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Rubicon Project and Telaria Combine, Forming the Largest Independent Sell-Side Ad Tech Company

By Daniel Sparks - Apr 1, 2020 at 5:24PM

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The newly minted tech company has its sights set on the massive opportunity in connected TV.

Starting today, global advertising exchange Rubicon Project (MGNI -1.41%) and video-focused sell-side advertising platform Telaria (TLRA) have officially become a single company, trading under the ticker symbol RUBI. On March 30, shareholders of both companies approved a merger of the two ad-tech companies, finalizing a deal that was first announced last December. While the two businesses will fall under Rubicon Project and operate as two separate brands for now, the company plans to launch with a new name in the coming months. In addition, Rubicon will merge the two platforms into a single, unified sell-side platform, making the world's largest independent omnichannel sell-side solution.

Here's a look at the merged company's plans, and a trailing view of the two businesses' financials on a combined basis.

Graphic of two jigsaw-puzzle pieces connecting

Image source: Getty Images.

Scale, an omnichannel platform, and a robust CTV business

Rubicon Project and Telaria bring highly complementary businesses to the table.

Rubicon's primary strength is its scale. As of an investor presentation last November, the ad-tech company's inventory stretched across 1,300 media companies, more than one million websites, and 60,000 apps. Furthermore, over 900,000 brands, ad agencies, and demand-side partners connected into its inventory. While Rubicon provides tools for publishers across all digital channels, its key growth drivers are video, mobile, and audio.

Rubicon Project, however, lacked a robust business in connected TV -- perhaps the biggest opportunity in programmatic advertising. That's where Telaria comes in. Telaria's CTV revenue jumped 99% year over year in 2019, and crossed half of total revenue in the fourth quarter.

"The merger rationale is primarily driven by the scale and strength of the omnichannel combined business and the opportunity in CTV, our belief that ad-supported CTV is gaining attention in the market and is at an inflection point for growth," said Rubicon Project CEO Michael Barrett on the company's fourth-quarter earnings call on Feb. 27. Barrett remains CEO of Rubicon following the merger.

Former Telaria CEO Mark Zagorski, who is now chief operating officer at Rubicon Project, remained optimistic about the CTV business in Telaria's quarterly update on March 10. "Our CTV business continues to drive our results, growing nearly 100% year-over-year, outperforming our expectations for the fourth quarter and the full year," Zagorski said. "As we look ahead, the market tailwinds powering CTV show no signs of abating and our platform is extremely well positioned to capitalize on these trends and capture market share."

Investors can also look forward to opportunities in video beyond CTV. Barrett said on Rubicon's recent earnings call that there's an "added opportunity" from a potential revenue synergy in mobile and desktop video -- the other half of Telaria's business and a fast-growing portion of Rubicon Project's. Rubicon's total video revenue in 2019 increased 43% year over year to $28.6 million.

Rapid growth, a pile of cash, and no debt

Together, the two businesses have an attractive financial profile, positioning the merged company well in these uncertain times. Adding both company's 2019 financials together, revenue totaled $225 million -- up 25% year over year. Furthermore, combined cash from both tech companies at the end of 2019 equaled $143 million, with neither business carrying any debt.

This financial profile, combined with cost synergies from no-longer-overlapping research and product development expenses, will enable Rubicon Project to invest aggressively in CTV and fortify its offering in the programmatic advertising space.

"The companies were strong on their own, and we continue to believe are even stronger together," Barrett said in a written interview with The Motley Fool on Wednesday. "This was true in good times, and it remains true in challenging market environments such as this."

Commenting specifically on COVID-19, Barrett admitted that overall advertising demand is impacted in the short term. But he also said that "it is a fluid situation and still too early to gauge the depth of a potential longer term impact." On a positive note, he added: "[W]e believe there will be an increased use of digital media -- and likely programmatic -- in the downturn, and it is also likely that we will see more ad supported CTV inventory, which could present unique opportunities as well."

Barrett believes the company is well equipped for the challenges and opportunities that lie ahead. "[A]s advertisers and agencies look for stability and overhead reduction," he said, "the combined strength of the company as the largest independent programmatic [sell-side platform] positions us well for when the market recovers."

Daniel Sparks owns shares of Telaria, Inc. and The Rubicon Project. The Motley Fool owns shares of and recommends Telaria, Inc. The Motley Fool has a disclosure policy.

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