Q4 2020 PubMatic Inc Earnings Call

It may be required by law.

In addition, today's discussion will include references to certain non-GAAP financial measures.

Non-GAAP measures are presented for supplemental informational purposes, only and should not be considered the substitute for financial information presented in accordance with GAAP.

Creation of these measures to the most directly comparable GAAP measure is available on our press release filed earlier today and our investor presentation, both of which are posted on investors day problematic Dot com.

I'll now turn the call over to Rajiv Rajiv thank.

Thank you for joining us today and I'm honored to welcome you to our first earnings call as a public company.

Before we begin I want to thank all of those who have supported us over the last 14 years, we have been fortunate to grow with the wonderful team of colleagues customers partners and investors, who have helped contribute to our success.

We're excited to welcome a new group of shareholders as we embarked on <unk> next phase of growth.

If I were to summarize the state of our business today, we are benefiting from having multiple growth drivers in place and executing well against that and.

And the fourth quarter of 2020, somatic delivered 64% year over year revenue growth on a purely organic basis, which contributed to significant operating leverage and profitability.

Adjusted EBITDA was $26 9 million or <unk>, 47, 9% margin and the fourth quarter of 190% increase over $9 3 million and the fourth quarter of 2019.

These results reflect rapid growth and the digital advertising market strong momentum and multiple growth drivers and our business and demonstrates <unk> differentiated market position within the digital advertising ecosystem.

We exceeded our own expectations for the quarter as we continue to outpace the industry shifts to digital advertising and gained market share.

For today's call I'll start with a brief overview of thematic and provide an update on the fourth quarter highlights and business trends Steve.

Steve will then go through our financial results and talk to and guidance after which we'll be happy to take your questions.

<unk> provides critical infrastructure and the form of the specialized cloud platform that enables real time programmatic advertising transactions between publishers and the media buying community.

Our innovative approach across the digital advertising ecosystem, that's created a sustainable and resilient business with 2020 being our fifth consecutive year of positive net income the <unk>.

Power of our infrastructure driven approach can be seen and our margins with much of our revenue outperformance flowing through the profit.

We have of large and increasing market opportunity with multiple growth drivers that we are executing against new publisher acquisition growth from existing customers and strategic initiatives from advertisers and agencies to consolidate ad buying onto thematic.

Our position as a leading provider of the Omnichannel solutions, and our expertise and extending header bidding technology into new AD formats and accelerated our growth.

Mobile and digital video and over the top streaming to connected TV devices represented 65% of our revenue and the fourth quarter as we drive upsell and cross sell initiatives across our holistic platform.

Omnichannel video revenue, which is the combination of short form video and OTT and CTV grew by over 100% year over year and Q4 2020.

I will go into detail on each of these growth drivers, but first let me start by outlining some of our core beliefs. The guide much of our vision and strategy.

First of all.

And all advertising will become digital and all digital advertising will become programmatic, which simply means of applying automation and data.

Programmatic advertising creates better outcomes for consumers publishers and advertisers.

Second advertisers prefer to the professional brand safe content of the open internet to the user generated content of the walled gardens, giving us significant opportunity to grow our business.

Third it's difficult to predict which connected devices will be used by consumers and the future. However.

However, consumers will always want to consume media and brands will always want to advertise their products somatic as an omni channel platform that innovate as consumer behavior evolves and therefore, it makes us far more durable than point solutions.

And lastly, long term success and digital advertising and enablement requires low cost infrastructure.

Every individual items brush and must be processed and real time and generate significant amounts of data.

And by controlling all layers of our infrastructure stack, including network hardware and software, we can operate more efficiently and create better outcomes for our customers.

Our core focus is on publishers, which is where our name of magic comes from the combination of publisher and automatic.

The vast majority of publishers don't have the technical capabilities needed to power real time data intensive programmatic transactions.

<unk> provides us the central service through our cloud infrastructure via a usage based business model that aligns our interest with our customers' interest and.

In addition to providing publishers with our header bidding expertise and technology platform, we increase the revenue by bringing additional data to each ad impression and incremental advertiser demand.

Our omni channel platform is highly efficient and allows us to work with publishers on all of their inventory across a variety of AD formats devices sales channels and geographies and because we do not own media properties, we bring and important perspective of the independents to the ecosystem.

Publishers also benefit from our strong track record of rapid innovation, which helps them compete in this rapidly evolving and growing industry.

As of the end of Q4, we work with 1200 and eat publishers and App developers across a variety of content verticals, including E Bay and Ibms of the weather company digital properties and are a leader in mobile and partnering with top mobile websites and apps such as of the score clipboard and unity and the portfolio of games.

We are of course also integrated with demand side platforms across the globe to bring AD dollars to our platform and programmatically fill inventory from our publisher customers.

Over the past few years, we have strategically extended our infrastructure and business arrangements to advertisers and agencies as they standardize of advertising supply chains on fewer larger incumbent and technology providers like cosmetic.

We provide inventory quality transparency global omni channel scale and value that incentive advertisers and agencies to spend more with us while increasing their advertising ROI.

We believe our specialized cloud infrastructure provides us with the significant competitive moat.

We've built our infrastructure footprint over many years, along with deep expertise and continuously optimizing and extending that infrastructure.

We believe the capital and expertise requirements as well as positioning ourselves at the center of the all of these transactions in the day to day generate are of significant competitive advantage for us and our infrastructure driven approach allows us to generate better customer outcomes through greater control and continuous innovation.

The net result is that our customers benefit from our high performing and efficient infrastructure and we benefit the and increasing <unk>.

Revenues and profits.

According to E marketer global digital AD spend is of $395 billion industry in 2021 and is expected to grow at a more than 10% rate annually over the next three years.

Magna estimates that programmatic or automated approaches to digital advertising will represent 87% of global digital AD spend by 2025, and we believe it will eventually represent the entire digital market.

Within the broader digital advertising market, we are focused on three high growth sectors mobile App digital video and OTT and CTV.

Programmatic mobile is of $102 billion market growing and an 11% CAGR per.

Programmatic digital video, where short form video is a $53 billion market growing at 17% CAGR.

And programmatic OTT and CTV is the $20 billion market growing at an 11% CAGR.

We estimate that <unk> currently has a 2% to 3% share of the addressable programmatic advertising market.

We want to grow that share by 10 X and the years ahead and gaining market share from both independent solutions and walled gardens. We decisively grew our share of the market and Q4, and we believe we are well positioned to continue our market share gains given our structural advantages.

We also believe the market opportunity is significantly bigger than forecast share as COVID-19 has pulled forward multiple years of consumer behavioral change as people around the world are transitioning more offline activities to online.

We anticipate that many of these consumer behavioral changes will stick driving further acceleration of the digital transformation.

One example has been the accelerated growth of e-commerce as people do more of their shopping online as opposed to going to brick and mortar stores and was particularly relevant during the Q4 holiday shopping season.

Given the pandemic and consumer changes, we saw all of our 2020.

The e-commerce of of shopping vertical grew nearly 100% on our platform from the first half of 2020 to the second half of 2020.

The pandemic has also type of advertisers that they need partners that bring scale and flexibility to seamlessly shifts dollars between marketing channel over.

Over the past year more advertising decisions had to be made and real time as budgets and strategy shifted.

<unk> supply chain has impacted the availability of goods for sale and local shutdowns impacted comps.

These decisions also had to be made while maintaining ROI and cost efficiencies, which we believe will benefit <unk> as a stable and innovative provider of digital advertising infrastructure and technology.

Let me turn now to the specific growth drivers at the Mac.

And so our addressable market opportunity grows romantic has experienced outsized revenue growth and market share gains as a result of the convergence of three key growth drivers new publisher acquisition.

Existing customer growth and buy side the spend consolidation.

These drivers are directly tied to transformative industry trends and give us confidence that we can grow rapidly for the foreseeable future.

First we continue to add new publisher customers and 2020, we added 368, New publishing partners.

<unk>, signing glued television and whether nation.

And OTT, and CTV, and Bumble and place studios and mobile App, our strength and mobile and short form video formats is also pave the path forward for newer growing formats like OTT and CTV, where we are actively pushing the industry towards transparent header bidding.

Today.

The vast majority of transactions.

OTT CTV transactions and the market or be of non programmatic insertion orders and other words transacted manually.

We are focused on disrupting the CTV market by bringing our programmatic header bidding technology to this fast growing the market.

As we have successfully done with mobile web and mobile App and digital video.

And 2020, we exited our beta program for our CTV rapid solution and made the product generally available in Q4 <unk>.

Importantly, our approach extends our existing global infrastructure for publishers, and AD buyers, which positions us well to extend our many existing customer relationships and to their OTT and CTV inventory.

With our header bidding approach advertisers generate higher advertising ROI and publishers generate increased revenue, which is a win for both parties.

In fact, the recently published a case study with the top 10 agency and the U S who was buying CTV inventory via our header bidding solution.

They were able to increase the impressions they purchased by more than three ex while maintaining flat to slightly lower CPM, resulting in significantly higher ROI for their advertisers.

These kinds of early results of our strong signals that we are building a better approach to monetizing CTV inventory via our platform.

We are now working with over 60 publishers, specifically for OTT and CTV as of the end of Q4.

And as important and exciting as the CTV opportunity is for US I want to also call out of our strong growth and digital video where short form video and contrast to longer format streaming content.

Digital video, excluding OTT and CTV is actually a bigger market and growing more rapidly and roughly three times the size of.

Digital video is $53 billion today growing 17% annually to $115 billion and 2025, whereas CTV and OTT is $20 billion today growing at 11% to 35 billion and the coming years.

As I mentioned at the outset I'm very excited to share that our omni channel video revenue, which is a combination of short form video and OTT and CTV grew by over 100% year over year and Q4 2020.

Similarly, mobile monetization via both video and display ads is a market of over $100 billion today and growing rapidly it.

It is the majority of our business and.

And we're very excited about the fact that we have multiple growth drivers and our business and we are successfully executing against them to drive our market share expansion.

Just as we are rapidly growing our new publisher base. We're also growing revenue from our existing customer base for the full year 2020, we achieved strong net dollar based revenue retention of 122% demonstrating our ability to expand with the needs of our customers and consolidate their business onto our platform.

And we've increased the value of our publisher relationships by expanding into high growth AD formats, such as mobile App video and connected TV as well as by introducing new products such as our open wrap header bidding wrapper solutions.

Our extensive customer success teams are specifically tasked with engaging our publisher customers to educate them on.

And about their needs and identify omnichannel opportunities to grow their business and our business via our single integrated platform.

And lastly, the consolidation of AD budgets on to fewer sell side platforms for greater efficiency innovation and transparency has been and continues to be of growth driver for our business.

Under our arrangements known broadly of supply path optimization agreements, we're able to capture a higher share of agency and advertiser spend while better servicing our publisher customers and accelerating the growth of our business.

For example, one major agency increased AD spend by over 150% year over year and Q4 as a result of the supply path optimization deal that was designed to increase buying efficiencies.

As buyers allocate a greater share of their AD budgets diplomatic and increases our revenue visibility and makes us stickier with publishers.

We have entered into agreements with all of the major agency holding companies as well as large advertisers like Procter and Gamble and Bayer to provide a combination of custom data and workflow integrations and new product features and volume based business terms.

And Q4 2020, we have made significant progress in ramping our supply path optimization deals with over 20% of AD buying on our platform via these spo agreements as compared to approximately 10% and Q1 of 2020.

All buying on our platform continues to be of demand side platforms and these spo arrangements are complementary to our DSP partners.

In addition to these key growth drivers the industry continues to evolve and we feel strongly <unk> is well positioned to continue to gain market share.

For example, consumer identity is driving rapid industry changes, which we believe will grow the size of the open internet advertising market relative to the walled gardens.

<unk> recently announced key partnerships with many of the leading identity providers globally, including live ramp and the trade desk with unified I'd to point out through our identity of solution.

As we look to 2021, we are extremely excited about the opportunities ahead and acknowledged that some unknowns remain for the global economy due to COVID-19, and our industry specifically.

Some verticals within digital advertising are accelerating while others like travel a way to return there.

There are important industry changes underway and the arena of consumer privacy, which we believe we are well positioned for the do create some uncertainty.

However, within these puts and takes we remain very optimistic as advertising continues to shift to digital and programmatic continues to grow.

We built an incredible company that serves the digital advertising ecosystem, and a unique and compelling way and which others cannot.

Our success would not have been possible without the hard work and dedication of our entire team.

We added a net 82 people globally to our team and 2020 onboarding them remotely due to the pandemic.

These new employees now create a team size of 548 people around the world as of December 2020 that has been awarded Great places to work certifications across three continents.

And there is so much more to do and I am humbled by this incredible team as we begin our journey as a public company.

<unk> is poised to gain significant market share as we continue to consolidate the market the <unk>.

Success of our long term growth drivers fuels, our ambition to grow our market share of 10 times, what it is today and the years ahead.

We have of differentiated cloud infrastructure platform that allows us to drive strong customer retention, while quickly innovating to grow our addressable market of AD formats and devices and.

And lastly, we have a proven ability.

To consistently drive profitable growth with strong cash flow, which we believe positions us well to keep innovating and delivering for our customers and our shareholders.

I'll now turn the call over to Steve cancel it for the detailed financials.

Thank you Rajiv and welcome everyone I'm, Steve Pantelic on.

<unk> CFO.

As our first earnings call at the public company I'm very pleased to discuss our outstanding results for the fourth quarter.

We achieved record revenues with growth of 64% year over year.

Net income of $18 $8 million and adjusted EBITDA of $26 $9 million.

With these results we entered 2021 with solid momentum across our global business and are actively participated in the large and growing market.

As an omni channel Global company, we are well positioned to grow across platforms and formats.

With existing and new customers and in every major AG market and the world Apart from China.

We also anticipate continued expansion of our supply path optimization deals now with driver of our growth.

Before I jump into the quarterly financials, I would like to briefly recap the <unk>.

The key financial drivers that we believe will lead to the long term success of the bar business.

First we have one of the few scaled global businesses and our highly fragmented industry.

Our specialized cloud infrastructure and local go to market presence is geographically distributed and all the major AG markets.

This allows us to continue expanding across the world with existing and new customers, both effectively and efficiently.

Second.

The combination of our usage based model and our ability to retain and grow revenue from existing customers provides a high degree of revenue stickiness and corresponding visibility.

Third we have high gross margins are.

Our long term efforts of driving Capex efficiency, coupled with our workflow automation to manage our growing customer base has led to an average gross margin and excess of 70% over the last nine years.

Fourth our business model is highly efficient.

Our model is built on long term durable structural advantages emanating from our owned and operated infrastructure.

And offshore R&D that enables us to consistently invest and technological innovation.

And lastly, we generate consistent cash flow through our efficient use of capital expenditures and rigorous working capital management.

As a result, 2020 was our seventh consecutive year of positive net cash from operating activities.

Now on to the quarter.

And the fourth quarter, we generated revenue of $56 2 million or growth of 64% year over year.

Our topline growth was driven by several factors.

Strength across a number of advertising verticals, notably E Commerce technology, and personal finance, a longer 'twenty and 'twenty holiday season, as compared to 2019 and to a lesser extent incremental AD spend related to the U S presidential election.

We also achieved an important milestone in Q4 as the sum of mobile video and OTT CTV revenue represented roughly 65 per cent of our total revenue.

A key factor was the growth and of our Omni channel video revenues the combination of short form video and.

And OTT CTV the grew over 100% year over year.

Now turning to the full year revenue grew 31% despite the strong headwinds experienced across the AD industry and the first half of 2020.

There are a couple of key callouts regarding our 'twenty and 'twenty revenue growth.

Mobile and video grew strongly throughout the year with market acceleration and the second half.

Desktop display starting to recover and the second half following the pandemic related challenges earlier in the year.

With the combined effect of mobile and video plus desktop display recovery year over year total revenue grew 50% and the second half of 2020.

And important contributor to these results was our existing customer growth.

And for the full year 2020, we achieved strong net dollar based retention of 122% we.

We also added a significant number of new publishers, despite the ongoing pandemic.

Overall, we added 368, new publishers and App developers for a total of 1208 customers at the end of 2020.

Revenue growth from existing and new publishers also contributed to reduced revenue concentration of our largest single customer Verizon media group, which accounted for about 20% of revenue and 2020 versus 28% of 2019.

It should be noted that while Verizon media group revenues were impacted by the COVID-19 pandemic are typically its desktop display business, we saw solid recovery in Q4.

Another important growth driver for us and 2020, it's been our supply path optimization deals with advertisers the agencies.

We have seen these relationships serve as the catalyst for buyers to consolidate AD dollars onto our platform.

And the final point on 'twenty and 'twenty revenue growth in order to take advantage of our significant opportunities throughout the year, we increased platform capacity.

And total we increased the number of impressions, we processed by 69% from.

27, eight trillion and 2019 to $46 nine trillion and 2020.

Turning to our gross margins in Q4, we were able to significantly expand our margin of 80% compared to 73% and the prior year.

Our full year gross margin also expanded the 72% compared to 68% per 2019.

As I mentioned earlier, our strong gross margins are a direct result of owning and constantly optimizing our infrastructure.

Because we focus on platform optimization cost management and targeted capacity expansion, we're able to achieve significant operating leverage.

Illustrating this point, we successfully reduced our GAAP cost of revenue per million of precious process by 32% year over year.

Once we have implemented our planned capacity expansion at a point of time, we achieve leverage because of our platform costs are largely fixed and the near term typically a quarter.

When we exceed our revenue targets as we get and Q4 2020, we achieve high flow through to profit.

With respect to our Q4 operating expenses the combination of increased head count for growth and incremental stock based compensation resulted in operating expenses of $22 6 million or 18% year over year.

For 'twenty and 'twenty, one we plan to continue to invest and team members and related investments to drive growth. We will also current incremental public company costs.

Overall, we expect our operating expenses on an absolute dollar basis to increase over the course of 2021.

GAAP net income and the fourth quarter was $18 8 million up 356% year over year.

It was 33% of revenue substantially higher than the prior year net margin of 12%.

Full year net income was $26 6 million, which grew by 301% over 2019.

Q4 diluted EPS was <unk> 34 compared to prior year of <unk>.

And 2020 full year EPS was <unk> 46.

Third to four cents per 2019.

Adjusted EBITDA in Q4 was $26 $9 million of 48% of revenue compared to 27% of revenue and the prior year.

This impressive profit result was primarily due to the high flow through from strong revenue ahead of plan.

And the cost leverage we achieved on our platform.

For the full year, adjusted EBITDA was $50 3 million or 34% of revenue a substantial increase over 2019 margin of 20%.

To summarize our breakout profitability was the result of several key drivers.

The acceleration of mobile and Omnichannel video driven by the increasing open internet activity globally.

Strong spending and key verticals like e-commerce, and incremental AD spending related to the U S presidential election, and Q4 and <unk>.

Creates buyer activity to the supply path optimization agreement signed in 2019 of 2020.

And our targeted investments and people and platform capacity.

I also want to call out that our profit growth is a reflection of our long term focus on growing both our topline and bottom line.

This focus has helped us deliver our eighth consecutive year of adjusted EBITDA profitability as of 2020.

Turning to cash flow, we generated net cash from operating activities of $24 $3 million per the full year 2020.

We believe that this cash generating ability of positions us well to take advantage of the long term trends and digital advertising and capture incremental growth and market share through targeted investments and people platform capabilities and capacity.

For example, we accelerated capacity investments and 2020 to support our growth in 'twenty and 'twenty one of the young.

We ended 2020 with cash cash equivalents and marketable securities of $101 million.

Now onto our 2021 guidance.

The other precedent conditions surrounding the pandemic makes assessing market conditions unusually difficult, particularly for the second half of 2021 of <unk>.

Accordingly, we are providing estimates for Q1 and the full year based on several underlying assumptions that I will summarize.

In terms of our revenues broadly speaking, we see multiple growth drivers and 2021.

Coming into the year, we clearly had solid momentum from strength and mobile and omni channel video expanding SPL relationships and favorable trends driving ecommerce.

Further to this point.

According to a recent E market of study global retail E. Commerce sales are projected to grow by almost 50% from 2020 to 'twenty and 'twenty four.

And this regard our business is well suited to take advantage of the e-commerce opportunity.

We have top publishers with high quality AD inventory and audiences that e-commerce advertisers want to reach.

And Q1, we are seeing solid momentum, but there is uncertainty around the timing and size of impact from Apple's elimination of idea of peg.

For Q2, we anticipate and above average favorable year over year comparison, as we will be lapping the early stages of the pandemic when advertising spending was significantly impacted last year.

Moving into the second half of the year due to the combination of uncertainty around macroeconomic conditions, the pandemic and lapping of very strong growth and the second half of 2020, we think it is appropriate to be conservative in terms of second half year on.

Year over year guidance.

Despite potential countervailing factors that may reduce on growth rates in 2021, such as the elimination of Apple's <unk> and uncertain pandemic status.

Overall, we remain confident that we can achieve full year revenue growth of 20%.

Now in terms of specifics.

For Q1, 2021, we expect revenue between 38 and $40 million a range of 34% of 41% year over year of growth.

Adjusted EBITDA between eight and $9 million or 21% to 23% EBITDA margin for.

For the full year 2021, we.

We expect revenue between 180, and $185 million or a range of 21% to 24% year over year.

Adjusted EBITDA between 45, and $49 million or 25% to 27% margin.

It should be noted in 'twenty and 'twenty, one we are incurring public company costs of approximately $7 million.

Full year capital expenditures are expected to be 18 million to $22 million.

And depending on growth opportunities, we may accelerate the facing of our planned capex to earlier this year.

Overall, we expect to increase the total number of impressions process and 2021 by over 40%.

In closing we are very pleased with our progress in 2020, but we are even more excited about the opportunities ahead of us and 2021.

Our track record of driving profitable revenue growth and cash loans allows us to continue innovating and delivery for our customers and shareholders.

We believe we of the right platform and the right approach to be at the forefront of our industry.

With that I'll turn the call over to our operator to open it up for questions.

Greater.

Yeah.

All of the gang of live Q&A listing and Theyre small.

You can participate and raising your hand this is located on the dashboard.

Or you are on your Perm growth perhaps.

Starting on.

Yeah.

Your first question comes from the line.

Right.

Okay.

Yes.

Good afternoon. Thank you for taking the question I guess on Steve just as it relates to the guide low twenties of after the the numbers that you just posted I think.

Many of our trying to understand and reconcile why you would see such a major slowdown.

The other companies and the industry like snap today said that they would grow 50% for the next several years.

Theres been some very bullish on.

Backdrop of of.

Of AD spend if you could just maybe discuss.

Your expectations and then I had a quick follow up question for Rajiv.

Sure well.

Good to speak with you Brent So the big picture is we really arent seeing a material slowdown.

And obviously coming off of very strong 2020.

And we're continuing to guide the 20 plus percent growth and 2021 and.

That is our long term growth target.

And the reality is we do have a strong second half of 2020, which was 50% growth year over year. So the comps are going to be tough, but there is no material slowdown from our perspective, we're feeling very good about the growth drivers that we have.

Both Rajiv and I commented, we have mobile growing omni channel video are growing very nicely and we are seeing recovery and our desktop display business and having said all of that there is a fair degree of uncertainty and the broader macro environment. So we're being appropriately conservative and as we go through the year and.

Each of these calls we will update the analyst community and the investing public.

Okay, Thanks, Steve and the gene just on connected TV can.

Can you just update us on on the progress and how you see that progressing through 'twenty, one, yes, absolutely, hey, Brent and I'll get to reconnect. So look I'm really excited by our growth and OTT and CTV. It's one of several high growth drivers and our business. Our CTV strategy really is consistent with how we've approached and scale of other ad formats.

Such as mobile App, our digital video.

And just to focus on aligning the needs of buyers for transparency and increased ROI from their AD spend with the needs of the publishers for increased revenue.

Today, the vast majority of OTT and CTV transactions or be of non programmatic insertion orders, which is a very manual approach and we're really focused on where we think the market is heading and which is programmatic monetization with header bidding using automation and data for better outcomes. So we started building product for this in 2019.

And we shipped it in mid 2020 and beta now we made our product generally available in Q4 of last year, the scaling very nicely to over 60 publishers with rapidly growing volume and continuous innovation and as I mentioned earlier, our omni channel video revenue, which is the combination of both OTT and CTV as well of the short form video.

<unk> grew by over 100% year over year. So of bottom line is we're really pleased with the progress there and we think it is.

Adding another growth driver to our business alongside mobile App and.

And alongside video and alongside Spo.

Great. Thank you. Thanks.

Thanks Brent.

And your next question comes from and Granola.

Hi, guys. Thanks for taking my question.

And I'm, assuming you can hear me right. We can't ask on just check yes. Thank you. So <unk> I think of accounted for 20% plus of the the platform can you talk a little bit about the drivers of spo adoption and just more recent trends you're seeing there and then secondly, just following up on on kind of the CTV common.

Terry.

Can you talk about what needs to happen GOR of the product to move more broadly just from an advertiser and as long as a publisher of perspective like what what needs to happen per CTV header bidding to become more widely available and more commonplace.

Sure Yes.

Let me start Andrew with the with Sto and and we'll move to the <unk> question. So look you know buyers are continuing to consolidate their AD spend onto <unk>, resulting in market share gains for us and I think we're a leader and executing spo deals because of the efficiency of our infrastructure, our omni channel and global scale and our focus on <unk>.

Transparency.

We invested significantly in 2020 and continue to invest in 2021 and building out our sales and account management team that is covering agencies and advertisers who are executing supply path optimization deals. So we feel very good about our competitive offering and.

And resulting win rate and so some of the drivers as to why.

Buyers are moving in this direction and it really starts with <unk>.

Buyers wanting to get their arms around their digital and.

And media supply chain, so transparency, they want to know where their ads of showing up and want to know what kinds of audiences. They are buying what kinds of data they are buying against one and on what fees look like and the supply chain.

Wanted to be more efficient, obviously coming out of the pandemic everybody else has had the re look at how to make their businesses more efficient.

And so that means they want to work with.

Fewer larger platforms that can meet their needs around the world and can meet their needs across a variety of different AD formats, and then the third thing that they're really looking for is a high quality inventory and so they want to make sure that they are buying humans and not box and we put all of that together for these buyers and I think we do it and of <unk>.

And where we are really focused on innovation on behalf of the buyer. So that the buyer gets more ROI from their AD budget and when we do that and do that well of course it means more revenue for our publishers and so that's really what's driving our market share gains with SPL.

Now turning to Europe.

Your second question around CTV.

We think in terms of what what are the drivers there.

And every AD format, we have seen that header bidding does take some time to.

Two.

To take over the majority of the vast majority.

Of how impressions are transacted in a particular market and that has to do with technology transition, but also people and process transition on how buyers are used to buying and how publishers are used to selling so the good example of this.

Where we're seeing great traction, which makes us very excited we published the case study a week or two ago with the top 10 agency and the U S. Who has started buying CTV inventory of via our header bidding solution. So they were able to increase the impressions that they purchased by more than 14 ex while maintaining flat to slightly lower CPM.

And which resulted and significantly higher ROI for the per their advertisers and so we're replicating that with the number of different buyers who need to evangelize that and.

But that kind of data and that kind of capability will drive more buyers to buying the of header bidding and.

And at the same time, we need to continue to deploy our technology on.

And the publisher side I'm Super excited about the fact that we ramped already to 60 publishers over 60 publishers and just two quarters.

So I think we're very well positioned to continue to drive the growth and this approach can be a little bit slower than replicating what others are doing but we think it's important and the long term.

Innovator that we focus on where the market is going to be as we drive growth for ourselves.

Alright, thank you.

Thank you.

And your next question comes from Justin Patterson.

Yeah.

Thank you very much and I'm glad the hope everyone is healthy and well right now.

And if I can first you quarterly on a lot of new impressions come on the platform and 2020 and added capacity around that given the momentum on that and the business and the growth of channels like CTV.

Are you thinking of additional investment and capacity and platform optimization. So I'll start with that and then I'll have one quick follow up.

Sure sure.

Good to reconnect Justin.

So.

From our perspective, one of the key ingredients of our ability to be profitable over the long run is to make targeted capacity investments when we see the opportunity and certainly that was the case in 2020, when we increased our impressions by nearly 70%.

And we approach the opportunity by ensuring that whenever we do bring on new oppressions. We all have the confidence that we can monetize those very cost effectively and so as we look at 2021, we continue to see significant opportunities across multiple growth factors of course.

We talked about mobile and Omnichannel video.

And the ramping up of CTV and.

And of course of the desktop display of recovery and so when I look at 2021 fully expect to continue to invest for capacity expansion.

And the range of about 18% to 22 million and total across all capital expenditure categories and we believe that this will allow us to keep to grow very nicely this year and beyond and.

And then.

We always take the opportunity if there's a chance to accelerate investment as we did in 2020.

And we'll do that in 2021 as well.

Got it thanks, Steve and then from Rajiv I appreciate your comments around privacy during the prepared remarks would love to hear how you're just thinking through the puts and takes around.

Industry spend on targeting and pricing and we have idea of bay come off and the place and then the growth of these on third party identifiers, you alternatives to the cookies.

Emerge and there's some cases out there where it's considered a threat and other cases it sounds like this could actually be inflationary and the open web. So from here. How do you think of it of the puts and takes yeah, absolutely and then obviously it is the area of the high degree of change. So look we think the identity transition that's underway.

And is a tremendous opportunity for the open internet to grow its share of the AD market relative to the walled gardens advertisers.

Advertisers are seeking a combination of brand safe content with known consumer identity and that has previously not existed at scale and by moving away from anonymous tracking like third party cookies or idea of Fay to known identity. The open Internet is building a better solution and we're really excited about the opportunity for that and also our <unk>.

<unk> within that and so we're investing heavily behind this opportunity.

Created multiple solutions and so if I can I'll just spend a minute on on the solution. So first as an infrastructure provider to the ecosystem. We've partnered with many of the leading identity solution providers trade desks and unified I'd to point out lybrand curtail and many others and what we've done is we've created a software layer for publishers.

That allows them to seamlessly integrate and manage all of these identity solutions, so that no matter, which solution and advertisers working with the publisher can access the advertisers' budgets and that's a unique solution and we're seeing a high degree of uptake from our publishers and this really lays the groundwork for a transition from anonymous identity to known identity.

And then second the publishers and advertisers may have valuable first party data on their users and so we built the solution that's being used by both segments of the market of publishers and advertisers. The package of these users into private marketplace deals and make them target of all by advertisers and so this is an opportunity really to target audiences when theyre not logged in.

So ultimately we think the ROI benefits from the conversion from anonymous to known identity will lead to increased AD spend and increase the utilization of our infrastructure benefiting both our customers and us and I think key to why we're excited about the potential here and the transition is that again, we're omni channel. So we're not overly.

So as to any single AD format or device.

And we.

We have a wide variety of different AD formats on our platform, which means the advertisers and agencies are leveraging our platform for both brand spend as well as performance advertising spend.

Great. Thank you both.

Thank you.

Our next question is from Brian Schwartz.

Yeah.

Yeah.

Yeah.

So the mine Hey, Brian and we can hear you now.

And your mind, let's Aaron Kessler of Army, Okay. Now Oh, yes, Okay. We got you Bryan and then we'll come to you and and right after that.

The rapid I think Darren related and they are.

Steve just wanted to ask you too real quick one follow up on the guidance kind of I'm going to put in between that and with the topline on what.

Are you assuming in terms of the recovery from the those distressed industry customers are you baking on any type of recovery.

And I'm from those publishers and travel all of our both distract the areas of the economy and your 'twenty and 'twenty one guidance.

Sure I'll take that first one and then obviously of any follow ups you have on the guidance.

We do see some recovery later in the year.

We've already seen recovery on desktop display, which was hit pretty hard in Q2 of 2020, we saw a robust recovery and the Q4 timeframe we.

We see that continuing and the first quarter and I think that's on <unk>.

Largely a per.

Respect about.

Some of these hard hit industries are starting to recover and plan for the future. So we do think that there's going to be recalibrated not as robust as let's say the ecommerce and personal finance technology areas, but by the end of the year those will start to emerge and as important advertisers and.

And broadly speaking.

Given that we are an omni channel company, we really can address all of the particular advertising needs across the globe and so we have a portfolio of business and Thats why.

It gives us the confidence of being able to exceed our long term growth targets of 20 plus percent of share.

Thanks, Dave and and the one follow up was just on on the margin guidance.

It looks like Youre investing more here.

Which is great. We're always happy to see that but you talked a little bit of Bob I think the Cogs line and the Capex expenses can you talk a little bit on where you are and vast zone in terms of your growth and Boston investments and 21, you're you're guiding the down margins here versus 2020. So clearly you are investing back into the business can you maybe just shut the weight of light.

And where are those of minutes going strength sure.

Well I'll start out with the gross margin I am fairly confident that we'll be continue on the track and we've had for many years of being around 70%.

Gross margin business and Theres always going to be some puts and takes and particular quarter because of the timing of investment so very confident on on being able to achieve that and maintain that come on at the future now where we're investing aggressively is around.

Growth per.

Particularly and engineering and we're gonna be hiring new engineers are predominantly the.

Out of our company and.

India on the does all of our offshore development and.

And the second area is sales and marketing growth around the globe to drive our new initiatives around identity.

As well as around our audience offerings and of course.

And you'd growth of mobile and Omnichannel video. So overall, our investments are towards growth and and people and then to a lesser extent capacity.

And the bottom line is on.

Feeling very confident that our long term target EBITDA margin of 13%, 30% is going to be achievable.

This year and beyond.

And if I could just briefly add to that Bryan a little bit more color. There I think we anticipate that obviously theres been a huge shift and in the size of the internet opportunity and how.

Consumers.

And are leveraging the internet right. They have more time, we're spending more of that time on line and Theyre doing new things on the internet that they didn't before.

And whether it's online banking or purchasing cars.

The ordering food work from home school from home all of these types of activities and of.

Significant portion of that and we think will stick and the future and.

And so we really see a lot of runway of lot of long term opportunity ahead of us.

And so to Steve's point, we are investing not only for 'twenty and 'twenty, one but really to <unk>.

Take advantage.

All of the shifts in consumer behavior.

And really drive market share expansion for us over the coming years.

And if I could just add one comment Brian as a public company. We are incurring incremental costs. This year of about $7 million. So that obviously flows through opex and of course, the stock based comp is and incremental add on to our cost structure of this year, but of course will be normalized.

'twenty two and beyond.

Thank you very much.

And as Brian and can you guys hear me, yes, we can yes that was easy.

Couple of questions on good quarter, guys on May 1st on the Q4 upside any more additional color you can provide did you see any kind of budget flush as I think you mentioned E. Commerce was very strong any other verticals you recall and also maybe around Dr versus brand and then.

Maybe for Rajiv just circling back to the CTV quickly it seems to be a bit of of debate just kind of.

Header bidding versus private marketplace of longer term is there a difference of views per the kind of power how advertisers are thinking about this versus the publisher community. Thanks.

Hello, and good to connect again, so with respect to fourth quarter. I mean, we really did have an outstanding fourth quarter and.

Was a function of a variety of factors.

And the mobile and Omnichannel video business continued to perform very well as I mentioned in my prepared comments over.

Over the course of the second half of 2020 that this is part of our business accelerated to over 100% and.

And that's a big part of our success and the fourth quarter and underneath that of course E. Commerce is a very important vertical as well as technology personal finance business.

Advertising and so we felt it was very broad brush and wasn't a function of just one particular area growing nicely and the other component is that we saw desktop display of recovery and that's a very important sign for me because it shows that as of yet.

As a global economy, we're starting to figure out how to operate successfully and the Covid world and so I expect many of those trends to continue into the sphere and beyond.

And the one incremental piece that obviously won't be repeated and.

True to everybody's pleasure is the the U S presidential election, So there was a nice incremental spend related to that.

We are on track to find replacement for that this year.

Great and and on the CTV question. So I mean, we participate in both private marketplace transactions.

And as well as of course, as we talked about driving the transformation with header bidding.

And what we see is that advertisers prefer the transparency and.

And the efficiency that header bidding brings that allows them to spend more because they get higher ROI and that ultimately leads to higher publisher revenue now what can happen and the short term and again, we've seen this play out and mobile App and the short form digital video and display as well is that publishers. They set their goals to have sales forces and the scope.

Those are off and on an annual basis and so the publisher of goes out into the market and they've got a goal to drive a certain amount of pnp transactions and thats. What they are looking to do but at the same time advertisers are shifting and how it is that they are buying and order to get more transparency more efficiency and higher ROI and so those two things will meet.

And the middle and so we have every confidence that the market is going to move into a more efficient.

And and header bidding driven more automated approach. It obviously makes it makes a lot of sense.

And so and we'll work actively with both the publisher and buyers not to see that transition play through.

Got it thank you.

Okay.

Okay.

That concludes the Q&A portion of todays call and I'll now turn the call back of <unk> for any closing remarks.

Great well. Thank you everybody for joining us here on our first earnings call today, we're extremely excited with our performance and momentum going into 'twenty and 'twenty, one and I'm grateful for the hard work and dedication of the entire amount of team as we highlighted we have multiple growth drivers, we're executing against as we expand our market share and.

Our infrastructure driven approach drives better outcomes for our customers and increased revenue and profit for us.

Look forward to seeing you at our upcoming Investor events have a great day.

Yeah.