Magnite, Inc. (MGNI) Q2 2015 Earnings Report, Transcript and Summary

Welcome to the second quarter 2015 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 section of Rubicon Project’s website following this call. I will now turn the call over to Erik Randerson, Vice President of Investor Relations for Rubicon Project. Sir, you may begin.

Thank you. Good afternoon, everyone, and welcome to Rubicon Project’s 2015 second 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 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, fees and take rate, capital investment and organizational development, our competitive position and market conditions and trends and growth expectations, including growth in order 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 and 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 metrics can be found in our earnings press release, which we have posted to the 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. With one final note, I’d like to mention that in the – in presentation sector of our Investor Relations website, we’ve included a Q2 financial highlights presentation that summaries our financial and operating results. In addition, the same section of our IR website also includes supplemental materials that provide further explanation on some additional metrics disclosure that Todd Tappin will cover in his remarks today to assist analysts and investors in evaluating our revenue comparisons. With that, let me turn the call over to Frank.

Thank you, Erik. We had another strong quarter highlighted by three key themes. First, outstanding financial results that exceeded our forecast; second, exciting progress on innovations in mobile and orders that position us to capture future growth; and third, accelerated buyer cloud growth driven by the Chango acquisition and integration, which exceeded our expectations. Second quarter revenue increased 88% year-over-year and adjusted EBITDA grew even faster rates up more than 150%. Our results and good contributions from Chango grew approximately two months. We achieved these impressive results while continuing to invest in our large market opportunity, demonstrating our success of being aggressive with innovation while being physically prudent. Innovation highlights from the second quarter includes launching support from mobile [indiscernible] and video ad units on our mobile exchange. And launching our Seller Cloud self served products for guaranteed orders. These innovations further improve our growth outlook and the large market opportunities of both mobile and orders, where they’re already enjoying revenue growth rates in the triple digits. And our newer offerings have been recognized for their innovation. This last week the second-generation High Frequency Cloud product I mentioned in the last quarter’s investor call, won the Business Intelligent Group’s Stratus Award in the category of hybrid cloud provider. Stratus Awards recognize companies innovating in the cloud with truly differentiated technologies. After the Chango acquisition growth in late April, our expanded buyer cloud business didn’t miss a beat and delivered revenue ahead of our expectations for the quarter. I’m proud our team’s focus and execution while undertaking important organizational changes to maximize our future growth potential. As a business scale, we also continue to benefit from network effects. An impressive growth and the most premium sellers globally have to explain the momentum in our buyer business and particularly in orders. Our integrations with the most premium sellers have strengthened our relationships with buyers and resulted an increase spend on our market place. Shifting gears to the future, investors often ask me, what are some of the key areas I’m focused on to leave Rubicon Project’s future innovation? It somewhat position a market leadership that we’re focusing some of our engineering resources on a key challenge and opportunity facing the digital advertising industry. The opportunity before is just to find [indiscernible] to consumers relationships with advertising as we know it. Considering with our three participants in the advertising market place, the buyer, the seller and the consumer, although a technology platform has advanced industry growth by leading automation in buying and selling of advertising, the advertisers relationship with consumers is not really as strong as it could be. Rubicon Project has the opportunity to further leverage automation to reinvent advertising, bringing the consumer to the center of our focus. Our goal is to redefine the relationship between advertisers and consumers across all the [indiscernible] and all ad units. We are particularly focused on mobile and eventually video, which offer a compelling opportunity to connect with consumers at the moment of greatest impact with relevant messages. I see a tremendous opportunity to fully embrace automation to drive the next evaluation of consumer’s advertising experience. It’s early and it’s exciting [indiscernible] will take time to carefully talking more about this in the next coming months. In summary, I’m proud that our team has continued to execute a consistently high level during an exciting period growth, while preserving our strong culture values. While Q2 with our sixth consecutive quarter of delivering strong financial results since the IPO, I believe we are just getting started. With that, I will let Greg and Todd walk you through more details and analysis of our results.

Thank you, Frank. As Frank just outlined, we had another strong quarter on Q2 and I’m proud of our team’s efforts, focus and strong execution that led to our impressive results. Before I turn to our performance in the quarter, I would like to share a few key trends that will have a significant impact on the growth of our industry. First, as the IAB announced last week in its Annual Programmatic Revenue report, the landscaper advertising automation is going rapidly. Total U.S. revenue related to the automation of advertisings passed $10 billion in 2014, comprising more than 20% of the total U.S. internet advertising market last year. Perhaps more significantly, programmatic revenue made up approximately half of all U.S. display related advertising in 2014. In short, automation is driving the growth of the global advertising market place. Second, the IAB is also forecasting strong future growth in new areas of the automated advertising space, mainly guaranteed orders and the area Rubicon Project has invested in aggressively, resulting in our current position of market leadership. In addition, IDC expects the overall orders market to grow to $52 billion world-wide by 2019 representing a cagier of 61%. And third, all signs point to continued surgeon growth in the mobile market place during the next several years. According to IDC, world-wide programmatic ad spending in mobile is expected to growth at a cagier of 95% through 2018. And importantly, our investment have also established us in a position of leadership as an independent provider of mobile automation technology. We anticipated these trends and invested in both developing innovative technology organically as well as acquiring leading technology capabilities to further support our growth objectives and position us for long-term success. I will now turn my comments to our performance in the second quarter. Given the trends we are seeing in the business, I will focus my remarks on four key growth drivers. A rapidly growing mobile business, our orders business, our unified buyer cloud including Chango and our Seller Cloud business which continues to achieve strong results. First let me turn to our mobile business. Our investors have frequently asked us about mobile, and until recently we have not focused much discussion on this part of our business. Those of you who have followed our company know that we prefer to focus on delivering results in the market place before telling our future objectives. Therefore, we were thrilled to take the raps of our mobile story last month, as we highlighted our booming business that is outpacing the growth of the industry. Since early 2013, our mobile business has grown at a triple digit growth rate across mobile operating systems such as IOS and Android and across both in App and mobile web inventory. Approximately two years ago when we began making significant investments in mobile, it represented just 3% of our total managed review. In the second quarter of 2015, mobile was 22% of managed revenue, up from 20% in Q1. Considering our growth trajectory, we expect to generate more than $200 million in mobile managed revenue this year. Against this impressive growth curve, we believe Rubicon Project is now the world’s largest independent advertising automation solution for buying and selling inventory on mobile. One growth driver in Q2 was the on-boarding of our new relationship with xAd, the global location market place. Rubicon Project is now powering xAd’s leading location based mobile private market places. The company enables nearly 1 million advertisers to reach 300 million unique devices each month. The ahead of platform for xAd Dan Hight had this to say about our capabilities, “We have a great partner, Rubicon Project. Their orders platform allows xAd to make location advertising easy and accessible to programmatic buyers globally at scale. Our customers both brands and agencies have seen measurable performance using our location private market place based on the real places people visit every day, such as, grocery stores, restaurants and fast-food.” In the second quarter, we also launched support from mobile native ad formats on our exchange. This important milestone represents the first time an independent mobile exchange is positioned to automate the buying and selling of mobile native ads at scale. Additionally, significant adoption of our mobile capabilities by a large install-based has been a key driver of our success. More than 70% of our seller clients in the U.S. comScore 1,000 is Rubicon Project’s cross platform capabilities to monetize our inventory across both desktop display and mobile ad units. Our proven cross platform capabilities extend across all ad units and inventory types. In fact, we believe Rubicon Project is the only independent company today that can automate the entire advertising ecosystem for buyers and sellers including all inventory types, such as guaranteed and non-guaranteed orders, RTB and static and across all ad units, such as display, video and native, and across all channels such as mobile web apps and desktop. In addition to being asked about mobile, we are often asked about video, an ad unit that offers exciting future growth potential and particularly on mobile devices since mobile video is the fastest growing segment of video advertising. With video, a key industry challenge has been the very limited supply of quality inventory available throughout exchanges. Importantly, our investments combined with industry trends position us to capture a much greater share of the video opportunity in the coming years. We believe the future of video advertising will be conducted through the orders environment in both the mobile and desktop channels. Consequently our investments in orders and mobile position us to benefit significantly from expected future growth of video inventory to become available in our fast growing orders and mobile businesses. Next I would like to talk to you about orders. Orders also continue to be a fast growing source of managed revenue, including in mobile, where orders growth is especially strong. Since mobile app developers typically do not have a direct sales force, mobile offers exciting potential for order automation as app developers embrace our technology to monetize their premium audiences. We expect continued strong growth in mobile orders in future quarters. We also continue to have success scale in our new guaranteed orders offering that automates the buying and selling of visual advertising on a fully reserve basis. In Q2, once again we significantly expanded our seller based on the guaranteed orders platform and made excellent progress working with our agency and holding company partners and brands directly to drive increase buyer spend. These efforts drove orders to 17% of our total managed revenue in Q2, up sequentially from 15% last quarter. We are exceptionally well positioned for success in orders as a early technology innovations offer the most comprehensive orders automation platform available, including guaranteed and non-guaranteed orders in the integrated solution. Now let’s talk about our newly integrated buyer cloud business which includes Chango. First and foremost, I’ve been thoroughly impressed by the efforts of our unified buyer cloud team, including our new team members from the Chango acquisition. The combined team’s expertise in buyer capabilities and deep knowledge of intent marketing are every bit as strong as had hoped. After the acquisition closed in late April, we began implementing our strategic integration plan to align our pre-existing buyer cloud business with our newly acquired Chango team. Now I’m pleased to report that we completed the integration of Chango into our buyer cloud in Q2, nearly six months ahead of schedule. The earlier than planned integration is already delivering the wheel tangible benefit on both the top and bottom line. In fact, their combined buyer cloud business exceeded our revenue expectations for the second quarter as our team remained focused on executing throughout the integration period during Q2. Accordingly, 90 days into the acquisition, we couldn’t be happier with our Chango integration and combine buyer cloud performance. The unified buyer team is already realizing synergies selling our expanded capabilities to a now much broader set of agency and brand advertiser relationships. Our buyer capabilities are beginning to resonate with leading brand advertisers that have broad programmatic expertise in-house. As we began the second half of the year, we remained committed to invest for growth in our buyer business and especially in the areas of orders and mobile. Last but not least, we continue to execute very well in our seller cloud business. Turning to our seller business globally, we meaningfully grew our seller relationships particularly in guaranteed orders where we continue to focus our efforts. Recent wins for our new guaranteed orders offering include eBay, Daily Mail, The Economist, The Guardian, Immediate Media Co, Trinity Mirror, and Viacom. I’ve note currently two of our largest 10 seller clients on mobile app platforms further demonstrating our cross platform capabilities and increased business moment in mobile specifically. I’m also pleased to report that during Q2 we launched an exciting new seller product that builds upon the Shiny Ads technology, we acquired and successfully integrated last fall. [Indiscernible] guaranteed orders offering had provide significant ROI by allowing sellers to generate incremental revenue from advertisers at almost zero incremental cost or efforts for the seller. Weather.com is a great example of a seller cloud client that has built a considerable business from the offering. The PP of local for weather.com, Ryan Davis recently said, “Rubicon Project self seller is incredibly scalable for us. It’s become a very important part of our business and a very fast growing one with infinite potential. There is no way we could do what we’re doing without it.” Now I will wrap up with a few comments on our commitment to inventory quality for the benefit of all buyers and sellers in our market place. As we announced earlier this year, I joined the board of TAG, the Trustworthy Accountability Group, may first of its kind industry collation leaving the efforts to counter ad supported piracy, malware and other critical challenges in the digital communication supply chain. And just last week, we announced as Rubicon Project is joining collaborative effort with Google, Facebook, Yahoo and other leaders in a global initiative designed to combat illegitimate advertising traffic originating from data centers. These efforts underscore a long standing commitment to ensure the development of the safe, high quality, well lead advertising market place. In summary, I’m pleased with our team’s execution during the second quarter. At the mid way point in 2015 we’ve already accomplished a great deal and we continue to work hard to position the company for the tremendous opportunity ahead. And with that, I will turn it over to Todd for a review of the financials. Here is Todd.

Thank you, Greg. Overall, we’ve continued to experience tremendous growth once again led by our RTB and order solutions. As well as significant contributions from our buyer cloud initiatives which accelerated with our acquisition of Chango that closed last quarter. Managed revenue with the advertising spend transacted to our platform in a given period is an important operating metric for both internal and external valuation purposes because it provides a measurable revenue if we were to part all of our revenue on a growth basis. Following on acquisition of Chango, efforts on our buyer cloud initiatives and integration of Chango and our buyer cloud operations, we now report revenue on a growth basis for transactions whereby we manage advertising campaign on behalf of buyers by acting as the primary average order in the purchase of that inventory, exercising discretion and establishing pricing and slicing in purchasing inventory from the seller. In general, there is no change that previous revenue reporting treatment for transactions in which buyers and sellers of advertising use our solution to execute or facilitate their purchasing sale of advertising which will continue to be reported net. Managed revenue for the second quarter of 2015 was $227.2 million compared to $153.5 million in the second quarter of 2014, an increase of 48% 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 comprised to 75% RTB, 17% for orders and 8% for static. By channel, managed revenue was comprised of 78% desktop and 22% mobile. Average CPM is continued to increase and were higher year-over-year, paid impressions associated with orders in RTB were higher year-over-year, while paid impressions for static transactions were lower year-over-year. The growth in average CPM is primary due to algorithm efficiency increased buyer spend, buyer cloud initiatives, orders growing as a percentage of overall managed revenue and a continued shift from static inventory purchases to RTB. Revenue on a GAAP basis inclusive of those transactions reported growth and those reported net in the second quarter of 2015 was $53 million compared to $28.3 million in the same period in 2014, representing a year-over-year increase of 88%. Prior to the acquisition of the Chango, we reported all revenue on a net basis. As a result of the acquisition, beginning in Q2 2015, a portion of our revenue is reported on a growth basis in accordance to GAAP. Revenue with reported growth for those arrangements for which the company manages advertising campaigns on behalf of buyers by acting as the primary average order in the purchase of that inventory. Exercising discretion in establishing prices and selecting and purchasing inventories in the seller. Revenues reported net for transactions in which buyers and sellers of advertising use the company’s solution to execute or facilitate that purchase in sale of advertising. We have fully consolidated and integrated to sales, product and engineering functions and technology at our previous buyer cloud in Chango operations, thereby making distinctions associated with the Chango [indiscernible] impractical. However, noted prime investors of the comprehensive comparative, we are providing managed revenue which will representing a reporting of all revenue on a growth basis, GAAP revenue and the revenue as if all transactions were reported on a net basis. As previously mentioned, on a GAAP basis, revenue increased from $28.3 million in Q2 2014 to $53 million in Q2 2015, representing an 88% increase. We had all transactions been reported net in Q2 2015, the revenue would have been $48.5 million, representing an year-on-year increase of 72% and an outperformance for the mid points of the guidance range of $42 million or 16%. Our original second quarter guidance have been provided under the new revenue recognition reporting. The midpoint of the revenue guidance for Q2 2015 would have been $46.5 million, and our Q2 results are $53 million would represent an attainment of 14% over those projections. In addition to managed revenue, GAAP revenue and net revenue, and a supplemental information for this quarter to assess a comparison of a close approximation for ongoing operations only. We are providing revenue for those transactions reported on a net basis only, meaning not all transactions but just those that are reported net. The midpoint of the previous guidance would have been $40 million and actual results were approximately $42.7 million for Q2 2015, thereby representing attainment of 7% over those projections and a year-over-year increase of 51%. These statistics are also provided on the Q2 2015 financial highlights presentation provided on our website. These results illustrates a continued growth of ongoing operations as well as demonstrating the financial strength of the Chango acquisition. Take rate with this managed revenue after any payment to sellers are non-GAAP net revenue divided by managed revenue increased to 21.4% in the second quarter 2015 as compared to 18.4% for the same period in 2014. The increase in take rate year-over-year was primarily due to the higher mix of RTB managed revenue compared to static and higher take rates from buyer cloud transactions which include Chango. We expect orders to increase as a percentage of overall managed revenue through 2015. Orders have an average CPM in excess of 3x RTB and lower fees. Therefore, as orders comprise a larger part of our managed revenue mix, revenue per transaction would increase and overall take rate would decrease. But in the near term, we expect this decrease to be offset by the higher take rate associated with buyer cloud transactions. Operating expenses including cost of revenue increased to $64.5 million in the second quarter of 2015 from $35.4 million during the same quarter in 2014. The increase in operating expenses were primarily due to the Chango acquisitions which contributed approximately $18.6 million in expenses and includes non-cash amortization of acquired intangible assets of $4.3 million for approximately two months of consolidated results. In addition, the increase in operating expenses includes cost of revenue was due to the expansion of our sales efforts and buyer cloud initiatives. Despite these cost increases, operating expenses were lower than anticipated as a result of overall cost efficiencies and a magnitude of plan hiring becoming a necessary, accordingly. While we continue to hire personnel in support of our key initiatives, we have reduced the forecasted total headcount for the full year. Net loss was $11.9 million in the second quarter 2015 compared to a net loss of $9.4 million for the same period in 2014. The increase in net loss of $2.6 million included an increase of $5.2 million in amortization of acquired intangible assets associated both our acquisition of Chango in April 2015 and iSocket during Q4 2014. Adjusted EBITDA was $6.7 million in the second quarter of 2015 compared to an adjusted EBITDA of $2.7 million in the second quarter of 2014, and well above the midpoint of our guidance loss of $4 million. The favorable variance in adjusted EBITDA was primarily due to the revenue performance and cost efficiencies previously noted as well as lower than expected acquisition related costs and secondarily, slower than anticipated hiring. GAAP loss per share was $0.30 in the second quarter 2015 compared to a loss of $0.29 per share during the second quarter 2014. Non-GAAP earnings per share in the second quarter 2015 was $0.06 compared to breakeven non-GAAP earnings per share in the same period 2014. For an explanation of the various share accounts that affect these computations, please see the table in the earnings release and the explanation of non-GAAP EPS and non-GAAP weighted average sale outstanding. Capital expenditures excluding capitalized stock compensations were $5.7 million for the second quarter 2015. We closed Q2 2015 with a $117.3 million in liquid assets and no debt. In terms of outlook for Q3 2015 we expect the following; GAAP revenues to be between $63 million and $65 million, adjusted EBITDA to be between $5.5 million and $6.5 million and non-GAAP earnings per share to be between $0.03 and $0.04 based on approximately $48.4 million forecasted weighted average shares. In terms of outlook for Q4 2015, we expect the following; GAAP revenues to be between $92.5 million and $94.5 million, adjusted EBITDA to be between $20 million and $21 million and non-GAAP earnings per share to be between $0.32 and $0.34 based on approximately $50.7 million forecasted weighted average shares. This results in an increase in full year 2015 estimates as follows; GAAP revenues to be between $246 million and $250 million which is an increase of the previously provided guidance on the same revenue recognition basis. Adjusted EBITDA to be between $36 million and $38 million which is an increase of the previously provided guidance of $11.5 million or 45% from the midpoint of these ranges, I mean nearly 80% increase from the initial 2015 guidance provided in the February. And non-GAAP earnings per share to be between $0.45 and $0.48 based on approximately $46.4 million forecasted weighted average shares. As we’ve previously noted, we believe that we’re in the right position to be a leader in this fast growing and large opportunity. Accordingly, we plan to continue to invest in discretionary innovation and R&D. Other important areas of investment during 2015 include buyer cloud initiatives, orders, international expansion, mobile, video for targeting and key word buying and selling. We would now like to open the lines for any questions.

[Operator Instructions] Your first question comes from the line of Jason Helfstein with Oppenheimer. Your line is open.

Thanks, few questions. So, if we assume a 50% take rate for Chango, it does appear that core managed revenues slowed about 8 to 10 points against easier comp, I mean are there any factors you’d call out? And that we know again that you’re trying to maximizing net revenue and gross profit, so as opposed to managed revenue but just any color there? Second, the guidance implies a pretty dramatic acceleration in fourth quarter organic revenue. Can you just talk about what’s driving that is it mobile or a native, is it direct to orders? And then lastly, how much of the investment in sales and marketing is being driven by the build out of direct-to-orders versus other initiatives? Thanks.

Hey Jason, I’m sorry. We’re having technical difficulty on this side and we could not hear your questions. I think your first question though and I’ll try to address as they work on issues on this side and then we can get back to the other two. I think if we heard your question correctly, the first question was, if you assume a 50% take rate with Chango what does that mean with respect to overall take rate, I think that was your question. Is that correct?

No, no, no. Can you hear me better now?

Unfortunately no, but give it a try.

So basically we assume a 50% take rate for Chango, it appears that core managed revenue decelerated by 8 to 10 percentage points against an easier comp. And so while we know that ultimately you’re trying to – you’re trying to manage to net revenue in gross profit as oppose to managed revenue, I’m just curious if there are any factors that you would call out for that slowdown? So that was the first question.

I’m sorry, we’re not getting it. We’re going to pause for about five minutes, see if we can correct the difficulties. [Audio Gap]

Ladies and gentlemen, this is the operator. Today’s conference is scheduled to resume momentarily.

Hi Jason, I think we’ve got it fixed finally. Could you – sorry about that. Can you repeat your questions?

Okay. So, the first one, if we assume a 50% take rate for Chango, it appears core managed revenue decelerated from first quarter by like 8 to 10 percentage points. And I know you guys managed the business to net revenue and to gross profit, but are there any factors you would call out for the deceleration in managed revenue? That’s question one.

Well, actually I don’t know that that’s true. If you look at our managed revenue in last year to this year, you’re still looking at some pretty significant growth. Managed revenue jumped from 154, if you take out what would be the buyer cloud initiatives and you look at just that for which was ongoing operation, again that’s with the estimate because we can bind operations. You’d still be in about the $215 million range versus the $227 reported. So I think you’re still looking at some pretty significant year-on-year growth.

Okay. And then the guidance implies a pretty aggressive fourth quarter ramp for organic growth. Can you talk about what’s driving that, is that buyer cloud, is that mobile, just some color there?

Sure, good question thanks. First off, you saw some tremendous contribution from our buyer cloud and initiatives here in the second quarter. And we only had two or three months of Chango integration for this period. So, as we go into Q3 and actually – well the full quarter effect, the fourth quarter is seasonally high period, so the combination of those things we do believe that we’ll see some definitely increased contributions from our buyer cloud initiatives. You’re also correct that we are, as you heard from the numbers and from both Frank and Greg’s comments as well as mine, we’ve also seen great traction on both mobile and orders. So, between buyer cloud, orders and mobile all three of those – yes, we are definitely looking at some strong growth in Q4.

And then just lastly on the cost side. How much of the investment in sales and marketing has been driven by the build out of direct orders versus other initiatives?

Most of the direct orders component and that from the buyer cloud are those from sales personnel and sales efforts for the demand side. So, as we started the beginning of the year and talked about buyer cloud initiatives we were starting from a relatively scratch position and when it came to being able to address the orders business whose customers are specifically brands and agencies. And with very little capability in the beginning of the year now to large capability through our acquisition and through other efforts that is where we’re seeing a lot of the investment.

Okay, thank you.

Your next question comes from the line of Kerry Rice with Needham. Your line is open.

Thank you. Thanks for all the information related to revenue. As I think about that and maybe you’ve kind of already answered the question of Jason’s but I think about the take rate is historically been around 18%, 19% jumped up to 21%. Is that related to the addition of Chango and how do we think about that take rate coming – going forward, I know with orders we’ve typically thought about that feeling a little pressure and ticking down any highlights there. And then on the mobile, growth and mobile maybe particularly for Q2, can you talk a little bit about the details of that in App versus mobile web and native and maybe how the partnership with Apple is also progressing? Thanks.

Sure Kerry, I’ll take the first question and then Greg will take the second. With regards to take rate the 21.4% that we had in this quarter, if you were to look at the impact that our buyer cloud initiatives might have had on that, it’ll be roughly in the neighborhood of 1.5% to 2%. Again there are approximations because we’ve combine operations but that’ll give you a better sense, so that puts you somewhere in the ball park of that 19.7% on a comparative basis for ongoing operations. So, a little bit of an increase but again most of that increase is as we seen in the past, the result of increase mix of RTB. As we look forward, your characterization I think is pretty accurate. We will have a couple of countervailing forces; one is, as orders continues to increase with the lower take rate but a higher revenue per transaction we’ll see some absolute dollar increase in revenue but it will have a downward impact on take rates. Counter to that, we’ll be the buyer cloud initiatives and as we mentioned, we’ve only had two or three months of Chango operations in Q2, so we’ll have a full clear effect of that in Q3 and going forward and that will have the impact that we just outlined with respect to the take rate for Q2, so that will push it up a bit. But once we have that sort of really on a more relative basis, then it will become more of the same sort of play with regard to mix. So, as buyer cloud mix or as RTB mix has a higher impact, then we’d see take rates rise. If orders mix has a higher impact then we might see take rates decline. So, in the near term I think we think about take rates as being relatively constant as those various factors balance one and other out.

Okay, maybe just one quickly follow-up before the mobile question. Is there anything else in the buyers cloud with that Chango?

When we consolidate operations prior to including Chango, we did have our own initiatives. And so, yes we have our own transactions as you know we’re building out the demand side and so we did have some of our own transactions. But they were relatively small. I can also tell you that of the Q2 non-GAAP net revenue for those that are net transactions only, again those for which we would try to characterize as ongoing operations to provide investors with a competitive. The portion that would be contributed net from buyer cloud in those was very, very small, you’re looking at probably less than 1%.

Okay, thanks.

Jason, this is Greg. Let me give you a quick update on Q2 mobile, and let me speak just for a minute in general and I’ll come back to your specific questions. We – as you know, we announced a couple of weeks ago some pretty exciting news with respect to our mobile business, it’s now over 22% of our total business and up substantially over the last two years. And I think it’s a good template for what we’re doing in not only in mobile but in other areas like video and mobile and orders, because what we’re doing is we’re building the exchange market place kind of brick-by-brick and what we do typically is we add supply and then we come back and add demand. So initially we create a lot of supply and then we came back to add more focus on mobile demand and that’s progressing very nicely. So, we’re seeing a couple of another nice initiatives this past quarter that it’s worth mentioning is we’re now moving forward with our initiatives for mobile video which we launched in Q2. We’re seeing inventory ramp from our partners, some of our bigger partners who we mention in transactions in the last couple of quarters. And that’s all kind of to be expected because it takes a little bit of time to build those market places. Q2 was a function of bringing native online which we – which we’re pretty excited about as everyone else in the industry, bringing mobile video online. And to come back to your questions more specifically, inventory revenue has been growing substantially in both mobile web and App. We’ve, as you know we’ve partnered with a number of really impressive organizations like InMobi, xAd among others and we’re now starting to move from the initial integration phases to more scaling phases. So we’re pleased, frankly very pleased as the numbers would show about where we are and we do expect that to carry on to the rest of the year. With respect to Apple, it’s still very early times in that partnership and as it is has been with other relationships, it does take time. Let’s not forget, we signed our deal with InMobi over a year ago and it’s been a very important process for us to work with companies like InMobi and xAd and others and use those proof points as we move forward with other great partner such as Apple in the line. I hope that helps.

Good, thank you.

Kerry, this is Frank here. I just wanted to add on to that. I think mobile is a good example, it sounds of the network effects that exists in our business as well as the market place effects. So similar to our ramp up with real-time bidding we would have introduced that into the market and then similar with orders. Once we’re able to go into our existing customers both buyers and sellers who are already integrated into the platform where we already have existing relationships. Things like mobile, video, orders they become added on features rather than entirely separate businesses, so we’re able to leverage this with that customer base and because of the market place dynamics in our business the – first we get the customer signed up to use these additional features. Once they do that that inventory becomes available in the platform. And then once that inventory is available in the platform then it attracts the buyers because now they have – they have access to the inventory and then they start buying. So we’ve seen this, the same sort of ramp happen with new additional features that we’ve introduced into our platform, I think the same things happening with mobile.

Okay, great. Thanks Frank.

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

All right, thanks. I have two questions. First on video, it sounds like you’re talking about little bit of an inflection in video where one of the issues previously had been too much quality inventory going through the platform. And now it seems that with the orders product that’s even some inflection, just kind of curious as you’re trying to see orders work for video, particularly mobile. What’s the type of inventory that you’re seeing flow through and can we think about it as sort of the highest class of premium video inventory? And then second, bit of housekeeping question for you Todd, wondering if it’s possible to give as a sense of what full year revenue guidance would be on a non-GAAP net revenue basis? Thanks.

Debra, I’ll start first, this is Greg. We’ll talk about video for a minute. I think – your question was right on and that is, we have been very strategic about our entrance and growth in the video market. Our focus has been primarily on building technology and expertise to that part of the video market that we feel will be growing strongly overtime, not necessarily just what it is particularly substantial at this moment in time. So, we look at the world perhaps a little bit differently than other folks, we haven’t talked about it in great deal other than tell – other than to say that the quality of video inventory and that exchanges hasn’t been what we liked over the past several years. But what we are seeing is, as you pointed out, a substantial – or the beginnings of real growth in spend in video on mobile, and that’s a little bit different market place than what we’ve seen in the past on desktop. We probably have all seen the numbers that have come out in recent months from IDC and IAB and others where video ad spend is expected to grow three times faster in mobile than it is in desktop. And as you know we haven’t been a very large player in the past in the desktop world for video but we feel given where we’re going with both video and orders, we’re well positioned. We look at video as a very – as a premium ad unit. And all premium ad units will largely be bought and sold in a environment that’s different from perhaps the indirect space. So, where things are going is moving more and more towards buying premium ad units and then order or direct-order automation environment and we expect video to be among the most significant ad units bought in that environment. So that’s our strategy going forward. I’ll turn it over to Frank first and then back to Todd.

Yeah, hi Debra. We never meant to suggest that we had low quality video inventory on our platform. Our comments in the pasts were really just illustrating our commitment to building and sustaining a high quality market place. We think that it’s easy to make money off of low quality inventory and amortizing in the short-term but that’s just – that’s never been the business that we’ve been in or is if the business that we want to be in. So, we’ve always focused on quality. Video is the same. I think that the video markets evolved a little differently than the display and the mobile markets. Initially in display there was a lot of unsolved inventory that was in search of demand and in mobile, it was a rapid growth in mobile and we saw that similar trend. And video has been the opposite where there is a lot of demand for video but the quality supply hasn’t been made available into, just into automated market places in general. And I think a large part of the reason for that is that, the publishers of the high quality inventory initially as they were bringing their video to the website to mobile applications, they were giving it away along with their television spots. And they’re using that to track more TV dollars and now that there is significant scale, they’re starting to recognize that they’re leaving money on the table by doing that. And I think it’s just now that they’re realizing what they can make your significant revenue off of this in automated market places. So, I think we’re seeing that happen now and we’ve been waiting for that to happen because we already have those existing relationships rather than trying to accelerate a video business artificially by going after lower quality inventory, that’s all we’re trying to say with our previous comments. And Deb, with regard to your question with regard to revenue guidance, we certainly talked about providing revenue on in-net basis from a guidance standpoint. And after a lot of analysis on that topic, we really look at what was an objective measure and we came to the conclusion that GAAP is really an objective measure. We’ve gone through quite a bit of analysis with a number of accounting firms on that topic, we’ve spot guidance from the SEC on that topic. And it’s uniformly understood measurement, and therefore we thought that that was really the most appropriate. We’ve always guided on GAAP, it wasn’t the revenue recognition principle that drove that decision in the past, it was the fact that it was in fact GAAP. In addition to that, we do observe that there are lots of investors to which we do not always have direct communication. And while we recognize that there are handful of investors that might appreciate us to give guidance on a net basis are also the handful of investors that only look at GAAP and look a filings and that sort of thing. We have also seen in the past where we’ve been ranked as in terms of science and stratum with regard to other companies, sometimes in our existing sector. Based on GAAP revenue which has unfortunately put us lower than we believe we should be placed. And so there were a number of different reasons, as the financial press looks at GAAP and others look at GAAP. So we decided that because there are a myriad of different constituents, all having different measures and interest that the most objective way to do it would be GAAP. And lastly, we looked at all the information that we’ve been providing and you can see from this quarter we’ve greatly expanded the amount of disclosures. We’ve provided revenue on a managed revenue basis, that as which everything would be growth, we provided on a GAAP basis, we provided on a net revenue basis, should all transactions be reported net and we’ve even taken it to a point of saying what if just those transactions are reported net, what would revenue be from a net basis there, and we provided that. We’ve also provided some color on take rate, we provided directional guidance with regard to take rate, and we believe with this myriad information and it’s our hope than analysts and investors who would like to be able to forecast in the net basis have adequate information from which to do that.

Okay, great. Thank you.

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

Yes, thank you very much. So Todd, my focus is going to be on free cash flow, looks like you did generate about $20 million enough free cash flow in the first half of the year. How should we think about the free cash flow trends in the second half and how specifically you think about that particular metric? And my second question, I’m going to open it up to all, obviously we’ve seen all the products coming together, they exchange building up. But specifically as it comes to a direct orders market, I mean how long do you think you’ll get paid at these levels for – from bringing quality buyers and sellers together, I mean is there a point where you might see some pressure and also with that pressure you need to continue to add products and services which is a good thing something like a Chango, but what other things could you add with this market place to justify your pricing? Thank you.

So Sameet, the first question with regard to free cash flow, with our increase in adjusted EBITDA guidance considerable increase in that guidance. Obviously the opportunity to increase that free cash flow increases. At the same time, the top line growth also continues to increase and when we have a number of initiatives and most of which actually tracking considerably well, mainly buyer cloud, orders and mobile, all tracking well. We also want to make sure that we’re prudently not under investing. In the past, our philosophy has been that we do want to be adjusted EBITDA profitable and we want to continue to grow that bottom line. At the same time, we don’t want to under invest for the larger growth opportunity that is not only before as Greg, I think has been illustrated from not only this quarter’s results but results historically for ourselves. So in doing so, we’ve look at managing cast on a relative breakeven basis with the difference going to CapEx and discretionary R&D, in some cases discretionary marketing. I think we’ll continue that particular philosophy in the near term, clearly as we’ve expand sometimes those efforts exceed our ability to find worthy investments or the ability to grow as fast as we like to when it comes to hiring. But at the same time, we also know that we have found some pretty meaningful cost efficiencies in this last quarter. So, you’ll probably heard both Greg and I in our opening remarks talk about the fact that the integration with Chango did not incur the cost and distractions that we initially thought that it may pose. And so that was an improvement. In addition to that, we also found efficiencies almost across the board, and therefore have lowered the amount of expected hiring for the year and we have taken that to the bottom line adjusted EBITDA and did play a role in the increase guidance that we provided through the rest of the year.

Sameet, it’s Frank, I’ll take that second question on the direct orders business. And so, first in the direct orders business I just want to highlight the areas of value that are provided there. So, first is the workflow, the workflow for both the buyer as well as the seller, the entire negotiation process. Second is the optimization. So, it’s important to keep in mind that this is all one part – all part of one platform where there is a number of different features. So the platform still have to decide whether it’s better to spend an impression, but not on advertising dollar but an impression whether it makes sense for a publisher or a seller to spend that impression in RTB or in static bidding or in direct orders or guaranteed direct orders. So there is lot of optimization and knowledge that needs to go into that. Utilization of the data itself to either price the impression, to identify the impression based off of audience or context as an example, the security and protection of that transaction as well, and then just the overall access to the market place. So if a buyer and seller transacting manually, they’re transacting with the limited set of potential buyers, just the number of buyers that they can make phone calls to, go have meetings with. You’ll have the martini lunch’s etcetera. So there is access to the market place itself as well as all the SaaS applications, the SaaS like applications, the reporting, the analytics. And so all this still goes into our direct orders products, including the payment processing itself. So if a dollar still put though our platform, you’re dealing with more currency exchange, so there is a lot that really goes into the direct orders. With all that said, we do believe that the direct orders – when you talk about pricing, I think you’re talking about take rate. Another way to look at that is, is the effective price or value per transaction. So if the take rate for direct orders we believe will be lower, with that said though, let me give you an example, and don’t take any of this as guidance, this is just for illustration purposes. Saying in real-time bidding, if there was a $3 CPM transaction and say that there is a 20% fee applied to that, the net value per transaction to us would be $0.60. In a direct order, because the value of that transaction is so much higher so let’s say that there is a $20 transaction and again for illustration purposes, let’s say that’s at a 10% transaction feel, that’s $2, so it’s $0. 60 compared to $2 which is over three times the value per transaction in the direct order. So we think that even if the rate that gets charged is less it’s because it’s on a higher value transaction, the net per transaction to us is higher and that should becomes a more profitable transaction overall, because we’re not processing large amounts of volume to do that. With that said, I think there is the opportunity for us to continue to add value added products and services. Just like we have in the past, when we first launched our platform almost nine years ago now, we were charging 10% fees and I think we’ve challenged that overtime, we’ve been able to increase this fees because we’ve been able to layer on as additional value added services that we’ve talked about in the past. And I think there is some opportunities exist in orders as well.

Great. Thank you.

Sure.

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

Hi guys, good afternoon, nice quarter. Just a couple of quick ones, can you tell us on the mobile side how many supply sources you guys are actually working with now as you talked about InMobi and xAd and maybe Apple here, but can you just give us a number how many inventory sources you’re working with at this point? And then secondly, back on the prior question about kind of the net revenue guidance potentially through the year. If, I’m hoping that if we can think of maybe $4.4million, $4.5 million of gross revenue being traffic acquisition cost in Q2. Can you just give us an understanding as to how much kind of tact if you will, built into the Q3 revenue guidance? Thanks.

Let’s start with second question. With regard to guidance and reflect to traffic acquisition costs as you called them, we refer to more is payment to sellers. It’s a little bit different than traffic per se so it’s a little different the way we view it. But, look we’ve provided guidance on a GAAP basis, I think we’ve given you some idea with regard to the overall GAAP revenue number as well as where we think the take rate might go from a qualitative standpoint and where it launches from today. I think that we certainly think that the amount that we take from our buyer cloud initiatives over a longer period of time will decline but in the near term it’s probably relatively stable. So the take rate fluctuation will primarily be influenced by a mix of – again buyer cloud orders, RTB and that sort of thing. So, I think that’s really the direction to provide. And with regard to how we view the guidance from revenue standpoint, we’ve clearly thought about the amount of trajectory we’ve had from the buyer cloud, we’re quite pleased with it. We’ll see a full quarter effect with that in Q3 and then also we’re quite pleased with the trajectory we’ve seen from both mobile and orders as well.

Todd, Greg here. This – as a matter of course, we don’t typically disclose the number of total mobile sellers but what I did mention – excuse me, what I did mention in my script is that 70% now of the comScore 1,000 sellers that work with us on desktop also work with us now on mobile. So I thought that would be an interesting statistic for everyone.

And Todd, maybe to give you a little bit color of why we find it difficult to talk about a certain number of sellers. First of all, the count becomes a little challenging when you have to start categorizing who the seller is. Whether you do that by entity, division, website, application, application owner, consolidation of applications and then of course, you have some instances where we have relationships that aggregate different applications. And so as a result, it becomes a little challenging. So, we do talk about obviously the size of our audience reach which continues to grow very nicely, we think we’ve reached a pretty large number, we’ve talked about 650,000 million or so in the past citing some third-party sources for that. So I think that’s really the way we’re starting to think about this now.

So just a follow-up on that Todd, let me try to ask a little bit differently than on the mobile front. Is there a way – I’m just trying to get an understanding on how meaningful and what partner is to your inventory supply for mobile? So, is there some sort of statistic or metric that you can provide us such that maybe your top mobile partner is you’re working with them and they supply ex-percent of your inventory at this stage for mobile. Just trying to get it understanding how concentrate you all with once a [indiscernible] or another? Thanks.

Well, on an overall basis which is what we tend to discuss and disclose. We don’t feel that we have any significant concentration obviously, certainly concentration categories you can look at our 10-K and see what disclosures are there. The other thing is, one way though I think that help you is what is it look like from a cohort standpoint. And if you look at the revenue for cohort for any group of sellers you will see that the revenue to which we supply to those sellers continues to grow for every cohort across the year-on-year.

Thanks.

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

Great, thanks. I hope you can hear me. Two questions, one for the buyer side thing, can you elaborate in what ways can you with the synergies between Chango and your existing buyer cloud manifest as in just scenarios or products or used cases to buyers be it agencies, brands or demand side platforms? And one on the sell side, question about, given that you have now various different forms of inventory, various different types of sales channels with static, RTB and orders and now a consolidated offering as such. How does that compare in sellers view point versus some sort of a inventory waterfall they may have being working with be it Millennial or Google Adx or AppNexus or some other inventory aggregator. And now there is Rubicon which can offer various different sales channels for various different forms of inventory as well.

Yeah Rohit, this is Greg. Let’s talk for a minute about your first question which is – and frankly we’re not hearing great again, so I’m reviewing your question that you’ve typed in. And from that perspective, we spent a lot of time in Q1, excuse me, in Q2 last quarter, working on ways that we could get to a better point with respect to our integration of Chango into our buyer cloud. And we, as I mentioned in the script, we’re really pleased with where we got to. We have gone to the point of unifying the two teams into one, they’re now being led by the gentlemen who founded Chango and he is now become our head of buyer cloud, and we have one unified sales team. And we’ve done that obviously for variety of reasons because part-in-part because of your question of synergies both on the cost side, but also on the revenue side, because it becomes very important as we move forward to do a number of things. We’ve got – we have a number of products and capabilities that address different channels within the buyer community as well as within the seller community. So we’re really focusing in large part and making shorten that we drive revenue from a consistent basis for both buyers and sellers and we’re not overlapping sales team. So we made sure of that in our first effort in unification and that as I mentioned is gone particularly well. So, we’re excited about that piece. The other piece that I should point out is that because we brought Chango capabilities into our buyer cloud we now have a more sophisticated in advanced bidding capability and as a result, we’ve gone to the added step of creating separation between our bidder and our buyer capabilities from our very important channel with DSPs. And we’ve spent a lot of time working with this channel over the last quarter to provide sufficient comfort with them with respect to how we share or don’t share information on any given situation. And we have put together a very organized approach to share – non-sharing information between buyers of course, and also making products and capabilities available to all buyers at the same exact time, so that nobody would have a unfair advantage in any shape and will look at our market place that’s completely open to any buyer whether within the Rubicon family or outside. This was – these were very important steps that we took and thought about before we close the transaction and implemented after we finished the integration.

Hi Rohit, it’s Frank, I’ll answer your other question about – around differentiation now that we have these capabilities. Like, we’ve been out there now for nine years. Our first products set started by focusing on solving a bit whole in the market for our sellers. We used that to gain a large install base of sellers. With that, also has created a lot of data, a lot of market data, pricing data and our algorithms continue to learn with every single transaction, every single seller that gets into our platform. And this is one of the reasons that we’ve been able to maintain and grow our leadership position in the market. So our platform now has almost nine years of data, trillions and trillions of transaction that it’s processed and obviously that continues to grow, across now more than 60% of the top hundred websites in the market. So, our platform sees hundreds of millions of users across large majority of the overall internet experience, not just one website. And I think it’s important to note that the sell side of this equation is really, really complicated. So if you’re a buyer, now we’ve got capabilities on both sides. If you’re a buyer, you’re basically bidding in an auction on impressions that you want. If you’re a seller, your every impression has a unique value and you need data to be able to accurately price that impression, identify that impression and connect it with the right buyer to create maximum yields within the parameters and rules that the seller sets. So, we believe that our platform does this incredibly well and I think our growth in the market has illustrated that our products outperforms the competition. In addition to that, we now have the capabilities across desktop display, mobile, as well as video, and we’re very strong in static bidding, real-time bidding and we’ve pioneered the category of order automation as well. So having all of these things in one platform holds a lot of value for a couple of reasons, one is that you’re able to leverage that data across all these capabilities, across all the different buyers and sellers, across all the different methods of buying, not just one of them. And then the second is that, because we have the static bidding and real-time bidding and the orders, our platform can connect buyers and sellers most effectively to make sure the right impression is reaching the right buyer and that the right metrics are being achieved for the buyers, whether that’d be a DSP, an ad network, an agency or an advertiser. So having all these things combined into one platform is really important. And then there is also just the efficiency for the seller. Being able to have all these capabilities in one platform across desktop, display, mobile and video in place, makes it easier to manage their overall business. So I think that’s why we continue to win business and that’s how one of the large reasons that we differentiate and outperform the competition.

Okay, great. Thanks Greg, thanks Frank.

Your next question comes from the line of Brett Huff with Stephens. Your line is open.

Hi, this is James Rutherford in for Brett. Hopefully you can hear me alright, but I just had one question and great quarter. On a perceived risk maybe by some on the street and that’s ad blocking, there has been some studies that show just kind of the rise globally. So, how do you kind of perceive that risk in your seller base, your publisher base and then how do you think over the long-term the industry deals with that phenomenon? Thanks.

Sure. So, first let me built that. We think that there is a great opportunity to bring the advertiser and the consumer closer together. We’ve got $300 billion that’s being spent today by advertisers. We’re trying to effectively guess what the consumer wants. And so we think there is a very big opportunity to make the consumer an active participant in this market place. Today there is buyers, there is sellers, the active participants and then there is the consumer which is the silent or passive consumer, passive participant in the market place. So we think we can make them an active participant where the advertisers doesn’t have to just guess and sort of throw things at the consumers. And I think really that’s the core of what I think the long-term opportunity is, with things like real-time bidding and automation. Look, this is the first time now where advertisers have the ability to connect with individual consumers on a one-to-one basis that was effectively the promise of the internet when it came along 15, 17 years ago. And now advertisers have the ability to reach it’s consumers in real time and decide in real time which messages to deliver to that consumer. So I think that’s a tremendous opportunity for the industry. We’re working on solutions for that right now, we hope that the rest of the industry does the same. But with ad blocking in particular, it looks like that is the symptom. First, this is nothing new, ad blocking has existed in desktop advertising for at least 15 years. I remember there was a version of Internet Explorer that came out that gave consumers the ability to block cookies, to block ads. We saw plug-ins that could be created for your web browsers like Firefox exists in the market. So this is something that’s existed, clearly there has been enough of the market that’s out there and also has been growing where your ad blocking has not been affected. There has been a lot of recent conversation about ad blocking I think primarily from the announcement that Apple made. And just to clarify that, Apple with Safari is now giving people the ability to develop an App to do ad blocking, so it doesn’t have it inherently built-in Safari as far as we understand it today. So, if you looked at the process in which this would need to evolve, first somebody have to go create the App, second they have to go to consumers to download and use the App. And then even then if that was to be effective, 80% of consumer’s time is spent in App and not on mobile web of which Safari and Apple just has a portion of the market anyway. So, we don’t look at this as a threat in the short-term or even the long-term, again its’ been nothing new. Instead though, I think we’re looking at things like this and saying, how do we make advertising better for the consumer so people don’t want to even walkout, how do I make it, so your advertising becomes an information service to consumers, and that’s where we’re focused.

Your next question comes from the line of Jason Kreyer with Craig Hallam. Your line is open.

[Indiscernible] guys and congrats on the quarter. Just wondering if you can talk a little bit about what you’re seeing in the orders business, where that growth is coming from, maybe if you can dig into a little bit deeper on what you’re seeing in guaranteed versus non-guaranteed?

Sure Jason, this is Greg. We talked a little bit about the orders market in my script both that non-guaranteed and guaranteed. Let me, excuse me, let me separate the two. The guaranteed orders market is in very early stage, so just like mobile, just like video we expect it to take some time. But going back to Frank’s illustration about the opportunity of the orders market or guaranteed orders market, when you look out four or five years you see a market that once automated is quite a bit larger than the existing market for automation today, so we’re looking at a $40 billion plus market for the automation of premium inventory that has yet to be automated, and we expect that to be done in the guaranteed orders market as more and more sellers and buyers come online. As I mentioned in last quarter, not this quarter, we’ve put quite a few of our sellers online on the platform for guaranteed orders and we continue to add every quarter more and more sellers. This quarter has been also about working with our friends at the large agencies and holding companies and brands directly about having them begin to test that market and spend more in that market, and we’re seeing we’re ahead of where we wanted to be. We’ve been investing in this area now for a better part of two years, well you may have heard us talk about 49bc a good year or so ago and then of course, we decided to acquire iSocket for the buyer side and Shiny for the seller side. So, we see this is a major growth driver for our business over the next several years. And we’re very pleased about the way things are going right now and we expect to see more adoption in the coming quarters.

Your final question comes from the line of Aaron Kessler with Raymond James. Your line is open.

Yes, hi guys, good quarter. So, quickly on international, any updates in terms of kind of what percent of international is today and how the trends there are progressing either client wins or growth rates relative to the U.S. business? Thank you.

With the order international we’re right around 35% from Q2 on a managed revenue basis from a seller perspective which is a little bit down from what we see in the past of 40%. However that’s not indicative of any performance, rather our buyer cloud initiatives have mainly focused on the U.S. in Q2. So as a result of a mixed standpoint in the acceleration we’ve had in buyer cloud, we have seen that overall mix has come down, so it’s not a change in performance but rather just the result of some over performance if you will from the buyer cloud side. With regard to clients and growth they continue to grow on both sides. We’ve had a number of successes namely in Japan especially with regard to assigning new sellers, and a lot of that revenue was just starting to come online and we expect the solid Q4 from Japan as a meaningful contributor from the international standpoint. Overall, I’d say growth on the international front has been generally strong.

Great. Thank you, good quarter.

There are no further questions at this time. I will turn the call back over to management for closing remarks.

Thank you all for joining us in the call today. Look forward to seeing many of you in the investor conferences in the coming weeks.

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