursuant to an award issued after April 7, 2016 under our 2014 Equity Incentive Plan which governs equity awards made to employees and directors of the Company since the IPO. Prior to the IPO, the Company granted equity awards under its 2007 Stock Incentive Plan, which governs equity awards made to employees and contractors prior to the IPO. In November 2014, the Company approved theor 2014 Inducement Grant Equity Incentive Plan, (the "Inducement Plan"), which governsor under our annual cash incentive plan, if: (1) the payment was predicated upon achieving certain equity awardsfinancial results that became the subject of a substantial restatement of our financial statements filed with the SEC within the three full fiscal years after the payment; (2) our board or the compensation committee determines that the participant engaged in intentional misconduct that caused or substantially caused the need for the substantial restatement; and (3) a lower payment would have been made to certain employeesthe participant based upon the restated financial results. In each such instance, the “excess portion” of the payment is the amount (in terms of dollars or shares) by which the payment received exceeded the lower payment that would have been made based on the restated financial results. In each case, the return of payment will be net of any taxes paid by the employee in connection with commencementoriginal receipt or subsequent transfer of employment.the payment. Our board or the compensation committee also has the discretion, in circumstances it deems appropriate, to require reimbursement of any or all payments received with respect to any award granted on or after April 7, 2016 to an employee who has engaged in fraud, bribery, or illegal acts similar to fraud or bribery related to employment, or knowingly failed to report such acts of another employee over whom the employee had direct supervisory responsibility. Our board or the compensation committee shall not seek recovery to the extent it determines (a) that to do so would be unreasonable or (b) that it would be better for us not to do so. In connection withmaking such determination, and without limiting the Company's acquisitionsscope of Chango Inc. ("Chango"), iSocket, Inc. ("iSocket"),its discretion, our board or the compensation committee shall take into account such considerations as it deems appropriate, including, without limitation, the likelihood of success under governing law versus the cost and nToggle, Inc. ("nToggle") it assumedeffort involved, whether the existing employeeassertion of a claim may prejudice our interests, including in any related proceeding or investigation, the passage of time since the occurrence of the act in respect of the applicable fraud or intentional illegal conduct, and any pending legal proceeding relating to the applicable fraud or illegal conduct. Our board or the compensation committee also may in its discretion direct us to disclose the circumstances surrounding any recoupment made under this policy where not otherwise required by applicable regulation.
Executive Officer Equity Ownership Guidelines and Retention Holding Requirements
Under equity award plans,retention guidelines implemented by our board in April 2016, the 2009 Chango Stock Option Plan (the "Chango Plan"),chief executive officer and each of the iSocket 2009 Equity Incentive Plan (the "iSocket Plan"),other named executive officers are required to accumulate within five years from the later of the date the guidelines were implemented and the nToggledate he became a named executive officer, and thereafter to retain for the duration of employment, a minimum level of company equity. The minimum level of equity for the chief executive officer is equal to five times base salary and the minimum level of equity for the other named executive officers is equal to the named executive officer’s base salary. Equity that counts toward the ownership requirement includes: (1) shares owned outright by the named executive officer or beneficially owned by the named executive officer by virtue of being held by a member of the named executive officer’s immediate family residing in the same household or in a trust for the benefit of the named executive officer or immediate family members residing in the same household; (2) shares held in qualified plans or IRAs; (3) vested shares (or vested RSUs) deemed to be held in
non-qualified
plans; (4) the
in-the-money
portion of vested stock options (but not unvested stock options); and (5) unvested time-based restricted shares (or restricted stock units).
Until the minimum level of company equity is achieved, a named executive officer is prohibited from selling or otherwise transferring beneficial ownership of more than
one-half
of: (a) the vested
after-tax
shares of our common stock obtained as a result of the vesting of any restricted stock or RSU award made after implementation of the equity retention guidelines; or (b) the shares of our common stock subject to the vested portion of any stock option award made after implementation of the equity retention guidelines, net of any shares surrendered or sold to cover exercise price and/or income tax resulting from the exercise.
Policy Against Repricing and Cash Buyouts
Our 2014 Equity Incentive Plan (the "nToggle Plan"). In connection with the Merger with Telaria, the Company assumed Telaria's 2013 Equity Incentive Plan, as amended (the "Telaria Plan"); 2008 Stock Plan, as amended (the "2008 Stock Plan"); and the ScanScout, Inc. 2009 Equity Incentive Plan, as amended (the "ScanScout Plan"). All compensatory equity awards outstanding at December 31, 2020 were issued pursuant to the 2014 Equity Incentive Plan, the iSocket Plan, the Chango Plan, the nToggle Plan, the Telaria Plan, the 2008 Stock Plan, the ScanScout Plan, the Inducement Plan, or the Company's 2007 Stock Incentive Plan.
    The Company’s equity incentive plans provide for the grant of equity awards, including non-statutory or incentive stock options, restricted stock awards, and restricted stock units, to the Company's employees, officers, directors, and consultants. The Company's board of directors administers the plans. Options outstanding vest based upon continued service at varying rates, but generally over four years from issuance with 25% vesting after one year of service and the remainder vesting monthly thereafter. Restricted stock awards and restricted stock units vest at varying rates, typically approximately 25% vesting after approximately one year of service and the remainder vesting annually, semi-annually, or quarterly thereafter. The restricted stock units granted in 2020, 2019, and 2018, included 0.7 million, 1.8 million, and 2.8 million, respectively, restricted stock units that vest 50% on each of the first and second anniversaries of the grant date. Options, restricted stock awards, and restricted stock units granted under the plans accelerate under certain circumstances for certain participants upon a change in control, as defined in the governing plan. No further awards were made under the iSocket Plan, the Chango Plan, or the nToggle Plan from the date of acquisition and no further awards were made under the 2007 Stock Incentive Plan since the IPO. Available shares under the iSocket Plan, the Chango Plan, and the nToggle Plan were rolled into the available share pool under the 2014 Equity Incentive Plan at the time of acquisition of each company, and available shares under the 2007 Stock Incentive Plan were rolled into the available share pool under the 2014 Equity Incentive Plan at the time of the IPO. An aggregate of 9,705,530 shares remained available for future issuance at December 31, 2020 under the plans. The 2014 Equity Incentive Plan has an evergreen provision pursuant to which the share reserve will automatically increase on January 1st of each year in an amount equal to 5% of the total number of shares of capital stock outstanding on December 31st of the preceding calendar year, although the Company’s board of directors may provide for a lesser increase, or no increase, in any year. The 2014 Inducement Grant Equity Incentive Plan has a provision pursuant to whichprohibit our board from decreasing the share reserve may be increased at the discretionexercise price of the Company's board of directors.
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Stock Options
    A summary of stock option activity for the year ended December 31, 2020 is as follows:

Shares Under OptionWeighted- Average Exercise PriceWeighted- Average Contractual LifeAggregate Intrinsic Value

(in thousands)(in thousands)
Outstanding at December 31, 20194,262 $6.82 
Granted1,145 $5.32 
Options assumed in Merger4,998 $3.80 
Exercised(3,359)$4.03 
Expired(150)$13.22 
Forfeited(201)$5.09 
Outstanding at December 31, 20206,695 $5.61 6.4 years$168,025 
Exercisable at December 31, 20204,044 $6.03 5.1 years$99,803 
The total intrinsic value of options exercised during the year ended December 31, 2020 was $21.5 million. At December 31, 2020, the Company had unrecognized employee stock-based compensation expense relating to nonvested stock options of approximately $7.0 million, which is expected to be recognized over a weighted-average period of 2.4 years. The grant date fair value of options granted and assumed during the year ended December 31, 2020 was $3.17 per share. The weighted-average grant date fair value per shareor otherwise repricing awards of stock options granted duringand stock appreciation rights unless such action is first approved by our stockholders. In addition, the year ended December 31, 2020 was $3.22 per shareplans prohibit us from redeeming or repurchasing stock options or stock appreciation rights unless such redemptions or repurchases are approved by our stockholders.
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Policy Against Hedging
We recognize that hedging against losses in company shares may disturb the alignment between stockholders and employees that our equity awards are intended to build. Accordingly, we have incorporated prohibitions on various hedging activities within our Insider Trading Policy, which applies to directors, officers and other employees who we have designated as insiders, as well as such persons’ family members, life partners, or owned or controlled entities. The policy prohibits all transactions that are designed to sell short, hedge or offset any decrease in the market value of our securities, including prepaid variable forward contracts, equity swaps, futures, collars, exchange funds, options, puts, and calls and purchases or sales of puts or calls for speculative purposes.
Risk Assessment in Compensation Programs
The compensation committee annually assesses our executive and broad-based compensation and benefits programs on an overall basis to determine whether the programs’ provisions and operations create undesired or unintentional material risk. This risk assessment process takes into account numerous compensation terms and practices that we maintain that aid in controlling risk, including the mix of cash, equity, and near- and long-term incentive programs, the use of multi-year vesting periods for equity awards, and a variety of performance criteria for incentive compensation, the claw-back provisions that apply to our annual incentive cash plan and equity plan, and the fair valuecap on the maximum cash incentive awards that can be earned in a given year regardless of options assumedcompany performance. This risk assessment process also included a review of program policies and practices, program analysis to identify risk and risk controls, and determinations as to the sufficiency of risk identification and risk control, the balance of potential risk to potential reward, and the significance of the programs and their risks to company strategy. Although we reviewed all significant compensation programs, we focused on those programs with variable payout, in particular assessing the ability of participants to directly affect payouts, and the controls on such situations.
Based on the foregoing, we believe that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on us as a whole. We also believe that our incentive compensation programs do not encourage risk-taking beyond the organization’s ability to effectively identify and manage significant risks; are compatible with effective internal controls and our risk-management practices; and are adequately supported by the compensation committee’s oversight of our executive compensation programs.
Compensation Committee Report
The compensation committee has reviewed and discussed our Compensation Discussion and Analysis section with management and, based on the review and discussions, recommended to the board that the Compensation Discussion and Analysis section be included in the Mergercompany’s Annual Report on Form
10-K.
Compensation Committee*
Doug Knopper, Chair
Robert J. Frankenberg
Sarah P. Harden
James Rossman
The foregoing report of the compensation committee is not soliciting material, is not deemed filed with the SEC and is not incorporated by reference in any Magnite filing under the Securities Act or the Exchange Act, whether made before or after the date of this report and irrespective of any general incorporation language in such filing.
21

Magnite Named Executive Officer Compensation Tables
Summary Compensation Table - 2020
The following table and narratives that follow describe the 2020, 2019 and 2018 compensation provided to our named executive officers. Mr. Soroca was $3.16 per share. Total fair valuenot a named executive officer of options vested during the year ended December 31,Magnite prior to 2019, thus, pursuant to SEC guidance, we have only included compensation information for 2019 and 2020. Ms. Evans was not a named executive officer of Magnite prior to 2020, was $4.7 million.thus, pursuant to SEC guidance we have only included compensation information for 2020.
    The Company estimates
Name and Principal Position
  
Year
   
Salary ($)
  
Bonus ($)
  
Stock
Awards ($) 
(1)
   
Option
Awards ($) 
(1)
   
Non-Equity

Incentive
Plan
Compensation ($) 
(2)
   
All Other
Compensation ($)
  
Total ($)
 
Michael Barrett
   2020    458,750(3)    1,829,238    740,068    476,102    8,747(4)   3,512,905 
President and CEO
   2019    515,000   —     1,799,000    883,827    609,503    5,735   3,813,065 
   2018    515,000   —     689,500    327,468    515,000    5,006   2,051,974 
David Day
   2020    422,500    813,083    370,034    258,940    12,575(5)   1,877,132 
Chief Financial Officer
   2019    400,000   —     924,960    454,019    307,710    28,540   2,115,229 
   2018    400,000   100,000(6)   334,108    45,646    260,000    28,571   1,168,325 
Thomas Kershaw
   2020    481,250    813,083    370,034    299,071    7,185(7)   1,970,623 
Chief Technology Officer
   2019    425,000   —     1,028,280    504,779    325,463    5,735   2,289,257 
   2018    425,000   150,000(8)   675,189    94,602    275,000    5,650   1,625,441 
Adam Soroca
   2020    362,500    596,260    271,357    225,691    6,195(9)   1,462,003 
Head of Global Buyer Team
   2019    325,000   —     772,440    377,879    266,288    7,682   1,749,289 
             
Katie Evans
   2020    271,437(10)   44,415(11)   1,029,906    222,019    216,690    15,593(12)   1,800,060 
Chief Operating Officer
             
(1)
In accordance with the rules of the SEC, these amounts represent the aggregate grant date fair value of the stock awards and option awards granted to the named executive officer during the applicable fiscal year computed in accordance with ASC 718. Magnite’s equity awards valuation approach and related underlying assumptions for awards granted in 2020 are described in Note 2 “Organization and Summary of Significant Accounting Policies—Stock-Based Compensation” and Note 13 “Stock-Based Compensation” to the Consolidated Financial Statements in the Company’s Annual Report on Form
10-K
(and the assumptions for awards granted prior to 2020 are set forth in the corresponding notes in the Annual Report on Form
10-K
for the applicable fiscal year). The reported amounts do not necessarily reflect the value that may be realized by the executive with respect to the awards, which will depend on future changes in stock value and may be more or less than the amount shown.
(2)
Cash incentive amounts earned by the named executive officers for service during the year, including amounts paid subsequent to that year based upon performance during that year. As discussed in the Compensation Discussion and Analysis section above, for 2020, the compensation committee approved a bifurcated structure for the 2020 Executive Bonus Plan with independent goals set for each of the first half of the fiscal year (“1H20”) and second half of the fiscal year (“2H20”). The first half of 2020, 1H20, was measured from January to June of 2020. The named executive officers were measured against legacy Rubicon Project 1H20 targets (or legacy Telaria 1H2020 targets for Ms. Evans), with the first half bonus payout based on H1 results. The second half of 2020, 2H20, was measured from July to December 2020 with goals set in July 2020 based on combined company results.
(3)
Mr. Barrett’s salary was temporarily reduced from $550,000 to $385,000 in response to business challenges associated with the
COVID-19
pandemic.
22

(4)
Includes 401(k) plan matching contributions, contributions to life insurance premiums and work-from-home stipend.
(5)
Includes 401(k) plan matching contributions, contributions to life insurance premiums, transportation reimbursement and work-from-home stipend.
(6)
Represents a $100,000 retention bonus that vested during the applicable year.
(7)
Includes 401(k) plan matching contributions, contributions to life insurance premiums and work-from-home stipend.
(8)
Represents a $150,000 retention bonus that vested during the applicable year.
(9)
Includes 401(k) plan matching contributions, contributions to life insurance premiums, transit benefit plan matching contributions and work-from-home stipend.
(10)
Ms. Evans commenced employment with the company on April 1, 2020 with an annual base salary of $400,000.
(11)
For 1H 2020, Ms. Evans’ did not earn any incentive compensation pursuant to the terms of her legacy Telaria 1H incentive compensation plan. The compensation committee approved payout of 29.61% of Ms. Evans’ 1H target bonus in order to align with other executives.
(12)
Includes 401(k) plan matching contributions, contributions to life insurance premiums and work-from-home stipend.
Grants of Plan-Based Awards - 2020
The following table provides information regarding the equity and
non-equity
incentive plan awards that were granted to Magnite’s named executive officers in 2020.
      
Estimated Future Payouts Under
Non-Equity
Incentive Plan Awards
   
Estimated Future Payouts Under
Equity Incentive Plan Awards
   
All
Other
Stock
Awards:
Number
of Shares
of Stock
or Units
   
All Other
Option
Awards:
Number of
Securities
Underlying
Options
   
Exercise
or Base
Price of
Option
Awards
($/Sh)
   
Grant Date
Fair Value
of Stock
and Option
Awards
(1)
 
Name
  
Grant
Date
  
Threshold
($)
   
Target
($)
   
Maximum
($)
   
Threshold
   
Target
   
Maximum
 
Michael Barrett
  
 
—  
 
  257,500    515,000    772,500               
   4/1/2020  
 
—  
 
  
 
—  
 
  
 
—  
 
         175,992    —     
 
—  
 
   929,238 
   4/1/2020  
 
—  
 
  
 
—  
 
  
 
—  
 
           231,568    5.28    740,068 
   4/1/2020(2)  
 
—  
 
  
 
—  
 
  
 
—  
 
   36,585    146,341    219,511          900,000 
David Day
  
 
—  
 
  150,500    301,000    451,500               
   4/1/2020  
 
—  
 
  
 
—  
 
  
 
—  
 
         153,993    —     
 
—  
 
   813,083 
   4/1/2020  
 
—  
 
  
 
—  
 
  
 
—  
 
         —      115,784    5.28    370,034 
Thomas Kershaw
  
 
—  
 
  175,000    350,000    525,000               
   4/1/2020  
 
—  
 
  
 
—  
 
  
 
—  
 
         153,993   
 
—  
 
  
 
—  
 
   813,083 
   4/1/2020  
 
—  
 
  
 
—  
 
  
 
—  
 
        
 
—  
 
   115,784    5.28    370,034 
Adam Soroca
  
 
—  
 
  131,250    262,500    393,750               
   4/1/2020   —      —      —            112,928    —      —      596,260 
   4/1/2020   —      —      —            —      84,908    5.28    271,357 
Katie Evans
   —     150,000    300,000    450,000               
   4/1/2020   —      —      —            195,058    —      —      1,029,906 
   4/1/2020   —      —      —            —      69,470    5.28    222,019 
(1)
In accordance with the rules of the SEC, these amounts represent the aggregate grant date fair value of the stock awards and option awards granted to the named executive officer during 2020 computed in accordance with ASC 718. Our equity awards valuation approach and related underlying assumptions for awards granted in 2020 are described in Note 2 “Organization and Summary of Significant Accounting Policies-Stock-Based Compensation” and Note 13 “Stock-Based Compensation” to the Consolidated Financial Statements in our Annual Report on Form
10-K.
The reported amounts do not necessarily reflect the value that may be realized by the executive with respect to the awards, which will depend on future changes in stock value and may be more or less than the amount shown.
(2)
Grant of a performance stock unit. The award is eligible to vest as to 0% to 150% of the target number of shares, based on the issuer’s total stockholder return for the three-year period beginning on the grant date of the award relative to the TSRs of the companies in the Russell 2000 index over that period.
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Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table
Employment Agreement/Offer Letters
We have entered into an employment agreement with Mr. Barrett and offer letters with each of our other named executive officers. Each of our named executive officers serves on an
at-will
basis and the employment agreement and offer letters do not have a specified term. The employment agreement and offer letters provide for a base salary, eligibility to receive an annual performance bonus, and eligibility to participate in employee benefit or group insurance plans maintained from time to time by us. We are also party to agreements with the named executive officers providing for the severance benefits described below under “Potential Payments upon Termination or Change in Control.”
Non-Equity
Incentive Plan Awards
For a description of the material terms of the
non-equity
incentive plan awards reported in the table above, see “Compensation Discussion and Analysis — Current Executive Compensation Program Elements—Annual Performance-Based Cash Awards” above.
Equity Incentive Plan Awards
Each of the equity incentive awards reported in the “Grants of Plan-Based Awards—2020” table above was granted under, and is subject to, the terms of our 2014 Equity Incentive Plan, referred to as the 2014 Plan. The 2014 Plan is administered by the compensation committee. The compensation committee has authority to interpret the plan provisions and make all required determinations under the plan. Awards granted under the plan are generally not transferable other than by will or the laws of descent and distribution, except that the plan administrator may authorize certain transfers.
Generally, and subject to limited exceptions set forth in the 2014 Plan, if we undergo certain corporate transactions such as a merger, consolidation or similar transaction, or a sale of all or substantially all of our assets or securities, the plan administrator has the discretion to determine how outstanding equity awards will be treated in connection with such corporate transaction (including discretion to provide for accelerated vesting of such awards in connection with the transaction), and if no affirmative determination is made, all outstanding equity awards will
24

fully vest and options will be fully exercisable, and will terminate or be terminated in connection with such corporate transaction, unless the awards are to be assumed or substituted by the successor corporation. The named executive officers are also party to agreements that provide for acceleration of their equity awards in connection with certain terminations of their employment as described below under “Potential Payments upon Termination or Change in Control.”
The equity awards granted to our named executive officers other than Mr. Barrett in 2020 were in the form of stock options, that contain service and/or performance conditions using the Black-Scholes option pricing model. The weighted-average input assumptions used by the Company were as follows:
Year Ended
December 31, 2020December 31, 2019December 31, 2018
Expected term (in years)6.36.16.0
Risk-free interest rate0.45 %2.55 %2.67 %
Expected volatility67 %60 %57 %
Dividend yield%%%
    Restricted Stock Units
    A summary of restricted stock unit activity for the year ended December 31, 2020 is as follows:
Number of SharesWeighted-Average Grant Date Fair Value
(in thousands)
Nonvested restricted stock units outstanding at December 31, 20198,077 $4.46 
Granted4,954 $5.52 
Restricted stock units assumed in Merger2,416 $5.40 
Canceled(1,035)$5.17 
Vested(5,126)$4.26 
Nonvested restricted stock units outstanding at December 31, 20209,286 $5.30 
The weighted-average grant date fair value per share ofand restricted stock units, granted duringreferred to as RSUs. Mr. Barrett received equity awards in 2020 in the year ended December 31, 2020 was $5.52. The aggregate fair valueform of restricted stock units that vested during the year ended December 31, 2020 was $43.6 million. At December 31, 2020, the intrinsic value of nonvested restricted stock units was $285.2 million. At December 31, 2020, the Company had unrecognized stock-based compensation expense relating to nonvested restricted stock units of approximately $36.9 million, which is expected to be recognized over a weighted-average period of 2.3 years.
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Performance Stock Units
In April 2020, the Company granted the Company's CEO 146,341 restricted stock units that vest based on certain stock price performance metrics with a fair value of $0.9 million. The grant date fair value per share of restricted stock was $6.15, which was estimated using a Monte-Carlo lattice model. During the year ended December 31, 2020, the Company recognized $0.2 million of stock-based compensation related to theseoptions, RSUs, and performance stock units, basedreferred to as PSUs. The vesting requirements applicable to each equity award granted to the named executive officers are described in the footnotes to the table below and in the section above entitled “Compensation Discussion and Analysis.” RSUs are payable on a performance measurement of 150%. At December 31, 2020, the Company had unrecognized employee stock-based compensation expense of approximately $0.7 million, which is expected to be recognized over the remaining 2.25 years. Between 0% and 150% of the performance stock units will vest on the third anniversary of its grant date. The compensation expense will not be reversed if the performance metrics are not met.
Employee Stock Purchase Plan
In November 2013, the Company adopted the Company's 2014 Employee Stock Purchase Plan ("ESPP"). The ESPP is designed to enable eligible employees to periodically purchase shares of the Company's common stock at a discount through payroll deductions of up to 10% of their eligible compensation, subject to any plan limitations. At the end of each six-month offering period, employees are able to purchase shares at a price per share equal to 85% of the lower of the fair market value of the Company's common stock on the first trading day of the offering period or on the last trading day of the offering period. Offering periods generally commence and end in May and November of each year.
    As of December 31, 2020, the Company has reserved 2,049,164 shares of its common stock for issuance under the ESPP. The ESPP has an evergreen provision pursuant to which the share reserve will automatically increase on January 1st of each yearvesting in an amount equal to 1% of the total number of shares of capitalour common stock. Stock options represent the right to receive a share of our common stock outstanding on December 31stupon exercise of the preceding calendar year, althoughoption and payment of the Company’s board of directors may provide for a lesser increase,exercise price. The named executive officers do not have the right to vote the shares subject to the awards and do not have any dividend rights with respect to the RSUs or no increase, in any year.stock options.
Stock-Based Compensation Expense
Total stock-based compensation expense recorded in the consolidated statements of operations was as follows:
Year Ended
December 31, 2020December 31, 2019December 31, 2018
(in thousands)
Cost of revenue$525 $421 $321 
Sales and marketing8,229 5,638 4,557 
Technology and development7,451 4,757 2,867 
General and administrative10,416 8,009 8,139 
Merger and restructuring costs1,870 398 
Total stock-based compensation expense$28,491 $18,825 $16,282 

Note 14—Merger and Restructuring, Costs
    Merger and restructuring costs consist primarily of professional services fees and employee termination costs, including stock-based compensation charges, associated with the Merger and restructuring activities. For the year ended December 31, 2018, Merger and restructuring costs also included relocation costs.
The following table summarizes Merger and restructuring cost activity (in thousands):
Year Ended
December 31, 2020December 31, 2019December 31, 2018
(in thousands)
Professional Service (investment banking advisory, legal and other professional services)$9,935 $2,041 $
Personnel related (severance and one-time termination benefit costs)5,747 $$3,042 
Non-cash stock-based compensation (double-trigger acceleration and severance)1,870 $$398 
Total merger and restructuring costs$17,552 $2,041 $3,440 
93

During the years ended December 31, 2020 and December 31, 2019, the Company incurred costs of $17.6 million and $2.0 million, respectively, primarily related to the Merger with Telaria. All of the expenses incurred in the year ended December 31, 2019 were incurred during the fourth quarter (refer to "reclassification" note within Note 2).
In the first quarter of 2018, the Company announced its restructuring plan to reduce headcount to bring the Company's general and administrative operations into better alignment with the current size of the business and de-layer certain functions, and to reduce its investment in unprofitable projects (the "2018 Restructuring Events"). During the year ended December 31, 2018, the Company incurred restructuring costs of $3.4 million for severance and one-time termination benefits.
Accrued restructuring costs related to the Merger were $2.9 million at December 31, 2020. Accrued restructuring costs associated with personnel costs are included within accounts payable and accrued expenses and accruals related to Merger assumed loss contracts are included within other current liabilities and other liabilities, non-current on the Company's consolidated balance sheet.
Year Ended
(in thousands)
December 31, 2020December 31, 2019December 31, 2018
Accrued Merger and restructuring costs at beginning of period$$67 $
Restructuring costs (personnel related and non-cash stock-based compensation)7,617 3,440 
Restructuring costs (Merger assumed loss contracts)3,543 
Cash paid for restructuring costs(6,355)(67)(2,975)
Non-cash stock-based compensation(1,870)(398)
Accrued Merger and restructuring costs at end of period$2,935 $$67 
The accrued balanceOutstanding Equity Awards as of December 31, 2020 does not include an additional $0.1 million of personnel related expenses expected to be incurred in 2021 associated with the 2020 restructuring activities as a result of the Merger.
Note 15—Income Taxes
    The following are the domestic and foreign components of the Company’s income (loss) before income taxes for the years ended December 31, 2020, 2019, and 2018:
Year Ended
December 31, 2020December 31, 2019December 31, 2018
(in thousands)
Domestic$(57,253)$(28,063)$(62,292)
International4,514 1,073 827 
Loss before income taxes$(52,739)$(26,990)$(61,465)
94

    The following are the components of the provision (benefit) for income taxes for the years ended December 31, 2020, 2019, and 2018:
Year Ended
December 31, 2020December 31, 2019December 31, 2018
(in thousands)
Current:
Federal$(144)$(153)$(23)
State15 28 41 
Foreign1,117 281 388 
Total current provision988 156 406 
Deferred:
Federal(762)
State(12)(174)
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 $0.7 million for the year ended December 31, 2020 compared to an income tax benefit of $1.5 million and income tax expense of $0.4 million for the years ended December 31, 2019 and 2018, respectively. The tax expense for the years ended December 31, 2020 and December 31, 2018 was primarily the result of the domestic valuation allowance and the tax liability associated with the foreign subsidiaries. The 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.
    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 years ended December 31, 2020, 2019, and 2018:
Year Ended
December 31, 2020December 31, 2019December 31, 2018
U.S. federal statutory income tax rate21.0 %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)%%
Stock-based compensation expense11.4 %3.5 %(5.3)%
Meals and entertainment(0.1)%(0.9)%(0.4)%
Debt cancellation%%(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)%%
Provision to return adjustments0.4 %1.4 %%
Effective income tax rate(1.3)%5.6 %(0.6)%
95

    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, 2020 and 2019:
December 31, 2020December 31, 2019
(in thousands)
Deferred Tax Assets:
Accrued liabilities$1,568 $1,396 
Lease liabilities8,943 
Stock-based compensation3,559 3,666 
Net operating loss carryovers117,707 75,853 
Tax credit carryovers4,882 13,055 
Other1,263 1,537 
Total deferred tax assets137,922 95,507 
Less valuation allowance(109,992)(93,611)
Deferred tax assets, net of valuation allowance27,930 1,896 
Deferred Tax Liabilities:
Fixed assets(824)(570)
Intangible assets(18,584)(298)
Right of use lease asset(8,283)
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 $9.2 million, respectively.
    At December 31, 2020, the Company had U.S. federal net operating loss carryforwards, or NOLs, of approximately $453.2 million, which will begin to expire in 2027. At December 31, 2020, the Company had state NOLs of approximately $280.0 million, which will begin to expire in 2027. At December 31, 2020, the Company had foreign NOLs of approximately $25.0 million, which will begin to expire in 2026. At December 31, 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, 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.
Pursuant to Section 382 of 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 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. The Company believes that the ownership change will not impact its ability to utilize substantially all of its NOLs and 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 to 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.
96

    At December 31, 2020, unremitted earnings of the subsidiaries outside of the United States were approximately $22.1 million, on which the Company previously recorded a transition tax of $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 relatedprovides information regarding outstanding equity awards made to the unrecognized tax benefits (in thousands):
Amount
(in thousands)
Balance as of December 31, 2018$4,717 
Increases related to current year tax positions
Decreases related to current year tax positions
Increases related to prior year tax positions
Balance as of December 31, 20194,720 
Decreases related to prior year tax positions(2,294)
Increases related to prior year tax positions788 
Balance as of December 31, 2020$3,214 
    Interest and penalties related to the Company’s unrecognized tax benefits accrued at December 31, 2020, 2019, and 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 Canada, Japan, the Netherlands, and the United Kingdom, all tax years remain open for examination by the local country tax authorities, for France only 2017 forward are open for examination, for Singapore 2016 and forward are open for examination, and for Australia, Brazil, and Germany, tax years 2015 and 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 yearsour named executive officers as of December 31, 2020.
To determine
       
Option Awards
   
Stock Awards
   
PSU Awards
 
Name
  
Grant
Date
   
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
   
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
  
Option
Exercise
Price
   
Option
Expiration
Date
   
Number
of Shares
or Units
of Stock
that
Have not
Vested
(#)
  
Market
Value of
Shares or
Units of
Stock that
Have Not
Vested
($) 
(1)
   
Equity
incentive
plan
awards:
number
of
unearned
shares,
units or
other
rights
that have
not
vested (#)
  
Equity
incentive
plan
awards:
market or
payout
value of
unearned
shares,
units or
other
rights that
have not
vested ($)
(1)
 
Michael Barrett
   4/1/20    —      231,568(2)   5.28    4/1/30       
   2/22/19    137,500    162,500(3)   5.14    2/22/29       
   3/15/18    212,500    87,500(4)   1.97    3/15/28       
   3/17/17    643,275    42,885(5)   5.80    3/17/27       
   4/1/20           175,992(6)   5,404,714    
   4/1/20              219,511(7)   6,741,183 
   2/22/19           196,875(8)   6,046,031    
   3/15/18           54,688(9)   1,679,468    
   3/17/17           114,495(10)   3,516,141    
David Day
   4/1/20    —      115,784(2)   5.28    4/1/30       
   2/20/19    10,062    87,209(3)   4.92    2/20/29       
   3/15/18    7,841    12,197(4)   1.97    3/15/28       
   3/15/17    6,031    1,341(11)   6.06    3/15/27       
   5/19/15    9,300    —     16.75    5/19/25       
   4/1/20           153,993(12)   4,729,125    
   2/20/19           105,750(13)   3,247,583    
   3/15/18           15,246(14)   468,205    
   3/15/17           2,346(15)   72,046    
Thomas Kershaw
   4/1/20    —      115,784(2)   5.28    4/1/30       
   2/20/19    82,041    96,959(3)   4.92    2/20/29       
   3/15/18    7,917    25,278(4)   1.97    3/15/28       
   3/15/17    12,889    2,778(11)   6.06    3/15/27       
   4/1/20           153,993(12)   4,729,125    
   2/20/19           117,563(16)   3,610,360    
   3/15/18           31,597(17)   970,344    
   3/15/17           4,862(15)   149,312    
25

       
Option Awards
   
Stock Awards
   
PSU Awards
 
Name
  
Grant
Date
   
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
   
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
  
Option
Exercise
Price
   
Option
Expiration
Date
   
Number
of Shares
or Units
of Stock
that
Have not
Vested
(#)
  
Market
Value of
Shares or
Units of
Stock that
Have Not
Vested
($) 
(1)
   
Equity
incentive
plan
awards:
number
of
unearned
shares,
units or
other
rights
that have
not
vested (#)
   
Equity
incentive
plan
awards:
market or
payout
value of
unearned
shares,
units or
other
rights that
have not
vested ($)
(1)
 
Adam Soroca
   4/1/20    —      84,908(2)   5.28    4/1/30        
   2/20/19    58,264    72,584(3)   4.92    2/20/29        
   3/15/18    23,819    12,288(4)   1.97    3/15/28        
   4/1/20           112,928(18)   3,468,019     
   2/20/19           88,313(19)   2,712,092     
   3/15/18           15,360(20)   471,706     
   7/14/17           6,563(21)   201,550     
Katie Evans
   2/3/11    1,442    —     3.96    2/3/21        
   6/8/11    1,442    —     3.96    6/8/21        
   7/26/12    2,884    —     4.64    7/26/22        
   7/19/12    2,884    —     4.64    7/19/22        
   3/5/13    7,212    —     5.46    3/5/23        
   7/31/13    5,410    —     7.74    7/31/23        
   12/5/13    22,971    —     3.95    12/5/23        
   2/27/18    39,763    16,374(22)   3.61    2/27/28        
   2/28/19    15,376    18,170(23)   5.16    2/28/29        
   4/1/20    —      69,470(2)   5.28    4/1/30        
   2/24/17           33,812(24)   1,038,367     
   2/27/18           13,871(25)   425,978     
   2/28/19           37,569(26)   1,153,744     
   4/1/20           92,396(27)   2,837,481     
   4/1/20           102,662(28)   3,152,750     
(1)
In accordance with the rules of the SEC, the values represent the product of the number of shares that have not vested and $30.71, which was the closing market price of our common stock on December 31, 2020. The reported amount does not necessarily reflect the value that may be realized by the individual because the awards vest over a specified period of time from the date of grant contingent upon continued employment and, in the case of PSUs, the issuer’s total stockholder return over the performance period, and the actual amount received upon sale of shares will depend upon the fair market value of the shares at the times they are sold.
(2)
These stock options vest (or vested) with respect to 25% of the underlying shares on April 1, 2021 and with respect to the remaining 75% of the underlying shares in equal monthly installments over the following 36 months.
(3)
These stock options vest (or vested) with respect to 25% of the underlying shares on February 1, 2020 and with respect to the remaining 75% of the underlying shares in equal monthly installments over the following 36 months.
(4)
These stock options vest (or vested) with respect to 25% of the underlying shares on February 1, 2019 and with respect to the remaining 75% of the underlying shares in equal monthly installments over the following 36 months.
(5)
These stock options vest (or vested) with respect to 25% of the underlying shares on March 17, 2018 and with respect to the remaining 75% of the underlying shares in equal monthly installments over the following 36 months.
26

(6)
These RSUs vest as follows: 47,664 shares on May 15, 2021, 11,000 on each August 15, November 15, February 15, and May 15 thereafter until February 15, 2024 and 7,328 on May 15, 2024.
(7)
The vesting of this PSU will be determined based on the issuer’s total stockholder return (“TSR”) for the three-year period beginning on the grant date of the award relative to the TSRs of the companies in the Russell 2000 index over that period. The award is eligible to vest as to 0% to 150% of the target number of performance-based restricted stock units. Number of shares reflects maximum achievement, based on performance to date.
(8)
These RSUs vest as follows: 43,750 shares on May 15, 2021 and each November 15 and May 15 thereafter until November 15, 2022, and with respect to 21,875 of such shares on May 15, 2023.
(9)
These RSUs vest as follows: 21,875 shares on each of May 15 and November 15, 2021; and with respect to 10,938 of such shares on May 15, 2022.
(10)
These RSUs vest on May 15, 2021.
(11)
These stock options vest (or vested) with respect to 25% of the underlying shares on February 1, 2018 and with respect to the remaining 75% of the underlying shares in equal monthly installments over the following 36 months.
(12)
These RSUs vest as follows: 41,706 shares on May 15, 2021, 9,625 on each August 15, November 15, February 15, and May 15 thereafter until February 15, 2024 and 6,412 shares on May 15, 2024.
(13)
These RSUs vest with respect to the underlying shares 23,500 shares on each of May 15, 2021, November 15, 2021, May 15, 2022 and November 15, 2022 and 11,750 of such shares on May 15, 2023.
(14)
These RSUs vest with respect to 6,098 on each of May 15 and November 15, 2021; and with respect to 3,050 of such shares on May 15, 2022.
(15)
These RSUs vest on May 15, 2021.
(16)
These RSUs vest with respect to 26,125 shares on each November 15 and May 15 hereafter until November 15, 2022, and with respect to 13,063 of such shares on May 15, 2023.
(17)
These RSUs vest with respect to 12,639 of the underlying shares on each of May 15 and November 15, 2021; and with respect to 6,319 of such shares on May 15, 2022.
(18)
These RSUs vest as follows: 30,585 shares on May 15, 2021, 7,058 shares on each August 15, November 15, February 15, and May 15 thereafter until February 15, 2024 and 4,705 shares on May 15, 2024.
(19)
These RSUs vest with respect to 19,625 shares on each November 15 and May 15 hereafter until November 15, 2022, and with respect to 9,813 of such shares on May 15, 2023.
(20)
These RSUs vest with respect to 6,144 of the underlying shares on each of May 15 and November 15, 2021, and with respect to 3,072 of such shares on May 15, 2022.
(21)
These RSUs vest with respect to 4,375 on May 15, 2021, and with respect to 2,188 of such shares on November 15, 2021.
(22)
These stock options vest (or vested) with respect to 25% of the underlying shares on February 14, 2019 and with respect to the remaining 75% of the underlying shares in equal monthly installments over the following 36 months.
(23)
These stock options vest (or vested) with respect to 25% of the underlying shares on February 14, 2020 and with respect to the remaining 75% of the underlying shares in equal monthly installments over the following 36 months.
(24)
These RSUs vested on February 14, 2021.
27

(25)
These RSUs vested or will vest in two equal installments on each of February 14, 2021 and February 14, 2022.
(26)
These RSUs vested or will vest in three equal installments on each of February 14, 2021, February 14, 2022 and February 14, 2023.
(27)
These RSUs vest as follows: 25,024 shares on May 15, 2021, 5,775 shares on each August 15, November 15 and February 15 thereafter until February 15, 2024, and 3,847 shares on May 15, 2024.
(28)
These RSUs vested or will vest in two equal installments on each of April 1, 2021 and April 1, 2022.
Option Exercises and Stock Vested - 2020
The following table provides information regarding stock options that were exercised by our named executive officers during 2020 and the estimated future lease payments,restricted stock unit awards granted to our named executive officers that vested during 2020.
   
Option Awards
   
Stock Awards
 
Name
  
Number of
Shares
Acquired on
Exercise(#)
   
Value
Realized on
Exercise
($)
(1)
   
Number of
Shares
Acquired on
Vesting (#)
   
Value
Realized on
Vesting
($)
(2)
 
Michael Barrett
   —      —      559,159    4,435,712 
David Day
   250,303    1,665,177    155,703    1,250,574 
Thomas Kershaw
   131,000    422,390    267,409    2,251,539 
Adam Soroca
   9,175    90,030    189,725    1,668,677 
Katie Evans
   528    2,619    13,525    99,544 
(1)
The value realized upon the exercise of a stock option is calculated by multiplying (i) the number of shares of our common stock to which the exercise of the option related, by (ii) the difference between the
per-share
closing price of our common stock on the date the stock option was exercised and the
per-share
exercise price of the options.
(2)
The value realized upon the vesting of a stock award is calculated by multiplying (i) the number of shares of our common stock that vested, by (ii) the
per-share
closing price of our common stock on the vesting date. Represents the gross value realized prior to any applicable tax withholding.
Potential Payments upon Termination or Change in Control
The following section describes the Company reviewsbenefits that may become payable to our named executive officers in connection with a termination of their employment with us and/or a change in control of Magnite. Due to the number of factors that affect the nature and amount of any benefits provided upon the events discussed below, any actual amounts paid or distributed may be different from the amounts presented below. Factors that could affect these amounts include the timing during the year of any such event.
We are a party to an Executive Severance and Vesting Acceleration Agreement, referred to as the severance agreement, with each of its leaseour named executive officers. These agreements provide that if we terminate the employment of any of these executives without “cause”, if any of these executives resigns for “good reason”, or if the executive’s employment terminates due 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 componentsexecutive’s death or “disability” (as such terms are defined in the estimated future lease payments. This typically includesseverance agreement), and prior to and not in connection with the consummation of a fixed minimum power commitment that“sale transaction” (as such term is includeddefined in the data center agreements, but it does not include any variable or usage-based additional charges. Onceseverance agreement), the estimated future lease payments are determined, the Company usesexecutive will be entitled to receive continuation of his then-current base salary for 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,specified period (12 months for Messrs. Barrett and Day and 6 months for Messrs. Kershaw and Soroca and Ms. Evans), 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.
pro-rata
97

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,target bonus for the year ended December 31, 2020,of termination based upon the Company recognized expensesportion 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 millionworked and net 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,bonus amounts previously paid for the year, ended December 31, 2019,continuation of group health insurance coverage or reimbursement of premiums for each executive and his respective dependents for a specified period (12 months for Mr. Barrett, 6 months for Messrs. Day and Soroca and Ms. Evans, and 3 months for Mr. Kershaw), and accelerated vesting of equity awards for a specified period (12 months for Messrs. Barrett and Day and 6 months for Messrs. Kershaw and Soroca and Ms. Evans).
28

If we terminate the Company recognized expensesemployment of $10.0 millionany of cloud-based services relatedthese executives without cause, if any of them resigns for good reason or if any the executive’s employment terminates due to data centers and $1.2 millionthe executive’s death or disability, in any case in connection with or following a change in control 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 maturityMagnite (within thirteen months of the Company's lease liabilities associatedchange in control for Mr. Barrett), the benefits described above will be increased to include for Messrs. Barrett and Day, additional cash severance equal to one year’s target bonus (paid over 12 months); for Mr. Kershaw and Ms. Evans, a longer period of continuation of base salary equal to 12 months; for all the executives, full acceleration of vesting of all equity awards; and for all executives, except Mr. Soroca, a longer period of group health insurance coverage or reimbursement of premiums (12 months for Messrs. Barrett and Day and Ms. Evans and 6 months for Mr. Kershaw). In December 2019, in connection 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 
20228,392 
20237,428 
20246,740 
20253,551 
Thereafter11,403 
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
Commitments
    The Company has commitments under non-cancelable operating leases for facilities, certain equipment, and its managed data center facilities (Note 16).
In addition, during the year ended December 31, 2020, the Company entered into an agreement for third-party cloud-managed services. As partapproval of the merger agreement between us and Telaria, our board approved the Company has a minimum commitment to pay $20.0 million over the course of five years, with no annual minimum commitment. As of December 31, 2020, the Company's commitment is $18.0 million.
    As of December 31, 2020 and 2019, the Company had $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.
Guarantees and Indemnification
    The Company’s agreements with sellers, buyers, and other third parties typically obligate the 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
98

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 expirationmodification 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, 2020. However, based on management’s knowledge as of December 31, 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.
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 18—Debt
    On September 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 26, 2020. The Loan Agreement provides a senior secured revolving credit facility of up to the lesser of $60.0 million and 85% of eligible accounts receivable, with a maturity date of September 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 is $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 2.25%, with LIBOR having a floor of 3.5%. If the Company elects prime, advances bear interest at a rate of prime plus 0.25%, with prime having a floor of 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. The Company is required to maintain a lockbox arrangement where clients payments received in the lockbox will be deposited daily into the Company's operating bank accounts.
    The Loan Agreement requires the Company to comply with financial covenants, measured quarterly, with respect to a minimum liquidity ratio and maximum quarterly 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
99

fees, and unused credit line fees, net of 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 property and equipment and capitalized labor costs as they relate to internal use software development costs. As of December 31, 2020, the Company was in compliance with 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, 2020, there were 0 amounts outstanding under the Loan Agreement (other than with respect to Ms. Evans, who commenced employment on April 1, 2020) to provide that if the lettersexecutive officer had been terminated in connection with or within 13 months following the closing of credit)the merger between us and Telaria on April 1, 2020, the executive officer would have been entitled to the enhanced change in control severance benefits described in this paragraph.
All severance benefits are conditioned upon these executives entering into a release of claims with us and abiding by the restrictive covenants contained in our standard confidentiality agreement (which includes an indefinite confidentiality covenant and
one-year
post-termination
non-solicitation
of employees covenant). Future availabilityThe severance agreements also provide that if the payments or benefits made to the executive in connection with a change in control of Magnite would result in an excise tax under Section 280G and 4999 of the credit facility is dependentU.S. Internal Revenue Code, such payments or benefits will be reduced if and to the extent such a reduction would result in a greater
after-tax
benefit for the executive.
The following tables present our estimates of the value of the payments and benefits that each of the named executive officers would have been entitled to receive (1) had his employment been terminated by us without “cause,” by the executive for “good reason”, or due to the executive’s death or “disability” on several factors including the available borrowing base and compliance with future covenant requirements.

Note 19—Related Party Transactions
    During the years ended December 31, 2020 2019, and 2018, the Company did not enter into any transactions with its related parties or affiliates of its related parties requiring disclosure pursuant to the applicable rules(2) had both such a termination of the Financial Accounting Standards Boards executive’s employment and a change in control of Magnite occurred on that date. The actual amounts that would be paid upon a named executive officer’s termination of employment and/or a change in control can only be determined at the U.S. Securities and Exchange Commission.

Note 20—Quarterly Financial Data (Unaudited)
The following tables set forth the Company's quarterly consolidated statementstime of operations data for each of the eight quarters in the two-year period ended December 31, 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.such event.
Three Months Ended
Mar. 31, 2019June 30, 2019Sept. 30, 2019Dec. 31, 2019Mar. 31, 2020June 30, 2020Sept. 30, 2020Dec. 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 revenue15,116 15,085 13,869 13,321 14,003 21,545 $21,031 21,168 
Sales and marketing10,592 11,519 11,040 11,414 11,269 20,029 $21,761 22,971 
Technology and development9,716 9,839 10,293 10,402 10,693 13,063 $13,562 14,228 
General and administrative10,280 10,027 9,121 10,322 9,127 15,780 $13,314 14,766 
Merger and restructuring costs2,041 1,930 12,493 $2,254 875 
Total expenses45,704 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:
Basic51,577 52,358 53,023 53,473 54,866 108,530 110,416 112,746 
Diluted51,577 52,358 53,023 59,595 54,866 108,530 110,416 124,376 

100
Severance Benefits
(1)
Name
    
Cash
Severance
($)
(2)
     
Pro-Rata

Bonus
($)
(3)
     
Continued
Health
Insurance
Coverage
($)
(4)
     
Value of
Accelerated
Vesting of
Equity
Awards

($)
(5)
     
Total ($)
 
Michael Barrett
     1,100,000      275,000      34,060      34,767,402      36,176,462 
David Day
     731,000      150,500      34,060      14,094,063      15,009,623 
Thomas Kershaw
     500,000      175,000      17,030      15,699,068      16,391,098 
Adam Soroca
     162,500      131,250      17,030      11,237,675      11,548,455 
Katie Evans
     400,000      150,000      17,030      3,526,068      4,093,098 
(1)
As discussed above, in December 2019, in connection with the approval of the merger agreement between us and Telaria, our board approved the modification of the severance agreements with our named executive officers (other than with respect to Ms. Evans, who commenced employment on April 1, 2020) to provide that if the executive officer had
29

been terminated in connection with or within 13 months following the closing of the merger between us and Telaria on April 1, 2020, the executive officer would have been entitled to the enhanced change in control severance benefits described in this paragraph. In addition, the consummation of the Telaria Merger represented a change of control of Telaria for purposes of Ms. Evans’ severance agreement with respect to any equity that had been granted to Ms. Evans prior to the Telaria Merger. Accordingly, the amounts above reflect enhanced change of control severance benefits.
(2)
The cash severance amount included in the table above is equal to 12 months base salary plus target bonus (in the case of Messrs. Barrett and Day), 12 months base salary (in the case of Ms. Evans or Mr. Kershaw) or 6 months base salary (in the case of Mr. Soroca).
(3)
For 2020, the compensation committee approved a
bi-furcated
bonus plan for 1H 2020 and 2H 2020. The
pro-rata
bonus amount included in the table above is equal to the executive’s target bonus for 2H 2020.
(4)
The executive is entitled to continuation of group health insurance coverage or reimbursement of premiums for the executive and his dependents for a specified period (12 months for Messrs. Barrett and Day and Ms. Evans, and 6 months for Messrs. Kershaw and Soroca).
(5)
The equity acceleration amount included in the table represents the value of the equity awards that would vest in connection with the termination of the executive’s employment. The value of the accelerated options and RSUs presented in the table is calculated based on our closing stock price on December 31, 2020 of $30.71 and, in the case of the accelerated options, less the exercise price of the options.
Severance Benefits (Change in Control)
Note 21—Subsequent Events
On February 4, 2021, the Company entered into a Stock Purchase Agreement (the "Purchase Agreement") with RTL to purchase all
Name
    
Cash
Severance
($)
(1)
     
Pro-Rata

Bonus
($)
(2)
     
Continued
Health
Insurance
Coverage
($)
(3)
     
Value of
Accelerated
Vesting of
Equity
Awards

($)
(4)
     
Total ($)
 
Michael Barrett
     1,100,000      275,000      34,060      34,767,402      36,176,462 
David Day
     731,000      150,500      34,060      14,094,063      15,009,623 
Thomas Kershaw
     500,000      175,000      17,030      15,699,068      16,391,098 
Adam Soroca
     162,500      131,250      17,030      11,237,675      11,548,455 
Katie Evans
     400,000      150,000      17,030      11,282,921      11,849,951 
(1)
The cash severance amount included in the table above is equal to 12 months base salary plus target bonus (in the case of Messrs. Barrett and Day), 12 months base salary (in the case of Ms. Evans or Mr. Kershaw) or 6 months base salary (in the case of Mr. Soroca).
(2)
For 2020, the compensation committee approved a
bi-furcated
bonus plan for 1H 2020 and 2H 2020. The
pro-rata
bonus amount included in the table above is equal to the executive’s target bonus for 2H 2020.
(3)
The executive is entitled to continuation of group health insurance coverage or reimbursement of premiums for the executive and his dependents for a specified period (12 months for Messrs. Barrett and Day and Ms. Evans, and 6 months for Messrs. Kershaw and Soroca).
(4)
The equity acceleration amount included in the table represents the value of the equity awards that would vest in connection with the termination of the executive’s employment. The value of the accelerated options and RSUs presented in the table is calculated based on our closing stock price on December 31, 2020 of $30.71, and, in the case of the accelerated options, less the exercise price of the options.
30

The Purchase Agreement includes customary representations, warranties and covenants of the parties, including covenants with respect to actions taken prior
CEO
Pay-Ratio
Disclosure
Pursuant 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
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 informationAct, we are required to disclose in the reportsratio of the total annual compensation of our President and CEO, Michael Barrett, to the median of the total annual compensation of all of our employees (excluding our CEO). Based on SEC rules for this disclosure and applying the methodology described above, 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 assurancehave determined that our disclosure controlsCEO’s total compensation for 2020 was $3,512,905, and procedures will operate effectively underthe median of the total 2020 compensation of all circumstances. Based uponof our employees (excluding our CEO) was $167,686. Accordingly, we estimate the evaluation described above,ratio of our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31,CEO’s total compensation for 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, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial 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 aftermedian of the datetotal 2020 compensation 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 scopeall of our assessment ofemployees (excluding our CEO) to be 20.95 to 1.
We identified the effectivenessmedian employee by taking into account the annualized total cash compensation for 2020 for all individuals, excluding our CEO, who were employed by us or one 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 Reportaffiliates 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 elementsWe included all employees, whether employed on a full-time or part-time basis. We did not make any assumptions, adjustments or estimates with respect to their total cash compensation for 2020, but we did annualize the compensation for any employees who were not employed by us for all of 2020. Because our originally identified median employee was hired
mid-year,
we selected a different median employee with substantially similar compensation. We believe total cash compensation for all employees is an appropriate measure because we do not distribute annual equity awards to all employees.
Once the median employee was identified as described above, that employee’s total annual compensation for 2020 was determined using the same rules that apply to reporting the compensation of our named executive officers (including our CEO) in the “Total” column of the Telaria business represented 25% of the Company's revenue and 25% of the Company’sSummary Compensation Table. The 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, 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
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 2021 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2020, or the 2021 Proxy Statement, under the headings "Proposal 1—Election of Directors," "Delinquent Section 16(a) 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 becompensation amounts included in the 2021 Proxy Statement under the headings "Executive Officers" and "Executive Compensation" and is incorporated herein by reference.first paragraph of this
pay-ratio
disclosure were determined based on that methodology.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information requiredas of December 31, 2020 with respect to the shares of our common stock that may be issued under our existing equity compensation plans:
Plan Category
  Number of
Securities to be
Issued Upon
Exercise of
Outstanding
Options
and Rights
  Weighted-
average
Exercise
Price of
Outstanding
Options
and
Rights
(4)
   Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans
(Excluding Securities
Reflected in Column
(a))
 
   (a)  (b)   (c) 
Equity Compensation Plans Approved by Stockholders
(1)
   9,961,429  $6.44    4,125,561(5) 
Equity Compensation Plans Not Approved by Stockholders
(2)
   6,166,099  $4.82    7,629,133(6) 
  
 
 
    
 
 
 
Total
   16,127,528(3)  $5.61    11,754,694 
(1)
Consists of our 2007 Stock Incentive Plan, 2014 Equity Incentive Plan, and 2014 Employee Stock Purchase Plan.
(2)
Consists of our 2014 Inducement Grant Equity Incentive Plan, the nToggle, Inc. 2014 Equity Incentive Plan, and the Telaria Plans, each described below.
(3)
Represents 6,695,155 shares to be issued upon exercise of outstanding options and 9,432,373 shares subject to outstanding unvested restricted stock units. Includes 146,341 performance related restricted stock units that vest based on certain stock price performance metrics. Between 0% and 150% of the performance stock units will vest on the third anniversary of its grant date.
(4)
Represents the weighted-average exercise price of outstanding options. Shares subject to outstanding unvested restricted stock units and performance-based stock units become issuable upon vesting without any exercise price or other cash consideration required.
(5)
Consists of 2,076,397 shares that were available for future issuance under the 2014 Equity Incentive Plan and 2,049,164 shares that were available for future issuance under the 2014 Employee Stock Purchase Plan as of December 31, 2020, including 263,750 shares subject to purchase during the offering periods in effect as of December 31, 2020. On January 1, 2021, an additional 5,701,427 shares became available for future issuance under the 2014 Equity Incentive Plan and an additional 1,140,285 shares became available for issuance under the 2014 Employee Stock Purchase Plan, both pursuant to the plan’s evergreen provisions.
(6)
Shares available for future issuance under the 2014 Inducement Grant Equity Incentive Plan and the Telaria, Inc. 2013 Equity Incentive Plan as of December 31, 2020.
31

Our 2014 Inducement Grant Equity Incentive Plan was adopted by Item 12our board in November 2014 for use in making employment inducement awards pursuant to New York Stock Exchange Rule 303A.08. A total of 1,000,000 shares of our common stock was initially reserved for granting stock options, restricted stock, restricted stock units, stock appreciation rights, performance stock awards, and other awards under our 2014 Inducement Grant Equity Incentive Plan. Our board or the compensation committee may increase the number of shares reserved for granting awards under this plan in its discretion, from time to time. The share reserve under this plan was increased by 1,700,000 shares in March 2017 to provide shares underlying the initial equity awards granted to Mr. Barrett in connection with his hire as our President and Chief Executive Officer, which were made as inducement awards. Our board and the compensation committee have discretion to determine the terms of awards granted under our 2014 Inducement Grant Equity Incentive Plan, including vesting, forfeiture and acceleration. The exercise price for stock options granted under our 2014 Inducement Grant Equity Incentive Plan will not be less than the fair market value of our common stock on the date of grant. Restricted stock units may be granted in exchange for any form of legal consideration acceptable to our board and restricted stock may be granted in exchange for the payment of a purchase price, past or future services to our company or any other form of legal consideration. In connection with our acquisition of iSocket, Inc. in November 2014, we issued 132,000 stock options under our 2014 Inducement Grant Equity Incentive Plan with an exercise price of $14.62 per share and a
ten-year
term, and vesting over approximately four years, with 25% of the total shares granted vesting on the first anniversary of the date of the acquisition of iSocket, Inc. and the balance vesting in 36 equal monthly installments thereafter. In connection with the acquisition of iSocket, we also issued 126,050 restricted stock unit awards under the 2014 Inducement Grant Equity Incentive Plan, vesting over approximately 54 months. In connection with our acquisition of nToggle, Inc. in July 2014, we issued an aggregate of 174,117 restricted stock units under the 2014 Inducement Grant Equity Incentive Plan, vesting over approximately four years.
We assumed the nToggle, Inc. 2014 Equity Incentive Plan in connection with our acquisition of nToggle, Inc. in July 2017. In connection with the acquisition, and giving effect to the exchange ratio used to determine the number of Rubicon Project options we issued in exchange for outstanding nToggle options, we assumed a total of 432,482 options previously granted under the nToggle, Inc. 2014 Equity Incentive Plan, with a weighted-average exercise price per share of $0.51, remaining terms ranging to April 2027 and remaining vesting periods ranging to April 2021. We also assumed 77,499 shares of unvested restricted stock with a remaining vesting period to October 2019. In addition, 480,673 shares of common stock remaining available under the nToggle, Inc. 2014 Equity Incentive Plan were added to the pool of available shares under our 2014 Equity Incentive Plan, and can be used for awards during the period when they would have been available for grant under the nToggle 2014 Equity Incentive Plan to persons who were not employed by the company or its affiliates immediately before the nToggle acquisition, and otherwise in accordance with the New York Stock Exchange Rule 303A.08. No Further awards will be includedmade under the nToggle 2014 Equity Incentive Plan.
32

We assumed the Telaria, Inc. 2013 Equity Incentive Plan, as amended, the Telaria, Inc. 2008 Stock Plan, as amended, the ScanScout, Inc. 2009 Equity Incentive Plan, as amended, and certain new hire inducement awards granted by the Telaria board (together, the “Telaria Plans”) in April 2020 in connection with the Telaria Merger. In connection with the Telaria Merger, and giving effect to the exchange ratio used to determine the number of Magnite options we issued in exchange for outstanding Telaria options, we assumed a total of 4,998,622 options previously granted under the Telaria Plans, with a weighted-average exercise price per share of $3.80, remaining terms ranging to February 2030 and remaining vesting periods ranging to January 2024.
We also assumed 2,416,824 shares of unvested restricted stock with a remaining vesting period to March 2024. In addition, 7,291,151 shares of common stock remaining available under the Telaria, Inc. 2013 Equity Incentive Plan were added to the 2014 Equity Incentive Plan, which shares will be used solely with respect to new hire awards or awards to former employees of Telaria prior to the merger. As of December 31, 2020, 7,272,204 shares were available for issuance under the Telaria, Inc. 2013 Equity Incentive Plan.
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents information regarding beneficial ownership of our equity interests as of May 4, 2021 by:
each stockholder or group of stockholders known by us to be the beneficial owner of more than 5% of our outstanding equity interests;
each of our directors and director nominees;
each of our named executive officers; and
all of our current directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules of the SEC, and thus represents voting or investment power with respect to our securities. Unless otherwise indicated below, to our knowledge, the persons and entities named in the 2021 Proxy Statement under the heading "Common Stock Ownershiptable have sole voting and sole investment power with respect to all shares beneficially owned, subject to community property laws where applicable. Percentage ownership of Certain Beneficial Owners and Management" andour common stock is incorporated herein by reference.based on 128,859,048 shares of our common stock outstanding as of May 4, 2021.

Name and Address of Beneficial Owner
(1)
    
Shares of
Common
Stock
(2)
     
Percent
 
5% Stockholders
    
 
 
 
    
 
 
 
RTL US Holding Inc.
(3)
     12,374,315      9.6 
BlackRock, Inc.
(4)
     8,030,030      6.2 
Named Executive Officers
    
 
 
 
    
 
 
 
Michael Barrett
(5)
     2,201,376      1.7 
David Day
(6)
     136,033      * 
Thomas Kershaw
(7)
     391,083      * 
Katie Evans
(8)
     348,252      * 
Adam Soroca
(9)
     309,308      * 
33

Directors and Director Nominees
        
Paul Caine
     166,172      * 
Robert J. Frankenberg
(10)
     152,986      * 
Sarah P. Harden
(11)
     53,626      * 
Doug Knopper
     92,884      * 
Rachel Lam
     156,891      * 
James Rossman
(12)
     303,191      * 
Robert F. Spillane
(13)
     152,986      * 
Lisa L. Troe
(14)
     147,836      * 
All Current Executive Officers and Directors as a Group (16 persons)
(15)
     5,334,179      4.1 
*
Indicates ownership of less than one percent.
(1)
Except as noted, the address of the named beneficial owner is c/o Magnite, Inc., 6080 Center Drive, 4th Floor, Los Angeles, California 90045.
(2)
The number of shares beneficially owned by each stockholder is determined under rules promulgated by the SEC and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes shares (i) as to which the individual or entity has sole or shared voting power or investment power, and (ii) the individual owns or has the right to acquire beneficial ownership of within 60 days of May 4, 2021. Shares not owned but which the individual has the right to acquire beneficial ownership within 60 days of May 4, 2021 are included in the numerator and denominator for that specific individual in calculating that individual’s beneficial ownership percentage, but not deemed outstanding in the aggregate for computing the ownership percentage for others.
(3)
At the closing of the acquisition SpotX, Inc. on April 30, 2021, we issued 12,374,315 shares to RTL US Holdings Inc.
(4)
Beneficial ownership is based solely on the Schedule 13G/A filed with SEC on January 29, 2021 by BlackRock, Inc. (“BlackRock”) with respect to our common stock. The Schedule 13G/A states that BlackRock has sole voting power as to 7,873,494 shares and sole dispositive power as to 8,030,030 shares. The address for BlackRock is 55 East 52nd Street, New York, NY 10055.
(5)
Includes 227,784 restricted stock units that will vest within 60 days of May 4, 2021 and 1,196,025 shares issuable pursuant to outstanding stock options exercisable by Mr. Barrett within 60 days of May 4, 2021, of which 1,161,376 were fully vested as of May 4, 2021.
(6)
Includes 73,650 restricted stock units that will vest within 60 days of May 4, 2021 and 62,383 shares issuable pursuant to outstanding stock options exercisable by Mr. Day within 60 days of May 4, 2021, of which 49,109 were fully vested as of May 4, 2021.
(7)
Includes 85,332 restricted stock units that will vest within 60 days of May 4, 2021 and 130,550 shares issuable pursuant to outstanding stock options exercisable by Mr. Kershaw within 60 days of May 4, 2021, of which 114,656 were fully vested as of May 4, 2021.
(8)
Includes 25,024 restricted stock units that will vest within 60 days of May 4, 2021 and 130,859 shares issuable pursuant to outstanding stock options exercisable by Ms. Evans within 60 days of May 4, 2021, of which 124,228 were fully vested as of May 4, 2021.
(9)
Includes 60,729 restricted stock units that will vest within 60 days of May 4, 2021 and 130,632 shares issuable pursuant to outstanding stock options exercisable by Mr. Soroca within 60 days of May 4, 2021, of which 119,755 were fully vested as of May 4, 2021.
(10)
Includes 86,500 shares issuable pursuant to outstanding stock options exercisable by Mr. Frankenberg within 60 days of May 4, 2021, all of which were fully vested as of such date.
(11)
Includes 18,882 restricted stock units that will vest within 60 days of May 4, 2021.
(12)
Includes 36,066 shares issuable pursuant to outstanding stock options exercisable by Mr. Rossman within 60 days of May 4, 2021, all of which were fully vested as of such date.
(13)
Includes 86,500 shares issuable pursuant to outstanding stock options exercisable by Mr. Spillane within 60 days of May 4, 2021, all of which were fully vested as of such date.
(14)
Includes 86,500 shares issuable pursuant to outstanding stock options exercisable by Ms. Troe within 60 days of May 4, 2021, all of which were fully vested as of such date.
(15)
Includes 560,565 restricted stock units that will vest within 60 days of May 4, 2021 and 2,246,360 shares issuable pursuant to outstanding stock options exercisable within 60 days of May 4, 2021, of which 2,148,972 were fully vested as of such date.
34

Item 13. Certain Relationships and Related Transactions, and Director Independence
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
There are no transactions since January 1, 2020 to which the company has been a participant, in which the amount involved in the transaction exceeded or will exceed $120,000, and in which any of our directors, executive officers or beneficial holders of more than 5% of our capital stock, or their family members, had or will have a direct or indirect material interest. Compensation arrangements with our directors and officers are described under “Director Compensation” and “Executive Compensation.”
Indemnification Agreements
We have entered into indemnification agreements with each of our current directors, executive officers and certain other officers. The information requiredindemnification agreements and our amended and restated certificate of incorporation and amended and restated bylaws require us to indemnify our directors and officers to the fullest extent permitted by Item 13Delaware law.
Procedures for Approval of Related Person Transactions
We have adopted a formal written policy providing that related person transactions may be consummated or continued only if approved or ratified by the audit committee. The policy defines “related person transactions” as transactions in which we are or will be includeda participant, the aggregate amount involved since the beginning of the company’s last fiscal year exceeds or may be expected to exceed $100,000, and a related person has or will have a direct or indirect interest. For purposes of this policy, a related person is a person who is or was since the beginning of our last fiscal year a director, nominee for director, or executive officer; a greater than 5% beneficial owner of our common stock; or an immediate family member of any such person. The policy provides that our legal department will review each proposed related person transaction and prepare a description for the audit committee, which will review the proposed transaction and consider such factors, as it deems appropriate, including at least the following factors:
the terms of the transaction as compared to terms available for a similar transaction with a non-related party;
the extent of the related person’s interest in the 2021 Proxy Statementtransaction;
the disclosure requirements associated with the transaction;
the effect of the transaction upon the independence of any director involved;
the effect of the transaction upon the ability of the related person to fulfill his or her duties to the company; and
the appearance of the transaction.
DIRECTOR INDEPENDENCE
Our common stock is listed on the Nasdaq Global Select Market of The Nasdaq Stock Market LLC (“Nasdaq”), which requires that a majority of a listed company’s board of directors be independent. In addition, the rules of Nasdaq require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating/corporate governance committees be independent. Under the rules of Nasdaq, a director will only qualify as an “independent director” if, in the opinion of the board of directors, that director does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
Our board of directors has undertaken a review of the independence of each director and considered whether each director has any material relationships with us. As a result of this review, our board of directors has determined that Mr. Frankenberg, Ms. Harden, Mr. Knopper, Ms. Lam, Mr. Rossman, Mr. Spillane and Ms. Troe are independent directors as defined under the headings "Certain Relationshipslisting requirements and Related Person Transactions"rules of Nasdaq for purposes of service on the board of directors. Mr. Barrett is not considered independent because he currently serves as our Chief Executive Officer. Mr. Caine is not considered independent due to his previous service as Executive Chairman and "Director Independence"Interim Chief Executive Officer of Telaria.
In addition to qualifying as “independent” under the listing requirements and is incorporated herein by reference.rules of Nasdaq, members of the board’s audit committee and compensation committee members must also satisfy additional, heightened independence standards under applicable SEC rules and regulations and Nasdaq listing requirements. Our board of directors has determined that each member of our audit committee and compensation committee satisfies these heightened independence standards.

35

Item 14. Principal Accountant Fees and Services
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES
The aggregate fees billed for audit and other services provided in the last two fiscal years by Deloitte are as follows:
 
Fee Category
  
2020
   
2019
 
Audit Fees
(1)
  $1,985,000   $932,775 
Audit-Related Fees
(2)
   62,876    325,289 
Tax Fees
(3)
   —      —   
All Other Fees
(4)
   253,320    3,790 
  
 
 
   
 
 
 
Total
  $2,301,196   $1,261,854 
  
 
 
   
 
 
 
(1)
Audit Fees cover professional services rendered for the audit of our annual financial statements and review of financial statements included in our quarterly reports on Form 10-Q, and services normally provided by the accountant in connection with statutory and regulatory filings or engagements.
(2)
Audit-Related Fees cover assurance and related services that are reasonably related to the performance of audit or review of our financial statements and not reported as Audit Fees.
(3)
Tax Fees cover tax compliance, advice, and planning services and consist primarily of review of consolidated federal income tax returns and foreign tax issues.
(4)
All Other Fees 2019 related to license fees for accounting research software. All Other Fees in 2020 are related to license fees for accounting research software and Merger and Acquisition support.
Pre-Approval Policy and Procedures
The information requiredaudit committee has adopted policies and procedures relating to the pre-approval of all audit and non-audit services that are to be provided by Item 14our independent registered public accounting firm. The audit committee will not approve non-audit services that the independent registered public accounting firm is not permitted to perform under the rules of the SEC and Public Company Accounting Oversight Board.
On an annual basis, the independent registered public accounting firm will propose to the audit committee an audit plan and engagement letter describing the services the auditor expects to provide and related fees. The final engagement letter and fees agreed by the company acting pursuant to the direction of the audit committee, and all of the services covered by the final engagement letter, will be includedconsidered pre-approved by the audit committee.
The audit committee or the Chair of the audit committee acting by delegated authority will approve, if necessary, any changes in terms, conditions and fees under the engagement letter resulting from changes in the 2021 Proxy Statement underaudit scope, company structure or other matters.
The audit committee has delegated to the heading "Proposal 2—RatificationChair of the Selectionaudit committee the authority to approve on a case-by-case basis any audit or non-audit services, in amounts up to $200,000 (1) per engagement, (2) per additional category of Deloitte & Touche LLP as Independent Registered Public Accounting Firm"services, or (3) in excess of pre-approved amounts for the specified service. The Chair then reports any services so approved to the audit committee at its next regularly scheduled meeting.
All services rendered for fiscal 2020 and is incorporated hereinfiscal 2019 were pre-approved by reference.the audit committee in accordance with the audit committee’s pre-approval policies and procedures described above.
103
36

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 StatementsThe response to this portion of Item 15 is set forth under Item 8 of the Original Form
10-K.

Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income (Loss)
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements

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
    2.1
Agreement and Plan of Merger, dated as of December 19, 2019, by and among The Rubicon Project, Inc., Madison Merger Corp., and Telaria, Inc. (incorporated by reference to Exhibit 2.1 to the Registrant'sRegistrant’s Current Report on Form 8-K filed with the Commission on December 20, 2019).
2.2
    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'sRegistrant’s Current Report on Form 8-K filed with the Commission on February 5, 2021).†
3.1
    3.1
Sixth Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant'sRegistrant’s Quarterly Report on Form 10-Q filed with the Commission on May 15, 2014).
3.2
    3.2
Certificate of Amendment to the Sixth Amended and Restated Certificate of Incorporation of Magnite, Inc., dated June 30, 2020 (incorporated by reference to Exhibit 3.1 to the Registrant'sRegistrant’s Quarterly Report on Form 10-Q filed with the Commission on August 10, 2020).
3.3
    3.3
Fourth Amended and Restated Bylaws of Magnite, Inc., dated June 30, 2020(incorporated (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*
    4.1
Description of Securities (incorporated by reference to Exhibit 4.1 to the Registrant’s Annual Report on Form 10-K filed with the Commission on February 25, 2021).
10.1+
  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'sRegistrant’s Registration Statement on Form S-1/A filed with the Commission on March 20, 2014).
10.2+
  10.2+
The Rubicon Project, Inc. 2014 Equity Incentive Plan, as amended and restated (incorporated by reference to Exhibit 10.1 to the Registrant'sRegistrant’s Current Report on Form 8-K filed with the Commission on April 8, 2016).
10.3+
  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'sRegistrant’s Annual Report on Form 10-K filed with the Commission on March 6, 2015).
10.4+
  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'sRegistrant’s Annual Report on Form 10-K filed with the Commission on March 6, 2015).
104
37

10.5+
10.6+
  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'sRegistrant’s Annual Report on Form 10-K filed with the Commission on March 6, 2015).
10.7+
  10.7+
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'sRegistrant’s Quarterly Report on Form 10-Q filed with the Commission on November 7, 2018).
10.8+
  10.8+
The Rubicon Project, Inc. 2014 Inducement Grant Equity Incentive Plan, as amended and restated (incorporated by reference to Exhibit 10.2 to the Registrant'sRegistrant’s Current Report on Form 8-K filed with the Commission on April 8, 2016).
10.09+
  10.09+
Telaria, Inc. 2013 Equity Incentive Plan, as amended (incorporated by reference to Exhibit 99.2 to the Registrants’ Registration Statement on Form S-8, dated April 9, 2020)
10.10
  10.10
Second Amended and Restated Loan and Security Agreement, dated as of September 25, 2020, between Silicon Valley Bank, Magnite, Inc., Magnite Hopper, Inc., Magnite Bell, Inc. and Magnite CTV, Inc. (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q, dated November 9, 2020).
10.11+
  10.11+
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'sRegistrant’s Registration Statement on Form S-1/A filed with the Commission on March 20, 2014).
10.12+
  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 10.23 to the Registrants Form 10-K filed with the Commission on February 27, 2020).
10.13+
  10.13+
Executive Employment Agreement between the Registrant and Michael Barrett, dated March 16, 2017 (incorporated by reference to Exhibit 10.1 to the Registrant'sRegistrant’s Current Report on Form 8-K filed with the Commission on March 22, 2017).
10.14+
  10.14+
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'sRegistrant’s Current Report on Form 8-K filed with the Commission on March 22, 2017).
10.15+
  10.15+
Executive Severance and Vesting Acceleration Agreement between the Registrant and Aaron Saltz, dated April 1, 2020 (incorporated by reference to Exhibit 10.3 to the Registrant'sRegistrant’s Quarterly Report on Form 10-Q filed with the Commission on August 10, 2020).
10.16*
  10.16
Office Lease between BRE HH Property Owner LLC and Magnite, Inc., dated November 20, 2020 (incorporated by reference to Exhibit 10.16 to the Registrant’s Annual Report on Form 10-K filed with the Commission on February 25, 2021).
21.1
  21.1
List of Subsidiaries(Subsidiaries(incorporated by reference to Exhibit 21.1 of the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 9, 2020)
23.1*
  23.1
Consent Consent of Deloitte & Touche LLP. Deloitte & Touche LLP.LLP (incorporated by reference to Exhibit 23.1 to the Registrant’s Annual Report on Form 10-K filed with the Commission on February 25, 2021).
31.1*
  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, dated February 24, 2021 (incorporated by reference to Exhibit 31.1 to the Registrant’s Annual Report on Form 10-K filed with the Commission on February 25, 2021).
38

  31.2
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, dated February 24, 2021 (incorporated by reference to Exhibit 31.2 to the Registrant’s Annual Report on Form 10-K filed with the Commission on February 25, 2021).
  31.3*
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 2002.2002, dated May 10, 2021.
31.2*
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 2002.2002, dated May 10, 2021. 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)
  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. of2002 (incorporated by reference to Exhibit 32 to the Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofRegistrant’s Annual Report on Form 10-K filed with the Sarbanes-Oxley Act of 2002.Commission on February 25, 2021).
101.ins *
Inline 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 *
Inline XBRL Taxonomy Schema Linkbase Document
101.cal *
Inline XBRL Taxonomy Calculation Linkbase Document
101.def *
Inline XBRL Taxonomy Definition Linkbase Document
101.lab *
Inline XBRL Taxonomy Label Linkbase Document
101.pre *
Inline XBRL Taxonomy Presentation Linkbase Document
104
104
Cover Page Interactive Data File - (formatted as Inline XBRL and contained in Exhibit 101)

*
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.
(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.
*    Filed herewith
39
+        Indicates a management contract or compensatory plan or arrangement
†    Certain schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K.

(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.



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-KAmendment to be signed on its behalf by the undersigned, thereunto duly authorized.
 
MAGNITE, INC.
(Registrant)
MAGNITE, INC.
(Registrant)

/s/ David Day
David Day
Chief Financial Officer
(Principal Financial Officer)
Date February 24,Date: May 10, 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:

NameTitleDate
/s/ Michael BarrettPresident, Chief Executive Officer and Director
(Principal Executive Officer)
February 24, 2021
Michael Barrett
/s/ David DayChief Financial Officer
(Principal Financial Officer)
February 24, 2021
David Day
/s/ Shawna HughesChief Accounting Officer
(Principal Accounting Officer)
February 24, 2021
Shawna Hughes
/s/ Paul CaineDirectorFebruary 24, 2021
Paul Caine
/s/ Robert J. FrankenbergDirectorFebruary 24, 2021
Robert J. Frankenberg
/s/ Sarah P. HardenDirectorFebruary 24, 2021
Sarah P. Harden
/s/ Doug KnopperDirectorFebruary 24, 2021
Doug Knopper
/s/ Rachel LamDirectorFebruary 24, 2021
Rachel Lam
/s/ James RossmanDirectorFebruary 24, 2021
James Rossman
/s/ Robert F. SpillaneDirectorFebruary 24, 2021
Robert F. Spillane
/s/ Lisa L. TroeDirectorFebruary 24, 2021
Lisa L. Troe


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