Magnite, Inc.

Good afternoon and welcome to the Magnite third quarter 2023 earnings conference 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. To ask a question, you may press star then one on your touchtone phone. To withdraw from the question queue, please press star then two. 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 third quarter 2023 earnings conference call. As a reminder, this call is being recorded. Joining me on the call today are Michael Barrett, CEO, 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 filed with the SEC, including our third quarter 2023 report on Form 10Q, and our 2022 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 contribution exact 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, 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 that 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. Please go ahead, Michael. Thank you, Nick.

I'm happy to report results for Q3 that exceeded our top-line guidance for total, CTV, and DVplus contribution ex-tac, while delivering strong profitability and free cash flow. Our DVplus business performed very well, delivering contribution ex-tac growth of 12%, despite a depressed CPM market. Moreover, in CTV, we continue to grow our market share with ad spend growing over 20% year-over-year, exceeding industry growth estimates. We were pleased with our execution in the quarter as we continued to solidify our position as the leading independent player in CTV. And as product mix shifts stabilize and macro ad spend returns to normal, we believe our CTV contribution XTAP growth will, over time, approach our ad spend growth. In this respect, it's important to remember that we are still in the early days of programmatic CTV. Marquee publishers are just now ramping AVOD and their inventory is limited and in high demand by advertisers. With this dynamic, pubs generally refer to sell programmatic deals through their direct sales teams. The good news is they are using our technology to execute those transactions. However, as we've explained previously, the programmatic direct business carries a lower take rate versus when we sell the inventory and layer on more services. We believe that as programmatic CTV scales, buyers will want to purchase the majority of their CTV programmatically using advanced data targeting within biddable environments, a process that can't be executed using a direct sales team. This evolution will attract a significantly broader advertiser base, increased ad spend, a more competitive CPM environment, and better ROI and COGS for both buyers and sellers. We had some noteworthy customer wins this quarter, announcing that we'd be powering the Disney Plus Bidable Marketplace via Magnite streaming, as well as an expansion in our partnership with Paramount Advertising. Buyers now have access to all of Paramount's combined streaming offerings, including their IQ program through Magnite. We're also encouraged by the fact that a lot of the growth in our CTV business is being enabled through advanced integrations with our ad server, SpringServe. As you know, ad serving puts us one step closer to the publisher and creates a stickier relationship. With SpringServe, our platform is more deeply embedded within the client workflow and becomes a central technology in their overall monetization strategy. The stickiness of the software and development we provide in CTV is far different than a typical SSP model. We are clearly growing share, as shown by our ad spend growth above 20%. And this is a result of working with nearly every scale media owner outside of the walled gardens. These clients have continually expanded their relationship with us, both vertically and horizontally. I'll offer two examples. One is a market-leading streamer and media company that started using us in a small part of their U.S. business for workflow and directly sold campaigns. Now, that partner has expanded our services to additional streaming platforms to other countries and now uses us to access biddable programmatic demand through the Magnite SSP. Another example is a market-leading TV OEM that started with us in ad serving. They now use us as their SSP and demand engine, as well as a source of incremental revenue through our new CTV Tiles product. This same partner also leverages our audience capabilities to sell and package its first party data on both its direct properties and through audience extension. These examples are common across our top partners, and we have continually shown that as our partners grow their CTV businesses, so do the ways in which they utilize our services. Despite a soft start to Q4 largely driven by macro conditions, We believe we are uniquely positioned to capitalize on the inevitable market turnaround. I'll briefly touch on just a few of the things that make me the most excited for 2024. Accelerated supply path optimization with our agency partners, particularly in our curated and often exclusive marketplaces. Consolidated spend on our platform leads to more publisher supply and enhance margins. Clearline, our recently launched buy-side tool, is off to a strong start, and with additional features and functionality planned for the coming quarters, we expect continued momentum and adoption. If you recall, Clearline is built to capture linear TV dollars that aren't currently in the CTV ecosystem, a TAM of enormous proportion. and planned innovation across our audience tools, SpringServe ad server, Magnite streaming, and DV Plus platforms. With our CTV platform integration behind us, we can now focus exclusively on new innovative products supporting our unrivaled omni-channel offering and new and existing customer expansion. Although Magnite works with every publisher across the DV Plus and CTV landscape, we have tremendous opportunities to grow our existing business and capture new entrants in fast-growing and dynamic markets like CTV. In summary, there is a lot to be excited about, our business, our people, our customers, and our partners. I've never felt better about our strategic position and ability to grow long-term. We have made the right investments, and it's time to put our heads down, work hard, and deliver. We're in a great position to capture an outsized portion of market growth when it inflects by executing and being the best at what we do. With that, I'll turn the call over to David for more details on the financials. David?