Q3 2021 Magnite Inc Earnings Call
<unk> third quarter 2021 conference call.
All participants will be in listen only mode.
Should you need assistance. Please signal a conference specialist by pressing the star keep all advised you that.
After today's presentation there'll be an opportunity to ask questions.
Ask a question you May press Star then one on your telephone keypad.
To withdraw your question. Please press Star then two.
Please note this event is being recorded.
I would now like to turn the conference over to Nick <unk> Investor Relations. Please go ahead.
Thank you operator, and good afternoon, everyone welcome to <unk> third quarter 2021 earnings Conference call. As a reminder, the comparisons you will see in the 10-Q as reported include the financial results of spot X and spring serve for Q3 2021, but for the third quarter of 2020. The results do not include spot X or spring serve given the acquisition dates.
On April 30, and July one 2021, respectively. During the course of this call when we refer to results and associated year over year comparisons with the phrase as reported you are referring to the basis as reported in our 10-Q, when we make comments referring to pro forma comparisons we are including products in spring served for the third quarter of 2020.
In order to provide a like to like comparison. Please keep in mind as it relates to spot X and spring sort of acquisitions. Prior quarterly results are estimated and unaudited as.
As a reminder, this conference call is being recorded joining me on the call today are Michael Barrett CEO and David Day, our CFO I would like to point out that we have posted financial highlights slides to our investor relations website to accompany today's presentation.
Before we get started I'll remind you that our prepared remarks and answers to questions will include information that might be considered to be forward looking statements, including but not limited to statements concerning our anticipated financial performance and strategic objectives, including the potential impact of COVID-19 on our business as well as statements concerning the acquisitions of <unk> and Springer and potential benefits.
On synergies, we expect to realize there from these statements are not guarantees of future performance. They reflect our current views with respect to future events and are based on assumptions and estimates and subject to known and unknown risks uncertainties and other factors that may cause our actual results performance or achievements to be materially different from expectations or results.
<unk> or implied by forward looking statements.
A discussion of these and other risks uncertainties and assumptions is set forth in the Companys periodic reports filed with the SEC, including our 2020 annual report on Form 10-K, and our 10 Qs for Q1, two and three for 2021, we undertake no obligation to update forward looking statements or relevant risks our commentary today will.
Include non-GAAP financial measures, including revenue ex Tac or less traffic acquisition costs, adjusted EBITDA and non-GAAP income per share reconciliations between GAAP and non-GAAP metrics for our reported results can be found in our earnings press release and the financial highlights deck that is posted on our Investor Relations website.
At times in response to your questions. We may offer incremental metrics to provide greater insights into the dynamics of our business. Please be advised that this additional detail maybe onetime in nature, and we may or may not provide an update on the future in.
In the future on these metrics I encourage you to visit our Investor Relations website to access our press release financial highlights deck periodic SEC reports and webcast replay of today's call to learn more about Mac night I will now turn the call over to Michael Michael. Please go ahead.
Thank you Nick it's been a busy three months since our last call, especially since we just hosted all of you on September 15th for our Investor Day.
Which if you missed I would highly encourage you to review.
Formats and channels, which combined were up 89% as reported.
Or 26% on a pro forma basis.
Our results are strong.
But were tempered with some late Q3 supply chain related ad cancellations.
Which we have also experienced early in the fourth quarter.
Despite this temporary headwind as well as a tough political advertising comps from last year, we still exhibited very strong financial results again this quarter.
I'll first cover some quick performance highlights CTV revenue ex Tac grew 51% on a pro forma basis.
Our D V plus business grew mid teens revenue ex Tac year over year on a pro forma basis.
TV plus is comprised of our mobile and desktop businesses, which grew 18% and 11% respectively.
Adjusted EBITDA margins on a revenue ex Tac basis came in above expectations at 35%.
And we generated 34 million in operating free cash flow, which we define as adjusted EBITDA less capex.
This quarter CTV represented 38% of revenue ex Tac and now represents the largest portion of our business.
After closing the spring serve acquisition this quarter, we are in an even stronger position to capture.
<unk> share in <unk>.
TV with the addition of a strategic AD server.
The work we've done has created an industry, leading CTV market position.
With the ability to serve a broad set of customer types with many different products and services to fuel future growth.
As the only independent end.
And monetization platform.
It bears repeating that we now have.
Significantly widened and strengthen the customer segments, we serve.
<unk> device Oems, such as Roku and Samsung.
Actual mvpds, such as sling and Hulu.
Digital first platforms, such as play Doh and TV.
And of course major broadcasters and programmers.
This discovery in facts, creating deeper more strategic more durable partnerships.
In addition.
We have also meaningfully expanded our service offering to touch more inventory and transaction types and our CTV revenue includes not only fees from magnate manage auction.
But also fees from publisher direct sold deals managed service revenue.
AD serving fees and value added services.
And we now participate in every part of the CTV buying process direct upfront and programmatic.
Through our technology solutions, and our managed service offering.
It is clear.
At IBSA removal has affected some industry players.
To be clear, we are not one of them, despite seeing well over 80% adoption of iOS.
<unk> dot five on our platform.
Our business doesn't participate in App downloads, and we have very little social advertising, that's limiting our exposure.
Further underpinning this point, we have seen a shift from iOS to Android and spend and better than expected cpm's from iOS opt outs, approximately 20% lower than opt ins.
Keep in mind that iOS revenue as a percentage of our total revenue ex Tac is in the mid single digits and there is zero CTV revenue in iOS.
As a reminder, on the third party Cookie front Google.
Google continues to plan to eliminate third party cookies in chrome towards the end of 2023.
We continue to believe that first party publisher segments collected in a privacy.
Manner will be the future of identity solutions, and then SSP will be a driving force behind this transition.
This is an area, where we are positioned extremely well.
Now I'd like to go into greater detail regarding the components of our AD spend to provide additional color.
I'll start with the strongest performing sectors in Q3.
Health and fitness home and garden retail and financial verticals continued to be the strongest performing year over year sectors.
This is on top of a very strong Q3 2020.
Year over year growth rates in this group range from 16% to 45% and compared to pre COVID-19 levels. The two year stack growth rates are all about 45% up to a high of 88%.
These sectors also jointly comprise a significant portion of industry ad spend.
When additional vertical that showed strength in Q3's Arts and entertainment with a return of movies.
Live sports and TV production, which was up over 70% year over year.
While we are focused on moving large linear TV budgets over to CTV from leading national advertisers.
We're also seeing traction moving smaller advertisers over to CTV in particular with respect to mid market and regional campaigns.
Rei started with us in Q2.
Tripled in Q3 is on pace for another big sequential increase in Q4.
CDW, who works with us through group them entered live sports CTV advertising this quarter.
And we ran CTV campaign for the Tennessee Titans advanced auto parts in North face.
The weakest performing sectors in Q3 relative to last year, where political <unk>.
Automotive hobby.
Hobbies, and food and beverage.
<unk> also still down double digits, and a two year stack, but up over 50% off a low base in Q3 of last year.
At a high level, we expect these trends to by and large persist into Q4.
We continue to see strength in retail tech and home and garden and weakness in auto driven by the chip shortages and travel due to the ongoing COVID-19 concerns.
The team has been very busy this quarter and there's a number of key wins worth mentioning.
We announced in conjunction with the trade desk and AMC networks, a new solution that allows TV programmers to deliver addressable ads programmatically on linear television.
Quigley Simpson, a full service agency specializing in brand and performance marketing.
<unk> spend commitment and selected magnate to serve as the agencies preferred SSP spin.
Specifically for our strengths in CTV to address performance marketers needs.
<unk> selected us this quarter as its preferred SSP with a focus on live sports in CTV.
Network seven in Australia has successfully used our platform during the Olympics, leveraging our advanced tools to more effectively manage large bursts of inventory during live sporting events.
In addition to these client wins.
Proud to announce magnate one two big AD Exchanger Awards last week at programmatic Io in New York.
First our CTV platform swept the best video technology for media suppliers Award.
Which recognizes innovative and powerful publishing facing tech in the video space.
Our entry.
Included success metrics from our work with AMC networks and the trade desk.
Second.
We won the best seller focused technology award for our demand manager solution.
This award recognizes vendors that excel in helping publishers build stronger and more sustainable businesses.
Illustrates had demand manager helps.
Weather company with their AD rendering speed spend diversification and scale.
As you can see it's been a very busy and productive quarter for magnet. Thanks.
Thanks to the tireless efforts of the Mag 19, we continued to deliver our customers a valuable and highly differentiated solution.
We are the only scaled independent omnichannel solution in market.
And are confident that we will continue to gain and grow share in CTV and TV plus in the quarters to come.
With that I will hand things over to David who will go into greater detail regarding financial performance and expectations.
Thanks, Michael we're.
We're pleased to announce a very solid Q3 to provide some more detail on results and to provide our outlook for growth in Q4.
Total revenue for Q3 was $131 9 million revenue ex Tac was $114 1 million up 89% from Q3 2020 on an as reported basis and up 26% on a pro forma basis.
CTV revenue ex Tac was $43 1 million in Q3 2021.
Most quadrupled from $11 1 million last year and was up 51% on a pro forma basis.
Mobile revenue ex Tac grew 18% and desktop revenue.
TAC grew 11% year over year, both on a pro forma basis.
Mobile and desktop combined now comprise what we call the divi plus.
Our display video and all other.
Our revenue mix for Q3, 2021 on an ex Tac basis was 38% CTV, 36% level and 26% desktop.
Operating expenses, which in our case includes cost of revenue for the third quarter were $155 8 million.
Versus $71 9 million in the same period, a year ago increases were primarily driven by the inclusion of <unk>.
Adjusted EBITDA operating expenses, which represents the difference between revenue ex Tac and adjusted EBITDA were $74 1 million for Q3 as compared to $2 $46 $6 million. In Q3, 2020 also driven primarily by the addition of products.
Costs were lower than expected driven by postponement of our return to office lower anticipated marketing event spend and reduced travel and entertainment costs. In addition, like many companies hiring the right talent is taking longer in the current environment.
Regarding spot X acquisition related cost synergy goals, we've realized more than half of the $35 million in run rate synergies that we targeted.
The next phase of synergy savings is on track and expected to occur as we migrate to one best in class CTV platform for our publishers and buyers in the future.
Net loss was $24 $3 million in the third quarter of 2021 as compared to a net loss of $10 5 million in the third quarter of 2020 the.
The increase in net loss was primarily attributable to an increase in amortization of acquired intangibles related to the <unk> acquisition.
Adjusted EBITDA was $40 million, resulting in a margin of 35% as compared to an adjusted EBITDA of $13 7 million or margin of 23% in the third quarter of 2020.
Driven by continued revenue growth in our legacy business and by the addition of <unk>.
We calculate our adjusted EBITDA margin as a percentage of revenue ex Tac.
GAAP loss per share was <unk> 18 for the third quarter of 2021 compared to GAAP loss per share in the.
And the same period in 2020.
Non-GAAP income per share in the third quarter of 2020 minus 14.
Compared to non-GAAP income per share of <unk> reported for the same period in 2020.
So 131 million weighted average basic shares.
$46 3 million weighted average diluted shares outstanding for the third quarter of 2021.
Capital expenditures, including bulk purchases of property and equipment and capitalized internal use software development costs were $6 million for the third quarter of 2021 in line with our expectations.
Operating free cash flow was $34 million in the quarter, which we define as adjusted EBITDA less capex.
As a reminder, our acquisition of <unk> closed on July one with cash consideration of $31 million.
Our interest expense for Q3, 2021 was $7 3 million of which roughly $6 million was cash.
At the end of Q3, we had $188 million in cash on the balance sheet.
Slight reduction from Q2 was primarily impacted by the $31 million paid for the spring sort of acquisition and cash interest costs offset by cash flow generated from operations.
As a reminder, our cash balances can swing disproportionately both up and down compared to the run rate of our business since we collect and pay the gross amount of flow through to our sellers, while we record revenue primarily on a net basis.
I will now share our future expectations.
We expect revenue ex Tac for the fourth quarter to be in the range of $138 million to $142 million.
We expect revenue ex Tac attributable to CTV for the fourth quarter to be in the range of $52 million to $56 million.
We expect that CTV will have solid growth in Q4, even with pressure on automotive and travel spend as Michael mentioned tough political comps and an abnormally strong finish to Q4 of 2020.
We believe these factors are transitory and will improve in 2022.
We expect that adjusted EBITDA operating expenses in Q4 will be $79 million to $81 million.
So the sequential cost increase in Q4 is primarily due to increased <unk>.
Computing costs related to seasonality return of some marketing expenses and office related expenses due to new office leases.
As a reminder, we expect to that returned to office marketing and travel costs will add an incremental $3 million to $4 million per quarter in operating expenses next year.
Based on the midpoint of our expected revenue ex Tac and adjusted EBITDA operating expense ranges, we expect adjusted EBITDA margin in Q4 to be approximately 43%.
We expect our Capex for Q4, 2021 will be roughly $8 million.
We expect Capex in 2022 to be in the range of $35 million to $40 million.
We continue to target long term annual revenue ex Tac growth of 25%.
And adjusted EBITDA over revenue ex Tac margins of 35% to 40%.
We are thrilled with the progress our teams are making especially considering all that they've had to accomplish and to integrate with our three merged in acquired companies all while working remotely.
Q3 continued to show the powerful financial leverage we have in our business model with strong adjusted EBITDA margin expansion that comes with our revenue growth.
With that let's open the line for Q&A.
We will now begin the question and answer session.
I'll ask a question you May press Star then one on your telephone keypad.
If youre using a speakerphone please pick up your handset pesky Mckee.
To withdraw your question press.
Josh.
At this time, we will pause momentarily to assemble our roster.
Your first question comes from Brian Martin with Needham.
Hi, guys congratulations on good numbers.
Thanks first question is on that.
My first one follows on the dress fabrics with pay TV, so youre thinking on that.
Revenue growth was two times the average could you Tom Taylor is that are you getting there.
Tomorrow is on CTV.
Are you getting more Arthur larger budget, you've got on the CPM.
Premium on the CTV guys, that's driving the growth of CTV twice the average of the entity.
Yes, Hey, Mark it's Michael I will jump on that first and David can provide additional colors.
Yes, I think it's a little bit of all the above I think what we're seeing is.
In terms of.
Same store sales if you will.
Just increasing opportunities with the supply clients with publishers that we have on board.
And I think that that's kind of a natural evolution that we've talked about and that is there's some reticence, if you're a publisher whether youre CTV or not when you enter into the programmatic world if youre used to direct sale sold inventory.
A little by literally you start to see that programmatic is complementary if not even higher.
Monetization indirect sale.
And more inventory is freed up.
As a result of that.
Furthering the growth rate in that area for that David I don't know if you have color on <unk>.
CPM or anything like that.
No I don't think have anything to add at AAN cpm's have been consistently strong.
Throughout the year no significant changes there, but there are as we all know there are very high.
Typically in that $20 plus range in CTV.
Okay, Great and then my second question and then I'll get back in queue.
With spring startup hoping brook.
No.
The freewheel any update on your competitive position.
The only independent.
Do you have any neutral growth.
Away from them.
None that were.
Going to talk about right now Laura but.
Traction is.
Really positive in that again and as you well know.
But for the benefit of others. The idea of spring serve as part of magnate wasn't this rip and replace a free well it was more as a complement to present AD serving options that CTV publishers have and it would allow us to get access to inventory.
Merrily.
Private marketplace deals or PG programmatic guaranteed deals that we wouldn't have access to before and thats bearing itself out and we'll definitely be able to share more color as the quarters go on.
Thanks very much.
Thank you.
Your next question comes from Shyam Patil with Susquehanna.
Hey, guys.
I just had a couple of questions.
I was wondering just.
First.
If you guys could just talk a little bit about just.
How you are feeling about your positioning and execution in the CTV space and David.
You just talked about a little bit just now but in your prepared remarks talked about some of the headwinds in the fourth quarter for CTV could you just elaborate on each of those I think you called out a few.
And then second question.
Michael I think you called out some verticals, where youre seeing some issues and I was just curious.
With the.
With all the concern around the global supply chains and disruption.
If those were to get worse in the fourth quarter.
Where do you think you would show up I mean, do you think it would show up kind of across the board do you think it would be.
<unk>.
In certain areas of our programmatic, but not in other areas just kind of curious for your take on that thank you.
Yes.
Sure why don't I go first because it will dovetail into Davids comments, specifically related to CTV for Q4.
Forecast standpoint, our guidance rather.
Yes, so it's interesting I think generally speaking if there are supply chain.
It exacerbates, which.
Desktop, what we're sensing and when we talk to our agency partners and advertisers.
We're sensing that there is some sectors verticals immune to the supply chain challenges and others that are severely impacted by it.
And by and large those sectors spread out pretty evenly across the platform units easy class CTV, maybe a percentage point difference here or there with one with one large exception and that is as you know we have this managed service business.
Focuses a lot on kind of middle market advertisers.
And there we.
Hello, disproportionate contribution of the auto sector.
In that vertical.
Go to market team.
Why is that well.
The largest regional advertisers or the big rooftop.
Car dealerships.
Dave.
CTV enjoy it immensely and they're the biggest affected by supply chain inventory to sell very hard to justify advertising.
And so with rare exception.
Pretty much across the board, but a little bit.
Significantly higher index of auto in the CTV numbers see the mid market team.
And travel regional tourism is over indexed on that team as well. So so theres two sector as being particularly hurt when by Covid, one by supply chain.
Impacts CTV disproportionately.
Don't know David if you have more color on that.
Sure.
Yes, let me quantify that a little bit in.
First we feel great about our momentum heading into Q4, we feel like it'll be a strong quarter.
From a comp perspective, if you were to remove political from 2020 Q4, our guide.
Guide.
<unk> is about a 23% year over year growth in CTV. If you were to remove the political comp you get to the low <unk> in a year over year growth scenario.
And if we look at the weakness that Michael mentioned and travel in automotive.
We believe that's impacting us to perhaps $3 million to $4 million in CTV in Q4, and key factor that in we're worried about a 40% year over year growth rate and so.
With the comp issues and with with this what we think are transitory issues from it from a supply chain perspective.
We feel good about Q4, and hopefully that helps to quantify that impact a little bit.
Yes that was helpful guys. Thank you.
Okay.
Your next question comes from Jason <unk> with Craig Hallum.
Alright.
Alright, Thanks, guys, David I wanted to start out with one for you. Just curious if you can maybe give us an idea of kind of the methodology as you go into the Q4 guide.
Per Michael's commentary it sounds like some of the disruption that you recognized maybe started at the tail end of Q3, and obviously, we're only about a month into Q4, so just curious.
How you are factoring that into the guide whether it's a continuation of what you saw late in Q3, or if you're anticipating maybe some verticals, having a little bit more of a hiccup and youre seeing right now.
And as you as you mentioned, yes, it our guidance.
Anticipates and includes.
Some of that softness in those sectors.
And it assumes our guide assumes that the softness that we've seen in September and what we've seen in October continue throughout the rest of the year.
And so it's been we think thats been stable in October and that's what we've reflected in our guide for the quarter.
Got it.
Michael maybe one for you.
Now that you've.
Fully acquired spring, Sir can you give us a little understanding of how you go to market with that solution. Because obviously there is there is a greater market share for magnate out there than there is for spring serve so how do you utilize your your magnate market to kind of promote spring sort of AD server and then try to grow.
Volume or usage there.
Yes, great call Jason.
In in.
In flight right.
The belief is that it is.
The spring serve Standalone answering business is there is a strong business and by and large.
That business.
From a go to market standpoint represented by.
Folks still carry the spring serve business card if you will.
Obviously in cases, where magnet is a deep relationship with the publisher.
We utilize that relationship with Magna and make the introduction where it gets interesting is when we're talking about magnate demand going through spring serve.
And working with clients in that respect and then.
Very much of a coordinated effort with magnate.
<unk> lead in that case and so.
Maybe verticals are seeing pressure and whatnot, but do you believe that we're seeing that flight to safety kind of happening in any of these end markets or do you still think that CTV can represent some type of a safe haven longer term as that market isn't being disrupted like other channels are.
Yeah, I mean, I I think that on the edges. There's a lot of opportunity for CTV. You know you read a lot about the advertisers that have stalled Derek campaigns are stopped spend or decreased spend because they are having a really challenging time.
Working with attribution and customer acquisition costs et cetera, those guys are extraordinarily lower funnel. They are extremely sophisticated you know mobile advertisers.
To think that they might you know jump from that world right into the world is CTV.
Is probably a bit of a stretch.
Those are the guys that spend you know.
The thousand Bucks a day.
$5000 a day on the Facebook C&C grants et cetera, but then there is a whole other slew of marketers that do social video advertising that have much larger campaigns that also.
Into account brand attribution that I think are perfect and and our team is set up for that Jason we have a team that goes after those brands is performance oriented brands that have a national budget that we think can transfer over them and we're having a good deal of success, there and we think that it kind of stays with the.
The line that we've been saying is that CTV is is kind of democracy.
Democratization of advertising, it's not just the top 200, Ellen is is going to be 10000 advertisers and its bearing itself out.
Got it thanks guys.
Our next question comes actually that's that's all I robot that's quite Alfaro.
Hi, This is Ben on for shut off I just wanted to ask the first question on T. T. V is there any way that you can break up you know you talked about your new and existing partnerships with various publisher group, though from Mbps OEM.
You are content producers like any way to break up the relative size of those segments by revenue in terms of contribution CTV revenue and then which are like the fastest growing.
Oh.
Yes, David.
Yeah, we have we haven't really shared those.
That breakout externally.
Externally.
And I would.
There's really not any segment that it's significantly more quickly or more slowly growing than the others.
Really got momentum really across the board.
Okay.
Okay. If I could just ask another one on Ah your analysts that you shared thought about demand manager adoption being I think 20% of total Prebid request do you think you can get that to 50% plus you just talk about like.
Guess, there how you get there I understand that the.
The advertisers and at that than using command manager are a lot more valuable just any color you right there.
Yeah sure. So yeah. So as you heard from me.
Investor Day, we.
Incredibly bullish about demand manager as a standalone product, but also as this kind of wedge.
To be able to get more business from.
R.
Publishers, primarily in the P. P G area and so.
As we talked about the when we first of all is demand manager a coupla years back the sweet spot of the marketplace was.
Publishers that were sophisticated.
Had a direct sales team themselves, but weren't so large that they can afford internal resources.
Two.
Run prebid on its own right and so those are the the low hanging fruit, but they were kind of middle size to you know a little bit further down the <unk>.
<unk>, if you will in terms of size.
And the sales cycle was going to be longer than the big enterprise folks folks like weather.
Yeah.
It was going to take a while.
To understand why they would pay for a product that they are kind of using for free and then they understand the internal costs and the development cycles and how quickly we.
Improved on the product and and so that's the exciting realm that we're kind of in this new area, where where we're knocking down these enterprise publishers and that's I think how you get 50% right.
If you in one of those guys in terms of the number of impressions that flows through the system versus the smaller folks you don't nearly need as many.
Lions achieve that so we think we're extraordinarily well positioned in and as the.
Battle moves from Cookie deprecation, so having henter bidding on the page doesn't make as much sense anymore to having a complete server to server solution.
That really becomes a really tough.
A tough road for publishers to manage that themselves and we think that even provides greater incentive to work with demand manager.
Oh.
Thank you.
Your next question comes I'm, not fond of them with IDC capital Michael.
Yeah. Thank you so much for taking my question, if I could just dig a little bit deeper on the supply chain and she was thinking so much out there for quantifying the queue for impact is there any way we can get a little more color on the exact cute three impact or maybe how the quarter was trending early or mid September just trying to kind of.
Separate out the things you can versus you can't control them a quarter.
[noise] Oh.
[noise], Yeah, I mean, obviously the the trends are we quantify $3 million to $4 million wherever the full quarter and I think those trends.
Sorry to observe probably over the month of September so.
That's how I guess I'm tied quantify that impact for the third quarter.
Okay.
A third of those levels I guess.
Alright, I'll above about my calculator I can figure that one up [laughter].
[noise] [noise], so going back to you know more companies specifics and Investor day, we talk kind of other companies specific Tam around 23 per cent on your current mix. So as we're seeing T. T. V. You know go up as a percentage that three a keg or now feels like it might already be pretty close to 25%.
You just talk a little bit about how to think about that long term guidance, we've been given of over 25% relative to that market growth.
T V. It takes on a larger portion of revenue.
Yeah. So.
CTV revenue growth Magna just came out with the <unk>.
34% growth for next year.
Others have that growth at a at a higher level and so we think those those levels are sustainable and we think we can take sure.
You'll notice also from an overall revenue perspective.
Desktop, which is expected to be sort of flat.
Grew 11% in the quarter and so that shows that were taking share in other areas. In addition to to CTV and so we feel strongly that.
King.
Revenue overall revenue growth of over over 25%.
Is achievable and to your point has CTV continues to grow as a as a percentage of our total revenue by definition that will have upward support for overall revenue growth rates.
Oh, thank you.
Your next question comes 10, 10 nine with Macquarie.
Hi, Thanks, so much for taking the question.
It's on CTV as well maybe more television broadly you guys have such a great position, representing so much inventory across television and now I guess more with linear as well just AMC network steel I think is interesting. My question is measurement is a huge topic right now in the industry and I'm wondering if you could talk a little bit about what.
Measurement services, you use and what things you see coming down the Pike and how you think the whole measurement of TB in CTV evolves over the next year or two thanks.
Okay.
Yeah, It's a great question and I'll hit it so generally speaking is a.
As a exchange.
Advocated a publisher.
We.
Work with you know every buyer underneath the Sun and.
Many come with their own request, we want this campaign measured this way we weren't this campaign measured this way with that third party.
So we have to necessarily work with everybody.
We're kind of not in the business of being kingmaker.
We're just the facile for the person with AIDS.
That are able to.
Work with any measurement service, we do proactively work with.
A handful to create audience segments based upon their measurement.
To help buyers, particularly.
And the managed service area.
And.
Have several relationships there but.
Again, I think our role is to be open to any new credible form of measurement that requested in the marketplace and we will support it.
As it relates to how it evolves, it's going to be extraordinarily interesting you have N B C.
Doing an RFP for a new measurement vendor.
Obviously nielsen's involved in that RFP, but so are a lot of other startups newer companies and then you have the folks like.
Ah roku or Hulu that have their own measurement within their own walled garden and aren't really sharing outside of it which isn't helping.
With the overall adoption of CTV, So I would say the bright spread about measurement is it.
It is acknowledged that it's an area.
Of growth and area of improvement and if we're seeing this kind of interest in CTV with slide measurement.
When the industry gets its act together I think that'll be a real catalyst to be able to propel growth even further.
[noise], Thanks, and maybe if I could tack on related question, which is about add fraud, which kind of comes and goes as a topic and I have been reading a bit more about it lately in terms of that program the CTV space.
Any any comments you could make on you know kind of the the status there and what you can do to help prevent that.
Yeah, so again in that respect.
When we went to.
Platform, we work with are the leading vendors and the.
<unk>.
Fraud area.
To make sure that the inventory is.
So called washed.
And.
I think that.
The fraud that.
Is.
Somewhat.
Prevalent in the industry is largely.
Excited magnate.
Because we have direct relationships with the publisher.
And we get the signal directly from them that it's a lot easier for us to to from an AD.
Inventory quality standpoint to ensure that this is exactly what they said it was.
So.
I think that you'll find on magnate, it's a pretty well curated well lit.
Low.
Very low Friday environment.
Yeah that makes sense [noise]. Thanks.
Thanks, a lot.
Your next question comes in.
Let's see.
Hey, guys.
Obviously snap and Facebook felt the brunt of apples privacy changes and I think you kind of a limit this to talk about it before but do you believe that it's been shifted out of social media and fatality, where you don't play and into the open internet or CTV as you talked about earlier and does that.
Did that benefit results at all or is it sounds like this to be a long term issue for social media players. So is this a catalyst for the open internet as we push forward.
Yeah, Nick this is Michael.
Good question I I believe so long term yes.
But there is a class of advertisers that really became expert at advertising and the mobile ecosystem and relied heavily upon IBSA.
That they're they're not going to be able to shift their spend overnight right on there just so used to that ecosystem.
The attribution measurements they've gone grown to trust their models are based upon.
From a conversion in lifetime value of acquisition all.
All those things have to be reworked.
Not unlike an advertiser that.
Live done.
Nielsen.
Household ratings and linear television having to get used to more of the measurement and CTV and so so I think there's no question in the open web will be a beneficiary from that.
I, just think there'll be an evolutionary and evolution period, where these marketers will have to tweak their their models get comfortable with new methodology new attribution.
And.
Continue from there.
That makes sense.
Additionally, I read that is D has created a data clean room to match Advertiser CRM data with with their first party data, obviously utilized snapper targeting efforts in details are scarce right now but.
This is obviously a big partner for you guys I'm just curious what are the implications here is magnate in ball and do you envision other publishers follows following suit.
[noise], yeah, so not to talk about Disney specifically because like.
Like you it's.
It's a relatively new concept for them and.
Belief would be that if it if it's done programmatically and it's.
The business that we currently have relationship with it would flow through the pipes.
The magnate pipe so.
There wouldn't be any adverse impact to us.
I do think you're going to see more of that I I don't think every publisher can stand up their own clean room, but it goes to show you how zealous.
She is are about guarding there.
User information right.
They have they're sitting on this mountain of information that.
To date hasn't really been acknowledged and the buying community. It's been a third party cookie World with third party data that is really rule the ecosystem.
And I think publishers are clearly seeing it shift.
And buyers are starting to acknowledge this is really good information they have a direct relationship with the consumer it's a consenting consumer I'm going to be able to target very well and so the idea of running your own clean room isn't that reduces it might've been two years ago. I do think you have to have a level of sophistication in size to warrant it.
We obviously talked about our clean room technology in multiple publishers use that but I do think you'll see more folks dip their toe in in that area.
But they are going to be.
The very large platforms like the pluses.
As opposed to.
A normal.
Sized.
Screaming and or otherwise publisher.
Mmm It sounds very helpful Best of luck going forward.
Thanks.
This can create that costs one I prefer.
I would like to turn the conference that sounds like a Michael that finding closing remarks.
Thank you <unk>.
So proud of how our team has worked remotely to bring this company together and serve our wonderful clients each day and I'm thrilled to keep updating you on our progress both in these settings and during the many investor meaningfully as scheduled.
Thank you for joining us for our Keithres results call.
We look forward to talking to many of you at virtual investor meetings hosted by Sig Tomorrow.
Conferences by Craig Hallum on November 16th RBC in November 17th and Stevens on December 2nd and need them on January 12th.
Thanks again for joining have a great evening.
The conference on everyone else has left to calm it looks like no one else is going to join this call in Annapolis.
[music].
[music].
Good afternoon, and welcome to the might not quite at 2021 conference call.
Will be in my friend or May not.
Kitchen please.
Police would not comment also all personal psyche alright.
Apple 12 propulsion Barbie Africana last question.
Off the costume pasta on one Arnold Palmer, Thank you uhm.
Italia Cross one puff that's M K.
Well not quite up.
Alright.
Alright can that kind of like that startled.
Pay for a home.
Thank you operator, good afternoon, everyone welcomed baghdad's third quarter of 2021 earnings Conference call. As a reminder of the comparisons you will be in the 10-Q as reported include the financial results of spots in spring Surfer Q3, 2021, but for the third quarter of 2020. The results do not include spots or sprints or if given the acquisition date.
Of April 30, and July 1st 2021, respectively. During.
During the course of this call when we refer to results and associated year over year comparisons with the phrase as reported you're referring to the basis as reported in our 10-Q.
When we make comments, referring to pro forma comparisons we are including spots in spring serve for the third quarter of 2020 in order to provide if you'd like to like comparison. Please keep in mind as it relates to spots in spring sort of acquisitions. Prior quarterly results are estimated and unaudited.
As a reminder, this conference call is being recorded joining me on the call today are Michael Barrett CEO, David day, or CFO I would like to point out that we have posted financial highlights life store Investor Relations website to accompany today's presentation.
Before we get started I will remind you that are prepared remarks. The answers to questions will include information that might be considered to be forward looking statements, including but not limited to statements concerning our anticipated financial performance and strategic objectives, including the potential impact of COVID-19, and our business as well as statements concerning the acquisition despotic, some sprints or and potential benefits.
Synergies, we expect to realize there from these statements are not guarantees of future performance. They reflect our current views with respect to future events and are based on assumptions and estimates and subject to known and unknown risks uncertainties and other factors that may cause our actual results performance for achievement to be materially different from expectations or result.
Ducted or implied by forward looking statements.
A discussion of these and other risks uncertainties and assumptions as set forth in the company's periodic reports filed with the SEC, including our Twenty-twenty annual report on Form 10-K, and our 10 cues for Q1, two and three for 2021, we undertake no obligation to update forward looking statements or relevant risks are commentary today.
Include non-GAAP financial measures, concluding revenue X tack or less traffic acquisition costs, adjusted EBITDA and non-GAAP income per share reconciliation between gap and non-GAAP metrics for a reported results can be found our earnings press release and the financial highlights deck that is posted on our Investor Relations website.
At times in response to your questions. We may offer incremental metric to provide greater insights into the dynamics of our business. Please be advised that this additional detail maybe one time in nature, and we may or may not provide an update on our future and the future on these metrics I encourage you to visit our Investor Relations website to access our press release financial highlights tacked periodically.
<unk> reports and webcast replay of today's call to learn more about backpack I will now turn the call over to Michael Michael. Please go ahead.
Thank you Nick.
It's been a busy three months since our last call, especially since we just hosted all of you on September 15th for Investor Day.
Which if you missed I would highly encourage you to review.
Format and channels, which combined were up 89% as reported or 26% on a pro forma basis.
Ah results are strong but were tempered with some late Q3 supply chain related add cancellations.
Which we have also experienced early in the fourth quarter.
Despite this temporary headwind as well as a tough political advertising comp from last year, we still exhibited very strong financial results again this quarter.
I'll first cover some quick performance highlights CTV revenue X Tac grew 51% on a pro forma basis.
R. D V plus business grew mid teens revenue X Tac year over year on a pro forma basis.
TB pluses comprised of our mobile in desktop businesses, which grew 18% and 11% respectively.
Adjusted EBITDA margins on a revenue X heck basis came in above expectations at 35%.
And we generated 34 million in operating free cash flow, which we define as adjusted EBITDA less capex.
This quarter CTV represented 38% of revenue X Tac and now represents the largest portion of our business.
After closing the springs serve acquisition this quarter.
We are in an even stronger position to capture and Gainshare and CTV with the addition of a strategic AD server.
The work we've done has created an industry, leading CTV market position.
With the ability to serve a broad set of customer types with many different products and services to fuel future growth as the only independent and and monetization platform.
It bears repeating that we now have.
Significantly widened and strengthen the customer segments, we serve occur.
Across device oan, such as Roku and Samsung.
Virtual mvpds, such as Slinging Hulu.
Digital first platform, such as Pluto and T V and of course major broadcasters and programmers such as this discovery and Fox, creating deeper more strategic more durable partnerships.
In addition, we.
We have we have also meaningfully expanded our service offering to touch more inventory and transaction paid.
And our CTV revenue includes not only fees for magnate managed auction.
But also fees from publisher directional deals manage service revenue.
Serving fees and value added services.
And we know participate in every part of the CTV buying process direct upfront and programmatic.
To our technology solutions and are managed service offering.
It is clear.
That IBSA removal has effected some industry players.
Want to be clear, we are not one of them, despite seeing well over 80% adoption of Iowa's 14 that five on our platform.
Our business doesn't participate in that downloads and we have very little social advertising, that's limiting our exposure.
Further underpinning this point, we have seen a shift from Iowa to Android and spend in better than expected cpm's from iOS opt outs, approximately 20% lower than often.
Keep in mind that iOS revenue as a percentage of our total revenue X Tac is in the mid single digits and there is zero CTV revenue in I O S.
As a reminder, on the third party Cookie front Google.
Google continues to plan to eliminate third party cookies and chrome towards the end of 2023.
We continue to believe at first party publisher segments collecting in a privacy complaint manner will be the future of identity solutions, and then ssp's will be a driving force behind this transition.
This is an area, where we are positioned extremely well.
Now I'd like to go into greater detail regarding the components of our AD spent to provide additional color.
I'll start with the strongest performing sectors in Q3.
Health and fitness home and garden retail and financial verticals continued to be the strongest performing year over year sectors.
On top of very strong Q3 2020.
Year over year growth rates in this group ranged from 16% to 45% and compared to pre covered levels bitchy. Your stack growth rates are all about 45% up to a high of 88%.
These sectors also jointly comprise a significant portion of industry ads, but.
When additional vertical that showed strength and Keithres arts and entertainment with the return of movies.
Sports and television productions, which was up over 70% year over year.
While we are focused on moving large linear television budgets over to CTV from leading national advertisers. We're also seeing traction moving smaller advertisers over to CTV in particular with respect to mid market and regional campaign.
Rei started with us in queue to tripled in Q3 is on pace for another big sequential increase in queue for <unk>.
CDW, who works with us through group them entered live sports CTV advertising this quarter.
And we ran CTV campaigns for the Tennessee Titans advanced auto parts and north face.
The weakest performing sectors in Q3 relative to last year, where political.
Emotive hobby.
Hobbies, and food and beverage.
Level is also still down double digits, and a two year stack, but up over 50% off a low base in Q3 of last year.
At a high level, we expect these trends to by and large persist and TQ for.
We continue to see strength in retail tech and home and garden and weakness in auto driven by the chip shortages and travel due to ongoing COVID-19 concerns.
The team has been very busy this quarter and there's a number of key wins worth mentioning.
We announced in conjunction with the trade desk and AMC networks, a new solution that allows television programmers to deliver addressable adds programmatically and linear television.
Quigley Simpson, a full service agency specializing in brand performance marketing.
Spend commitment and selected magnate to serve as the agency's preferred SSP spit.
Specifically for our strengths and CTV to address performance marketers needs.
To bow selected us this quarter as it's preferred SSP with a focus on my sports in the C. T V.
Network seven in Australia successfully used our platform during the Olympics, leveraging our advanced tools to more effectively manage large burst of inventory during live sporting events.
In addition to the client wins I'm proud to announce magnate one too Big and exchange Your awards last week at programmatic Io in New York.
First our CTV platform swept the best video technology for media suppliers Award.
Which recognizes.
Innovative and powerful publishing facing tech and the video space or.
Our entry.
Included success metrics from our work with AMC networks and the trade desk.
Second.
We wanted the best seller focus Technology award for a demand manager solution.
This award recognizes vendors that excel in helping publishers build stronger and more sustainable businesses and illustrates had demand manager helped.
The weather company with their add rendering speed spend diversification and scale.
As you can see it's been a very busy and productive courted for magnate.
Thanks to the tireless efforts to the magnate team, we continue to deliver our customers a valuable and highly differentiated solution.
We are the only scaled independent omnichannel solution in market.
And are confident that we will continue to gain and grow sure and CTV and D V plus in the quarters to come.
With that I will hand things over to David who will go into greater detail regarding financial performance and expectations.
Thanks, Michael.
We're pleased to announce a very solid Q3 to provide some more detail on results and to provide our outlook for growth in queue for Tom.
Revenue for Q3 was $131 $9 million revenue X tack was $114 1 million 80.
89% from Q3, 2020, unannounced reported basis and up 26% on a pro forma basis.
CTV revenue X Pac was $43 1 million in Q3 2021.
Quadrupled from $11.1 million last year and was up 51% on a pro forma basis.
Mobile revenue X tax grew 18% and desktop revenue S X tax grew 11% year over year, both on a pro forma basis.
Mobile and desktop combined now comprise what we call D D plus or display video and all other.
Our revenue mix for Q3, 2021, not an ex tack basis, but 38% CTV, 36% level and 26% desktop.
Creating expenses, which in our case include the cost of revenue for the third quarter of $155.8 million versus $71 $9 million in the same period a year ago.
Increases were primarily driven by the inclusion of products.
Adjusted EBITDA operating expenses, which represents the difference between revenue Ecotax and adjusted EBITDA.
$474.1 million for Q3, as compared to $2 $46 $6 million in Q3 2020.
Also driven primarily by the addition of products.
Costs were lower than expected driven by a postponement of our return to office.
Lower anticipated marketing event spend and reduced travel and entertainment costs.
In addition, like many companies hiring the right talent is taking longer than the current environment.
Regarding spot X acquisition related costs synergy goals, we've realized more than half of the 35 million and run rate synergies that we targeted the.
The next phase of synergy savings is on track and expected to occur as they migrate to one best in class CTV platform for our publishers and buyers in the future.
And lots of $24 $3 million in the third quarter of 2021 as compared to a net loss of $10.5 million in the third quarter of 2020.
The increase in net losses, primarily attributable to an increase in amortization acquired intangible related to the <unk> acquisition.
Adjusted EBITDA was $40 million, resulting in a margin of 35% as compared to an adjusted EBITDA of 13.7 million or margin of 23% in the third quarter of 2020 driven.
Driven by continued revenue growth in our legacy business by the additional products.
We calculate our adjusted EBITDA margin as a percentage of revenue next time.
Gap loss per share with 18 cents for the third quarter of 2021 compared to cap off per share 10 cents in the same period in 2020.
Non-GAAP income per share in the third quarter of $2021.14 compared to non-GAAP income per share a <unk> report for the same period in 2020.
There were 131 million weighted average basic shares.
Hundred $46 3 million weighted average diluted shares outstanding for the third quarter of 2021.
Capital expenditures, including both purchases of property and equipment and capitalize internal use software development costs for $6 million for the third quarter of 2021 in line with our expectations.
Operating free cash flow was $34 million in the quarter, which we define as adjusted EBITDA less capex.
As a reminder, or acquisition on screen served closed on July 1st with cash consideration $31 million.
Our interest expense for Q3, 2021 was seven 3 million of which roughly $6 million cash.
I've been in Q3, we have $188 million in cash on the balance sheet.
A slight reduction from Q2 was primarily impacted by the $31 million paid for the spring sort of acquisition and cash interest costs.
By cash flow generated from operations.
As a reminder, our cash balances contained disproportionately both up and down compared to the run rate of our business since we collect and pay the gross amount of flow through to our sellers. While we recorded revenue primarily on a net basis.
I will now share our future expectations.
We expect revenue X talk for the fourth quarter to be in the range of $138 million to $142 million.
We expect revenue tax tax attributable to CTV for the fourth quarter to be in the range of $52 million to $56 million.
We expect that CTV will have solid growth in queue for even with pressure on automotive and travel spend as Michael mentioned tough political comps and an abnormally strong finish to Q4 of 2020.
We believe these factors are transitory and will improve in 2022.
We expect that adjusted EBITDA operating expenses in Q4 will be $79 million to $81 million.
Sequential cost increase in queue for is primarily due to increased cloud computing costs related to seasonality return and some marketing expenses and office related expenses due to new office leases.
As a reminder, we expect to that returned to office marketing and travel costs will add an incremental $3 million to $4 million per quarter and operating expenses next year.
Based on the midpoint of are expected revenue Max Tac and adjusted EBITDA operating expense ranges.
Adjusted EBITDA margin in key for it to be approximately 43%.
We expect Capex for Q4, 2021 will be roughly $8 million.
We expect Capex in 2022 to be in the range of $35 million to $40 million.
We continue to target longterm annual revenue X tag growth of 25%.
And adjusted EBITDA over revenue X Pac margins are 35% to 40%.
We are thrilled with progress our teams are making especially considering all that they've had to accomplish and to integrate with our three merged and acquired companies all well working remotely.
Q3 continue to show the powerful financial leverage we have in our business model with strong adjusted EBITDA margin expansion that comes with our revenue growth.
With that let's open the line for Q&A.
We will now begin the cross form ankle function.
Asked a question.
That's on one on your telephone keypad.
If you're using a speaker phone please pick up a handful of my pet's name Nicki.
To withdraw your question.
Mmk.
This time will pass <unk> off there.
No. Our first question comes from La Martin with medium.
How about.
Private number right.
Thanks.
On that.
My first I'm, sorry, if I'm in the.
The address the address I think cable so your Thanksgiving.
Revenue growth with two times the average could you Tom Pollock is that how you got a new car.
Leaving or you got in law, Arthur a larger budget you got it.
Long.
<unk>.
That's driving the growth of CTV twice the average.
Yeah, Hey, like Michael I will jump on that person David can provide additional colors, yes, I think it's a little bit of all the above I think what we're seeing is.
In terms of.
Same store sales if you will just.
Just increasing opportunities with the supply client the publishers that we have on board.
And I think that that's kind of a natural evolution that we've talked about and that is.
Reticence, if you're a publisher whether youre CTV or not when you I turned into the programmatic world if you're used to direct sale sold inventory and little by Little you start to see that programmatic is complementary if not even higher.
Monetization indirect cell.
And.
Inventory is freed up.
As a result of that.
Other than the the growth rate in that area for that David I don't know if you have color on <unk>.
<unk> or anything like that.
No I think I have anything to add as Agl's cpm's have been consistently strong.
Throughout the year no significant changes Arafat era as we all know they are very high.
Typically in at $20 plus range and CTV.
Okay, Great I'm on my second question on that I'll get accurate count.
I started helpful.
On the ads on the freeway.
On your competitive profession not at Yahoo.
Perhaps away from them.
None that were.
Going to talk about right now Laura but.
Traction is.
Really positive in.
Again, and as you well know.
For the benefit of others. The idea of spring serve as part of magnate wasn't this rip and replace it free well it was more as a complement to present AD serving options at the CTV poachers have.
And it would allow us to get access to inventory.
Primarily.
Private marketplace deals or P. G programmatic guaranteed deals that we wouldn't have access to before and Thats burying itself out and we'll definitely be able to share more color as the quarters go on.
I'll probably much.
Thank you.
Yeah. Our next question comes home to Kal that's tough.
Hey, guys instead.
Is that a couple of questions.
I was wondering just first.
If you guys could just talk a little bit about it.
How you're feeling about your positioning in execution CTV space and David.
You just talked about a little bit just now but in your prepared remarks talked about some of the headwind in the fourth quarter for CTV could you just elaborate on on each of those I think he called out a few.
And then second question.
Michael I think you've called out some vertical where you were seeing some some issues and I was just curious.
With the.
With all the concern around the global supply chains and disruptions.
If those were to get worse in the in the fourth quarter.
Where do you think you would show up I mean, do you think it would show up kind of across the board do you think it would be.
In certain areas of programmatic, but not in other areas just kind of curious if you could take on that thank you.
Sure why don't I go first because it'll dovetail into David's comments that were specifically related to CTV for Q4 from a.
Forecast standpoint or guidance, rather yeah. So it's interesting I think generally speaking if there are supply chain.
It exacerbates, which.
Desktop, what we're sensing and when we talk to our agency partners and advertisers.
We're sensing that there is some.
Sectors verticals immune to the supply chain challenges and others that are severely impacted by it.
And by and large those sectors spread out pretty evenly across the platform unit easy class CTV, maybe a percentage point difference here or there with one with one large exception and that is as you know we have this Ah managed service business H.
Focuses a lot on kind of middle market advertisers.
And there we.
Have a disproportionate contribution of the auto sector.
Vertical.
Go to market team.
Why is that well one of the largest regional advertisers are the big rooftop.
Car dealerships.
The <unk>.
CTV enjoy it immensely and they're the biggest affected by supply chain inventory to sell very hard to justify advertising.
And so with rare exception.
Pretty much across the board, but a little bit.
Significantly higher index of auto in the CTV numbers, Susan mid market team.
And travel regional tourism is over indexed on that team as well. So so there's two sector as being particularly hurt when by Covid one by supply chain.
Impacts CTV disproportionately.
I don't know David if you have more color on that that you'd like to share.
Yeah, let me qualify that a little bit and 10 first we feel great about our momentum heading into the queue for which I can will be a strong quarter.
From a cop perspective, if you were to remove political from 2020 Q for our guide.
Guide.
Straight up is about a 23% year over year growth and CTV. If you were to remove the political comp you get to the low thirties in.
In a year over year growth scenario.
And if we look the weakness that Michael mentioned and travel in automotive.
We we believe that's impacting us two perhaps $3 million to $4 million in CTV in queue for and key factor that and we're worried about a 40% year over year growth rate and so.
With the with the comp issues and with with this what we think are transitory issues from a from a supply chain perspective.
Feel good about Q4, and hopefully that helps to quantify that that impact of a little bit.
Yeah that was helpful Guy Thank you.
Okay.
Yeah. Our next question comes from telephone crying with Craig Hallum.
Hi.
Alright, Thanks, guys, David I want to start out with one for you. Just curious if you can maybe give us an idea of kind of the methodology as you go into the queue for guide for Michael's commentary it sounds like some of the disruption that you recognized maybe started at the tail end of Q3, and obviously, we're only about a month.
In the queue for so just curious.
How you are affecting that into the guide whether it's a continuation of what you saw late in Q3, or if you're anticipating maybe some verticals, having a little bit more of a hiccup and you are seeing right now.
And as you as you mentioned the asset or guidance.
Anticipates that includes.
Some of that softness in those sectors.
It assumes our guide assumes that the softness that we've seen in September and.
What we've seen in October continue throughout the rest of the year.
And so it's been now we think that's been stable on October and that's what we've reflected in our guidance for the quarter.
Got it.
Michael maybe one for you.
Now that you've.
Fully acquired spring, Sir can you give us a little understanding of how you go to market with that solution. Because obviously, there's there's greater market share for magnate out there than there is for spring serve so how do you utilize.
Or your magnate market to kind of promote spring serve AD server and tried to grow volume or usage there.
Yeah, Great call Jason.
A in in.
Inflate right.
The belief is that it is the springs serves standalone answering business is as strong business and by and large.
That business.
Is from a go to market standpoint represented by.
Folks still carry the spring serve business card if you will.
Obviously in cases, where magnate as a deep relationship with a publisher.
We utilize that relationship with magnate and make the introduction where it gets interesting is when we're talking about magnate demand going through springs served.
And working with clients in that respect and then that's very much of a coordinated effort with magnay as lead in that case and so.
The.
The great part about spring sort of being part of magnet is not just.
Investment in the car.
Current product roadmap access to the hundreds of engineers and product folks that we have but also expansion.
Globally.
As you know we have the big footprint in APAC, a big footprint in EMEA spring serve has largely been.
Not in those markets and so we see that is a huge opportunity to lead through magnates.
Presence in the marketplace to kind.
Start on third base as opposed to.
<unk> start that would normally occur springs for springs have been quite a magnet.
Perfect and now I'm going to try to sneak in one last one unconnected television so.
Obviously, we're seeing some disruption from things like <unk> in the market and I understand for your comments you aren't seeing that but over time, we've talked about CTV potentially being this flight to safety because it has not impacted by cookies and because it's not impacted by mobile ideas and.
Get that some maybe verticals are seeing pressure and whatnot, but do you believe that we're seeing that flight to safety kind of.
Happening in any of these end markets or do you still think that CTV can represent some type of the safe haven longer term as that market isn't being disrupted like other channels are.
Yeah, I mean, I I think that on the edges, there's a lot of opportunity for CTV.
You read a lot about the advertisers that have stalled Derek campaigns are stopped spend or decreased spend because they're having a really challenging time.
Working with attribution and customer acquisition costs et cetera, those guys are extraordinarily lower funnel they are extremely sophisticated.
Mobile advertisers.
To think that they might jump.
Jumped from that world right into the World is CTV.
Is probably a bit of a stretch.
Or the guys that spend you know.
Thousand Bucks a day.
$5000 a day on the Facebook C&C cramps et cetera, but then there is a whole other slew of marketers that do social video advertising that have much larger campaigns that also.
Take into account brand attribution that I think are perfect and and our team is setup for that Jason we have a team that goes after those brands is performance oriented brands that have Ah.
National budget that we think can transfer over them and we're having a good deal of success. There we think that it kind of stays with the the line that we've been saying is that CTV is is kind of democracy.
Market position of advertising, it's not just the top 200, Ellen Hayes is going to be 10000 advertisers and its bearing itself out.
Got it thanks guys.
Our next question comes Hensley that's <unk>.
Hi, This is Ben on for shut off I just want to ask the first question on CTV is there any way that you can break up you talked about your.
Your new and existing partnerships with various publisher group, though from Mvpds OEM major content producers like any way to break up the relative size of those segments by revenue in terms of contribution to CTV revenue and then which are like the fastest growing.
Okay.
Yes, David.
Yes, we have we haven't really shared those.
That break out.
Externally.
And I would.
There's really not any segment that that significantly more quickly or more slowly growing than the others.
We've really got momentum really across the board.
Okay.
Okay, if I could just ask another one on Ah.
Analysts say you shared thought about demand manager adoption being I think 20% of total Prebid request do you think you can get that to 50% plus you just talk about like progress there how you get there.
I understand that.
Advertisers to spend at that than using command manager are a lot more valuable just any color you can fill out there.
Yeah sure. So uhm, yeah. So as you heard from me.
Investor Day, we.
Credibly bullish about demand manager.
As a standalone product, but also as this kind of wedge.
To be able to get more business from.
R.
Publishers, primarily in the P. P G area.
And so.
As we talked about the when.
When we first of all it's demand manager a coupla years back the sweet spot of the marketplace was.
Publishers that were sophisticated.
Had a direct sales team themselves, but weren't so large that they could afford internal resources.
Two.
Run prebid on its own right and so those were the.
The low hanging fruit, but they were kind of middle sized to you know a little bit further down the chain.
<unk>, if you will in terms of size.
And the sales cycle was going to be longer than the big enterprise folks folks like weather.
It was gonna take awhile.
To understand why they would pay for a product that they're kind of using for free and then they understand the internal costs and the development cycles and how quickly we.
Improved on the product and and so that's the exciting realm that we're kind of in this new area, where where where knock it down these enterprise publishers and that's I think how you get 50% right.
If you in one of those guys in terms of the number of impressions that flows through the system versus the smaller folks you don't nearly need as many.
Clients.
That we think we're extraordinarily well positioned in and as the.
Battle moves from could you deprecation, so having header bidding on the page doesn't make as much sense anymore to having a complete server to server solution.
That really becomes a really tough.
Ah.
A tough road for publishers to manage that themselves and we think that even provides greater incentive to work with demand manager.
Oh.
Thank you.
Your next question comes I'm, not fond Penwith IDC capital market.
Yeah. Thank you so much for taking my question, if I could just dig a little bit deeper on the supply chain issues. Thank you. So much David for quantifying the queue for impact is there any way we can get a little more color on the exact Q3 impact or maybe how the quarter was trending early or mid September just trying to kind of.
To separate out the things you can versus you can't control them a quarter.
[noise], Yeah, obviously, the trends that we quantify $3 million to $4 million wherever the full quarter and I think those trends.
Starting to observe probably over the month of September so.
That's how I guess I'd quantify that impact for the third quarter.
Okay.
A third of those levels I guess.
Right I'll I'll bust out my calculator and I can figure that one out [laughter].
[laughter].
So going back to you know more companies specifics and Investor day, we talk kind of other companies specific Tam around 23% of your current mix. So as we're seeing CTV go up as a percentage that three year taggert now feels like it might already be pretty close to 25%.
Could you just talk a little bit about how to think about that long term guidance, we've been given of over 25% relative to that market growth.
T V. It takes on a larger portion of revenue.
Yeah. So.
CTV revenue growth Magna just came out with.
34% growth for next year.
Others have that growth at a at a higher level and so we think those those levels are sustainable and we think we can take share.
If you'll notice also from an overall revenue perspective.
Desktop, which is expected to be sort of flat grew 11% in the quarter and so that shows that were taking share in other areas. In addition to to CTV and so we feel strongly that.
<unk>.
Revenue overall revenue growth of over over 25%.
Is achievable and to your point has CTV continues to grow as a as a percentage of our total revenue by definition that will have upward support for overall revenue growth rates.
Oh, thank you.
Your next question come 10, 10, nine with Macquarie.
Hi, Thanks, so much for taking the question.
It's on CTV as well maybe more television broadly you guys have such a great position, representing so much inventory across television now I guess more with linear as well just AMC network steel I think is interesting my <unk>.
Question is.
Measurement is a huge topic right now in the industry and I'm wondering if you could talk a little bit about what measurement services, you use and what things you see coming down the Pike and how you think the whole measurement of TB in CTV evolves over the next year or two thanks.
Yeah, It's a great question and I'll hit it so generally speaking as a.
As a exchange.
An advocate of the publisher.
We.
Work with you know every buyer underneath the Sun and.
Many come with their own requests we want this campaign measured this way we weren't this campaign measured this way with that third party.
So we have to necessarily work with everybody.
We're kind of not in the business and then being kingmaker.
We're just the facile for the person with AIDS.
That are able to.
Work with any measurement service, we do proactively work with.
A handful to create audience segments based upon their measurement.
To help buyers, particularly.
And demanded service area.
And.
Several relationships there but.
Then I think our role is to be open to any new credible form of measurement that requested in the marketplace and we will support it.
As it relates to how it evolves, it's going to be extraordinarily interesting you have N B C.
Doing an RFP for a new measurement vendor.
Obviously nielsen's involved in that RFP, but so are a lot of other start ups and newer companies and then you have the folks like Ah roku or Hulu that have their own measurement within their own walled garden and aren't really sharing outside of it which isn't helping.
With the overall adoption CTV, so I would say the bright spread about measurement is.
It's acknowledged that it's an area.
Of growth and area of improvement.
And if we're seeing this kind of interest in CTV with slide measurement when the industry gets it.
Act together I think that'll be a real catalyst to be able to propel growth even further.
[noise], Thanks, and maybe if I could tack on related question, which is about add fraud, which kind.
Kind of comes and goes as a topic and I have been reading a bit more about it lately in terms of that program CTV space and.
Any any comments you can make on you know kind of the status there and what you can do to help prevent that.
Yeah, so again in that respect.
When we went to Platt.
Platform, we work with are the leading vendors and the.
<unk>.
Fraud area.
To make sure that the inventory is.
So called washed.
And.
I think that.
The fraud that.
Is.
Somewhat prevalent in the industry is largely.
Side a magnate.
Because we have direct relationships with the publisher.
And we get the signal directly from them that it's a lot easier for us to add.
From our inventory quality standpoint to ensure that this is exactly what they said it was.
So I think that you'll find on magnate, it's a pretty well curated well lit.
Low.
Well Friday environment.
Yeah that makes sense. Thanks.
Thanks, a lot.
Your next question comes <unk> with Steven.
Hey, guys.
Obviously snap and Facebook felt the brunt of apples privacy changes.
And I think you kind of alluded to this to talk about it before but do you believe has been shifted out of social media.
<unk>, where you don't play and into the open Internet or CTV as you talked about earlier and.
Does that that did that benefit results at all or is it sounds like this could be a long term issue for social media players. So is this a catalyst for the open internet as we push forward.
Yeah, Nick and this is Michael Uhm good question.
I believe so long term, yes mm.
But there is a class of advertisers that really.
Kane expert at advertising and the mobile ecosystem and relied heavily upon IBSA.
That they're they're not going to be able to shift their spend overnight right. There just so used to that.
System.
The attribution measurements they've grown to trust their models are based upon.
From a conversion in lifetime value of acquisition.
All those things have to be reworked.
Not unlike.
Advertisers.
Live done.
Nielsen.
Household ratings and linear television having to get used to more of the measurement and CTV and so so I think there's no question in the open web will be a beneficiary from that.
I, just think there'll be an evolutionary and evolution period, where these marketers will have to tweak their their models get comfortable with new methodology new attribution.
And.
Continue from there.
That makes sense. Additionally.
Additionally, I read that Disney has created a data clean room to match advertisers CRM data with with their first part of data.
Obviously utilizing that for targeting efforts in details are scarce right now but.
This is obviously a big partner for you guys I'm just curious what are the implications here is magnate involved and do you envision other publishers follows following suit.
[noise], yeah, so not to talk about Disney specifically because like.
Like you it's.
It's a relatively new concept for them and.
Belief would be that if it if it's done programmatically.
And it's.
The business that we currently have relationship with it would flow through the pipes.
The magnate pipe so.
There wouldn't be any adverse impact to us.
And I I do think you're going to see more of that I I don't think every publisher can stand up their own clean room, but it goes to show you how zealous.
Wishes are about guarding there.
User information right.
They have they're sitting on this mountain of information that.
To date has it really been acknowledged and the buying community. It's been a third party cookie World with third party data that is really rule the ecosystem and I think publishers are clearly seeing it shift.
And buyers are starting to acknowledge this is really good information they have a direct relationship with the consumer it's a consenting consumer aren't going to be able to target very well and so the idea of running your own clean room isn't that reduces it might've been two years ago. I do think you have to have a level of sophistication in size to warrant it.
We obviously talked about our clean room technology in multiple publishers use that but I do think you'll see more folks get their toe in in that area.
But they are going to be.
Very large platforms like the pluses.
As opposed to.
A normal.
Sized.
Screaming and or otherwise publisher.
I remember that makes sense very helpful best of luck going forward.
Thanks.
This can create that question asked that question I would like to turn the conference back over to Michael that finding closing remarks.
Thank you <unk>.
So proud of how our team has worked remotely to bring this company together and serve our wonderful clients each day and I am thrilled to keep updating you on our progress both in these settings and during the many investor meaningfully as scheduled.
Thank you for joining us for Q3 results call.
We look forward to talking to many of you at virtual investor meetings hosted by Sig Tomorrow.
Conferences by Craig Hallum in November 16th RBC in November 17th and Stevens on December 2nd and need them on January 12th.
Thanks again for joining have a great evening.