Q2 2020 Magnite Inc Earnings Call
[music] good afternoon, and welcome to the Meg.
Night second quarter 2020 earnings conference call.
All participants will be in listen only mode.
Would you need assistance. Please signal a conference specialist by pressing the Starkey 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 too.
Please note this event is being recorded.
I would now like to turn the conference over to Nick Horrible Oak head of Investor Relations. Please go ahead.
Thank you operator, and good afternoon, everyone. Welcome to back nine second quarter 2020 earnings Conference call. Following the merger of Rubicon project and Dilorio.
As you May recall the merger closed on April 1st 2020, and this quarter's 10-Q will be the first quarter that includes the combined company results. The comparisons you will see in the 10-Q are listed as reported as they include the combined financial results in the second quarter of 2020, but for 2019. The results do not include Gloria.
During the course of this call them, we refer to result to result, and associated year over year comparisons with the phrase as reported we're referring to the bases as reported in our 10-Q, when we make comments referring to pro forma comparisons we are using combined company metrics for the prior year period in 2019 as the basis for compare.
And in order to provide additional detailed insights to business performance that management also uses to evaluate our business performance.
As a reminder, this conference call is being recorded joining me on the call today or Michael Barrett CEO, David Day, CFO and Tom Kershaw, our CTO for the QNX session I would like to point out that we have posted financial highlights slides 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 objective.
Including the potential impact of Cobot 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 X.
Affectations or results projected or implied by forward looking statements, including with respect to the severity and duration of the covered 19 condemning.
A discussion of these and other risks uncertainties assumptions are set forth in the company's periodic reports filed with the SEC, including our 2019 annual report on form 10-K, and subsequent filings and including our 10-Q for the second quarter of 2020, we undertake no obligation to update forward looking statements or relevant risks.
Our commentary today will include non-GAAP financial measures reconciliations between GAAP and non-GAAP metrics for our reported results can be found in our earnings press release, and then the financial highlights stack that has posted on our Investor Relations website.
We define cash flow as adjusted EBITDA less capital expenditures, which excludes changes in working capital 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 at this additional detail maybe onetime 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 todays call to learn more about Mac night I will now turn the call over to Michael. Please go ahead.
Nick before we get started I wanted to take a moment to recognize that this is our first earnings call as magnay, the leading CTV in full service Omnichannel SSP.
When we announced our intent to emerge in December we knew that our combined company deserved a new name.
I mean that would capture the culture and drive of both companies.
Project, our strength as a global leader position.
Position us as the alternative to the walled gardens and highlight our ambition teen 90 industry through innovation and transparency.
The magnate branding bodies all of that and since we launched in June the excitement from our clients and partners has been phenomenal.
I'd like to review the highlights of our first full quarter since completing the merger.
We've seen a strong improvement in our business trends since our last call and are seeing very positive momentum since the start of Q3.
But before we get to the current trends, which will be most interested in I'll give a brief overview of the second quarter 2020 results.
Q2 revenue was 42.3 million, reflecting year over year revenue growth of 12% versus as reported Rubicon project only revenue of 37.9 million in Q2 2019.
GTV revenue was 7.9 million in Q2, which represented an increase of 12% year over year.
In Q2, adjusted EBITDA was loss was 3.5 million much better than we originally expected.
Since our last earning call we have observed steadily improving revenue recovery.
We noted in our last earnings call that we had observe revenue stabilizing in April in early may at a level of roughly down 30% year over year on a pro forma basis.
Revenue in May and June continue to recover with June down only 17% year over year on a pro forma basis, resulting in a 24% year over year decline for the full quarter.
Since you started this quarter, we have observed even greater recovery with Q through Q3 revenue quarter to date nearly breakeven year over year on a pro forma basis.
Since the start to Q3, we have observed even more rapid acceleration in CTV revenue growth currently running at roughly 50%.
Year over year.
I'd like to provide some color on where we are seeing signs of recovery.
I have to re performing add sectors in Q3 today, our technology home and garden in health and fitness.
The lowest performing sectors, our travel retail in automotive.
From a global regional perspective, we've continued to see significant ATAC outperformance relative to Americas and EMEA.
Q3 quarter to date APAC is growing in the high teens on a pro forma year over year basis in both the Americas in EMEA are close to returning to flat pro forma year over year growth.
We've done some additional work looking at AD spend trends in regions of the us impacted by Corona virus resurgence. Initially we saw AD spend slow in regions, where hot spots of being concentrated in April and May However, when new aspects emerged in July.
There's not been a corresponding slowdown in spend in these areas.
We have in fact seen continued sequential growth in AD spend in all geographic areas led by the strongest sectors, we mentioned earlier.
Overall, as we step back and look at the main drivers of AD spend improvement several trends emerge.
Increased marketer confidence in the second half for 2020.
PEO or supply pass optimization, which you first of buyers consolidated in the number of supply partners. They work with.
The return of live sports in uptick in political AD spend and lastly AD spend shift from marketers participating and add boycotts of social sites like Facebook.
On the SPL front, we've seen a flight to quality that has benefited magnay dsps agencies and publishers are narrowing their programatic partners to a handful of full service omnichannel players with sufficient resources to weather the cove it impacted economy <unk>.
Correct this trend to accelerate in the coming quarters, and we're also seeing a pickup in AD spend as result of larger dsps consolidating spend with us away from smaller industry players through SBO.
On the sports side, we've seen the return of basketball baseball soccer hockey in golf, among others and very strong AD spend deployment against programming.
We participate directly in the last sports market with CTV spend with Hulu swing Pluto facts, fumo and others not to mention expand across all of their formats.
Political spend is starting to grow request in four months until the November election.
We expect that there may be an earlier spending search, which primarily impacts our CTV business with more malin versus wide voting this year as compared to past elections and as a result, we expect a more concentrated impact from political spending in Q3 versus Q4.
Sure.
Lastly, we've been tracking this spend of many large brands that made public statements of their social media boycotts since the boycotts began we've seen a pickup in their specific spending that has continued into early August.
I'll now shift gears to CTV.
CTV business is an important focus for us and we provide an industry, leading CTV monetization platform to many of the largest players in the market.
In Q2, 2020, CTV, representing 19% of our total revenue.
In 2020 of the CTV market continues to accelerate the largest industry participants, including who lose Disney Roku Peacock Sling Pluto and others has seen strong subscriber growth increased consumer viewing time in solid AD spend growth.
We are seeing these same positive trends and RCT. We are seeing these seem positive trends in rctv business, which we define as digital content viewed on traditional TV screen.
Specifically, we have seen a significant increase in CTV AD inventory. This was driven by consumers watching more CTV content during the Covidien 18, pandemic and by larger secular trends.
These trends include consumers cord cutting or canceling satellite subscriptions to save money consumer preference for the lower cost AD supported CTV content and marketers shifting dollars to CTV because of the expanding audience and its premium content together these trends are driving country.
Tiered solid performance of our CTV business, which as I mentioned earlier is now growing approximately 50% year over year since the start of Q3.
We gathered some additional color on CTV industry trends and predictions that demonstrate the strength of this growing market.
Cord cutting is accelerating by 2024 traditional linear pay TV subscribers are expected to decline by 27 million or down 24% to less than half of all occupied U.S. households, According to research from Moffett Nathanson.
The combination of high prices as well as loss of live sports contributed to an overall drop of 1.8 million pay TV subscribers in Q1.
Translates into an annual rate of decline of 7.6% the fastest shrinkage of the sector and record.
Which we expect even further accelerated during the pandemic in Q2.
He vod platforms are growing downloads or the political at more than tripled to 3 million in April from 900000 in January According to censor tower, a market researcher scientists are to be jumped 30% to 4 million over the same period, while lose left 55%.
To 673000.
Finally on the demand side agencies plan to increase or OTI CTP spending by 46% compared to 2018, well brand said they expected to boost budgets by 32%. According to IB and their June 2020 report.
As these and other trends continue to play out we have seen business with our largest partners grow across the board that include the likes of who lose sling Pluto dish to be in across many of the content providers like discovery Fox and NBC.
We believe the future is great for connected TV magnate and importantly, our clients will continue to benefit from our industry, leading technology and service as a CTV market evolves.
I'd like to change topics and talk a little bit about privacy.
There continues to be a lot of attention or industry and privacy initiatives from both regulators in industry participants concerning the collection and use of individual user data for instance, googles recent decision to eliminate the use of third party cookies and apples recent announcement requiring user opt in.
For I'd say tracking.
First we fully support consumer privacy efforts and believe of privacy first model is good for the health of our industry in our business.
The new privacy paradigm is shifting responsibility for identification, we're squarely to publishers that a first party relationships with their consumers in our better positioned to get consent versus a third party that is operating in the background.
This transform the value of publisher has which are users and as the largest independent SSP, we're well positioned to help them capitalize in this industry shift.
Second while we expect there to be some short term disruption in the ecosystem as participants adjust to the absence of certain identifiers. We do not expect these changes to cards meaningful reductions in overall ad spend or revenue.
We do not believe budgets will generally be reduced.
And we believe that spend will continue to flow to high value users on a mix of mobile desktop and CTV.
It may mean more volume trading at lower Cpms in some cases, but AD budgets themselves should continue to be deployed and there is no lack of inventory.
Furthermore, CTV ads and has never been third party cookie dependent or depended upon mobile identifiers like I'd say, so there should be little to no impact to CTV growth.
At the industry works towards the new targeting paradigm in fact, more spend will likely shift to CTV, especially as our addressability efforts continue to rollout in allow buyers to find their audiences on these platforms.
Third we are actively participating in this industry shift to ensure that we enable our publishers to realize value.
For their first party data without sacrificing the security in control over that data.
Some of the things we are doing to include.
Helping publishers passed through first party values, such as demo interest and subscriber takes in the bid requests which allows buyers incorporate this publisher info into their buys.
Packaging publishers segments into deal ideas, which allows buyers to purchase segments rather than identifiers.
Augmenting buyer segments with lookalike segments created by first party publisher data.
Support for the S.K. AD network standard, which was released by Apple and augmented by IB specifications to allow for attribution on Apple devices, and lastly, beta testing, our new vendor marketplace, which allows sellers to package their data and extend that to other public.
Your inventory this is lie with some accounts today.
Beyond publisher first party data. We are also leading efforts through pre bid dashboard with broad industry support to create an open community driven first party identity model and we are obviously participating heavily in the Google Chrome privacy project also referred to.
The Google privacy sandbox.
Now an update on demand manager, where we continue to see strong adoption by leading publishers at the end of Q2, we had 172 live contracts as compared to 156 at the end of Q1 and 86 at year end.
Revenue continues to grow and we continue to meet or exceed our contract signing targets for the year, which bodes well for the future as publishers look to the decrease costs and optimize revenue.
The key drive growth drivers for our business remain the same way, we're focused on continuing to invest in CTV as our fastest growth area.
Driving revenue in the combined combined non CTV video businesses to deliver growth.
Accelerating SPL as a transparent independent omnichannel partner.
Growing our publisher focused prepaid offering with demand manager and lastly, playing a key supporting role in the changing landscape and identity solutions.
I'm proud of the efforts that our team has undertaken to be productive in make huge strides to recover and further position us for success going forward.
The merger of our two companies as a huge strategic milestone to position us for the future and an even more optimistic now than ever with that I will hand things over to David who will go into greater detail regarding our Q2 financial performance cost reductions in expectations David.
Great. Thanks, Michael.
As Michael noted, we're very pleased with the significantly improving revenue trends since our Q1 call and our June 18th update.
As Michael pointed out Q3 revenue levels on a pro forma basis are nearing breakeven year over year quarter today, which is up approximately 40% on an as reported basis.
Most importantly, CTV has resumed a very strong growth trajectory currently growing at roughly 50% year over year quarter to date.
The Q2 2020 year over year increase in as reported revenue was 12%.
Attributable to the Claria merger and offset of course by the negative impact of covered my team.
As reported Q2, 2020 revenue declined 10% in mobile and 8% than desktop.
CTV was entirely additive due to the revenue from the Claria merger.
On a pro forma basis, Q2, 2020 revenue for mobile declined to 32% desktop declined 26% and CTV grew 12%.
Revenue mix for Q2, 2020 was 19% CTV, 45% mobile and 36% desktop.
Operating expenses, which in our case includes cost of revenue for the second quarter of 2020 or $82.9 million versus 46.5 million in the same period a year ago.
Increases were driven by the inclusion of Claria expenses.
12.5 million of nonrecurring merger and merger related restructuring expenses and the purchase accounting impact of approximately $7 million and noncash intangible asset amortization.
On an adjusted EBITDA basis, operating expenses, including cost of revenue for the second quarter or $45.8 million as compared to $33.5 million in Q2 2019.
This was below the 40 to 49 million in total adjusted EBITDA operating expenses. We originally expected driven primarily by additional synergy savings and temporary cost reduction efforts, including the deferral and some non time sensitive projects.
Our GAAP based gross margin for the second quarter was 49%.
Gross margin is lower due to the impact of covered 19 on a revenue and that due to increased noncash intangible amortization, resulting from claria purchase accounting.
One time deal and merger related expenses in Q2 were approximately $12.5 million and are excluded from adjusted EBITDA.
Deal and merger related expenses in the quarter were comprised of 6.8 million in banking legal and professional service fees and 5.7 million in personnel related expenses, primarily severance.
Net loss was $39.1 million in the second quarter of 2020, it's compared to net loss of $8.3 million in the second quarter in 2019.
As I mentioned earlier adjusted EBITDA loss was $3.5 million, which is better than originally estimated due to improving business conditions and adjusted EBITDA operating expenses coming in lower than our initial expectations.
GAAP loss per share was 36 cents for the second quarter of 2020 compared to GAAP loss per share of 16 cents and the same period in 2019.
Non-GAAP loss per share in the second quarter 2020 was 10 cents compared to non-GAAP loss per share of six cents reported for the same period in 2019.
There were 108.5 million weighted average basic and diluted shares outstanding for the second quarter of 2020.
It would have been an additional 5.8 million shares included in the diluted share count.
Had the company posted net income versus a net loss consistent with anti dilutive accounting rules.
For purposes of estimating the full year EPS calculations. Please also keep in mind the impact of the April 1st 2020 closing date and the lower share count that should be used for Q1.
Capital expenditures, including purchases of property and equipment as well as capitalized internal use software development costs.
$3.3 million for the second quarter 2020 inline with our guidance.
To close the second quarter with $107 million in cash an increase of $36 million from the 71 million dollar balance at the end of Q1.
The cash increase was driven primarily by the addition of flurry of cash to our balance sheet.
Offset by deal related cash usage of approximately $17 million and operating cash burn of approximately $7 million, which includes adjusted EBITDA loss and capex for the quarter.
Offset by favorable working capital impacts.
As a reminder, our cash balances can swing disproportionally, both up and down compared to the run rate of our business since we collect and pay the gross amount of flow through to our sellers, while we record revenue on that basis.
No that as part of the purchase accounting related to the merger, we recorded intangible assets with the basis of roughly $103 million and goodwill of $150 million.
The intangible assets, consisting primarily of acquired technology of $58 million, which will be amortized over five years in cost of revenue.
And $36 million for customer relationships, which will be amortized over two and a half years in sales and marketing.
We continue to expect the annual total annual run rate cost reductions from a cost synergies to exceed $20 million.
At this time and based on current economic and business recovery trends, we're not planning on not planning any head count related cost actions.
I will now share some indications for our third quarter.
We expect revenue for the third quarter to be in the range of $51 million to $55 million.
These revenue expectations are based on the level of year over year revenue growth that we're currently experiencing which is nearly flat year over year on a pro forma basis.
It is of course challenging to handicap, how revenue will respond in these still uncertain times.
Although we are cautiously optimistic that current trends will continue.
We expect that adjusted EBITDA operating expenses in Q3, including cost of revenue will be approximately $49 million to $50 million.
As a result, we expect to be adjusted EBITDA positive in Q3.
We continue to expect that Capex for the full year 2020 will be roughly 22 million.
We expect cash balances to be lower at the end of Q3 and the potential Q3 decrease from adjusted EBITDA less Capex Capex would normally indicate.
As a result of the benefit from working capital in Q2 that will likely normalize in Q3.
We are very pleased to report on results and trends that are much improved compared to our Q on a call.
The efforts, we've undertaken position us very well to benefit from the continued improvement of economic conditions and the weather any additional pressures should they arise.
We will continue to be extremely prudent with respect to cost while also making critically important investments in the future growth CTV demand manager.
And in our tech stack efficiency.
With that let's open the line for key Renee.
We will now begin the question answer session.
To ask a question you May press Star then one on your telephone keypad.
If you are using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then to.
At this time, we will pause momentarily to assemble our roster.
The first question is from Lee crawl would be Riley FBR. Please go ahead.
Great. Thank for taking my questions and a nice work on the quarter and quarter to date trends.
Right.
I wanted to start off just kind of on the quarter. They trends you highlighted a few sectors that were performing well have a few factors that we're performing poorly due to the macro backdrop I'm just curious what kind of the working assumption is for the impacted sectors to the downside in Q3, and then also I know you kinda defended.
The idea Fay <unk>.
Impact on the business is there any impact from a revenue standpoint, or do you guys fully believe that you can steer clear of any impact in the second half.
Yes.
Questions that David do you want to take the said trends to date with the categories aggression.
Yeah, that's rightfully Paul that's why I apologize. So we can you just.
It it's a expand on that question.
Yeah, I guess is there an assumption that those negative sectors improve in Q3 or do they kind of trend similar to Q2.
Yeah, you know, we're we're basing our guidance on what were observing today. So we're we're not assuming a significant upsides and those those lower.
Performers at this point in time.
I'm not saying that's.
Well, what will happen, but that's why we're basing our by our guidance on.
Yeah, and I can we I can hit the idea, saying then Oh, so would love to ER.
Throw that to a time kershaw as well our CTO is on the call is far more expert at the impacts of idea say, perhaps not materially but from a technical standpoint, but yeah. We feel we feel comfortable Lee in that we are terribly exposed or have.
Outside exposure to any deprecation of idea Fey and of course, it's all the guessing game as to how many of the top apps are unable to get consumer permission and so that all at the play itself out, but generally speaking we think that the a inventory is brought in.
Diverse enough in the spend is brought in diverse enough that what we've seen a platforms, whether its GDPR or any the other apple initiatives like intelligent tracking prevention and on the deprecation of cookies and the Safari browser that.
If there's a momentary imbalance, it's usually in cpms not an AD budgets and there tends to be enough inventory, where if you sold one unit a dollar you now selling two units at 50 cents I'm not trying to minimize the impact that may have a specific publishers, but for a platform generally speaking we deliver.
For the budgets and we haven't seen the budget cut I don't know Tom if you have anything further to add to that.
Yeah, I totally agree with that I think the thing to note that's going to be a phased rollout, Iowa 14 rolls out in the Middle September and it's not going to be adopted on day, one it'll be adopted gradually by whereas overtime and the same way the opt in process for apps is the opt into idea pay tracking is per out and that will be rolled out again over a period of time. So you won't see like.
A onetime impact we'll see a gradual rollout of this and with the introduction of the SK networks standard where attribution of we feel that spend will still slow the iOS devices. How many mobile buyers have been close contact with us on what's going to be necessary to maintain spend so I think there will be some impacts your them.
The here or there, but I think given the phase rollout our experience with this because we've seen the via before me, it's a pretty comfortable we'll be able to manage this transition.
Got it that was very helpful. I think most investors to breathe a sigh of relief there. Thanks Tom.
The second question I had just wanted to focus on the SPR share gains I know, we've talked about it several times in the past.
It's always kind of been on the horizon, but it seems like the tone and in this call has changed and so it really seems like perhaps it is starting to materialize I guess what is the catalyst for the change in town and I guess, what is sort of the trajectory for S. T O from here go forward.
Yeah, I'll jump on that and maybe David want to chime in a lead but yeah. There's no question, we're seeing a better than average rebounding or is this quarter in you know that projections that they've got the guy that we gave for Q3 and if you look across the industry you look at.
Cpms that we have a trending on our platform they in the into volume it all seems to to be beating on or the industry average with this you know coven tamp down so.
Multiple initiatives that we've done over the last two years to the strengthening of the company's profile with the merger with Toria the strength for the balance sheet in terms of being able to ER assuage buyers and sellers that where we're not going anywhere or with our cash balance.
There's definitely been in uptake we think in this kind of flight to quality and I also believe that many of these initiatives are.
They're not all of you would like S.P. or to be Wendy wake up and four platforms go out of business and its tangible and everyone recognizes that S.P.O. is upon us. This is it's a gradual game and you know we've been seeing a gradual shifting a gradual a strengthening of the <unk>.
And then the magnate platform and there's no question then there's countless examples of agencies or agency partners are DSP partners that we can point to where we're getting.
Should spend towards the platform.
Got it thank you for taking my questions guys. Thanks.
Your next question is from Jason Kreyer with Craig Hallum. Please go ahead.
Hey, guys. Good afternoon, a good to hear the improvement in friends.
Well I just want to start on connected TV, Michael can you give any details on on the cadence that you saw over the course of the quarter and in particular, if you've seen any changes in the volume of Ctb being purchased programmatically as opposed to direct.
Yes, so we see what we can see right Jason So it's not completely a macro insight, but what we have seen is what you know ER intuitively folks predicted and you know others have commented upon and that is CTV was.
Not immune from the pause in March on it was a drastic decline in growth rates, but it was still growing and then we saw it as one of the fastest a tech media types to recover in so outpacing the gains that we saw the rest.
For the platform and those are even accelerated as we pointed out with the guidance for Q3, and we know that.
It's an increase in inventory that we are seeing not partially because of consumer behavior, but also because of how difficult. It is in a world without upfront in a world. It's been disrupted from direct selling the idea that you can monetize a disease.
All right added impressions and the surgeon viewership without having to Marshall your direct team to do so in this backdrop.
We definitely definitely benefited from that trend and I think somebody that oh here to stay the.
Concern that Programatic would dragged down cpms that concern it programmatic would take away arrest control of inventory from a leading players you can just sense it abating and that there's this new norm that it's going to be front and center with their does.
Depreciation strategies in or south strategies and is now going to play a very very important role.
Pull forward by I would guess you know eight or so quarters in terms of what it would normally be the development cycle.
Perfect. Thank you and you made a couple of comments that that stood out to me earlier in regards to the privacy initiatives to in particular I wanted to see if you could just give a little bit more color on or maybe of Tom can give a little bit more color on all but one was just the establishment of publisher segments.
It seems like almost kinda, creating better capabilities to target individual groups and then the second on launching a vendor marketplace. So any more color on those two would be great.
Sure Tom you want to jump on us.
Sure. So I'm not sure segment publishers, leveraging first party data or the creation of segments is something that the industry isn't doing for a while we've been passing publisher data in the form a P value parents to buyers for a long time, they werent really using that data actively and what shifted now at this change in identity is that we're using deals and.
Deal ideas to package up segments for fire. So they can buy their audiences without having to process Daddy's themselves. I think what this is going to represent is a shift of kind of control and responsibility to the sell side to the till it publisher community and those publishers are going to need to to federate because lot of them are too small scale on their own. So these groups of publishers.
I'm using tools like pre bed they'd be able to create standardized.
Audiences for a bus I'd like clear trend, we're seeing a we're super excited about it now they were with pre bed and man that I think whereas you know collectively in a really good position there. The vendor marketplace is it's a new innovation that allows us to plug third party data into our platform. So say a third party provide.
Her has a bunch of information per se went creation or for her targeting they can plug that into our platform will collect the money from the buyer on their behalf are from the seller and passed onto them seamlessly. So they don't need to have contract with thousands of publishers and what this help publishers do little help them take their first party data and extend that.
Sure. So we think there's going to be a data marketplace as well as kind of a format marketplace that will be enabled as we move towards this up first party environment.
Okay since since Tom's already got the floor I'm going to throw one more out to you but.
Over the course of the quarter I guess early in the quarter. We saw one of the larger D.S.P., it's starting to put some some regulations out there to limit supply paths and and as we've gone through tracks. We've heard that that's been a big a tailwind for pre bed and they'd seen better adoption and just wondering if you can kind of connect some dots for us I mean do you see that.
As as a benefit to magnate with pre bed, gaining market share or what kind of the read through for you guys.
Well, yeah, I have to see it pretty positively for many night that pre but this gain market share I think it's a it's just phenomenal estimates at pretty good success that one publishers were asked a couple of months go you have to pick you up to pick between Google eight nine and pre but they [noise] overwhelmingly picked pretty bad as their preferred methodology for connecting.
Onto the rest of the World and that's a testament to the open source nature and the control. The publishers have so we definitely did see that trend we see.
Continued movement of inventory into prevent.
The next phase of this or for that to extend to mobile and TV, but certainly that was a one of the big trends in the first half year was just the continued acceleration are pretty bad as as the preferred method for most publishers to a connected through answers.
All right well thanks, a lot for all the color guys and Tom I. Appreciate you joining the call. Thank you.
It should.
Your next question is from Matt Thornton would to a securities. Please go ahead.
Hey, guys, Michael David Nick or Tom I'm. Thanks, taking my question, maybe first is coming back to supply path optimization I got you know maybe this was from Michael I guess it did you see without getting into specifics, but are you starting to see it in the second quarter did you see developments that just gave you a.
Yeah, just proof points that that's starting to play out in the way that favors magnate, meaning obviously you guys. Just close. This merger you know did you see a buyer or buyers come to the table and proving their their supplier.
Cohorts, a and favorite magnified because of the steps you guys I've taken so I'm just curious your without any specifics if you've seen some a evidence start to come to fruition fruition. There and then just secondly on maybe on the revenue side, we've talked a little bit about some of the cost synergies that you guys reiterated a further for the deal.
I'm just curious if you've started to see again evidence of some of the revenue synergies that we've talked a lot of past starting to come through as well as you start to cross sell a the two different customer bases in the two different kind of geographic footprints any color there would be helpful. Thanks, guys.
Yeah, Matt I'll I'll jump on that so.
Yeah. He did big Big vision it'd be a promise of magnate, bringing together they agreed CTV capabilities a tour area in the Omnichannel capabilities of Rubenstein, we are right, we see validation of that play on a daily basis, but.
To be honest, that's a longer term delivery in terms of then working with publishers on demand manager products for video management platform products and you know more of a software we what we saw this big opportunity that Mark and that's how or when we got together wasn't just being.
You know being able to provide demand to publishers for all media type that's very important obviously, but the idea was to take this the next level and be able to a combined.
Some of the cool initiatives, they've done with Hulu with argument manager project I bring them altogether and habits are one platform one software first approach.
Okay and that obviously takes time and I'll be honest, it's certainly isn't helped by not being able to be in the office meeting your colleagues.
In doing all the normal stuff you normally would do under business, but we are.
Terribly occurs feedbacks and a fabulous from from clients and you know as it relate directly to you know fruition of a deal promised we definitely saw that the initial pausing to spend that occurred in the concern from publishes.
Viability of certain demand sources and viability certain platforms. Given this combined strengthen the two companies and a combined balance sheet. There was no question I played a significant role in this shift is spending is calling of partners among leading publishers and so we.
Definitely benefited from that and as it relates to revenue synergies I think it's kinda dovetails into the first part of the.
The answer the first question, which was.
Those are definitely longer term plays will be shouting them from the mountain top as they start to come to fruition, but you know I think that that right now given what we're doing we're just trying to excel as a way at the CTV game Excel at the Omni channel again and work behind it.
It seems making it one cohesive pitch that we'll be able to deliver on the ultimate promise I don't know via ranking dad David.
I think you got it.
Maybe just one quick quick follow up and I'll jump back into queue.
I guess when you think about the landscape overtime, obviously have come together with with to L'oreal, which was which is a very pragmatic move I'm curious as we continue to see kind of fall out here. If you think they'll be more opportunity for you guys to be a consolidator.
Of all the supply side I know, there's always been argument that maybe it's a consolidation supplies I didn't make sense, but obviously the world changing I'm curious your views of of of that looking forward.
Yeah, Matt I don't think they change I think we're bullish on the consolidation I think we're where we look at deals constantly and what took a so long to do the to argue is you know the market timing was rate for both companies, but it was also we're both winning and we don't want.
To do a merger a roll up or an acquisition Jeff's for the sake of trying to do it for you know financial Engineering I think you know any company. We look at its got to be playing offense has to be in a very strategic invaluable piece of the ecosystem.
Had a plethora of options themselves, because you're doing well, but by into the overall vision of this combined entity in running the table was the omni channel FSP with a huge focus and see TV and so we're I think you'll see activity from us.
Right, Okay, and in the future, but and where they said open to a lot of things, but were highly selective in still don't buy that thesis of or trying to roll up a bunch a general exchanges that we're kind of born in the desktop banner era and.
Trying to you know.
See if that adds up to more than a you know there's some of the parts.
Great. Thanks, guys appreciate it.
The next question is from Kyle Evans with Stephens. Please go ahead.
Great. Thanks for taking my question and this is actually Michael on for Kyle.
I know you talked about the number of wad contracts increasing out of 172 for demand manager do you feel like you're scaling to a user base and have a healthy enough AD environment to get to the original pre cobot goal of 5 million in revenue and just to tack onto that are there any new competitive threats to the man manager outside of in house.
House development, a pretty good solutions that you're seeing.
Oh jumped the latter and let David I handle the revenue projection piece of it but no I don't think the landscape has changed much Michael and that was a and thank you for the question and that was kind of the.
Believes that we had that our primary competitor a into demand manager space is gonna be the free pre bid product and that is certainly played itself out and why you see the acceleration is a pretty grid is growing in complexity previous moving server to server and I think publishers or stay.
So look hard at internal cost in realizing that by taking a company like ours. It was a managed service software offering its a very attractive economic proposition based trying to run it yourself or so I think that's ER.
That's.
Really what we're seeing in terms of the uptick as it relates to revenue a in reaching the original 5 million goal.
David do you do we have yeah.
I'll take that yeah, Yeah, I think you know I think there was well first as you noted on the sign ups, we're just we're thrilled and where.
You know what's interesting is we're also getting more interest from I think some of the larger players.
That we thought would have taken more time to gain this level of interest you know because oh, they didn't because of the impact on their revenue and they look at their cost structure. So definitely positive you know a progress on the fine upside from a revenue side I think we're not probably IDR guidance, but but.
We.
There's picking up hole here that that yeah, we don't expect to hit those levels. A this year I'm of course, you know we've still got a runway here the rest of the year, so things could take up even more but at this point I don't think we're going to getting hit those levels, but I think we're gonna be better positioned for 2021.
Got it. Thank you and just one follow up the onetime deal and merger related payment you guys were expecting them to queue of 16 million I know it came in a little bit below or just wondering what the variance was here I'm in a few ins expect any kind of more incremental expenses in Q3 year, if that's going to be a little.
Cleaner going forward. Thanks, Yeah.
Yeah, and there is the it was a little bit confusing the.
Part of the that we're talking about cash outlays, when we talk about that 16 million and the cash outlay related expenses actually be 17 million. So it's actually just just a pick up and it's just a a quirk of some of the investment banking costs on the target side actually aren't on the cost ledger, but they are on.
<unk> cash flow ledger, so the did where where proceeding as expected with both the cost and the cash outlays related to the to the deal costs, Yeah, and then going forward. There's there's a there's a lot of noise and this quarter and a it should certainly.
On the gap side normalize you know significantly next quarter quarter.
Got it thanks, so much.
The next question is from Chris Sekai with singular research. Please go ahead.
Oh, hi, everyone can you I know there with some weakness a in the desktop and mobile channel.
Ah can you just provide some color I'm asked you know what with what were the main Oh, the weakness there and in the near future Oh, you know how do you see these channel and the future.
Why don't you grab that David.
Yeah all that.
Well I think the premise I mean, obviously you know how that has impacted across the business and.
Actually there the results on both desktop.
And mobile I think our are better than we would've anticipated.
Certainly you know even even at the end of May for the quarter and certainly did not anticipate that momentum that we have continued into July and so you know I wouldn't necessarily described.
Even other down that's that's purely a you know we see cobot, driven and we think we're well on our way to ER to recovery as overall AD spend levels lift across the industry and as we get continued momentum on something that Michael talked about with continued a S.P.O.
And and then in particular as some of the sector or some of the low performing sectors do you start to recover for example, you know travel and retail I'm certainly not necessarily in the Super near term, but you know we believe they will come back as well and those will.
Certainly helped lift our desktop and mobile business as well.
Okay, Great and then as far as.
Proportion of revenues from <unk> <unk>.
No I.
By the end of the your where we can you provide a good I've made you know how how how much revenue you come from TV.
At the desktop and mobile.
Yeah, you know we're only you know we got we're not providing specific see TV.
Revenue guidance are going forward, but obviously with a 50% growth rate and a higher.
A quick or trajectory or certainly that 19% or they experience in Q2 is yelp mathematically you gonna Gonna grow so we're very bullish on that TV business and.
I think that you know the benefits that were seeing are not just you know how good related but but there are sustainable for the longer term.
Okay, Great thing.
Thank you.
This concludes our question and answer session I would like to turn the conference back over to Michael Barry for any closing remarks.
Thank you operator, and as David mentioned that fit and his closing remarks. We're we're very pleased to deliver solid Q2 results in a view into the strange we've seen so far in Q3, we were optimistic about these trends continuing and remain very excited about the future long term growth prospects.
Of our business, especially CTV.
None of this would be possible without the tireless effort, but every team member of magnate.
We closed our merger to started this quarter, having never had the opportunity to meet each other in person get three thousands of hours resumed meetings the teams of bonded and not miss to be.
I don't get me wrong, we all hope one day do return safely to our offices and resuming more regular business cadence that of our team can put up these types of results under extraordinarily trying circumstances I feel very bullish about the future magnet.
Thank you all for joining us for Q2 results call. We look forward to talking to many of you to virtual investor meetings in the coming weeks and everyone have a good evening.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
[music].
[music].
[music] [noise].
[music].