Q1 2021 PubMatic Inc Earnings Call
Alternatively, operating and public cloud infrastructure only allows for control of the software layer, which would limit our ability to generate superior customer outcomes.
Second controlling all layers of the tech stack allows us to rapidly innovate, which benefits our customers who rely on us for best in class technology.
We deploy new capabilities features and algorithm updates on a daily basis across our global infrastructure and.
And and evolving landscape, we believe our platform enables continuous innovation and future proofs of our business and that of our customers.
And third by owning all layers of the infrastructure stack, we are well positioned to continuously drive down costs by becoming more efficient the benefit to our customers and to us.
We have a demonstrated track record of continuous reductions and our unit infrastructure costs, which enables us to deliver a healthy profit while also investing for long term success.
And together, we believe our infrastructure driven approach creates a significant competitive moat around our business.
Our efficiency advantage allows us to be transparent with buyers, which in turn causes them to spend more on our platform.
And as they spend more on our platform our publishers benefit with increased revenue.
Even as our addressable market opportunity continues to grow <unk> is delivering outsized revenue growth and.
2020 per <unk> revenue grew 31% over 2019, well above the digital advertising market growth of 12% we expect to.
To deliver outsized revenue growth and 2021 as well driven by the convergence of three key trends the.
The economic reopening driving omni channel growth and digital AD spend continued growth and evolution of the connected TV and over the top streaming AD markets and continued AD spend consolidation by agencies and advertisers.
Let me dig into each of these trends in more detail.
Okay.
Significant portions of the global economy, including the U S are set for rapid reopening following the anticipated lifting of COVID-19 related lockdowns as people start to travel and seek entertainment and dine out.
And with GDP on the rise E marketer is projecting growth and global advertising spend to accelerate from 13% in 2020% to 20% and 2021.
Mobile advertising in particular and is expected to grow 23% worldwide this year and more than half of our business is mobile.
Several verticals tied to the reopening such as food and drink as well as style and fashion our rapidly growing AD spend on our platform.
We expect several other verticals that have not yet accelerated to do so in the coming months.
We expect these trends to create significant tailwind for us and 2021.
Our omni channel platform is particularly well suited for the current environment as advertisers can reach consumers wherever they may be consuming media at home at the office or out and about as each geographic market, we participate and involves evolves on its own reopening path.
Furthermore, we maintain the belief that COVID-19 has pulled forward multiple years of consumer behavioral change as people around the world are transitioning more offline activities to online and.
We anticipate that many of these consumer behavioral changes will stick and driving further long term acceleration and digital advertising spend.
As a leading provider of omni channel advertising solutions, we are present, and where consumers are spending time at home on a laptop of connected TV and outside of the home on mobile devices or at the office, while working making us more durable than point solutions.
Programmatic OTT and connected TV is another area of rapid growth and innovation that positions <unk> for continued market share gains.
And this global market was estimated by E marketer to be $20 billion and 2020 growing at an 11% CAGR over the medium term the.
The faster growing portion of this market is programmatic CTV estimated to be almost $7 billion and the U S and 2021, which equates to year over year growth of more than 50%.
This impressive growth rates suggest that the industry as early and the transition from linear television to over the top streaming connected TV devices.
As a pioneer and programmatic CTV, we are one of the first to introduce the CTV header bidding product, enabling AD buyers to benefit from the same efficiencies they enjoy and other formats using unified options and.
More recently, we have built particular strength and biddable and fixed price private marketplace deals as well as the open market transactions.
There are many public examples of major content owners like Disney or NBC and agencies like Omnicom and group and speaking to the power and growth of Biddable CTV.
After almost a year and market our open rap OTT header bidding wrapper continues to gain momentum and AD buyers are seeing results.
And for example of large advertiser ran a head to head tests, using our solution and another Ssp's tag based integration.
Our solution outperformed across all relevant metrics, demonstrating significant advantages to CTV header bidding.
We produced 40% more bid opportunities and 14 times higher total win rates then the tag integration.
They also benefited from more efficient cpm's due to transparent and dynamic bid opportunities as compared to fixed fee deals. These are the same types of benefits, we've seen from header bidding and all other major ad formats.
We also recognize the importance of brand safety and control across all digital formats, We recently announced our fraud free CTV program per AD buyers, which extends our existing rigorous inventory review process to in demand CTV inventory.
We believe this will enable buyers to embrace the full potential of programmatic bidding and allow us to further accelerate our growth.
And the first quarter, we experienced strong sequential growth and our OTT CTV business growing 55% over Q4, 2020, and we monetize CTV inventory from over 80 publishers, including new publisher additions like Meredith local group and local now.
These results provide us with the further tailwind for growth as AD buyers continue to shift towards the automated biddable buying of this high value inventory.
As buyers make the shift publishers are meeting their programmatic buying and demands while generating increased revenue and delivering increased ROI to advertisers on our platform.
The third growth driver of fueling our market share gains is the consolidation of AD budgets onto fewer sell side platforms for greater efficiency innovation and transparency.
This has been and continues to be of growth driver for our business under.
Under a range of its known broadly of supply path optimization or spo agreements, we're able to capture a higher share of agency and advertiser AD spend while better servicing our publisher customers and delivering increased ROI and innovative solutions to ad buyers.
A growing portion of our business comes from Spo deals and the first quarter of 2021, we nearly doubled the share of that spend on our platform that is via spo agreements as compared to the first quarter of 2020.
We're collaborating with major agencies, such as Havas, and Publicists media Asia Pacific to provide a combination of custom data and workflow integrations and new product features and volume based business benefits to their advertisers.
In March we announced that group and selected <unk> to be of global preferred SSP partner.
With our publisher partners, gaining access to unique quality AD spend net scale from their broad portfolio of global advertisers.
And we will gain programmatic advantages given more efficient access to globally scaled brand safe inventory across the OTT CTV mobile App mobile web and desktop for video and display advertising.
As consolidation continues across the industry this partnership and others like it will help to ensure that we provide our publisher customers access to a growing share of AD spend from leading global brands.
I'd like to turn now to of potential future growth driver that we are investing heavily behind.
As the industry continues to evolve we believe the disruption caused by rapid changes the audience addressable city and the pending deprecation of the cookie and other anonymous identifiers will benefit <unk> as the value proposition for the open internet grows relative to the walled gardens and the eyes of advertisers.
We have invested heavily behind this opportunity for several years and continue to do so on.
I'm pleased to share that today the majority of revenue on our platform now has the alternative identifiers to the third party cookie and Apple idea of FA, which underscores the leadership position, we have taken and the addressable the transition.
Having alternative identifiers available at scale in many cases identifiers that provide greater addressable <unk> that anonymous identifiers like the third party cookie provides an environment to drive even greater utilization of our infrastructure.
We expect these identifiers to grow the share of spend and the open internet and on our platform in particular.
We've achieved this milestone through long term investment and our portfolio of solutions that together and meet the growing and evolving needs for audience address ability.
Our identity hub solution scaled to well over 175 publishers, including Cox automotive and the U S and time out and the U K allows them to seamlessly integrate optimize and manage multiple leading identity providers globally, such as live ramp authenticated traffic solution and the trade desk unified I'd to point out along with the does.
And others.
Identity hub is also now pre integrated with our open <unk> solution one of the more widely used pre bid based header bidding wrappers, which has been deployed and 34 countries around the world.
This solution creates more value for publishers with registered or subscribe the users.
Our audience on core solution allows buyers to access high quality publisher of first party data to execute effective and privacy safe advertising campaigns at scale we.
We are of a variety of data partners and the retail CPG healthcare automotive and other industries.
For example, we recently announced the partnership with Samba TV to integrate their extensive first party connected TV data to deliver TV audience targeting to omnichannel programmatic advertising buyers.
This partnership allows European advertisers to reach audiences based on television viewing behaviors and drive incremental reach by targeting audiences that are not exposed to linear TV advertising.
We're also investing and contextual solutions to improve advertising efficacy and.
And fourth we are working with Google and the worldwide Web consortium on Google's privacy sandbox proposals, including flock.
Audience address the ability of something that publishers need to solve for and we understand that it will not be a one size fits all approach with our long term investment in this area with the portfolio of solutions. We think we are well positioned to help our publisher and buyer customers buy and highly relevant audiences at scale and improve the efficacy of the open internet as compare.
To today.
Together these trends are fueling growth across all segments of our customer base and all formats AD formats. We serve as the result of corresponding increase in utilization of our infrastructure drives our profit growth and cash generation.
As we look forward to the rest of the year, we are confident and our strategic growth drivers and our ability to continue to gain market share.
We outperformed and the first quarter.
This coupled with advertising dollars beginning beginning to flow back into the ecosystem as global economies recover and gives us the confidence to raise our full year outlook.
We are successfully executing against multiple organic growth drivers, leading to strong growth and market share gains and we expect that to strengthen has the economic reopening and the U S and elsewhere accelerates.
Our continued success fuels, our ambition for significant market share gains and the years ahead.
We have a differentiated cloud infrastructure platform that allows us to drive strong customer retention, while rapidly innovating to grow our addressable market of AD formats and devices, we have and 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 cut.
<unk> and our shareholders and.
And I see a lot of growth opportunities ahead of us, which I am excited about.
I'll now turn the call over to Steve <unk> to walk through the detailed financials.
Thank you Rajiv and welcome everyone.
As you see from our reported numbers pragmatic achieved outstanding financial results with first quarter revenue and adjusted EBITDA above guidance.
Growing significantly compared to the prior year, and importantly, growing organically faster than the market.
At the same time, we continued to invest for future growth.
We are expanding our solutions across platforms and formats, adding new customers.
Increasing the capacity of our infrastructure and expanding our engineering and go to market the teams.
We believe these investments gives us a powerful network effect with more visibility of scale.
Five increased revenues from existing customers and operating highly profitable platform that benefits our customers and us.
Revenue and the first quarter was $43 6 million and increase of 54% over Q1 last year net.
Net income was $4 9 million and increase of 444% over the prior year and on adjusted EBITDA was $14 5 million, 183% higher than Q1 and 2020.
These top and bottom line results reflect the strength of our platform and the high profit flow through embedded and our business model.
Before I jump into the quarterly financials I'll recap the five key financial drivers that we believe will drive the long term success of our business.
First we have one of the few scaled global businesses and our highly fragmented industry and offers and omni channel solution, our publishers and buyers.
Our specialized cloud infrastructure and good market presence is geographically distributed and all the major AD markets apart from China.
This framework allows us to continue expanding across the world with existing and new customers, both effectively and of additionally.
Second the combination of our usage based model and our ability to retain and grow revenues from existing customers provides a high degree of revenue stickiness and corresponding visibility.
Third we have built the business that consistently delivers high gross margins.
Fourth our business model is embedded with durable structural advantages emanating from our owned and operating infrastructure and offshore R&D and enables us to cost effectively invest and technological innovation.
And lastly, we generate consistent cash flow through rigorous working capital management and efficient capital expenditures.
Now turning to the highlights for Q1.
Our revenue growth was driven by broad strength across advertising verticals, demonstrating our ability to participate and the economic reopening occurring and the U S and other markets we participated.
Apart from the political and travel AD verticals spending and nearly every vertical was up 50% of our higher versus Q1 2020.
Notably through the first quarter, we saw significant sequential improvement and such adverse total automotive food and drink and style and fashion as reopening trends and merged.
And the spending was particularly strong for our mobile and Omnichannel video of instances with combined revenue is growing 83% year over year.
As the reminder, Omnichannel video is the sum of the online digital video plus OTT CTV.
In aggregate on mobile plus the Omnichannel video revenue represented approximately 63% of our total revenues and on the first quarter.
Looking at just the OTT CTV format, we delivered 55% growth sequentially versus Q4 2020 with the number of publishers monetize the inventory by OTT CTV formats growing to over 80% in the first quarter.
Since we first launched of our header bidding solution for OTT CTV mid 2020, we have seen a rapid growth and revenues.
And the first quarter. We also saw continued recovery and our desktop business with Grubhub the growth of 26% over Q1 of last year.
Our Verizon Media group revenues grew over 20% year over year and represented approximately 20% of total revenues and the first quarter.
As a reminder, this concentration levels are down from 2019, when BMG represented 28% of revenue.
We continue to benefit and the quarter from strong existing customer revenues.
For the 12 months and in Q1 2021 net dollar based retention was 130% significantly up from the comparable period a year ago.
Another long term growth driver continues to be our supply path optimization deals with advertisers and agencies.
We have seen these relationships serve as a catalyst for buyers to consolidate AD dollars onto our platform with spending coming by spo deals nearly doubling since Q1 2020.
To rapidly scale and take advantage of these growth opportunities, we continue to invest and increase platform capacity.
As a result, we processed over 18 trillion impressions and the first quarter double what we process for the same period last year.
Turning to our Q1 gross margins.
We delivered 72% margin compared to 65% and the prior year.
Our long term strategy of owning and optimizing our purposeful infrastructure enables us to reduce our unit costs.
Illustrating this point, we successfully reduced our cost and revenue per million impressions process by approximately 40% year over year.
Once we have implemented our targeted capacity expansion at a point and time, we achieve leverage because of our platform costs are largely fixed and the near term typically of corner out.
When we exceed our revenue targets as we get and Q1, 2020, one we benefit from high flow through to profit.
With respect to our Q1 operating expenses the combination of increased head count for growth.
The incremental public company costs and stock based compensation resulted in operating expenses of $24 7 million up 43% year over year.
Net income in the first quarter was $4 9 million up 444% year over year.
It was 11% of revenue substantially higher than the prior year net margin of 3%.
Q1 diluted EPS was <unk> <unk>.
Adjusted EBIT in Q1 was $14 5 million on 33% of revenue compared to 18% of revenue and the prior year, primarily due to the high flow through from strong revenue ahead of plan and the cost leverage we achieved on our platform.
To summarize our strong quarterly performance with the result of several key drivers.
Acceleration of mobile and omni channel video driven by increase and open internet activity globally.
Strong spanning across nearly all ad verticals.
Increased revenues from existing customers supported by supply path optimization agreements signed in 2019 and 2020.
And our targeted investments and people and platform capacity.
Turning to our cash flow.
We generated net cash from operating activities of $12 7 million for Q1 2021, we.
We ended Q1, 2020, one with cash cash and equivalents and marketable securities of $110 million.
Now onto our Q2 and full year 2021 guidance.
Overall, given our strong Q1 performance latest trends and Q2 and increased visibility for the balance of the year, we are increasing our full year guidance for revenue and adjusted EBITDA.
To set the context, we are experiencing favorable macroeconomic conditions and.
On a fundamental level, we believe that the total amount of time people spend on line has accelerated faster than expected.
Of course, it remains to be seen to what degree of this current acceleration of online behaviors will continue and when the pandemic land. Nevertheless, we are seeing the preliminary stages of a robust reopened and the U S and and select the major end markets around the world and we believe this trend will benefit problematic and its customers.
Currently in Q2, we are seeing sequential progress compared to Q1.
We anticipate and an above average of favorable year on year comparison, as we will be lapping the early stages of the pandemic when advertising was significantly impacted last year.
As referenced earlier, we see encouraging signs with respect to reopening of tailwind, helping our revenues.
Partial partially offsetting these positive trends is the impact from Apple's elimination of idea of Fei, which did not occur in Q1 as originally anticipated and is now rolling through the ecosystem.
We have factored the idea of any impact into our guidance.
Because we arent omnichannel platform, we are well positioned to partially offset this impact as advertisers shift to alternative high ROI formats and channels that we serve.
Looking at the full year, we are raising our prior guidance because of the solid momentum we are currently see.
It is important to note showed inflation of current and CPM increase for advertisers our usage based model allows us to participate in that revenue upside.
That said, we remain prudent and keep a slightly conservative stance due to the combination of uncertainty around macroeconomic conditions and the reality that some parts of the world are still suffering from the worst of effects of the pandemic.
Also keep in mind that year over year percentage comparisons and the second half of the year may appear less robust as we lap very strong growth that included onetime effects such as carryover spending from the first half of 2020 and Q4 political ad spend.
On a two year stack basis I E. If we add our 2022nd half growth plus our guidance for the second half 2021 of total cumulative revenue growth is anticipated to be 67%.
On the investment side for the remainder of the year, we plan to add more capacity and people than originally anticipated and so we see new opportunities to drive our profitable growth.
We also expect incremental cost related to the return to our offices around the globe and higher <unk> and our team reagents and person with customers around the globe overall, we expect the operating expenses on an absolute dollar basis to increase over the course of 2021.
Now in terms of specifics.
For Q2, 2021, we expect revenue between 45 and $46 million, a range of 70% and 75% year over year growth.
We expect adjusted EBITDA between 14, and $15 million or above the 30% margin.
For the full year 2021, we are raising our revenue target by $15 million and now expect revenue between 195, and $200 million or 31% to 34% year over year growth.
We are also raised and our adjusted EBITDA target by $9 million and expect adjusted EBITDA of between 54 and $58 million or 27% to 29% margin.
For the remaining three quarters of 2021 as a reminder, we are incurring new public company costs of approximately $6 million.
We are increasing our full year capital expenditures to capture the increased growth opportunities and make advanced purchases to mitigate risk of strip towards over the coming nine months.
As a result, we expect to be have capex between 23 and $27 million from the full year.
It should be noted we expect a significant amount of this accelerated capacity to largely come on line in Q3, and consequently, there'll be short term below trend Q3 gross margin due to higher depreciation costs, but which will normalize over the succeeding several quarters we.
We don't see this affecting our calendar year gross margin rate target.
Overall, we expect to increase the total number of impressions process and 2021 by over 60% compared to 2020.
And closing.
We are pleased with our progress and the first quarter of 'twenty. One while we are even more excited about the opportunities ahead of us and the remainder of this year.
We are proactively taking advantage of the shift to identity and the open internet.
We are growing on mobile and Omnichannel video businesses, expanding our spo relationships, increasing revenues with existing publishers, and adding publishers and existing and new geographic markets.
Our track record of driving profitable revenue growth and cash flows allows us to continue innovating and delivering 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 the operator to open it up for questions.
Thank you Steve as a reminder, you can ask the question by raising your hand located on the dashboard.
And your first question comes from Brian <unk>.
Jefferies.
And airlines.
Good afternoon, guys. Thanks, so much and maybe one for Rajeev and in the fall for steam Rajeev just on.
And in the overall demand environment and it is obviously and really robust robust and I think many of our asking the durability and the sustainability of what we're seeing and what your what Youre seeing and signs that that you think this is.
More durable and then just a quick flashback.
Sure Yeah, absolutely I think we see multiple signs in terms of the durability of our model.
As well as the durability of spend growth and therefore, our revenue.
So we called out a number of reopening verticals that are growing on our platform like food and drink style and fashion automotive.
There are other verticals that have not yet and accelerated that are tied to the reopening we expect those.
Two to start to accelerate and then at the same time all of the verticals that grew very rapidly last year. During the pandemic those continue to be strong and I think that really signifies that consumer behavior has shifted quite a bit from online and offline activities to online activities and we do think theres been a significant pull forward.
Shift and that consumer behavior that will stick and.
And so that's what we're seeing in the macro environment and then I think where we have positioned our business is really the benefit from all of these trends. So I think what we've shown is that we have a very diversified omni channel business and so whether the consumer is at home.
Watching a connected TV device or on a laptop or they're out and about on a mobile device or now and maybe going back to the office.
We're able to be in front of that consumer on the websites of media that they're consuming as as reopening happens this guidance shifts like we just heard from today from from the CDC and so I think we're going to be in a strong position.
To be with that consumer where they're consuming media and then bring advertisers spent of the platform as a result.
Great.
Real quick for Steve just good first half.
The expense control on EBITDA growth, but I think we all.
The completely understand the hay more expense coming back into the model of given the return is there anything else in terms of big investments we should consider.
That will all come back that the oil impact EBITDA in the second half of the air.
No.
The investments that we do anticipate are already factored into the guidance that I've given.
To reinforce the points that I made.
We see tremendous growth opportunities. So we continue to invest and people, particularly on new technology.
And go to market.
And around the world.
Specialized areas of my key television. So we are absolutely focused on investing in growth number one and.
And that is for people and then also as I indicated.
Continued capacity expansion.
And.
With respect to sort of the reopening cost people going back into the offices, we had assumed.
A normalization in the second half of the year. So I currently don't anticipate any surprises.
Thank you.
Thanks, Brad.
Yeah.
Your next question comes from Justin Patterson at Keybanc.
Okay on line.
Thank you very much and hope, you're all healthy and well.
Rajiv could you talk about discussions you've had with advertisers and publishers and just how great of a crawl around of the IRS changes and the privacy sandbox proposals and Thats something thats influencing the pace of change and the industry and helping with a bulk of adoption of identity hub and the audience Encore and then per Steve.
Should we think about the returns around the capex investments and the opportunities to grow impression of the head. Thanks, so much.
Yeah, absolutely Hey, Justin Thanks for the question so.
I would say there is a.
Probably speaking there is a degree.
Of the iteration.
And experimentation across the ecosystem.
As the whole industry transitions from anonymous tracking whether it was the third party cookie or the Apple idea of Fe towards a different set of solutions and I think what's clear is that there will not be a one size fits all kind of a single solution and.
And so what we are doing with publishers and buyers you know, whether it's advertisers and agencies as you mentioned, it's really the position ourselves to be at the forefront of innovation and.
And the leading the conversation and the industry and.
And innovating with our customers and with our partners and so the way that we have approached that and we've been investing here for two or three years now in anticipation of this change coming is to build out of portfolio of solutions and I think you'll see the strength of that and the and the metric that we shared that the majority of revenue on our platform now as alternative.
Identifiers, and I think what's particularly exciting about that is these alternative identifiers or in many cases better or more granular.
And then the past identifiers the anonymous identifiers and they also include consumer consent. So the consumer is aware of what's happening and they have the choice to make and in that process and.
And so I think what we're going to find is that the open internet will take share as of.
We come through this transition.
And our goal is to make sure that <unk> in particular continues to grow its market share.
And adjusted with respect to your question around return on invested and on our capacity expansion we have been.
Managing our own and operating infrastructure before.
Most of a decade, and so we become very proficient at.
Management sort of the initial outlay tie.
Tying it to the opportunity that.
And that we see and then finding ways to optimize it and as a reminder, our gross margin has averaged over 90 day period at 7% of pilot.
And so it's a function of focus and then of course.
Ensuring that we are always true.
And a very close look at the demand side.
And the supply side and ensuring that were of the capacity in place.
And so historically, we typically see return on our investment.
Over the course of <unk>.
And the three to four quarters and I don't see that really changing one change that I indicated in my comments was net we are of doing some advanced purchasing to counteract any potential effect from chip shortages. So our growth is not constrained and that we will.
Have a short term impact on gross margin, but I expect that the normalized relative more quickly and.
Our topline growth.
Thank you very much.
Yeah.
Your next question comes from Andrew.
Joe on key anchor you on the line.
Thanks for taking my question guys.
Two please.
I think you said is true deal doubled from a year ago and can you just dive into what you attribute that increase of spo too and I guess kind of looking forward.
What inning are we and as we think about spo and kind of looking at and then I'll ask the second one after this.
Sure Yeah, so just to repeat the metrics.
We nearly doubled to almost double the share of spend on our platform coming from supply path optimization deals the spo deals.
In Q1 of 'twenty, one compared to Q1 of 'twenty.
And so the drivers of these are you know I think across the ecosystem.
There is a desire for.
For the ecosystem to be more efficient and more transparent and I think what we have focused on for several years now is really to position the problematic.
To be.
Starts with our infrastructure advantage and owning and operating our own infrastructure and Steve highlighted some of the the way that we make that very efficient, but that efficiency allows us to be very transparent with buyers and buyers of course are creating transparency because there has been of history and this industry of the arbitrage or oral cavity.
And so we can go to the buyers and say Hey look we can show you all of the things that you want to understand about where your media spend is going at and how those budgets are being allocated.
And because of that efficiency, we're also able to make our partners more efficient. So the buyers that we work with and we're able to make their systems more efficient.
Because of the efficiency of our platform what inventory, we choose what parameters, we decided to send to the buyers.
And then lastly, we have the.
Global Omni channel platform, which means we're able to meet the needs of many many buyers across the variety of AD formats and geographies and so I think all of those things combined make us a very compelling choice.
And for agencies and for advertisers to consolidate spend on and so to the second part of your question I think we're pretty early still in and this trend.
And I could see over the next several years.
Getting to maybe the majority of spend on our platform or half of the spend on our platform.
Being through these.
Supply path optimization agreements.
And then I just wanted to go back.
<unk> question on kind of 50% plus of revenue now from alternative Ids.
Can you talk about kind of the benefit to CPM there, Steve I think the guide kind of implies kind of a mid teens kind of decline and CPM. So if I think about 60% of impression growth and and then secondly, how does that get to a 100% kind of before 2022 and the deprecation of cookies like is that a realistic goal or how do we think.
The full coverage.
Well, there's a couple of questions there, but let me first focus on and some of your model questions on the <unk> and the impact for the full year.
So.
We anticipate adding significantly more than 60% of impressions.
And so I really don't see and significant degradation and the CPM.
It's the evolving the picture given depending on when the capacity comes online so I'm feeling very positive about the status of the CPM.
And with respect to the rate at which.
Identity comes into play and it really is a function and all.
The overall ecosystem adopting the.
The the core principles and the reality is I think publishers.
And the open interest not recognized the debt.
And you didn't have to be and upside.
And we have multiple case studies and examples where.
And when you bring an idea of maintenance and helping each net cpm's absolutely of Menno.
So net net I'm not too concerned about GPS and fact.
And it's really been quite stable from the first quarter, our CPM since year relative to last year.
And I would expect the normal cycle to unfold.
One of the.
That you didn't ask but I'll add with respect to net inflation.
If inflation does the fact cpm's because we have a usage based model, we will be able to participate in that.
And in that scenario.
And Andrew on the on the other part of your question.
So the that we've reached that point, where the majority of revenue and you know as alternative identifiers and that rate is growing pretty rapidly I don't see it as our needing to get to a 100% that will of course continue to push that higher towards that but the reason is the that advertisers will go to where the opportunity the.
Roy lives and so if the the majority of revenue as these alternative identifiers and and we can hopefully lead the industry and this area that I expect advertisers to shift their AD budgets to those impressions that have these identifiers and thats pretty similar to what we saw with <unk>.
In Europe of couple of years ago, where not all of impressions were consenting and out of the gate and so there.
Those impressions that were very quickly got bid it up and then it started to accumulate the lion's share of the of advertiser budgets.
Yeah.
Alright. Thank you guys. Thank you.
Your next question comes from enter and mirror at Raymond James.
And you're on the line.
Hi, guys. Thanks for taking my question you talked a bit about some of your investments that you've been planning to make.
Could you give us a lot of sense of kind of of the prioritization of some of those investments and with the reopening strength kind of coming back is there any alteration to the your thought on your go to market strategy or any particular pockets that you wanted to lean into on the on that.
Yes, the only can take the first part the I can tell you.
Sure thing so in terms of the prioritization apps.
Absolutely.
Growing the size of the bar technology team in India as a priority.
Like go to market, especially around the globe driving.
Our identity solution and drive.
The CPD business.
And then of course the normal.
Support functions around the globe.
And while average we added about 40 people and the first quarter and the anticipated can you add people throughout the course of the year. So.
The people that are kind of help us take advantage of the significant growth opportunities ahead of us as sort of our number one priority number two is the.
Keep on increasing capacity.
All of our infrastructure and the first quarter.
We almost we nearly doubled the number of impressions, we had versus last year.
<unk> trillion net we process.
We expect the coupon and expanding that group of course of this year were going out the front end.
Loaded a bit because of the.
Potential exposure.
Ron the choices.
It's really those two areas that we're going to focus on focused on growth, but it gives me of a very profitable business model on <unk>.
Last year was our ninth straight year of adjusted EBITDA profitability, our companies and we're gonna be able to grow profitably.
Great and the Hill.
On the second part of your question.
One of the big shifts will really be around PS.
Peoples Peep people, making our employees our team members making of mental adjustment.
To being back.
In.
In the office and in entertainment with clients engaging with clients and person. So I think we've all gotten very used to the zoom.
Approach to conducting meetings and and I think that will be of mental shift that will take some time now in terms of the buy side and the sell side on the sell side I don't see a shift in terms of the publishers.
That we're going after either you know who they are or the the channels that they are and mobile CTV and.
Et cetera on the buy side I think there will be and expansion of verticals, which is already underway to go after some of the reopening verticals that had been dormant for many of the last 12 to 14 months travel would be a good example of that or or food and drink.
We will be more active in terms of engaging with advertisers around supply path optimization I think the key benefit here is that structurally we have of global platform. We are an omni channel platform and so there are no significant structural changes that we need to make now because I think we will continue to be very present.
With where wherever the consumers are and then wherever the advertisers don't want to put ads in front of those consumers.
Great. Thank you.
Your next question comes from Chase and how fine of Oppenheimer.
Thanks, Scott of two questions. So one.
How are you thinking about servicing CTV publishers as they try to move more spending in two of digital upfront and kind of the idea of.
Private market place or just because that is still where the bulk of the money is and so how you try to capture that and then secondly, how many preferred FSP deals would be practical from large global agency. So you highlighted group.
Should they have one deal like that should they have three just how do we think about that thank you. Yeah. That's the way so with respect to let me start on your CTG question.
And in the upfront.
So we're seeing strong growth and our CTV business and both private marketplace deals as well as open market spending.
We're very excited about and I would say that we view ourselves really is pioneering the future of CTV building the foundation for where the market is headed not necessarily where it is today and and I think we.
And I'll, probably agree that the industry is still very early and the transition of television from linear to digital but the majority of TV spend is still linear although it's transitioning rapidly and <unk>.
Today, the lion's share of digital AD spending is on insertion orders or fixed price TMP deals and this is what's driving the transactions.
Transactions and the Upfronts and I would expect to see more data driven decisions being made and the future whether it's audience targeting or it's a CPM and pricing decisions and so we are starting to see the transition to a bid environment and merge and we're currently pushing the industry and this direction with our own technology and and.
Our own approach and I E.
And then a roku commented on this and their earnings call last week, where they mentioned that they see the market evolving to include a spectrum of advertiser prices managed and an auction environment and I think that that's something that we've really been saying from the beginning.
So I think this approach may be a little bit slower to evolve, but we see it as ultimately being a bigger opportunity.
And the long run.
You can start to see that and our results with the spend growing sequentially, 55% from Q4 of 'twenty to Q1 of 'twenty one.
Now on the on the other part of your question around how many preferred.
And on the agency might have so I.
I think where we are with supply path optimization is that agencies are moving from having several dozen.
SSP that they may be spending across not not by design, but just kind of by happens to answer or by accident. So that could be anywhere from two or three dozen too I've seen situations, where agencies are spending on 50 60 platforms globally.
And two typically a single digit number and that number can be anywhere from three to seven ssp's.
On where and that kind of ballpark I think it doesn't make sense does not make sense for and agency to consolidate down to one single SSP that total.
And we create the level of supply chain risk debt that they don't want to take on.
And I think there are some variations enough variations between some of the major ssp's debt, that's unlikely, but I think to really get the benefits around efficiency innovation and transparency.
Doesn't mean moving down to a couple of Ssds and that's how we see most of these agencies of all of them.
Thank you.
Your next question comes from swell of Evercore.
On a normalized.
Great. Thank you for them and accurately and follow up on the group and the partnership so what does it mean for your business and where you say group and.
And.
You are if the partner for them. So what does that mean, how meaningful is the partnership for you and then.
And just could you remind us what S. P. A contract usually and clearly I know there are some volume discounts, but what else do contracts typically include and then actually if I may please and.
How big has traveled per year.
Hopefully see of recovery, you're not the only one I know trade day also commented on it.
How impactful it and see how impactful is the recovery of kind of be throughout Europe.
Sure maybe I can take the the first two and I see it can comment on the travel vertical.
So in terms of of what does it mean for group and what it means is that we've entered into a partnership with them.
Where we are.
Innovating for them, so building certain technology capabilities that they need to better plan better execute streamlined delivery of advertising.
And we are giving them levels of transparency data and reporting insights and efficiency that they could not game.
Through.
And through their normal work with with many different ssp's.
And then what that means for us is that we see significant growth and volume of spend on our platform.
And which in practical terms means we're growing the share of spend that we have.
From group them and as we do that then publishers.
Want to work, even more with us because they know that were a source of of the budgets. The significant budgets of course that that group of in house.
And now it's important to note that we've entered into this agreement with them. It does take time to execute and ramp up the the the rollout of this type of agreement, we have to engage with them and their and their team members in a variety of different markets around the world right, So and in different countries in Europe, and the U S and <unk>.
Asia and.
And so that you know that takes time and Thats team member to team member between our local team members and and group events.
All of these these agreements can take several quarters to sign.
And then I would say similar timeframe to start to ramp up.
Now typically speaking what do these contracts include to your second question.
And it can include volume based commercial agreements so things like <unk>.
The volume based pricing arrangements. They can include transparency clauses in terms of data that will make available.
And they can also include.
The custom technology feature.
Features that we commit to build for a particular buyer. So those would be the main categories of things.
That of typical deal can can include some deals will include some or all of those components and other deal flow will include others.
Yeah.
With respect to your question is just where the on the travel vertical whether we look at it is that it's actually a net positive for the company because it's been relatively nascent.
And the last nine months 12 months and.
It's been for most of.
Overall as the proportion of the total AD spend and it's in the single digits.
But having said that when the thing that I want to emphasize regarding our.
AG verticals and that we have quite a degree of diversity.
And ill spend across all AD verticals. So we really do get a part of the Chesapeake and many.
And of the reopening and of course and continued growth and the Norwegian.
Sectors like shopping.
And in technology et cetera.
And the overall.
The the top six and seven aggregate, who we have represented about 66% so very nice diverse.
And we'll do that we have.
And I expect travel to become a bigger part of the business over time.
And so do you think Steve Thank you Sheila.
And your next question comes from the silly and Ken and Bob.
On the line.
Good afternoon, congratulations on good results.
The question I had kind of Jimmy Yeah, Yeah.
The.
The question I had was about connected TV and we see some players being demand of demonstrating some of the inventory.
The inventory constrained supply constrained.
I was wondering as you roll and you're connected to the business where are you on the spectrum and how are you going to grow.
The balance is I guess some of the planets.
Yes, I can I can take that so our CTV business just like any of the other AD formats that we transact in.
The digital video.
Mobile web display mobile app display and video et cetera, they're all really marketplace businesses.
Surround and auction platform. So we have the sell side and we have of buy side.
And so key to our scaling up any of these formats, yes to build both in parallel and.
And so were now monetizing CTV inventory from overheat and publishers as of the end of Q1, and we continue to grow the advertiser base and we shared the case study and.
In the prepared remarks earlier as the demonstration of of the power of the of the auction model and the auction of approach.
So I think unlike others, given and we have and auction based platform.
We don't see the types of the.
Kind of a temporary constraints that others might see what would happen and our platform is that buyers would simply bid up the inventory. If there was a short term supply constraints.
And because of our usage based model, we would benefit from that just as the publisher would benefit in terms of greater revenue and.
And we've seen that and practice.
Call of many years ago.
And Michael Jackson patch for instance, it was a record day for maybe two years on the telematics platform in terms of volume, but there was so much media consumption of around that event and.
And what what have demonstrated is that and auction environment.
Is really the right approach to maximizing the benefit for both the buyer and the seller.
And that's why it and as I said earlier, that's where we're focused because we think that's where the bigger opportunity lies long term.
The quick follow up if I may.
So in terms of the CTV inventory are you more skewed towards the linear on linear inventory from the deal.
As of <unk>.
<unk>.
And where are you.
Yes, where we are focused on the.
And the VM Mvpds as.
And as well as I would say high quality.
Audiences right.
And of.
Okay.
For instance, we cited EV space and our and our S. One document from late last year.
I think we're going after really the tier one and the tier two.
Segments of the channel broadcasters and apps and the CTV and OTT space. Thank you very much.
Thank you.
Okay.
And the last question part of it's from Marc Swanson and R E.
Right there on the line.
Hey, Matt and you might be on mute.
Yeah.
Okay.
And you can also price and Bryan Timm yet.
Okay. We've got you know, Matt Yeah, Yeah, Yeah, I've learned nothing over the last year after the pandemic.
Mike.
Thank you for taking my questions I apologize for that I'm speaking of the pandemic, Steve could you talk a little bit about the recovery and more of like a geo by Geo and vertical by vertical basis, what we've learned through these kind of the early stages of the recovery of that could be applied to some geos and verticals that haven't Rick.
It is quite quick.
Sure.
What we saw and from the first quarter was a lot of the beaten down and vertical side.
Travel.
And style and fashion.
Home and garden.
All of those starting to come back pretty nicely and I had mentioned and my comments that nearly all of the AD verticals that we participate nearly 20%.
All of them were on a year over year basis grew 50% on more so it really is a situation where it's not just the.
Of the stalwarts like shopping and the technology the continued to perform well, but many of these others.
And that are starting to two.
Virginia, and improve and we saw that steadily through the first quarter and IP.
We expect that to continue and as we go forward now from a geographic perspective, the terrific news from our side is that we are seeing growth and in every major region.
Even in APAC.
And the strong results and.
And that's true and I think the weight of frame out what we are experiencing some of that as an omni channel on <unk>.
Company.
With what I call of very robust existing customer base and as a reminder, our.
Net dollar based retention was 130% was on the trailing 12 months. So we have the engine of our existing customers we have the.
The applicability of mobile and video formats and.
A pandemic and emerging world.
And we have the benefit now.
The old yields coming on board. So we really are firing on all cylinders as the company and we don't anticipate net necessarily slowing down.
Thank you and if I could add just one more quick one per rajeev.
And then they start on the CTV opportunity and kind of thinking about the fact that all.
All of your competitors also see the Tam growth rate. So how do you leverage one of the advantage of being independent versus some of the competitors in that space and then to Steve's point about investing on the space. How do you build competitive moats and differentiation early on the kind of make sure you maintain that position that we've talked about.
Sure Yeah, I think the site by virtue of being independent.
Means that we're unconvicted right in terms of <unk>.
Serving the needs of our customers.
And I referenced earlier.
One of the challenges and the industry has been.
Capacity.
<unk> things like that I hear from agencies, all the time that one of the reasons, they engage and and things like supply path optimization with US is that we don't own media right. We have no incentive.
To put spend from an advertiser on one one impression versus another we treat them all equally and and we're willing to be very transparent about that so I think independents helps.
Two of very significant degree when youre thinking about branding budgets in particular of better flowing through CTV and.
And so the metrics on how to measure the return are not they're not the same the.
They're not as clear as they might be and performance based advertising and so of buyers want to know that the technology partners that they're working with.
And our unconstructed and really are looking out for their interest and so I think thats really where the the independents piece comes into to our benefit.
And then in terms of the competitive moat, I think where our moat.
Why is today and and we will continue to like.
It's really in our infrastructure driven approach.
And where we're able to innovate extremely rapidly because we own all layers of the infrastructure stack. So we are shipping code across our global platform on a daily basis, we're making our platform more efficient and more transparent and driving superior outcomes, because we own all of that infrastructure and so that is.
Really what drives the competitive competitive moat.
Over the course of of days weeks months and quarters as we continue to innovate and build.
Strong reputation and the industry and I think the metric that Steve just share. It obviously the 130% net dollar based retention you know is of.
And a great metric around and how we're performing in that regard.
Thank you.
Yeah.
And that concludes the Q&A portion of our call today on that I'll turn the call back of are you seeing it the remarks.
Thank you.
Well I want to thank you all for joining today, we're very excited about our market share expansion and the number and magnitude of growth opportunities ahead of us Steve and I look forward of connecting with many of you and the coming days. Thank you all.
Yeah.