Magnite, Inc.

Good afternoon and welcome to the Magnite fourth quarter 2020 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Nick Kormeluk, Head of Investor Relations. Please go ahead.

Thank you, Operator, and good afternoon, everyone. Welcome to Magnite's fourth quarter 2020 earnings conference call. As a reminder, the comparisons you will see in the 10-K, as reported, included the combined financial results for the fourth quarter of 2020 but for 2019 and for the first quarter of 2020, the results do not include Telaria given the merger date of April 1st, 2020. During the course of this call, when we refer to results and associated year over year comparisons with the phrase as reported, we are referring to the basis as reported in our 10 K. When we'll make comments referring to pro forma comparisons, we are using combined company metrics, including Telaria for the prior year period in 2019, and the first quarter of 2020 as the basis for comparison in order to provide additional detailed insights that management also uses to evaluate our business performance. When discussing pro forma information as it relates to the SpotX acquisition, we are also including the preliminary results of SpotX for the relevant period. As a reminder, this conference call is being recorded. Joining me on the call today are Michael Barrett, CEO, and David Day, our CFO. I would like to point out that we have posted financial highlights live to our investor relations website to accompany today's presentation. Before we get started, I will remind you that our prepared remarks and answers to questions will include information that might be considered to be forward-looking statements, including, but not limited to, statements concerning our anticipated financial performance and strategic objectives, including the potential impacts of COVID-19 on our business, as well as statements concerning the proposed acquisition of Spodex, the timing or terms of the closing of the transaction, and the potential benefits and synergies we expect to realize therefrom. These statements are not guarantees of future performance. They reflect our current views with respect to future events and are based on assumptions and estimates and subject to known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from expectations or results projected or implied by forward-looking statements. A discussion of these and other risks, uncertainties, and assumptions is set forth in the company's periodic reports filed with the SEC, including our 2020 annual report on Form 10-K and prior filings. We take no obligation to update forward-looking statements or relevant risks. Our commentary today will include non-GAAP financial measures, including adjusted EBITDA, and with respect to pro forma comparisons that include SPOTX results, non-GAAP net revenue. Reconciliations between GAAP and non-GAAP metrics for our reported results or the preliminary SPOTX results can be found in our earnings release and in the financial highlights desk that is posted on the Investor Relations website. We define cash flow as adjusted EBITDA less capital expenditures which excludes changes in working capital. We define net revenue as GAAP revenue, less amounts paid to sellers, that are included within cost of revenue. We'll be referencing preliminary non-GAAP net revenue and adjusted EBITDA results for SPOTx for the year ended 2020 and for the fourth quarter of 2020. These results are preliminary and unaudited and are subject to change. Also note that we will use the term online video, or OLV, where we previously used the term non-CTV video. At times, in response to your questions, we may offer incremental metrics to provide greater insights into the dynamics of our business. Please be advised that this additional detail may be one time in nature, and we may or may not provide an update on the future of these metrics. I encourage you to visit our investor relations website to access our press release, financial highlights deck, periodic SEC reports, and webcast replay of today's call to learn more about Magnite. With that, I'll now turn the call over to Michael. Michael, please go ahead.

Thank you, Nick. Our revenue performance in the fourth quarter was strong across the board, and most notably in CTV and online video, or OLV, demonstrating our value as the leading independent sell-side platform. Top-line growth once again outpaced industry performance, especially in those two fast growth segments in the market, and we meaningfully exceeded the trends that we shared in our last earnings call. Overall, top-line strength led to further margin expansion, demonstrating the leverage we have in our financial model to deliver profitable earnings growth. I'll briefly cover Q4 2020 results. Revenue was $82 million, which equates to a 69%, as reported, increase year-over-year and a 20% pro forma increase year-over-year. CTV revenue was 15.3 million, representing an increase of 53% year-over-year on a pro forma basis. OLV revenue grew 35% year-over-year on a pro forma basis, and we delivered 30 million of adjusted EBITDA with a margin of 37%. Next, I want to highlight a few key topics. First, I'll talk a little more about the pending acquisition of Spotix and share some additional details on their business. Second, I'll talk more broadly about CTV product and market trends. Third, I'll go into broader programmatic market trends, providing information on client wins and SBO progress. And lastly, I'll provide an update on our identity initiatives. We are thrilled to have announced the proposed acquisition of Spotix. The Spotix deal is a big strategic win for Magnite, our clients, and shareholders. Spotix has great tech, great people, strong customer relationships, fast-growing revenue, and is highly profitable. The transaction is expected to close in Q2, pending customary regulatory approvals. One of the exciting benefits of the acquisition will be to combine two great engineering and sales teams, which will accelerate the release of new features and functionality for our CTV clients. The goal of this supercharged development roadmap is to draw more linear TV advertising dollars to add supported programmatic CTV by providing our clients with the tools they need to succeed. Combining Magnet and SpotX pro forma results for 2020 would have resulted in approximately 350 million of non-GAAP net revenue. For Q4 2020, CTV would have been the largest format, closely followed by OLV, positioning Magnite to go head-to-head with the larger players in the CTV market. The combined companies would have also had a meaningfully higher combined adjusted EBITDA margin of 22% in 2020, and that's prior to any targeted cost synergies. David will provide additional financial details related to Spotix. I'll now turn to CTV market trends and product news. CTV growth trends continue to be very favorable. From cord cutting to increasing growth estimates to movement of linear TV dollars to CTV, To recent results from the trade desk in Roku, all signs support very healthy market growth dynamics. We continued to outpace industry growth estimates from eMarketer in CTV in the fourth quarter and grew our Q4 CTV revenues 53%. We recently announced an open beta for our new CTV unified decisioning solution. This product is critical to increasing publishers' revenue by enabling them to have their direct and programmatic inventory compete for the highest price, thus driving higher yields. It is particularly important during a time of increased demand where programmatic CPMs can exceed direct sold CPMs. Many publishers who primarily sold direct missed an opportunity to adjust their strategies and allocate more inventory to programmatic. The product is currently in beta with a handful of clients with positive early results. It is something that we plan to charge for separately and will share more specifics in subsequent quarters. The broader programmatic market also performed well in Q4. Of particular note, OLV grew 35% in Q4 on a pro forma basis. We are pleased to see the benefits of revenue synergies from the Tulare merger and the participation in this growing market earlier than expected. Next, I want to provide an update on key customers and examples of supply path optimization, or SPO. Consolidation continues to take place in our industry, and our omni-channel offering Servicing technology plus opportunity to cross-sell from the Talaria merger have put us in a great position to grow further. On the agency front, we expanded our work with Havas in building out a trusted marketplace while deepening relationships with key publishers. In Q4, Magnite launched Havas' meaningful media marketplace on our technology platform. The program now features over 100 publishers across the U.S. and in key European countries. We also continued our work with Omnicom's marketplace in Q4. Omnicom is bringing large and engaged advertisers that are shifting spend into curated, premium, and transparent inventory. The build-out of this marketplace is a major priority for them in 2021. We formally launched the marketplace in December, and now feature 20 premium publishing partners running display and online video inventory. A CTV marketplace solution is in development. Along with SPO, we believe there is additional room for total ad spend acceleration, as there are several sectors, including auto, travel, entertainment, and sports, that are still performing well below pre-COVID levels and have significant upsets. I'll now shift to give a brief update on our efforts with respect to identity solutions. As you're aware, third-party cookies and IDFAs are going away, and this creates an opportunity for Magnate to bring greater value to publishers. I'm pleasantly surprised at the pace of development of the new identity solutions and the way that the programmatic ecosystem has come together to find open, viable alternatives that work in a privacy-compliant manner. We believe three primary identity solutions will coexist and complement each other to replace the current landscape, and we are deeply involved in the development of all three. First, and particularly important to us, publisher first-party data segments that are created within our Magnite marketplace and can be bought at scale across a large number of publishers to find desired audiences. Second, open source identifiers, such as offered by the Trade Desk and LiveRamp, that are based on logged-in users, will play an important role in the market. We are particularly pleased to see the Trade Desk announce that its Universal ID 2.0 will now live within and be operated by pre-bid. an independent organization that we co-founded which is designed to ensure and promote fair and transparent marketplaces across the industry. And third, Privacy Sandbox from Google Chrome, where the browser preserves identity and creates cohorts or groups. We believe that our platform and scale position us well to provide the infrastructure and tools that publishers need to succeed in the new world of identity. Our key growth drivers remain the same. Growing CTV, which will continue to be our most compelling opportunity for the foreseeable future, further accelerated with the addition of Spotix. Increasing market share gains across all formats and device types as we better service a fragmented marketplace as a transparent, independent omni-channel partner expanding our software solutions as seen with our new unified decisioning product and our demand manager offering and lastly playing a leading role in transforming the landscape of targeted advertising and creating value for our clients with broad reaching identity solutions before turning the call over to david I wanted to provide a contract update for a very strategic CTV and market leading client, Disney. It is well known that we've been serving as their SSP partner and that we've had a strong CTV relationship through Hulu dating back several years. We are pleased to announce that we have renewed our contract for an additional 18 months. In addition, we are excited to announce we'll be expanding our relationship by powering programmatic transactions across the wider umbrella of premium Disney, such as ESPN, ABC, among others, as part of their Disney DXHP or cross-platform offerings. As we continue to expand on opportunities within Hulu's platform and their many content partners, we will now also work across and directly with these additional Disney properties. This is a true omnichannel partnership, and our relationship is stronger than it has ever been. We look forward to continued innovation and growth as we work closely with our partners at Disney. With that, I will hand things over to David, who will go into greater detail regarding financial performance and expectations.