Magnite, Inc.

Good day and welcome to Magnite's fourth quarter 2021 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. 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 Karmeluk, Senior Vice President, Investor Relations. Please go ahead.

Thank you, Operator, and good afternoon, everyone. Welcome to Magnate's fourth quarter 2021 earnings conference call. As a reminder, the comparisons you will see in the 10K as reported include the financial results of SpotX and SpringSurfer Q4 2021 earnings but for the periods prior to the date of acquisition, the results do not include SpotX or SpringServe, which were acquired on April 30, 2021, and July 1, 2021, respectively. During the course of this call, when we refer to the 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 make comments referring to pro forma comparisons, we are including Talaria, SpotX, and SpringServe for the relevant pre-acquisition period in order to provide a like-to-like comparison. Please keep in mind, as it relates to the SpotX and SpringServe acquisitions, prior quarterly results are estimated and unaudited. 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 highlight slides to our investor relations website to accompany today's presentation. Before we get started, I'll 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. 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 2021 annual report on Form 10-K. We undertake no obligation to update forward-looking statements or relevant risks. Our commentary today will include non-GAAP financial measures, including revenue extract or less traffic acquisition costs, adjusted EBITDA, and non-GAAP income per share. Reconciliations between GAAP and non-GAAP metrics for our reported results can be found in our earnings press release and in the financial highlights deck that is posted on our investor relations website. At times in response to your questions when we 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 and access our press release, financial highlights deck, periodic SEC reports, and webcast replay of today's call to learn more about Magnite. I will now turn the call over to Michael. Please go ahead, Michael. Thank you, Nick.

2021 was a transformational year for Magnite. We are now the largest and leading independent sell-side platform across all programmatic channels and specifically in CTVA. Through organic growth of over 50% in CTV and two very strategic acquisitions, Spotix and SpringServe, we vaulted Magnite to become the clear leader in CTV among independent SSPs. We posted a strong Q4 and have started this year with similar growth rates in CTV and improved growth rates in DV+, and we are optimistic about 2022. In addition, We believe that our quarterly year-over-year growth rates will improve as the year progresses. And, as we stated previously, we continue to expect full-year 2022 revenue X-PAC to come in well over $500 million, and we continue to maintain our adjusted EBITDA margin target of 35% to 40%. Let me cover some quick 2021 full-year stats that highlight the scope of our transformation. Total revenue XTAC, as reported, came in at $416 million versus $220 million in the prior year. For full year 2021, revenue XTAC from CTV, as reported, was $143 million versus $34 million in 2020. On a pro forma basis, CTV grew 52%, and accounted for close to 40% of our total revenue extract. And DV Plus grew 20% on a pro forma basis year over year, demonstrating strong growth. Now I'll dive deeper into the state of our CTV business. Ad-supported CTV is in its early days, and like any developing market, revenue growth measured on a quarterly basis can be choppy. Why is that? In addition to being an early stage fast developing market, it helps to understand Magnite's major buckets of CT revenue by product. The majority of our CT revenue is generated by three buckets. All three have different take rates and ad spend growth expectations, and often spend can shift inch or quarter between these buckets depending on seller and buyer desires. The first bucket consists of ad serving fees and publisher sold deals that run through our platform. Ad serving and publisher sold deals represent the largest portion of ad spend, but also carry the lowest take rate for Magnite. This product represented over 40% of our CTV revenue at stack. As we've discussed on many occasions, the largest CTV publishers have established direct sales teams and predominantly transact with trusted buyers through reserve auctions where they can exert tight control over their inventory. Ad serving software may carry a low CPM-based fee, however, is essential software for publishers and allows us to establish a stickier relationship, which we believe leads to additional ad spend through our SSP. This bucket is highly differentiated and has very strong potential for growth. Our second bucket of revenue consists of deals sold through the Magnite CTV marketplace. Today, these Magnite-led deals comprise over 40% of revenue. We believe this bucket also has very strong potential growth because, first, publisher sales teams are largely focused on the top 200 linear TV advertising. CTV will significantly expand the universe of TV buyers to thousands of advertisers who never advertise on linear. Publishers will rely on Magnite to access this new pool of advertisers. Second, CTV first ad-supported streaming services are continuing to gain traction. These services do not have a history of legacy sales teams and rely on Magnite as a primary source of demand And third, live stream programming. Every major sports league is getting into live streaming. These avails are much more difficult to forecast for directly sold campaigns and often lead to more opportunities for programmatic ads. Just yesterday, we announced the launch of live stream acceleration, or LSA, a technology designed to help CTV publishers optimize their live inventory programmatically. This is an industry-leading innovation, which is being used by Sling TV for its live sport inventory. While using LSA, Sling saw a 47% lift in ad conversions compared to the previous five weeks. Our last bucket of revenue comes from our managed service insertion order business. Managed service accounts for approximately 15% of our CTV revenue XTAC and carries the highest take rate. It's also by nature the most volatile piece of our business because it relies on direct sales efforts with brands and agencies. We believe it's an important differentiator for Magnite as it allows us to capture video dollars that have yet to make their way to programmatic CTV and thus bring fresh demand to our publishers. Because managed service is often an entry point to programmatic, we do see a shift from this bucket to our programmatic buckets which can result in short-term hit to revenue due to the lower associated take rates. However, we generally find that once we land a managed service client, we are able to migrate them through our ecosystem and keep them as a programmatic client, which in the long term will drive more consistent spend and growth through our platform. We believe this is a validation of our technology and the value that programmatic brings to advertisers. Overall, I feel very good about how we position our CTV business. On the sales side, we work with nearly all of the largest programmers and broadcasters, virtual MVPDs, digital-first streaming services, and device manufacturers. On the buy side, we work very closely with the largest agencies such as GroupM, Havas, and Omnicom in deploying their upfront and programmatic buys. We also work directly with brands such as Bayer, Activision, and HP as they grow and expand their CTV advertising efforts. We reach over 80 million households every month, and we believe we have more than 20% market share as measured by ad spend. Shifting gears, our DV Plus business performed well in 2021, and we've doubled down here to drive growth going forward. We continue to focus on the high-end reserve market, but also have renewed attention on expanding our share in open auction as well. In open auction, we are onboarding inventory more quickly, tuning our systems for speed, improving our auction mechanics, and providing our DSB partners with new bid signals to improve their efficiency. Finally, our commercial work with the buyers and publishers to deepen our already strong supply path optimization partnerships is setting the table for a strong year. Now I'd like to talk about some recent industry news related to our DVPlus business, starting with the Trade Desk's announcement that they will stop spending on Google's open bidding service and separately that they've launched a service called Open Path that lets publishers connect to them directly to monetize display and online video inventory. Let's take these one at a time. Though Magnate will continue to support Google's open bidding, we think that the trade desk shift away from it is good for the ecosystem, good for pre-bid, and good for us. There are many other SSPs that are over reliant on open bidding and generally don't add much value. We believe this move will lead the trade desk to readjust their ad spend onto platforms like Magnite, where open bidding represents a very small portion of their business with us today. Regarding OpenPass, though the name is new, we've been seeing the trade desk and other demand sources offer direct connections to publishers for some time. In the end, most publishers find it insufficient to rely solely on a direct connection versus the breadth and depth of what a full featured SSP like Magnite offers. I'm not just talking about capabilities like yield management, inventory curation, ad quality tools, billing and reconciliation, or access to seasoned monetization experts, though all of that is critical. Magnite also facilitates demand for publishers across all formats, in many cases directly from brands and agencies. This view is shared by many of Magnite's key publishing partners, including Paul Bannister, chief strategy officer at Cafe Media. Paul, who was also included in last week's announcement from the trade desk, had this to say about OpenPath. And I quote, for Cafe Media, OpenPath and other direct connections to buyers are part of a holistic approach to monetization that includes the unified auction. we see Magnite as a critical and growing part of that strategy, helping us to oversee and yield optimize across a range of our demand. For select publishers that want a direct connection to buyers, the approach can be additive to the unified auction, potentially lifting a publisher's revenue. Demand Manager, our header bidding software based on pre-bid, makes it easy for publishers to activate direct connections to buyers such as the trade desk. And lastly, I want to provide an update on our audience strategy. Increasingly, the role of audience creation is moving to the sell side because publishers have direct relationships with consumers. This is true for web publishers that will be most impacted by the deprecation of third-party cookies and other identifiers, as well as CTV media owners, for which first-party data has always been an integral part of addressability. You saw that we completed a small deal in December for Nth Party, which added talent and tech to speed up our ability to bring audience creation solutions for the sell side to market. We will continue to make investments in this area and play an increasingly important role in identity targeting by offering scaled solutions that create value for publishers in both CTV and DV+. We look forward to updating you on this critical market need in the months ahead. If you look at the year we've posted from a top line, bottom line, cash flow, and strategic M&A perspective, I am very, very proud of what we've accomplished. In addition, I'm very excited about our long-term growth profile and the durability of our model to be the top source of publisher monetization as the leading and largest independent omnichannel sell-side platform. With that, I will hand things over to David who will go into greater detail regarding financial performance and expectations. David?