Magnite, Inc.

Good day, and welcome to the Magnite second quarter 2023 earnings call. All participants will be in 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. Please note, this event is being recorded. I would now like to turn the conference over to Nick Kormeluk of Investor Relations. Please go ahead.

Thank you, operator, and good afternoon, everyone. Welcome to Magnite's second quarter 2023 earnings conference call. As a reminder, this conference call is being recorded. Joining me on the call are Michael Barrett, CEO, and David Day, our CFO. I would like to point out that we have posted financial highlight slides on 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 may 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 macroeconomic factors 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 followed with the SEC, including our second quarter 2023 quarterly report on Form 10-Q and our 2022 annual report on Form 10-K. We undertake no obligation to provide forward-looking statements or relevant risks. Our commentary today will include non-GAAP financial measures, including contribution X-stack or less traffic acquisition costs to more accurately reflect what we previously referred to as revenue XTAC, adjusted EBITDA and non-GAAP income per share. Reconciliations between GAAP and non-GAAP metrics for our reported results can be found on 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, we may offer additional 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 the webcast replay of today's call to learn more about Magnite. I will now turn the call over to Michael. Michael, please go ahead. Thank you, Nick.

Q2 was a solid quarter for Magnite. Total revenue grew 11%. Contribution XTAC grew 9%. And the justity bidder came in at $37 million with a margin of 28%. That said... EBITDA and margin were negatively impacted by the MediaMath bankruptcy, which David will discuss in more detail. Once again, our DVplus business was a bright spot, as contribution XTAC grew 10% year over year, despite an industry-wide weakness in CPMs, showing clear market share gains. About a year ago, we refocused on our DVplus business, completed a number of technical improvements, and consolidated our online video activity. This freed us up to put greater focus on the needs of our partners, platform enhancements and optimizations for ad spend performance. We're now seeing the results of those efforts, and we expect more strength in our DVplus business moving forward. On the CTV front, contribution XTAC grew a healthy 8%. We continue to execute well against our plan this quarter, while managing through a challenging market that is far from normal. Starting in June, we began to see softness in our managed service business driven by macro challenges as several large managed service campaigns were paused based upon ad budget pressure, particularly in the auto and media and entertainment verticals. As we've discussed in previous hearing calls, our managed service business operates at our highest take rate, so the flow through to financials are significant. The industry also saw TV upfronts, excluding sports and live events, coming weaker than anticipated, which is a good indicator of advertiser sentiment in the current challenge to ad spend environment. On a positive note, we would hope that, though buyers were cautious in the upfronts, their budgets remain largely intact and that spend could be deployed in the scatter market, which will benefit streaming services and programmatic partners like Magnite. Several trends also accelerated this quarter into Q3. The most significant of those trends is that the largest and fastest-growing streaming players, the broadcasters, plus services, and TV OEMs, are all getting truly serious about programmatic, and are taking share from smaller CTV publishers. We're seeing this shift manifest itself in our own partners, including Disney, Roku, Warner Brothers Discovery, and Vizio, who are moving more inventory toward programmatic transactions and away from traditional direct sold executions. While we believe this trend is positive for the long-term health of the programmatic CTV market and our business, it is negatively impacting our near-term financials. The reason is simple. As all those large sellers move direct sold deals to publisher direct programmatic, they're becoming a bigger part of our ad spend mix, but they're relying on services with lower take rates. What's not showing up in our financials is that we're growing market share at a far greater rate than our revenue would suggest. In Q2, our ad spend grew at a significantly higher rate than our revenue and industry forecast. With that being said, we see a huge long-term opportunity here. The shift to premium programmatic CTV is in full swing, and Netflix hasn't even started its programmatic efforts. Magnite is winning at the top tier clients, and from experience, we know that the more we work with these types of companies, the closer we get to them, the more we can move to delivering higher value, higher take rate services over time. So what makes us confident that we can expand our value generation on this growing market share? It's a combination of continuing to execute on existing industry leading products and introducing new innovative services. On the existing front, we're going to, upsell higher value SSP services to those clients by running auctions and bringing proprietary demand, continue to win new ad serving clients with SpringServe, expand our SpringServe tiles business and other proprietary formats, and continue to create direct private marketplaces between agencies and premium publishers, further accelerating our SPO efforts. On the new and future front, This quarter, we introduced two new innovative offerings and one new partnership. First, there's Clearline, the self-service direct video buying solution for agencies. We believe strongly in this product's ability to unlock linear budgets and efficiently bring them to programmatic, which, as I mentioned, is of strategic interest to agencies. In fact, we recently announced that the list of agencies using Clearline has expanded beyond our launch partners, Camelot, GroupM, and MIQ, to include GSD&M, Horizon Media, Omnicom Media Group Germany, and Stagwell Brand X Performance Network. Clearline has also seen robust momentum on the sales side, where we've added A&E Networks, AMC Networks, DirecTV Advertising, Dish Media, Disney Advertising, Fox Digital, Nine, and Warner Brothers Discovery to our launch partners, LG and Vizio. Second, in June, we introduced Magnite Access, a suite of omnichannel audience, data, and identity products that make it easier for media owners and their advertising partners to maximize the value of their data assets, including a DMP, a data storefront, a secure solution enabling sellers and buyers to match data sets, and more. Parts of Access are available to clients today, and others are in testing and on track to reach wider availability this year. And finally, earlier this month, we and Freewheel announced an integration enabling clients of their ad server, including many of the world's largest programmers and broadcasters, to work seamlessly with Magnite for their programmatic needs. Not only does this integration allow our mutual clients to better maximize yield across sales channels, but it also unifies their view of ad creatives, frequency capping, and other data across systems, which ultimately improves the advertiser and consumer experience. We expect it will take a few quarters for this integration to ramp up, but we're bullish on the value for the industry and the opportunities it opens for us to further grow our footprint. We believe these efforts will both positively influence our revenue and increase our role as a strategic partner to our clients. And now that we have completed the CTV platform integration that began with our acquisition of Spodex two years ago, we will apply even more focus toward innovation that advances our technology and leadership position. In summary, We are very pleased with how our business is performing in our share gains in both DV plus and CTV. So the rapid shift to premium programmatic and CTV has come with near some near term revenue pressure. The ad spend growth represents a significant opportunity for us to expand our relationship with the industry's top players. I'm confident that we have the resources and the strategy to execute on this opportunity. With that, I'll turn the call over to David for more detail on the financials. David?