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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM 10-Q
__________________
  (Mark One)

  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
 
Commission File Number: 001-36384
__________________
MAGNITE, INC.
(Exact name of registrant as specified in its charter)
 __________________
Delaware20-8881738
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
12181 Bluff Creek Drive, 4th FloorLos Angeles, CA
90094
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code:
(310) 207-0272
______________

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $0.00001 per shareMGNINasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes    No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes    No   
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).   Yes  No
Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date.
ClassOutstanding as of November 5, 2020
Common Stock, $0.00001 par value111,958,965


Table of Contents
MAGNITE, INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
Page No.
Part I.
Item 1.
Item 2.
Item 3.
Item 4.
Part II.
Item 1.
Item 1A.
Item 2.
Item 6.
2

Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
MAGNITE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
(unaudited)
September 30, 2020December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents
$103,797$88,888
Accounts receivable, net
412,435217,571
Prepaid expenses and other current assets
13,3676,591
TOTAL CURRENT ASSETS
529,599313,050
Property and equipment, net
18,87623,667
Right-of-use lease asset
42,73621,491
Internal use software development costs, net
17,38616,053
Intangible assets, net
97,13111,386
Other assets, non-current
2,9422,103
Goodwill
157,8047,370
TOTAL ASSETS
$866,474$395,120
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses
$457,428$259,439
Lease liabilities, current
11,1767,282
Other current liabilities
5,019778
TOTAL CURRENT LIABILITIES
473,623267,499
Lease liabilities, non-current
34,24215,231
Other liabilities, non-current
2,478454
TOTAL LIABILITIES
510,343283,184
Commitments and contingencies (Note 11)


STOCKHOLDERS' EQUITY
Preferred stock, $0.00001 par value, 10,000 shares authorized at September 30, 2020 and December 31, 2019; 0 shares issued and outstanding at September 30, 2020 and December 31, 2019
Common stock, $0.00001 par value; 500,000 shares authorized at September 30, 2020 and December 31, 2019; 110,712 and 53,888 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively
21
Additional paid-in capital
759,116453,064
Accumulated other comprehensive loss(2,585)(45)
Accumulated deficit
(400,402)(341,084)
TOTAL STOCKHOLDERS' EQUITY
356,131111,936
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$866,474$395,120

The accompanying notes to unaudited condensed consolidated financial statements are an integral part of these statements.

3

Table of Contents
MAGNITE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(unaudited)
 Three Months EndedNine Months Ended
September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Revenue$60,982 $37,642 $139,625 $107,928 
Expenses:
Cost of revenue21,031 13,869 56,579 44,070 
Sales and marketing21,761 11,040 53,059 33,151 
Technology and development13,562 10,293 37,318 29,848 
General and administrative13,314 9,121 38,221 29,428 
Merger and restructuring costs2,254  16,677  
Total expenses71,922 44,323 201,854 136,497 
Loss from operations(10,940)(6,681)(62,229)(28,569)
Other (income) expense:
Interest (income) expense, net30 (218)(112)(625)
Other income(1,194)(48)(2,487)(236)
Foreign exchange (gain) loss, net293 (296)(845)(138)
Total other income, net(871)(562)(3,444)(999)
Loss before income taxes(10,069)(6,119)(58,785)(27,570)
Provision (benefit) for income taxes446 55 533 (569)
Net loss$(10,515)$(6,174)$(59,318)$(27,001)
Net loss per share:
Basic and Diluted$(0.10)$(0.12)$(0.65)$(0.52)
Weighted average shares used to compute net loss per share:
Basic and Diluted110,416 53,023 91,371 52,324 

The accompanying notes to unaudited condensed consolidated financial statements are an integral part of these statements.


 
4

Table of Contents
MAGNITE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(unaudited)
Three Months EndedNine Months Ended
September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Net loss$(10,515)$(6,174)$(59,318)$(27,001)
Other comprehensive income (loss):
Unrealized gain on investments   2 
Foreign currency translation adjustments18 (292)(2,540)(328)
Other comprehensive income (loss)18 (292)(2,540)(326)
Comprehensive loss$(10,497)$(6,466)$(61,858)$(27,327)

The accompanying notes to unaudited condensed consolidated financial statements are an integral part of these statements.



5

Table of Contents
 

MAGNITE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
(unaudited)
Common Stock Additional
Paid-In
Capital
Accumulated  Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Stockholders’
Equity
Shares
Amount
Balance at December 31, 201851,159 $1 $433,877 $(259)$(315,606)$118,013 
Exercise of common stock options76 — 251 — — 251 
Restricted stock awards, net(182)— — — — — 
Issuance of common stock related to employee stock purchase plan— — — — — — 
Issuance of common stock related to RSU vesting1,171 — — — — — 
Shares withheld related to net share settlement(459)— (1,835)— — (1,835)
Stock-based compensation— — 4,514 — — 4,514 
Other comprehensive income— — — 94 — 94 
Net loss— — — — (12,546)(12,546)
Balance at March 31, 201951,765

$1 

$436,807 

$(165)

$(328,152)

$108,491 
Exercise of common stock options79 132  132 
Restricted stock awards, net— — — — — — 
Issuance of common stock related to employee stock purchase plan118 — 477 — — 477 
Issuance of common stock related to RSU vesting1,022 — — — — — 
Shares withheld related to net share settlement— — (12)— — (12)
Stock-based compensation— — 4,949 — — 4,949 
Other comprehensive income— — — (128)— (128)
Net loss— — — — (8,281)(8,281)
Balance at Balance at June 30, 201952,984

$1 

$442,353 

$(293)

$(336,433)

$105,628 
Exercise of common stock options83 — 146 — — 146 
Issuance of common stock related to RSU vesting6 — — — — — 
Stock-based compensation— — 4,815 — — 4,815 
Other comprehensive loss— — — (292)— (292)
Net loss— — — — (6,174)(6,174)
Balance at Balance at September 30, 2019
53,073$1 $447,314 $(585)$(342,607)$104,123 

6

Table of Contents
Common Stock Additional
Paid-In
Capital
Accumulated  Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Stockholders’
Equity
SharesAmount
Balance at December 31, 201953,888 $1 $453,064 $(45)$(341,084)$111,936 
Exercise of common stock options27 — 23 — 23 
Restricted stock awards, net— — — — — — 
Issuance of common stock related to employee stock purchase plan— — — — — 
Issuance of common stock related to RSU vesting1,861 — — — — 
Shares withheld related to net share settlement(716)— (7,485)— (7,485)
Stock-based compensation— 4,218 — 4,218 
Other comprehensive loss— (789)— (789)
Net loss— (9,675)(9,675)
Balance at March 31, 202055,060 $1 $449,820 $(834)$(350,759)$98,228 
Exercise of common stock options746 — 2,276 — — 2,276 
Issuance of common stock related to employee stock purchase plan159 — 693 — — 693 
Issuance of common stock related to RSU vesting1,904 — — — — — 
Shares withheld related to net share settlement(107)— (349)— — (349)
Issuance of common stock associated with the Merger52,099 1 275,772 — — 275,773 
Exchange of stock options and RSU related to Merger— — 11,646 — — 11,646 
Stock-based compensation— — 10,101 — — 10,101 
Other comprehensive loss— — — (1,769)— (1,769)
Net loss— — — — (39,128)(39,128)
Balance at Balance at June 30, 2020109,861 $2 $749,959 $(2,603)$(389,887)$357,471 
Exercise of common stock options563 — 1,569 — — 1,569 
Issuance of common stock related to RSU vesting289 — — — — — 
Shares withheld related to net share settlement(1)— (7)— — (7)
Stock-based compensation— — 7,595 — — 7,595 
Other comprehensive loss— — — 18 — 18 
Net loss— — — — (10,515)(10,515)
Balance at Balance at September 30, 2020110,712 $2 $759,116 $(2,585)$(400,402)$356,131 


The accompanying notes to unaudited condensed consolidated financial statements are an integral part of these statements.
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MAGNITE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
Nine Months Ended
September 30, 2020September 30, 2019
OPERATING ACTIVITIES:
Net loss$(59,318)$(27,001)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization36,157 24,841 
Stock-based compensation21,298 13,877 
(Gain) loss on disposal of property and equipment(17)92 
Provision for doubtful accounts31 897 
Accretion of available-for-sale securities 24 
Non-cash lease expense(601)(469)
Unrealized foreign currency gains, net(2,108)(391)
Deferred income taxes837 (748)
Changes in operating assets and liabilities:
Accounts receivable(46,145)32,149 
Prepaid expenses and other assets(2,896)672 
Accounts payable and accrued expenses23,464 (34,018)
Other liabilities5,260 (117)
Net cash (used in) provided by operating activities(24,038)9,808 
INVESTING ACTIVITIES:
Purchases of property and equipment(4,211)(5,605)
Capitalized internal use software development costs(6,894)(6,000)
Cash, cash equivalents and restricted cash acquired in Merger54,595  
Maturities of available-for-sale securities 7,500 
Net cash provided by (used in) investing activities43,490 (4,105)
FINANCING ACTIVITIES:
Proceeds from exercise of stock options3,868 529 
Proceeds from issuance of common stock under employee stock purchase plan693 477 
Taxes paid related to net share settlement(7,841)(1,847)
Net cash used in financing activities(3,280)(841)
EFFECT OF EXCHANGE RATE CHANGES ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH41 (192)
CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH16,213 4,670 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH — Beginning of period88,888 80,452 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH — End of period$105,101 $85,122 
SUPPLEMENTAL DISCLOSURES OF OTHER CASH FLOW INFORMATION:
Cash paid for income taxes$829 $300 
Cash paid for interest$49 $46 
Capitalized assets financed by accounts payable and accrued expenses$2,388 $2,005 
Capitalized stock-based compensation$616 $401 
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities$2,036 $13,074 
Change in restricted cash$1,304 $ 
Common stock and options issued for Merger$287,418 $ 
The accompanying notes to unaudited condensed consolidated financial statements are an integral part of these statements.
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MAGNITE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1—Organization and Summary of Significant Accounting Policies
Company Overview
Magnite, Inc. ("Magnite" or the "Company"), formerly known as The Rubicon Project, Inc., was formed and began operations in April 2007. On April 1, 2020, Magnite completed a stock-for-stock merger ("Merger") with Telaria, Inc., ("Telaria"), a leading provider of connected television ("CTV") technology. The Company operates a sell side advertising platform that offers buyers and sellers of digital advertising a single partner for transacting globally across all channels, formats, and auction types.
On June 8, 2020, the Company voluntarily delisted its common stock from the New York Stock Exchange ("NYSE") and commenced listing on The Nasdaq Global Select Market of The Nasdaq Stock Market LLC ("Nasdaq"). On June 30, 2020, the Company changed its name from "The Rubicon Project, Inc." to "Magnite, Inc." In connection with the name change, the Company also changed its ticker symbol from "RUBI" to "MGNI." Magnite has its principal offices in Los Angeles, New York City, London, and Sydney, and additional offices in Europe, Asia, North America, and South America.
The Company provides a technology solution to automate the purchase and sale of digital advertising inventory for buyers and sellers. The Company’s platform features applications and services for sellers of digital advertising inventory, or publishers, that own or operate websites, applications, CTV channels, and other digital media properties, to manage and monetize their inventory; applications and services for buyers, including advertisers, agencies, agency trading desks, and demand side platforms, to buy digital advertising inventory; and a transparent, independent marketplace that brings buyers and sellers together and facilitates intelligent decision making and automated transaction execution at scale. The Company's clients include many of the world's leading publishers of websites, CTV channels, mobile applications, and buyers of digital advertising inventory.
Publishers monetize their inventory through the Company’s platform by seamlessly connecting to a global market of integrated buyers that transact through real-time bidding, which includes direct sale of premium inventory to a buyer, referred to as private marketplace ("PMP"), and open auction bidding, where buyers bid against each other in a real-time auction for the right to purchase a publisher’s inventory, referred to as open marketplace ("OMP"). At the same time, buyers leverage the Company’s platform to manage their advertising spending and reach their target audiences, simplify order management and campaign tracking, obtain actionable insights into audiences for their advertising, and access impression-level purchasing from thousands of sellers.
Basis of Presentation and Summary of Significant Accounting Policies
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles, or GAAP, for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of the results for the interim period presented have been included. Operating results for the nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for any future interim period, the year ending December 31, 2020, or for any future year.
The condensed consolidated balance sheet at December 31, 2019 has been derived from the audited financial statements at that date, but does not include all of the disclosures required by GAAP. The accompanying condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto for the year ended December 31, 2019 included in its 2019 Annual Report on Form 10-K.
There have been no significant changes in the Company's accounting policies from those disclosed in its audited consolidated financial statements and notes thereto for the year ended December 31, 2019 included in its Annual Report on Form 10-K.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current period presentation. Specifically, this includes amounts reclassified for the three months ended March 31, 2020 to conform to the current presentation for the three and nine months ended September 30, 2020 in the condensed consolidated statements of operations related to merger and restructuring costs.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported and disclosed financial statements and accompanying footnotes. Due to the economic uncertainty as a result of the COVID-19 pandemic, it has become more difficult to apply certain assumptions and judgments into these estimates. The extent of the impact of COVID-19 pandemic on the Company's operational and financial
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performance will depend on future developments, which are highly uncertain and cannot be predicted, including but not limited to, the duration and spread of the outbreak, its severity, including any resurgence, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. During the nine months ended September 30, 2020, this uncertainty resulted in a higher level of judgment related to its estimates and assumptions. As of the date of issuance of the condensed consolidated financial statements for the three and nine months ended September 30, 2020, the Company is not aware of any specific event or circumstance that would require the Company to update its estimates, judgments, or revise the carrying value of its assets or liabilities. These estimates may change, as new events occur and additional information is obtained, and are recognized in the consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any such differences may be material to the Company's financial statements.
Recently Adopted Accounting Standards
In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13—Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). This guidance requires entities to use a current expected credit loss methodology to measure impairments of certain financial assets and to recognize an allowance for its estimate of lifetime expected credit losses. The main objective of this update is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The guidance was effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company adopted ASU 2016-13 as of January 1, 2020. The standard had no material impact on its consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13—Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement ("ASU 2018-13"), to streamline the disclosure requirements of ASC Topic 820—Fair Value Measurement. ASU 2018 removes certain disclosure requirements, including the valuation process for Level 3 fair value measurements, and adds certain quantitative disclosures around Level 3 fair value measurements. This ASU is effective for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period, with early adoption permitted. The provisions of ASU 2018-13 are required to be adopted retrospectively, with the exception of disclosure of the range and weighted average of significant unobservable inputs used to develop Level 3 measurements, which can be adopted prospectively. The Company adopted ASU 2018-13 as of January 1, 2020. The standard had no material impact on its consolidated financial statements and related disclosures.
In August 2018, the FASB issued ASU 2018-15—Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract ("ASU 2018-15"). ASU 2018-15 was issued to clarify the requirements of ASC 350-40—Intangibles—Goodwill and Other—Internal-Use Software ("ASC 350-40"). The ASU clarifies that implementation, setup and other upfront costs related to cloud computing agreements ("CCA") should be accounted for under ASC 350-40. ASC 2018-15 will require companies to capitalize certain costs incurred when purchasing a CCA that is a service. Under the new guidance, companies will apply the same criteria for capitalizing implementation costs in a CCA service as they would for internal-use software. The capitalized implementation costs will generally be expensed over the term of the service arrangement and the related assets will be assessed for impairment using the same model applied to long-lived assets. This ASU is effective for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period, with early adoption permitted. ASU 2018-15 can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company adopted ASU 2018-15 as of January 1, 2020 on a prospective basis. The standard had no material impact on its consolidated financial statements and related disclosures.
Recent Accounting Pronouncements
In December 2019, the FASB issued ASU 2019-12—Simplifying the Accounting for Income Taxes ("ASU 2019-12"). ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to general principles in Topic 740 and clarifies and amends existing guidance for clarity and consistent application. This guidance is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2020 including interim reporting periods within those fiscal years. Early adoption is permitted. The Company is evaluating the impact of adopting this new accounting guidance on its consolidated financial statements and related disclosures, but does not anticipate it will have a material impact.
The Company does not believe there are any other recently issued and effective or not yet effective pronouncements that would have or are expected to have any significant effect on the Company’s financial position, cash flows or results of operations.

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Note 2—Net Income (Loss) Per Share
The following table presents the basic and diluted net loss per share:  
Three Months EndedNine Months Ended
September 30, 2020September 30, 2019September 30, 2020September 30, 2019
(in thousands, except per share data)
Basic and Diluted EPS:
Net loss$(10,515)$(6,174)$(59,318)$(27,001)
Weighted-average common shares outstanding110,416 53,029 91,371 52,349 
Weighted-average unvested restricted stock (6) (25)
Weighted-average common shares outstanding used to compute net loss per share110,416 53,023 91,371 52,324 
Basic and diluted net loss per share$(0.10)$(0.12)$(0.65)$(0.52)
The following weighted-average shares have been excluded from the calculation of diluted net loss per share attributable to common stockholders for each period presented because they are anti-dilutive:
Three Months EndedNine Months Ended
September 30, 2020September 30, 2019September 30, 2020September 30, 2019
(in thousands)(in thousands)
Options to purchase common stock1,920 1,078 1,720 732 
Unvested restricted stock awards   16 
Unvested restricted stock units3,768 5,168 3,851 3,911 
Unvested performance stock units14  6  
ESPP30 48 40 35 
Total shares excluded from net loss per share5,732 6,294 5,617 4,694 
Note 3—Revenues
The Company generates revenue from transactions where it provides a platform for the purchase and sale of digital advertising inventory. The Company also generates revenue from the fee it charges clients for use of its Demand Manager product, which generally is a percentage of the client's advertising spending on any advertising marketplace. The Company's platform dynamically connects sellers and buyers of advertising inventory in a digital marketplace. The Company's solution incorporates proprietary machine-learning algorithms, sophisticated data processing, high-volume storage, detailed analytics capabilities, and a distributed infrastructure. Digital advertising inventory is created when consumers access sellers’ content. Sellers provide digital advertising inventory to the Company’s platform in the form of advertising requests, or ad requests. When the Company receives ad requests from sellers, it sends bid requests to buyers, which enable buyers to bid on sellers’ digital advertising inventory. Winning bids can create advertising, or paid impressions, for the seller to present to the consumer.
The total volume of spending between buyers and sellers on the Company’s platform is referred to as advertising spend. The Company keeps a percentage of that advertising spend as a fee, and remits the remainder to the seller. The fee that the Company retains from the gross advertising spend on its platform is recognized as revenue. The fee earned on each transaction is based on the pre-existing agreement between the Company and the seller and the clearing price of the winning bid. The Company recognizes revenue upon fulfillment of its performance obligation to a client, which occurs at the point in time an ad renders and is counted as a paid impression, subject to an underlying agreement existing with the client and a fixed or determinable transaction price. Performance obligations for all transactions are satisfied, and the corresponding revenue is recognized, at a distinct point in time when an ad renders. The Company does not have arrangements with multiple performance obligations.
The determination of whether revenue should be reported on a gross or net basis is based on an assessment of whether the Company is acting as the principal or an agent in the transaction. In determining whether the Company is acting as the principal or an agent, the Company follows the accounting guidance for principal-agent considerations. Making such determinations involves judgment and is based on an evaluation of the terms of each arrangement, none of which are considered presumptive or determinative.
For substantially all transactions on the Company's platform, the Company reports revenue on a net basis as it does not act as the principal in the purchase and sale of digital advertising inventory because it does not have control of the digital advertising inventory and does not set prices agreed upon within the auction marketplace. However, for certain transactions related to revenue streams acquired in connection with the Merger with Telaria, the Company reports revenue on a gross basis, based primarily on its
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determination that the Company acts as the primary obligor in the delivery of advertising campaigns for buyers with respect to such transactions. For the three months ended September 30, 2020, revenue reported on a gross basis was less than 2% of total revenue.
The following table presents our revenue by channel for the three and nine months ended September 30, 2020 and 2019:
Three Months EndedNine Months Ended
September 30, 2020September 30, 2019September 30, 2020September 30, 2019
(in thousands, except percentages)
Channel:
CTV$11,059 18 %$  %$18,978 14 %$  %
Desktop20,901 34 15,936 42 51,468 37 47,745 44 
Mobile29,022 48 21,706 58 69,179 49 60,183 56 
Total$60,982 100 %$37,642 100 %$139,625 100 %$107,928 100 %
    The following table presents our revenue disaggregated by geographic location, based on the location of the Company's sellers:
Three Months EndedNine Months Ended
September 30, 2020September 30, 2019September 30, 2020September 30, 2019
(in thousands)(in thousands)
United States$45,048 $26,378 $101,168 $73,654 
International15,934 11,264 38,457 34,274 
Total$60,982 $37,642 $139,625 $107,928 
Payment terms are specified in agreements between the Company and the buyers and sellers on its platform. The Company generally bills buyers at the end of each month for the full purchase price of impressions filled in that month. The Company recognizes volume discounts as a reduction of revenue as they are incurred. Specific payment terms may vary by agreement, but are generally seventy-five days or less. The Company's accounts receivable are recorded at the amount of gross billings to buyers, net of allowances for the amounts the Company is responsible to collect. The Company's accounts payable related to amounts due to sellers are recorded at the net amount payable to sellers (see Note 5). Accordingly, both accounts receivable and accounts payable appear large in relation to revenue reported on a net basis.
At September 30, 2020, two buyers accounted for 37% and 9%, respectively, of consolidated accounts receivable. At December 31, 2019, two buyers accounted for 23% and 17%, respectively, of consolidated accounts receivable.
Accounts receivable are recorded at the invoiced amount, are unsecured, and do not bear interest. The allowance for doubtful accounts is reviewed quarterly, requires judgment, and is based on the best estimate of the amount of probable credit losses in existing accounts receivable. The Company reviews the status of the then-outstanding accounts receivable on a customer-by-customer basis, taking into consideration the aging schedule of receivables, its historical collection experience, current information regarding the client, subsequent collection history, and other relevant data, in establishing the allowance for doubtful accounts. Accounts receivable is presented net of an allowance for doubtful accounts of $4.5 million at September 30, 2020, and $3.4 million at December 31, 2019. Accounts receivable are written off against the allowance for doubtful accounts when the Company determines amounts are no longer collectible.
The Company reviews the associated payable to sellers for recovery of buyer receivable allowance and write-offs; in some cases, the Company can reduce the payable to sellers. The reduction of seller payables related to recovery of uncollected buyer receivables is netted against allowance expense. The contra seller payables related to recoveries were $1.9 million and $0.9 million as of September 30, 2020 and December 31, 2019, respectively.
The following is a summary of activity in the allowance for doubtful accounts for the three and nine months ended September 30, 2020 and 2019:
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Three Months EndedNine Months Ended
September 30, 2020September 30, 2019September 30, 2020September 30, 2019
(in thousands)(in thousands)
Allowance for doubtful accounts, Beginning Balance$4,672 $1,720 $3,400 $1,340 
Allowance for doubtful accounts, Merger-assumed  1,033  
Write-offs(1)(71)(1,897)(3,278)
Increase (decrease) in provision for expected credit losses(274)(33)1,854 3,554 
Recoveries of previous write-offs83 14 90 14 
Allowance for doubtful accounts, September 30 $4,480 $1,630 $4,480 $1,630 
During the three months ended September 30, 2020 and September 30, 2019, the provision for expected credit losses associated with accounts receivable and the offset by increases of contra seller payables related to recoveries of uncollected buyer receivables were insignificant, resulting in insignificant amount of bad debt. During the nine months ended September 30, 2020, the provision for expected credit losses associated with accounts receivable of $1.9 million was offset by increases of contra seller payables related to recoveries of uncollected buyer receivables of $1.8 million, which resulted in an insignificant amount of bad debt expense. During the nine months ended September 30, 2019, the provision for expected credit losses associated with accounts receivable of $3.6 million was offset by increases of contra seller payables related to recoveries of uncollected buyer receivables of $2.7 million, which resulted in bad debt expense of $0.9 million.
Note 4—Fair Value Measurements
Recurring Fair Value Measurements    
Fair value represents the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Observable inputs are based on market data obtained from independent sources. The fair value hierarchy is based on the following three levels of inputs, of which the first two are considered observable and the last one is considered unobservable:
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 – Unobservable inputs.
The table below sets forth a summary of financial instruments that are measured at fair value on a recurring basis at September 30, 2020:
TotalQuoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs 
(Level 3)
(in thousands)
Cash equivalents
$7,868 $7,868 $ $ 
The table below sets forth a summary of financial instruments that are measured at fair value on a recurring basis at December 31, 2019:
TotalQuoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs 
(Level 3)
(in thousands)
Cash equivalents
$13,501 $13,501 $ $ 
At September 30, 2020 and December 31, 2019, cash equivalents of $7.9 million and $13.5 million, respectively, consisted of money market funds and commercial paper, with original maturities of three months or less. The carrying amounts of cash equivalents are classified as Level 1 or Level 2 depending on whether or not their fair values are based on quoted market prices for identical securities that are traded in an active market.
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Note 5—Other Balance Sheet Amounts
Accounts payable and accrued expenses included the following:
September 30, 2020December 31, 2019
(in thousands)
Accounts payable—seller$434,340 $247,891 
Accounts payable—trade10,065 4,822 
Accrued employee-related payables13,023 6,726 
Total$457,428 $259,439 

Restricted cash was $1.3 million at September 30, 2020, which is included in the ending balance of cash, cash equivalents and cash in the condensed consolidated statement of cash flows for the nine months ended September 30, 2020. Restricted cash of $0.6 million was included within prepaid and other current assets and $0.7 million was included within other assets, non-current. There was no restricted cash at December 31, 2019.
Note 6—Goodwill and Intangible Assets
The Company's goodwill balance as of September 30, 2020 and December 31, 2019 was $157.8 million and $7.4 million, respectively. The increase during the nine months ended September 30, 2020 was a result of the Merger with Telaria (see Note 7).

The Company’s intangible assets as of September 30, 2020 and December 31, 2019 included the following:
September 30, 2020December 31, 2019
(in thousands)
Amortizable intangible assets:
Developed technology$77,158 $19,658 
Customer relationships37,450 1,650 
In-process research and development8,230  
Backlog920  
Non-compete agreements70 70 
Trademarks200 20 
Total identifiable intangible assets, gross124,028 21,398 
Accumulated amortization—intangible assets:
Developed technology(18,110)(9,823)
Customer relationships(7,941)(162)
In-process research and development  
Backlog(613) 
Non-compete agreements(33)(7)
Trademarks(200)(20)
Total accumulated amortization—intangible assets(26,897)(10,012)
Total identifiable intangible assets, net$97,131 $11,386 
Amortization of intangible assets for the three months ended September 30, 2020 and 2019 was $7.8 million and $0.7 million, respectively, and $16.9 million and $2.3 million for the nine months ended September 30, 2020 and 2019, respectively.
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The estimated remaining amortization expense associated with the Company's intangible assets was as follows as of September 30, 2020:
Fiscal YearAmount
(in thousands)
Remaining 2020$7,822 
202130,772 
202226,132 
202313,881 
202413,697 
Thereafter4,827 
Total$97,131 

Due to the economic impact associated with the COVID-19 pandemic, the Company performed a qualitative assessment of its long-lived assets and goodwill and concluded based on the Company's assessment of current market capitalization, adequate cash position, and expected future results, that there were no impairment indicators as of September 30, 2020 that would indicate impairment of its long-lived assets, including fixed assets, intangibles, and internal use capitalized software costs, and goodwill.

Note 7—Business Combinations
On April 1, 2020, (the "Acquisition Date"), the Company completed the Merger with Telaria. Upon completion of the Merger, each share of Telaria common stock issued and outstanding was converted into 1.082 shares of Magnite common stock. As a result, the Company issued 52,098,945 shares of Magnite common stock. In connection with the Merger, Magnite also assumed Telaria’s 2013 Equity Incentive Plan, as amended; 2008 Stock Plan, as amended; and the ScanScout, Inc. 2009 Equity Incentive Plan, as amended.
As of the Acquisition Date, former holders of Telaria common stock owned approximately 48% and pre-merger holders of Magnite common stock owned approximately 52% of the common stock of the combined company on a fully diluted basis.
The Merger was accounted for using the acquisition method of accounting in accordance with Accounting Standards Codification, referred to as ASC 805, Business Combinations. Magnite management determined that Magnite was the acquiror for financial accounting purposes. In identifying Magnite as the accounting acquiror, management considered the structure of the transaction and other actions contemplated by the merger agreement, relative outstanding share ownership and market values, the composition of the combined company’s board of directors, the relative size of Magnite and Telaria, and the designation of certain senior management positions of the combined company.
In accordance with ASC 805, the Company recorded the acquisition based on the fair value of the consideration transferred and then allocated the purchase price to the identifiable assets acquired and liabilities assumed based on their respective fair values as of the Acquisition Date. The excess of the value of consideration transferred over the aggregate fair value of those net assets was recorded as goodwill. Any identified definite lived intangible assets will be amortized over their estimated useful lives and any identified intangible assets with indefinite useful lives and goodwill will not be amortized but will be tested for impairment at least annually. All intangible assets and goodwill will be tested for impairment when certain indicators are present. Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates including the selection of valuation methodologies, estimates of future revenues and cash flows, discount rates, and selection of comparable companies.
Management's purchase price allocation is preliminary and subject to change pending finalization of the valuation, including finalization of tax attributes and tax related liabilities. Under the acquisition method of accounting for business combinations, if the Company identifies changes to acquired deferred tax asset ("DTA") valuation allowances or liabilities related to uncertain tax positions during the measurement period, and they are related to new information obtained about facts and circumstances that existed as of the acquisition date, those changes are considered a measurement-period adjustment, and the Company will record the offset to goodwill. The Company records all other changes to DTA valuation allowances and liabilities related to uncertain tax positions in current- period income tax expense.
For purposes of measuring the estimated fair value, where applicable, of the assets acquired and the liabilities assumed as reflected in the unaudited condensed combined financial information, the Company has applied the guidance in ASC 820, Fair Value Measurement, which establishes a framework for measuring fair value. In accordance with ASC 820, fair value is an exit price and is defined as "the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date." Under ASC 805, acquisition-related transaction costs and acquisition-related
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restructuring charges are not included as components of consideration transferred but are accounted for as expenses in the period in which the costs are incurred.
As part of the Merger, existing outstanding restricted stock units of Telaria common stock and stock options to purchase common stock of Telaria were exchanged for 1.082 restricted stock units of the Company and options to purchase the Company's common stock, respectively. The fair value of stock options exchanged on the date of the Merger attributable to pre-acquisition services was recorded as purchase consideration. The fair value of the restricted stock units and stock options exchanged on the date of the Merger attributable to post-acquisition services will be recorded as additional stock-based compensation expense in the Company's consolidated statements of operations over their remaining requisite service (vesting) periods.
The following table summarizes the total purchase consideration (in thousands):

Shares of Magnite common stock$274,604 
Fair value of stock-based awards exchanged11,646 
Acceleration of single trigger equity awards, converted1,168 
Total purchase consideration$287,418 
    
The purchase consideration for the acquisition included 52,008,316 shares of the Company's common stock with a fair value of approximately $274.6 million, based on the Company's stock price as reported on the NYSE on the Acquisition Date. The fair value of stock options and restricted stock units exchanged on the Acquisition Date attributable to pre-acquisition services of approximately $10.4 million and $1.2 million, respectively, have been recorded as purchase consideration. In addition, the Company recorded additional purchase consideration associated with acceleration of 90,629 shares of common stock issued associated with single-trigger equity awards in the amount of $1.2 million.
The fair value of stock options and restricted stock units exchanged on the Acquisition Date attributable to post-acquisition services of $4.7 million and $12.2 million, respectively, will be recorded as additional stock-based compensation expense on the Company's consolidated statement of operations over their remaining requisite service (vesting) periods.
The fair value of the purchase price was allocated to the identifiable assets acquired and liabilities assumed based upon their estimated fair values as of the date of the acquisition as set forth below:

Cash and cash equivalents$51,848 
Accounts receivable, net150,924 
Prepaid expenses and other current assets3,190 
Property and equipment, net1,814 
Right-of-use lease asset26,627 
Intangible assets102,650 
Restricted cash2,747 
Other assets, non-current369 
Deferred tax assets, non-current103 
Goodwill150,434 
Total assets acquired$490,706 
Accounts payable and accrued expenses173,643 
Lease liabilities - current portion5,322 
Deferred revenue11 
Other current liabilities365 
Lease liabilities - non-current portion23,323 
Other liabilities, non-current624 
Total liabilities assumed203,288 
Total purchase price$287,418 

The Company believes the amount of goodwill resulting from the purchase price allocation is primarily attributable to expected synergies from assembled workforce, an increase in development capabilities, increased offerings to customers, and enhanced opportunities for growth and innovation. Goodwill will not be amortized but instead will be tested for impairment at least
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annually or more frequently if certain indicators of impairment are present. In the event that goodwill has become impaired, the Company will record an expense for the amount impaired during the quarter in which the determination is made. The goodwill generated in the Merger is not tax deductible.
The following table summarizes the components of the intangible assets and estimated useful lives (dollars in thousands):

Estimated Useful Life
Technology$57,500 5 years
In-process research and development8,230 
4.7 years*
Customer relationships35,800 2.5 years
Backlog920 0.75 years
Trademarks200 0.25 years
Total intangible assets acquired$102,650 
* In-process research and development consists of two projects with a weighted-average useful life of 4.7 years. Amortization begins once associated projects are completed and it is determined the projects have alternative future use.

The intangible assets are generally amortized on a straight-line basis, which approximates the pattern in which the economic benefits are consumed, over their estimated useful lives. Amortization of developed technology is included in cost of revenues and the amortization of customer relationships, backlog, and trademarks is included in sales and marketing expenses in the condensed consolidated statement of operations. Once the projects associated with acquired in-process research and development are completed, amortization will be included in cost of revenues in the consolidated statement of operations. The intangible assets generated in the Merger are not tax deductible.
As such, as part of the Merger, deferred tax liabilities of $23.9 million were established related to the acquired intangible assets, which were fully offset by the estimated income tax effect of the partial release of Telaria's valuation allowance. The deferred tax liability was calculated based on an estimated combined tax rate of 23.3%.
The Company recognized approximately $2.3 million and $16.7 million of acquisition related costs during the three and nine months ended September 30, 2020, respectively (see Note 8). In addition, as part of the Merger, the Company acquired Telaria's U.S. federal NOLs of approximately $126.2 million and state NOLs of approximately $128.0 million. Pursuant to Section 382 of the Internal Revenue Code, Telaria, Inc. underwent an ownership change for tax purposes. As a result, the use of the NOLs will be subject to annual Section 382 use limitations. The Company believes the ownership change will not impact the Company's ability to utilize substantially all of the NOLs to the extent it generates taxable income that can be offset by such losses.
Unaudited Pro Forma Information