10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2016

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: 001-36543

TubeMogul, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware	51-0633881
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1250 53rd Street, Suite 2 Emeryville, California	94608
(Address of principal executive offices)	(Zip code)

(510) 653-0126

(Registrant’s telephone number, including area code)

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  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨  (do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No   x

Indicate the number of shares outstanding of each of the issuers classes of common stock as of the latest practicable date. As of April 29, 2016, the registrant had 35,759,820 shares of common stock, $0.001 par value per share, outstanding.

Report Table of Contents

TABLE OF CONTENTS

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	3
	Condensed Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015	3
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2016 and 2015	4
	Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2016 and 2015	5
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2016 and 2015	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	28
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47
Item 3.	Defaults Upon Senior Securities	47
Item 4.	Mine Safety Disclosures	48
Item 5.	Other Information	48
Item 6.	Exhibits	48
	Signatures	49

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

TUBEMOGUL, INC.

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

(Unaudited)

	March 31,			December 31,
	2016			2015
Assets
Current assets:
Cash and cash equivalents	$	83,758		$	83,439
Accounts receivable, net		147,628			159,899
Prepaid expenses and other current assets		5,123			3,752
Total current assets		236,509			247,090
Property, equipment and software, net		10,646			8,585
Restricted cash		1,563			1,563
Other assets		1,614			1,495
Total assets	$	250,332		$	258,733
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	45,140		$	47,346
Accrued liabilities		66,432			74,927
Revolving line of credit		6,050			2,050
Other current liabilities		2,429			1,701
Total current liabilities		120,051			126,024
Other liabilities		951			746
Note payable, net of current portion		2,140			1,787
Total liabilities		123,142			128,557
Commitments and contingencies (Note 5)
Stockholders’ equity:
Preferred stock; $0.001 par value; 10,000 shares authorized and 0 outstanding as of    March 31, 2016 and December 31, 2015, respectively	—			—
Common stock; $0.001 par value; 200,000 shares authorized and 35,694 and 35,344    shares issued and outstanding as of March 31, 2016 and December 31, 2015,    respectively		35			35
Additional paid-in capital		172,670			167,316
Accumulated deficit		(45,272	)		(37,016	)
Accumulated other comprehensive loss		(243	)		(159	)
Total stockholders’ equity		127,190			130,176
Total liabilities and stockholders’ equity	$	250,332		$	258,733

See accompanying notes to condensed consolidated financial statements.

3

TUBEMOGUL, INC.

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

	Three Months Ended
	March 31,
	2016			2015
Revenue:
Platform Direct	$	20,671		$	14,304
Platform Services		21,409			16,012
Total revenue		42,080			30,316
Cost of revenue		11,669			8,303
Gross profit		30,411			22,013
Operating expenses:
Research and development		12,566			8,769
Sales and marketing		16,188			11,112
General and administrative		10,276			7,827
Total operating expenses		39,030			27,708
Loss from operations		(8,619	)		(5,695	)
Other income (expense), net:
Interest income (expense), net		13			(28	)
Foreign exchange gain (loss), net		544			(1,307	)
Other income (expense), net		557			(1,335	)
Net loss before income taxes		(8,062	)		(7,030	)
Provision for income taxes		(194	)		(114	)
Net loss	$	(8,256	)	$	(7,144	)
Basic and diluted net loss per share	$	(0.23	)	$	(0.24	)
Basic and diluted weighted-average shares used to compute net loss per share		35,516			30,026

See accompanying notes to condensed consolidated financial statements.

4

TUBEMOGUL, INC.

Condensed Consolidated Statements of Comprehensive Loss

(In thousands)

(Unaudited)

	Three Months Ended
	March 31,
	2016			2015
Net loss	$	(8,256	)	$	(7,144	)
Other comprehensive loss:
Foreign currency translation adjustments		(84	)		(93	)
Comprehensive loss	$	(8,340	)	$	(7,237	)

See accompanying notes to condensed consolidated financial statements.

5

TUBEMOGUL, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Three Months Ended
	March 31,
	2016			2015
Cash flows from operating activities:
Net loss	$	(8,256	)	$	(7,144	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		849			412
Provision for doubtful accounts		(251	)		79
Provision for sales allowances		428			558
Stock-based compensation expense		4,059			2,401
Changes in operating assets and liabilities:
Accounts receivable		12,094			1,273
Prepaid expenses and other current assets		(1,371	)		(406	)
Other assets		(119	)		(45	)
Accounts payable		(1,269	)		4,605
Accrued liabilities		(8,495	)		(11,671	)
Other current and noncurrent liabilities		661			592
Net cash used in operating activities		(1,670	)		(9,346	)
Cash flows from investing activities:
Purchases of property, equipment and software		(3,847	)		(843	)
Net cash used in investing activities		(3,847	)		(843	)
Cash flows from financing activities:
Proceeds from term loan		840			—
Repayment of note payable and convertible note		(215	)		(366	)
Proceeds from revolving line of credit		4,000			—
Proceeds from issuances of common stock from the exercise of options and ESPP		1,295			911
Net cash provided by financing activities		5,920			545
Effect of exchange rate changes on cash and cash equivalents		(84	)		(93	)
Net increase (decrease) in cash and cash equivalents		319			(9,737	)
Cash and cash equivalents, beginning of period		83,439			46,592
Cash and cash equivalents, end of period	$	83,758		$	36,855
Supplemental disclosures:
Equipment purchases included in accounts payable	$	278		$	177
Cash paid for income taxes	$	236		$	34

See accompanying notes to condensed consolidated financial statements.

6

TUBEMOGUL, INC.

Notes to Condensed Consolidated Financial Statements

(In thousands, except per share data and where otherwise noted)

(Unaudited)

1. The Company and its Significant Accounting Policies

The Company

TubeMogul, Inc., a Delaware corporation (the Company), provides software for brand advertising. The Company’s customers include many of the world’s largest brands and their media agencies. The Company is headquartered in Emeryville, California and has offices in several other locations in the U.S. and internationally including in Kyiv, London, Paris, Sao Paulo, Shanghai, Singapore, Sydney, Tokyo and Toronto.

Principles of Consolidation and Basis of Presentation

These unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) regarding interim financial reporting, and include the accounts of the Company’s wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015.   

The consolidated balance sheet as of December 31, 2015 included herein was derived from the audited financial statements as of that date. These unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, the Company’s comprehensive loss and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full fiscal year ending December 31, 2016 or any other period.

Use of Estimates

The preparation of the financial statements in accordance with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates in these condensed consolidated financial statements include allowances for doubtful accounts, reserves for sales allowances, useful lives for depreciation and amortization, loss contingencies, valuation of deferred tax assets, provisions for uncertain tax positions, capitalization of software costs, delivery of impressions for campaigns using the Company’s programmatic TV (PTV) solution and assumptions used for valuation of stock-based compensation. Actual results could differ from those and other estimates.

Accounts Receivable

Accounts receivable are stated at net realizable value. The Company recognizes allowances for estimated bad debt and sales allowances in the period in which the related sale is recorded. Allowances for bad debts are estimated based on the Company’s historical write-off experience and an assessment of customer-specific circumstances including, aged balances, payment history, changes in payment terms, and other customer-specific information which may provide an indication that account balances are not collectible. Accounts receivable are written off when no future collection is possible.

Many of the Company’s contracts with advertising agencies provide that if the brand (i.e., the agency’s customer) does not pay the agency, the agency is not liable to the Company and the Company must seek payment from the brand. Accordingly, the Company considers the creditworthiness of the brand in establishing its allowance for doubtful accounts. However, since inception, the Company has not had to initiate collection efforts directly with any brands where the contract was with an advertising agency.

7

The following table presents the changes in the allowance for doubtful accounts:

	Three Months Ended			Year Ended
	March 31,			December 31,
	2016			2015
Balance, beginning of period	$	(2,110	)	$	(1,369	)
Reductions (additions) to allowance		251			(1,287	)
Write offs, net of recoveries		152			546
Balance, end of period	$	(1,707	)	$	(2,110	)

The Company established a reserve for sales allowances during the year ended December 31, 2014. Sales allowances primarily relate to credit memos issued for billing discrepancies and customer concessions, and are estimated using a combination of specifically identified potential claims and estimated amounts which are derived from actual historical experience. The allowance is recorded as a reduction to revenue in the consolidated statement of operations and accounts receivable on the consolidated balance sheets.

The following table presents the changes in sales allowances:

	Three Months Ended			Year Ended
	March 31,			December 31,
	2016			2015
Balance, beginning of period	$	(875	)	$	(460	)
Additions to allowance		(428	)		(3,244	)
Issued sales allowances		537			2,829
Balance, end of period	$	(766	)	$	(875	)

Fair Value Measurement and Financial Instruments

The Company measures the fair value of its financial instruments in accordance with of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) for Fair Value Measurements. Under this standard, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date. In determining fair values of all reported assets and liabilities that represent financial instruments, the Company uses the carrying market values of such amounts. The provision establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company.

Unobservable inputs are inputs that reflect the Company’s assumptions as to what market participants would use in pricing the asset or liability developed based on the best information available under the circumstances. The hierarchy is broken down into three levels based on the observability of inputs as follows:

Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

Level 2 — Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 — Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

The Company had $73,681 and $72,416 of cash equivalents as of March 31, 2016 and December 31, 2015, respectively, which are measured at fair value on a recurring basis. Inputs used in measuring fair value of cash equivalents are categorized as Level 1.     

From time to time the Company enters into foreign currency forward contracts to mitigate its exposure to foreign exchange risk.  The foreign currency forward contracts are valued using observable inputs, such as quotations on forward foreign exchange points and foreign interest rates and are categorized as Level 2. Realized gains from these contracts were insignificant for the three months ended March 31, 2016. The Company uses foreign currency forward contracts to mitigate the impact of foreign currency fluctuations of certain non-U.S. dollar denominated asset positions, primarily cash and accounts receivable. Gains and losses resulting from currency exchange rate movements on these forward contracts are recognized in other income (expense) in the accompanying condensed

8

consolidated statements of operations in the period in which the exchange rates change and offset the foreign currency gains and losses on the underlying exposure being hedged. The Company does not enter into derivative financial instruments for trading or speculative purposes.As of March 31, 2016, the Company had forward foreign exchange contracts to buy a total notional value of $15.3 million against various foreign currencies. The Company does not apply hedge accounting to its derivative transactions. The Company is exposed to credit loss in the event of nonperformance by the counterparty to the foreign currency foreign exchange contracts. The Company continually monitors its positions and the credit ratings of the counterparties involved to mitigate the amount of credit exposure.

Other financial instruments not measured at fair value on the accompanying consolidated balance sheets at March 31, 2016 and December 31, 2015, but which require disclosure of their fair values, include accounts receivable, accounts payable, accrued liabilities and debt. The estimated fair values of such instruments at March 31, 2016 and December 31, 2015 approximated their carrying values due to being short term in nature. The fair values of all of these instruments are categorized as Level 2 in the fair value hierarchy.

There were no assets measured using Level 3 inputs at March 31, 2016.

Segment Information

The Company considers operating segments to be components of the Company in which separate financial information is available that is evaluated regularly by the Company’s Chief Operating Decision Maker (CODM) in deciding how to allocate resources and in assessing performance. The CODM for the Company is the Chief Executive Officer. The CODM reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. The Company has one business activity, and there are no segment managers who are held accountable for operations, operating results or plans for levels or components below the consolidated unit level. Accordingly, the Company has determined that it has a single operating and reportable segment, which is to design, develop and market software for digital branding.

9

Recent Accounting Pronouncements

Standard	Description	Planned Date of Adoption	Effects on the Consolidated Financial Statements
Accounting Standards Update No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), (ASU 2016-08)	ASU 2016-08 clarifies the implementation guidance on principal versus agent considerations. The guidance includes indicators to assist an entity in determining whether it controls a specified good or service before it is transferred to the customers. The effective date and transition requirements are the same as the effective date and transition requirements of Update 2014-09. Accounting Standards Update No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, defers the effective date of Update 2014-09 by one year.	January 1, 2018	The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements and footnote disclosures.
Accounting Standards Update No. 2016-09, Compensation – Stock Compensation (Topic 718), (ASU 2016-09)	ASU 2016-09 identifies areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. For public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for any entity in any interim or annual period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period.	January 1, 2017	The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements and footnote disclosures.
Accounting Standards Update 2016-02, Leases,  (ASU 2016-02)	ASU 2016-02 requires lessees to recognize a right-of-use asset and lease liability for all leases with terms of more than twelve months. Recognition, measurement and presentation of expenses will depend on classification as a finance or operating lease. The ASU also requires certain quantitative and qualitative disclosures. Accounting guidance for lessors is largely unchanged. The amendments in this Update are effective for fiscal years beginning after December 15, 2018.	January 1, 2019	The requirements should be applied on a modified retrospective basis and the updated standard will be effective for the Company in the first quarter of 2020. The Company expects that the impact of the adoption of this standard will result in the recognition of a lease asset and lease liability for those operating leases in effect at the date of adoption however, the Company is still in the process of determining the full extent the impact the adoption of this ASU will have on its consolidated financial statements and related disclosures.
Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers,  (ASU 2014-09)	ASU 2014-09 clarifies existing accounting literature relating to how and when a company recognizes revenue. The updated standard will replace most existing revenue recognition guidance under U.S. generally accepted accounting principles (GAAP) when it becomes effective and permits the use of either the retrospective or cumulative effect transition method. Under ASU 2014-09, a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services. Additionally, the guidance requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The FASB decided on July 9, 2015 to defer for one year the effective date of the new revenue standard for public and nonpublic entities reporting under GAAP. The FASB also decided to permit entities to early adopt the standard, for annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.	January 1, 2018	The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements and footnote disclosures.

10

2. Property, Equipment and Software

Property, equipment and software consisted of the following:

	March 31,			December 31,
	2016			2015
Computer, software and office equipment	$	4,730		$	4,509
Capitalized internal use software costs		4,639			3,587
Furniture and fixtures		2,111			1,821
Leasehold improvements		3,683			2,336
		15,163			12,253
Less accumulated depreciation and amortization		(4,517	)		(3,668	)
Total	$	10,646		$	8,585

Total depreciation and amortization expense was $849 and $412 for three months ended March 31, 2016 and 2015, respectively.

3. Accrued Liabilities

Accrued liabilities consisted of the following:

	March 31,		December 31,
	2016		2015
Accrued media costs	$	55,722	$	61,040
Sales commissions		2,501		3,776
Payroll and related expenses		4,785		6,314
Other accrued expenses		3,424		3,797
Total	$	66,432	$	74,927

Accrued media costs consist of amounts owed to the Company’s vendors for impressions delivered through March 31, 2016 and December 31, 2015.

4. Debt Obligations

	March 31,		December 31,
	2016		2015
Short-term debt and current portion of long-term debt
Revolving credit facility	$	6,050	$	2,050
Current portion of long-term debt:
Term loan		1,120		848
Total current	$	7,170	$	2,898
Long-term debt
Term loan	$	3,260	$	2,635
Less: current portion of long-term debt:		1,120		848
Total noncurrent	$	2,140	$	1,787

Revolving Line of Credit

In April 2014, the Company entered into an amendment to its growth capital term loan and a revolving line of credit (Loan Agreement). The amendment increased the amount of the revolving line of credit to $35.0 million and extended the availability and maturity through April 1, 2016.  The amendment also introduced a new financial covenant that requires the Company to meet certain minimum revenue levels.

In December 2015, the Company entered into a second amendment to its Loan Agreement. The second amendment increased the amount of the revolving line of credit to $40.0 million and extended its maturity date to April 1, 2017.

11

Under the Loan Agreement, the Company may borrow under the revolving line of credit up to the lesser of (a) $40.0 million and (b) a borrowing base equal to 80% of eligible accounts receivable as defined in the agreement.  Advances under the revolving line of credit accrue interest at a floating per annum rate equal to the prime rate as published in the Western Edition Wall Street Journal. The Company is required to pay a minimum amount of interest equal to the amount of interest that would accrue per quarter on a notional outstanding principal balance of $2.1 million.

The Loan Agreement includes a covenant whereby the Company is required to maintain an adjusted quick ratio of at least 1.10 to 1.00, tested as of the last day of each month, on a consolidated basis. This covenant is applicable to a given month if the Company fails to maintain, as of the last day of such month, consolidated revenues equal at least to 85% of the revenue projected in the business plan approved by the Company’s Board of Directors, measured on a trailing six-month basis. The agreement also includes a revenue covenant which requires that the Company maintain consolidated revenues equal at least to 80% of the revenue projected in the Board approved business plan measured on a trailing six-month basis, as long as the required covenant shows not less than 15% growth from the comparable period in the preceding fiscal year.  

If the combined amount of the Company’s cash on deposit with the lender, plus the availability under the revolving line of credit is less than $10.0 million, then the Company is required to deliver additional reporting to the lender.

As of March 31, 2016, the Company had $6.1 million outstanding and had $33.9 million available under the revolving line of credit.

Term Loans

In connection with the December 2015 second amendment to its Loan Agreement, the Company added a $5.0 million capital equipment term loan. Outstanding amounts under the facility bear interest at a floating annual rate of prime plus 0.5%. The Company is required to repay each capital equipment financing facility loan in 36 equal monthly payments of principal plus accrued interest commencing on the first day of the month immediately following the funding of each capital equipment facility loan. As of March 31, 2016, the Company had $3.3 million outstanding under the capital equipment term loan. The interest rate at March 31, 2016, was approximately 4.0%.

Future Payments

Future principal payments of debt instruments as of March 31, 2016 were as follows:

	Principal Payments
2016 (nine months)		836
2017		7,201
2018		1,199
2019		74
Thereafter	—
Total payments	$	9,310

5. Commitments and Contingencies

Lease Commitments

The Company’s commitments for minimum rentals under its operating leases as of March 31, 2016 are as follows:

	Operating
	leases
2016 (nine months)	$	3,674
2017		4,668
2018		4,129
2019		3,836
2020		3,245
Thereafter		5,214
Total minimum lease payments	$	24,766

Rent expense was $1.3 million and $625 for the three months ended March 31, 2016 and 2015, respectively.

12

Future minimum rents due to the Company under its existing subleases are $0.4 million for 2016, and $0.6 million for 2017 through 2019. These amounts are not included in the table above.

Purchase Commitments

In August 2015, the Company entered into a commitment to purchase media from a single supplier in the amount of $7.5 million to $15.0 million, depending on the type of media purchased. These purchases can be made at any time from February 15, 2015 through September 30, 2016. As of March 31, 2016, the Company had purchased $1.9 million of media under this arrangement.   

In March 2016, the Company entered into a purchase commitment with a TV data partner, which requires the Company to pay approximately $1.2 million in monthly installments over a 12-month period beginning May 1, 2016.

Irrevocable Standby Letters of Credit

As of March 31, 2016, the Company had three irrevocable standby letters of credit outstanding totaling approximately $1.6 million. The Company entered into these letters of credit for the benefit of its sub landlord or landlord. These irrevocable letters of credit automatically renew on their anniversary so long as the related operating lease is still effective. The letter of credit may be canceled prior to the expiration date upon the written request of the beneficiary.

The Company is contractually required to keep the letters of credit for the term of the respective leases, therefore, the letters of credit are recorded as restricted cash and are classified as long-term assets on the condensed consolidated balance sheets.

Legal

The Company is involved from time to time in various claims and legal actions arising in the ordinary course of business. While it is not feasible to predict or determine the ultimate outcome of these matters, the Company believes that none of its current legal proceedings will have a material adverse effect on its financial position or results of operations.

6. Stock-Based Compensation

In July 2007, the board of directors and stockholders of the Company approved and adopted the TubeMogul, Inc. 2007 Equity Compensation Plan (the 2007 Plan) that permitted the grant of incentive and nonqualified stock options, stock awards (including restricted stock units (RSUs)), and stock appreciation rights to purchase shares of the common stock of the Company. Under the 2007 Plan, shares of common stock are reserved for the issuance of permitted awards to eligible participants. Options granted generally vest and become exercisable over a four-year term from the date of grant, at a rate of 25% after one year, then monthly on a straight-line basis thereafter. Options granted generally are exercisable for up to 10 years from the date of grant. RSUs granted are generally released from restriction over a four-year term from the date of grant, at a rate of 25% after one year, then quarterly on a straight-line basis thereafter.

The Company has authorized and reserved a total of 6,093,703 shares of common stock under the 2007 Plan for the grant of permitted awards to employees, directors, consultants, and other service providers for the Company or related companies. The 2007 Plan terminated effective July 18, 2014, though it continues to govern outstanding awards issued under the 2007 Plan prior to July 16, 2014.

In February 2014, the Company’s board of directors and stockholders approved and adopted the TubeMogul, Inc. 2014 Equity Incentive Plan (the 2014 Plan), and the 2014 Plan became effective on July 16, 2014, the day immediately preceding the Company’s initial public offering (IPO). The 2014 Plan permits the grant of stock options, stock appreciation rights, restricted stock, RSUs, performance awards and other cash-based or stock-based awards. In addition, the 2014 Plan contains a mechanism through which the Company may adopt a deferred compensation arrangement in the future. Under the 2014 Plan, shares of common stock are reserved for the issuance of permitted awards to eligible participants. Options granted will generally vest and become exercisable over a four-year term from the date of grant, at a rate of 25% after one year, then monthly on a straight-line basis thereafter. Options granted generally are exercisable for up to 10 years from the date of grant. RSUs granted will generally be released from restriction over a four year term from the date of grant, at a rate of 25% after one year, then quarterly on a straight-line basis thereafter.

The Company initially authorized and reserved a total of 2,500,000 shares of common stock under the 2014 Plan for the grant of permitted awards. This reserve automatically increased on January 1, 2016 by 1,767,183 shares and will continue to increase on each subsequent anniversary through 2024, by an amount equal to the smaller of (a) five percent (5%) of the number of shares of common stock issued and outstanding on the immediately preceding December 31; or (b) an amount determined by the Company’s board of

13

directors. This reserve may also be increased by up to an additional 4,975,000 shares, to include (a) any shares remaining available for grant under the 2007 Plan at the time of its termination; and (b) shares that would otherwise be returned to the 2007 Plan, upon the expiration or termination of awards granted under that plan.

Shares subject to awards which expire or are cancelled or forfeited will again become available for issuance under the 2014 Plan.

The shares available under the 2014 Plan will not be reduced by awards settled in cash.  The shares available under the 2014 Plan will be reduced by shares withheld to satisfy tax withholding obligations with respect to stock options and stock appreciation rights. The gross number of shares issued upon the exercise of stock appreciation rights or options exercised by means of a net exercise or by tender of previously owned shares will be deducted from the shares available under the 2014 Plan.

For purposes of the tables below, the 2007 Plan and the 2014 Plan are collectively referred to as the “Plan.” The following table summarizes the Plan’s stock option activity:

	Outstanding number of shares			Weighted-average exercise price per share		Weighted-average grant date fair value	Total intrinsic value of exercises		Weighted-average remaining contractual life		Aggregate intrinsic value
Balance at December 31, 2015		4,266		$	6.55					7.14	$	34,748
Options granted	—
Options exercised		(63	)		1.82		$	683
Options canceled		(8	)		7.99
Balance at March 31, 2016		4,195		$	6.62					6.90	$	32,079
Options exercisable and vested at    March 31, 2016		2,565		$	3.15					6.05	$	26,395
Options vested and expected to vest at    March 31, 2016		4,113		$	6.51					6.87	$	31,800

At March 31, 2016, there was approximately $9.9 million of total unrecognized compensation cost related to unvested options granted under the compensation plan. The remaining unrecognized compensation cost is expected to be recognized over the weighted average remaining vesting period of approximately 3.56 years at March 31, 2016.

The fair value of options granted to employees is estimated on the date of grant and to non-employees at each measurement period using the Black-Scholes-Merton option valuation model. This stock-based compensation expense valuation model requires the Company to make assumptions and judgments regarding the variables used in the calculation. These variances include the expected term (weighted average period of time that the options granted are expected to be outstanding), the expected volatility of the Company’s common stock, expected risk-free interest rate, expected dividends. To the extent actual results differ from the estimates, the difference will be recorded as a cumulative adjustment in the period estimates are revised. The Company uses the simplified calculation of expected term, as the Company does not have sufficient historical data to use any other method to estimate expected term. Expected volatility is based on an average of the historical volatilities of the common stock of several entities with characteristics similar to those of the Company. The expected risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option. Expected forfeitures are based on the Company’s historical experience.

There were no stock options granted in the three months ended March 31, 2016. The following assumptions were used to calculate the fair value of options for the three months ended March 31, 2015:

	Three Months Ended
	March 31,
	2015
Risk-free interest rate		1.80%
Dividend yield	—  %
Volatility		70%
Expected term	6.5 years

14

The following table summarizes the Plan’s RSU activity:

				Weighted-
	Outstanding			Average
	number of			Grant Date
	shares			Fair Value
Balance at December 31, 2015		2,067		$	13.51
RSUs granted		938			11.26
RSUs released		(167	)		13.79
RSUs canceled		(95	)		12.88
Balance at March 31, 2016		2,743		$	12.76

The fair value of RSUs granted to employees is estimated on the date of grant and to non-employees at each measurement period using the fair value of the underlying common stock.

At March 31, 2016, there was approximately $29.2 million of total unrecognized compensation cost related to unvested RSUs granted under the compensation plan. The remaining unrecognized compensation cost is expected to be recognized over the weighted average remaining vesting period of approximately 3.19 years at March 31, 2016.

The following table summarizes the effects of stock-based compensation in the Company’s accompanying condensed consolidated statements of operations:

	Three Months Ended
	March 31,
	2016		2015
	(in thousands)
Research and development	$	1,304	$	642
Sales and marketing		1,272		709
General and administrative		1,483		1,050
Total stock-based compensation	$	4,059	$	2,401

Employee Stock Purchase Plan

In February 2014, the Company’s board of directors adopted and the stockholders approved the Company’s 2014 Employee Stock Purchase Plan (ESPP), which became effective in July 2014. The ESPP allows eligible employees to purchase shares of the Company’s common stock through payroll deductions of up to 15% of their eligible compensation, subject to any plan limitations. The administrator may, in its discretion, modify the terms of offering periods. At the end of each offering period, employees are able to purchase shares at 85% of the lower of the fair market value of the Company’s common stock on the first trading day of the offering period or on the last day of the offering period. As of December 31, 2015 the Company had 1,136,964 shares available for sale under the ESPP. The ESPP provides for annual increases in the number of shares available for issuance under the ESPP on the first day of each fiscal year, equal to the least of (a) two percent of the number of shares of Stock issued and outstanding on the immediately preceding fiscal year, or (b) an amount determined by the Board.  

7. Net Loss per Share

The Company’s basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period. The diluted net loss per share is computed by giving effect to all potential dilutive common stock equivalents outstanding for the period. For purposes of this calculation, options to purchase common stock, RSUs and shares to be issued under the ESPP are considered common stock equivalents but have been excluded from the calculation of diluted net loss per share as their effect is antidilutive as the Company had net losses for the three months ended March 31, 2016 and March 31, 2015.

15

The following securities were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive for the periods presented:

	Three Months Ended
	March 31,
	2016		2015
Employee stock options		4,195		4,959
RSUs		2,743		1,202
ESPP		138		83
Total		7,076		6,244

8. Income Taxes

The Company is subject to income tax in the U.S. as well as other tax jurisdictions in which it conducts business. Earnings from non-U.S. activities are subject to local country income tax. The Company does not provide for federal income taxes on the undistributed earnings of its foreign subsidiaries as such earnings are to be reinvested indefinitely.

The Company recorded an income tax provision of $194 and $114 for the three months ended March 31, 2016 and March 31, 2015, respectively, related to foreign income taxes and state minimum taxes. Based on the available objective evidence during the three months ended March 31, 2016, management believes it is more likely than not that the tax benefits of the U.S. and Japan losses incurred during that period may not be realized by the end of the 2016 fiscal year. Accordingly, the Company did not record the tax benefits of the U.S. and Japan losses incurred during the three months ended March 31, 2016. The primary difference between the effective tax rate and the federal statutory tax rate relates to foreign tax rate differences, meals and entertainment and state and local minimum and capital taxes. As of March 31, 2016, the Company had no material uncertain tax positions.

Utilization of the net operating loss carryforwards may be subject to an annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended (the Code), and similar state provisions. Any annual limitation may result in the expiration of net operating losses before utilization.

9. Subsequent Events

In April 2016, the Company entered into a lease agreement with a landlord and a lease assignment agreement with the existing tenant, to lease additional office space at its headquarters in Emeryville. Under these agreements, the Company is required to pay approximately $6.1 million in lease payments beginning June 1, 2016. Future minimum rents under these agreements are approximately $0.9 million in 2016, $0.8 million in 2017 through 2020, and $2.0 million thereafter.  In connection with the lease agreement, the Company entered into an irrevocable standby letter of credit in the amount of $1.0 million for the benefit of its landlord. The irrevocable letter of credit automatically renews on its anniversary so long that the lease is still effective. The letter of credit may be canceled prior to the expiration date upon the written request of the beneficiary.

16

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition, results of operations and cash flows should be read in conjunction with (1) the unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q (Form 10-Q), and (2) the audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the fiscal year ended December 31, 2015 included in our Annual Report on Form 10-K (File No. 001-36543). This Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act.  These statements are often identified by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “will,” “would” or the negative or plural of these words or similar expressions or variations. Such forward-looking statements are subject to a number of risks, uncertainties, assumptions and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified herein, and those discussed in the section titled “Risk Factors,” set forth in Part II, Item 1A of this Form 10-Q and in our other SEC filings. You should not rely upon forward-looking statements as predictions of future events. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

Overview

TubeMogul is a leader in software for brand advertising. Advertisers use TubeMogul’s software platform to plan, buy, measure, and optimize their global brand advertising. By reducing complexity, improving transparency and leveraging real-time data, our platform enables advertisers to gain greater control of their advertising spend and achieve their brand advertising objectives.

By integrating programmatic technologies and disparate sources of inventory within a single platform, we enable our customers to launch sophisticated, scalable advertising campaigns — onto digital devices and televisions — within minutes. Brands use our platform to verify the success and impact of their advertising campaigns by measuring the audience reached by the campaign, how the audience interacted with their advertisements and the impact the campaign had on the consumer’s perception of the brand. Our platform uses these real-time insights to dynamically optimize spend across multiple sources of inventory including digital ad exchanges, supply-side platforms, private marketplaces, ad networks and direct premium publishers. Our platform measures key brand advertising metrics including brand lift, as measured by integrated brand surveys, as well as GRPs (Gross Rating Points) and engagement.

We make our platform available through two offerings: Platform Direct, which allows advertisers to continuously run campaigns through a self-serve model, and Platform Services, which allows advertisers to specify campaign objectives and have our team execute the campaign on their behalf using our platform.

Our Platform Direct offering allows advertisers to run self-serve campaigns eliminating the often complex and inefficient RFP process through which digital media is typically bought. Platform Direct customers enter into master service agreements with us that enable them to execute all of their campaigns under the agreement without the need for campaign-by-campaign insertion orders or IOs. We generate Platform Direct revenue by charging our customers a utilization fee that is a percentage of media spend as well as fees for additional features offered through our platform. Because Platform Direct customers have control of the media purchasing decisions through our platform, our Platform Direct revenue is recognized on a net basis, meaning that it only includes our fees and not the cost of media purchased. The gross margin for our Platform Direct offering for the year ended December 31, 2015 was 96%.

Our Platform Services offering allows advertisers who continue to use a traditional RFP process to realize the benefits of our platform without needing to alter their purchasing process. Platform Services arrangements are generally in the form of discrete IOs which are negotiated on a campaign-by-campaign basis. We generate Platform Services revenue by delivering digital video advertisements based upon our customer’s campaign specifications. Our Platform Services revenue is recognized on a gross basis, meaning that it includes the cost of the media purchased. The gross margin for our Platform Services offering for the year ended December 31, 2015 was 49%.

For 2015, campaigns were executed through our platform for over 5,000 brands, both directly and through agencies. Total Spend through our platform has increased to $414.2 million for the year ended December 31, 2015 from $254.3 million and $111.9 million for the years ended December 31, 2014 and 2013, respectively, representing a compound annual growth rate, or CAGR, of 92%. We define Total Spend as the aggregate gross dollar volume that our Platform Direct customers and Platform Services customers spend through our platform, which includes media purchases and our fees. We actively engage with our Platform Services customers to educate them about the benefits of migrating to our Platform Direct offering.

We were incorporated in California in 2007 and reincorporated in Delaware in March 2014.

17

First Quarter 2016 Highlights

For the first quarter of 2016, we recorded Revenue of $42.1 million, an increase of 39% as compared to the first quarter of 2015, and gross profit of $30.4 million, an increase of 38% as compared to the first quarter of 2015. Gross margin was 72.3%, compared with 72.6% in the first quarter of 2015.

Total Spend for the first quarter of 2016 was $112.8 million, an increase of 58% as compared to the first quarter of 2015.

The change in revenue and gross margin reflects both the change in the contribution of Platform Direct and Platform Services Spend to Total Spend year over year, and the impact of increased PTV activity subsequent to the first quarter of 2015. For the first quarter of 2016, our Platform Direct offering represented 81% of Total Spend as compared to 78% in the first quarter of 2015, and our Platform Services offering represented 19% of Total Spend in the first quarter of 2016 compared to 22% in the first quarter of 2015.

Operating loss was $8.6 million, compared to an operating loss of $5.7 million in the first quarter of 2015. Basic and diluted net loss per share was $0.23, compared to $0.24 in the first quarter of 2015.

Please see “Total Spend and Platform Direct Spend” below for a reconciliation of Total Spend and Platform Direct Spend to the most directly comparable financial measures calculated in accordance with GAAP.

Key Operating and Financial Performance Metrics

To help us monitor the overall performance of our business and identify trends, we evaluate the following key metrics: Total Spend, Platform Direct Spend, revenue, gross profit, gross margin and Adjusted EBITDA. Total Spend, Platform Direct Spend and Adjusted EBITDA are discussed immediately following the table below. Revenue, gross profit and gross margin are further discussed under the headings “Components of our Results of Operations.”

	Three Months Ended
	March 31,
	2016			2015
	(in thousands, except for percentages)
Key Metrics
Platform Direct Spend	$	91,374		$	55,265
Platform Services Spend		21,409			16,012
Total Spend	$	112,783		$	71,277
Platform Direct revenue	$	20,671		$	14,304
Platform Services revenue		21,409			16,012
Total revenue	$	42,080		$	30,316
Gross profit	$	30,411		$	22,013
Gross margin		72.3	%		72.6	%
Adjusted EBITDA	$	(3,711	)	$	(2,882	)

18

Total Spend and Platform Direct Spend

For purposes of calculating Total Spend and Platform Direct Spend, we define spend as the aggregate gross dollar volume that our customers spend through our platform, which includes cost of media purchases and our fees. Platform Direct Spend does not represent revenue earned by us and is a non-GAAP financial measure defined by us as the spend through our Platform Direct offering. Platform Services Spend equals our Platform Services revenue. Total Spend does not represent revenue earned by us and is a non-GAAP financial measure defined by us as the sum of Platform Direct Spend and Platform Services Spend. We believe Platform Direct Spend and Total Spend are meaningful measures of our operating performance because our ability to generate increases in Platform Direct Spend and Total Spend are strongly correlated to our ability to generate increases in Platform Direct revenue and revenue, respectively. Platform Direct Spend and Total Spend are used by our management and board of directors to understand our business and make operating decisions. A limitation of each of Platform Direct Spend and Total Spend is that each is a measure that we have defined for internal purposes that may be unique to us, and therefore it may not enhance the comparability of our results to other companies in our industry that have similar business arrangements but present the impact of media costs differently. Because of these limitations you should consider Platform Direct Spend and Total Spend along with the corresponding GAAP-based measures. The following is a reconciliation of these measure to Platform Direct revenue and revenue, the most directly comparable financial measures calculated in accordance with GAAP.

	Three Months Ended				Years ended
	March 31,				December 31,
	2016		2015		2015		2014		2013
	(in thousands)
Platform Direct Revenue	$	20,671	$	14,304	$	72,212	$	49,231	$	19,331
Plus: Non-GAAP Platform Direct Media Cost		70,703		40,961		233,536		140,017		54,685
Platform Direct Spend		91,374		55,265		305,748		189,248		74,016
Platform Services Spend		21,409		16,012		108,484		65,012		37,883
Total Spend	$	112,783	$	71,277	$	414,232	$	254,260	$	111,899

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP financial measure defined by us as net loss before interest income (expense), net, provision for income tax, depreciation and amortization expense, stock-based compensation expense, and foreign exchange gains and losses, both realized and unrealized. Adjusted EBITDA is a key measure used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short and long-term operational plans. In particular, we believe that the exclusion of the amounts in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors. Please see below for a reconciliation of Adjusted EBITDA to net loss, the most directly comparable financial measure calculated in accordance with GAAP.

	Three Months Ended
	March 31,
	2016			2015
	(in thousands)
Net loss	$	(8,256	)	$	(7,144	)
Interest (income) expense, net		(13	)		28
Provision for income taxes		194			114
Depreciation and amortization expense		849			412
Stock-based compensation expense		4,059			2,401
Foreign exchange (gain) loss, net		(544	)		1,307
Adjusted EBITDA	$	(3,711	)	$	(2,882	)

19

In prior reported quarters, our definition of Adjusted EBITDA excluded most amortization, but included amortization of internal-use software. In March 2016, we revised our definition of Adjusted EBITDA to exclude all amortization. We believe the exclusion of all amortization from Adjusted EBITDA provides management and the board of directors a more useful measure to understand and evaluate our core operating performance and trends. For comparison purposes, the following is a reconciliation of Adjusted EBITDA to net loss, using our historical method for calculating this non-GAAP financial measure:

	Three Months Ended
	March 31,
	2016			2015
	(in thousands)
Net loss	$	(8,256	)	$	(7,144	)
Interest (income) expense, net		(13	)		28
Provision for income taxes		194			114
Depreciation and amortization expense, excluding amortization of    internal use software development costs		605			317
Stock-based compensation expense		4,059			2,401
Foreign exchange (gain) loss, net		(544	)		1,307
Adjusted EBITDA	$	(3,955	)	$	(2,977	)

Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP. Some of these limitations are as follows:

· although depreciation and amortization expense are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;

· Adjusted EBITDA does not reflect: (1) changes in, or cash requirements for, our working capital needs; (2) the potentially dilutive impact of stock-based compensation; (3) impact of foreign exchange gains and losses, both realized and unrealized; or (4) tax payments that may represent a reduction in cash available to us; and

· other companies, including companies in our industry, may calculate Adjusted EBITDA or similarly titled measures differently, which reduces its usefulness as a comparative measure.

Because of these and other limitations, you should consider Adjusted EBITDA along with other GAAP-based financial performance measures, including various cash flow metrics, net loss, and our GAAP financial results.

Factors Affecting Our Performance

We believe that the continued growth and future success of our business depend on various opportunities, challenges and other factors, including the following:

Retention of and Growth in Spend by Existing Customers

Our future revenue is dependent upon our ability to retain our existing customers and to gain a larger amount of their advertising spend through both our Platform Direct and Platform Services offerings. In particular, our recent growth in Total Spend has been driven by an increase in spend by our existing Platform Direct customers.

Customer Transition from Platform Services to Platform Direct

Our sales strategy is to educate our customers about the benefits of shifting from Platform Services, where purchases are made on a campaign-by-campaign basis, to Platform Direct, where customers are able to consolidate their video advertising spend through one solution on a self-serve basis. Our future performance will be impacted by our ability to continue to convince customers to shift to our Platform Direct offering. Since 2011, the growth in the proportion of our Total Spend represented by Platform Direct Spend is an indicator of our ability to convince customers to shift from Platform Services to our Platform Direct offering.

Sales Leverage Improvement

Our ability to achieve and sustain profitability will depend on our ability to generate operating leverage inherent from the self-serve model of our Platform Direct offering. After our initial investments to acquire new Platform Direct customers, we typically generate significant revenue from these customers without commensurate increases in sales and marketing expenses.

20

Investment in Growth

We plan to continue to invest for long-term growth. We anticipate that our operating expenses will increase in the foreseeable future as we invest in research and development to maintain and enhance our platform, in sales and marketing primarily to acquire new customers and general and administrative expenses to support our growth. We believe that these investments will contribute to our long-term growth, although they will adversely affect our results of operations in the near term. In addition, the timing of these investments can result in fluctuations in our annual and quarterly operating results.

Market Growth

We expect to benefit from the continued growth in the digital video advertising market but any material change in the growth rate of this market could affect our performance. The growth of such market may be adversely impacted by a variety of factors including any delays in the shift of video advertising spend from traditional TV to digital channels. In addition, advertising spend is closely tied to the performance of the economy and a downturn in economic conditions could adversely affect the overall advertising market and our operating results.

Revenue Growth from Additional Media Markets

Our future performance will be dependent in part upon the continued growth of digital video channels, including mobile video, connected TV, social video and TV formats such as video on demand, and upon our ability to grow our revenue in these channels. Accordingly, our business and operating results will be significantly affected by our ability to timely enhance our platform to address these emerging segments of the digital video advertising market and the speed with which advertisers adopt these channels to conduct their advertising campaigns.

Seasonality

In the advertising industry, companies commonly experience seasonal fluctuations in revenue. For example, many advertisers allocate the largest portion of their budgets to the fourth quarter of the calendar year to coincide with increased holiday purchasing. Historically, the fourth quarter of the year reflects our highest level of advertising activity, and the first quarter reflects the lowest level of such activity. We expect our revenue to continue to fluctuate based on seasonal factors that affect the advertising industry as a whole.

Components of Our Results of Operations

Revenue

We generate revenue from our Platform Direct customers from fees based on a percentage of their media spend through our platform as well as from fees for additional services delivered concurrently such as audience targeting data, ad serving, brand safety, topic targeting and other reporting related services that we offer. We generate revenue from our Platform Services customers by delivering digital video advertisements based upon a pre-agreed set of fixed objectives with an advertiser or agency. Our Platform Services business is generally priced based upon a cost per thousand impressions, or CPM, or based upon specific campaign specifications such as number of engagements, completed views or on-target impressions.

Cost of Revenue

Cost of revenue is comprised primarily of media costs. Media costs consist of advertising impressions we purchase from advertising sources of inventory in connection with our Platform Services offering. We typically pay for these impressions on a CPM basis. Cost of revenue also includes technical infrastructure costs which include the cost of internal and third-party servers and related services, internet access costs and amortization of internal use software development costs on revenue-producing technologies. Technical infrastructure costs represented 4.6% of our cost of revenue for the three months ended March 31, 2016. After giving effect to the allocation of these costs between our Platform Direct revenue (in respect of which it is the largest component of cost of revenue) and Platform Services revenue based upon the amount of media purchases through each service, our gross margin for Platform Direct revenue and Platform Services revenue was 96.9% and 48.5%, respectively, for the three months ended March 31, 2016.

In our Platform Services arrangements, we generally enter into binding IOs with fixed price commitments which are determined prior to the launch of an advertising campaign. To fulfill these commitments, we purchase advertising inventory on a real-time basis during the course of the advertising campaign period, which may be weeks or months. As a result, we are exposed to market risk that the cost of such inventory to us may be greater than we expected when we entered into the IO or we may benefit from market prices being less than we expected, either of which impact our media costs as a percentage of revenue.

21

Operating Expenses

We classify our operating expenses into three categories: research and development, sales and marketing and general and administrative. Our operating expenses consist primarily of personnel costs, technical infrastructure costs, marketing related costs, and facilities costs. Personnel costs include salaries, bonuses and commissions for sales personnel, stock-based compensation expense, and employee benefit costs.

Our research and development expenses consist primarily of personnel costs, outsourced engineering costs associated with the ongoing maintenance and development of our platform and related technologies, allocated technical infrastructure costs directly related to research and development activities, and other operating costs allocable to engineering activities.

Our sales and marketing expenses consist primarily of personnel costs, including operations personnel costs allocable to sales and marketing activities, outsourced sales and marketing activities, brand marketing, trade shows, travel and entertainment, and marketing collateral.

Our general and administrative expenses consist primarily of personnel costs associated with our executive, finance, human resources, legal and other administrative personnel, and also include accounting, legal and other professional service fees, facility costs, bad debt expense, depreciation expense and other corporate expenses.

Other Income (Expense), Net

Interest income (expense), net is related to the interest earned on our money market cash balances, and interest due on our term loan and revolving line of credit.

Foreign currency gain (loss), net consists of gains and losses on foreign currency translation as well as realized losses or gains from the settlement of our foreign currency forward contracts. We have foreign currency exposure related to our accounts receivable and accounts payable that are denominated in currencies other than the U.S. dollar, principally the British pound, Canadian dollar, Euro and Australian dollar. To the extent that our revenue from international operations increases and the scope of our international operations grows, our operating results will become more susceptible to changes in foreign currency rates.

Provision for Income Taxes

Provision for income taxes consists primarily of state income taxes in the U.S. and income taxes in foreign jurisdictions in which we conduct business. Due to uncertainty as to the realization of benefits from our deferred tax assets, including net operating loss carry forwards, research and development and other tax credits, we have a full valuation allowance reserved against such assets.

22

Results of Operations

The following table sets forth our condensed consolidated results of operations and our condensed consolidated results of operations as a percentage of total revenue for the periods presented. The period-to-period comparisons of results are not necessarily indicative of future periods.

	Three Months Ended
	March 31,
	2016			%of Revenue			2015			% of Revenue
	(in thousands, except percentages)
Revenue:
Platform Direct	$	20,671			49	%	$	14,304			47	%
Platform Services		21,409			51	%		16,012			53	%
Total revenue		42,080			100	%		30,316			100	%
Cost of revenue		11,669			28	%		8,303			27	%
Gross profit		30,411			72	%		22,013			73	%
Operating expenses:
Research and development (1)		12,566			30	%		8,769			29	%
Sales and marketing (1)		16,188			38	%		11,112			37	%
General and administrative (1)		10,276			24	%		7,827			26	%
Total operating expenses		39,030			93	%		27,708			91	%
Loss from operations		(8,619	)		(20	)%		(5,695	)		(19	)%
Other income (expense), net:
Interest income (expense), net		13			0	%		(28	)		(0	)%
Foreign exchange gain (loss), net		544			1	%		(1,307	)		(4	)%
Other income (expense), net		557			1	%		(1,335	)		(4	)%
Net loss before income taxes		(8,062	)		(19	)%		(7,030	)		(23	)%
Provision for income taxes		(194	)		(0	)%		(114	)		(0	)%
Net loss	$	(8,256	)		(20	)%	$	(7,144	)		(24	)%

(1) Stock-based compensation expense included above was as follows:

	Three Months Ended
	March 31,
	2016		2015
	(in thousands)
Research and development	$	1,304	$	642
Sales and marketing		1,272		709
General and administrative		1,483		1,050
Total stock-based compensation	$	4,059	$	2,401

Comparison of the Three Months Ended March 31, 2016 and 2015

Revenue

	Three Months Ended
	March 31,
	2016		2015		$ Change		% Change
	(in thousands, except percentages)
Platform Direct	$	20,671	$	14,304	$	6,367		45	%
Platform Services		21,409		16,012		5,397		34	%
Total revenue	$	42,080	$	30,316	$	11,764		39	%

23

Revenue increased $11.8 million, or 39%, during the three months ended March 31, 2016 compared to the three months ended March 31, 2015. Platform Direct revenue increased by $6.4 million, or 45%, during the three months ended March 31, 2016 compared to the three months ended March 31, 2015. Platform Direct revenue from Platform Direct customers who were customers during the three months ended March 31, 2015 contributed $1.6 million of the growth. Platform Direct revenue from Platform Direct customers who spent with us during the three months ended March 31, 2016 that did not spend with us during the three months ended March 31, 2015 contributed $4.8 million of the growth. Platform Services revenue increased by $5.4 million, or 34%, during the three months ended March 31, 2016 compared to the three months ended March 31, 2015. The increase in Platform Services revenue was primarily due to the revenue from customers who spent with us during the three months ended March 31, 2016 that did not spend with us during the three months ended March 31, 2015. We expect that revenue will increase over the next quarter as we expand our customer base and existing customers increase their advertising spend through our platform.

Cost of Revenue, Gross Profit and Gross Margin

	Three Months Ended
	March 31,
	2016			2015			$ Change		%Change
	(in thousands, except percentages)
Cost of revenue	$	11,669		$	8,303		$	3,366		41	%
Gross profit		30,411			22,013			8,398		38	%
Gross margin		72.3	%		72.6	%

Cost of revenue increased $3.4 million, or 41%, during the three months ended March 31, 2016 compared to the three months ended March 31, 2015. This increase was primarily due to a $3.2 million increase in media costs associated with the growth in Platform Services revenue. Technical infrastructure costs and amortization of internally developed software costs increased by $0.3 million, or 51%, for the three months ended March 31, 2016 compared to the three months ended March 31, 2015. The increase in technical infrastructure cost was due to increased costs of third-party data center operations, hosting and ad server management and bandwidth costs which was associated with the growth in Platform Direct and Platform Services revenue in the three months ended March 31, 2016. After giving effect to the allocation of these costs between Platform Direct revenue and Platform Services revenue, gross profit from Platform Direct and Platform Services revenue increased to $20.0 million and $10.4 million for the three months ended March 31, 2016 from $13.8 million and $8.2 million for the three months ended March 31, 2015, respectively. Gross margin decreased to 72.3% for the three months ended March 31, 2016 compared to 72.6% for the three months ended March 31, 2015. We expect that gross profit will increase over the next quarter as we increase revenue.

Research and Development

	Three Months Ended
	March 31,
	2016		2015		$ Change		%Change
	(in thousands, except percentages)
Research and development	$	12,566	$	8,769	$	3,797		43	%

Research and development expense increased by $3.8 million, or 43%, during the three months ended March 31, 2016 compared to the three months ended March 31, 2015. The increase was primarily due to an increase in personnel costs of $3.9 million, related to a 45% increase in headcount, as of March 31, 2016, which reflected our continued investment in hiring technical personnel, including several engineering leads, to maintain our platform and support our research and development effort. We believe that continued investment in our platform is critical to achieving our objectives, and we expect research and development expenses to continue to increase over the next quarter.

Sales and Marketing

	Three Months Ended
	March 31,
	2016		2015		$ Change		%Change
	(in thousands, except percentages)
Sales and marketing	$	16,188	$	11,112	$	5,076		46	%

24

Sales and marketing expense increased by $5.1 million, or 46%, during the three months ended March 31, 2016 compared to the three months ended March 31, 2015. The increase was primarily due to an increase in personnel costs of $4.8 million, related to a 31% increase in headcount to support our revenue growth. We expect sales and marketing expenses to increase over the next quarter as we continue to actively invest in our business, including expanding our domestic and international business.

General and Administrative

	Three Months Ended
	March 31,
	2016		2015		$ Change		%Change
	(in thousands except percentages)
General and administrative	$	10,276	$	7,827	$	2,449		31	%

General and administrative expense increased by $2.4 million, or 31%, during the three months ended March 31, 2016 compared to the three months ended March 31, 2015. The increase was primarily due to an increase in personnel costs of $1.4 million, related to a 27% increase in headcount as of March 31, 2016, including additions of several senior administrative personnel and an increase in facility costs of $0.9 million as we opened new offices and expanded some of our existing facilities. We expect to continue to invest in our corporate infrastructure and incur further expenses related to being a public company, including accounting and legal costs, investor relations costs, insurance premiums and other compliance costs associated with Section 404 of the Sarbanes-Oxley Act. As a result, we anticipate that general and administrative expenses will increase over the next quarter.

Other Income (Expenses), Net

The $1.9 million favorable change in other income (expense), net was primarily due to foreign currency exchange gains and losses from the strengthening of the US dollar against most currencies in 2015 and early 2016, as well as realized gains and losses from the settlement of our foreign currency forward contracts.

Provision for Income Taxes

Our provision for income taxes for the three months ended March 31, 2016 and March 31, 2015 primarily relates to state taxes and taxes due in foreign jurisdictions.

Liquidity and Capital Resources

Since our incorporation in March 2007, we have financed our operations and capital expenditures through private sales of convertible preferred stock, revolving lines of credit, term debt and $106.0 million of net proceeds from our IPO and follow-on offerings, after deducting underwriting discounts, commissions and before deducting total expenses in connection with our public offerings of $4.2 million.

Our principal sources of cash are our existing cash and cash equivalents balances and funds that may be drawn under our revolving line of credit and our capital equipment term loan. As of March 31, 2016, we had cash and cash equivalents of $83.8 million and borrowing capacity of $33.9 million under our revolving line of credit and $1.7 million under our capital equipment term loan. As of March 31, 2016 we had $6.1 million outstanding under the revolving line of credit and $3.3 million outstanding under the capital equipment term loan. We believe that our existing cash and cash equivalents together with the revolving line of credit and the capital equipment term loan, will be sufficient to meet our working capital requirements for at least the next 12 months. However, our liquidity assumptions may prove to be incorrect, and we could utilize our available financial resources sooner than we currently expect. Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth in the section of this Form 10-Q entitled Item 1A “Risk Factors.”

25

Cash Flows

The following table summarizes our cash flows for the periods presented:

	Three Months Ended
	March 31,
	2016			2015
	(in thousands)
Cash flows used in operating activities	$	(1,670	)	$	(9,346	)
Cash flows used in investing activities		(3,847	)		(843	)
Cash flows provided by financing activities		5,920			545
Effects of exchange rate on cash and cash equivalents		(84	)		(93	)
Increase (decrease) in cash and cash equivalents	$	319		$	(9,737	)

Operating Activities

Cash used in operating activities is primarily influenced by the amount of cash we invest in personnel and infrastructure to support the anticipated growth of our business and the increase in the Total Spend by customers using our platform. Cash used in operating activities has typically been due to net loss, adjusted for non-cash expense items such as depreciation, amortization and stock-based compensation expense, and changes in our operating assets and liabilities in particular accounts receivable, and liabilities as we grow our business. In periods of high growth, our working capital needs may become greater as we remit payment for media purchased through our platform by our Platform Direct and Platform Services customers in advance of receiving payment from our customers.  Our average DPO was 86 days and our average DSO was 103 days for 2015. We compute our DSO and DPO as of a given date based on our average trade receivables or trade payables, respectively, for the trailing twelve month period divided by, for DSO, daily Total Spend and for DPO, daily cost of revenue and operating expenses, excluding noncash and payroll related expenses, in each case, over such period. The average trade receivables or trade payables are the average of the trade receivables or trade payables balances at the beginning and end of the twelve month period. Daily Total Spend is the spend for the trailing twelve month period divided by 365 days. Daily cost of revenue and operating expenses are the cost of revenue and operating expenses, excluding noncash and payroll related expenses, for the trailing twelve month period divided by 365 days. While we typically experience slow payment by advertising agencies, as is common in our industry, we have historically experienced minimal accounts receivable write-offs.

Cash used in operating activities in the three months ended March 31, 2016 was $1.7 million, due to net loss of $8.3 million, offset by a $1.5 million effect of changes in operating assets and liabilities and by non-cash expenses totaling $5.1 million which primarily comprised of stock based compensation expense. The net change in working capital was primarily due to a decrease in accounts receivable of $12.1 million related to the decrease in Total Spend, offset by a decrease of $9.8 million in accounts payable and accrued liabilities related to a decrease in purchases of media and other liabilities to support the decrease in Total Spend, due to seasonality.

Cash used in operating activities in the three months ended March 31, 2015 was $9.3 million, due to net loss of $7.1 million, offset by non-cash expenses totaling $3.4 million, and the $5.6 million effect of changes in operating assets and liabilities. The net change in working capital was due to a decrease of $7.1 million in accrued liabilities and accounts payable related to a decrease in purchase of media and other liabilities to support the decrease in Total Spend, due to seasonality.

We expect cash used by operating activities to fluctuate significantly in future periods as a result of a number of factors, some of which are outside of our control, including the timing of our billings and collections, our operating results, and the timing and amount of our media purchases and other liability payments.

Investing Activities

Cash used by investing activities in the three months ended March 31, 2016 was $3.8 million due to the purchase of property, equipment and software, in support of the growth of the business.

Cash used in investing activities in the three months ended March 31, 2015 was $0.8 million, primarily due to purchase of property, equipment and software, in support of the growth of the business.

Financing Activities

Cash provided by financing activities in the three months ended March 31, 2016 was $5.9 million, primarily due to $4.8 million in the borrowings under our debt facilities and $1.3 million from the proceeds from the issuances of common stock from the exercises of options and under the ESPP.

26

Cash provided by financing activities in the three months ended March 31, 2015 was $0.5 million, primarily due to proceeds of issuing common stock under the ESPP and the result of option exercises of $0.9 million, offset by $0.3 million of repayment on a note payable.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of March 31, 2016.

Indemnification Agreements

In the normal course of business, we provide customers with indemnification provisions of varying scope against claims of intellectual property infringement by third parties arising from the use of our products. Historically, costs related to these indemnification provisions have not been significant and we are unable to estimate the maximum potential impact of these indemnification provisions on our future results of operations. In addition, we have entered into indemnification agreements with directors and certain officers and employees that will require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees. No demands have been made upon us to provide indemnification under such agreements and there are no claims that we are aware of that could have a material effect on our consolidated balance sheet, consolidated statement of operations, consolidated statement of comprehensive loss or consolidated cash flows.

Contractual Obligations and Commitments

	Payments Due by Period
	Total		Less than 1 Year		1-3 Years		3-5 Years		More Than 5 Years
	(in thousands)
Operating lease obligations	$	24,766	$	4,927	$	8,533	$	7,773	$	3,533
Notes payable		3,260		1,146		2,114		—		—
Revolving line of credit		6,050		6,050		—		—		—
Data providers		1,200		1,000		200		—		—
	$	35,276	$	13,123	$	10,847	$	7,773	$	3,533

Operating lease obligation amounts above do not reflect our future minimum rents receivable under our existing subleases of approximately $0.6 million during the next year and $1.5 million thereafter.

In August 2015, we entered into a commitment to purchase media in the amount of $7.5 million to $15.0 million, depending on the type of media purchased. These purchases can be made at any time from February 15, 2015 through September 30, 2016. As of March 31, 2016, the Company had purchased $1.9 million of media under this arrangement. Future payments under this arrangement are not included in the above table.

Credit Facilities

Our Loan and Security Agreement with Silicon Valley Bank, as amended, (Loan Agreement), provides for a $40.0 million revolving line of credit with a maturity date of April 1, 2017 and a $5.0 million capital equipment term loan. The Loan Agreement also includes a financial covenant that requires that we meet certain minimum revenue levels. As of March 31, 2016, the total borrowings outstanding under the revolving line of credit were $6.1 million and the total borrowings outstanding under the capital equipment term loan were $3.3 million. Advances under the line of credit accrue interest at a floating per annum rate equal to the prime rate as published in the Western Edition Wall Street Journal. The capital equipment term loan bears interest at a floating annual rate of prime plus 0.5%, and when utilized, we are required to make equal monthly payments of principal plus accrued interest over a period of 36 months from the date of borrowing. As of March 31, 2016, we were compliant with existing loan covenants.

Critical Accounting Policies, Judgments and Estimates

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, or GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.

27

We believe that the assumptions and estimates associated with revenue recognition, stock-based compensation, capitalized software development costs, and income taxes have the greatest potential impact on our consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates. There have been no material changes to our critical accounting policies and significant judgments and estimates as compared to the critical accounting policies and significant judgments and estimates as described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015.

Recently Issued Accounting Pronouncements

For a description of accounting changes and recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our condensed consolidated financial statements, see Note 1 in the notes to condensed consolidated financial statements of this Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We have operations both within the U.S. and internationally, and we are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate and foreign exchange risks.

Interest Rate Fluctuation Risk

Our cash and cash equivalents consist of cash and money market funds. Our borrowings under our revolving credit facility and term loans are generally at floating interest rates. The primary objective of our investment activities is to preserve principal while maximizing income without significantly increasing risk. Because our cash and cash equivalents have a relatively short maturity, our portfolio’s fair value is relatively insensitive to interest rate changes. We do not believe that an increase or decrease in interest rates of 100 basis points would have a material effect on our operating results or financial condition. In future periods, we will continue to evaluate our investment policy in order to ensure that we continue to meet our overall objectives.

Foreign Currency Exchange Risk

We have limited foreign currency risks related to our revenue and operating expenses denominated in currencies other than the U.S. dollar, principally the Australian dollar, the Canadian dollar, the British pound and the Euro. The volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy. Although we have experienced and will continue to experience fluctuations in our net loss as a result of transaction gains (losses) related to revaluing certain cash balances, trade accounts receivable balances and intercompany balances that are denominated in currencies other than the U.S. dollar, we believe such a change will not have a material impact on our results of operations. As our international operations expand, our operating results may be more exposed to fluctuations in the exchange rates of the currencies in which we do business. We use derivative financial instruments to reduce foreign currency exchange risks. We use foreign currency forward contracts to partially mitigate the impact of fluctuations in cash and accounts receivable balances denominated in foreign currency. We do not use these contracts for speculative or trading purposes, nor are they designated as hedges. These contracts typically have a maturity of one month, and we record gains and losses from these instruments in other income (expense), net.

As of March 31, 2016, we had forward foreign exchange contracts to buy a total notional value of $15.3 million against various foreign currencies.

Item 4. Control and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2016. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and procedures as of March 31, 2016, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

28

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred the period covered by this Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls 

Our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP.  However, our management, including our Chief Executive Officer and our Chief Financial Officer, does not expect that our disclosure controls and procedures will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Additionally, control systems may become inadequate because of changes in conditions or the degree of compliance with policies or procedures may deteriorate over time.

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

We are not currently a party to any legal proceedings, litigation, or claims that could materially affect our business, results of operations, cash flows, or financial position. We may, from time to time, be party to litigation and subject to claims incident to the ordinary course of business. As our growth continues, we may become party to an increasing number of litigation matters and claims. The outcome of litigation and claims cannot be predicted with certainty, and the resolution of any future matters could materially affect our future results of operations, cash flows or financial position.

Item 1A. Risk Factors

You should carefully consider the risks described below together with the other information set forth in this Report, which could materially affect our business, financial condition and future results. The risks described below are not the only risks facing our company. Risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and operating results. If any of the following risks is realized, our business, financial condition, results of operations and prospects could be materially and adversely affected. In that event, the trading price of our common stock could decline.

Risks Related to Our Business

We have a history of losses and we may not achieve or sustain profitability in the future.

We have incurred losses in each fiscal year since our incorporation in 2007 and had an accumulated deficit of $45.3 million as of March 31, 2016. We may not be profitable in the future as we anticipate that our operating expenses will increase significantly in the foreseeable future as we continue to invest in research and development to enhance our platform and in sales and marketing to acquire new customers. These efforts may prove more expensive than we currently anticipate, and we may not succeed in increasing our revenue sufficiently to offset these higher expenses. Even if we are successful in increasing our customer base, we may not become profitable in the future or may be unable to maintain any profitability achieved if we fail to increase our revenue and manage our operating expenses or if we incur unanticipated liabilities. Although our revenue has increased substantially in recent periods, the rate of growth has declined in recent quarters. We may not be able to slow or reverse this decline in the revenue growth rate and we may not be able to sustain current revenue levels. Revenue growth may slow or revenue may decline for a number of reasons, including slowing demand for our offering, increasing competition, lengthening sales cycles, decelerating growth of, or declines in, our overall market, or our failure to capitalize on growth opportunities or to introduce new offerings. We could also incur increased losses as we continue to focus on growing our Platform Direct offering because the sales cycle with those customers tends to be protracted, resulting in the majority of costs associated with sales of our Platform Direct offering being generally incurred up front, while customers are billed over time through our usage-based pricing model. Any failure by us to achieve and maintain profitability could cause the price of our common stock to decline significantly.

29

Our limited operating history makes it difficult to evaluate our current business and future prospects.

While we have experienced significant growth in recent periods, our short operating history and developing business model make it difficult to evaluate our current business and our future prospects. We have encountered and will continue to encounter risks and difficulties frequently experienced by growing companies in rapidly developing and changing industries, including challenges in forecasting accuracy, determining appropriate investments of our limited resources, market acceptance of our platform and future features and functionality, competition from new and established companies, including those with greater financial and technical resources, acquiring and retaining customers and increasing revenue from existing customers, enhancing our platform and developing new technologies, features and functionality. You should consider our business and prospects in light of the risks and difficulties that we will encounter as we continue to develop our business model. We may not be able to address these risks and difficulties successfully, which would materially harm our business and operating results and cause the market price of our common stock to decline.

We may not maintain our recent revenue growth.

Our revenue growth will depend, in part, on our ability to acquire new customers, gain a larger amount of our existing customers’ advertising spend, continue to innovate and develop new technologies, features and functionality, extend our global footprint and increase our share of and compete successfully in new, growing digital video advertising markets, and we may fail to do so. A variety of factors outside of our control could affect our revenue growth, including changes in spend budgets of advertisers and the timing and size of their spend. Decisions by advertisers to delay or reduce their advertising spending or divert spending away from video advertising could slow our revenue growth or reduce our revenue. Our success in implementing our strategy of migrating customers from our Platform Services offering to our Platform Direct offering could also slow our revenue growth as we recognize a higher amount of revenue from the same amount of spend associated with our Platform Services offering than with our Platform Direct offering. You should not consider our recent growth rate in revenue as indicative of our future growth.

We may experience quarterly fluctuations in our operating results due to a number of factors which make our future results difficult to predict and could cause our operating results to fall below expectations.

Our quarterly operating results may fluctuate due to a variety of factors, many of which are outside of our control. As a result, comparing our operating results on a period-to-period basis may not be meaningful. You should not consider our past results, including our recent growth rates in terms of advertising spend and revenue, as indicative of our future performance.

In addition to other risk factors listed in this section, factors that may affect our quarterly operating results include the following:

· fluctuations in demand for our platform, including seasonal variations in our customers’ advertising spend;

· the level of advertising spend managed through our platform for a particular quarter and the mix between spend managed through our Platform Direct offering and Platform Services offering;

· budgeting cycles and changes in video advertising budgets of and spending by our customers;

· the length and associated unpredictability of our sales cycle;

· the timing and amount of operating expenses related to the maintenance and expansion of our business, operations and infrastructure;

· the timing and amount of investment in the development of new technologies, and features and functionality of our platform;

· changes in the availability or price of advertising inventory;

· the timing and success of changes in our offerings or those of our competitors;

· changes in our pricing or pricing of our competitors’ solutions and changes in the pricing of digital video advertising generally;

· network outages or security breaches or the perception that our platform or customer or consumer data is not secure and any associated expenses;

· delay between our payments for advertising inventory purchased through our platform and our subsequent collection of fees from our customers related to that inventory;

· changes in the competitive dynamics of our industry, including consolidation among competitors or customers;

· changes in government regulation applicable to our industry;

30

· foreign currency exchange rate fluctuations; and

· general economic and political conditions in our domestic and international markets.

Based upon all of the factors described above, we have a limited ability to forecast our future revenue, costs and expenses, and as a result, our operating results may from time to time fall below our estimates.

If our customers do not maintain and increase their advertising spend through our platform, our revenue growth and results of operations will be adversely affected.

Our contracts and relationships with advertisers generally do not include long-term or exclusive obligations requiring them to use our platform or maintain or increase their advertising spend on our platform. Furthermore, advertisers generally use multiple providers in managing advertising spend. Accordingly, we must convince our customers to use our platform, increase their usage and spend a larger share of their advertising budgets with us, and do so on an on-going basis. We may not be successful at educating and training customers, particularly our newer customers, on the benefits of our platform to increase usage and generate higher levels of advertising spend. If these efforts are unsuccessful or advertisers decide not to continue to maintain or increase their advertising spend through our platform for any other reason, then we may not attract new advertisers or our existing customers may reduce their video advertising spend through or cease using our platform. Therefore, we cannot assure you that advertisers that have generated advertising spend through our platform in the past will continue to generate similar levels of advertising spend in the future or that they will continue to use our platform at all. We may not be able to replace customers who decrease or cease their usage of our platform with new customers that spend similarly on our platform. If our existing customers do not continue to use and increase their use of our platform, or if we are unable to attract sufficient advertising spend on our platform from new customers, our revenue could decline, which would materially and adversely harm our business and results of operations.

The market for software-based digital video advertising for brands is relatively new and evolving. If this market develops slower or differently than we expect, our business, growth prospects and financial condition would be adversely affected.

The substantial majority of our revenue has been derived from customers that purchase digital video advertising through our platform either on a self-serve basis or with us executing campaigns for them. We expect that spend on digital video advertising will continue to be our primary source of revenue for the foreseeable future, and that our revenue growth will largely depend on increasing digital video advertising spend through our platform. The market for digital video advertising is an emerging market and today advertisers generally devote a smaller portion of their advertising budgets to digital video advertising than to traditional advertising methods, such as TV, newspapers, radio and billboards. Our current and potential customers may find digital video advertising to be less effective than other brand advertising methods, and they may reduce their spending on digital video advertising as a result. To date, digital advertising has been primarily for performance-based advertising, or relatively simple display advertising such as banner ads on websites and, until recently, was principally focused on online channels such as desktops. Emerging channels such as mobile and social media are unproven and may not develop into viable channels. The future growth of our business could be constrained by both the level of acceptance and expansion of digital video advertising as a format and emerging digital video advertising channels, including mobile video, connected TV, social video and TV formats such as video on demand, as well as the continued use and growth of existing channels. To date, our revenue has been derived primarily from advertising served to desktops. Even if these new channels become widely adopted, advertisers may not increase their advertising spend through platforms such as ours. If the market for digital video advertising deteriorates, develops more slowly than we expect or the shift from traditional advertising methods to digital video advertising does not continue, or there is a reduction in demand for digital video advertising caused by weakening economic conditions, decreases in corporate spending, perception that digital video advertising is less effective than other media or otherwise, it could reduce demand for our offerings, which could decrease revenue or otherwise adversely affect our business.

We have recently added the capability to buy linear television advertising using our platform. The market for software-based solutions for linear television advertising is new and unproven. Our current and potential customers may find software-based solutions for linear television advertising purchasing to be less effective than traditional methods, and they may determine not to utilize such solutions. The future growth of our business could be constrained by both the level of acceptance and expansion of the market for software-based solutions for linear television advertising. If the market for software-based solutions for linear television advertising develops more slowly than we expect, it could reduce demand for our offerings, which could decrease revenue or otherwise adversely affect our business.

We may not be able to compete successfully against current and future competitors.

We operate in a rapidly evolving and highly competitive market, subject to changing technology, branding objectives and customer demands and with many companies providing competing solutions. We compete primarily with companies developing solutions to automate the purchase of digital video advertising impressions across multiple sources of inventory. We also compete with other companies that address certain aspects of the online digital video advertising market, including demand-side platforms and

31

video-focused ad networks, and in-house tools and custom solutions currently used by brand advertisers and their agencies and by publishers to manage advertising activities. In addition, we compete for advertising spend with large entities that offer digital video advertising services as part of a larger solution for digital media buying. In the future, we may compete with companies developing comprehensive marketing platforms. Other companies that offer analytics, mediation, exchange or other third-party specific technologies may also compete with us. As our platform evolves and we introduce new technologies, features and functionality of our platform, we may become subject to additional competition. Some of our current and prospective competitors in the broader digital advertising market have substantially greater resources and longer histories than us in the digital advertising space, may actively seek to serve our market and have the power to significantly change the nature of the marketplace to their advantage. These companies could develop and offer new solutions that directly compete with ours or leverage their position to make changes to their existing platforms that could be disadvantageous to our competitive position. We expect competition to increase with the changes in the competitive dynamics of our industry, including increasing consolidation among our competitors, customers and partners.  

Increased competition may result in reduced pricing for our platform, longer sales cycles or a decrease of our market share, any of which could negatively affect our revenue and future operating results and our ability to grow our business. A number of competitive factors could cause us to lose potential sales or to sell at lower prices or at reduced margins, including, among others:

· competitors may establish or strengthen relationships with brands, agencies, sources of inventory or other parties, thereby limiting our ability to promote our platform and generate revenue;

· competitors could introduce solutions that are similar to, or broader, than ours or comprehensive platforms that provide integrated solutions for multiple advertising channels including display, mobile and video;

· competitors could reduce the prices they charge to brand advertisers and agencies;

· companies may enter our market by expanding their platforms or acquiring a competitor; and

· companies marketing search, social, display, mobile or web analytics services could bundle digital video advertising solutions or offer such products at a lower price as part of a larger product sale.

In addition, many of our competitors, such as Google, AOL (recently acquired by Verizon), Yahoo! and Adobe, have greater customer relationships and financial, marketing and technical resources than we do, allowing them to leverage a larger customer base, adopt more aggressive pricing policies, and devote greater resources to the development, promotion and sale of their products, services and solutions, including products that may be based on new technologies or standards, than we can. Some of these large competitors also have substantial proprietary video advertising inventory that may provide them with competitive advantages, including far greater access to Internet data, the ability to significantly influence pricing for video advertising inventory and the ability to control access to proprietary inventory. If our competitors’ solutions become more accepted than our solution, our competitive position will be impaired and we may not be able to increase our revenue or may experience decreased gross margins.

We may not be able to compete successfully against current and future competitors. If we cannot compete successfully, our business, results of operations and financial condition could be negatively impacted.

If we are successful at increasing adoption of our self-serve platform, we may become dependent on a limited number of customers for a large portion of our revenue, which could impact the predictability of our revenue and adversely impact our results of operations.

To the extent our self-serve platform is adopted by major brands and other large advertisers, we may become more dependent upon a limited number of customers for a larger portion of our revenue. Since large advertisers tend to spend a much greater amount on advertising campaigns than our typical customers have in the past, it would be difficult to maintain our revenue growth rate without increases in spending from these customers. It also would be difficult to replace any revenue generated by these customers to the extent they lower their spend through our platform. Accordingly, if our revenue concentration increases and our largest customers do not generate revenue at the levels or within the timeframes that we expect, our ability to maintain or increase our revenue and meet our quarterly guidance will be adversely affected. Additionally, larger customers often seek to gain greater pricing concessions which can adversely impact our results of operations.

A substantial portion of our business is sourced through advertising agencies that do not pay us until they receive payment from the brand, therefore increasing the length of time between our payment for media inventory and our receipt of payment for use of our platform, and our ability to collect for non-payment may be limited to the brand, increasing our risk of non-payment.

Substantially all of our Platform Services revenue and a substantial majority of our Platform Direct revenue is sourced through advertising agencies. We contract with advertising agencies as an agent for the brand. We remit payment for media inventory purchased through our platform by our Platform Direct and Platform Services customers in advance of receiving payment from them as the advertising agency does not pay us for use of our platform until it has received payment from the brand. This payment process

32

will increasingly consume working capital if we continue to be successful in growing our business. In addition, we typically experience slow payment by advertising agencies as is common in our industry. In this regard, we had average days sales outstanding, or DSO, of 103 days, and average days payable outstanding, or DPO, of 86 days for 2015. We compute our DSO and DPO as of a given date based on our average trade receivables or trade payables, respectively, for the trailing twelve month period divided by, for DSO, daily Total Spend and for DPO, daily cost of revenue and operating expenses, excluding noncash and payroll related expenses, in each case, over such period. The average trade receivables or trade payables are the average of the trade receivables or trade payables balances at the beginning and end of the twelve month period. Daily Total Spend is the spend for the trailing twelve month period divided by 365 days. Daily cost of revenue and operating expenses are the cost of revenue and operating expenses, excluding noncash and payroll related expenses, for the trailing twelve month period divided by 365 days. If our DSOs increase significantly, and we are unable to borrow against these receivables on commercially acceptable terms, our working capital availability could be reduced, and as a consequence our results of operations and financial condition would be adversely impacted. Many of our contracts with advertising agencies provide that if the brand does not pay the agency, the agency is not liable to us, and we must seek payment solely from the brand. Contracting with these agencies, which in certain cases have or may develop high-risk credit profiles, subjects us to greater credit risk than where we contract with brands directly. This credit risk may vary depending on the nature of an advertising agency’s aggregated brand advertiser base. Any write-offs for bad debt could have a material adverse effect on our results of operations for the periods in which the write-offs occur. Even if we are not paid, we are still obligated to pay for the advertising we have purchased for the advertising campaign, and as a consequence, our results of operations and financial condition would be adversely impacted.

Our business depends in part on advertising agencies and their holding companies as intermediaries, and this may adversely affect our ability to attract and retain business.

For the year ended December 31, 2015, over 5,000 brands executed campaigns through our platform, directly or through an agency. Many brands rely upon advertising agencies in planning and purchasing advertising. Although we maintain relationships with brands, we often do not contract with them directly. In cases where we do not have a direct contractual relationship with the brand, we sell to advertising agencies that utilize our advertising solutions on behalf of their customers. Each advertising agency allocates advertising spend from brands across numerous channels and has no obligation to work with us as it embarks on advertising campaigns. Accordingly, if we fail to maintain satisfactory relationships with an advertising agency, we risk losing business from the brands represented by that agency. If the advertising agency is owned by a holding company, this risk is magnified because we also risk losing business from the other agencies owned by such holding company and the brand advertisers those agencies represent. In addition, customer relationships with holding company media trading desks may adversely affect our business with advertising agencies affiliated with the holding company because some holding companies may seek to consolidate media buying to one trading desk and restrict their affiliated advertising agencies from relationships with providers that have a direct relationship with the trading desk. Because advertising agencies act as intermediaries for multiple brands, our customer base is more concentrated than might be reflected by the number of brands that use our platform. In addition, these intermediary relationships may impede our brand-building efforts, making it more difficult for us to achieve widespread brand awareness that is critical for broad customer adoption of our platform.

Our sales cycle can be long and unpredictable and require considerable time and expense before executing a customer agreement, which may make it difficult to project when, if at all, we will obtain new customers and when we will generate revenue from those customers.

The sales cycle for our Platform Direct business, from initial contact with a potential lead to contract execution and implementation, typically takes significant time and is difficult to predict. Our sales cycle in some cases has been up to nine months or more. Our sales efforts involve educating our customers about the use, technical capabilities and benefits of our platform. Some of our customers undertake a significant evaluation process that frequently involves not only our platform but also the offerings of our competitors. This process can be costly and time-consuming. As a result, it is difficult to predict when we will obtain new customers and begin generating revenue from these new customers. As part of our sales cycle, we may incur significant expenses before executing a definitive agreement with a prospective customer and before we are able to generate any revenue from such agreement. We have no assurance that the substantial time and money spent on our sales efforts will generate significant revenue. If conditions in the marketplace generally or with a specific prospective customer change negatively, it is possible that no definitive agreement will be executed, and we will be unable to recover any of these expenses. Even if our sales efforts result in obtaining a new customer, under our usage-based pricing model, the customer controls when and to what extent it uses our platform and it may not use our platform sufficiently to justify the expenses incurred to acquire the customer and integrate the customer’s data in our platform and related training and support. If we are not successful in targeting, supporting and streamlining our sales processes and if revenue expected to be generated from a prospective customer is not realized in the time period expected or not realized at all, our ability to grow our business, and our operating results and financial condition may be adversely affected. If our sales cycles lengthen, our future revenue could be lower than expected, which would have an adverse impact on our consolidated operating results and could cause our stock price to decline.

33

Our business and operations have experienced rapid growth in recent periods, which has placed, and may continue to place, significant demands on our management and infrastructure. If we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of service or address competitive challenges adequately.

We increased our number of full-time employees from 232 as of December 31, 2013 to 577 as of December 31, 2015. Our growth has placed, and may continue to place, a significant strain on our managerial, administrative, operational, financial and other resources as these personnel are integrated into and become productive within our organization. We intend to further expand our overall headcount and operations both domestically and internationally, with no assurance that our business or revenue will continue to grow to offset our investment in research and development and sales and marketing. Maintaining and growing a global organization and managing a geographically dispersed workforce will require substantial management effort, the allocation of valuable management resources and significant additional investment in our infrastructure. In this regard we will be required to continue to improve our operational, financial and management controls and our reporting procedures and we may not be able to do so effectively. Further, to accommodate our expected growth we must continually improve and maintain our technology, systems and network infrastructure. As such, we may be unable to manage our expenses effectively in the future, which would negatively impact our gross margin or operating expenses in any particular quarter. If we fail to manage our anticipated growth and change in a manner that does not preserve the key aspects of our corporate culture, the quality of our platform may suffer, which could negatively affect our brand and reputation and harm our ability to retain and attract key talent and customers.

Seasonal fluctuations in advertising spend impact our results of operations and cash flows.

Our results of operations and cash flows vary from quarter to quarter due to the seasonal nature of advertising spending. For example, many advertisers devote a disproportionate amount of their advertising budgets to the fourth quarter of the calendar year to coincide with increased holiday purchasing. In contrast, the first quarter of the calendar year is typically the slowest in terms of advertising spend. To the extent that seasonal fluctuations become more pronounced, or are not offset by other factors, our results of operations and operating cash flows could fluctuate materially from period to period.

We use a limited number of third-party service providers and data centers. Any disruption of service could harm our business.

The technical infrastructure for our platform is managed through a combination of third-party web hosting services providers, or third-party service providers, and our own servers which are located at a third-party data center facility. We do not control the operation of the third-party service providers or the operation of the third-party data center facility nor do we have long term agreements with the third-party service provider and data center facility that we utilize. The third-party service providers and owner of the data center facility have no obligation to continue to provide these services to us on commercially reasonable terms, or at all. If we are unable to renew these agreements on commercially reasonable terms, we may be required to use a new service provider or transfer to a new facility or facilities, and we may incur significant costs and possible service interruption in connection with doing so.

The facilities of third-party service providers and data centers are vulnerable to damage or service interruption resulting from human error, intentional bad acts, earthquakes, hurricanes, floods, fires, war, terrorist attacks, power losses, hardware failures, systems failures, telecommunications failures and similar events. Moreover, we have not implemented a disaster recovery capability whereby we maintain a back-up copy of our platform permitting us to immediately switch over to the back-up platform in the event of damage or service interruption at our data center. The occurrence of a natural disaster or an act of terrorism, any outages or vandalism or other misconduct, or a decision to close the facility without adequate notice or other unanticipated problems could result in lengthy interruptions in our platform’s performance, any of which could damage our reputation and materially and adversely affect our operating results and future prospects.

Any changes in service levels at the facilities or any errors, defects, disruptions or other performance problems at or related to the facilities that affect our platform could harm our reputation and may damage our customers’ businesses. Interruptions in our platform’s performance might reduce our revenue, subject us to potential liability, or result in reduced usage of our platform. In addition, some of our customer contracts require us to issue credits for downtime in excess of certain levels and the issuance of any credits or make-goods could harm our operating results and financial condition.

We also depend on third-party Internet-hosting providers and continuous and uninterrupted access to the Internet through third-party bandwidth providers to operate our business. If we lose the services of one or more of our Internet-hosting or bandwidth providers for any reason or if their services are disrupted, for example due to viruses or “denial-of-service” or other attacks on their systems, or due to human error, intentional bad acts, power loss, hardware failures, telecommunications failures, fires, wars, terrorist attacks, floods, earthquakes, hurricanes, tornadoes or similar events, we could experience disruption in our ability to offer our platform or we could be required to retain the services of replacement providers, any of which could increase our operating costs and harm our business and reputation.

34

As a result of our customers’ increased usage of our platform, we will need to continually improve our hosting infrastructure.

We have experienced significant growth in the number of customers, transactions and data that our hosting infrastructure supports. We seek to maintain sufficient excess capacity in our infrastructure to meet the needs of all of our customers. We also seek to maintain excess capacity to facilitate the increase in new customers and the expansion of existing customer advertising spend on our platform. For example, if we secure a large customer or a group of customers which require significant amounts of bandwidth or storage, we may need to increase bandwidth, storage, power or other elements of our application architecture and our infrastructure, and our existing systems may not be able to scale in a manner satisfactory to our existing or prospective customers.

The amount of infrastructure needed to support our customers is based on our estimates of anticipated usage. We will need to expand our infrastructure to meet anticipated increase in usage, for which we expect to incur additional costs. In addition, if we were to experience unforeseen increases in usage, we could be required to increase our infrastructure investments further and during a time other than we expect. As use of our platform grows, we will need to devote additional resources to improving our application architecture and our infrastructure in order to maintain the performance of our platform. We may need to incur additional costs to upgrade or expand our computer systems and architecture in order to accommodate increased or expected increases in demand. If we incur these costs, our gross margin would be adversely impacted.

We must develop and introduce enhancements and new features and functionality that achieve market acceptance or that keep pace with technological developments to remain competitive in our evolving industry.

We operate in a dynamic market characterized by rapidly changing technologies and industry and legal standards. The introduction of new advertising solutions by our competitors, the market acceptance of solutions based on new or alternative technologies, or the emergence of new advertising industry standards could render our platform obsolete. Our ability to compete successfully, attract new customers and increase revenue from existing customers depends in large part on our ability to enhance and improve our existing platform and to continually introduce or acquire new technologies and features and functionality demanded by the market we serve. The success of any enhancement or new solution depends on many factors, including timely completion, adequate quality testing, appropriate introduction and market acceptance. Any new solution, product or feature that we develop or acquire may not be introduced in a timely or cost-effective manner, may contain defects or may not achieve the broad market acceptance necessary to generate significant revenue. If we are unable to anticipate or timely and successfully develop or acquire new offerings or features or enhance our existing platform to meet evolving customer requirements, our business and operating results will be adversely affected.

Material defects or errors in our platform could result in customer dissatisfaction and harm our reputation, result in significant costs to us and impair our ability to sell our platform.

The software applications underlying our platform are inherently complex and may contain material defects or errors, which may cause disruptions in availability, misallocation of advertising spend or other performance problems. Any such errors, defects, disruptions in service or other performance problems with our platform could negatively impact our business and our customers’ businesses or the success of their advertising campaigns and causing customer dissatisfaction and harm to our reputation. If we have any errors, defects, disruptions in service or other performance problems with our platform, customers may reduce their usage or delay or withhold payment to us, which could result in an increase in our provision for doubtful accounts or lengthen our collection cycles for accounts receivable. Such performance problems could also result in customers making warranty or other claims against us, our giving credits to our customers toward future advertising spend or costly litigation. As a result, material defects or errors in our platform could have a material adverse impact on our business and financial performance.

The costs incurred in correcting any material defects or errors in our platform may be substantial and could adversely affect our operating results. After the release of new versions of our software, defects or errors may be identified from time to time by our internal team and by our customers. We implement bug fixes and upgrades as part of our regularly scheduled system maintenance. If we do not complete this maintenance according to schedule or if customers are otherwise dissatisfied with the frequency and/or duration of our maintenance, customers could reduce their usage of our platform or delay or withhold payment to us, or cause us to issue credits, make refunds or pay penalties.

Our business depends in part on the success of our strategic relationships with third parties.

Our business depends in part on our ability to continue to successfully manage and enter into successful strategic relationships with third parties. We currently have and are seeking to establish new relationships with third parties to develop integrations with complementary technologies, sources of inventory, such as Google, and data vendors such as Nielsen. For example, in order for customers to target ads in ways they desire and otherwise optimize and verify campaigns, our platform must have access to data regarding Internet user behavior and reports with demographic information regarding Internet users. We depend on various third parties to provide this audience data and demographic reporting. Maintaining and expanding our strategic relationships with third

35

parties is critical to our continued success. Further, our relationships with these third parties are typically non-exclusive and do not prohibit the other party from working with our competitors, and in some cases our business partners also offer products or services that compete with ours, which makes these relationships more complicated and may over time lead to changes in our relationship including our loss of access to certain inventory or data supplied by these partners. These relationships may not result in additional customers or enable us to generate significant revenue and a change in these relationships could result in a loss of revenue. Identifying suitable business partners and negotiating, documenting, and maintaining relationships with them require significant time and resources. If we are unsuccessful in establishing or maintaining our relationships with these third parties, our ability to successfully execute campaigns, compete in the marketplace or to grow our revenue could be impaired and our operating results would suffer.

Our business model depends upon our ability to continue to access advertising inventory that we do not own.

Our platform depends on access to advertising inventory controlled by publishers and various other providers, such as public ad exchanges, supply-side platforms, private marketplaces, ad networks and direct premium publishers. In particular, we rely on continued access to premium ad inventory in high-quality and brand-safe environments, viewable to consumers across multiple screens. We do not own the inventory of advertising opportunities upon which our business depends and, therefore, we might not always have access to inventory of sufficient quality or volume to meet the needs of our customers’ campaigns. As a result, we may have limited visibility to our future access to inventory, especially premium ad inventory and inventory in international markets. Companies such as ad networks make media buying commitments to publishers, and may compete with us and restrict our access to media inventory of those publishers. Companies such as ad exchanges charge both publishers and advertisers fees and may be able to charge advertisers lower fees than us. In addition, many publishers sell a portion of their advertising inventory directly to advertisers, and publishers may seek to do so increasingly in the future. If that were to occur, we may have fewer opportunities to provide our customers access to inventory, which would harm our ability to grow our business and our financial condition and operating results would be adversely affected.

Furthermore, as the number of competing intermediaries that purchase advertising inventory from RTB exchanges and that utilize advertising solutions providers continues to increase, intermediaries or their bidding processes may favor other bidders and we may not be able to compete successfully for advertising inventory available on RTB exchanges. Even if our bids are successful, the inventory may be of low quality or misrepresented to us, despite our attempts to prevent fraud and conduct quality assurance checks on inventory and we could be subject to liability and our business could be harmed.

In connection with Platform Services arrangements, we commit to delivery of a campaign at a fixed price in advance of acquiring the advertising inventory required for the campaign, exposing us to the risk that we may be unable to fulfill these commitments cost-effectively or at all.

In order to execute and deliver campaigns under our Platform Services arrangements, we generally enter into binding IOs with fixed price commitments which are determined prior to the launch of an advertising campaign. We do not own or otherwise control the inventory necessary to fulfill these IOs. Further, in fulfilling IO commitments, we generally purchase advertising inventory on a real-time basis during the course of the advertising campaign period, and we generally do not have fixed priced sources of supply of such inventory. Accordingly, we are not assured of having access to inventory of sufficient quality or quantity to meet the needs of our customers’ campaigns on a cost-effective basis or at all. If we are unable to obtain inventory cost-effectively, or at all, our gross margins could be negatively affected or we could be unable to fulfill our obligations under the IO, which would have a negative impact on our ability to attract and retain customers, potentially damage our reputation, expose us to liability and harm our revenue and growth.

Our Platform Services customers are not obligated to pay for advertising inventory that is not consistent with their campaigns. Since we have no recourse to suppliers, we assume full risk of loss for inventory that is not accepted by our customers.

Our Platform Services customers are not obligated to pay for advertising impressions that are not consistent with the terms of their IO with us. Further, the sources of our advertising impressions generally make no representations regarding specific characteristics of an impression relevant to any campaign. In addition, we have made and expect to continue to make purchasing decisions during the fulfillment of campaigns resulting in the purchase of impressions that are not acceptable to the advertiser. These decisions may result from mistakes due to human error by our personnel or a systems error. In other cases, third-party verification technology used by the customer may reach a different conclusion about the suitability of the inventory. In any of these cases, the advertiser may reject impressions that do not meet the terms of the IO, we may be required to provide a credit or be considered to be in breach of our obligations and we would have no recourse to the supplier. As a result, our gross margins and our ability to attract and retain customers could be negatively affected, we could be exposed to liability and our revenue and growth could be harmed.

36

If we fail to detect fraudulent or unacceptable ad placements, or if we serve advertisements on websites with inappropriate content, our reputation will be damaged, advertisers may reduce the use of or stop using our platform, and we may incur liabilities.

Our business depends in part on providing our advertisers with services that are trusted and safe for their brands and that provide the anticipated value. We frequently have contractual commitments to take reasonable measures to prevent advertisements from appearing on websites with inappropriate content or on certain websites that our advertisers may identify. Our advertisers also expect that ad placements will not be misrepresented, such as auto-play in banner placements marketed as pre-roll inventory, and that ad impressions represent the legitimate activity of human internet users. We use proprietary technologies and third party services in our efforts to detect and block inventory on websites with inappropriate content, misrepresented ad placements and fraudulent bot generated impressions. However, technologies utilized by bad actors are constantly evolving and preventing and combating fraud and inappropriate content, which is an industry-wide issue requires constant vigilance and investment of time and resources. There has recently been a significant amount of negative publicity about bot generated impressions within our industry, so our ability to combat bot generated impressions has become increasingly important. We may not always be successful in our efforts to prevent and combat fraud and inappropriate content. We may serve advertisements on inventory that is objectionable to our advertisers, and our software may also inadvertently purchase inventory on behalf of our advertisers that proves to be unacceptable for advertising campaigns, such as fraudulent bot generated impressions. In addition, negative publicity around fraudulent digital advertising placements may adversely impact the perceptions of advertisers regarding programmatic purchasing of digital advertising. As a result, we may lose the trust of our advertisers, which would harm our brand and reputation, our advertisers may reduce the use of or stop using our platform, we may be exposed to liabilities or the need to provide credits or refunds, and our business and financial performance may be harmed.

If our information systems are disrupted or unauthorized access to customer data or our data is otherwise obtained, our platform may be perceived as not being secure, customers may reduce the use of or stop using our platform, our reputation could be harmed and we may incur significant liabilities.

We collect, store and transmit information of, or on behalf of, our advertisers. Security breaches could result in the loss of information or financial assets, litigation, indemnity obligations and other liability. While we have security measures in place, our information systems and networks and those of third parties that we use in our operations are vulnerable to cybersecurity risk and ongoing threats. Our security measures may be breached as a result of third-party action, including cyber-attacks such as viruses, hacking, phishing attacks or other intentional misconduct by computer hackers, employee error, malfeasance or otherwise. This could result in one or more third parties obtaining unauthorized access to our customers’ data, our data, including intellectual property and other confidential business information, or our financial assets. Such attacks may also cause interruptions to the services we provide and cause customers to lose confidence in our platform.  Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. To date, unauthorized users have not had a material impact on our systems; however, there can be no assurance that such attacks may not be successful in the future.

Third parties may also attempt to fraudulently induce employees or customers into disclosing sensitive information such as user names, passwords or other information in order to gain access to our customers’ data or our data, including intellectual property and other confidential business information or our financial assets. Although we have developed systems and processes that are designed to protect our data and customer data and to prevent other security breaches, we cannot assure you that such measures will provide absolute security, If an actual or perceived breach of our security occurs, the market perception of the effectiveness of our security measures could be harmed, we could lose potential sales and existing customers or we could be subject to liability.  

In addition, we utilize third-party cloud computing services in connection with our operations. Problems faced by us or our third-party hosting/cloud computing providers, including technological or business-related disruptions, as well as cybersecurity threats, could adversely impact our business and results of operations, our ability to accurately report our financial results, as well as the experience of our customers. As we expand our operations, we expect to utilize additional systems and service providers that may also be essential to managing our business. Although the systems and services that we require are typically available from a number of providers, it is time consuming and costly to qualify and implement these relationships. Therefore, our ability to manage our business would suffer if one or more of our providers suffer an interruption in their business, or experience delays, disruptions or quality control problems in their operations, or we have to change or add systems and services. We may not be able to control the quality of the systems and services we receive from third-party service providers, which could impair our ability to maintain proper controls over financial reporting and complete timely and accurate financial reporting, and may impact our business, results of operation and financial condition.

Any failure to protect our intellectual property rights could impair our ability to protect our proprietary technology and our brand.

Our success and ability to compete depend in part upon our intellectual property. We primarily rely on intellectual property laws, including trade secret, copyright, trademark and patent laws in the U.S. and abroad, and use contracts, confidentiality procedures, non-disclosure agreements, employee disclosure and invention assignment agreements and other contractual rights to protect our intellectual property. However, the steps we take to protect our intellectual property rights may be inadequate or we may be unable to secure intellectual property protection for all of our platform.

37

If we are unable to protect our intellectual property, our competitors could use our intellectual property to market products, services or solutions similar to ours and our ability to compete effectively would be impaired. Moreover, others may independently develop technologies that are competitive to ours or infringe our intellectual property. Any of our intellectual property rights may be challenged by others or invalidated through administrative processes or litigation. The enforcement of our intellectual property rights depends on our legal actions against these infringers being successful, but we cannot be sure these actions will be successful, even when our rights have been infringed. In addition, we might be required to spend significant resources to monitor and protect our intellectual property rights, and our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights. Litigation to protect and enforce our intellectual property rights could be costly, time-consuming and distracting to management, whether or not it is resolved in our favor, and could ultimately result in the impairment or loss of portions of our intellectual property. Any patents issued in the future may not provide us with competitive advantages or may be successfully challenged by third parties.

Furthermore, legal standards relating to the validity, enforceability and scope of protection of intellectual property rights are uncertain. Effective protection of our intellectual property may not be available to us in every country in which our platform are available. The laws of some foreign countries may not be as protective of intellectual property rights as those in the U.S., and mechanisms for enforcement of intellectual property rights may be inadequate. Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our intellectual property.

We could incur substantial costs as a result of any claim of infringement of another party’s intellectual property rights.

In recent years, there has been significant litigation involving patents and other intellectual property rights. Companies in the Internet and technology industries are increasingly bringing and becoming subject to suits alleging infringement of proprietary rights, particularly patent rights, and our competitors may hold patents or have pending patent applications, which could be related to our business. These risks have been amplified by the increase in third parties, or non-practicing entities, whose sole primary business is to assert such claims. We have received in the past, and expect to receive in the future, notices that claim we or our customers using our platform have misappropriated or misused other parties’ intellectual property rights. If we are sued by a third party that claims that our technology infringes its rights, the litigation could be expensive and could divert our management resources. We do not currently have an extensive patent portfolio of our own, which may limit the defenses available to us in any such litigation.

In addition, in many instances, we have agreed to indemnify our customers against certain claims that our platform infringes the intellectual property rights of third parties. The results of any intellectual property litigation to which we might become a party, or for which we are required to provide indemnification, may require us to do one or more of the following:

· cease offering or using technologies that incorporate the challenged intellectual property;

· make substantial payments for legal fees, settlement payments or other costs or damages;

· obtain a license, which may not be available on reasonable terms, to sell or use the relevant technology; or

· redesign technology to avoid infringement.

If we are required to make substantial payments or undertake any of the other actions noted above as a result of any intellectual property infringement claims against us or any obligation to indemnify our customers for such claims, such payments or costs could have a material adverse effect upon our business and financial results. Furthermore, our business could be adversely affected by any significant disputes between us and our customers as to the applicability or scope of our indemnification obligations to them.

Our use of open source technology could impose limitations on our ability to commercialize our platform.

We use open source software in our platform. Some open source software licenses require users who distribute open source software as part of their software to publicly disclose all or part of the source code to such software and/or make available any derivative works of the open source code on unfavorable terms or at no cost. The terms of various open source licenses have not been interpreted by the courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to market our platform. While we monitor our use of open source software and try to ensure that none is used in a manner that would require us to disclose our source code or that would otherwise breach the terms of an open source agreement, such use could inadvertently occur and we may be required to release our proprietary source code, pay damages for breach of contract, re-engineer our applications, discontinue sales in the event re-engineering cannot be accomplished on a timely basis or take other remedial action that may divert resources away from our development efforts, any of which could cause us to breach customer contracts, harm our reputation, result in customer losses or claims, increase our costs or otherwise adversely affect our business and operating results.

38

Expanding our international operations subjects us to new challenges and risks.

As of December 31, 2015 we had offices in nine countries outside the U.S., and as we continue to expand our customer base outside the U.S., our business is increasingly susceptible to risks associated with international operations. However, we have a limited operating history outside the U.S., and our ability to manage our business and conduct our operations internationally requires considerable management attention and resources and is subject to particular challenges of supporting a rapidly growing business in an environment of diverse cultures, languages, customs, tax laws, legal systems, alternate dispute systems and regulatory systems. The risks and challenges associated with international expansion include:

· continued localization of our platform, including translation into foreign languages and associated expenses;

· the need to support and integrate with local advertisers, agencies, publishers and partners;

· competition with service providers that have greater experience in the local markets than we do or who have pre-existing relationships with potential customers in those markets;

· compliance with multiple, potentially conflicting and changing governmental laws and regulations, including employment, tax, privacy and data protection laws and regulations such as the EU Data Privacy Directive;

· compliance with anti-bribery laws, including compliance with the Foreign Corrupt Practices Act and the U.K. Anti-Bribery Act;

· difficulties in invoicing and collecting in foreign currencies and associated foreign currency exposure;

· difficulties in staffing and managing foreign operations and the increased travel, infrastructure and legal compliance costs associated with international operations;

· different or lesser protection of our intellectual property rights;

· difficulties in enforcing contracts and collecting accounts receivable, longer payment cycles, higher levels of credit risk and other collection difficulties;

· compliance with applicable laws of taxing jurisdictions where we conduct business and applicable U.S. tax laws as they relate to our international operations, the complexity and adverse consequences of such tax laws and potentially adverse tax consequences due to changes in such tax laws;

· restrictions on repatriation of earnings; and

· regional economic and political conditions.

As a result of these risks, any potential future international expansion efforts that we may undertake will not be successful.

Fluctuations in the exchange rate of foreign currencies could result in currency transactions losses.

We currently have foreign sales and accounts receivable denominated in multiple currencies including Australian dollars, Brazilian real, British pounds, Canadian dollars, Euros, Japanese Yen and Singapore dollars. In addition, we purchase advertising in local currencies and incur a portion of our operating expenses in the currencies of the countries where we have offices. To the extent that our revenue from international operations increases and the scope of our international operations grows, our operating results will become more susceptible to changes in currency exchange rates. We face exposure to adverse movements in currency exchange rates, which may cause our revenue and operating results to differ materially from expectations. A decline in the U.S. dollar relative to foreign currencies would increase our non-U.S. revenue when translated into U.S. dollars. Conversely, if the U.S. dollar strengthens relative to foreign currencies, our revenue from international operations could be adversely affected. Our operating results could be negatively impacted depending on the amount of cost of revenue or operating expense denominated in foreign currencies. As exchange rates vary and our mix of U.S. and foreign currency denominated transactions or expenses changes, revenue, cost of revenue, operating expenses and other operating results, when translated, may differ materially from expectations. We use foreign currency forward contracts to mitigate a portion of our foreign currency exposure.  However, these derivative contracts may be limited in the protection they provide us from exposure to foreign exchange rate fluctuations and involve costs and risks of their own, such as ongoing management time and expertise, external costs to implement the contracts and potential accounting implications. Additionally, our hedging activities rely on our ability to forecast accurately and could expose us to additional risks that could adversely affect our financial condition and operating results and could contribute to increased losses as a result of volatility in the foreign currency market.

39

Unfavorable conditions in the global economy could limit our ability to grow our business and negatively affect our operating results.

Revenue growth and potential profitability of our business depends on the level of advertising spend in the markets we serve. To the extent that weak economic conditions cause our customers and potential customers to freeze or reduce their advertising budgets, particularly those for digital video advertising, demand for our platform may be negatively affected. Historically, economic downturns have resulted in overall reductions in advertising spend. If economic conditions deteriorate or do not materially improve, our customers and potential customers may elect to decrease their advertising budgets or defer or reconsider software and service purchases, which would limit our ability to grow our business and negatively affect our operating results.

Any forecasts of market growth that we have provided or may provide in the future may prove to be inaccurate, and even if the markets in which we compete achieve the forecasted growth, we cannot assure you our business will grow at similar rates, if at all.

Growth forecasts are subject to significant uncertainty and are based on assumptions and estimates, which may not prove to be accurate. Forecasts relating to the expected growth in advertising and other markets, may prove to be inaccurate. Even if these markets experience the forecasted growth, we may not grow our business at similar rates, or at all. Our growth is subject to many factors, including our success in implementing our business strategy, which is subject to many risks and uncertainties.

Our business depends on our chief executive officer and founder and retaining and attracting qualified management and technical personnel and maintaining or expanding our sales and marketing capabilities.

Our success depends upon the continued service of Brett Wilson, our co-founder, President and Chief Executive Officer, other members of our senior management team and key technical employees, as well as our ability to continue to attract and retain additional highly qualified management and operating personnel. We do not maintain key person life insurance policies on any of our employees. While we have offer letters with certain of our key employees, we do not have fixed term employment agreements with Mr. Wilson or any of our other key employees. Each of Mr. Wilson, other executive officers, key technical personnel and other employees could terminate his or her relationship with us at any time. Our business also requires skilled engineering, product and sales personnel, who are in high demand and are difficult to recruit and retain. As we continue to innovate and develop our platform and expand into additional geographic markets, we will require personnel with expertise in these areas. Competition for qualified employees is intense in our industry and particularly so in the San Francisco Bay Area, California, where most of our technical employees are based. The loss of Mr. Wilson or any other member of our senior management team or, even a few qualified employees, or an inability to attract, retain and motivate additional highly skilled employees required for the planned expansion of our business, could delay or prevent the achievement of our business objectives and could materially harm our business and our customer relationships.

Our ability to achieve revenue growth in the future will depend, in part, on our success in recruiting, training and retaining sufficient numbers of sales personnel. These new employees require significant training and experience before they achieve full productivity. For internal planning purposes, we assume that it will take approximately nine months before a newly hired sales representative is fully trained and productive in selling our platform. This amount of time may be longer for sales personnel focused on new geographies or specific market segments. As a result, the cost of hiring and carrying new representatives cannot be offset by the revenue they produce for a significant period of time, if at all. Our recent hires and planned hires may not become productive as quickly as we would like or to the extent we expect, and we may not be able to hire or retain sufficient numbers of qualified individuals in the markets where we do business. Our business will be seriously harmed if these efforts do not work as planned or generate a corresponding significant increase in revenue.

If the use of “third-party cookies” or other tracking technologies (including pixels) is rejected by Internet users, restricted or otherwise subject to unfavorable terms, such as by non-governmental entities, or if ad blocking technologies continue to become more widely utilized by Internet users, our performance may decline and we may lose customers and revenue.

Some features of our platform use cookies or other technologies, such as pixels, which we refer to generally as cookies. Our cookies are known as “third-party cookies” because they are placed on individual browsers when Internet users visit a website on which we serve an ad. These cookies are placed through an Internet browser on an Internet user’s computer and correspond with a data set that we keep on our servers. Our cookies record non-personal information about Internet users’ interactions with our advertiser customers through a browser while the cookie is active. We use these cookies to help us achieve our brand advertisers’ campaign goals, to help us ensure that the same Internet user does not see the same advertisement multiple times, to report aggregate information to our advertisers regarding the performance of their advertising campaigns, and to detect and prevent fraudulent activity. We also use data from cookies to help us decide whether to bid on, and how to price, an opportunity to place an advertisement in a certain location, at a given time, in front of a particular Internet user. If our access to cookie data is reduced, our ability to conduct our business in the current manner may be affected and thus undermine the effectiveness of our platform.

40

Internet users may easily block and/or delete cookies (e.g., through their browsers by resetting mobile device advertising identifiers). The most commonly used Internet browsers (Chrome, Firefox, Internet Explorer, and Safari) allow Internet users to modify their browser settings to prevent cookies from being accepted by their browsers, or are set to block third-party cookies by default. If more browser manufacturers and Internet users adopt these ad blocking settings, utilize privacy modes when browsing websites, or delete their cookies more frequently than they currently do, our business could be harmed. Some government regulators (discussed below) and privacy advocates have suggested creating a “Do Not Track” standard that would allow Internet users to express a preference, independent of cookie settings in their browser, not to have website browsing recorded. If Internet users adopt a “Do Not Track” browser setting, and the standard either imposed by state or federal legislation, or agreed upon by standard setting groups, prohibits us from using non-personal data as we currently do, then that could hinder growth of video advertising on the web generally, cause us to change our business practices and adversely affect our business.

In addition, browser manufacturers could replace cookies with their own product and require us to negotiate and pay them for use of such product to record information about Internet users’ interactions with our brand advertiser customers, which may not be available on commercially reasonable terms or at all.

We may be required to, or otherwise may determine that it is advisable to, develop or obtain additional tools and technologies to compensate for the lack of cookie data, which we may not be able to do. Moreover, even if we are able to do so, such additional tools may be subject to further regulation, time consuming to develop or costly to obtain, and less effective than our current use of cookies.

Ad blocking technologies have been developed, and will likely continue to be developed, that can block the display of online digital advertising in the browsers and on the mobile devices of internet users that have implemented these technologies. We derive a substantial majority of our revenue from our customers’ advertising spend on digital video advertising through our platform. As a result, if adoption of these ad blocking technologies by Internet users continues to increase, this could have a negative effect on our operating results.

Legislation and regulation of online businesses, including privacy and data protection regimes, is expansive, not clearly defined and rapidly evolving. Such regulation could create unexpected costs, subject us to enforcement actions for compliance failures, or restrict portions of our business or cause us to change our technology platform or business model.

Government regulation may increase the costs of doing business online. Federal, state, municipal and foreign governments and agencies have adopted and could in the future adopt, modify, apply or enforce laws, policies, and regulations covering user privacy, data security, technologies such as cookies that are used to collect, store and/or process data, advertising online, the use of data to inform advertising, the taxation of products and services, unfair and deceptive practices, and the collection (including the collection of information), use, processing, transfer, storage and/or disclosure of data associated with unique individual Internet users. Although we have not collected data that is traditionally considered personal data, such as name, email address, address, phone numbers, social security numbers, credit card numbers, financial data or health data, we typically do collect and store IP addresses and other device identifiers, which are or may be considered personal data in some jurisdictions or otherwise may be the subject of legislation or regulation. In addition, certain U.S. laws impose requirements on the collection and use of information from or about users or their devices. For instance, the Children’s Online Privacy Protection Act, or COPPA, imposes requirements on website operators and online services that are aimed at children under the age of 13 years of age. COPPA requires notice and parental consent to include persistent identifiers for behavioral advertising and other tracking across websites. Other existing laws may in the future be revised, or new laws may be passed, to impose more stringent requirements on the use of identifiers to collect user information, including information of the type that we collect. Changes in regulations could affect the type of data that we may collect, restrict our ability to use identifiers to collect information, and, thus, affect our ability to collect data, the costs of doing business online, and affect the demand for our platform, the ability to expand or operate our business, and harm our business.

U.S. and non-U.S. regulators also may implement “Do-Not-Track” legislation, particularly if the industry does not implement a standard (discussed above). The California Online Privacy Protection Act of 2003 requires operators of commercial websites and online service providers, under certain circumstances, to disclose in their privacy policies how such operators and providers respond to browser “do not track” signals.

Some of our activities may also be subject to the laws of foreign jurisdictions, whether or not we are established or based in such jurisdictions. Within the EU, where we currently have an active presence in the United Kingdom, Directive 2009/136/EC, commonly referred to as the “Cookie Directive,” directs EU member states to ensure that accessing information on an Internet user’s computer, such as through a cookie, is allowed only if the Internet user has given his or her consent. In response, some member states have implemented legislation requiring entities to obtain the user’s consent before placing cookies for targeted advertising purposes. Additional EU member state laws may follow. We may be required to, or otherwise may determine that it is advisable to, develop or obtain additional tools and technologies to compensate for the lack of cookie data. Even if we are able to do so, such additional tools may be subject to further regulation, time consuming to develop or costly to obtain, and less effective than our current use of cookies. In addition, certain information, such as IP addresses as collected and used by us may constitute “personal data” in certain non-U.S.

41

jurisdictions, including in the United Kingdom, and therefore certain of our activities could be subject to EU laws applicable to the processing and use of personal data. Furthermore, EU regulators have agreed on the text of a new General Data Protection Regulation, anticipated to take effect in 2018, which will largely replace many member state laws, potentially imposing additional obligations on us and allowing for substantial monetary penalties for non-compliance.

In addition, we may inadvertently receive personal information from advertisers or advertising agencies or through the process of executing video advertising campaigns or usage of our platform. Our failure to comply with applicable laws and regulations, or to protect personal data, could result in enforcement action against us, including fines, imprisonment of our officers and public censure, claims for damages by consumers and other affected individuals, damage to our reputation and loss of goodwill, any of which could have a material adverse impact on our operations, financial performance and business. Even the perception of privacy concerns, whether or not valid, may harm our reputation and inhibit adoption of our solution by current and future advertisers and advertising agencies.

In addition, data security is of increasing concern to U.S., state and foreign regulators and, as a result, the legal standards for data security and the consequences for violating those standards continue to evolve and the threat posed by cyber-attacks and data breaches continues to grow. While we take measures to protect the security of information that we collect, use, and disclose in the operation of our business, and to offer certain privacy protections with respect to such information, such measures may not always be effective.

Our revenue may be adversely affected if we are required to charge sales taxes or other taxes for our platform.

States, countries or other jurisdictions may seek to impose sales or other tax collection obligations on us in the future, or states or jurisdictions in which we already pay tax may increase the amount of taxes we are required to pay. A successful assertion by any state, country or other jurisdiction in which we do business that we should be collecting sales or other taxes on the revenue of our platform could, among other things, create significant administrative burdens for us, result in substantial tax liabilities for past sales, discourage customers from using our platform or otherwise substantially harm our business and results of operations.

We might require additional capital to support business growth, and this capital might not be available on acceptable terms, if at all.

We intend to continue to make investments to support our business growth and may require additional funds to respond to business challenges, such as keeping pace with technological developments in order to remain competitive in our evolving industry, improve our operating infrastructure or acquire complementary businesses and technologies. In addition, we remit payment for media inventory purchased through our platform by our Platform Direct and Platform Services customers in advance of receiving payment from them as the advertising agency does not pay us for use of our platform until it has received payment from the brand. This payment process will continue to consume working capital and the effect on our cash flows may become more pronounced if we continue to grow our business. As a result, we may need to engage in equity or debt financings to secure additional funds. If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Any debt financing secured by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. In addition, we may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to support our business growth, particularly if we experience unexpected increases in advertising spend through our platform, and to respond to business challenges could be significantly impaired.

Our credit facility subjects us to operating restrictions and financial covenants that impose risk of default and may restrict our business and financing activities.

Pursuant to our loan and security agreement with Silicon Valley Bank, as amended to date, we are subject to certain financial ratio and liquidity covenants, as well as restrictions that limit our ability, among other things, to:

· dispose of or sell our assets;

· make material changes in our business or management;

· consolidate or merge with other entities;

· incur additional indebtedness;

· create liens on our assets;

· pay dividends;

42

· make investments;

· enter into transactions with affiliates; and

· pay off or redeem subordinated indebtedness.

These covenants may restrict our ability to finance our operations and to pursue our business activities and strategies. Our ability to comply with these covenants may be affected by events beyond our control. In the past, we were not compliant with certain administrative covenants. Although the bank waived such noncompliance in the past, there is no guarantee it will do so in the future. If a default were to occur and not be waived, such default could cause, among other remedies, all of the outstanding indebtedness under our loan and security agreement to become immediately due and payable. In such an event, our liquid assets might not be sufficient to meet our repayment obligations, and we might be forced to liquidate collateral assets at unfavorable prices or our assets may be foreclosed upon and sold at unfavorable valuations.

Our ability to renew our existing revolving line of credit, which matures in April 2017, or to enter into a new credit facility to replace or supplement the existing facility may be limited due to various factors, including the status of our business, global credit market conditions, and perceptions of our business or industry by sources of financing. In addition, if credit is available, lenders may seek more restrictive covenants and higher interest rates that may reduce our borrowing capacity, increase our costs, or reduce our operating flexibility.

If we do not have or are unable to generate sufficient cash available to repay our debt obligations when they become due and payable, either upon maturity or in the event of a default, we may not be able to obtain additional debt or equity financing on favorable terms, if at all. Our inability to obtain financing may negatively impact our ability to operate and continue our business as a going concern.

We may selectively pursue acquisitions of complementary businesses and technologies, which could divert our management’s attention, result in additional dilution to our stockholders and otherwise disrupt our operations and adversely affect our operating results.

We may selectively pursue acquisitions of complementary businesses and technologies that we believe could complement or expand our applications, enhance our technical capabilities or otherwise offer growth opportunities. The pursuit of potential acquisitions may divert the attention of management and cause us to incur various expenses in identifying, investigating and pursuing suitable acquisitions, whether or not they are consummated.

In addition, we have limited experience with acquiring other businesses or technologies. If we acquire businesses or technologies, we may not be able to integrate the acquired personnel, operations and technologies successfully, or effectively manage the combined business following the acquisition. We also may not achieve the anticipated benefits from the acquired business due to a number of factors, including:

· inability to integrate or benefit from acquired technologies or services in a profitable manner;

· unanticipated costs or liabilities associated with the acquisition;

· incurrence of acquisition-related costs;

· difficulty integrating the accounting systems, operations and personnel of the acquired business;

· difficulties and additional expenses associated with supporting legacy products and hosting infrastructure of the acquired business;

· difficulty converting the customers of the acquired business onto our applications and contract terms, including disparities in the revenue, licensing, support or professional services model of the acquired company;

· diversion of management’s attention from other business concerns;

· adverse effects to our existing business relationships with business partners and customers as a result of the acquisition;

· the potential loss of key employees;

· use of resources that are needed in other parts of our business; and use of substantial portions of our available cash to consummate the acquisition.

In addition, a significant portion of the purchase price of companies we acquire may be allocated to acquired goodwill and other intangible assets, which must be assessed for impairment at least annually. In the future, if our acquisitions do not yield expected returns, we may be required to take charges to our operating results based on this impairment assessment process, which could adversely affect our results of operations.

43

Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our operating results. We may also unknowingly inherit liabilities from acquired businesses or assets that arise after the acquisition and that are not adequately covered by indemnities. In addition, if an acquired business fails to meet our expectations, our operating results, business and financial position may suffer.

If we fail to maintain effective internal control over financial reporting investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may be negatively affected.

We are required to maintain internal control over financial reporting and to report any material weaknesses in such internal control. Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act requires that we evaluate and determine the effectiveness of our internal control over financial reporting and provide a management report on the internal control over financial reporting, which must be attested to by our independent registered public accounting firm to the extent we decide not to avail ourselves of the exemption provided to an emerging growth company, as defined by The Jumpstart Our Businesses Act of 2012, or the JOBS Act.

The process of designing and implementing the internal control over financial reporting required to comply with this obligation, is time consuming, costly, and complicated. We have expended, and anticipate that we will continue to expend, resources, including accounting and consulting expenses and management oversight as we continue to develop and refine our internal control over financial reporting. If we identify material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, if we are unable to assert that our internal control over financial reporting are effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, if and when required, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the Securities and Exchange Commission, or SEC, or other regulatory authorities, which could require additional financial and management resources.

We incur significantly increased costs and devote substantial management time as a result of operating as a public company.

As a public company, we incur significant legal, accounting and other expenses that we did not incur as a private company. For example, we are subject to the reporting requirements of the Exchange Act, and are required to comply with the applicable requirements of the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as rules and regulations subsequently implemented by the SEC and The Nasdaq Stock Market, or NASDAQ, including the establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. Compliance with these requirements will continue to increase our legal and financial compliance costs and has and will increasingly make some activities more time consuming and costly. Our management team has limited experience managing a publicly-traded company and limited experience complying with the increasingly complex laws pertaining to public companies. Our management team may not successfully or efficiently manage our transition to being a public company that is subject to significant regulatory oversight and reporting obligations under the federal securities laws. In addition, we expect that our management and other personnel will need to divert attention from operational and other business matters to devote substantial time to these public company requirements. In particular, we expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act. We will need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge and may need to establish an internal audit function.

As a public company it is more expensive for us to obtain director and officer liability insurance on the terms that we would like and we may find it more difficult for us to attract and retain qualified people to serve on our board of directors, our board committees or as executive officers.

We are an emerging growth company and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.

For as long as we are an emerging growth company, we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies including, but not limited to, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

44

We will remain an emerging growth company until the earliest of (i) the end of the fiscal year in which the market value of our common stock that is held by non-affiliates exceeds $700 million as of June 30, (ii) the end of the fiscal year in which we have total annual gross revenue of $1 billion or more during such fiscal year, (iii) the date on which we issue more than $1 billion in non-convertible debt in a three-year period or (iv) July 17, 2019.

We may not be able to utilize a significant portion of our net operating loss or research tax credit carryforwards, which could adversely affect our profitability.

As of March 31, 2016, we had federal and state net operating loss carryforwards due to prior period losses, which if not utilized will begin to expire in 2017 for state purposes and 2027 for federal purposes. These net operating loss carryforwards could expire unused and be unavailable to offset future income tax liabilities, which could adversely affect our profitability.

In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, our ability to utilize net operating loss carryforwards or other tax attributes in any taxable year may be limited if we experience an “ownership change.” A Section 382 “ownership change” generally occurs if one or more stockholders or groups of stockholders who own at least 5% of our stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Similar rules may apply under state tax laws.

Future issuances of our stock could cause an “ownership change.” It is possible that any future ownership change could have a material effect on the use of our net operating loss carryforwards or other tax attributes, which could adversely affect our profitability.

Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the U.S.

Generally accepted accounting principles in the U.S. are subject to interpretation by the Financial Accounting Standards Board, the SEC, and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results, and could affect the reporting of transactions completed before the announcement of a change.

Risks Related to Ownership of Our Common Stock

We may fail to meet our publicly announced guidance or other expectations about our business and future operating results, which would cause our stock price to decline.

We have and may continue to provide guidance about our business and future operating results as part of our press releases, conference calls or otherwise. In developing this guidance, our management must make certain assumptions and judgments about our future performance. Our business results may vary significantly from such guidance due to a number of factors, many of which are outside of our control, and which could adversely affect our operations and operating results. Furthermore, if our publicly announced guidance of future operating results fails to meet expectations of securities analysts, investors or other interested parties, the price of our common stock would decline.

The price of our common stock has been volatile and may continue to be volatile and may decline regardless of our financial performance.

Technology stock has historically experienced high levels of volatility. The trading price of our common stock has fluctuated and may continue to fluctuate significantly. Factors that could cause fluctuations in the trading price of our common stock include:

· overall performance of the equity markets;

· the development and sustainability of an active trading market for our common stock;

· our operating performance and the performance of other similar companies;

· changes in the estimates of our operating results that we provide to the public, our failure to meet these projections or changes in recommendations by securities analysts that elect to follow our common stock;

· press releases or other public announcements by us or others, including our filings with the SEC;

· changes in the market perception of digital video advertising solutions generally or in the effectiveness of our platform in particular;

· announcements of technological innovations, new applications, features, functionality or enhancements to products, services or solutions by us or by our competitors;

45

· announcements of acquisitions, strategic alliances or significant agreements by us or by our competitors;

· announcements of customer additions and customer cancellations or delays in customer purchases;

· announcements regarding litigation involving us;

· recruitment or departure of key personnel;

· changes in our capital structure, such as future issuances of debt or equity securities;

· our entry into new markets;

· regulatory developments in the U.S. or foreign countries;

· the economy as a whole, market conditions in our industry, and the industries of our customers;

· the size of our market float; and

· any other factors discussed in this Form 10-Q.

In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many technology companies. Stock prices of many technology companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In the past, stockholders have filed securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and adversely affect our business.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. If few securities analysts commence coverage of us, or if industry analysts cease coverage of us, the trading price for our common stock would be negatively affected. If one or more of the analysts who cover us downgrade our common stock or publish inaccurate or unfavorable research about our business, our common stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our common stock could decrease, which might cause our common stock price and trading volume to decline.

Substantial future sales of shares by our stockholders could negatively affect our stock price.

Sales of a substantial number of shares of our common stock in the public market, particularly sales by our directors, executive officers, and significant stockholders, or the perception that these sales might occur or if there is a large number of shares of our common stock available for sale, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities.

Our shares of common stock are freely tradable without restrictions or further registration under the Securities Act of 1933, as amended, or the Securities Act, except for any shares held by our affiliates as defined in Rule 144 under the Securities Act.

As of March 31, 2016, holders of an aggregate of approximately 10.2 million shares of our common stock have rights, subject to some conditions, to require us to file registration statements covering their shares or to include such shares in registration statements that we may file for ourselves or other stockholders. We have also registered shares of common stock that we have issued upon the exercise of outstanding stock options and RSUs, and that we may in the future issue, under our equity compensation plans. These can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates.

Furthermore, certain of our executive officers have adopted, and other employees, executive officers or directors may in the future adopt written plans, known as “Rule 10b5-1 Plans,” under which they have contracted, or may in the future contract, with a broker to sell shares of our common stock on a periodic basis to diversify their assets and investments. Sales of substantial amounts of our common stock in the public market, including, but not limited to sales made by our employees, executive officers and directors pursuant to Rule 10b5-1 Plans, or the perception that these sales could occur, could cause the market price of our common stock to decline.

46

The concentration of our common stock ownership with our executive officers, directors and affiliates will limit your ability to influence corporate matters.

Our executive officers, directors and their respective affiliates beneficially owned, in the aggregate, approximately 39% of our outstanding common stock as of March 31, 2016. These stockholders will therefore have significant influence over management and affairs and over all matters requiring stockholder approval, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or our assets, for the foreseeable future. This concentrated control will limit the ability of our public stockholders to influence corporate matters and, as a result, we may take actions that our stockholders do not view as beneficial. This ownership could affect the value of shares of our common stock.  

We do not intend to pay dividends for the foreseeable future.

We have never declared nor paid cash dividends on our capital stock. We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future. Consequently, stockholders must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment.

Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable.

Provisions in our certificate of incorporation and by-laws, may have the effect of delaying or preventing a change of control or changes in our management. These provisions include the following:

· authorize the issuance of “blank check” preferred stock that could be issued by our board of directors to defend against a takeover attempt;

· establish a classified board of directors, as a result of which the successors to the directors whose terms have expired will be elected to serve from the time of election and qualification until the third annual meeting following their election;

· require that directors only be removed from office for cause and only upon a supermajority stockholder vote;

· provide that vacancies on the board of directors, including newly created directorships, may be filled only by a majority vote of directors then in office rather than by stockholders;

· prevent stockholders from calling special meetings; and

· prohibit stockholder action by written consent, requiring all actions to be taken at a meeting of the stockholders.

In addition, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder becomes an “interested” stockholder.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) Recent Sales of Unregistered Securities

None

(b) Use of Proceeds

On July 17, 2014, the SEC declared our Registration Statement on Form S-1 (File No. 333-194817) effective for our initial public offering.  On June 10, 2016, the SEC declared our Registration Statement on Form S-1 (File No. 333-204629) effective for our follow-on offering. There have been no material changes in our use of the proceeds from our initial public offering and follow-on public offering as described in our final prospectuses filed with the SEC pursuant to Rule 424(b) of the Securities Act and other periodic reports previously filed with the SEC.

Item 3. Defaults upon Senior Securities

None.

47

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

See the Exhibit Index immediately following the signature page of this Form 10-Q, which is incorporated herein by reference.

48

SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

TUBEMOGUL, INC.
By:	/s/  Brett Wilson
	Brett Wilson
	President and Chief Executive Officer
	(Principal Executive Officer)
Date:	May 10, 2016
By:	/s/  Paul Joachim
	Paul Joachim
	Chief Financial Officer
	(Principal Financial Officer and Principal Accounting Officer)
Date:	May 10, 2016

49

EXHIBIT INDEX

Exhibit		Incorporated by Reference
Number	Description	Form	File No.	Exhibit(s)	Filing Date	Filed Herewith
10.1*	Employment Offer Letter between the Company and Robert Gatto.	8-K	001-36543	10.1	April 5, 2016
10.2*	Amendment to Employment Offer Letter between the Company and Robert Gatto.					X
31.1	Certification of Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.					X
31.2	Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.					X
32.1†	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.					X
32.2†	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.					X
101.INS	XBRL Instance Document.					X
101.SCH	XBRL Taxonomy Extension Schema Document.					X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.					X
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.					X
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.					X
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.					X

* Indicates a management contract or compensatory plan.

† This certification is deemed furnished not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended (Securities Act), or the Exchange Act.

50

EX-10.2

Exhibit 10.2

Amendment No. 1 to Offer Letter

The undersigned, Robert Gatto (“you”) and TubeMogul, Inc. (the “Company”), hereby agree that, effective as of March 30, 2016, the one-time cash starting bonus in the amount of $100,000 contemplated in Section 5 of that certain employment Agreement dated February 1, 2016 (the “Offer Letter”) shall be subject to the clawback provision set forth below.  All capitalized terms used but not defined herein shall have the meanings given to them in the Offer Letter.

If you voluntarily terminate your employment with the Company for any reason or your employment with the Company is terminated by the Company for Cause on or before March 30, 2017 (the first anniversary of your appointment as the Company’s Chief Operating Officer), you shall repay to the Company an amount equal to $100,000 multiplied by the fraction, the numerator of which is 365 less the number of days during which you were employed by the Company, and the denominator of which is 365. If applicable, you agree to make this repayment in full within 90 days of the termination of your employment, and you further authorize the Company to immediately offset against and reduce any amounts otherwise due to you from the Company for any amounts owing from you to the Company in repaying the starting bonus.

The Offer Letter remains in full force and effect as modified herein.

TubeMogul, Inc.

By: /s/ Brett Wilson

Its: CEO

/s/ Robert C. GattoRobert Gatto

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Brett Wilson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of TubeMogul, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:  May 10, 2016	/s/ Brett Wilson
	Brett Wilson
	President and Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Paul Joachim, certify that:

1. I have reviewed this quarterly report on Form 10-Q of TubeMogul, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:  May 10, 2016	/s/ Paul Joachim
	Paul Joachim
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Brett Wilson, President and Chief Executive Officer of TubeMogul, Inc. (the “Company”), certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The Quarterly Report on Form 10-Q for the Company for the quarter ended March 31, 2016 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:  May 10, 2016	/s/ Brett Wilson
	Brett Wilson
	President and Chief Executive Officer
	(Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Paul Joachim, Chief Financial Officer of TubeMogul, Inc. (the “Company”), certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The Quarterly Report on Form 10-Q for the Company for the quarter ended March 31, 2016 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:  May 10, 2016	/s/ Paul Joachim
	Paul Joachim
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2016	Apr. 29, 2016
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q1
Trading Symbol	TUBE
Entity Registrant Name	TUBEMOGUL INC
Entity Central Index Key	0001449278
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		35,759,820

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 83,758	$ 83,439
Accounts receivable, net	147,628	159,899
Prepaid expenses and other current assets	5,123	3,752
Total current assets	236,509	247,090
Property, equipment and software, net	10,646	8,585
Restricted cash	1,563	1,563
Other assets	1,614	1,495
Total assets	250,332	258,733
Current liabilities:
Accounts payable	45,140	47,346
Accrued liabilities	66,432	74,927
Revolving line of credit	6,050	2,050
Other current liabilities	2,429	1,701
Total current liabilities	120,051	126,024
Other liabilities	951	746
Note payable, net of current portion	2,140	1,787
Total liabilities	$ 123,142	$ 128,557
Commitments and contingencies (Note 5)
Stockholders’ equity:
Preferred stock; $0.001 par value; 10,000 shares authorized and 0 outstanding as of March 31, 2016 and December 31, 2015, respectively
Common stock; $0.001 par value; 200,000 shares authorized and 35,694 and 35,344 shares issued and outstanding as of March 31, 2016 and December 31, 2015, respectively	$ 35	$ 35
Additional paid-in capital	172,670	167,316
Accumulated deficit	(45,272)	(37,016)
Accumulated other comprehensive loss	(243)	(159)
Total stockholders’ equity	127,190	130,176
Total liabilities and stockholders’ equity	$ 250,332	$ 258,733

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Mar. 31, 2016	Dec. 31, 2015
Statement Of Financial Position [Abstract]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	35,694,000	35,694,000
Common stock, shares outstanding	35,344,000	35,344,000

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Revenue:
Total revenue	$ 42,080	$ 30,316
Cost of revenue	11,669	8,303
Gross profit	30,411	22,013
Operating expenses:
Research and development	12,566	8,769
Sales and marketing	16,188	11,112
General and administrative	10,276	7,827
Total operating expenses	39,030	27,708
Loss from operations	(8,619)	(5,695)
Other income (expense), net:
Interest income (expense), net	13	(28)
Foreign exchange gain (loss), net	544	(1,307)
Other income (expense), net	557	(1,335)
Net loss before income taxes	(8,062)	(7,030)
Provision for income taxes	(194)	(114)
Net loss	$ (8,256)	$ (7,144)
Basic and diluted net loss per share	$ (0.23)	$ (0.24)
Basic and diluted weighted-average shares used to compute net loss per share	35,516	30,026
Platform Direct
Revenue:
Total revenue	$ 20,671	$ 14,304
Platform Services
Revenue:
Total revenue	$ 21,409	$ 16,012

XML

Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Statement Of Income And Comprehensive Income [Abstract]
Net loss	$ (8,256)	$ (7,144)
Other comprehensive loss:
Foreign currency translation adjustments	(84)	(93)
Comprehensive loss	$ (8,340)	$ (7,237)

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Cash flows from operating activities:
Net loss	$ (8,256)	$ (7,144)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	849	412
Provision for doubtful accounts	(251)	79
Provision for sales allowances	428	558
Stock-based compensation expense	4,059	2,401
Changes in operating assets and liabilities:
Accounts receivable	12,094	1,273
Prepaid expenses and other current assets	(1,371)	(406)
Other assets	(119)	(45)
Accounts payable	(1,269)	4,605
Accrued liabilities	(8,495)	(11,671)
Other current and noncurrent liabilities	661	592
Net cash used in operating activities	(1,670)	(9,346)
Cash flows from investing activities:
Purchases of property, equipment and software	(3,847)	(843)
Net cash used in investing activities	(3,847)	(843)
Cash flows from financing activities:
Proceeds from term loan	840
Repayment of note payable and convertible note	(215)	(366)
Proceeds from revolving line of credit	4,000
Proceeds from issuances of common stock from the exercise of options and ESPP	1,295	911
Net cash provided by financing activities	5,920	545
Effect of exchange rate changes on cash and cash equivalents	(84)	(93)
Net increase (decrease) in cash and cash equivalents	319	(9,737)
Cash and cash equivalents, beginning of period	83,439	46,592
Cash and cash equivalents, end of period	83,758	36,855
Supplemental disclosures:
Equipment purchases included in accounts payable	278	177
Cash paid for income taxes	$ 236	$ 34

XML

The Company and its Significant Accounting Policies

3 Months Ended

Mar. 31, 2016

Accounting Policies [Abstract]

The Company and its Significant Accounting Policies

1. The Company and its Significant Accounting Policies

The Company

TubeMogul, Inc., a Delaware corporation (the Company), provides software for brand advertising. The Company’s customers include many of the world’s largest brands and their media agencies. The Company is headquartered in Emeryville, California and has offices in several other locations in the U.S. and internationally including in Kyiv, London, Paris, Sao Paulo, Shanghai, Singapore, Sydney, Tokyo and Toronto.

Principles of Consolidation and Basis of Presentation

These unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) regarding interim financial reporting, and include the accounts of the Company’s wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015.   

The consolidated balance sheet as of December 31, 2015 included herein was derived from the audited financial statements as of that date. These unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, the Company’s comprehensive loss and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full fiscal year ending December 31, 2016 or any other period.

Use of Estimates

The preparation of the financial statements in accordance with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates in these condensed consolidated financial statements include allowances for doubtful accounts, reserves for sales allowances, useful lives for depreciation and amortization, loss contingencies, valuation of deferred tax assets, provisions for uncertain tax positions, capitalization of software costs, delivery of impressions for campaigns using the Company’s programmatic TV (PTV) solution and assumptions used for valuation of stock-based compensation. Actual results could differ from those and other estimates.

Accounts Receivable

Accounts receivable are stated at net realizable value. The Company recognizes allowances for estimated bad debt and sales allowances in the period in which the related sale is recorded. Allowances for bad debts are estimated based on the Company’s historical write-off experience and an assessment of customer-specific circumstances including, aged balances, payment history, changes in payment terms, and other customer-specific information which may provide an indication that account balances are not collectible. Accounts receivable are written off when no future collection is possible.

Many of the Company’s contracts with advertising agencies provide that if the brand (i.e., the agency’s customer) does not pay the agency, the agency is not liable to the Company and the Company must seek payment from the brand. Accordingly, the Company considers the creditworthiness of the brand in establishing its allowance for doubtful accounts. However, since inception, the Company has not had to initiate collection efforts directly with any brands where the contract was with an advertising agency.

The following table presents the changes in the allowance for doubtful accounts:

	Three Months Ended			Year Ended
	March 31,			December 31,
	2016			2015
Balance, beginning of period	$	(2,110	)	$	(1,369	)
Reductions (additions) to allowance		251			(1,287	)
Write offs, net of recoveries		152			546
Balance, end of period	$	(1,707	)	$	(2,110	)

The Company established a reserve for sales allowances during the year ended December 31, 2014. Sales allowances primarily relate to credit memos issued for billing discrepancies and customer concessions, and are estimated using a combination of specifically identified potential claims and estimated amounts which are derived from actual historical experience. The allowance is recorded as a reduction to revenue in the consolidated statement of operations and accounts receivable on the consolidated balance sheets.

The following table presents the changes in sales allowances:

	Three Months Ended			Year Ended
	March 31,			December 31,
	2016			2015
Balance, beginning of period	$	(875	)	$	(460	)
Additions to allowance		(428	)		(3,244	)
Issued sales allowances		537			2,829
Balance, end of period	$	(766	)	$	(875	)

Fair Value Measurement and Financial Instruments

The Company measures the fair value of its financial instruments in accordance with of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) for Fair Value Measurements. Under this standard, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date. In determining fair values of all reported assets and liabilities that represent financial instruments, the Company uses the carrying market values of such amounts. The provision establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company.

Unobservable inputs are inputs that reflect the Company’s assumptions as to what market participants would use in pricing the asset or liability developed based on the best information available under the circumstances. The hierarchy is broken down into three levels based on the observability of inputs as follows:

Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

Level 2 — Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 — Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

The Company had $73,681 and $72,416 of cash equivalents as of March 31, 2016 and December 31, 2015, respectively, which are measured at fair value on a recurring basis. Inputs used in measuring fair value of cash equivalents are categorized as Level 1.     

From time to time the Company enters into foreign currency forward contracts to mitigate its exposure to foreign exchange risk.  The foreign currency forward contracts are valued using observable inputs, such as quotations on forward foreign exchange points and foreign interest rates and are categorized as Level 2. Realized gains from these contracts were insignificant for the three months ended March 31, 2016. The Company uses foreign currency forward contracts to mitigate the impact of foreign currency fluctuations of certain non-U.S. dollar denominated asset positions, primarily cash and accounts receivable. Gains and losses resulting from currency exchange rate movements on these forward contracts are recognized in other income (expense) in the accompanying condensed consolidated statements of operations in the period in which the exchange rates change and offset the foreign currency gains and losses on the underlying exposure being hedged. The Company does not enter into derivative financial instruments for trading or speculative purposes.As of March 31, 2016, the Company had forward foreign exchange contracts to buy a total notional value of $15.3 million against various foreign currencies. The Company does not apply hedge accounting to its derivative transactions. The Company is exposed to credit loss in the event of nonperformance by the counterparty to the foreign currency foreign exchange contracts. The Company continually monitors its positions and the credit ratings of the counterparties involved to mitigate the amount of credit exposure.

Other financial instruments not measured at fair value on the accompanying consolidated balance sheets at March 31, 2016 and December 31, 2015, but which require disclosure of their fair values, include accounts receivable, accounts payable, accrued liabilities and debt. The estimated fair values of such instruments at March 31, 2016 and December 31, 2015 approximated their carrying values due to being short term in nature. The fair values of all of these instruments are categorized as Level 2 in the fair value hierarchy.

There were no assets measured using Level 3 inputs at March 31, 2016.

Segment Information

The Company considers operating segments to be components of the Company in which separate financial information is available that is evaluated regularly by the Company’s Chief Operating Decision Maker (CODM) in deciding how to allocate resources and in assessing performance. The CODM for the Company is the Chief Executive Officer. The CODM reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. The Company has one business activity, and there are no segment managers who are held accountable for operations, operating results or plans for levels or components below the consolidated unit level. Accordingly, the Company has determined that it has a single operating and reportable segment, which is to design, develop and market software for digital branding.

Recent Accounting Pronouncements

Standard	Description	Planned Date of Adoption	Effects on the Consolidated Financial Statements
Accounting Standards Update No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), (ASU 2016-08)	ASU 2016-08 clarifies the implementation guidance on principal versus agent considerations. The guidance includes indicators to assist an entity in determining whether it controls a specified good or service before it is transferred to the customers. The effective date and transition requirements are the same as the effective date and transition requirements of Update 2014-09. Accounting Standards Update No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, defers the effective date of Update 2014-09 by one year.	January 1, 2018	The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements and footnote disclosures.
Accounting Standards Update No. 2016-09, Compensation – Stock Compensation (Topic 718), (ASU 2016-09)	ASU 2016-09 identifies areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. For public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for any entity in any interim or annual period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period.	January 1, 2017	The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements and footnote disclosures.
Accounting Standards Update 2016-02, Leases,  (ASU 2016-02)	ASU 2016-02 requires lessees to recognize a right-of-use asset and lease liability for all leases with terms of more than twelve months. Recognition, measurement and presentation of expenses will depend on classification as a finance or operating lease. The ASU also requires certain quantitative and qualitative disclosures. Accounting guidance for lessors is largely unchanged. The amendments in this Update are effective for fiscal years beginning after December 15, 2018.	January 1, 2019	The requirements should be applied on a modified retrospective basis and the updated standard will be effective for the Company in the first quarter of 2020. The Company expects that the impact of the adoption of this standard will result in the recognition of a lease asset and lease liability for those operating leases in effect at the date of adoption however, the Company is still in the process of determining the full extent the impact the adoption of this ASU will have on its consolidated financial statements and related disclosures.
Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers,  (ASU 2014-09)	ASU 2014-09 clarifies existing accounting literature relating to how and when a company recognizes revenue. The updated standard will replace most existing revenue recognition guidance under U.S. generally accepted accounting principles (GAAP) when it becomes effective and permits the use of either the retrospective or cumulative effect transition method. Under ASU 2014-09, a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services. Additionally, the guidance requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The FASB decided on July 9, 2015 to defer for one year the effective date of the new revenue standard for public and nonpublic entities reporting under GAAP. The FASB also decided to permit entities to early adopt the standard, for annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.	January 1, 2018	The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements and footnote disclosures.

XML

Property, Equipment and Software

3 Months Ended

Mar. 31, 2016

Property Plant And Equipment [Abstract]

Property, Equipment and Software

2. Property, Equipment and Software

Property, equipment and software consisted of the following:

	March 31,			December 31,
	2016			2015
Computer, software and office equipment	$	4,730		$	4,509
Capitalized internal use software costs		4,639			3,587
Furniture and fixtures		2,111			1,821
Leasehold improvements		3,683			2,336
		15,163			12,253
Less accumulated depreciation and amortization		(4,517	)		(3,668	)
Total	$	10,646		$	8,585

Total depreciation and amortization expense was $849 and $412 for three months ended March 31, 2016 and 2015, respectively.

XML

Accrued Liabilities

3 Months Ended

Mar. 31, 2016

Payables And Accruals [Abstract]

Accrued Liabilities

3. Accrued Liabilities

Accrued liabilities consisted of the following:

	March 31,		December 31,
	2016		2015
Accrued media costs	$	55,722	$	61,040
Sales commissions		2,501		3,776
Payroll and related expenses		4,785		6,314
Other accrued expenses		3,424		3,797
Total	$	66,432	$	74,927

Accrued media costs consist of amounts owed to the Company’s vendors for impressions delivered through March 31, 2016 and December 31, 2015.

XML

Debt Obligations

3 Months Ended

Mar. 31, 2016

Debt Disclosure [Abstract]

Debt Obligations

4. Debt Obligations

	March 31,		December 31,
	2016		2015
Short-term debt and current portion of long-term debt
Revolving credit facility	$	6,050	$	2,050
Current portion of long-term debt:
Term loan		1,120		848
Total current	$	7,170	$	2,898
Long-term debt
Term loan	$	3,260	$	2,635
Less: current portion of long-term debt:		1,120		848
Total noncurrent	$	2,140	$	1,787

Revolving Line of Credit

In April 2014, the Company entered into an amendment to its growth capital term loan and a revolving line of credit (Loan Agreement). The amendment increased the amount of the revolving line of credit to $35.0 million and extended the availability and maturity through April 1, 2016.  The amendment also introduced a new financial covenant that requires the Company to meet certain minimum revenue levels.

In December 2015, the Company entered into a second amendment to its Loan Agreement. The second amendment increased the amount of the revolving line of credit to $40.0 million and extended its maturity date to April 1, 2017.

Under the Loan Agreement, the Company may borrow under the revolving line of credit up to the lesser of (a) $40.0 million and (b) a borrowing base equal to 80% of eligible accounts receivable as defined in the agreement. Advances under the revolving line of credit accrue interest at a floating per annum rate equal to the prime rate as published in the Western Edition Wall Street Journal. The Company is required to pay a minimum amount of interest equal to the amount of interest that would accrue per quarter on a notional outstanding principal balance of $2.1 million.

The Loan Agreement includes a covenant whereby the Company is required to maintain an adjusted quick ratio of at least 1.10 to 1.00, tested as of the last day of each month, on a consolidated basis. This covenant is applicable to a given month if the Company fails to maintain, as of the last day of such month, consolidated revenues equal at least to 85% of the revenue projected in the business plan approved by the Company’s Board of Directors, measured on a trailing six-month basis. The agreement also includes a revenue covenant which requires that the Company maintain consolidated revenues equal at least to 80% of the revenue projected in the Board approved business plan measured on a trailing six-month basis, as long as the required covenant shows not less than 15% growth from the comparable period in the preceding fiscal year.  

If the combined amount of the Company’s cash on deposit with the lender, plus the availability under the revolving line of credit is less than $10.0 million, then the Company is required to deliver additional reporting to the lender.

As of March 31, 2016, the Company had $6.1 million outstanding and had $33.9 million available under the revolving line of credit.

Term Loans

In connection with the December 2015 second amendment to its Loan Agreement, the Company added a $5.0 million capital equipment term loan. Outstanding amounts under the facility bear interest at a floating annual rate of prime plus 0.5%. The Company is required to repay each capital equipment financing facility loan in 36 equal monthly payments of principal plus accrued interest commencing on the first day of the month immediately following the funding of each capital equipment facility loan. As of March 31, 2016, the Company had $3.3 million outstanding under the capital equipment term loan. The interest rate at March 31, 2016, was approximately 4.0%.

Future Payments

Future principal payments of debt instruments as of March 31, 2016 were as follows:

	Principal Payments
2016 (nine months)		836
2017		7,201
2018		1,199
2019		74
Thereafter	—
Total payments	$	9,310

XML

Commitments and Contingencies

3 Months Ended

Mar. 31, 2016

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

5. Commitments and Contingencies

Lease Commitments

The Company’s commitments for minimum rentals under its operating leases as of March 31, 2016 are as follows:

	Operating
	leases
2016 (nine months)	$	3,674
2017		4,668
2018		4,129
2019		3,836
2020		3,245
Thereafter		5,214
Total minimum lease payments	$	24,766

Rent expense was $1.3 million and $625 for the three months ended March 31, 2016 and 2015, respectively.

Future minimum rents due to the Company under its existing subleases are $0.4 million for 2016, and $0.6 million for 2017 through 2019. These amounts are not included in the table above.

Purchase Commitments

In August 2015, the Company entered into a commitment to purchase media from a single supplier in the amount of $7.5 million to $15.0 million, depending on the type of media purchased. These purchases can be made at any time from February 15, 2015 through September 30, 2016. As of March 31, 2016, the Company had purchased $1.9 million of media under this arrangement.   

In March 2016, the Company entered into a purchase commitment with a TV data partner, which requires the Company to pay approximately $1.2 million in monthly installments over a 12-month period beginning May 1, 2016.

Irrevocable Standby Letters of Credit

As of March 31, 2016, the Company had three irrevocable standby letters of credit outstanding totaling approximately $1.6 million. The Company entered into these letters of credit for the benefit of its sub landlord or landlord. These irrevocable letters of credit automatically renew on their anniversary so long as the related operating lease is still effective. The letter of credit may be canceled prior to the expiration date upon the written request of the beneficiary.

The Company is contractually required to keep the letters of credit for the term of the respective leases, therefore, the letters of credit are recorded as restricted cash and are classified as long-term assets on the condensed consolidated balance sheets.

Legal

The Company is involved from time to time in various claims and legal actions arising in the ordinary course of business. While it is not feasible to predict or determine the ultimate outcome of these matters, the Company believes that none of its current legal proceedings will have a material adverse effect on its financial position or results of operations.

XML

Stock-Based Compensation

3 Months Ended

Mar. 31, 2016

Share Based Compensation [Abstract]

Stock-Based Compensation

6. Stock-Based Compensation

In July 2007, the board of directors and stockholders of the Company approved and adopted the TubeMogul, Inc. 2007 Equity Compensation Plan (the 2007 Plan) that permitted the grant of incentive and nonqualified stock options, stock awards (including restricted stock units (RSUs)), and stock appreciation rights to purchase shares of the common stock of the Company. Under the 2007 Plan, shares of common stock are reserved for the issuance of permitted awards to eligible participants. Options granted generally vest and become exercisable over a four-year term from the date of grant, at a rate of 25% after one year, then monthly on a straight-line basis thereafter. Options granted generally are exercisable for up to 10 years from the date of grant. RSUs granted are generally released from restriction over a four-year term from the date of grant, at a rate of 25% after one year, then quarterly on a straight-line basis thereafter.

The Company has authorized and reserved a total of 6,093,703 shares of common stock under the 2007 Plan for the grant of permitted awards to employees, directors, consultants, and other service providers for the Company or related companies. The 2007 Plan terminated effective July 18, 2014, though it continues to govern outstanding awards issued under the 2007 Plan prior to July 16, 2014.

In February 2014, the Company’s board of directors and stockholders approved and adopted the TubeMogul, Inc. 2014 Equity Incentive Plan (the 2014 Plan), and the 2014 Plan became effective on July 16, 2014, the day immediately preceding the Company’s initial public offering (IPO). The 2014 Plan permits the grant of stock options, stock appreciation rights, restricted stock, RSUs, performance awards and other cash-based or stock-based awards. In addition, the 2014 Plan contains a mechanism through which the Company may adopt a deferred compensation arrangement in the future. Under the 2014 Plan, shares of common stock are reserved for the issuance of permitted awards to eligible participants. Options granted will generally vest and become exercisable over a four-year term from the date of grant, at a rate of 25% after one year, then monthly on a straight-line basis thereafter. Options granted generally are exercisable for up to 10 years from the date of grant. RSUs granted will generally be released from restriction over a four year term from the date of grant, at a rate of 25% after one year, then quarterly on a straight-line basis thereafter.

The Company initially authorized and reserved a total of 2,500,000 shares of common stock under the 2014 Plan for the grant of permitted awards. This reserve automatically increased on January 1, 2016 by 1,767,183 shares and will continue to increase on each subsequent anniversary through 2024, by an amount equal to the smaller of (a) five percent (5%) of the number of shares of common stock issued and outstanding on the immediately preceding December 31; or (b) an amount determined by the Company’s board of directors. This reserve may also be increased by up to an additional 4,975,000 shares, to include (a) any shares remaining available for grant under the 2007 Plan at the time of its termination; and (b) shares that would otherwise be returned to the 2007 Plan, upon the expiration or termination of awards granted under that plan.

Shares subject to awards which expire or are cancelled or forfeited will again become available for issuance under the 2014 Plan.

The shares available under the 2014 Plan will not be reduced by awards settled in cash.  The shares available under the 2014 Plan will be reduced by shares withheld to satisfy tax withholding obligations with respect to stock options and stock appreciation rights. The gross number of shares issued upon the exercise of stock appreciation rights or options exercised by means of a net exercise or by tender of previously owned shares will be deducted from the shares available under the 2014 Plan.

For purposes of the tables below, the 2007 Plan and the 2014 Plan are collectively referred to as the “Plan.” The following table summarizes the Plan’s stock option activity:

	Outstanding number of shares			Weighted-average exercise price per share		Weighted-average grant date fair value	Total intrinsic value of exercises		Weighted-average remaining contractual life		Aggregate intrinsic value
Balance at December 31, 2015		4,266		$	6.55					7.14	$	34,748
Options granted	—
Options exercised		(63	)		1.82		$	683
Options canceled		(8	)		7.99
Balance at March 31, 2016		4,195		$	6.62					6.90	$	32,079
Options exercisable and vested at    March 31, 2016		2,565		$	3.15					6.05	$	26,395
Options vested and expected to vest at    March 31, 2016		4,113		$	6.51					6.87	$	31,800

At March 31, 2016, there was approximately $9.9 million of total unrecognized compensation cost related to unvested options granted under the compensation plan. The remaining unrecognized compensation cost is expected to be recognized over the weighted average remaining vesting period of approximately 3.56 years at March 31, 2016.

The fair value of options granted to employees is estimated on the date of grant and to non-employees at each measurement period using the Black-Scholes-Merton option valuation model. This stock-based compensation expense valuation model requires the Company to make assumptions and judgments regarding the variables used in the calculation. These variances include the expected term (weighted average period of time that the options granted are expected to be outstanding), the expected volatility of the Company’s common stock, expected risk-free interest rate, expected dividends. To the extent actual results differ from the estimates, the difference will be recorded as a cumulative adjustment in the period estimates are revised. The Company uses the simplified calculation of expected term, as the Company does not have sufficient historical data to use any other method to estimate expected term. Expected volatility is based on an average of the historical volatilities of the common stock of several entities with characteristics similar to those of the Company. The expected risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option. Expected forfeitures are based on the Company’s historical experience.

There were no stock options granted in the three months ended March 31, 2016. The following assumptions were used to calculate the fair value of options for the three months ended March 31, 2015:

	Three Months Ended
	March 31,
	2015
Risk-free interest rate		1.80%
Dividend yield	—  %
Volatility		70%
Expected term	6.5 years

The following table summarizes the Plan’s RSU activity:

				Weighted-
	Outstanding			Average
	number of			Grant Date
	shares			Fair Value
Balance at December 31, 2015		2,067		$	13.51
RSUs granted		938			11.26
RSUs released		(167	)		13.79
RSUs canceled		(95	)		12.88
Balance at March 31, 2016		2,743		$	12.76

The fair value of RSUs granted to employees is estimated on the date of grant and to non-employees at each measurement period using the fair value of the underlying common stock.

At March 31, 2016, there was approximately $29.2 million of total unrecognized compensation cost related to unvested RSUs granted under the compensation plan. The remaining unrecognized compensation cost is expected to be recognized over the weighted average remaining vesting period of approximately 3.19 years at March 31, 2016.

The following table summarizes the effects of stock-based compensation in the Company’s accompanying condensed consolidated statements of operations:

	Three Months Ended
	March 31,
	2016		2015
	(in thousands)
Research and development	$	1,304	$	642
Sales and marketing		1,272		709
General and administrative		1,483		1,050
Total stock-based compensation	$	4,059	$	2,401

Employee Stock Purchase Plan

In February 2014, the Company’s board of directors adopted and the stockholders approved the Company’s 2014 Employee Stock Purchase Plan (ESPP), which became effective in July 2014. The ESPP allows eligible employees to purchase shares of the Company’s common stock through payroll deductions of up to 15% of their eligible compensation, subject to any plan limitations. The administrator may, in its discretion, modify the terms of offering periods. At the end of each offering period, employees are able to purchase shares at 85% of the lower of the fair market value of the Company’s common stock on the first trading day of the offering period or on the last day of the offering period. As of December 31, 2015 the Company had 1,136,964 shares available for sale under the ESPP. The ESPP provides for annual increases in the number of shares available for issuance under the ESPP on the first day of each fiscal year, equal to the least of (a) two percent of the number of shares of Stock issued and outstanding on the immediately preceding fiscal year, or (b) an amount determined by the Board.  

XML

Net Loss Per Share

3 Months Ended

Mar. 31, 2016

Earnings Per Share [Abstract]

Net Loss Per Share

7. Net Loss per Share

The Company’s basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period. The diluted net loss per share is computed by giving effect to all potential dilutive common stock equivalents outstanding for the period. For purposes of this calculation, options to purchase common stock, RSUs and shares to be issued under the ESPP are considered common stock equivalents but have been excluded from the calculation of diluted net loss per share as their effect is antidilutive as the Company had net losses for the three months ended March 31, 2016 and March 31, 2015.

The following securities were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive for the periods presented:

	Three Months Ended
	March 31,
	2016		2015
Employee stock options		4,195		4,959
RSUs		2,743		1,202
ESPP		138		83
Total		7,076		6,244

XML

Income Taxes

3 Months Ended

Mar. 31, 2016

Income Tax Disclosure [Abstract]

Income Taxes

8. Income Taxes

The Company is subject to income tax in the U.S. as well as other tax jurisdictions in which it conducts business. Earnings from non-U.S. activities are subject to local country income tax. The Company does not provide for federal income taxes on the undistributed earnings of its foreign subsidiaries as such earnings are to be reinvested indefinitely.

The Company recorded an income tax provision of $194 and $114 for the three months ended March 31, 2016 and March 31, 2015, respectively, related to foreign income taxes and state minimum taxes. Based on the available objective evidence during the three months ended March 31, 2016, management believes it is more likely than not that the tax benefits of the U.S. and Japan losses incurred during that period may not be realized by the end of the 2016 fiscal year. Accordingly, the Company did not record the tax benefits of the U.S. and Japan losses incurred during the three months ended March 31, 2016. The primary difference between the effective tax rate and the federal statutory tax rate relates to foreign tax rate differences, meals and entertainment and state and local minimum and capital taxes. As of March 31, 2016, the Company had no material uncertain tax positions.

Utilization of the net operating loss carryforwards may be subject to an annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended (the Code), and similar state provisions. Any annual limitation may result in the expiration of net operating losses before utilization.

XML

Subsequent Events

3 Months Ended

Mar. 31, 2016

Subsequent Events [Abstract]

Subsequent Events

9. Subsequent Events

In April 2016, the Company entered into a lease agreement with a landlord and a lease assignment agreement with the existing tenant, to lease additional office space at its headquarters in Emeryville. Under these agreements, the Company is required to pay approximately $6.1 million in lease payments beginning June 1, 2016. Future minimum rents under these agreements are approximately $0.9 million in 2016, $0.8 million in 2017 through 2020, and $2.0 million thereafter. In connection with the lease agreement, the Company entered into an irrevocable standby letter of credit in the amount of $1.0 million for the benefit of its landlord. The irrevocable letter of credit automatically renews on its anniversary so long that the lease is still effective. The letter of credit may be canceled prior to the expiration date upon the written request of the beneficiary.

XML

The Company and its Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2016

Accounting Policies [Abstract]

Principles of Consolidation and Basis of Presentation

Principles of Consolidation and Basis of Presentation

These unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) regarding interim financial reporting, and include the accounts of the Company’s wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015.   

The consolidated balance sheet as of December 31, 2015 included herein was derived from the audited financial statements as of that date. These unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, the Company’s comprehensive loss and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full fiscal year ending December 31, 2016 or any other period.

Use of Estimates

Use of Estimates

The preparation of the financial statements in accordance with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates in these condensed consolidated financial statements include allowances for doubtful accounts, reserves for sales allowances, useful lives for depreciation and amortization, loss contingencies, valuation of deferred tax assets, provisions for uncertain tax positions, capitalization of software costs, delivery of impressions for campaigns using the Company’s programmatic TV (PTV) solution and assumptions used for valuation of stock-based compensation. Actual results could differ from those and other estimates.

Accounts Receivable

Accounts Receivable

Accounts receivable are stated at net realizable value. The Company recognizes allowances for estimated bad debt and sales allowances in the period in which the related sale is recorded. Allowances for bad debts are estimated based on the Company’s historical write-off experience and an assessment of customer-specific circumstances including, aged balances, payment history, changes in payment terms, and other customer-specific information which may provide an indication that account balances are not collectible. Accounts receivable are written off when no future collection is possible.

Many of the Company’s contracts with advertising agencies provide that if the brand (i.e., the agency’s customer) does not pay the agency, the agency is not liable to the Company and the Company must seek payment from the brand. Accordingly, the Company considers the creditworthiness of the brand in establishing its allowance for doubtful accounts. However, since inception, the Company has not had to initiate collection efforts directly with any brands where the contract was with an advertising agency.

The following table presents the changes in the allowance for doubtful accounts:

	Three Months Ended			Year Ended
	March 31,			December 31,
	2016			2015
Balance, beginning of period	$	(2,110	)	$	(1,369	)
Reductions (additions) to allowance		251			(1,287	)
Write offs, net of recoveries		152			546
Balance, end of period	$	(1,707	)	$	(2,110	)

The Company established a reserve for sales allowances during the year ended December 31, 2014. Sales allowances primarily relate to credit memos issued for billing discrepancies and customer concessions, and are estimated using a combination of specifically identified potential claims and estimated amounts which are derived from actual historical experience. The allowance is recorded as a reduction to revenue in the consolidated statement of operations and accounts receivable on the consolidated balance sheets.

The following table presents the changes in sales allowances:

	Three Months Ended			Year Ended
	March 31,			December 31,
	2016			2015
Balance, beginning of period	$	(875	)	$	(460	)
Additions to allowance		(428	)		(3,244	)
Issued sales allowances		537			2,829
Balance, end of period	$	(766	)	$	(875	)

Fair Value Measurement and Financial Instruments

Fair Value Measurement and Financial Instruments

The Company measures the fair value of its financial instruments in accordance with of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) for Fair Value Measurements. Under this standard, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date. In determining fair values of all reported assets and liabilities that represent financial instruments, the Company uses the carrying market values of such amounts. The provision establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company.

Unobservable inputs are inputs that reflect the Company’s assumptions as to what market participants would use in pricing the asset or liability developed based on the best information available under the circumstances. The hierarchy is broken down into three levels based on the observability of inputs as follows:

Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

Level 2 — Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 — Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

The Company had $73,681 and $72,416 of cash equivalents as of March 31, 2016 and December 31, 2015, respectively, which are measured at fair value on a recurring basis. Inputs used in measuring fair value of cash equivalents are categorized as Level 1.     

From time to time the Company enters into foreign currency forward contracts to mitigate its exposure to foreign exchange risk.  The foreign currency forward contracts are valued using observable inputs, such as quotations on forward foreign exchange points and foreign interest rates and are categorized as Level 2. Realized gains from these contracts were insignificant for the three months ended March 31, 2016. The Company uses foreign currency forward contracts to mitigate the impact of foreign currency fluctuations of certain non-U.S. dollar denominated asset positions, primarily cash and accounts receivable. Gains and losses resulting from currency exchange rate movements on these forward contracts are recognized in other income (expense) in the accompanying condensed consolidated statements of operations in the period in which the exchange rates change and offset the foreign currency gains and losses on the underlying exposure being hedged. The Company does not enter into derivative financial instruments for trading or speculative purposes.As of March 31, 2016, the Company had forward foreign exchange contracts to buy a total notional value of $15.3 million against various foreign currencies. The Company does not apply hedge accounting to its derivative transactions. The Company is exposed to credit loss in the event of nonperformance by the counterparty to the foreign currency foreign exchange contracts. The Company continually monitors its positions and the credit ratings of the counterparties involved to mitigate the amount of credit exposure.

Other financial instruments not measured at fair value on the accompanying consolidated balance sheets at March 31, 2016 and December 31, 2015, but which require disclosure of their fair values, include accounts receivable, accounts payable, accrued liabilities and debt. The estimated fair values of such instruments at March 31, 2016 and December 31, 2015 approximated their carrying values due to being short term in nature. The fair values of all of these instruments are categorized as Level 2 in the fair value hierarchy.

There were no assets measured using Level 3 inputs at March 31, 2016.

Segment Information

Segment Information

The Company considers operating segments to be components of the Company in which separate financial information is available that is evaluated regularly by the Company’s Chief Operating Decision Maker (CODM) in deciding how to allocate resources and in assessing performance. The CODM for the Company is the Chief Executive Officer. The CODM reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. The Company has one business activity, and there are no segment managers who are held accountable for operations, operating results or plans for levels or components below the consolidated unit level. Accordingly, the Company has determined that it has a single operating and reportable segment, which is to design, develop and market software for digital branding.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Standard	Description	Planned Date of Adoption	Effects on the Consolidated Financial Statements
Accounting Standards Update No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), (ASU 2016-08)	ASU 2016-08 clarifies the implementation guidance on principal versus agent considerations. The guidance includes indicators to assist an entity in determining whether it controls a specified good or service before it is transferred to the customers. The effective date and transition requirements are the same as the effective date and transition requirements of Update 2014-09. Accounting Standards Update No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, defers the effective date of Update 2014-09 by one year.	January 1, 2018	The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements and footnote disclosures.
Accounting Standards Update No. 2016-09, Compensation – Stock Compensation (Topic 718), (ASU 2016-09)	ASU 2016-09 identifies areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. For public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for any entity in any interim or annual period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period.	January 1, 2017	The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements and footnote disclosures.
Accounting Standards Update 2016-02, Leases,  (ASU 2016-02)	ASU 2016-02 requires lessees to recognize a right-of-use asset and lease liability for all leases with terms of more than twelve months. Recognition, measurement and presentation of expenses will depend on classification as a finance or operating lease. The ASU also requires certain quantitative and qualitative disclosures. Accounting guidance for lessors is largely unchanged. The amendments in this Update are effective for fiscal years beginning after December 15, 2018.	January 1, 2019	The requirements should be applied on a modified retrospective basis and the updated standard will be effective for the Company in the first quarter of 2020. The Company expects that the impact of the adoption of this standard will result in the recognition of a lease asset and lease liability for those operating leases in effect at the date of adoption however, the Company is still in the process of determining the full extent the impact the adoption of this ASU will have on its consolidated financial statements and related disclosures.
Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers,  (ASU 2014-09)	ASU 2014-09 clarifies existing accounting literature relating to how and when a company recognizes revenue. The updated standard will replace most existing revenue recognition guidance under U.S. generally accepted accounting principles (GAAP) when it becomes effective and permits the use of either the retrospective or cumulative effect transition method. Under ASU 2014-09, a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services. Additionally, the guidance requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The FASB decided on July 9, 2015 to defer for one year the effective date of the new revenue standard for public and nonpublic entities reporting under GAAP. The FASB also decided to permit entities to early adopt the standard, for annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.	January 1, 2018	The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements and footnote disclosures.

XML

The Company and its Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2016

Accounting Policies [Abstract]

Schedule of Allowance for Doubtful accounts

The following table presents the changes in the allowance for doubtful accounts:

	Three Months Ended			Year Ended
	March 31,			December 31,
	2016			2015
Balance, beginning of period	$	(2,110	)	$	(1,369	)
Reductions (additions) to allowance		251			(1,287	)
Write offs, net of recoveries		152			546
Balance, end of period	$	(1,707	)	$	(2,110	)

Schedule Of Changes In Sales Allowances [Table Text Block]

The following table presents the changes in sales allowances:

	Three Months Ended			Year Ended
	March 31,			December 31,
	2016			2015
Balance, beginning of period	$	(875	)	$	(460	)
Additions to allowance		(428	)		(3,244	)
Issued sales allowances		537			2,829
Balance, end of period	$	(766	)	$	(875	)

XML

Property, Equipment and Software (Tables)

3 Months Ended

Mar. 31, 2016

Property Plant And Equipment [Abstract]

Schedule of Property, Equipment and Software

Property, equipment and software consisted of the following:

	March 31,			December 31,
	2016			2015
Computer, software and office equipment	$	4,730		$	4,509
Capitalized internal use software costs		4,639			3,587
Furniture and fixtures		2,111			1,821
Leasehold improvements		3,683			2,336
		15,163			12,253
Less accumulated depreciation and amortization		(4,517	)		(3,668	)
Total	$	10,646		$	8,585

XML

Accrued Liabilities (Tables)

3 Months Ended

Mar. 31, 2016

Payables And Accruals [Abstract]

Schedule of Accrued Liabilities

Accrued liabilities consisted of the following:

	March 31,		December 31,
	2016		2015
Accrued media costs	$	55,722	$	61,040
Sales commissions		2,501		3,776
Payroll and related expenses		4,785		6,314
Other accrued expenses		3,424		3,797
Total	$	66,432	$	74,927

XML

Debt Obligations (Tables)

3 Months Ended

Mar. 31, 2016

Debt Disclosure [Abstract]

Schedule of Debt

4. Debt Obligations

	March 31,		December 31,
	2016		2015
Short-term debt and current portion of long-term debt
Revolving credit facility	$	6,050	$	2,050
Current portion of long-term debt:
Term loan		1,120		848
Total current	$	7,170	$	2,898
Long-term debt
Term loan	$	3,260	$	2,635
Less: current portion of long-term debt:		1,120		848
Total noncurrent	$	2,140	$	1,787

Future Principal Payments of Long-Term Debt

Future principal payments of debt instruments as of March 31, 2016 were as follows:

	Principal Payments
2016 (nine months)		836
2017		7,201
2018		1,199
2019		74
Thereafter	—
Total payments	$	9,310

XML

Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2016

Commitments And Contingencies Disclosure [Abstract]

Schedule of Commitments for Minimum Rentals Under Operating Lease

The Company’s commitments for minimum rentals under its operating leases as of March 31, 2016 are as follows:

	Operating
	leases
2016 (nine months)	$	3,674
2017		4,668
2018		4,129
2019		3,836
2020		3,245
Thereafter		5,214
Total minimum lease payments	$	24,766

XML

Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2016

Summary of Stock Option Plan

The following table summarizes the Plan’s stock option activity:

	Outstanding number of shares			Weighted-average exercise price per share		Weighted-average grant date fair value	Total intrinsic value of exercises		Weighted-average remaining contractual life		Aggregate intrinsic value
Balance at December 31, 2015		4,266		$	6.55					7.14	$	34,748
Options granted	—
Options exercised		(63	)		1.82		$	683
Options canceled		(8	)		7.99
Balance at March 31, 2016		4,195		$	6.62					6.90	$	32,079
Options exercisable and vested at    March 31, 2016		2,565		$	3.15					6.05	$	26,395
Options vested and expected to vest at    March 31, 2016		4,113		$	6.51					6.87	$	31,800

Schedule of Share-based Compensation, Restricted Stock Unit Award Activity

The following table summarizes the Plan’s RSU activity:

				Weighted-
	Outstanding			Average
	number of			Grant Date
	shares			Fair Value
Balance at December 31, 2015		2,067		$	13.51
RSUs granted		938			11.26
RSUs released		(167	)		13.79
RSUs canceled		(95	)		12.88
Balance at March 31, 2016		2,743		$	12.76

Summary of Effects of Stock-Based Compensation

The following table summarizes the effects of stock-based compensation in the Company’s accompanying condensed consolidated statements of operations:

	Three Months Ended
	March 31,
	2016		2015
	(in thousands)
Research and development	$	1,304	$	642
Sales and marketing		1,272		709
General and administrative		1,483		1,050
Total stock-based compensation	$	4,059	$	2,401

Employees

Schedule of Assumptions Used to Calculate Fair Value of Options

The following assumptions were used to calculate the fair value of options for the three months ended March 31, 2015:

	Three Months Ended
	March 31,
	2015
Risk-free interest rate		1.80%
Dividend yield	—  %
Volatility		70%
Expected term	6.5 years

XML

Net Loss Per Share (Tables)

3 Months Ended

Mar. 31, 2016

Earnings Per Share [Abstract]

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

The following securities were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive for the periods presented:

	Three Months Ended
	March 31,
	2016		2015
Employee stock options		4,195		4,959
RSUs		2,743		1,202
ESPP		138		83
Total		7,076		6,244

XML

The Company and its Significant Accounting Policies - Schedule of Allowance for Doubtful Accounts (Details) - Doubtful Accounts Receivables and Credit Memos - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Valuation And Qualifying Accounts Disclosure [Line Items]
Balance, beginning of period	$ (2,110)	$ (1,369)
Reductions (additions) to allowance	251	(1,287)
Write offs, net of recoveries	152	546
Balance, end of period	$ (1,707)	$ (2,110)

XML

The Company and its Significant Accounting Policies - Schedule of Changes in Sales Allowances (Details) - Credit Memos - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Valuation And Qualifying Accounts Disclosure [Line Items]
Balance, beginning of period	$ (875)	$ (460)
Additions to allowance	(428)	(3,244)
Issued sales allowances	537	2,829
Balance, end of period	$ (766)	$ (875)

XML

The Company and its Significant Accounting Policies - Additional Information (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2016 USD ($) Business	Dec. 31, 2015 USD ($)
Organization Consolidation And Presentation Of Financial Statements [Abstract]
Cash and cash equivalents	$ 73,681	$ 72,416
Outstanding forward contracts notional amount	15,300
Assets measured using Level 3 inputs	$ 0
Number of operating business activity | Business	1

XML

Property, Equipment and Software - Schedule of Property, Equipment and Software (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Property Plant And Equipment [Line Items]
Property, equipment and software, gross	$ 15,163	$ 12,253
Less accumulated depreciation and amortization	(4,517)	(3,668)
Total	10,646	8,585
Computer, Software and Office Equipment
Property Plant And Equipment [Line Items]
Property, equipment and software, gross	4,730	4,509
Capitalized Internal Use Software Costs
Property Plant And Equipment [Line Items]
Property, equipment and software, gross	4,639	3,587
Furniture and Fixtures
Property Plant And Equipment [Line Items]
Property, equipment and software, gross	2,111	1,821
Leasehold Improvements
Property Plant And Equipment [Line Items]
Property, equipment and software, gross	$ 3,683	$ 2,336

XML

Property, Equipment and Software - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Property Plant And Equipment [Abstract]
Depreciation and amortization	$ 849	$ 412

XML

Accrued Liabilities - Schedule of Accrued Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Payables And Accruals [Abstract]
Accrued media costs	$ 55,722	$ 61,040
Sales commissions	2,501	3,776
Payroll and related expenses	4,785	6,314
Other accrued expenses	3,424	3,797
Total	$ 66,432	$ 74,927

XML

Debt Obligations - Short Term and Current Portion of Long Term (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Short-term debt and current portion of long-term debt
Revolving credit facility	$ 6,050	$ 2,050
Current portion of long-term debt:
Total current	7,170	2,898
Revolving Credit Facility
Short-term debt and current portion of long-term debt
Revolving credit facility	6,050	2,050
Term Loan
Current portion of long-term debt:
Current portion of long-term debt	1,120	848
Long-term debt
Long-term debt	3,260	2,635
Current portion of long-term debt	1,120	848
Total noncurrent	$ 2,140	$ 1,787

XML

Debt Obligations - Revolving Line of Credit - Additional Information (Details) - USD ($)			3 Months Ended
	Dec. 31, 2015	Apr. 30, 2014	Mar. 31, 2016
Line Of Credit Facility [Line Items]
Consolidated Revenues			85.00%
Covenant requirement, minimum consolidated revenue percentage to be maintained			80.00%
Minimum required percentage of growth rate for loan covenant			15.00%
Cash on deposit with lender plus availability under revolving line of credit required to deliver additional reporting			$ 10,000,000
Revolving line of credit	$ 2,050,000		$ 6,050,000
Minimum
Line Of Credit Facility [Line Items]
Adjusted Quick Ratio			110.00%
Revolving Credit Facility
Line Of Credit Facility [Line Items]
Line of credit facility, maximum borrowing capacity	$ 40,000,000	$ 35,000,000
Line of credit facility expiration date	Apr. 01, 2017	Apr. 01, 2016
Line of credit facility, covenant terms			Under the Loan Agreement, the Company may borrow under the revolving line of credit up to the lesser of (a) $40.0 million and (b) a borrowing base equal to 80% of eligible accounts receivable as defined in the agreement. Advances under the revolving line of credit accrue interest at a floating per annum rate equal to the prime rate as published in the Western Edition Wall Street Journal. The Company is required to pay a minimum amount of interest equal to the amount of interest that would accrue per quarter on a notional outstanding principal balance of $2.1 million.
Investment Owned, Balance, Principal Amount			$ 2,100,000
Revolving line of credit	$ 2,050,000		6,050,000
Available borrowing with revolving line of credit			$ 33,900,000

XML

Debt Obligations - Term Loans - Additional Information (Details) - USD ($)	Mar. 31, 2016	Dec. 31, 2015	Apr. 30, 2014
Equipment Term Loan Facility
Line Of Credit Facility [Line Items]
Line of credit facility, maximum borrowing capacity		$ 5,000,000
Term loan outstanding	$ 3,300,000
Interest rate, percentage	4.00%
Revolving Credit Facility
Line Of Credit Facility [Line Items]
Line of credit facility, maximum borrowing capacity		$ 40,000,000	$ 35,000,000
Line of credit facility, applicable margin	0.50%

XML

Debt Obligations - Future Principal Payments of Debt Instruments (Details) $ in Thousands	Mar. 31, 2016 USD ($)
Debt Disclosure [Abstract]
2016 (nine months)	$ 836
2017	7,201
2018	1,199
2019	74
Total payments	$ 9,310

XML

Commitments and Contingencies - Commitments For Minimum Rentals Under Operating Lease (Details) $ in Thousands	Mar. 31, 2016 USD ($)
Commitments And Contingencies Disclosure [Abstract]
2016 (nine months)	$ 3,674
2017	4,668
2018	4,129
2019	3,836
2020	3,245
Thereafter	5,214
Total minimum lease payments	$ 24,766

XML

Commitments and Contingencies - Additional Information (Details)		1 Months Ended	3 Months Ended
	Aug. 31, 2015 USD ($)	Mar. 31, 2016 USD ($) LOC	Mar. 31, 2016 USD ($) LOC	Mar. 31, 2015 USD ($)
Long Term Purchase Commitment [Line Items]
Rent expense			$ 1,300,000	$ 625,000
2016 (nine months)		$ 3,674,000	3,674,000
2017		4,668,000	4,668,000
2018		4,129,000	4,129,000
2019		3,836,000	3,836,000
Commitment to purchase		$ 1,200,000	$ 1,900,000
Description of purchase commitment period of time			These purchases can be made at any time from February 15, 2015 through September 30, 2016.
Monthly installments to pay the purchase commitment amount		12 months
Purchase commitment payment commencement date		May 01, 2016
Number of irrevocable standby letters of credit | LOC		3	3
Irrevocable letters of credit outstanding amount		$ 1,600,000	$ 1,600,000
Minimum
Long Term Purchase Commitment [Line Items]
Commitment to purchase	$ 7,500,000
Maximum
Long Term Purchase Commitment [Line Items]
Commitment to purchase	$ 15,000,000
Subleases
Long Term Purchase Commitment [Line Items]
2016 (nine months)		400,000	400,000
2017		600,000	600,000
2018		600,000	600,000
2019		$ 600,000	$ 600,000

XML

Stock-Based Compensation - Additional Information (Details) - USD ($) $ in Millions	1 Months Ended	3 Months Ended	12 Months Ended
	Feb. 28, 2014	Mar. 31, 2016	Dec. 31, 2015	Jan. 01, 2016
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Percentage of increase on common stock authorized on each subsequent anniversary		5.00%
Common stock, shares authorized reserve, description and terms		This reserve automatically increased on January 1, 2016 by 1,767,183 shares and will continue to increase on each subsequent anniversary through 2024, by an amount equal to the smaller of (a) five percent (5%) of the number of shares of common stock issued and outstanding on the immediately preceding December 31; or (b) an amount determined by the Company’s board of directors.
Stock options, granted		0
Share available for sale under the ESSP			1,136,964
Common Stock Including Additional Paid in Capital
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Common stock, shares authorized		4,975,000
2007 Equity Compensation Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Common stock, shares authorized		6,093,703
2014 Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Common stock, shares authorized		2,500,000		1,767,183
2014 ESPP
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Common stock purchase price discounted rate for eligible employee	15.00%
Lower fair market value of common stock on the first trading day	85.00%
Employee Stock Option
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unrecognized compensation cost		$ 9.9
Unrecognized compensation cost expected to be recognized period		3 years 6 months 22 days
Employee Stock Option | 2007 Equity Compensation Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Options granted vesting period		4 years
Percentage of options granted vesting period		25.00%
Employee Stock Option | 2014 Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Options granted vesting period		4 years
Percentage of options granted vesting period		25.00%
RSUs
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unrecognized compensation cost		$ 29.2
Unrecognized compensation cost expected to be recognized period		3 years 2 months 9 days
RSUs | 2007 Equity Compensation Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Options granted vesting period		4 years
Percentage of options granted vesting period		25.00%
RSUs | 2014 Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Options granted vesting period		4 years
Percentage of options granted vesting period		25.00%
Maximum | Employee Stock Option | 2007 Equity Compensation Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Options granted exercisable vesting period		10 years
Maximum | Employee Stock Option | 2014 Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Options granted exercisable vesting period		10 years

XML

Stock-Based Compensation - Summary of Stock Option Plan (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Outstanding number of shares
Outstanding number of shares, Beginning	4,266,000
Outstanding number of shares, Options granted	0
Outstanding number of shares, Options exercised	(63,000)
Outstanding number of shares, Options canceled	(8,000)
Outstanding number of shares, Ending	4,195,000	4,266,000
Outstanding number of shares, Options exercisable and vested	2,565,000
Outstanding number of shares, Options vested and expected to vest	4,113,000
Weighted-average exercise price per share
Weighted average exercise price per share, Beginning	$ 6.55
Weighted average exercise price per share, Options exercised	1.82
Weighted average exercise price per share, Options canceled	7.99
Weighted average exercise price per share, Ending	6.62	$ 6.55
Weighted average exercise per share, Options exercisable and vested	3.15
Weighted average exercise per share, Options vested and expected to vest	$ 6.51
Total intrinsic value of shares
Total intrinsic value of shares, Options exercised	$ 683
Weighted average remaining contractual life
Weighted average remaining contractual life	6 years 10 months 24 days	7 years 1 month 21 days
Weighted average remaining contractual life, Options exercisable and vested	6 years 18 days
Weighted average remaining contractual life, Options vested and expected to vest	6 years 10 months 13 days
Aggregate intrinsic value
Aggregate intrinsic value	$ 32,079	$ 34,748
Aggregate intrinsic value, Options exercisable and vested	26,395
Aggregate intrinsic value, Options vested and excepted to vest	$ 31,800

XML

Stock-Based Compensation - Schedule of Assumptions Used to Calculate Fair Value of Options (Details)	3 Months Ended
	Mar. 31, 2015
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Risk-free interest rate	1.80%
Volatility	70.00%
Expected term	6 years 6 months

XML

Stock-Based Compensation - Summary of Plans RSU Activity (Details) - Restricted Stock Units (RSUs) shares in Thousands	3 Months Ended
	Mar. 31, 2016 $ / shares shares
Outstanding number of shares
Outstanding number of shares, Beginning | shares	2,067
Outstanding number of shares, RSUs granted | shares	938
Outstanding number of shares, RSUs released | shares	(167)
Outstanding number of shares, RSUs canceled | shares	(95)
Outstanding number of shares, Ending | shares	2,743
Weighted-average Grant Date Fair Value
Weighted-Average Grant Date Fair Value, Beginning | $ / shares	$ 13.51
Weighted-Average Grant Date Fair Value, granted | $ / shares	11.26
Weighted-Average Grant Date Fair Value, released | $ / shares	13.79
Weighted-Average Grant Date Fair Value, canceled | $ / shares	12.88
Weighted-Average Grant Date Fair Value, Ending | $ / shares	$ 12.76

XML

Stock-Based Compensation - Summary of Effects of Stock-Based Compensation (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total stock-based compensation	$ 4,059	$ 2,401
Research and development
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total stock-based compensation	1,304	642
Sales and marketing
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total stock-based compensation	1,272	709
General and administrative
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total stock-based compensation	$ 1,483	$ 1,050

XML

Net Loss per Share - Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share (Details) - shares	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Anti-dilutive securities that were excluded from calculation of diluted net loss per share	7,076,000	6,244,000
Employee Stock Option
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Anti-dilutive securities that were excluded from calculation of diluted net loss per share	4,195,000	4,959,000
Restricted Stock Units (RSUs)
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Anti-dilutive securities that were excluded from calculation of diluted net loss per share	2,743,000	1,202,000
Employee stock purchase plan (ESPP)
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Anti-dilutive securities that were excluded from calculation of diluted net loss per share	138,000	83,000

XML

Income Taxes - Additional Information (Details) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Income Tax Examination [Line Items]
Foreign income taxes and state minimum taxes	$ 194,000	$ 114,000
Material uncertain tax positions	0
US
Income Tax Examination [Line Items]
Current federal tax benefit	0
Japan
Income Tax Examination [Line Items]
Current foreign tax benefit	$ 0

XML

Subsequent Events - Additional Information (Details) - USD ($) $ in Thousands	Apr. 30, 2016	Mar. 31, 2016
Subsequent Event [Line Items]
Operating leases, future minimum payments due, total		$ 24,766
2016 (nine months)		3,674
2017		4,668
2018		4,129
2019		3,836
2020		3,245
Thereafter		$ 5,214
Subsequent Event
Subsequent Event [Line Items]
Operating leases, future minimum payments due, total	$ 6,100
2016 (nine months)	900
2017	800
2018	800
2019	800
2020	800
Thereafter	2,000
Subsequent Event | Standby Letters of Credit
Subsequent Event [Line Items]
Irrevocable letters of credit amount	$ 1,000