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Magnite to Acquire SpotX; Deal Creates Largest Independent CTV & Video Advertising Platform
February 8, 2021
Source: Businesswire
Full year 2020 combined company estimated non-GAAP net revenue would have been $350 million on a pro forma basis(1)(2)
Combined company Connected TV (CTV) & video net revenue would have represented approximately 67% of total company preliminary non-GAAP pro forma net revenue(1)(2) in Q4 2020
On a combined basis, the CTV business would have nearly tripled to $42 million in Q4 2020 versus Magnite standalone, or approximately 34% of Q4 2020 preliminary non-GAAP pro forma net revenue(1)(2)
The non-CTV video business of the combined company would have represented approximately 33% of Q4 2020 preliminary non-GAAP pro forma net revenue(1)(2)
SpotX total preliminary non-GAAP net revenue(1)(2) for 2020 was $116 million, of which $67 million was CTV
Purchase price consists of $560 million in cash and 14 million shares of Magnite stock, for a total of $1.17 billion based on the closing price of Magnite stock as of February 4, 2021
Magnite’s preliminary results for Q4 2020 include
GAAP Revenue of $82 million, up 69% on an as-reported basis, and up 20% on a pro forma basis from Q4 2019, with CTV revenue of $15.3 million, up 53% on a pro forma basis(1)
Net income of $5.8 million and Adjusted EBITDA(3) of $29.9 million, representing a 36% adjusted EBITDA margin(4)
Magnite (Nasdaq: MGNI), the largest independent sell-side advertising platform, today announced that it has entered into a definitive agreement to acquire SpotX from RTL Group for $1.17 billion in cash and stock. SpotX is one of the leading platforms shaping CTV and video advertising globally.
Together, Magnite and SpotX will create the largest independent CTV and video advertising platform in the programmatic marketplace. The combined company will provide better support for sellers, create an alternative to the CTV advertising market’s largest players, and greatly improve scale and efficiency for buyers.
“Sellers have been looking for a scaled independent alternative to the giant companies who dominate the CTV marketplace,” said Michael Barrett, President & CEO of Magnite. “The combination of Magnite and SpotX will make this a reality by bringing together the best CTV technologies and teams at a critical time. Ad-supported CTV is just beginning to draw budgets from linear TV and we will be well-positioned to participate in the strongest segment of industry growth for the foreseeable future.”
“As CTV flourishes and the media industry continues to turn to programmatic, there is a huge opportunity for an independent scaled company to offer the single most comprehensive technology in the market,” said Mike Shehan, Co-Founder and CEO at SpotX. “We built SpotX with the mission of becoming the leading global video advertising platform, and our goal is now coming to fruition with Magnite. I am thrilled about what we will achieve together.”
Thomas Rabe, CEO of RTL Group, added: “We are excited about the combination of SpotX and Magnite, two leading CTV advertising providers. This transaction allows for significant value creation and upside potential for the parties, sellers and advertisers in the growing CTV market. We look forward to participating in the future success of SpotX and Magnite as shareholders in the combined entity.”
Together, Magnite and SpotX will serve some of the world’s leading programmers, broadcasters, platforms and device manufacturers, including A+E Networks, Crackle Plus, The CW Network, Discovery, Disney/Hulu, Electronic Arts, Fox Corporation, fuboTV, Microsoft, Newsy, Philo TV, Pluto TV, Roku, Samsung, Sling TV, Tubi, ViacomCBS, Vizio, Vudu, WarnerMedia and Xumo.
Magnite’s expanded technical capabilities and teams will be able to move more quickly and cater to a broader set of client needs, including sellers that are newer to the world of programmatic and those who have mature, programmatic-only operations. Likewise, the acquisition will make it easier for brands and agencies to buy premium CTV inventory at scale with standard features and a single, addressable pool of audiences.
Transaction Details
Magnite is targeting in excess of $35 million in run-rate operating cost synergies, with more than half of the synergies realized within the first year of combined operations.
Magnite plans to finance the transaction with cash on hand, 14 million shares issued to RTL Group and committed financing from Goldman Sachs. The company expects the transaction to close in the second quarter of 2021, subject to receipt of regulatory approvals and satisfaction of customary closing conditions. Until the transaction closes, both companies will continue to operate independently.
Goldman Sachs and LUMA Partners acted as financial advisors to Magnite and Goldman Sachs is providing committed financing for the transaction. Gibson Dunn provided legal counsel to Magnite.
Magnite will discuss additional details about the transaction and Q4 2020 results on its Q4 2020 earnings conference call on Wednesday, February 24th.
Notes:
(1) Combined pro forma non-GAAP net revenue includes (i) preliminary unaudited non-GAAP net revenue for SpotX for 2020 or Q4, as applicable; (ii) preliminary unaudited non-GAAP net revenue for Magnite for 2020 or Q4, as applicable; and (iii) with respect to full year 2020, Telaria’s unaudited non-GAAP net revenue for Q1 2020 (since the Telaria merger closed on April 1, 2020, and therefore Telaria Q1 2020 results are not represented in Magnite’s full year 2020 reported results).
(2) Non-GAAP net revenue is a non-GAAP financial measure. Please see the discussion in the section called "Non-GAAP Financial Measures" and the reconciliations included at the end of this press release.
(3) Adjusted EBITDA is a non-GAAP financial measure. Please see the discussion in the section called "Non-GAAP Financial Measures" and the reconciliations included at the end of this press release.
(4) Adjusted EBITDA margin is calculated as Adjusted EBITDA divided by GAAP revenue. A reconciliation of net loss to Adjusted EBITDA is included at the end of this press release.
Fourth Quarter 2020 Results Conference Call and Webcast
The Company will host a conference call on February 24, 2020 at 1:30 PM (PT) / 4:30 PM (ET) to discuss the results for its fourth quarter of 2020.
Live conference call:
Toll-free number:
(844) 875-6911 (for domestic callers)
Direct dial number:
(412) 902-6511 (for international callers)
Passcode:
Ask to join the Magnite conference call
Simultaneous audio webcast:
investor.magnite.com under "Events and Presentations"
Conference call replay:
Toll-free number:
(877) 344-7529 (for domestic callers)
Direct dial number:
(412) 317-0088 (for international callers)
Passcode:
10151407
Webcast link:
investor.magnite.com under "Events and Presentations”
About Magnite
We’re Magnite (NASDAQ: MGNI), the world’s largest independent sell-side advertising platform. Publishers use our technology to monetize their content across all screens and formats—including desktop, mobile, audio and CTV. And the world's leading agencies and brands trust our platform to access brand-safe, high-quality ad inventory and execute billions of advertising transactions each month. Anchored in sunny Los Angeles, bustling New York City, historic London, and down under in Sydney, Magnite has offices across North America, EMEA, LATAM and APAC.
Non-GAAP Net Revenue:
We define non-GAAP net revenue as GAAP revenue less amounts paid to sellers that are included within cost of revenue for the portion of our revenue or SpotX’ revenue, as applicable, that is reported on a gross basis. Non-GAAP net revenue would represent our revenue if we were to record all of our revenue on a net basis. Non-GAAP net revenue does not represent revenue reported on a GAAP basis. Non-GAAP net revenue is a useful measure in assessing the performance of our business and the business of SpotX because it shows the operating results of our business and the business of SpotX on a consistent basis without the effect of differing revenue reporting (gross vs. net) that is applied under GAAP across different types of transactions, and facilitates comparison of our results to the results of companies that report all of their revenue on a net basis.
Adjusted EBITDA:
We define Adjusted EBITDA as net income (loss) adjusted to exclude stock-based compensation expense, depreciation and amortization, amortization of acquired intangible assets, impairment charges, interest income or expense, and other cash and non-cash based income or expenses that we do not consider indicative of our core operating performance, including, but not limited to foreign exchange gains and losses, acquisition and related items, non-operational real estate expense (income), net, and provision (benefit) for income taxes. We believe Adjusted EBITDA is useful to investors in evaluating our performance for the following reasons:
- Adjusted EBITDA is widely used by investors and securities analysts to measure a company’s performance without regard to items such as those we exclude in calculating this measure, which can vary substantially from company to company depending upon their financing, capital structures, and the method by which assets were acquired.
- Our management uses Adjusted EBITDA in conjunction with GAAP financial measures for planning purposes, including the preparation of our annual operating budget, as a measure of performance and the effectiveness of our business strategies, and in communications with our board of directors concerning our performance. Adjusted EBITDA may also be used as a metric for determining payment of cash incentive compensation.
- Adjusted EBITDA provides a measure of consistency and comparability with our past performance that many investors find useful, facilitates period-to-period comparisons of operations, and also facilitates comparisons with other peer companies, many of which use similar non-GAAP financial measures to supplement their GAAP results.
- Although Adjusted EBITDA is frequently used by investors and securities analysts in their evaluations of companies, Adjusted EBITDA has limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of our results of operations as reported under GAAP. These limitations include:
- Stock-based compensation is a non-cash charge and will remain an element of our long-term incentive compensation package, although we exclude it as an expense when evaluating our ongoing operating performance for a particular period.
- Depreciation and amortization are non-cash charges, and the assets being depreciated or amortized will often have to be replaced in the future, but Adjusted EBITDA does not reflect any cash requirements for these replacements.
- Impairment charges are non-cash charges related to goodwill, intangible assets and/or long-lived assets.
- Adjusted EBITDA does not reflect non-cash charges related to acquisition and related items, such as amortization of acquired intangible assets, merger related severance costs, and changes in the fair value of contingent consideration.
- Adjusted EBITDA does not reflect cash and non-cash charges and changes in, or cash requirements for, acquisition and related items, such as certain transaction expenses and expenses associated with earn-out amounts.
- Adjusted EBITDA does not reflect changes in our working capital needs, capital expenditures, non-operational real estate expenses or income, or contractual commitments.
- Adjusted EBITDA does not reflect cash requirements for income taxes and the cash impact of other income or expense.
- Other companies may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.
- Adjusted EBITDA should not be considered as an alternative to net income (loss), income (loss) from operations, or any other measure of financial performance calculated and presented in accordance with GAAP.
Contacts
Investor Relations
Nick Kormeluk
949-500-0003
nkormeluk@magnite.com
Media Relations
Charlstie Veith
516-300-3569
cveith@magnite.com
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