Welcome to the Fourth Quarter 2014 Rubicon Project Earnings Conference Call. During the call all participants will be in a listen only mode. After the presentation we will conduct a question and answer session. (Operator Instructions) As a reminder this conference is being recorded and will be available for replay from the investor relations sections of Rubicon Project website following this call. I will now turn the call over to Eric Anderson, Vice President of Investor Relations for Rubicon Project. Sir you may begin.

Good afternoon, everyone, and welcome to Rubicon Project's 2014 fourth quarter earnings conference call. As a reminder, this conference call is being recorded. Joining me today are Frank Addante, CEO, Founder and Chief Product Architect; 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 question will include predictions, estimates and other information that might be considered to be forward-looking statements, including but not limited to, the guidance we're providing and other non-historical statements related to our anticipated financial performance, operating and strategic plans, expectations regarding new initiatives including our orders, mobile and video business and international expansion. Our relationships and business with buyers and sellers using our platform fees and take rate, capital investment and organizational development, treatment and software development cost market conditions and trends in growth expectations and our competitive position. 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 and in response to market conditions or other factors. Reported results should not be considered an indication of future performance. A discussion of some of these risks, uncertainties and assumptions is set forth in more detail in the company's registration statement on Form F-1 and quarterly reports on Form 10-Q including under the headings Risk Factors and Management's 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 page of our website which could found at rubiconproject.com. At times in response to your questions, we may offer incremental metrics to provide greater insights into the dynamics of our business or quarterly results. Please be advised 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 at investor.rubiconproject.com to access our fourth quarter press release, periodic SEC reports, a webcast replay of today's call or to learn more about The Rubicon Project. With that, let turn the call over to Frank.

Thank you, Eric, and good afternoon, everyone. We had another strong quarter that exceeded our forecast. Fourth quarter revenue increased 49% and adjusted EBITDA more than doubled year over year. We also achieved GAAP profitability for the first time as a public company demonstrating our success in being aggressive with innovation while remaining physically prudent in building a profitable business. For the full year revenue increased 49% managed revenue towards grew to $668 million and adjusted EBITDA grew 70% outperforming the expectations set during our IPO process. It's an exciting time to be in the advertising market the market that is increasingly embracing automation. Our team continues to execute very well in driving strong growth in our business while enhancing our strategic position for the opportunities ahead as we pursue our mission to re-invent advertising. And that’s what I've like to discuss today, first our unique and strategic market position and the growing market opportunity. Second key trends in advertising and automation today and third our investment in technologies that continue to re-invent advertising to address the large and growing market opportunities that lie at. Let's start with our unique market position and growing opportunities Rubicon Project build potential infrastructure that thousands of companies rely on to trade inventory and increased revenue. Our technologies target a $200 billion in growing advertising market opportunity globally. We are a leader in the fastest growing portion of that market, automation. The most exciting thing about the market opportunity is its rapid growth, in only five years real time betting is grown from 0 to $9 billion in 2014 and as expected to reach $30 billion by 2018 according to magna global. But RTB is only a small segment of our overall market opportunity for example the market for direct orders is much larger…

Thank you, Frank, and thank you all for joining us on the call this afternoon. Frank's comments about our market positions reinforce that we have continued to achieve measurable progress against our mission to leave the automation of advertising for buyers and sellers. I'll focus my remarks on the operational highlights for the fourth quarter of which they were many. Q4 was an incredibly busy time for everyone at Rubicon project and I am proud that the unified effort our team is brought to delivering success we close and integrated two important acquisitions, signed and on-boarded dozens of new sellers, tightened our relationships with our key agency buyers and signed major new deals with Apple and Amnet group, a division Dentsu Aegis Media. Our common theme is that Rubicon Project is increasingly recognize as one of the most trusted marketplaces for premium buyers and sellers to transact, often leveraging their first party data within our brand safe and transparent environment to do so. Our strong financial and operational performance further validates that our solutions resonates with our customers and the market at large. There are four core pillars of our business that we focused on day in and day out. First providing premium sellers with innovative and scalable solutions to help them maximize revenue from the advertising inventory. Second providing buyers the capabilities needed to efficiently access our marketplace. Third enhancing our cross platform solutions for all buyers and sellers and fourth I international growth. Now let me touch on each of these briefly starting with our seller efforts. The seller team closed our 2014 by signing an impressive roster of premium publishers in Q4. Some of which included Publishers Clearing House Kia, Kijiji Canada and the Motley pool. With these and other important wins we now have direct seller…

Thank you, Greg. Overall, overall we've continued to experience tremendous growth, once again led by our RTB solutions, while continuing to invest in the business to drive future growth. Managed revenue which is the advertising spend transacted to our platform at a given period is important operating metric for both internal and external evaluation purposes because many companies in our industry report revenue on a gross basis, managed revenue provide a comparison to other and in our industry. Managed revenue for the fourth quarter of 2014 was 216 million compared to 158 million the fourth quarter of 2013 an increase of 37% years over year. Managed revenue was 668 million for the full year 2014 compared to 485 million in 2013 a 38% increased. The increased in manage revenue is primarily driven by an increase in both pricing and bidding activity led by RTB which represents the largest portion of our business at approximately 75% from overall managed revenue followed by orders which grew throughout 2014 and represented 10% of overall managed revenue for the full year 2014 and 13% for Q4 2014. The average CPM for the fully 2014 was $0.67 compared to $0.36 in 2013. The growth in CPM was primarily due to outgoing net efficiency increase buyer spend and a continued shift from static inventory purchases to RTB. Total paid impressions for 2014 was 999 billion compared to 1.3 trillion in 2013 the decrease in paid impressions was mainly a result of quality control initiatives we entered to during the end of 2013 and an ongoing shift from static bidding to RTB. Accordingly, RTB paid impression grew year on year from 457 billion to 548 billion. Revenue which we report on a net basis consistent of fees from buyers and sellers transacting on our platforms revenue in…

[Operator Instructions] Your first question comes from the line of Kerry Rice with Needham. Your line is open.

Couple of questions here, we've heard some chatter about DSPs trying to build our own direct relationship with publishers. I don’t know if you've seen that trend and if you have can you talk about how that might Rubicon? And in the second question I have is on media advertising I know InMobi does native advertising. But could you talk a little bit about how you plan to integrate maybe display or native advertising on the platform in more quantity. Thank you.

You've asked two questions, one about native. We can start about that and we can come back to your first question if you want. So there is been a lot of talk about the native in the industry I'm sure you followed that it in every mobile conference you got to, it's all the rage and we are participating in that process we are building out our capabilities in native right now. We expected to be in market very soon both for our powering the InMobi exchange for other mobile clients and our general mobile capabilities. So we see tremendous opportunities of course in mobile you've seen the growth we've shown in the last year and we see native as being a big component of that growth going forward. With that I'll turn it over Frank he can handle your first question.

Yes I think a lot of company's would love to have the position that we have as being net seller’s platform, it certainly would give them an advantage over all of their competitors. I mean there are hundreds of DSPs and ad network that existing the market. I think it's important to remember where we started, so when we started in this market they were between 50 and 100 ad networks with existing in the market and they all had a direct relationship with the sellers whether that be a publisher, an application creator and part of that created the confusion and the high cost of operation and managing all these different relationships. So it's a part of the reason that Rubicon Projects needed to exist, in the first place was to create this platform that enable the sellers to be able to manage all of the different buyers in one place. So yes, I think it rear that you'll see a DSP trying to build the direct relationship with a seller and if they do on it's usually around some kind of special data sharing relationship and even in that case often times that’s still coming through our exchange. So it's nothing that we're concerned about going forward to me in future the more confusion that’s created in the market the more opportunity that creates rest to be that platform that sorts through that confusion. I think Kerry will add on to that, as you can see from our results and as you heard us discussed I the opening remarks the performance of our solutions has really been quite strong and the reason for that is that we have developed that set of software, hardware and architecture to really improve the monetization and improve the economics and efficiencies of a marketplace and to do that takes not only a tremendous amount of time to build and ingenuity especially with respect to being able to monetize every type of inventory placement. But of course the combination and mining of massive amount of data to which poverty algorithm that makes that matching and pricing so effective. So to do that is obviously one of the things that puts us in a tremendous position as well as where we sit in the eco-system as Frank mentioned.

Your next question comes from the line of Deb Schwartz with Goldman Sachs. Your line is open.

Couple of questions, first on order. Can you talk about what you're seeing on both desktop and mobile from order and whether or not you kind of break out or give us a sense of how much you contributed to 2014? And then secondly on guaranteed can you talk a little bit about the benefits for publishers in automating guaranteed is it an argument of your better pricing or better yield or is it more long line of cost savings? Thanks.

Deb good questions to let’s start with the non-guaranteed piece that you ask about and then we'll come back to the automated guaranteed. We are very bullish on the director order automation in general both guaranteed and non-guaranteed as you know we acquired two companies in the space and we were only to market in RTB automation and as you know that market is growing dramatically in the last five years and frankly that’s the part of internet advertising that’s growing the fastest in the last five years. So now we've kind of turned our attention to the part of the market that we see is right for automation over the next five years and that has been absent of automation to date and that’s the automated guaranteed piece. With respect to non-guaranteed we've been in market now for several years, we're seeing tremendous growth in this area and real adoption. We are working very diligently with buyers and sellers to perfect the process because we see this as a continually growing area as buyer -- premium buyers and sellers want to work more closely together in private marketplace as where they can control the rules and the process even better. So that was one of the reasons for us building out our buyer capabilities in our own environment which was facilitated better for our sellers and frankly it would create the opportunity for all buyers in our marketplace to be able to access better inventory, better quality inventory in private marketplace. So that’s being going very smoothly and of course we are extremely bullish about where we’re seeing automated guarantee going. We’ve been in market for short time now with both our 49 BC technology which has been merged into iSocket and ShinyAds and we’re seeing real -- really promising adoption, but keep in mind that we’re still early in the market and with that regard we are -- we want to be measured about where we see things going over the course of the next 24 months because we’re making a market in a new area and we’re changing behavior.

And Deb I’ll add on to that as well with the guaranteed it certainly not just a cost savings play for the customer, it's a revenue generating play, if you look at your typical seller they have a sales force that maybe reaches 200 advertisers that are out there, there are over 100,000 advertisers that has bought advertising in our marketplace across our platform, so it's really an access in a liquidity opportunity for them. Sales channel for any company is the most expensive channel and the most difficult channel for any company to be able to scale. So being able to automate the direct orders simply provides greater access to the larger market which will equate to not only more liquidity from revenue standpoint but hopefully increases in rates as well.

And Deb I think you asked about the number in terms of what orders comprise, the orders was 13% of our revenue in Q4 with 10% overall for 2014.

Your next question comes from the line of Rohit Kulkarni with RBC Capital Markets. Your line is open.

Nice quarter guys, and then if you look at your 2015 guidance and if I simplify the source of growth as in greater monetization from existing inventory with existing publishers and number two would be more inventory access from existing publishers be it mobile, video or premium or make new publishers, how would you helps us kind of figure out what would be the highest source of growth do you think overall all three buckets you think have a pretty long run rate of growth? And second question is about pricing leverage, can you talk about how much leverage do you think you have of given that you are leading the marketplace? On one hand the benefit for straight forward in terms of higher yields or the cost savings what have you, but on the other hand, but general investor believe about pricing pushback from both buyers and sellers in advertising technology space?

Sure, let me first address the 2015 growth drivers, really it is a combination of several things. We’re certainly seeing tremendous growth from our product suite which consist naturally of orders, RTB and static and you can see by virtue of disclosures we made with regard to orders, the pace that which that adoption is now being embraced in the market. But in addition to that the guaranteed portion of that is brand new for 2015 to which we have really strong expectation. So that’s one, but you should also know the side of the fact that the core business of RTB does also continue to grow nicely. You can see from our CPM increase year-on-year about 84% that the monetization and aspect of the algorithm, the pricing and the overall solution is really working well. And so I think we can’t discomfort that the core business continues to grow to at a very nice pace and that certainly is fueled by more and more inventory allocation toward RTB, as well as the addition of new sellers. And that also has propel by increased expansion internationally with new sellers as well, so I think we really need to look at all of those. Now we think about those core products as I mentioned orders, RTB and static as the core products because that is the solution for the customers and we didn’t look at the different ad units. So whether there be display or native or video, they’re simply just ad units inside of those core products. And then we would take that entire package to multiple platforms, because platform being desktop, mobile and in the future cable satellite set-top box that sort of thing. So, we view our business differently, we recognize that as some participants in the market have become public and they are specialize in certain areas, we don’t really view our business that way, we have a technological solution that bring buyers and sellers together in a marketplace and those core products of orders RTB static is really how we look at that. So to single out certain platforms or single out certain ad units isn’t exactly in line with the way we develop, managed or view the business as developing that said it is clear that our on traction in gaining more audience scale on mobile has continued to move it at a great pace and like all other products and all other platforms that developed overtime usually audience comes first and the monetization follows and we're seeing that play out is the same way with mobile.

Your next question comes from the line of Jason Helfstein with Oppenheimer. Your line is open.

This is Jed on for Jason. Just looks like you’re scaling yourselves force better than most of our models -- than most of our models on forecasting. Can you just discuss the factors driving this leverage and has this better productivity changed any of your hiring plans for '15 and do you have to have a different sales force to growing the video?

That’s a good question and that sounds like they might have not completed the answer to Rohit, so let me finish the answer to yours in the same thing. So operating leverage, about 90% of our cost are fixed and so naturally when we have such strengths on the top line we're going to see the bottom line follow suit and with respect to how we see our cost structure growing you think that the technology cost will grow pretty much in line with the way they have over the past several quarters. And we would certainly point investors to look at those cost of revenue as well as the technology line when considering that overall level of expenditure most of the CapEx is also technology spend. So when you add those together that’s the majority of our overall cash spend is in the area of technology and that will certainly still be the leading area of spend going into '15. With regards to sales and marketing we do think it will tick up a bit with respect to growth rates from the prior year and that’s because of our buyer cloud initiative. In the order is business where you're bringing a private marketplace together advertisers and sellers or any form of buyers and sellers, you have to be in more direct capacity. And so that is a different type of sales force. In addition to that international expansion is also another reason to add to the sales force. So we'll see a slightly more disproportional increase there for those reasons but then we'll see tremendous leverage on the G&A front. In 2014 you had the full year effective developing the infrastructure to become a public company and then as we go into 2015 you won’t have that full year effective 2014. Therefore we'll see tremendous leverage on the G&A side.

Alright then just more follow up given your earlier comments around computing power and taking the lot of the data in house. Should we expect CapEx to stay consistent a percentage of main revenue in 2014?

Yes we would think CapEx is still going to be in that same sort of Ball Park. We don’t think however that we'll be capitalizing quite as much of the internally develop software simply because of we had so many initiatives in 2014 that were put in to production at the end of the year and in the beginning of 2015. So many of those R&D type of the expenditures and those would spend to develop and now being put in production will now be expensed versus being capitalize in '15 versus '14. So overall a comparable amount of CapEx spends, but a little bit different accounting when it comes to internally develop software.

Thank you.

There are few things I'd like to highlight about your first question. This is Frank here; I think it's important to note that our business model is quite different than lot of other advertising companies. We don’t have to go and sell new campaigns every single quarter to drive growth in our business, we're not like software typical software company were we have to sign up new customers every single quarter to grow our business. We certainly do those things, but we have a lot of things that are naturally happening in our business within our existing customer base that drives growth. So that’s pretty tend for a second that we didn’t sign at any new customers of course we would never want that happen, but let’s pretend for a second that we didn’t, within our existing customer base there is a number of growth drivers. The first is as our customers revenue grow so does ours so they are constantly doing things to drive more users to the website they're trying to attract more and more advertisers. So as our customers grow because our business models to charge in percentage fee of the revenue managed by our platform, but then our revenue grows as well. The second is as the market grows of course because we already have the integrations with many of the most important buyers and sellers on our platform as our market growing so does our revenue. The third is the usage of data, so as either first party data from the seller themselves, could be the buyers data, could be usage of our own data that data makes every individual transaction potentially more valuable an as the rate of that particular transaction increases let’s say that goes from $0.50 to $2 or from $2 to $10 again because we target percentage of the revenue our revenue increases and then the fourth is our transition for static bidding to real time bidding to direct orders, again very similar to the data point. As those transactions become more specific, more targeted, more valuable those rates are increasing and again our revenue increases off of our existing customer base, so I just want to highlight those few things.

Your next question comes from the line of Sameet Sinha with B. Riley. Your line is open.

Couple of questions, first actually several question on mobile, can you talk about how that audiences is killing obviously InMobi integration static, you talk about high ad, when should we expect that business to take off then, on that I mean mobile monetization is all been to -- it creates on mobile anything different, if you can point that out? And my second question is, you spoke about integration with 50 of the going to 200 within mobile product, how should we assume, is that the mobile rate, is that the app can you tell us about that? Thank you.

So a number of questions there, let's start initially and I am going to turn it over to Todd to finish, I’ll take the first-half and he will finish with the second half. The mobile adoption has been very steady, we’ve been at this now for several years, we’ve learned very carefully what our buyers and sellers want as they convert into more and more mobile buyers and sellers and the -- as a result you're seeing steady and steady mobile adoption from us when you look back to two years where we’re barely into market and now we -- as we say we’ve got 25% and growing of the comScore 200, which kind of parallels where we are with as we moved into display and now we’re well over 50% of the comScore 100 display. So what you're seeing is that slow and steady progression of us continuing to turn our buyers and sellers with formerly display buyers and sellers into now mobile buyers and sellers. And you’ll see that same kind of process for us with respect to video that was question asked earlier, we don’t intent to hire a different video sales team to take on video. So with that respect, I think you're going to see quarter-by-quarter blocking and tackling. Now we’re now in finishing of Phase 2 of our in InMobi relationship and moving into the third phase, we’ve now been bringing tens of thousands of mobile apps on to the platform and a sizeable amount of mobile buyers as well who are now eager to be purchasing or accessing the users from the InMobi exchange. So really this is going according the plan and you're going to see continued process from us in mobile as we did in display and then in future we will in our video.

Sameet with regard to your question, so the 50 to 200 is just mobile web so apps are actually on top of that in additional number and with respect to take rate, we’re trying to explain one of our questions, we really view our offering as an overall solution and we focus on our core products being orders RTB and static. So when we think about taking that different audience to the different platforms it's still the same solution, the same business. So as a result take rates are really the same between mobile as well as desktop.

I have one follow-up question actually, if I can ask you to look a couple of years down the line, you saw [indiscernible] sold dramatically this year already, where do you think you stand in that obviously the acquisition that you made towards the end of last year and give you some of that capability. Can you talk about when do you plan to come out with your solution?

Sameet, we’ve been thinking about that for a years now that’s why we exist our mission statement from the very beginning has been to automate the buying, selling of advertising and what you’ll notice is it doesn’t -- we don’t have the word digital in there. So our vision was to automate all advertising, digital was the natural place to start and if you look back at our history and our -- the way that we’ve build our business, we focused on a premium part of the market because those customers are the same customers that are transacting in cost display, mobile, video, TV, magazines, billboards. So we sort of tuck the I guess the harder route to building out our business and because we’re -- and we look at this business over the event of the long-term as automating all advertising and we’ve made those investments into those premium customer relationships early, we probably could have a driven a lot more margin and profit earlier on if we focused on some of the lower hanging fruit then maybe would have been some short-term revenue that didn’t have long-term strategic value. So, I guess to answer your question short, we are -- we wake up every day thinking about that that’s what drives our platform, absolutely we build our platform and that’s where our innovation is heading.

Your last question comes from the line of Todd Van Fleet with First Analysis. Your line is open.

Just thinking about the scalability of the business this year, I know you said you’d had some or you're going to see some changes in capitalization versus expensing this year, but the revenue supposed to be up about 50 million this year, the adjusted EBITDA is about flat. How should we think about the operating leverage in the business versus kind of the core versus kind of the incremental investment that might be made this year for sales international and so forth?

We did guide about a 40% year over year increase in revenue and we were certainly presided that those prospects the adjusted EBITDA on an absolute dollar basis does increase year over year and the margin is down slightly for a few reasons one is you noted and as we previously mentioned slightly more expensing then slowly develop software cost that we expect versus which is capitalize. But also we have some more discretionary spending this year, the discretionary primarily in the areas of R&D and with respect to garage as Frank mentioned and also in marketing. And so those discretionary items are ones that we can dial as we deem necessary as appropriate. So if were to take this on more of a same store sale type of basis without that increase in discretionary spending. You certainly would see the adjusted EBITDA margins rise year over year.

And Todd we still talk it about kind of that 30% to 35% kind of I think that’s your target for the longer term. But incrementally I am just thinking one year to the mix absent any investments and accounting issues and so forth is that still how we should roughly think about the business kind of year end year out?

Yes those long range targets we still feel very good about, in fact in Q4 this year we actually hit that target. So if you just looking at one quarter this past quarter we're actually already there. So I think to get there over that long range target plan is certainly achievable and right now we see the so much opportunity in the areas of growth and where we want to invest, if we think it’s prudent to go ahead and do that. But again it is discretionary and we always want to invest with physical prudent. So it is our intent to maintain a high adjusted EBITDA margin in that North of 10% sort of range that is our intend and we want to spend commensurately with the market opportunity. And that’s really what we mean when we talk about investing but with physical prudent and so I think that’s what reflected in the guidance. Now naturally there is the case where you could simply outgrow that and then the margins would grow as a result that’s what we saw in 2014. So with that back drop again looking at those long range targets we think are still pretty reasonable.

Just one more if I could, on inventory quality. Is there anything that any metrics is you guys could point to that you maybe you track internally that would suggest that the overall level of inventory? The overall amount of inventory across your system or at least that makes it through to a transaction is improving or -- because it seems like that one of the things that certainly might hold back stand drifting and be programmatic and automated channels is the overall quality of the inventory, so I'm trying to get some way to kind of qualitatively or quantitatively flush out maybe with your help the progress I guess on that front if that make sense.

So we have been talking about inventory quality since we started doing our earnings call. Because it's been such an important part of our thought process going forward we've talk about it in the earnings script we've talked about how we creating a clean well lit marketplace is we like to use that term and as you know recently we are just rated number 3 of 400 best inventory providers by Pixelade. So we take a lot of pride in this, we continue to really focus on it. So we have a team of people that are dedicated looking at both in house and also even third party solutions to create the best inventory quality. We talk about in terms of PPT People Process and Technology, a combination of frankly all three and relying on our technology, we’re also putting in the right process and the expertise to drive the highest inventory quality and we -- our views on this are such that our quality must -- we have incredibly high standards and they are unwavering and we don’t really relent on that when it comes to short term revenue at the expense of long term growth and safety of our marketplace. So we look at from a holistic point of view, more qualitative than we do any given specific metric. I mean from all perspective we're going try make sure that not one ads goes through our system that we’re not pleased with. But at this point in time there is nothing specific in terms of metrics that we can really show to you at this time.

At this time I will turn the call back over to management for closing comments.

Thank you all for joining us this quarter we look forward to see you in Investor Conference in coming week.

This concludes today's conference call. You may now disconnect.