Q3 2020 Magnite Inc Earnings Call

Good afternoon, and welcome to the Magna <unk> third quarter 2020, <unk> earnings Conference call.

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I would now like to try the conference over to.

Nick formally of Investor Relations. Please go ahead.

Thank you operator, and good afternoon, everyone.

Tobacco <unk> third quarter 2020 earnings conference call as a reminder, the comparisons you will see in the 10-Q as reported.

The combined financial results in the third quarter of 2021 for 2019 the results do not include Gloria.

Of course of this call when we refer to result associated to year over year comparisons with the phrase as reported we are referring to the basis 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 at the basis for comparison in order to provide.

Additional detailed insights to business performance management also uses to evaluate our business performance.

As a reminder, this conference call is being recorded joining me on the call today are Michael Barrett CEO, David Day, our CFO and Tom Hirsch, Our Chief Technology Officer is also joining us for the Q1 EPS.

I'd like to point out that we have posted financial highlights lives to where Investor relations web site to accompany today's presentation.

Before we get started or Monday 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.

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 included with respect to the severity and duration of the COVID-19 pandemic.

A discussion of these and other risks uncertainties and assumptions is set forth in the company's periodic reports filed with the FCC, including our 2019 annual report on form 10-K, and subsequent filings, including our 10-Q for the third quarter of 2020.

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 in the financial highlights deck that was 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 insight into the dynamics of our business.

Please be advised that 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 that periodically see reports and webcast replay of todays call to learn more about back Mike.

I will now turn the call over to you Michael Please go ahead.

Thank you Nick.

Our revenue performance in the third quarter was strong across the board and these trends are continuing into the fourth quarter demonstrating the value. We provide is the leading independent sell side platform.

Our strong top line outpaced category industry performance in meaningfully exceeded trends that we shared on our last earnings call.

Just like to rapid margin recovery, demonstrating the power we have in our financial model and the discipline to deliver profitable earnings growth.

I'll get right to the overview of the Q3 2020 results.

Q3 revenue was 61 million, which equates to a 62% as reported increased year over year 12.

12% pro forma increase year over year in the 44% sequential increase over Q2 reported revenue of 42.3 million.

P.T.V. Q3 revenue was 11.1 million, representing an increase of 51% year over year on pro forma basis.

Q3, adjusted EBITDA turned positive with a 23% margin at 13.7 million.

We couldn't read we're experiencing is broad based and that's taking place across all formats in device States led of course by sea today.

I'd like to provide some color on recovery trends in sectors.

Overall revenue growth trends continue to show strength.

Five plus weeks into the fourth quarter, and we expect we expect them to continue.

Key drivers in this third quarter included political spending and the return to live sports, we saw strong performing verticals, including technology in home and garden in trend improvement in weaker sectors said, she's shopping and automotive.

It's also notable that even in regions, where koby case counts and recently increased we have not seen interruptions or pauses instead.

You start the fourth quarter, we've seen some more normalized seasonal pattern returning.

It comes from retailers push to drive holiday shopping earlier than in free prior years Prime day in October continued strength from sports and news streaming TV content.

We are seeing seeing continued strong post election year over year growth in CTV.

Even without the benefits of political spending.

I'd like to provide an update on the Rubicon project into our merger integration and our go to market efforts.

A couple of key points.

Our employees have done a remarkable job of coming together, allowing us to go to market and execute for customers and the buyer side and publisher side.

Driving market share gains with new and existing customers.

We exceeded our original merger cost synergy targets ahead of schedule.

And have positioned the business well to deliver strong financial leverage with revenue growth.

We've also made progress in non fee TV video revenue, which you're trying to grow.

At 3% year over year pro forma growth for Q3.

This is an area of focus we identified when we announced the merger.

D TV continues to lead our growth.

In the drivers are powerful.

We believe the events of this past year has significantly accelerated the adoption of the AD supported programmatic CTV. These drivers are.

Further acceleration of cord cutting, causing a faster disruption to the linear TV advertising world is over 63 million or 38% of U.S. years in aggregate now unreachable by pay TV. According to E marketer.

And a projected 35% U.S.C. TV AD spend grows in 2020.

Additional drivers include expansion of live sports access an AD supported TV.

Broader consumer acceptance of AD supported free or lower class content as the economy and consumer spending has been impacted.

Dramatic acceleration of content, an AD supported platforms like publishers acquiring or watching their own platforms.

[noise] CTV publishes looking for better efficiencies and improved monetization and lastly, marketers wanting more control and flexibility of their spend as evidenced by fracturing gambles public statements.

D TV political spend was a positive contributor to Q3 growth as expected.

It's election season, so just how powerful ineffective see TV advertising can be.

Based on these findings we publish a case study you know I guess that shows market marketers across various sectors are they can you see TV in their future campaigns.

As we've indicated previously our.

Most notable partners include the likes a Disney who swing Pluto dish to be in crackle.

Device manufacturers, such as Samsung, Sony LG and Vizio.

In broadcasting cable partners like discovery Fox and NBC.

The publisher side, we held content providers monetize their inventory that runs through ROE could fire stake Apple TV, Chromecast, Playstation and Xbox devices to name a few leaders.

Overall, we believe these trends are driving marketers to accelerate the move of linear TV AD dollars to see TV advertising.

This move hasn't begun in the back half of 2020 as up fronts have been greatly reduced and marketers begin planning for 2021.

These trends are further supported by comments made by the trade desk and recoup on their earnings call last week.

I'll now hand back to talk about the benefits of our enhanced go to market strategy.

As the leading independent and scaled omni channel platform, we're seeing tangible results with buyers and sellers that we believe are.

Resulting in market share gains.

I want to share a few examples of how this is working on the agency brand and publish your friends.

On the agency side Omnicon U.S. selected magnate to power the new Omnicom marketplaces.

Magnates differentiated buyer tool suite.

Coupled with access to both traditional and see TV inventory.

I mean, it's the ideal launch partner.

As part of this effort Omnicom is bringing large engaged advertisers that want to ship spend into curated premium and transparent inventory.

The launch is taking place this quarter and desktop and mobile with Ctb expected in 2021.

On the brand marketing side.

With a leading consumer packaged goods or CPG brand Matt.

Magnate leverage its existing CTV relationship into a broad programmatic buy across all inventory types.

With the multi platform opportunity.

This advertising was able to plan their campaign secure their desired audience and unique campaign reach all through one magnate by as a result.

Sprain spending with magnate over a three month span increased from 100 8-K in the prior year to over 2.5 million in Q3 2020.

On the publisher side in early October Disney announced the strategic reorganization of its media and entertainment businesses to combine all of their screening services as a key growth driver for the entire company.

As Disney announced a few weeks back your offering is powered by magnate it's.

This further solidifies our already strong relationship with disease, who will UNFI TV as well as across their non see TV and display business.

Today I'll cover how targeted advertising is changing for the open web and the opportunity this presents for magnet.

Despite the pending data the third party cookie Tom.

Targeted advertising isn't going anywhere.

Instead, it's quickly shifting from an and identity model powered by buyers.

To win able by publishers and powered by global S P's like magnate.

The first chapters in programmatic history were largely dominated by buyers because the system relied on their distribution of third party cookies to aggregate and find audiences.

Within 18 months, the third party cookie and mobile identifiers, such as that flows idea Fay.

He will be replaced by more consumer friendly means of identity.

That work in the world to GDP are <unk> and C.C.P.S.

Of the proposed alternatives the vast majority lean heavily on first party identifiers implemented by publishers not buyers.

Because publishers have direct relationship with consumers their best position to obtain user consent for implementing first party identifiers.

That said for this publisher centric identity mild to work effectively across massive volumes of sites to consumers industry requires cell site infrastructure and tools.

We are well positioned to be one of the only company with the scale and publisher relationships can do this.

The shift towards sell side Addressability is much more than theoretical.

Magnate is already helping accelerate claims profit from it yeah.

A year ago, almost none of the revenue we need for publishers was derived from audience segments created within our own technology.

Today more than 10% of our revenues generated from audience segments, we create an magnate marketplace and we believe related revenue will more than double by the end of 2021.

Further because we believe strongly that identity should be open stores free and interoperable with all existing and future solutions.

We will continue to partner with the Threed bit, Delaware community and identity standards and technologies, including taxonomies.

For how audience segments should be expressed.

Keep in mind. These solutions will be joined by first party consented targeting that will continue to play a role in the market for some time to come is seen in recent news from the trade desk lied rent increase though all supporting an open source unified I'd.

In summary targeted advertising isn't going anywhere in global S.S.P., such as magnate will be absolutely central to making it work.

Now an update on demand manager, where we continue to see strong adoption by leading publishers.

At the end of Q3, we had 187 wide contracts as compared to 172 at the end of Q2.

We are seeing larger publishers that recently.

And we are deploying new demand manager format, such as mobile, which was announced two weeks ago.

We're particularly pleased with the signing and Onboarding of the weather channel.

I'd be in Watson advertising is working with magnate.

To leverage demand manager for control and insights into the digital advertising ecosystem.

Our demand manage your revenue continues to grow and we are ahead of our contract signing targets for the year, which bodes well for the future as publishers look to decrease cost and optimize revenue.

We continue our focus on the following key growth drivers.

Growing ctb, which will continue to continue to be our most exciting opportunities for the foreseeable future.

Accelerating market share gains across formats and device types.

As we consolidate the fragmented marketplace as a transparent and upon independent.

Any channel partner.

Expanding our publisher focus pre bid offering with the manager and lastly, playing a leading role in the changing landscape of targeted advertising with broad reaching identity solutions.

I'm proud of the efforts that our team has undertaken in of their performance in this challenging work from home environment.

Claims dedication and adaptability are evident in our results.

With that I will hand things over to David who will go into greater detail regarding our Q3 financial performance cost reductions in Q4 expectation yes.

Good.

Thanks, Michael.

As Michael described we are pleased to report continued improvement and strength in our top and bottom line performance Q.

Q3 is illustrative of the power of the leverage we have in our financial model with recovery in margins.

Q3, 2020 revenue of 61 million represented a year over year increase in as reported revenue of 62%. The truth is attributable to the Claria merger and a significant recovery from Covanta, driven lows and it was up 12% on a pro forma basis.

Revenue recovery was broad based across device types and format led by CTV growth of 51% on a pro forma basis.

Also notable in Q3 was fat display revenue grew 9% year over year on a pro forma basis, which demonstrates the share gains in a contracting market.

Based on device type Q3 revenue for mobile increased 14% and desktop declined 3% on a pro forma basis.

Revenue mix for Q3, 2020 was 18% CTV, 48% mobile and 34% desktop.

Operating expenses, which in our case includes cost of revenue for the third quarter of 2020 or $71.9 million versus 44.3 million in the same period a year ago increases are driven by the inclusion of Claria operational and purchase accounting related expenses and from 2.3 million of nonrecurring merge.

Merger and merger related restructuring expenses for certain personnel and professional service related expenses, which are excluded from adjusted EBITDA.

On an adjusted EBITDA basis operating expenses, including cost of revenue.

The third quarter were $47.2 million as compared to $31.5 million in Q3 2019.

This was below the 49 to 50 million in total adjusted EBITDA operating expenses. We originally expected driven primarily by the timing of synergy savings and a temporary cost reduction efforts, including the deferral of some non time sensitive projects.

We've achieved the 20 million in run rate cost savings, which we had targeted as of the end of the third quarter of 2020.

Our GAAP basis gross margin for the third quarter was 66% up.

From 49% in Q2, 2020, and also up from 63% in Q3 of 2019 on an as reported basis.

Net loss was $10.5 million in the third quarter of 2020 as compared to a net loss of $6.2 million.

Third quarter of 2019.

Adjusted EBITDA was a positive $13.7 million, resulting in a margin of 23% much better than originally estimated due to strong revenue growth and the lower adjusted EBITDA operating expenses as noted.

This strong incremental flow through of revenue to adjusted EBITDA shows leverage we have in our financial model from incremental revenue growth.

[noise] GAAP loss per share was 10 cents for the third quarter of 2020 compared to GAAP loss per share of 12 cents in the same period in 2018.

Non-GAAP income per share in the third quarter of 2020 was six cents compared to non-GAAP loss per share of two cents reported for the same period in 2019.

There were 110.4 million weighted average basic and diluted shares outstanding for the third quarter of 2020 there.

There would have been an additional 5.7 million shares included in the diluted share count.

The company posted net income versus a net loss consistent with anti dilutive accounting rules.

For purposes of estimating full year EPS calculations. Please also keep in mind the impact of the.

April Onest 2020 merger closing date, and a lower share count that should be used for Q1 and the post merger share count for Q2, three and four.

Capital expenditures, including purchases of property and equipment as well as capitalized internal use software development costs were $5.3 million for the second quarter of 2020 in line with our guidance.

We closed the third quarter with $104 million in cash a slight decrease from $107 million balance at the end of Q2.

The cash decrease was driven primarily by an expected usage of working capital, which we highlighted in our last call and which was offset.

Mostly offset by positive free cash flow of $8 million for the quarter, which we defined as adjusted EBITDA less capex.

As a reminder, our cash balances can swing disproportionately 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 a net basis.

I will now share some indications for our fourth quarter.

We expect revenue for the fourth quarter to be in the range of $72 million to $75 million and we expect to see TV to continue with strong year over year growth rates.

Our revenue growth estimates represent greater than 20% sequential growth in line with prior seasonal patterns.

Got some it's also assume no additional negative coverage related impacts.

We expect that adjusted EBITDA operating expenses in Q4, including cost of revenue will be approximately $50 million to $52 million, which includes the reinstatement of some of our temporary covered related cost reductions.

As a result, we expect our adjusted EBITDA margin in Q4 to be approximately 30%.

We expect that Capex for the full year 2020 will be roughly 24 million a slight increase the prior expectations in order to support growing volumes and specific growth opportunities in Asia Pac.

We are very pleased with our revenue growth and with our cost management through these challenging and very unpredictable times.

The efforts, we've undertaken position us well to adapt quickly to any potential future macro volatility to capitalize on the significant growth opportunities ahead of us and to drive increasing flow through and profitability.

We will continue to balance investment to support top line growth along with healthy margins.

With that let's open the line for Q and a.

We will now begin the question and 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 two at.

At this time, we will pause momentarily to assemble our roster.

And our first question comes from Jason Kreyer of Craig Hallum. Please go ahead.

Hi, guys. Good afternoon, nice work on the quarter.

Wondering if any more color on the <unk> the nature of the relationship with Disney I mean, we know that to l'oreal had a contract in place with who knew that was going to be up for renewal in February. So just wondering if you can give details like if that's been restructure and you know what what segments within Disney or what brands at Disney. This culberson, just any more color on.

It would be great.

Yeah, Hey, Jason its Michael.

Yeah, I think at this point I is it safe to say, we feel really good about our relationship with say Disney powering their you know Hulu Cross platform initiative.

He's definitely I think Amy.

Vote of confidence for AMAG night, and they disease.

His vision of bringing together this omni channel company.

And I I think when the time is appropriate and we'll be able to talk more about the status of that relationship.

Fair enough.

You gave some good color Michael on on the connected TV opportunity is just a piggy backing off kind of your expectations for the future you kind of mentioned you know what Procter and Gamble had said and the accelerated you know pay that for that consumer how does this manifest for magna It I mean why.

What do you hear from publishers, what are your expectations for Upfronts Nextshares curious <unk> any thoughts you have going into 21 around what happens with Ptv. After everything we've been through these last six months.

Yes, great questions and of course, there's two to.

Angles to come at that from right the publisher side and that in the buyer side the agencies and having spent a fair amount of time with both.

Not surprisingly they have slightly different [laughter] opinions about how it's all going to play out so I would just relay their sentiment and that is I think that that buyers and got into this process.

Hi, This you know coated.

2020.

And I think as seen by and large that the.

CPM or the value of their inventory.

Wasn't negatively impacted by due to targeted programmatic advertising I think as we know not to.

Dwell too long and the history lesson of pro.

Programmatic advertising, but it did begin is it written in business in the display world right Andrew the knock on programmatic was the minute. It left the direct selling world and went to programmatic.

Cams are gonna plummet and there goes your business.

And although that's an accurate observation. The reality was they were gobs of inventory it wasn't scarce and monetizing it for a penny was probably better than not monetizing it at all and it didnt have that upstream impact to the direct selling cpms and so I think that that with that fear taken away for publishers that do they saw.

The performance in what programmatic is done for their businesses.

That there's a greater inclination to utilize it we're having it as part of their monetization strategy and I think we've commented in quarters past that we've kind of seen a pull forward of maybe a year a year and a half for that eventually work its way out to two being front and center. So we think we'll be able to see.

The more inventory than we've ever seen.

In the coming quarters as far as agencies are concerned there's always been a lot of attention about the upfront anyway, and so that's going to play itself out I don't think anything happens and the advertising business that's been in place for.

For the year, so odd years, I don't think it evaporates overnight, but safe to say I think more and more marketers and agencies would prefer to negotiate or more on a calendar basis or less of the upfront obligation then has been traditionally done in the linear TV world.

If that answers your question.

Yeah. That's helpful color, maybe just one last one for me you talked about the audience segmentation revenue and I wasn't expecting to hear that that's already up to 10% there, but can you walk through how the revenue progression kind of works from from one end to the other I'm not sure if you're working with Dsps.

Our agencies to deploy that or who is involved in those conversations if you're going direct to the brands did to work that out and just kind of more color on how it works.

Yeah, Jason why don't I avail ourselves of the expert.

Tom cruise shot in <unk>, El <unk>, maybe bringing light time without mentioning names you know a case study of how it's worked with particularly publishers the data in how the economics work.

That's fair I mean, the way. It works today is buyers bring segments to us and they'll bring that segment to us in the form of an idea so that buyer could be an agency or a brand that say this is the group I want to I want to I want to find and target and we'll know doesn't that isn't in the platform and then use those to create a deal I'd. So we then send to the buyer a deal that says here's auto.

In tenders or here is sports car enthusiasts are here as people like purple shoes. So were we create these segments based on information buyers give us today, we expose that in the form of a deal I d., so that audience and just given some of the deal I do what we're doing now is with third party cookies going away. It isn't publisher data to do that so publisher for.

First party information about sites that have been visited or contacts or things that publishers have learned about that users journey. So the economics stay very similar to the way. It is today, but the segment creation move to themselves to the sell side. So we're doing this now using buyer data and the big trend you're going to see a lot of.

In 2021 is leveraging a seller data because after third party cookies, an idea phase are removed that seller. Dave is a thing that is going to still be there. If something has got to be persistent and present and that model is going to really exploit at that time that answer your question kind of the basics of how it works.

Yeah, that's very helpful. Thanks, Tom Thanks, you guys appreciate it.

Like I say, we're chasing that ill.

Ill.

The next question comes from Laura Martin of Needham. Please go ahead.

Hi, there. So my first one is you brought up trade desk and their C.T.D. revenue grew 200% and years grew 51% pro forma so I'm just wondering what the leakage is and why you wouldn't see since you're the largest sell side up on another large amount that's left on them and they're not why wouldn't those close to <unk>.

Hey, Lauren it's Michael.

Yes, you know I think that it's.

It's <unk> trade desk Roastery is something.

Something we can.

They put robredo nice side as well because that's around the exact same if not a little bit more high growth in spend that they are doing on our platform.

I think you look at trade that success, it's probably more a case of stealing share.

And then it is structural that Guy you know DSP has a shot at a higher growth rate than an SSP. So I think we've talked at least for that.

Our vision.

For the sell side that we know its more fragmented than the buy side, but we do believe that it will behave over time like the buy side and there will be outsized winners a handful maybe just one or two and that will be magnate and so I I I think that we're outpacing.

Industry growth and the rates of you know the high Twentys Thirtys that died.

Marketer and others have talked about so I think we feel like we're gaining share in our side.

And I think you know to come as to the ultimate steady.

Steady state for us in terms of when supply past optimization or happens on this side of the SSD side.

Okay. That's super helpful and then the market.

Was Oh, my God bless it down 3% and tell you guys got earnings Fabulous or any thoughts of a lot. My question is do.

Do you think that the upfront because that production is going to start at the Pfizer vaccine works means we're going to have to go back to it all upfront production full production full movie, which is good for you.

And then back into the normal upfront so that maybe we're going to have a one year benefit from up fronts and it actually persist once that's come back do you have a point of view I love.

The the relative benefit to the magnitude of only having one year off about price versus maybe a couple of years off.

Yes, another great question, and obviously just conjecture on our part but again in talking with AD buyers I you know.

Case in point with disease I Cross platform play in in streaming they haven't.

Programmatic has never been more important to their business in many many many publishers businesses. So even if our friends returned in earnest, a there's always going to be inventory.

Mobile threats to access so I don't know necessarily if the returned to Upfronts. It's the death of a CTV gross.

By any stretch I think the big team Laura This 2020 with the audience adoption right, where the eyeballs are dollies will follow in the upfront is not necessarily going to eat up all that inventories. So I think that we stand very well positioned going forward and as we talked.

On a number of occasions, we kind of think that 2020 has kind of pulled forward two more years of this maturation and programmatic is a monetization strategy for publishers will be very important piece of the puzzle.

Great results, Thanks, guys bye.

Sure.

The next question comes from Sweat talk calibre of RBC capital markets. Please go ahead.

Okay. Thank you let me try it simply.

Could you talk about the fourth quarter trends understood on your thought process for uptime and cost next year could you. Please talk about what you saw in the fourth quarter, you qualitatively talked about the strength any quantitative.

Sort of comment on TV and how we should think about it for the fourth quarter and then the second question.

How it is.

Clay does commentary on unified I'd add there a strategy to address a cookie less future in fact maddening business. If at all given that you have audience segmentation being done publisher I.

Access to data.

And then final one is on digital please so.

Let me now as you've mentioned is trying to aggregate their oh P.T. platform, how material of an opportunity can that be for Matt Matt how just that decision from Disney how important is it warm at night and I'm just not only this year, but over the next.

A couple of years thanks.

Right. So in order a good question asked David do you want to comment upon fourth Cup fourth quarter quality, a quantitative trends.

In particular, I guess CTV focus.

Yes sure.

Yeah, I think you know as we mentioned you know we're we're seeing the same momentum that we saw in Q3.

In early Q4, and expect you know that the the same kind of growth in ours NRC TV business. So I guess one question that that what might have is on the political spend front.

As you look at 2020 in total political spend represented.

In the in the lower single digits as as a percentage of our spend and so and so that that will have a huge impact in Q4 from a from a drop off perspective, and so yeah. We you know it.

After cut coming out of two quarters of extreme volatility in Q2, and Q3 I think I think the message for Q4 is we're seeing I'm a little bit of of [laughter] normal see I'm not sure what normalcy is today, but more normalcy from the standpoint of the trends that we're seeing.

Little bit less volatility and normal seasonal patterns, you know kicking in from Q3 to Q4.

Outstanding and Tom would you like to talk about the trade desk unified I'd with the question I think wed.

Our friend foe.

He co exist and a mutually what does it mean to our initiatives annoyed and segmentation.

Oh Super friends isn't the answer that I mean, we are your big supporters of the trade desk, you I'd to add though initiative and we've been working with them on prototypes and educating the industry via pre bezel profit is doing a lot of work to try to support you I did too as it rolls out you went into is focused on it.

Adding users to log in and creating a single sign environment to the Internet where users can send to a new internet targeting regime, and we think that is going to be a huge part of the internet, but there's also going to be a big party Internet, where you don't have a user log and how the user does not want to provide email addresses identifier that's going to be the majority of the internet.

So the moment created segments are the other publisher created segment is going to be the majority of the internet going forward and these two solutions will coexist very symbiotically with each other and you have to have really kind of didn't have one without the other so you'll have logged in users via a standard open source not there like that keep me you I'd too.

And you'll have publisher created segments, we're logging doesn't exist and together those two solutions will cover the vast majority of the internet at comparable spend and performance holds only out today. So we're really excited about both in the <unk> and the way they're going to work together as we move towards the Acos environment.

And then the last question is about Disney how material. So there are things.

Things, we can and I can't.

Can't discuss about Disney as I alluded to Jason at the top of the call. When there is an opportunity to do skus.

Our relationship with Disney in greater detail, we'll certainly do so but in terms of material.

The materiality as it relates to from a financial perspective.

I think we'll still steer clear of describing are trying to scope the size of the Disney relationship at a difference to our partnership with Disney but I. It is certainly material from a momentum in a proof an efficacy standpoint years no bigger player out.

There in the Vod World and if you're working with them in a preferred partnership capacity or an exclusive capacity. It certainly has a halo effect with the other clients out there so I'm extremely important and strategic relationship for us both financially and.

Meaningfully on the qualitative side.

Okay very helpful. Thank you everyone.

You're welcome.

The next question comes from Lee Crown of B. Riley Securities. Please go ahead.

Great. Thanks for taking my questions and congrats on a very solid quarter.

Wanting to wanted to ask my audience segmentation question, then on line with a everybody else on the call.

If if you had to kind of slice and dice from a different perspective, you guys are agnostic across audience segmentation or a you know a standardized vision like you I'd, but is there a monetization difference between those or is there an opportunity to generate a higher CPM from audience segmentation that accrues to magnate versus an open web body.

I think over time, there is that I think what we're trying to do right. Now is is replicate the environment, we have today and give buyers the opportunity to reach those reaches audiences at scale and publishers the opportunity to keep cpms in growing the way they've been crown they've been ground. So I think that there will be by fusing buyer information and publisher data more.

Actively theoretically will be able to get even more precise and accurate delivery of relevant ads to users. So there is a hope to that but I honestly I think the phase one approach is to just get to it.

Purity level, where we stepped away from cookies and have the same tools. The same revenue for publishers and the same outcomes for buyers. So I I like the idea that we should shoot for the moon and get even better than we are today, but for now that's just soft plan. This was cookies go away and and keep applying the same and then we'll go from there that would probably be my.

The answer to that question.

Got it that makes sense and then just a point of clarification on the infrastructure progress if I heard correctly that you saw a non fee TV video grow year over year is the implication there that the infrastructure initiatives or are ahead of plan I think last time you guys.

I said the Q1 2021 was when you would have everything fully integrated I'm, just curious how far how much progress you've made and when you expect completion if not already.

Yeah, you know, yeah, Alright times jump out when I'm, David Yeah. Good.

I'll start and Tom you can jump in yeah, I think yeah. We're pleased I think there's elements that are ahead of plan I think you know there's definitely a young are pleased with those results, but I'm definitely more work to be done and that you know not not claiming victory yet, but Tom why don't you jump in there.

Yeah, I would just add that our plan is to is to have a highly optimized CTV platform and a highly optimized omnichannel platform. So we think we're going to have both so the integration for us is about developing common methodologies and common a wafer customers interact with us even though the pot.

On will be highly structure to maximize that particular format to the things that we'll be integrating already working to integrate that we're on track to have in place by Q1, our identity and deals which are key to everything we just talked about around segmentation. So we're building a common identity structure between the two companies so that buyers can find audiences.

On CTV on on traditional video on display on audio in whatever form that they want and the fact that that may live on one platform and the other is clearly transparent that the other thing. We're doing is developing a deals infrastructure, where buyers and sellers can 'cause beach get reached deals and negotiate transactions regardless of the media type so.

The integration is coming along quite nicely, but yeah. I think we have the best of both worlds not love. This common user experience for buyers and sellers of the platforms underneath them will be highly optimized to the media there Kerry.

Got it that's helpful.

Then last question you kind of highlighted some case studies and success with Omnicom agency, a and a CPG brand.

Just kind of curious are those agreements exclusive meaning you are you represent the only SSP and in that relationship and you know based on that answer or are there other agencies and brands in the pipeline that perhaps can have the sort of success youve seen with these initial two applications.

Yeah lead it's Michael I'll jump on that one.

By and large I would characterize these as preferred relationships I don't think its in <unk> agencies best interest to only work with one SSP from a competitive dynamic. So I think what they do is they want to work with the preferred SSP that we'll do help them with customization helped.

With their model.

And help them build out there they're the platform they desire to work with them to attract advertisers to it and publishers to it.

And it just doesn't make a heck of a lot of sense of the agency to do that you know.

More than you know as several times and so but I you know, we're very pleased with the traction obviously, you know omnicom very large media company need media agency and you.

You know, they're thinking not too dissimilar to how other agencies are approaching you know this this next phase of programmatic and I think once you build out a successful execution for when agency that it's it's it's it it's quite likely you'll be a preferred partner for more than just one.

Yeah, but I will say as David we are there we are the only partner in this initial launch phase and so as they are rolling it out you know, they're they're sending all the business our way and you know, we're assisting them to to get it off the ground.

Great that's really helpful.

Nice work on the results and thanks for taking my questions.

Thanks Wayne.

The next question comes from Matthew Thornton of True Securities. Please go ahead.

Hey, good afternoon, everybody. Thanks for taking the questions couple a couple if I could.

Yeah I was just I don't know is for Michael or David personal synergies I think you said cost synergies, we've kind of already achieved what we set out to achieve I'm curious where we are on on revenue synergies in terms of go to market are you still kind of operating somewhat psi load or are we already fully integrated and really the cross my question is do we.

We'll have the opportunity to get to a fully integrated go to market, where we can start to see a revenue synergy still accelerate from from here that would be question number one.

Secondly, maybe for Mike on the competitive landscape you alluded to share gain I'm curious if you were alluding to the sea TV side or the non see TV side or or both so maybe just a little more flavor and color around what you're seeing out there competitively and then one for David just housekeeping you guys used to talk about a legacy 25.

<unk> EBITDA margin target for Rubicon, I'm curious, if there's any update to that for the for the combined company. Thanks guys.

Great now yeah, I'll take the top 10 day, we can grab next so synergies that from a revenue standpoint that that was the purpose is citing there's three examples of that working with an agency and creating a marketplace or omnicom working with.

As CPG brand and increasing their spend substantially because of the capabilities of the both the CTV and they are non TB business and obviously, we talked about Disney. So yeah. There was that we said we'd share examples when we had them because of the early examples a far more to come.

You know listen it's been a spectacular effort by the team doing this all I assume with the customers on so I couldn't be more pleased with where we find ourselves with a differentiated voice in the marketplace and some of the early successes, we're seeing so yeah, there's definitely more real.

Revenue synergies to come.

As far as share gain when we speak about share gain I think we can confidently say across the board cross CPB and on TV, we see where we rank with our publishing partners in terms of you know <unk> their stack ranking of who brings him the biggest check.

Hi, we are consistently at the top I in win in cases, where we weren't we are now in so that is definitely not just the rising tide, it's a rising tide plus a hard work by the team.

You know get more inventory do a great job monetizing that with buyers and so we're very very confident that that some of the success. We're seeing is at the expense of our competitors.

David you want to handle the margin question.

Yeah Yeah.

Yeah, No no changes from a adjusted EBITDA margin perspective, we continue to target, a 25% or greater adjusted EBITDA margins.

23% in Q3, and our our guidance would imply a 30% plus margin in Q4.

There's still a lot going on with a cold.

Cultivated a and the volatility that we have and so I suspect that that early next year will be you know maybe addressing that more more formally.

Great. Thanks, guys appreciate it.

Thanks, Matt.

The next question comes from Kyle Evans of Stephens. Please go ahead.

Great. Thanks for taking my questions and this is actually Michael new non fertile.

Continuing on the U.I.D. two daughters theme, we've seen good momentum for the solution via press releases from cardio and Nelson.

We still don't have really good understanding of the timeline for ultimate rollout of the tuck help me think about what milestones we should be looking at.

For when the solution could ultimately go live and the follow up you know what is I guess community own really mean for you I'd and what are the pros and cons of where that could eventually said whether it be you know with the I.B. or somewhere else things.

Well in terms of timeline. So we're starting to see were prototype in the plumbing part of this you know right now there's two pieces. The first is it.

Turning to the users how the Internet works and getting in new consent from them by the way under which they provide log in information and the second is plumbing that log information in a secure way. So we're already down a road at both of those and as an industry I would expect to see the plumbing part of this in the real world and.

One.

The and essentially what we're talking about doing is taking an optimized versions of user identifiers encrypting them and passing them to buyers and the platforms and then there's a shared encryption key that can be used to decrypt those values. So that the value is on your readable by those who are authorized so to me. This is a really really power.

Right away to reinvent, how we interact users and to provide persistent identifier for buyers and sellers action on I think doing this in open source and a community in the community environment, where the values our own collectively is the right way to do this and we have a huge amount of support up and down from buyers and sellers as the.

For this method the IB will play a role we need we need a neutral third party to administer the encryption keys. We also need standard methods for for poor sending these values back and poor, but I think the trade that is absolutely correct to do this in light of day in open source owned by.

The community is is the correct way forward and it gives us the ability to instead of fighting over who owns what I'd and slowing progress we have to collectively develop a solution that's going to replace their party cookies. We have 14 months to do it and we're well on track to do it and without open source and without cooperation we'd have no chance of doing it so not all.

He is it the best way, it's really the only way and were accused supporters of that.

No.

Got it that's very helpful.

And then just a quick other one any updates on supply path optimization. It sounds like you've made you know market share gains across the board or how much is you know the supply optimization contributed to that thanks.

Yeah, Thanks, Michael on the.

So as we kind of talked about last quarter, you know the the supply path optimization. We feel continues you know.

Case in point, you know and that's what like you know working with that Omnicom in as a preferred partner, that's certainly a tangible sign of SPL.

And you know it it continues I think it was a time when we thought maybe SPL look more like Sellwood branded you know flame out of a handful of you know general access piece and.

I think it's more going to look like the way, it's playing out in that is.

On a quarter by quarter on the margins.

Securing more dollars gaining more share outpacing industry growth and all of that is attributed to taking dollars away from our competitors and so.

You know, there's we'd love to be able to point to you know a resounding evidence of S.T. out, but I think we see every day in terms of our strength through their publisher relationships and are seeing who the buyer side that we've become this differentiated brand preference.

A heck of a position to be in.

Got it that's helpful. Thanks, and congrats on the quarter.

Thanks appreciate you calling in.

This concludes the question and answer session I would like to turn the conference back over to Michael Barrett for any closing remarks.

Thank you operator, we're very excited to deliver strong Q3 results and to see the momentum we have as we enter the fourth quarter.

Strategically we worked hard to align the business with material enduring growth platforms in a programmatic markets with.

With our teams great execution, we've been able to realize strong growth and to build a market leadership position.

Even though there is much work ahead I feel very bullish about the future of magnet.

Thank you for joining us for Q3 results call. We look forward to talking to many of you through virtual investor meetings and conferences hosted by Nida, Craig Hallum RBC and Stephens in the next two weeks.

Thanks, again and have a good evening.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.