Welcome to the First Quarter 2018 Rubicon Project Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note, this conference is being recorded. I would now like to turn the conference over to Mr. Nick Kormeluk. Please go ahead.

Thank you, operator. Good afternoon, everyone. Welcome to Rubicon Project's first quarter 2018 earnings conference call. As a reminder, this conference call is being recorded. Joining me on the call today are Michael Barrett, President and CEO; and David Day, our CFO. I would like to point out that we have posted the financial highlights slides to our Investors Relations website to accompany today's presentation. Before we get started, I would like to remind you that our prepared remarks and answers to questions will include information that might be considered to be forward-looking statements including, but not limited to, statements concerning our anticipated financial performance such as revenue, advertising spend, profitability, net income loss, adjusted EBITDA, earnings per share and cash flow, strategic objectives including focus on header bidding, mobile, video, and private marketplace opportunities, investments in our business; development of our technology; introduction of new offerings, the impact of our acquisition of nToggle and its traffic shaping technology on our business; scope and duration of client relationships; our fees; business mix; sales growth; client utilization of our offerings; the impact of the European General Data Protection Regulation and other regulatory initiatives; our competitive differentiation; our leadership position in the industry; our market share, market conditions, trends and opportunities; user reach; certain statements regarding future operational performance measures including ad requests, fill rate, advertising spend, take rate, paid impressions, and average CPM, the effect of our cost reduction initiatives and factors that could affect these and other aspects of our business. 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…

Thank you, Nick. Despite feeling like we just held our Q4 call, which was a short seven weeks ago, I'm pleased to say that we have seen continued positive trends in both ad spend and revenue growth. Our cost management efforts continue and we intend to remain very focused on driving additional operational efficiencies in the business. In Q1, we performed slightly better than our indications provided on March 14th in all key financial areas, including ad spend, take rate, revenue and expenses, which David will discuss in more detail. We recently held a private business event we called our Executive Exchange in New York, which included brands, agencies, DSPs, publishers and other related partners. The time spent with this very senior group of executives was invaluable. We spent time listening and collaborating on their strategic road maps for growing their businesses, while adapting to rapidly changing privacy was, increasing focus on fraud removal, transparency in auction dynamics and pricing, supply path optimization, CapEx challenges and attention to key growth areas, namely, audio, video, mobile app and PMPs. We believe that getting mindshare through client meetings like these will strengthen our relationships and translate into market share gains for Rubicon Project, as we demonstrate how our growth initiatives and investments are aligned with our clients. Our strategy to provide a high quality efficient broad reaching exchange resonated extremely well with partners across the board. As evidence of this traction, our engagement level to work on partner specific initiatives to jointly grow revenue following this event has been extremely high. It is no secret that one of the largest trends on the DSP side of our industry is supply path optimization. With the adoption of the client-side header bidding in 2016 and 2017, DSPs saw impressions duplicated four to five times,…

Thanks, Michael. As Michael pointed out, we are happy to report that our financial trends continue to improve. We believe these are signs that our investments in technology changes in our go-to-market strategy and efforts to improve internal efficiency are becoming more visible in our financial results as we move through 2018. I will briefly cover Q1 results before discussing progress from our cost reduction efforts and recent unexpected financial trends in more detail. Turning to our results. For the first quarter of 2018, we generated $211 million in advertising spend, up 10% year-over-year, $24.9 million in revenue, adjusted EBITDA loss of $14.2 million, which included approximately $2.5 million of non-recurring severance costs, resulting in a loss of $0.44 per share in non-GAAP EPS. The 10% total advertising spend increase in Q1 2018 versus prior year was a bit stronger than the estimate we provided on our last call, as our momentum carried through the last several weeks of the quarter. The year-over-year increase was driven by a 34% increase in mobile ad spend, offset by a slight 3% decrease in desktop. As Michael indicated, audio and video grew the fastest. When looking at amounts paid to sellers or APS, which we referenced last quarter, we had a year-over-year increase of 28% in Q1. This clearly illustrates to our publishers that we are gaining share and delivering more revenue to them. Desktop represented 57% of ad spend mix in the first quarter versus 65% in Q1 of last year. Mobile's 43% ad spend share was up from 35% a year ago. Revenue for the first quarter was down year-over-year due to the elimination of our buyer fees on November 1, 2017, partially offset by the increase in year-over-year ad spend. Our average take rate was 11.8% during the first quarter…

We will now begin the question-and-answer session. Your first question comes from Jason Kreyer with Craig-Hallum.

Hey, gentlemen. Good afternoon, and thanks for taking my questions.

Hey, Jason.

Michael, I just wanted to kind of double click on the commentary you provided on SPO, maybe you can just kind of shape that opportunity, how you see that playing out as the year progresses? And then a little bit more detail on what gives you confidence that – as that trend continues that you'll gain share as the year goes on?

Yeah, good question, Jason. So what we've already seen is we've seen contraction begin because we've said in previous calls, one of the selling propositions that DSPs had maybe two years ago was to brag to marketers their clients how many platforms they access inventory on and the number just astounded me, and I mean in the industry it was north of 100 platforms. And now I think if you were to ask the Trade Desk or you ask MediaMath or any of the top DSPs, how many platforms you're accessing inventory from, that number is definitely fallen. I've heard numbers as low as 60, and that's just – they hit the pause button there and there's going to be continued acceleration in terms of collapsing platforms. It's really being driven by the fact that these redundancies are seeing the same impression on multiple platforms, hence driving their operating costs higher. But this whole idea about transparency and safety and content quality and ad quality really resonate with their marketers and their marketers are like, hey, I am not that comfortable anymore buying these really, really long tail sites on these niche exchanges. I'd much prefer to understand I know who the publisher is, where that advertising dollars are going. And so, we – I don't think any of the positive momentum to date is a result of that contraction, but we certainly think that that's going to be a wind at our back as you exit this year going into 2019, because I think that next cut from say 60 to whatever that number might be, that's definitely going to – the money is still going to be spent some less tertiary platforms will be cut out of the equation, and I think we'll be the benefit, and my confidence in that is largely the feedback from the buyers. They like working with us. They like the technology that we have, particularly nToggle and EMR and they like the fact that we run a curated, safe, clean transparent marketplace. So all those kind of tough moves that we made definitely are buying – paying off in a world that's a little bit more buyer-centric than it has been in the past for Rubicon Project.

Okay, thanks. Two on programmatic audio. So maybe you can just give an update on how things are progressing with Spotify. I know you've announced that relationship before? And then second with Pandora's acquisition of AdsWizz, just wondering if you can handicap, if you think there is an opportunity there or what does that acquisition increase or decrease your ability to work with that company?

Yes. So not to get into specifics, because obviously, we don't have permission to talk specifically about our clients, but we've noted in the past that Spotify is one of our largest audio partners, it continues to grow as our audio numbers grow, so does Spotify's participation in that share. And so, it's a real bright spot for us, and we're really excited that we got into it early and helped create that marketplace. As far as AdsWizz is concerned, on the one hand as you really say (00:29:16) Pandora specifically, they bought proprietary ad technology. And so, I think that once it gets settled and they deploy it, there's a good chance that we could be a demand source for them plugging into their technology. So, we remain confident that there is a path to working closely with Pandora. On the other hand, the opportunity is that ad was used by others in the industry, and generally speaking when a third-party company is bought by a competitor, it isn't exactly going to increase their spend on that platform. So, I think what you're going to see is spend having to find a home somewhere, and I think we may be a good beneficiary of that as well.

Perfect. Thanks for the color. Maybe just a last one for me. The take rate moving up quarter-over-quarter, obviously a positive take away or I guess at least moving up from where you exited last quarter. Can you just give us a sense of how those conversations are happening with the publishers, what their receptivity is to potential increases?

Yeah, I mean, I think that as you see from the evidence of the increase, albeit modest, I think that we've said it before, we became pretty reliant on buy-side fees, maybe to the detriment of market based fees for publishers. And so in those instances, where I think we felt as though we're priced well, well, well below the competition, there was some room for movement. And again, it's a product suite right open market, private market, et cetera. So, we're talking about a blend of all those. We maintain our steadfast desire to be a low priced provider of services. And so, we feel as though even with the improvement in take rate, we still find ourselves in that position. And do we have a little bit more room to move, perhaps. But the simple fact is I wouldn't anticipate a dramatic increase in take rate, that's not the goal here. The goal here is to become very efficient to get to the market if not just slightly below market, and be able to extol that as a quality or the exchange.

All right.

And I think the second point there is that – I think some have been concerned in the past with these rates dropping, how low can it go. And I think this shows that it's stable and there's a decent floor at least in the near-term on those rates.

Okay. That's a good point. Thanks for the color guys. I appreciate it.

Thanks, Jason.

The next question comes from Kerry Rice with Needham. Kerry Rice - Needham & Co. LLC: Thanks a lot. Maybe a corollary to the take rates improving a tad bit and stabilizing, and then getting some ad spending recovery. Can you talk a little bit about maybe gross margin? Given the high level fix cost, do you see that kind of bouncing back a little bit from maybe Q1 or do we think about Q1 being roughly stable going forward? And then the second question is, maybe the dynamic between desktop and mobile, our mobile certainly has improved year-over-year, it's kind of ticked down from Q3 and Q4 of 2017. I don't know if that's just seasonality or maybe if there's something else that's driving that trend to boost desktop a little bit in Q1? Thanks.

Sure. Yeah, let me – I'll take the second one first. So on the desktop and mobile, yeah, not significant changes, some of our recent growth is being driven by some of our server-side momentum. So Google Exchange Bidding, that's a little heavier weighted on the desktop side in the short-term in the mobile and other – mobile component will certainly grow more rapidly over time. So we think that mobile will continue to be a growing component of our business and that these fluctuations are just short-term volatility.

On the gross margin?

Yeah, on the gross margin. Yeah, like you said, our model is a very leverageable model. And so, we're continuing to decrease our costs and so from a margin perspective, every bit of ad spend and revenue growth drops almost directly to the bottom line. And so, even from a cost of revenue perspective, on a gross margin basis, a vast majority of our costs of revenue are more or less fixed, and there's just a small component of that that's variable. So you should see improving margins on that front over time as that ad spend picks up. Kerry Rice - Needham & Co. LLC: Okay. Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to Michael Barrett for any closing remarks.

I would like to thank all of our employees for their efforts and hard work, as well as our partners and shareholders for their support during a very challenging 12 months that has now put us in the current position of showing improved overall company performance. We look forward to seeing some of you at some of our upcoming financial conferences in May. We will be at SunTrust Conference on May 8th in San Francisco; Needham Conference in New York on May 16th; and the Craig-Hallum Conference in Minneapolis on May 30th. Thanks again for joining the call and have a good evening.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.