Erik Randerson - Vice President-Investor Relations Frank Addante - CEO, Founder & Chairman Gregory R. Raifman - President & Director Todd L.

Tappin - Chief Operating Officer / Chief Financial Officer

Mark Kelley - Citigroup Global Markets, Inc. (Broker) Timothy O'Shea - Jefferies LLC Kerry Rice - Needham & Co.

LLC Matthew C. Thornton - SunTrust Robinson Humphrey, Inc.

Brett Huff - Stephens, Inc. Jason Helfstein - Oppenheimer & Co., Inc.

(Broker) Sameet Sinha - B. Riley & Co.

LLC Andrew Bruckner - RBC Capital Markets LLC Aaron M. Kessler - Raymond James & Associates, Inc.

Jason Kreyer - Craig-Hallum Capital Group LLC

Good afternoon, everyone, and welcome to Rubicon Project's 2016 first quarter earnings conference call. As a reminder, this conference call is being recorded.

Joining me today are Frank Addante, CEO and Founder; Greg Raifman, President; and Todd Tappin, Chief Operating Officer and Chief Financial Officer. Before we get started, I'd like to remind our listeners that our prepared remarks and answers to questions will include expectations, predictions, estimates and other information that might be considered to be forward-looking statements, including, but not limited to, guidance we are providing and other non-historical statements related to our anticipated financial performance, operating and strategic plans, expectations regarding new initiatives, our relationships and business with buyers and sellers using our platform, competitive differentiation, fees and take rate, capital investment and organizational development, our competitive position and market conditions and trends and growth expectations, including growth in Orders, Mobile and Video and in our Buyer Cloud operations.

Forward-looking statements involve risks, uncertainties and assumptions and actual results may differ significantly from the results suggested by forward-looking statements for various reasons, including without limitation, if such risks or uncertainties materialize or assumptions prove to be inaccurate. Further, we may adjust our plans and expectations in response to market conditions or other factors.

Reported results should not be considered an indication of future performance. A discussion of these and other risks, uncertainties and assumptions is set forth in the company's Annual Report on Form 10-K for the year ended December 31, 2014, as well as our quarterly reports on Form 10-Q, including under the headings Risk Factors and Management Discussion and Analysis of Financial Condition and Results of Operations.

We undertake no obligation to update forward-looking statements or relevant risks. Our commentary will include non-GAAP financial measures.

Reconciliations between GAAP and non-GAAP metrics for our reported results can be found in our earnings press release, which we have posted to our investor relations website at investor.rubiconproject.com. At times, in response to your questions, we may offer incremental metrics to provide greater insights into the dynamics of our business.

Please be advised that this additional detail may be one-time in nature and we may or may not provide an update in the future on these metrics. I encourage you to visit our investor relations website to access our press release, periodic SEC reports, a webcast replay of today's call or to learn more about Rubicon Project.

As a final note, I would like to mention that in the Events & Presentations section of our investor relations website, we have included a Q1 financial highlights presentation that summarizes our financial and operating results. I would like to suggest you access this presentation as Todd will speak to one of the slides included in the presentation during his prepared remarks in a few minutes.

With that, let me turn the call over to Frank.

Thank you, Erik. And good afternoon, everyone.

Q1 was a great quarter for Rubicon Project, highlighted by non-GAAP net revenue increasing 71% year-over-year and adjusted EBITDA more than tripling year-over-year. And this strong result builds on the impressive 62% year-over-year growth we reported in the first quarter of last year.

Since founding Rubicon Project nine years ago, we have worked very hard to create and preserve a culture of high performance at the company. Our results demonstrate our team's commitment to winning and to our strong cultural values.

With that said, I would like to give some background thinking on our guidance intentions that Todd will share with you in more detail. Rubicon Project has always been a company that has been aggressive with innovation while being fiscally prudent.

You will see that we are confident in the full-year guidance that we set start earlier this year and we are reiterating our revenue guidance for 2016. We're also increasing the outlook on the bottom-line performance for the year.

This further illustrates the leverage in our business model that positions us to accommodate revenue growth within our current cost base. We are a marketplace business and investing in the growth of the marketplace is a top priority for us.

Our growth is fueled by marketplace network effects and it's important for our continued success for us to invest in the growth of the marketplace, especially as we continue to invest in market segments such as video, orders and consumer solutions. Since our inception, it has been typical for us to see advertising spend shift in our marketplace from month to month and from quarter to quarter.

Sometimes, we may see a slower start to a month or to a quarter only to see a re-acceleration towards the end of the month or that quarter; or a quick start, then a slowdown. We always consider that periodic increases or decreases in revenue can be explained by these shifts in the timing of spending.

Advertising budgets are typically planned out and set for a year. How it gets spent can be dynamic throughout that year.

It's common for us to see money move around from publisher to publisher, DSP to DSP, or even agency to agency. Ultimately, that spend ends up reaching sellers one way or another.

This is one of the strengths of being in the marketplace business. We are well-positioned as money shifts around and our business is naturally diversified.

This has led to eight consecutive quarters of beat and raise prior to this quarter. While we are increasing our bottom-line guidance for the year, we realize that, based on our past top-line and bottom-line performance, some may wonder why we're not increasing our revenue guidance for the year.

We believe we have significant opportunities for growth. Based upon what we have experienced in the year to date, we do not think it is appropriate to increase our revenue guidance at this time.

As I mentioned, there may be a timing shift in advertising spend in our marketplace, and as Todd will explain, our Q2 revenue guidance remains consistent with historical patterns in our business. Our team is performing well, and we believe we are strategically positioned as a company.

The advertising market continues to grow and automation has evolved from a market where we were having to heavily educate potential customers to one where it is now top-of-mind and a must-have for them. Looking forward, we remain optimistic about our growth prospects across several large market opportunities, such as mobile, orders and video advertising automation.

Also particularly exciting for me is the longer term opportunity we have to improve the advertising experience for consumers by creating a marketplace that puts the consumer first. Advertising is about telling a story and sharing information, but the exchange has always been one-way.

Consumers are actively telling us they no longer want to be passive participants in this exchange, but they do not have productive options that allow them to control their advertising experience. It is time that we enable them to engage, ask them what they want, give them a choice in their advertising experience.

And Rubicon Project is uniquely positioned to do this, as we reached an estimated 1 billion consumers and more than 50% of the top websites and applications that they visit. I'm very excited about this opportunity to lead our industry to reimagine the advertising experience from a consumer point of view.

In doing so, I believe it will grow the overall market, and in turn create value for our customers and our shareholders, and it's the right thing to do. With that said, I will let Greg and Todd walk you through a more detailed analysis of our results.

Thank you, Frank. To begin with, I'd like to extend my congratulations to our team for delivering another strong quarter, on the heels of our stellar fourth quarter to close out 2015.

Our financial results for Q1 outperformed every prior first quarter in our company's history, highlighted by non-GAAP net revenue increasing 71% and adjusted EBITDA more than tripling year-over-year. Non-GAAP earnings per share were $0.31, a more than tenfold increase from $0.02 in the first quarter of 2015.

We also continued to generate positive free cash flow, further strengthening our balance sheet. Our financial strength, cash flow generation and the scalability of our business model continue to position us to capitalize on future growth opportunities and extend our competitive differentiation globally.

Today, we'll focus my remarks on three key themes. First, significant advances in our Open Platform Initiative to further increase the value of our marketplace for our buyers and sellers.

Second, key growth drivers of Mobile, Video, Orders and International that provide exciting opportunities for continued expansion of our business during the balance of 2016 and beyond. And third, client wins that further validate our belief that Rubicon Project is uniquely positioned to continue leading the market in advertising automation.

So to let me begin with a discussion of our Open Platform Initiative. Last year we recognized that many customers wanted to further consolidate their buying and selling of advertising impressions by deeply integrating with partners like Rubicon Project, capable of providing comprehensive solutions.

To maximize our success, we launched the Open Platform Initiative to provide our customers with maximum control and flexibility in leveraging our technology. Similar to how a company like Salesforce.com enables customization by its end clients, our open product architecture provides multiple integration points for our buyer and seller customers through APIs, or application programming interfaces.

We are pleased with the early success of this initiative, which we expect will further increase the value of our marketplace for buyers and sellers. The recent global launch of our Exchange API offering is a key milestone in our Open Platform Initiative.

Exchange API allows our sellers such as mobile advertising platforms like InMobi and xAd, ad serving companies like e-Planning and mobile app developers like Gameloft to easily integrate and leverage our proven technology to create a unified auction among all of their demand sources. In simple terms, by opening up their inventory to our marketplace demand, our Exchange API partners can generate a higher yield for nearly every impression, while significantly increasing the supply of inventory available through Rubicon Project.

It works across all major channels such as mobile and desktop, inventory types such as RTB and orders and ad units such as video and display. Exchange API provides an important benefit for us in that it allows us to scale our offering to serve a large and fragmented base of inventory supply that would otherwise be difficult and inefficient for us to serve directly.

For example, some of our Exchange API partners provide access to more than 10,000 mobile apps, allowing us to efficiently provide one single technology interface for all of them. Since launching Exchange API globally in March, we have attracted significant interest from dozens of companies interested in deploying our open technology, underscoring our opportunity to scale the offering.

Our recent announcement of a partnership with Mediaocean, the largest media planning, buying and billing software company in the world further advances our Open Platform Initiative. For those not familiar with the company, Mediaocean manages more than $100 billion in agency buying annually from more than 80,000 customers worldwide.

Its customers include the world's largest ad agency holding companies and brands seeking to reach targeted audiences across mobile, video and display. The agreement to integrate our combined technologies via our Open Platform Initiative will provide every buyer using Mediaocean's Prisma media buying and planning product the opportunity to directly access all of the functionality of Rubicon Project's Guaranteed Orders buyer and seller enterprise software system.

During Q1, we further advanced our Open Platform Initiative by announcing that our industry leading FastLane header bidding solution became compliant with Google's Accelerated Mobile Pages Project, or AMP. FastLane was the first header bidding solution in the industry to be accepted by Google for the AMP Project, offering users a faster and more streamlined mobile web experience.

FastLane continues to experience rapid adoption and growth, empowering publishers and app developers to generate higher revenue for their audiences. We expect the Open Platform Initiative will further increase competitive differentiation for our marketplace, while increasing monetization for sellers and generating improved return on investment for buyers.

Now, I'd like to turn to key growth opportunities that have fueled our strong performance in Q1. First and foremost, we remain excited about Mobile.

Mobile managed revenue grew by 89% year-over-year in Q1, expanding to 30% of total managed revenue. This was up significantly from Mobile representing just 20% of managed revenue in Q1 of 2015.

Our cross-channel initiatives continue to deliver for our clients, both buyers and sellers. In fact 99% of our top 2,000 advertisers purchased both mobile and desktop inventory in our marketplace in the first quarter.

And our cross-channel strength runs throughout our business into the seller side as well. In Q1, 87% of our top 100 sellers worked cross-channel with us to monetize both mobile and desktop inventory in the first quarter.

An exciting aspect of the mobile market today is the emergence of mobile video inventory, which has high levels of user engagement. This video on mobile opportunity represents the sweet spot for future growth of digital advertising.

Rubicon Project is the only marketplace offering buyers and sellers the breadth and depth combination of a top three mobile exchange, a growing video exchange that focuses on premium highly desirable video inventory, the highest independent inventory quality rankings and the most widely adopted orders platform within which to transact. A key differentiator for our mobile platform is the complete scope it offers buyers and sellers to transact video within mobile.

While many point solutions today support primarily one format of video, Rubicon Project's platform was purpose built for mobile video and today supports every major format of video advertising, including native, expandable, interstitial, pre-roll, mid-roll and post-roll, rewarded and outstream, all of which can be location-enabled for superior targeting. Looking forward, we continue to see the future of mobile, and specifically video, moving more and more towards orders where we are very well-positioned with our widely adopted and industry-leading orders marketplace.

Increasingly, mobile publishers that had previously been hesitant to make their video inventory available to programmatic channels are confidently choosing to do so in our well-lit premium quality orders marketplace. I'll offer a perfect example of what I'm talking about, which is also an example of a company leveraging our Exchange API offering that I mentioned earlier.

Just today, we announced a new partner that offers considerable growth potential in mobile video advertising through our orders platform. Tapjoy has named Rubicon Project as its launch partner for the Tapjoy Private Exchange, delivering its premium mobile video and gaming app inventory to programmatic buyers globally, through our Orders marketplace.

Tapjoy's premium audiences, 520 million monthly active mobile consumers through more than 10,000 mobile apps, will be available to buyers in our orders platform. Orders, which comprises guaranteed orders and private marketplace orders on a non-guaranteed basis, also continues to be a major growth opportunity.

In Q1, our Orders managed revenue increased 43% year-over-year and expanded to 17% of total managed revenue. This was up from Orders representing 15% of managed revenue in Q1 of 2015.

Lastly, I'm encouraged by the performance of key international markets, offering high growth potential. Most notably, managed revenue in Japan increased more than 5x year-over-year in Q1.

Since launching in the Japanese market, two years ago, we have followed our proven expansion model. We entered the market and have successfully on-boarded many of the country's most premium publishers including, Nikkei Business Online, ORICON STYLE, the popular entertainment destination and Kenki (17:00), the Japanese equivalent of weather.com (17:02).

As we have demonstrated in geographies throughout the world, when we successfully attract high-quality sellers, inevitably we generate increased buyer interest in demand, creating dual network effects to lead to strong business growth. In other highlights, we also achieved outstanding year-over-year growth in Brazil in Q1 and in South Africa.

Last month, we launched AdJoin our 10th publisher cooperative featuring a consortium of the country's most premium publishers. Now, I'll wrap up with some more proof points on our progress, expanding our marketplace by attracting additional premium buyers and sellers.

Beginning with buyers. For our buyer offerings, focused on intent marketing, we have increased our focus on securing strategic client wins that could bring large spending commitments to our platform.

As a result, I'm pleased to share that we signed two large commitments in Buyer Cloud during the first quarter. Major Q1 wins in Buyer Cloud include overstock, and newer direct relationship with exciting growth potential and a major expansion with a home goods retailer that increased its spend more than 200% year-over-year in the first quarter.

Shifting to sellers. We are very excited to welcome ESPN as a newly on-boarded client across mobile, video and desktop inventory.

And now, let me shift to a great case study highlighting the benefits of our complete advertising automation solution. Publishers Clearing House is a leading interactive media company that reaches $13 million monthly unique visitors globally.

Since on-boarding in late 2014, PCH has meaningfully expanded its partnership with us. PCH initially began working with Rubicon Project for real-time bidding and static bidding of desktop display inventory.

In the past several months, PCH had significantly expanded its relationship with us to leverage our mobile video and private marketplace orders offerings, and most recently guaranteed orders. Driven by extraordinary success in video and orders in the first quarter, PCH achieved a greater than 350% year-over-year increase in spend on our marketplace, truly demonstrating the power of our comprehensive advertising automation solution that I described last quarter.

To wrap up, I continue to be pleased by our team's execution in a competitive environment as demonstrated by our strong Q1 results. As Frank alluded to, we can't expect results every quarter to be so favorable, as there can be shifts in advertising spend throughout the year that may affect quarterly comparisons.

Nonetheless, our focused strategy of engineering a truly differentiated advertising marketplace is clearly working. Buyers and sellers continue to see fewer more comprehensive technology partners that bring us scale to the market that Rubicon Project and very few others in the industry are capable of delivering.

And with that, I would like to turn it over to Todd to discuss our financial results in more detail. Here is Todd.

Thank you, Greg. Overall, we've continued to experience strong growth led by RTB and mobile.

Managed revenue which is the (20:06) advertising spending transact on our (20:07) platform for the first quarter 2016 was $248.5 million compared to $197.2 million for the first quarter of 2015, an increase of 26% year-over-year. The increase in managed revenue was primarily driven by an increase in both pricing and bidding activity led by RTB, which continues to represent the largest portion of our business.

Managed revenue was composed of 78% RTB, 17% orders and 5% static. And by channel, managed revenue was composed of 70% desktop and 30% mobile for the first quarter of 2016.

GAAP revenue for the first quarter of 2016 was $69.2 million compared to $37.2 million in the same period in 2015, representing a year-over-year increase of 86%. Non-GAAP net revenue for the first quarter of 2016 was $63.6 million compared to $37.2 million in the same period in 2015, an increase of 71% year-over-year and once again ahead of expectations.

Take rate, which is non-GAAP net revenue divided by managed revenue, increased to 25.6% in the first quarter of 2016 compared to 18.9% for the same period in 2015. The increase in take rate year-over-year was primarily due to the higher mix of RTB and buyer cloud transactions, which carry higher take rates and a lower mix of static transactions.

We expect take rate to decline over time for various reasons. For example, we may provide the market with different pricing opportunities in an effort to drive more volume.

Another factor that could contribute to declining take rate is an increase of orders as a percentage of overall managed revenue, because orders carries a lower take rate. Although an increase in orders as a percentage of our revenue could yield higher absolute non-GAAP net revenue due to the higher CPMs typically associated with Orders transactions.

Operating expenses including cost of revenue increased to $71.1 million in the first quarter of 2016 from $44.3 million during the same period in 2015. The increase in operating expenses of $26.8 million was primarily due to an overall increase in personnel expenses of approximately $10.7 million, which included the expansion of our sales efforts and Buyer Cloud initiatives.

Payments to sellers of $5.7 million including cost of revenue, and an increase in non-cash amortization of acquired intangible assets of $3 million. Net income was $2.3 million for the first quarter of 2016, which included tax benefit of $4.3 million.

This was an improvement from the net loss of $5 million reported in the same period in 2015. Adjusted EBITDA of $15.5 million in the first quarter of 2016 was well above expectations and well above adjusted EBITDA of $4.2 million in the first quarter of 2015.

The increase in adjusted EBITDA was due to the revenue and performance coupled with operating efficiencies and the timing of investments which moved from the first quarter 2016 to the second quarter of 2016 including investments in personnel and non-CapEx data center costs to accommodate growth, driven by our ex-API and header bidding solutions, as well as investments in our international operations. GAAP income per share was $0.05 for the first quarter of 2016, including the tax benefit compared to GAAP loss per share of $0.14 in the same period in 2015.

Non-GAAP earnings per share in the first quarter of 2016 was $0.31, also including the tax benefit, which was well ahead of expectations and significantly higher than the $0.02 reported in the same period in 2015. For an explanation of the various share counts that affect these computations, please see the table on the earnings release and the explanation of non-GAAP EPS and non-GAAP weighted average shares outstanding.

Capital expenditures excluding capitalized stock compensation were $3.7 million for the first quarter of 2016. We closed the period with a $166.9 million in cash and liquid assets, up $13.7 million from $153.2 million at year-end and we generated free cash flow of $6.9 million during the first quarter 2016.

Looking ahead, we expect the following for the second quarter 2016. Non-GAAP net revenue to be between $61 million and $64 million, GAAP revenue to be between $65 million and $70 million.

As noted in our prior communications, we would guide investors to focus on non-GAAP net revenue as we believe it is a better measurement of our revenue performance. Adjusted EBITDA to be between $9 million and $11 million, which is down sequentially from the first quarter, primarily due to the shift in the timing of operating expenses from Q1 to Q2 as previously noted, including investments in personnel, non-CapEx data center cost and international operations to accommodate growth.

And non-GAAP earnings per share to be between $0.08 and $0.10 based on approximately $53.5 million forecasted weighted average shares. For the full year 2016, we expect the following.

Non-GAAP net revenue to be between $275 million and $295 million, GAAP revenue to be between $315 million and $355 million, adjusted EBITDA to be between $55 million and $65 million, an increase from the previous guidance due to better operating efficiencies and non-GAAP EPS to be between $0.75 and $0.85, which is also an increase from the prior guidance based on approximately $53.5 million forecasted weighted average shares. We would like to provide a few additional comments regarding the guidance.

The guidance assumes no further tax benefits for the remainder of the year, thus partially contributing to the disparity between Q1 and full year EPS. The allocation of revenue among each quarter follows very closely, with seasonal patterns, which have been very consistent year-over-year demonstrated by the financial highlights presentation on our website, where by Q2 is typically represented approximately 22% to 23% of the total year, in line with our guidance.

We believe that the previously provided revenue guidance for the full year was wide enough to accommodate the exceeded expectations of Q1 and it is still early in the year to adjust. However, we have raised the adjusted EBITDA and EPS guidance as a result of the strong Q1 and operating efficiencies.

Additionally, to reiterate earlier commentary, the shifting of some expenditures from the first quarter to the second quarter explains the sequential Q1 to Q2 adjusted EBITDA and non-GAAP EPS forecast. As we have previously discussed, we believe there are complete advertising automation solution and provides both our buyer and seller customers with powerful applications, which in turn provide Rubicon Project with a competitive advantage.

Accordingly, we plan to continue to invest in areas to drive this complete solution strategy. In addition, we believe that we have demonstrated differentiated results and capabilities compared to others in our sector.

We would now like to open the line for any questions.

Hey, guys. Thanks for taking the questions.

So, take rate (27:28) nice step up again in the quarter and you noted in your prepared remarks that a lot of that has to do with higher real-time bidding and Buyer Cloud versus last year. But, I'm just curious, if you can quantify how much Chango contributed to the sequential increase since orders actually grew a little bit ahead of RTB?

And then, secondly, can you talk a little more about FastLane and Google, how should we think about your compliance with AMP in terms of growth rates for mobile and access to inventory? I know it's early days since you guys just announced it, but anything there would be helpful.

Thanks.

Hi, Mark. Thanks.

With regard to take rate, you're correct. Most of the increase year-on-year was product mix that has been in the past.

Certainly, RTB has contributed to that. And with respect to Buyer Cloud, we don't breakout that separately.

I will say that the RTB component did actually grow on its own, a little bit in terms of take rate, although we wouldn't guide investors to think about that as some sort of trend, because that can be a combination of multiple items such as the mix of the various publishers or applications as well as number of other things. And as we have talked about in the past, well, it hasn't yet come to fruition.

We do expect it over time take rates will come down simply because we do believe that orders will eventually contribute a larger percentages of the overall mix, which carry lower take rates compared to RTB, but with higher CMPs will contribute greater absolute non-GAAP net revenue. And then, we are shifting some of our initiatives on the Buyer Cloud to provide different pricing alternatives, they will be determined by the market.

And in doing such, it is our anticipation that, that will lower that take rate, but with the offset of higher volume. So, those initiatives that we had hoped to put in place in the first half of the year have now been pushed more towards the second half of the year.

Mark, this is Greg. I want to give you couple of updates about both AMP and our Open Platform initiative.

When you think about, what we are doing with FastLane, you think about, why we've connected with the Google with respect to the AMP program, and frankly there are other pilot program they launch, it's all consistent with what we're doing with the Open Platform initiative that I talked about. And from that perspective, we are pleased to be able to provide choices and options for our clients both on the buyer side and the seller side, and we are doing that routinely.

You see it on the buyer side with respect to Open Platform initiatives like with Mediaocean, you see it on the seller side with respect to what we're doing with Google, both the PMP (30:22) – the AMP plan as well as the pilot program. So, this is consistent with our theme of being open and it's something that you'll be hearing about more and more, quarter-after-quarter.

With respect to FastLane, again it's very synergistic in the sense that we are providing different types of options for our – in this case our publishers, our sellers, whether they are – its FastLane for mobile or FastLane for desktop publishers, it's the same theme again, where we want to provide as many choices as we can for our clients, whether they want to use private marketplaces, whether they want to use open auctions, whether they want to use of our FastLane for mobile or tie-in with the Google programs or in fact the EMS system, the Exchange Management System that we're going to be bringing to market, which helps provide capabilities to manage those. So, this is all consistent with what we are doing.

And to-date, we've seen a lot of implementation with respect to FastLane. We already have, as I mentioned 77 FastLane customers live globally, 37 of our top one accounts have adopted, we're expecting, as I mentioned in the last quarter, we're expecting to see as many as 100 satisfying customers globally, so we're pretty pleased with the results today.

Yes. Hi.

Tim O'Shea for Brian, thanks for taking my question. Just looking at mobile for the quarter accounted for 30% of managed revenue, it's actually a tick down from last quarter and I'm pretty sure this is the first time we've seen mobile penetration decline on a quarter-over-quarter basis.

So, I'm just curious if there's anything worth calling out that maybe drove that trend and perhaps if you think mobile might stabilize around this 30% level or do you expect mobile to continue to account for a larger part of the business going forward? Thanks.

Hi, Tim. Actually we don't think a 1% change quarter-on-quarter is meaningful and we shouldn't expect a very specific linear growth quarter-on-quarter.

To answer the question more specifically, we do expect mobile to continue to grow as a percentage and really remember, that we're a marketplace and we're providing the opportunity for marketers to reach audience. And so, we're reaching that audience wherever it is and that's one of the competitive advantages we have to a complete solution is that (32:46) we offer the ability now to reach across desktop, mobile, web, mobile apps and so it's really where the audience is, but we do expect mobile to continue to grow as a percentage overall and we don't really feel that the difference coming off (33:02) very, very strong Q4 versus the Q1 1% is meaningful.

Thanks a lot. Maybe going back to guidance just for a second.

I guess, the questions I would ask is, is there any specific shifts you've seen pushing the ad spending to the second half of the year, anything you would call out? And then, as it relates to again the guidance, it didn't sound like it, but just wanted to kind of clarify around trends going from Q1 to Q2.

Typically you see some sequential increase at the midpoint of your guidance, it's pretty flat. Anything that you would say is different between Q2 of 2015 and what you're looking at in terms of Q2 2016?

And then finally, was there any more seasonality that you felt, I mean, I know Q4 was strong, but any more severe seasonality in Q1 that you would highlight? Thanks.

Thanks, Kerry. Obviously, we're coming off of still a very strong quarter.

We grew 71% (34:20) year-on-year on a net revenue basis. I think you're on target with timing and that is if we do see some strong Q1 spend that probably if we were to look at it as a 1H or first half of the year basis, had some shift with respect to that move in (34:36) between Q1 and Q2.

And likewise, the same is on the expense line, we outlined some of the operating expenses that we did plan to spend in Q1, which we now are spending in Q2. And so, as a result, we do have we believe some shift in the revenue between Q1 and Q2 and shift in expenses between Q1 and Q2.

One thing I think it's really important to highlight is that if you look at the slide that I referenced on our financial highlights presentation or website, you would see that on page eight, we show you the historical allocation. And for the last four years, Q2 has been very, very consistent for all four years.

You can see it in the bar chart as it averages between 22% and 23% of the year and our guidance for Q2 is really right on top of that.

Yeah. Good afternoon.

And thanks for taking the question, guys. I guess, maybe just to start up on the Mediaocean.

Greg, you talked about a little bit, I guess is there any update there just in terms of timing as to when that partnership goes live? And I guess, I have a follow up to that.

Yeah, Matt, good question. We are in the midst right now of working to get collectively the two teams, the two technology teams to combine our technologies, which we foresee will be taking the next quarter or two, and then once completed, we will then go into market with our combined technology.

So, we'll keep you posted on updates as we go forward. But right now, we're in the midst of combining technologies.

Got you. Perfect.

And then, I guess – coming back to a political spend I guess for the year. Any updated thoughts on how that's kind of playing out this year and again what kind of contribution you might see from the political ad spend outlook?

Thanks, Matt. (36:38) that we are really in a great position with regard to political spend.

And we believe that a lot of that will go to social publishers, specifically, Twitter, Facebook and the like. So, we don't really expect a lot with regard to political campaign spending there to go through us.

Good afternoon. Thanks for taking my question.

Two quick questions, one is can you quantify how much of the expense shifting from 1Q to 2Q, just to give us a better sense of what the fundamental upside was? And then, my second one, I'll go ahead and ask it, and then get off the line.

You guys grew a little over 60% organically, net revenue in 4Q, mid-50%s in 1Q and yet the net revenue organic still implies 20%. I get the Q2 guidance and that revenue might shift around in between quarters, but I'm still confused about what trends might be changing to get us sort of deceleration the 20%?

And thanks for the – answering those questions.

Sure, Brett, as far as the amount of shift, it's roughly in the neighborhood of $4 million to $7 million somewhere in there on the expense side. With regard to the sequential, again, we're looking at the full year without a change.

And if we look at the historical trends, as we've pointed out, our Q2 guidance is right on top of that and we think that what we had provided previously and actually from six months ago with regard to our full year is still really our best estimate of where we think the year comes out. So, as we sit here today and look at the sometime shifting perhaps between Q1 and Q2, we just don't feel there's anything to change with regard to the full-year.

Thanks. Can we talk a little bit about managed revenue?

In the quarter it grew 26%. It has been decelerating, I guess, as you get bigger, right, your growth will approach the market and we know you are managing ultimately (38:59) net revenue and gross profit, which is the right way to run the business, but how should we think about kind of, how fast the market is growing, kind of what that 26% means, does that actually mean that your managed revenue is still growing faster than, effectively the programmatic market?

You know, was it really kind of, where you are choosing to focus and the value-added side of it and so, again focus on that growth, ultimately the net revenue, not that managed revenue number? Thanks.

Thanks, Jason. Well, first of, I think as you look at the 26% as you mentioned, yes you're coming off of a much larger denominator.

I think the other thing to point out, is don't forget that Q1 2015 was actually a very, very strong quarter as well, so there is a higher base comparative to which we're drawing that growth rate. In comparison to industry growth, it has been something that's difficult for us, because we know the size of the programmatic business as provided by analysts, but you had to break that down into so many different ways, what's desktop versus mobile versus RTB.

And so I'm not sure that we have a perfect answer for you on that, if we look at some of the growth rates with regard to say online display as measured by IDC (40:21) they would have a 2015 to 2016 growth of 19%. That might suggest that we're still solidly ahead.

We know certainly, as we compare Mobile, when you look at the Mobile growth rates, clearly our growth rates there have been well in excess of the market and Orders is still very new. So I think it's a difficult question to answer, but you do have to break it down to the components.

Yes. Thank you very much.

First question around the trends that you spoke about between quarter-to-quarter, can you give us a flavor of what sort of ad spend kind of moved from Q1 to Q2, was there anything that you can point to, any specific vertical maybe, or any type of media that moved from Q1 to Q2? And secondly, I wanted to talk about International, you kind of pointed out, Japan – also the character – I mean, do you see that all the geographies where you open up offices generally follow the same trend, and I remember that you opened up a data center in Japan, is that kind of a prerequisite to kind of scaling those geographies?

And if yes, then when can we expect new kind of data center builds over the next, let's say, 12 months to 24 months?

Hi, Sameet, thanks for the question. With regard to the ad spend, we do track what advertisers or marketers are spending over our platform.

I'm not sure that what we would provide to you would be meaningful with regard to anything from an industry trend or even from a business trend, for the following reasons. One is that 78% (41:59) of our business in this quarter, it still came from real-time bidding.

And our direct customers for real-time bidding are primarily demand-side platforms. And those demand side platforms are allocating spend across a large swath of agencies and brands.

And when you think about the fact that there are approximately 300 plus or minus demand side platforms that are using our marketplace and that there could be upwards to 300 or so bid requests for any given impression, really the allocation dynamics of that leads you to inconclusive types of results on what type of marketers or specific brands or verticals might be increasing or decreasing. So I'm not sure that we really are in the right position to give you a solid answer there.

I'll turn Japan over to Greg, but one quick comment on that is Japan, as Greg mentioned in his opening remarks, has trended well. We talked about – we opened the territory last year and we did expect that this year we would start to see some meaningful contribution and that has come to fruition.

Yeah, I'm just going to add on to the question about the shifting. So if you look at the historical growth for the business, one of our strategies has been to connect to all the places that buyers and sellers are trying to interact with consumers.

So early on in our business, we were going after the top 500 websites and desktop display inventory. We went after big newspaper sites, we saw social networking sites come into the mix.

At that time, social networking inventory was not that attractive to advertisers. So we were actually trying to basically shift some of the – our attention to attracting more of the high quality news sites.

Over the course of a couple of years that changed. We've seen the same thing from ad networks.

then it went to DSPs and then from DSPs, money is now coming from trading desks, from static bidding to real-time bidding, desktop to mobile. We see a lot of these shifts in spend and one of our strategies again has been to connect to all the places that these buyers and sellers are trying to reach consumers, no matter what kind of properties they are on, what kind of methods they're buying.

And I think that sort of articulates the strength of us being in this diversified marketplace business. So I just wanted to highlight that as part of our explanation there.

Okay. This is Greg.

Quick update on International and in particular Japan, you asked about. Japan has followed along very nicely with the expansion model we typically put in place, which is when we go into s new market, we look for supply first and of course, we look for quality supply, because that's one of our primary motivations.

And then we follow it with demand. And it usually takes some time to build critical mass.

And so, we entered Japan a year or so ago, we expected it would take a little bit of time as Todd mentioned. So, we were pleased to see that growth is up 5x year-over-year for Q1.

And another point to make is that, we feel like our International team is a very strong asset for Rubicon Project, they've built out a great business internationally, first in desktop and now they are moving to mobile and video, and we expect to see great things for them from EMEA, JAPAC, and LatAm. So it's not really a surprise that we are starting to make traction in Japan, and also Brazil, as I mentioned.

One quick update, and you mentioned about the data center, it's not essential for us to have a data center in every new country we move into, it's typically in an area that's close. So I don't want you expecting that we're going to put a new data center into every particular country or region we move to, so just a point of reference there.

Thanks.

Thank you for the time. I want to talk a little bit about cash, and how you think about how much working capital you need on the balance sheet, now that you are building cash and cash flow positive, potential for any sort of buybacks?

And then finally, just where you expect the CapEx to be for the year and going forward. Thanks so much.

Thanks for your question, Andrew. Right, well, we closed out with $166.9 million of cash from liquid assets, and there is $6.9 million of free cash flow in this particular quarter.

As we look at that balance in relation to our overall balance sheet, remember that the balance sheet is driven more by our managed revenue, which exceeded $1 billion last year. So in that context, we don't really feel that we are overcapitalized.

We will spend about $30 million to $35 million in CapEx this year. And as we think about what to do on that the capital, we certainly have recognized that we may have some opportunities with regard to M&A.

We're looking at a lot of those, that is a potential use of the capital. We don't know that buying back at this stage is sensible; we still have a flow that is a little bit on the smaller side.

The market continues to grow substantially and investing in that growth is still very prudent, naturally also making sure that we are mindful of the bottom line. So right now, we think that the balance is a strong balance, it's not an over-capitalized balance.

We're not sure that the use of funds to buy back shares is sensible. And we do think that investing in growth is.

Great, guys. Couple of questions.

First, just in terms of the managed revenue growth. Any updates you saw in April, is it similar trends that you saw Q1 or do you see some re-acceleration there?

Second is for Todd, I made a share count, I think you guide to close to about 55 million for Q1, it looks like it was 48 million; maybe misreading that. But just can you give us a sense kind of why the delta?

And third is the expenses, with the uptick in Q2, did you see kind of where you constrained a little bit on the hiring environment in Q1, or just a little more detail there. Thank you.

Thanks, Aaron. First of all, I think, we're going to stay away from giving monthly guidance, and as you know, we don't give guidance on managed revenue.

We'll stand behind the guidance we provided for Q2 and the full year. With regard to share count, right, we did have that delta, because of two things.

One was the estimated share price to determine treasury stock in the forecast. And the other is the timing of the issuance of shares, since it's weighted average we obviously assumed earlier issuance then we actually had.

So hence why we had fewer shares than what we had forecasted. As far as the expenses are concerned, hiring was part of it.

I wouldn't say that it was quote-unquote troubled. However, just the timing is such that we are seeing some of those hirings taking place more in Q2 than Q1.

Hey, guys. Thanks for taking the questions.

Just wondering if we can dig into Buyer Cloud a little bit, if you can talk about kind of what you're seeing there, maybe specifically trends that you're seeing in take rate. And then Todd, I think you mentioned you had some initiatives like the transparent pricing that would shift into the second half of the year, I want to make sure I heard that correctly, and then, if you can give us some sense of why you expect that to shift out a little bit?

Thanks.

Okay. Hey, this is Greg.

Let me give you a quick update on Buyer Cloud and then I'll turn it over to Todd. As we've talked about for some time now, we believe that a complete offering or a solution for both buyers and sellers is a point of differentiation for us.

And so, we have, with that in mind, been continually growing our capabilities on the buyer side to provide – to make it easier and easier for all buyers of any kind to participate in our marketplace, whether they be DSPs or trading desks or agent or agencies or advertisers. Whatever buyer we want to be able to provide those capabilities to make it as easy as possible for them to spend in our marketplace.

So one of the reasons behind why we acquired Chango, moved into the performance marketing, because it was an area that we didn't see a lot of spend and we wanted to enhance it. So this is how it will work out; we've completed the acquisition, we've moved into selling by channels now, we had been selling by products and now we've moved into selling by the channels that I've talked about, and we expect to see continued efficiencies in that regard, as well as growth for Buyer Cloud over the next couple of quarters.

Thank you, covered it.

Thank you, everyone for your time today and we'll look forward to seeing you on the conference circuit in the coming weeks.