Magnite(MGNI) - 2020 Q4 - Annual Report

Part I Business Magnite operates a sell-side advertising platform, expanding through mergers and focusing on CTV while navigating competition and privacy changes - On April 1, 2020, the company completed a stock-for-stock merger with Telaria, Inc., creating what is believed to be the world's largest independent sell-side advertising platform[20] - On February 4, 2021, Magnite entered into an agreement to acquire SpotX, Inc. for $560 million in cash and 14 million shares of common stock, expected to create the largest independent CTV and video advertising platform[21] - The COVID-19 pandemic negatively affected revenue in the first half of 2020 due to reduced advertising budgets, but trends improved significantly in the third and fourth quarters with a return to positive growth[26] - The company is actively developing and supporting open identity solutions through Prebid.org and other industry initiatives to address the elimination of third-party cookies by major platforms like Google and Apple[40] Revenue by Channel (2020) | Channel | Revenue (in thousands) | Percentage of Total | | :--- | :--- | :--- | | CTV | $ 34,319 | 15% | | Desktop | $ 78,956 | 36% | | Mobile | $ 108,353 | 49% | | Total | $ 221,628 | 100% | Risk Factors The company faces significant risks from the SpotX acquisition, ongoing COVID-19 impacts, intense competition, evolving data privacy regulations, and reliance on key buyers - The completion of the SpotX acquisition is subject to customary closing conditions, including regulatory approvals, and failure to complete it could materially adversely affect the company's stock price and financial condition[110][111] - The COVID-19 pandemic has adversely affected economies and caused advertisers to reduce budgets, directly impacting the company's revenue, with its duration and severity remaining highly uncertain[126][127][129] - The industry's move to phase out third-party cookies by 2022 poses a significant risk, as the development and adoption of new identity solutions may disrupt the ecosystem and cause platform performance to decline[174] - Evolving and stringent data privacy laws, such as the GDPR in Europe and the CCPA/CPRA in California, create significant compliance costs and risks of enforcement actions, which could adversely affect the business model[176][178][181] - The company relies on a concentrated number of buyers, with two buyers indirectly contributing to approximately 40% of revenue in 2020, making the company vulnerable if these relationships are reduced[204] Unresolved Staff Comments The company reports no unresolved staff comments from the Securities and Exchange Commission - None[262] Properties The company's corporate headquarters are in Los Angeles, with a new lease commencing in May 2021, and it maintains additional global offices and data centers - Corporate headquarters are located in Los Angeles, California, with a new lease for 38,754 square feet beginning in May 2021 and expiring in April 2031[263][264] - The company maintains two offices in New York with leases expiring in 2029 and 2030, along with additional facilities in North America, South America, Europe, Australia, and Asia[264][265] Legal Proceedings The company is involved in routine legal proceedings but anticipates no material adverse effect on its financial condition as of December 31, 2020 - The company is subject to routine legal proceedings but does not believe any pending matters will have a material adverse effect on its financial condition as of December 31, 2020[266] Mine Safety Disclosures This item is not applicable to the company's business - Not applicable[268] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Magnite's common stock moved to Nasdaq in June 2020, and the company has never paid or anticipates paying dividends in the foreseeable future - On June 8, 2020, the company voluntarily delisted from the NYSE and began trading on The Nasdaq Global Select Market, changing its name to Magnite, Inc. and its ticker symbol to 'MGNI' on June 30, 2020[270] - The company has never declared or paid any cash dividends and does not plan to in the foreseeable future, with its credit facility also containing restrictions on dividend payments[272] Selected Financial Data Selected financial data shows revenue growth to $221.6 million in 2020, alongside a widened net loss of $53.4 million, with total assets significantly increasing to $939.0 million due to the Telaria merger Selected Financial Data (in thousands) | Metric | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Revenue | $221,628 | $156,414 | $124,685 | | Loss from operations | $(54,234) | $(27,583) | $(63,608) | | Net loss | $(53,432) | $(25,478) | $(61,822) | | Total assets | $938,960 | $395,120 | $360,012 | | Total liabilities | $557,347 | $283,184 | $241,999 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 42% revenue increase to $221.6 million in 2020, a widened net loss of $53.4 million due to merger costs, and strong liquidity with $117.7 million in cash Results of Operations (in thousands) | | 2020 | 2019 | | :--- | :--- | :--- | | Revenue | $221,628 | $156,414 | | Loss from operations | $(54,234) | $(27,583) | | Net loss | $(53,432) | $(25,478) | | Adjusted EBITDA | $43,065 | $25,694 | - Revenue increased by $65.2 million (42%) in 2020, primarily due to the Telaria merger which contributed $60.1 million, with overall growth significantly impacted by the COVID-19 pandemic[308] - Total expenses increased by 50% to $275.9 million in 2020, driven by costs from the Telaria merger, including a $31.5 million increase in sales and marketing (including amortization of acquired intangibles) and $17.6 million in merger and restructuring costs[306][316][326] - The company's principal sources of liquidity are $117.7 million in cash and cash equivalents and a $60.0 million revolving credit facility, which management believes is sufficient to meet working capital needs for at least the next twelve months[338][339][341] Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks including interest rate, foreign currency exchange, and inflation, with foreign currency risk potentially leading to a $3.1 million loss from a 10% adverse change - The company's primary market risks are interest rate, foreign exchange, and inflation[385] - Foreign currency risk is present due to operations in currencies other than the U.S. Dollar, where a hypothetical 10% adverse change in foreign exchange rates would result in a foreign currency loss of approximately $3.1 million[387] - Interest rate risk is minimal as cash and investments have short maturities, and the variable-rate credit facility had no outstanding balance at year-end[386] Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements for 2020 and the independent auditor's unqualified opinion, excluding Telaria from internal control assessment Consolidated Balance Sheet Data (in thousands) | | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $117,676 | $88,888 | | Accounts receivable, net | $471,666 | $217,571 | | Goodwill | $158,125 | $7,370 | | Total Assets | $938,960 | $395,120 | | Liabilities & Equity | | | | Accounts payable and accrued expenses | $509,315 | $259,439 | | Total Liabilities | $557,347 | $283,184 | | Total Stockholders' Equity | $381,613 | $111,936 | Consolidated Statement of Operations Data (in thousands) | | Year Ended Dec 31, 2020 | Year Ended Dec 31, 2019 | | :--- | :--- | :--- | | Revenue | $221,628 | $156,414 | | Total expenses | $275,862 | $183,997 | | Loss from operations | $(54,234) | $(27,583) | | Net loss | $(53,432) | $(25,478) | Consolidated Statement of Cash Flows Data (in thousands) | | Year Ended Dec 31, 2020 | Year Ended Dec 31, 2019 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(12,065) | $31,983 | | Net cash provided by (used in) investing activities | $32,636 | $(23,388) | | Net cash provided by (used in) financing activities | $7,354 | $(205) | | Change in cash, cash equivalents and restricted cash | $28,843 | $8,436 | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[605] Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2020, with Telaria's controls still being integrated - Management concluded that disclosure controls and procedures were effective at a reasonable assurance level as of December 31, 2020[606] - The assessment of internal control over financial reporting excluded the recently acquired Telaria, Inc., which represented 25% of the company's revenue and 25% of total assets for the year ended December 31, 2020[608][611] - Based on its evaluation, management concluded that the company's internal control over financial reporting was effective as of December 31, 2020[612] Other Information The company reports no other information for this item - None[613] Part III Directors, Executive Officers and Corporate Governance Information regarding directors, executive officers, and corporate governance is incorporated by reference from the 2021 Proxy Statement - Information is incorporated by reference from the 2021 Proxy Statement[614] Executive Compensation Information regarding executive compensation is incorporated by reference from the 2021 Proxy Statement - Information is incorporated by reference from the 2021 Proxy Statement[616] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information regarding security ownership is incorporated by reference from the 2021 Proxy Statement - Information is incorporated by reference from the 2021 Proxy Statement[617] Certain Relationships and Related Transactions, and Director Independence Information regarding related party transactions and director independence is incorporated by reference from the 2021 Proxy Statement - Information is incorporated by reference from the 2021 Proxy Statement[618] Principal Accountant Fees and Services Information regarding principal accountant fees and services is incorporated by reference from the 2021 Proxy Statement - Information is incorporated by reference from the 2021 Proxy Statement[619] Part IV Exhibits, Financial Statement Schedules This section lists consolidated financial statements and an index of exhibits filed with the Form 10-K, with no separate financial statement schedules provided - This section lists the consolidated financial statements and an index of all exhibits filed with the Form 10-K[620][622] - No financial statement schedules are provided because the information is not required or is included in the financial statements or notes[621] Form 10-K Summary The company reports no Form 10-K summary - None[625]