Rubicon – More thoughts
This was from the Rubicon 2015 year-end conference call. It’s pretty extraordinary.
Rubicon Project is one of only two public companies in ad tech that have announced revenue growth greater than 50% in 2015. And Rubicon Project, Google, Facebook and Criteo are the only public companies in the space that have achieved positive net income for 2015, positive free cash flow for 2015 and adjusted EBITDA margins on net revenue greater than 20% for the year. Our full-stack solution for both buyers and sellers is a core contributor to our value proposition and our best-in-class financial results and has established a clear foundation for continued growth in the future…
…Our strength in mobile has also helped to drive important new customer wins. Recently in January of this year, we partnered with Zynga for an exclusive launch of all of its premium guaranteed and reserved inventory in our marketplace via programmatic buying. According to comScore, Zynga’s mobile applications ranked sixth in consumer time spent online per month.
Our expanded relationship with Zynga is strategically important because like so many media owners, Zynga has historically held back much of its premium inventory exclusively for its direct sales force. Therefore, Zynga’s decision to now make all of its premium inventory, previously only available through its direct sales channel, now available through Rubicon Project, not only demonstrates the value of our orders marketplace. It also signals a trend we expect to see much more of in the future. We have proven we can drive the right demand through orders as well as open option RTB.
Earlier this month, we announced a highly strategic win with Gameloft, the world’s largest digital and social games developer. Rubicon Project will automate mobile advertising across Gameloft’s large audience that reaches more than 147 million unique players per month.
Moving now from mobile, our orders platform that I just mentioned is also gaining significant adoption from buyers and sellers. In Q4, our managed revenue from orders grew 125% year over year. Global managed revenue originating from our orders product increased to 18% overall in Q4, up from just 13% a year ago.
Spotify is an example of a premium seller that has generated exceptional growth from our orders platform since launching with Rubicon Project in mid 2015. Spotify now reaches a large audience of 60 million users, and our platform allows Spotify to activate and fully leverage its proprietary first party data, which drives increased value for both Spotify and the buyers of Spotify’s inventory in the marketplace.
In orders as in mobile, our buyers and sellers are opting to deepen their relationship with us to work cross channel, and thus we are seeing the same broad adoption for orders. In Q4, 94% of our largest 100 sellers were working with Rubicon Project to drive growth in both our orders and RTB offerings, up from 83% in Q4 of 2014. Impressively in Q4, 89% of our top-2,000 advertisers utilized both orders and RTB solutions to reach their audiences at scale….
In the past three quarters, we have increased the number of premium video sellers on our platform by nearly 400% while at the same time we have increased the number of video buyers on our marketplace more than 60%. In just a couple of quarters after launching mobile video in our marketplace, more than 25% of our mobile buyers have transacted in mobile video…
And it goes on and on like that. They are almost giddy about how fast they are growing in every way! In fact, they clearly are growing like gangbusters! They had earnings of 72 cents in the December quarter, up by almost 200% from the year before, and earnings of $1.03 for all of 2015, up from 20 cents the year before.
And then they give a nonsense estimate for earnings of 72 CENTS for ALL of 2016! No wonder the analysts got annoyed!
Here was management’s reasoning. You can decide what you think of it.
Our Q4 2015 and full-year 2015 results exceeded expectations, particularly with respect to adjusted EBITDA with 43% and 26% margins respectively. While these results were strong, it would not be prudent to revise our 2016 guidance based on this one-quarter result, which is also a seasonally high period. Q4 2015 is not part of the FY16, and Q4 2016 is too far out to adjust for Q4 2015 results while we’re only in the second month of 2016.
Is that ultra-conservative? Or just constipated? Okay, now we just saw their March quarter come in at 31 cents, up 29 cents from 2 cents the year before, their trailing earnings are $1.32, and they budged their annual earnings guidance by 8 cents, all the way up to 80 cents (wow!), a good 52 cents BELOW their current trailing earnings, and refused to move their Revenue estimate at all, although they keep talking about how great their business is going.
As Bert said, being conservative is nice, but being reasonable is better. Giving nonsensically low estimates like that doesn’t allow the analysts to get any true idea of what’s going on with your company. Guidance is supposed to guide, by definition. When you’ve beaten each guidance, not by 10%, or by 20%, but by more than 100%, your guidance isn’t guidance! It isn’t guiding anyone. It’s nonsense.
This has caused the present sell-off, in my opinion, at least. And presented a possible true bargain for us!
Saul
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We had to post it in three parts this time.
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