PubMatic, Inc.

Hello everyone and welcome. We will begin momentarily. Hello, everyone, and welcome to Pubmatic's second quarter 2024 earnings call. My name is Annabeth Ferris, and I will be your Zoom operator today. Thank you for your attendance today. As a reminder, this webinar is being recorded. I will now turn the call over to Stacey Clements with the Blue Shirt Group.

Good afternoon, everyone, and welcome to Pubmatic's earnings call for the second quarter ended June 30th, 2024. This is Stacey Clements with the Blue Shirt Group, and I'll be your operator today. Joining me on the call are Rajiv Goel, co-founder and CEO, and Steve Pantelik, CFO. Before we get started, I have a few housekeeping items. Today's prepared remarks have been recorded, after which Rajiv and Steve will host live Q&A. If you plan to ask a question, please ensure that you've set your Zoom name to display your full name and firm, and use the raise hand function located at the bottom of your screen. A copy of our press release can be found on our website at investors.pubmatic.com. I would like to remind participants that during this call, management will make forward-looking statements, including without limitation, statements regarding our future performance, market opportunity, growth strategy, and financial outlook. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy, and future conditions. These forward-looking statements are subject to inherent risks, uncertainties, and changes in circumstances that are difficult to predict. You can find more information about these risks, uncertainties, and other factors in our reports filed from time to time with the Securities and Exchange Commission and are available at investors.pomatic.com, including our most recent Form 10-K and any subsequent filings on Form 10-Q or 8-K. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you, therefore, against relying on any of these forward-looking statements. All information discussed today is as of August 8, 2024, and we do not intend and undertake no obligation to update any forward-looking statement, whether as a result of new information, future developments, or otherwise, except as may be required by law. In addition, today's discussion will include references to certain non-GAAP financial measures, including adjusted EBITDA, non-GAAP net income, and free cash flow. These non-GAAP measures are presented for supplemental informational purposes only and should not be considered a substitute for financial information presented in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measures is available in our press release. And now I will turn the call over to Rajiv.

Thank you, Stacey, and welcome, everyone. We continue to deliver strong growth in key secular areas. Revenue from omnichannel video, which includes CTV, mobile, and desktop devices, grew 19% over Q2 last year. Mobile app grew even faster. Driving this was significant growth in monetized impressions. We expanded existing customers and partners such as Halion, Omnicom Media Group, and Mars, and we signed new marquee customers like Roku and Disney Plus Hotstar. Looking beyond these rapid growth areas, our revenue in the quarter was impacted by some macro softness and a large DSP buyer on our platform that changed their bidding approach, as mentioned on our call in May. We now expect activity from this buyer to stabilize in the coming months. Importantly, the growth we've delivered outside of this one buyer highlights the momentum we're seeing in the rest of the business. The programmatic market is rapidly maturing as content creators and media buyers build out their ad tech stacks. And I'm confident that the solutions we offer today and the investments we are making in supply path optimization, CTV, commerce media, audience targeting, and performance marketing will drive long-term profitable revenue growth. It's no coincidence that content creators and buyers are investing in these same areas to scale and grow their businesses. As inventory expands and ad budget shift to digital, there's a fundamental shift towards programmatic. To better illustrate this, we need only look at some of the key outcomes of the recently concluded upfronts. With the growing onslaught of streaming inventory now available, the market is maturing, bringing CTV prices down and attracting a greater share of advertisers' media budgets as they see higher ROI from this channel. We are benefiting from this lift. In the second quarter, CTV growth accelerated significantly in both monetized impressions and revenue growth. Adding to the opportunity, many of the biggest names in streaming like Netflix, Disney, NBC, and Roku are opening up programmatic access to their premium inventory, and many of them are leveraging Pumatic technology to do so. Programmatic is also reshaping ad buying across the open internet. We have seen an accelerated pace of conversations with walled gardens and social companies as they seek access to unique ad budgets and premium inventory available via Pubmatic's platform. For example, Pubmatic has expanded its work with Amazon ads to include enhanced API integrations that provide streamlined access to Pubmatic's SSP inventory and participation in the certified supply exchange program, which enables advertisers using the Amazon DSP to create unique deals to reach Amazon audiences on Pubmatic inventory. None of these major industry shifts would be possible without the use of sell-side technology. Podmatic enables content creators to have full control and transparency to bring their inventory to market. Our solutions facilitate data-driven targeting across their supply, create liquidity for their inventory, and ultimately drive yield in conjunction with their insertion order-based direct sales. We also offer scaled access to ad budgets. In many cases, we are signing new publishers because of our strong media buyer relationships built over many years via supply path optimization. While early investments with agency holding companies continue to deliver growth in SPO, we are also seeing tremendous success with independent agencies and direct brands. Halion, the consumer health company with a portfolio of household name brands, including Advil, Tums, and Centrum, is on a journey to optimize the quality of their media while reducing the carbon footprint of their media buying operations. To solve these challenges, they needed to get closer to the publisher and directly control their media supply chain. They selected Pomatic to create a global marketplace that meets Halion's inventory quality targets, resulting in a significant increase in the number of impressions won while improving the environmental sustainability and effectiveness of their campaigns. Underpinning the growth in SPO activity is Activate. Omnicom Media Group in the Netherlands recently expanded its SPO relationship to include Activate. With Activate, Pomadec offers OMG curated marketplaces for scaled access to multi-publisher deals, as well as direct inventory access to premium inventory. The greatest testament to the strength of Activate is the impressive results clients are seeing. When Mars Petcare was seeking to build awareness and consideration for Greenies pet treats, they and their agency, GroupM, tapped Activate to create an optimized path to premium CTV supply. Key to enabling this is Activate's ability to make the entire digital advertising supply chain more efficient by reducing the overhead caused by multiple technology platforms for each ad impression. Jonathan Tuttle, Associate Director of Media for Mars Pet Nutrition North America, explained that leveraging Activate to go direct to media supply was a game changer for the brand, allowing them to invest more of their budget in working media. In his own words, quote, one of the primary goals of our media at Mars is to drive business efficiencies through new and innovative approaches to the way we buy and deliver our media. We were able to accomplish this in spades by leveraging pragmatic activate, close quote. Ultimately, Mars exceeded its sales lift goal by 20% and exceeded incremental sales goals by 126%. The greenfield opportunities we see for Activate are amplified by the growing trends in programmatic advertising across streaming media. These trends mirror what we are seeing across our business with our rapidly growing CTV publisher footprint, many of which are scheduled to go live in the second half of 2024. We recently onboarded Disney Plus Hotstar, India's streaming platform offering a wide range of content across Indian and international titles as a preferred SSP. This summer has been a boon of live sports content coming to streaming devices, with the Olympic Games in Paris, the T20 Global Cricket Tournament, Copa America and the Euros all occurring within a few weeks span. On top of that, the active political cycle is bringing more eyeballs to streaming media. With premier publisher relationships and media buyers already on our platform, we are participating in the CTV consumption tailwinds. Additionally, I'm excited to share that we recently integrated into Roku's newly announced Roku Exchange, providing advertisers with access to their highly engaged audiences across premium live and on-demand programming. Podmatic brings the strength of our SPO relationships, as well as unique budgets from Activate, to maximize demand for Roku's streaming ad inventory. As I mentioned last quarter, we believe we are in the early stages of a new CTV and online video flywheel for growth. Adding to this momentum is an increase in mobile app, which is the vast majority of mobile ad spend. Our mobile app revenue grew over 20% for the third straight quarter, nearly double 2024's expected year-over-year market growth rate of 13%. Pomatic has a decade of experience providing mobile solutions, empowering app developers and providing buyers with a more efficient and controlled path to deliver ad experiences on mobile devices. Together, these have resulted in mobile app market share gains. Major apps like Duango, Newsbreak, and Takatone are seeing success through their integrations with our tech. We see mobile app as a key differentiator for Pumatic amongst our peer set. We are one of the only omnichannel SSPs to have a scaled SDK footprint integrated directly into publishers' apps. This provides us with increased performance along with greater control of the ad experience for the end user as we render the ad in the mobile device. Programmatic mobile app advertising is nearing an inflection point of growth. All of the major mediation layers, including Applovin, Google AdMob, and Unity, are moving away from waterfall auctions to embrace unified auction technology. This is exactly what our OpenRap software is built to enable. OpenRap SDK showed strong growth, doubling in revenue from a year ago. All of this opens up ad opportunities for more buyers, including performance-oriented brand buyers looking to drive outcomes and ROI within mobile app environments. Our existing SPO relationships provide us with direct access to advertiser and agency budgets to fill this inventory and take advantage of this growing opportunity. This is one of the reasons Roblox chose to partner with Pugmatic. Together, we are implementing programmatic media buying with select buyers and expect to expand access to more buyers later this year. Targeted investments in commerce media are adding significant long-term opportunity and contributing to growth. Our technology enables commerce companies to build their ad businesses by unlocking the value of their shopper data and ad inventory, both onsite and offsite. The commerce media market is growing faster than any other form of digital advertising. Our conversations with retailers and transactional commerce companies have accelerated over the past few months as we continue to scale our commercial and engineering teams dedicated to this line of business. We have an active pipeline of over 100 commerce media companies in every region, and one consistent theme has emerged. Commerce media networks are increasingly in the market for leading SSP technology like Pubmatics. Leading retail media companies, Instacart and Klarna, which we announced in early Q2, are expected to launch later this year. Ride-sharing apps also present a huge opportunity. For example, Uber's advertising business is on pace to exceed a billion dollars this year. We see this as a growing customer segment for Pubmatic, and in Q2, we signed Rapido, an Indian ride-hailing service for 10 million people across 120 cities. Rapido selected Pomatic initially for our monetization and unified auction technology with the opportunity to expand the onsite and offsite audience monetization as they evolve their commerce media offering. I couldn't be more excited about the breadth of opportunities ahead of us in commerce media. We see this line of business as a natural extension of our omnichannel platform. As a sell-side technology leader, we continue to invest and innovate, unlocking new avenues for growth. As digital advertising becomes increasingly programmatic, both media buyers and content owners are choosing to build their advertising businesses on our platform, with several large, exciting partnerships set to launch over the coming months. Our product portfolio supports the key secular growth drivers across the industry, supply path optimization, CTV, mobile app, commerce media, and addressability. I'll now turn the call over to Steve for the financials.