What happened

Shares of digital advertising platform provider Rubicon Project (NYSE:RUBI) tumbled on Wednesday following the company's fourth-quarter report. While Rubicon beat analyst estimates by a wide margin, disappointing first-quarter guidance sent the stock 26.5% lower by 11:30 a.m. EDT.

So what

Rubicon reported fourth-quarter non-GAAP (adjusted) revenue of $66.9 million, down 20% year over year but $2.9 million higher than the average analyst estimate. GAAP (generally accepted accounting principles) revenue slumped 23% to $72.7 million, while total advertising spend on the platform dropped 18% to $277.1 million.

The Rubicon Project logo.

Image source: Rubicon Project.

Non-GAAP earnings per share (EPS) came in at $0.37, down from $0.74 in the prior-year period but $0.22 better than analysts were expecting. Adjusted EBITDA slumped 39.7% to $21.7 million, while GAAP EPS was a loss of $0.44 due to charges related to the impairment of intangible assets and restructuring.

While Rubicon did better than analysts were expecting, its first-quarter guidance fell far short of expectations. The company expects non-GAAP revenue to be in the range of $41 million to $44 million, along with a non-GAAP EPS loss between $0.22 and $0.26. Analysts were expecting revenue of $57.3 million and a non-GAAP profit of $0.10 per share.

Now what

Along with its earnings release, Rubicon announced that Michael Barrett will become the new CEO, replacing founder Frank Addante. Addante discussed the progress that the company made in 2016, along with its key priorities in 2017:

We made advancements in our strategic growth areas, including mobile, video and orders, while continuing to see promising results from FastLane, our solution for header bidding. Through restructuring and divestiture during the year, we strengthened our business and refocused our energies, resources and investments on what has made Rubicon Project successful for nearly a decade: our global ad exchange business. As we move into 2017, we remain focused on signing up more publishers, application developers, and adding inventory to our global exchange, a key component to drive future growth.

With revenue and earnings slumping in the fourth quarter, and with guidance falling well short of expectations, Rubicon has a lot of work to do to prove to investors that its growth story isn't over.

Timothy Green has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.