Q1 2024 Magnite Inc Earnings Call
Operator: Good day, and welcome to the Magnite First Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode.
Good day and welcome to the bag night first quarter 'twenty 'twenty four earnings conference call.
Speaker Change: All participants will be in listen only mode.
Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your telephone keypad. To withdraw your question, please press star, then 2. Please note, this event is being recorded. I would now like to hand the call to Nick Kormeluk of Investor Relations. Please go ahead.
Speaker Change: Should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
Speaker Change: After todays presentation, there will be an opportunity to ask questions.
Speaker Change: To ask a question you May press Star then one on your telephone keypad.
Speaker Change: To withdraw your question. Please press Star then two.
Speaker Change: Please note this event is being recorded.
Speaker Change: I would now like to hand, the call to Nick Corbel Luke of Investor Relations. Please go ahead.
Nick Kormeluk: Thank you, operator, and good afternoon, everyone. Welcome to Magnite's first quarter 2024 earnings conference call. As a reminder, this conference call is being recorded. Joining me on the call today are Michael Barrett, CEO, and David Day, our CFO.
Speaker Change: Thank you operator, and good afternoon, everyone. Welcome to <unk> first quarter 2024 earnings Conference call. 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 on our Investor Relations website to accompany today's presentation before we get started.
Nick Kormeluk: I would like to point out that we have posted financial highlight slides on our investor relations website to accompany today's presentation. Before we get started, I will remind you that our prepared remarks and answers to questions will include information that might be considered to be forward-looking statements, including but not limited to statements concerning our anticipated financial performance and strategic objectives, including the potential impacts of macroeconomic factors on our business. These statements are not guarantees of future performance; they reflect our current views with respect to future events and are based on assumptions and estimates and are subject to known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from expectations or results projected or implied by forward-looking statements.
Nick Kormeluk: A discussion of these and other risks, uncertainties, and assumptions is set forth in the company's periodic reports filed with the SEC, including our first quarter 2024 quarterly report on Form 10-Q and our 2023 annual report on Form 10-K. We undertake no obligation to update forward-looking statements or relevant risks. Our commentary here today will include non-GAAP financial measures, including contribution ex-tac, or less traffic acquisition costs, adjusted EBITDA, and non-GAAP income per share.
Speaker Change: I will remind you that our prepared remarks and answers to questions will include information that might be considered to be forward looking statements, including but not limited to statements concerning our anticipated financial performance and strategic objectives, including the potential impacts of macroeconomic factors on our business. These statements are not guarantees of future performance. They reflect our current views with respect to <unk>.
Nick Kormeluk: Future events and are based on assumptions and estimates and are subject to known and unknown risks uncertainties and other factors that may cause our actual results performance or achievements to be materially different from expectations or results projected or implied by forward looking statements for a discussion of these and other risks uncertainties and assumptions is set forth in the company's periodically.
Speaker Change: But with the SEC, including our first quarter 'twenty 'twenty four quarterly report on Form 10-Q, and our 2023 annual report on Form 10-K, we undertake no obligation to update forward looking statements or relevant risks. Our commentary today will include non-GAAP financial measures, including contribution ex Tac or less traffic acquisition.
Speaker Change: 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 the Investor Relations website at times in response to your questions. We may offer additional metrics to provide greater insights into the dynamics of our business. Please be.
Nick Kormeluk: 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 the Investor Relations website. At times, in response to your questions, we may offer additional metrics to provide greater insights into the dynamics of our business. Please be advised that this additional detail may be one-time in nature, and we may or may not provide an update on the future of these metrics.
Speaker Change: Buys that this additional detail maybe onetime in nature, and we may or may not provide an update on the future of these metrics I encourage you to visit our Investor Relations website to access our press release financial highlights deck periodic SEC reports and the webcast replay of today's call to learn more about back that I will now turn the call over to Michael. Please go ahead.
Nick Kormeluk: I encourage you to visit our Investor Relations website to access our press release, financial highlights deck, periodic SEC reports, and the webcast replay of today's call to learn more about Magnite. I will now turn the call over to Michael. Please go ahead.
Michael G. Barrett: Thank you, Nick. I'm pleased to report that results for Q1 once again exceeded our top-line guidance for contribution XTAC across all business lines, particularly CTV, which grew 18% in the quarter. Our DV Plus business also performed very well, delivering contribution XTAC growth of 9%. We've had a great start to 2024 and an exceptionally strong March and remain optimistic that positive trends will continue throughout the year. Our best-in-class CTV platform has benefited from a number of key accelerators.
Michael G. Barrett: Thank you Nick I am pleased to report the results for Q1, once again exceeded our top line guidance for contribution ex Tac across all business lines, particularly C. T V, which grew 18% in the quarter.
Michael G. Barrett: Our D V plus business also performed very well delivering contribution ex Tac growth of 9%.
Michael G. Barrett: We've had a great start to 'twenty 'twenty, four and an exceptionally strong March and remain optimistic that positive trends will continue throughout the year.
Michael G. Barrett: Our best in class CTV platform benefited from a number of key accelerators.
Michael G. Barrett: Last quarter, we emphasized the strength of our platform for handling live sports. In the quarter, this was demonstrated through strong performance in NCAA Basketball March Madness, proving how valuable Magnite is as a monetization partner for this highly sought-after inventory. Our ad serving business, Spring Serve, also delivered stellar results from new wins and ramping partners and continues to be a strong differentiator for us and highly strategic. The combination of SpringServe and our Magnite Streaming SSP makes us much more than just a conduit for demand; we offer a complete solution that includes ad serving, yield monetization, audience capabilities, and a host of tools to protect the consumer viewing experience and honor complex rules around competitive separation and frequency capping.
Michael G. Barrett: Last quarter, we emphasize the strength of our platform and handling live sports.
Michael G. Barrett: In the quarter. This was demonstrated to strong performance and NCAA basketball March madness.
Michael G. Barrett: Moving how valuable magnate is is the monetization partner for this highly sought after inventory.
Michael G. Barrett: Our AD serving business Springs are also delivered stellar results from new wins and ramping partners and continues to be a strong differentiator for us and highly strategic.
Michael G. Barrett: The combination of spring served in our magnate screaming S. S. P makes us much more than just a conduit for demand.
Michael G. Barrett: We offer a complete solution that includes AD serving yield monetization audience capabilities and a host of tools to protect the consumer viewing experience in honor of complex rules around competitive separation and frequency capping.
Michael G. Barrett: We are also deeply embedded within our client's workflow, so from their perspective, this combined implementation of our ad server and SSP looks more like a typical enterprise software solution. This stickiness creates a meaningful moat and barrier to entry for others.
Michael G. Barrett: We are also deeply embedded with our and our clients' workflow. So from their perspective. This combined implementation of our AD server and S. S. P looks more like a typical enterprise software solution.
Michael G. Barrett: Stickiness creates a meaningful moat and barrier to entry for others.
Michael G. Barrett: And in our case, the barrier is not just workflow for MAD operations; it is also in the form of superior monetization. For all of these reasons, we believe having the best streaming first ad server and the most technologically advanced SSP combined in one offering gives us a significant market advantage in retaining, expanding, and winning new business. We've been really excited to build on our U.S. leadership position by expanding SpringServe globally with new wins in international markets and broadening existing partnerships.
Michael G. Barrett: In our case the barriers not just workflow from an operations. It is also in the form of superior monetization.
Michael G. Barrett: For all these reasons, we believe having the best screaming first AD server.
Michael G. Barrett: And the most technologically advanced assets P. Combined in one offering gives us a significant market advantage in retaining expanding and winning new business.
Michael G. Barrett: We've been really excited to build on our U S leadership position by expanding spring serve globally with new wins internationally and broadening existing partnerships.
Michael G. Barrett: These wins and ramping customers include Titan for Philips' operating system, Barca One, the Barcelona football club streaming app, Altice France, and YTV Japan, a leading Japanese broadcaster. Clearline, our self-service direct buying platform, is continuing to gain traction, and we have numerous agencies and multiple brands testing and transacting through Clearline.
Michael G. Barrett: These wins and ramping customers include tightened for Philips operating system.
Michael G. Barrett: One Barcelona football clubs streaming app.
Michael G. Barrett: Piece, France, and why T B Y T V, Japan, a leading Japanese broadcaster.
Michael G. Barrett: Clear line, our self service direct buying platform is continuing to gain traction and we have numerous agencies and multiple brands testing and transacting through clear line.
Michael G. Barrett: Of particular note, we are very excited to announce an expansion of our MediaOcean partnership to include an exclusive deal for CTV buying through ClearLive. MediaOcean represents over $200 billion in total spend, and their products are deeply integrated into the linear TV and media buying workflows of agencies and brands. Through this partnership, linear TV buyers will be able to use the MediOcean planning tool to directly buy CTV inventory through Clearline.
Michael G. Barrett: A particularly of particular note we were very excited to announce an expansion of our media Ocean partnership to include an exclusive deal for CTV buying through clear line.
Michael G. Barrett: Media Ocean represents over 200 billion in total spend and their products are deeply integrated into the linear TV media buying workflows of agencies and brands.
Michael G. Barrett: Through this partnership linear TV buyers will be able to use the media ocean planning tool to directly buy CTV inventory through clear line.
Michael G. Barrett: Specifically, targeting a large 60 billion plus US linear TV total addressable market for us to be able to convert into CTV ad buys. In addition, through feedback from our various agency partners, we are hard at work on building and launching additional features and functionality in Q2 in preparation for live sports programming like the Summer Olympics, NFL, and college football, as well as the fall election. Stepping back to look a little bit more broadly at the CTV market, recently, some attention has been given to the advent of DSPs connecting directly to sellers in the connected TV landscape. Some observers have been anxious about what this means for cell-side platforms like MAG.
Michael G. Barrett: Specifically targeting a large 60 billion plus U S linear TV total addressable market for us to be able to convert into CTV ad buys.
Michael G. Barrett: In addition through feedback from our various agency partners. We are hard at work on building and launching additional features and functionality in Q2 in preparation for live sports programming like the Summer Olympics, NFL and college football as well as the fall elections.
Michael G. Barrett: Now stepping back to look a little bit more broadly at the CTV market.
Michael G. Barrett: Recently, some attention is being given to the advent of DSP is connecting directly to sellers in the connected TV landscape.
Michael G. Barrett: Some observers had been anxious about what this means for sell side platforms like magnate.
Michael G. Barrett: Our perspective, backed by both data and experience, leaves us more optimistic than anxious. It's important to remember that the concept of direct connections isn't new. The Trade Desk introduced OpenPath across display and video just over two years ago, sparking similar concerns. Despite this, our DV Plus businesses continue to gain share, and we have accelerated our growth rate year over year. This experience strengthens our confidence.
Michael G. Barrett: Our perspective is backed by both data and experience leaves us more optimistic than anxious.
Michael G. Barrett: It is important to remember that the concept direct connections isn't new the trade desk introduce open path across display and video just over two years ago, sparking similar concerns.
Michael G. Barrett: Spite this R. D V plus business has continued to gain share and we have accelerated our growth rate year over year.
Michael G. Barrett: This experience strengthens our confidence.
Michael G. Barrett: While some large media owners are likely to test or adopt a dual-pipeline approach to drive incremental programmatic demand, we believe differentiated SSPs like Magnite will continue to thrive for the following reasons. First, it's about values and incentive alignment. Demand-side platforms are, by definition, incentivized to prioritize the needs of advertisers and agencies over anyone else. In contrast, SSPs like Magnite are built to help the sell-side win, full stop. Everything we do is through this lens, including the guidance we give on a daily basis and the tech we provide for complex operations, such as billing, collections, reconciliation, fraud protection, and, of course, yield management. The second reason relates to holistic yield management.
Michael G. Barrett: While some large media owners are likely to test or adapted to pipeline approach to drive incremental programmatic demand, we believe differentiated ssp's like magnate.
Michael G. Barrett: SSPs are uniquely positioned to help media owners optimize yield decisions holistically, leveraging data and AI insights to maximize clients' revenue across all formats and channels. The larger, more global, and more technically comprehensive the SSA, the more effective it is, and Magnite is uniquely positioned on all these fronts. The third reason is a universal, more efficient, and safer publisher deal environment. A universal deal library, such as what we provide for many of our seller clients, enhances deal value by ensuring broader and more equitable demand access.
Michael G. Barrett: It continued to thrive for the following reasons.
Michael G. Barrett: First it's about values and incentive alignment.
Michael G. Barrett: The alternative, under a direct connect scenario, is multiple deal libraries in each connected DSP, resulting in buyer inefficiency, potential data leakage, and poor user experience. Number four is all about the ability to capture demand from a growing number of diversified streaming advertisers. We are in the early stages of CTV advertising, and the focus, rightfully so, is capturing linear dollars spent by broadcast advertisers. Today, a handful of DSPs handle this business. But that isn't the future.
Michael G. Barrett: Demand side platforms are by definition incentivize to prioritize the needs of advertisers and agencies over anyone else in contrast, ssp's like magnet or built to help the sell side when full staff.
Michael G. Barrett: Everything we do is through this lens, including the guidance, we gave on a daily basis and the tech we provide for complex operations, such as billing collections reconciliation fraud protection and of course yield management.
Michael G. Barrett: Second reason relates to holistic yield management S. S piece are uniquely positioned to help media owners optimize yield decisions holistically.
Michael G. Barrett: Leveraging data and AI insights to maximize clients' revenue across all formats and channels the larger more global and more technically comprehensive DSA. The SSP the more effective it is and magnate is uniquely positioned on all these fronts.
Michael G. Barrett: The third reason is a universal more efficient safer publisher deal environment.
Michael G. Barrett: Our Universal deal library, such as what we provide for many of our seller clients enhances deal value by ensuring broader and more equitable demand access.
Michael G. Barrett: The alternative under a direct connect scenario is multiple deal libraries and each connected DSP.
Michael G. Barrett: Resulting in buyer inefficiency potential data leakage and poor user experience.
Michael G. Barrett: Number four is all about the ability to capture demand from a growing number of diversified streaming advertisers.
Michael G. Barrett: We are in the early stages of CTV advertising and the focus rightfully. So is capturing linear dollars spent by broadcast advertisers today, a handful dsp's handle this business, but that isn't the future.
Michael G. Barrett: The future is 5,000-plus advertisers, not 500. These digital-first advertisers will demand precise targeting in a biddable environment and will partner with a host of DSPs in buying tools. It will be impossible for a streaming publisher to directly connect all of this demand without absorbing huge build-out costs for no economic value.
Michael G. Barrett: The future is 5000, plus advertisers not 500. These digital first advertisers will demand precise targeting and a biddable environment and will partner with a host of DSP and buying tools.
Michael G. Barrett: It will be impossible for a screaming publisher to directly connect all of this demand without observed absorbing huge build out cost for no economic value.
Michael G. Barrett: These publishers will lean on a tech partner that can easily integrate this disparate demand and ensure the best yield. Magnite's combination of SSP and AdServer uniquely positions us as the monetization partner of choice for CTV publishers. And the last reason is our unique demand. Magnite's strategic agency deals, managed service operations, clear line demand, and partnerships like our exclusive deal with MediOcean represent a vital part of publisher revenue streams, and this revenue only flows through our SSP pipe. It's also important to mention that almost any direct DSP implementation is integrated through Spring Serve, either as the primary ad server or as the programmatic layer sitting on top of third-party ad servers.
Michael G. Barrett: These publishers will lean in the tech partner that can easily integrate this disparate demand and ensure the best yield Magna.
Michael G. Barrett: Magnates combination of S. S. P N AD server uniquely positions us as the monetization partner of choice for CTV publishers.
Michael G. Barrett: And the last reason is our unique demand.
Michael G. Barrett: <unk> strategic agency deals managed service operations clear line demand and partnerships like our exclusive deal with media Ocean represents a vital part of publisher revenue streams and this revenue only flows through our S. S. P pipes.
Michael G. Barrett: It's also important to mention that almost any direct ESP implementation is integrated through spring serve either as the primary AD server or as the programmatic layer sitting on top of third party ad servers.
Michael G. Barrett: So, while the disintermediation narrative makes for a nice headline, Magnite continues to participate in the economy through our deep partnerships with the likes of Disney, Roku, and Warner Bros. Discovery, Paramount, Fox, Samsung, LG, and Vizio ensure we have a valuable long-term role in the growth of the CTV market. We are excited to enter the 2024 upfront season, during which a majority of these partners will continue to expand their programmatic advertising efforts as it relates to CTV ad sales. Now I'm moving over to DV Plus.
Michael G. Barrett: So while the disintermediation narrowed it makes for a nice headline magnay continues to participate in the economics.
Michael G. Barrett: Our deep partnerships with the likes of Disney Roku Warner Brothers Discovery, Paramount Fox, Samsung LG and Vizio ensure we have a valuable long term role in the growth of the CTV market.
Michael G. Barrett: We are excited to enter the 2020 for upfront season during.
Michael G. Barrett: During which a majority of these partners will continue to expand their programmatic advertising efforts as it relates to CTV ad sales.
Michael G. Barrett: Yeah.
Michael G. Barrett: Now moving over to D V plus Q1, once again finished strong with revenue ex Tac growth of 9%.
David L. Day: Q1, once again, finished strong with revenue ex-tac growth of 9%. Our results continue to be driven by an extreme focus on buyers, improving monetization for sellers, improving performance with AI, and investing in formats such as native, audio, podcast, and digital out of home. As you are aware, Google recently announced yet another delay in its deprecation of third-party cookies. The announcement was not unexpected, and notwithstanding the delay, we will continue to do testing and work with Google so that when we are prepared to fully support Privacy Sandbox when it eventually launches.
Michael G. Barrett: Our results continue to be driven by extreme focus on buyers improving monetization for sellers improving performance with AI and investing in formats, such as native audio podcast and digital out of home.
Michael G. Barrett: As you are aware, Google recently announced yet another delay in its deprecation of third party cookies.
Michael G. Barrett: The announcement was not unexpected and notwithstanding the delay we will continue to do testing and work with Google.
David L. Day: When we are prepared to fully support privacy land. So that we are prepared to fully support privacy sandbox when it eventually watches and.
David L. Day: In addition, we believe we have built the industry's best technology platform to help publishers better monetize their first-party data. Ultimately, we believe the elimination of third-party cookies will greatly strengthen our market position, as other SSP competitors will struggle to support new third-party solutions and do not possess the scale or strategic proximity to publishers necessary to support first-party segment creation. Our DV Plus scale continues to grow as we add new publishers and see over 1.2 trillion ad requests daily, offering the broadest and most efficient customized supply of inventory for our DSPs and brands to find and target the users they are looking to reach.
Michael G. Barrett: In addition, we believe we have built the industry's best Technologic technology platform to help publishers better monetize their first party data ultimately we believe the elimination of third party cookies will greatly strengthen our market position as other SSP competitors will struggle to support new.
Michael G. Barrett: New third party solutions and do not possess the scale or strategic proximity to publishers necessary to support first party segment creation.
Michael G. Barrett: Our D V plus scale continues to grow as we add new publishers and see over $1 two trillion AD requests daily.
Michael G. Barrett: Offering the broadest and most efficient customized supply of inventory for a DSP and brands to find and target users. They are looking to reach.
David L. Day: In closing, we are excited about the business we have built and off to a great start to 2024. The prospects for Magnite and our growth opportunities are very strong. With that, I'll turn the call over to David for more detail on the financials. David?
Michael G. Barrett: In closing we are excited about the business, we have built and off to a great start to 2020 for the.
Michael G. Barrett: The prospects for magnate and our growth opportunities are very strong.
Michael G. Barrett: With that I'll turn the call over to David for more detail on the financials David.
David L. Day: Thanks, Michael.
David L. Day: We are pleased to have a strong start to 2024 with CTV and DV Plus contribution XTAC significantly beating the high end of our guide. We also reported an adjusted EBITDA margin of 19% for the quarter, which is above the high end of our guidance range. Total revenue for Q1 was $149 million, up 15% from Q1 2023. Contribution XTAC was $131 million, up 12%. CTV's contribution to XTAC was $55 million, up 18% year over year, which significantly exceeded our guidance range.
David L. Day: We are pleased to have a strong start to 2024 with CTV and divi plus contribution ex Tac significantly, beating the high end of our guide.
David L. Day: We also reported an adjusted EBITDA margin of 19% for the quarter, which is above the high end of our guidance range.
David L. Day: Total revenue for Q1 was $149 million up 15% from Q1 2023.
David L. Day: Contribution ex Tac was $131 million up 12%.
David L. Day: CTV contribution ex Tac was $55 million up.
David L. Day: 18% year over year, which significantly exceeded our guidance range.
David L. Day: A strong contribution from live sports, including better than expected March Madness results, as well as continued growth in ad serving, were significant drivers of CTV. Our CTV outperformance was entirely driven by our programmatic offerings, with managed service down slightly year over year.
Michael G. Barrett: <unk> contribution from live sports, including better than expected March madness results as well as continued growth in AD serving were significant drivers of CTV.
Michael G. Barrett: Our CTV outperformance was entirely driven by our programmatic offerings with managed service down slightly year over year.
David L. Day: DV Plus contribution XTAC was $76 million, an increase from $70 million, or up 9% compared to the first quarter last year. Our contribution XTAC mix for Q1 was 42% CTV, 41% mobile, and 17% desktop. From a vertical perspective, automotive, financial, and food and beverage were our strongest performing categories. Categories that did not perform as well were entertainment, home and garden, and technology.
Michael G. Barrett: D V plus contribution ex Tac was $76 million, an increase from $70 million or up 9% compared to the first quarter last year.
Michael G. Barrett: Our contribution ex Tac mix for Q1 was 42% CTV, 41% mobile and 17% desktop.
Michael G. Barrett: From a vertical perspective, automotive financial and food and beverage were our strongest performing categories.
Michael G. Barrett: Categories that did not perform as well or entertainment home and garden and technology.
David L. Day: Total operating expenses, which includes cost of revenue for the first quarter, were $163 million, a decrease from $231 million in the same period last year. A primary driver of the decrease was the result of the Spodex-acquired intangible assets that became fully amortized in the third quarter of last year. Adjusted EBITDA operating expense for the first quarter was $106 million, at the low end of our guidance range. The increase from $93 million last year was driven by higher cloud computing expenses, planned event and travel-related expenses, including our full company offsite in Q1, as well as personnel-related costs driven by annual merit increases and payroll tax resets.
Michael G. Barrett: Total operating expenses, which includes cost of revenue for the first quarter were $163 million a decrease from $231 million in the same period last year.
David L. Day: A primary driver of the decrease was the result of the spot X acquired intangible assets that became fully amortized in the third quarter of last year.
Michael G. Barrett: Adjusted EBITDA operating expense for the first quarter was $106 million at the low end of our guidance range. The increase from 93 million last year was driven by higher cloud computing expenses planned events and travel related expenses, including our full company off site in Q1.
David L. Day: <unk>.
David L. Day: As well as personnel related costs, driven by annual merit increases and payroll tax resets.
David L. Day: The net loss was $18 million for the quarter compared to a net loss for the first quarter of 2023 of $99 million. Adjusted EBITDA was $25 million, and the adjusted EBITDA margin was 19% for the quarter, which compares to $23 million and a margin of 20% last year. As a reminder, we calculate adjusted EBITDA margin as a percentage of contribution x-tax. Gap loss per basic and diluted share was $0.13 for the first quarter of 2024, compared to a loss of $0.73 for the first quarter of 2023.
David L. Day: Net loss was $18 million for the quarter compared to a net loss for the first quarter of 2023 of $99 million.
David L. Day: Adjusted EBITDA was $25 million and adjusted EBITDA margin was 19% for the quarter, which compares to 23 million and a margin of 20% last year.
Michael G. Barrett: As a reminder, we calculate adjusted EBITDA margin as a percentage of contribution ex Tac.
Michael G. Barrett: GAAP loss per basic and diluted share was <unk> 13 for the first quarter of 2024 compared to a loss of 73 for the first quarter of 2023.
David L. Day: Non-GAAP earnings per share in the first quarter of 2024 was $0.05 compared to $0.04 reported last year. The reconciliations to non-GAAP income and non-GAAP earnings per share are included with our Q1 results press release. Our cash balance at the end of Q1 was $253 million, a decrease from $326 million at the end of the fourth quarter. The decrease was due to typical seasonality in our business.
David L. Day: non-GAAP earnings per share in the first quarter of 2024 was five <unk>.
Michael G. Barrett: Compared to <unk> reported last year.
David L. Day: Reconciliations to non-GAAP income and non-GAAP earnings per share are included with our Q1 results press release.
Michael G. Barrett: Okay.
Michael G. Barrett: Our cash balance at the end of Q1 was $253 million a decrease from $326 million at the end of the fourth quarter. The decrease was due to typical seasonality in our business.
David L. Day: Capital expenditures, including both purchases of property and equipment and capitalized internally used software development costs, were $15 million for the quarter. Operating cash flow, which we define as adjusted EBITDA less CapEx, was $10 million for the quarter. Our net interest expense for the quarter was $8 million.
Michael G. Barrett: Capital expenditures, including bulk purchases of property and equipment and capitalized internal use software development costs were $15 million for the quarter.
David L. Day: Operating cash flow, which we define as adjusted EBITDA less capex.
Michael G. Barrett: There's $10 million for the quarter.
Michael G. Barrett: Our net interest expense for the quarter was $8 million.
David L. Day: As we announced last quarter, we successfully refinanced our credit facilities in Q1, which stabilizes our capital structure for the foreseeable future. Our net leverage was 1.7x at the end of Q1 due to the same difficult cash seasonality I mentioned earlier. We expect to see net leverage improvements in future quarters this year and expect a net leverage ratio of 1x or less by the end of the year. I will now share our expectations for the second quarter and full year.
Michael G. Barrett: As we announced last quarter, we successfully refinanced our credit facilities in Q1, which stabilizes our capital structure for the foreseeable future.
Michael G. Barrett: Our net leverage is 1.7 acts at the end of Q1 due to the same typical cash seasonality I mentioned earlier.
Michael G. Barrett: We expect to see net leverage improvements in future quarters. This year and expect the net leverage ratio of onex or less by the end of the year.
David L. Day: For the second quarter, we expect contribution XTAC to be in the range of $142 to $146 million, and contribution XTAC attributable to CTV to be in the range of $59 to $61 million, comprised of double-digit programmatic CTV growth, partially offset by lower managed service contribution, which is going up against a strong comp in Q2 2023. Contribution XTAC attributable to DV Plus to be in the range of $83 to $85 million, and adjusted EBITDA operating expenses to be between $101 and $103 million, which implies an adjusted EBITDA margin of approximately 30% for Q2 at the midpoint.
Speaker Change: I will now share our expectations for the second quarter and full year.
Speaker Change: For the second quarter, we expect contribution ex Tac to be in the range of $142 million to $146 million.
David L. Day: Contribution ex Tac attributable to CTV to be in the range of $59 million to $61 million.
Michael G. Barrett: Emprise of double digit programmatic CTV growth, partially offset by lower managed service contribution which is going up against a strong comp in Q2 2023.
Michael G. Barrett: Contribution ex Tac attributable to divi plus to be in the range of $83 million to $85 million.
Michael G. Barrett: And adjusted EBITDA operating expenses to be between 101 in $103 million.
Michael G. Barrett: This implies adjusted EBITDA margin of approximately 30% for Q2 at the midpoint.
David L. Day: For the full year, we're raising both top and bottom line guidance. We're raising contribution X tax to grow at least 10% with CTV to grow faster than DV+, and adjusted EBITDA margin, now expected to expand 100 to 150 basis points over 2023. And we're increasing our expected adjusted EBITDA growth to the mid-teens, up from double digits previously, with even higher growth in pre-cash flow, and total CapEx to be in the mid to high $40 million range, including PPME and capitalized software.
David L. Day: For the full year, we are raising both top and bottom line guidance, we are raising contribution ex Tac to grow at least 10% with CTV to grow faster than TV plus adjust.
Michael G. Barrett: Adjusted EBITDA margin now expected to expand 100 to 150 basis points over 2023.
Michael G. Barrett: And we are increasing our expected adjusted EBITDA growth to the mid teens up from double digits previously with even higher growth in free cash flow and total capex to be in the mid high 40 mid to high $40 million range, including PP&E and capitalized software.
David L. Day: We're off to a great start in 2024 and are very encouraged by the recovery in our CTV growth. We're excited about the opportunities ahead of us and look forward to continued strong programmatic CTV performance. And with that, I'll open the line for Q&A, and I'll begin the question.
Michael G. Barrett: We're off to a great start in 2024 and are very encouraged by the recovery in our CTV growth.
Michael G. Barrett: We're excited about the opportunities ahead of us and look forward to continued strong programmatic CTV performance.
Speaker Change: And with that let's open the line for Q&A Q&A.
Speaker Change: Yeah.
Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble the roster. And our first question comes from Shyam Patil of Susquehanna. Please go ahead.
Speaker Change: We will now begin the question and answer session.
Shyam Vasant Patil: Ask a question you May press Star then one on your telephone keypad.
Operator: If youre using a speakerphone please pick up your handset before pressing.
Michael G. Barrett: The key.
Michael G. Barrett: To withdraw your question. Please press Star then two.
Michael G. Barrett: At this time, we will pause momentarily to assemble the roster.
Michael G. Barrett: And our first question comes from Shyam Patil of Susquehanna. Please go ahead.
Michael G. Barrett:
Shyam Vasant Patil: Hey guys, congrats on a really strong result there. I had a couple of questions. Michael, you talked in your prepared remarks about, you know, CTV benefiting from strength and ad serving. I was wondering if you could talk a little bit more about that and just opportunities to kind of expand ad serving going forward. And then also, I guess, the second question, on Clearline. You talked about the MediOcean partnership and the Clearline integration. Can you just talk about, I guess, for that partnership and then just kind of ClearLine overall, how you think about the contribution from this over time? Thank you.
Shyam Vasant Patil: Hey, guys. Congrats on a really strong result, there.
Shyam Vasant Patil: Had a couple of questions.
Shyam Vasant Patil: Michael.
Shyam Vasant Patil: Michael you talked in your prepared remarks about C.
Shyam Vasant Patil: T D.
Michael G. Barrett: Benefiting from strength in an AD serving I was wondering if you could talk a little bit more about about that and just.
Shyam Vasant Patil: Opportunities to kind of expand add surveying.
Michael G. Barrett: Going forward and then also I guess second question on unclear line.
Michael G. Barrett: You talked about the media media partnership and the <unk> integration can you just talk about I guess for that partnership and then just kind of clear line overall, just how you think about the contribution from this over time. Thank you.
Michael G. Barrett: Yeah, sure, Sean. So on the ad serving front, there are two stories, right? So ad serving itself has just so far exceeded expectations. If you recall, when we acquired Spodex, we had the option to be able to buy Spring Serve at the time. And it came with a kind of expectation of performance and everything that we thought of on the top range of performance. It's so far exceeded expectations.
Speaker Change: Yes sure.
Speaker Change: On the answer my friend, it's two stories right. So AD serving itself has just so far exceeded expectations. If you recall when we acquired spot X, we had the option to be able to buy.
Speaker Change: By spring serve at the time.
Speaker Change: And.
Speaker Change: It came with it.
Speaker Change: The expectation of performance in everything that we thought of on the top range.
Michael G. Barrett: Range of performance, it's so far exceeded so it's it's growing incredibly fast.
Michael G. Barrett: So it's growing incredibly fast, through same-store sales and also through new customer adoption. It really is... Bye, a rare choice for digital-first streaming companies. You know, obviously, broadcasters have been at online video for a long time, and Freewheel has a very good position in that market. But if you look at the OEMs, you look at fast services, you look at, you know, virtual MVPDs, all of these guys, you know, Spring Serve is the server choice. So as just a standalone, Spring Serve is killing it, but the secret sauce here is Spring Serve in combination with our SSP.
Speaker Change: Same store sales and also through new customer adoption.
Michael G. Barrett: It really is.
Michael G. Barrett: Hi.
Speaker Change: Rare.
Speaker Change: Choice for digital first.
Michael G. Barrett: Streaming companies.
Speaker Change: Obviously the broadcasters.
Speaker Change: I've been at online video for a long time and freewheel.
Michael G. Barrett: Very good position in that market, but if you look at the Oems you look at SaaS services.
Speaker Change: You look at our virtual Mvpds all of these guys are you know.
Speaker Change: Spring serve as the server choice. So is it just stand alone spring service, killing it but.
Speaker Change: The secret sauce here is spring serve in combination with <unk> a R. S. S. P. So as the year goes on you're going to see you know one unified log in you know <unk> clients, who don't use spring serve will have access to spring serve tools our clients that are spring serve.
Michael G. Barrett: So as the year goes on, you're going to see, you know, one unified login; clients that don't use Spring Serve will have access to Spring Serve tools, and clients that are Spring Serve only will have access to the SSP. And we think that, in addition to just being a stickier relationship with publishers, having the two together will drive superior monetization. So we couldn't be more excited with the prospects going forward and with the results to date with Spring Serve. As it relates to Clearline, yeah, very excited about the MediOcean relationship. As you know, their software is in all the major agencies. Everyone uses it. They use it for planning, for linear programming.
Michael G. Barrett: Only clients will have access to the SSP and we think that in addition to just being a stickier relationship with publishers, having the two together.
Speaker Change: We will drive superior monetization, so we couldnt be more excited with the prospects going forward and with the results to date with the spring serve.
Speaker Change: As it relates to clear line, yes, very excited about the media Ocean a relationship as you know there's software sits at all the major agencies everyone uses it they use it for planning.
Speaker Change: For linear.
Michael G. Barrett: And increasingly, they're using it to process insertion orders to send over to those very same broadcasters for their streaming service, and the need there is to automate that, to make that more programmatic. And so we think that there's a real opportunity here, partnering with our partners at MediOcean to really shift the market and the way they think about transacting kinds of publisher sold deals that used to be in service owner and now can be processed programmatically with targeting, etc.
Speaker Change: And increasingly they're using it to process insertion orders to send over to those very same broadcasters for their streaming service and.
Speaker Change: The need there is to automate that to make that more programmatic and so we think that theres a real opportunity here partnering with our partners at media Ocean to really shift the market and the way. They think about transacting kind of publisher sold deals that used to be insertion are now can be.
Speaker Change: Practice programmatically with targeting etcetera, so really excited about that obviously very early days, but we get we really rushed this partnership and got it in place. So that it's there for the Upfronts and I think that where.
Michael G. Barrett: So really excited about that, obviously, very early days, but we really rushed this partnership and got it in place so that it's there for the upfronts. And I think that we're very excited about the timing there. As for the prospects of ClearLine, I think we've been very realistic that it will be a modest revenue generator in the near future. But we think that providing this kind of buy-side alternative for certain types of buyers, whether they're extremely fee sensitive or they're not needing to have the full suite of DSP services, we think it's going to be very attractive, and we continue to invest in it and put resources behind it.
Speaker Change: Very excited about the timing there.
Speaker Change: As for the prospects of clear line I think we've.
Speaker Change: We've been very realistic that it will be a modest revenue generator in the near future, but we think that providing this kind of buy side alternatives for certain types of buyers, whether they're extremely fee sensitive or.
Speaker Change: They're not needing to have the full suite of DSP services, we think it's going to be very attractive and continuing to invest in it and put resources against it.
Michael G. Barrett: Yeah.
Speaker Change: Great. Thanks, Michael.
Operator: The next question comes from Laura Martin of Needham. Please go ahead.
Speaker Change: The next question comes from Laura Martin of Needham. Please go ahead.
Laura Anne Martin: I'll add my congratulations. Nice speed and raised quarter, you guys. Congratulations. Thanks, Laura. I have two, Michael.
Laura Anne Martin: I'll add my congratulations nice speed on great quarter, you guys congratulations.
Laura Anne Martin: Thanks, Laura.
Laura Anne Martin: So one is, Roku said that they were seeing CPM profit because Netflix is coming into the market and probably Amazon Prime Video too, which is creating an oversupply. So that's sort of my first question is, do you see a cost per thousand pricing difference within the CTV market between the TV OEMs like Roku, LG, Samsung, and what you call the broadcasters? And if so, if there is a difference, are there trends that are different, or is the whole CTV market moving together? That's my first question.
Laura Anne Martin: I have two Michael So one is.
Laura Anne Martin: So you said that they were seeing CPM softness because netflix is coming into the market.
Laura Anne Martin: Probably Amazon Prime video chat, which is creating an oversupply. So that's sort of my first question is do you see a cost per thousand pricing difference within the CTV market between the TV Oems like Roku, LG, Samsung and what you've called the broadcaster and if so if there is a different are there trends.
Laura Anne Martin: There are different as far as the whole PCB market move together.
Laura Anne Martin: My first one.
Michael G. Barrett: Yeah, we look at it holistically, Laura, but we also do look at it in cohorts, right? And so the broadcaster cohort versus the OEM and kind of made for the medium kind of guys. And there is a disparity in CPMs, no question about it. They obviously, not surprisingly, are higher for the broadcasters in the Netflix of the world and lower for folks like the OEM that Delta hasn't really widened over the last several quarters. We've seen some price declines. Obviously, you know, Netflix went out at a very, very high price point. That probably wasn't sustainable. It was a launch.
Speaker Change: Yeah, we look at into we look at it Holistically Laura but we also do look at it in cohorts right and so the broker broadcast or cohort versus the OEM and in kind of made for the medium. Many guys and there is a disparity in cpm's. There's no question about it.
Michael G. Barrett: Obviously, not surprisingly are higher for the broadcasters are in the Netflix of the world.
Michael G. Barrett: Lower for.
Speaker Change: Folks like the OEM that delta hasn't really widened over the last several quarters. We've seen some price decline. Obviously you know Netflix went out is very very high price point.
Laura Anne Martin: That's probably wasn't sustainable was a it was a launch but so that's come back down but generally speaking we've.
Michael G. Barrett: But so that's come back down. But generally speaking, we've seen a little softness in CPMs. But when I say a little softness, we're talking about a very low single-digit decline. So it hasn't been what the market has kind of some pundits have said, which is a cratering of CPMs. That hasn't occurred.
Laura Anne Martin: We've seen a little softness in the C. P M, but when I say, a little softness we're talking very low single digit decline Ah so it hasn't been.
Laura Anne Martin: What the market has kind of some of the pundits have said, which are creating a CPM so that hasnt occurred.
Laura Anne Martin: Super interesting and helpful. Next week, we're walking into the upfront market were $9 billion $19 billion are spent in the upfront market at you and what is your gut feel.
Laura Anne Martin: Super interesting and helpful. Next week, we're walking into the upfront market, where $9 billion, $19 billion is spent on the upfront market. If you, what is your gut feel when we're on the other side of the upfront market when all the new deals are signed by August? How much will programmatic be this year compared to the past? Are we at a tipping point? Do you feel that a lot more programmatic deals are actually gonna get signed in this year's upfront? What's your point of view on that?
Laura Anne Martin: One more on the other side of the upfront market when all of the new deal signings by August how much what programmatic b. This year compare to the past or we had a tipping point do you feel that we're a lot more programmatic deals are actually getting it signed in this year's upfront what's your point of view.
Michael G. Barrett: I do, Laura, and I think that what we'll see is that the majority of that will still be the publishers sold directly to the premium guys. They'll be more biddable, but not the majority of it by any stretch. And so, you know, our ad spend growth rate continues to be with these guys, and most of that's publishers selling deals. And I think you're going to just see more and more of that, because that's what buyers want.
Speaker Change: I do Laura and I think that what we will see the majority of that will still be the publisher sold directly with the premium guys there'll be more biddable on but not the majority of it by any stretch and so you know our our AD spend growth rate continues to be toward with these guys and most of that.
Speaker Change: Thats publishers sold deals and I think youre going to just see more and more of that because that's what buyers want.
Michael G. Barrett: Okay, so that's the key driver for you next year, if that prediction comes true, then, right?
Speaker Change: Okay. So that's the key driver for you next year, if that prediction comes true that right.
Michael G. Barrett: Well, I think it's reflected in any kind of guidance that's out there for 2024. Hard to have that go through 2025. Okay.
Speaker Change: Well I think it's reflected it's reflected in any kind of a guidance. That's out there for 2024 are hard to have that really through 2025.
Laura Anne Martin: Okay. Thank you very much. Congratulations.
Speaker Change: Okay. Thank you very much congratulations.
Speaker Change: Thank you.
Operator: The next question comes from Jason Kreyer of Craig Hallam. Please go ahead.
Laura Anne Martin: The next question comes from Jason <unk> of Craig Hallum. Please go ahead.
Jason Michael Kreyer: Great, thank you guys. Michael, I appreciate the time you spent on direct connections. Just curious, if we look at that, you know, looking forward to the next three to five years, what does the dialogue look like on direct connections? Do those still exist? Do they maybe just exist for, you know, a few of the largest buyers and a few of the largest publishers? Or maybe not? What is your thought on the evolution of the industry?
Jason: Great. Thank you guys. Michael I. Appreciate the time you spent on direct connection just curious if we look at that looking forward over the next three to five years. What is the dialogue will look like on direct connection do those still exist do they may be just exist for <unk>.
Jason Michael Kreyer: A few of the largest buyers in a few of the largest publishers or maybe what is your thought on the evolution there.
Michael G. Barrett: It's a great call. I mean, not trying to be too self-serving, that I think that UCTV is quite different. And, you know, the point we tried to point out in the DLibrary area is that it's really tough and inefficient for a publisher to create DLibraries in every DSP. That's the role of the SSP, right? You create the DLibrary in one location so every buyer knows where to go to get it.
Michael G. Barrett: Oh, it's a great call I mean, I think not trying to be too self serving.
Michael G. Barrett: That I think that I do see Tvs quite different.
Michael G. Barrett: And you know the point, we tried to point out about in the deal library areas that it's really tough and inefficient for a publisher to create deal libraries and every DSP.
Michael G. Barrett: That's the role of the S. S. P rate you create the deal library in one location every buyer knows where to go to get it. So I think that theres that element. There's a there's an element of risk for a publisher. It's if they haven't done it before it can be costly it requires engineering talent to do so I think based upon those kind of.
Michael G. Barrett: So, I think that there's that element. There's an element of risk for a publisher. If they haven't done it before, it can be costly, and it requires engineering talent to do so. So, I think, based upon those kind of broader challenges, I don't think this is for everyone. You know, I think that those that have the technical ability to do so will try it because who wouldn't want incremental demand? But, I do think the vast majority of dollars that would be flowing into CTV will flow through pipes like ours because of the reasons that we alluded to in the script today.
Michael G. Barrett: Broader challenges I don't think this is for everyone.
Michael G. Barrett: That does that have the technical ability to do so will sample this because who wouldn't want incremental demand, but I do think the vast majority of dollars that would be flowing into CTV will walk will flows through pipes like ours are because of the reasons that we alluded to in the script today.
Jason Michael Kreyer: Thank you. I want to go back to the CTV conversation from kind of last summer or fall. Obviously, you've had a nice bounce back there in your business. And if we just kind of look over the last, you know, two or three quarters, are you just seeing generally better advertising trends that's driven those tailwinds? Is it, you know, are the buckets changing, which is creating a more favorable take rate? Or you did kind of give, you did give some detail on managed service, but I'm curious if you can give details on any of those other variables.
Speaker Change: Thank you.
Michael G. Barrett: I I want to go back to the CTV conversation from kind of last summer fall, obviously, you've had a nice bounce back there in your business and if we just kind of look over the last two or three quarters.
Speaker Change: Are you just seeing generally better advertising trends, that's driven those tailwind is it.
David L. Day: Where are the buckets, changing which is creating a more favorable take rate or you did kind of give you.
Jason Michael Kreyer: You did give some detail on managed service, but I'm curious if you can give any details on any of those other variables.
Michael G. Barrett: Yeah, Jason, I would say that, and David will correct me, but I would say the biggest driver is macro, that it's an improved ad environment, and there's more spend available. And I would say from the last time we talked about the buckets, you know, Magnite managed deals, publisher managed deals, and managed service, maybe on the margins, the actual publisher sold deals have increased. So what you're seeing is obviously a lower take rate for that category, but there are more of them, many, many more of them.
Speaker Change: Yeah, Jason I would say that.
Speaker Change: And David will correct me, but I would say.
Michael G. Barrett: The biggest driver is a macro that it's it's an improved AD environment and theres more spend available and I would say from a from the last time, we talked about the buckets you know.
Speaker Change: Magnate managed deals publisher manage deals and managed service maybe on the margins the actual publisher so deals have increased.
Speaker Change: So what youre seeing is Ah.
Michael G. Barrett: Obviously, a lower take rate for that category, but more of them. Many many more of them and so I still think right now when folks look at available inventory and Theres a lot of it Amazon Prime obviously dumped a bucket of inventory onto the market. This last quarter I think there's still a real preference.
Michael G. Barrett: And so I still think right now when folks look at available inventory, and there's a lot of it; Amazon Prime obviously dumped a bucket of inventory onto the market this last quarter. But I think there's still a real preference for the buyer to go super premium, brand name, broadcasters that they're comfortable with, shows that they're comfortable with. And so I don't think that that trend line will change dramatically anytime soon. I mean, on the margins, you know, our march over performance, some of that was driven by managed service and, you know, particularly around NCAA basketball. But I don't think there's going to be any dramatic change throughout 2024 in terms of the mix of buckets.
Jason Michael Kreyer: Perfect. Thank you.
Speaker Change: For the buyer to go Super premium brand name broadcasters that they're comfortable with shows that they're comfortable with and so I don't think that that trend line will change dramatically anytime soon I mean on the margins you know our March over performance. Some of that was driven by a managed service.
Jason Michael Kreyer: And you know, particularly around the NCAA basketball, but.
Jason Michael Kreyer: But I don't think there's going to be any dramatic change throughout 2020.
Speaker Change: For in terms of the mix of buckets.
Jason Michael Kreyer: Perfect. Thank you.
Speaker Change: Thanks Man.
Operator: The next question comes from Matt Swanson of RBC Capital Markets. Please go ahead.
Jason Michael Kreyer: The next question comes from Matt Swanson of RBC capital markets. Please go ahead.
Matthew John Swanson: Yeah, thank you. And I'll add my congratulations to the team. Maybe if we get David involved here, we haven't had to deal with an improving macro for quite some time. Could you just talk a little bit about what your approach to guidance is with some of the momentum we're seeing in the market?
Matthew John Swanson: Yeah, Thank you and I'll add my congratulations to the team.
Matthew John Swanson: Maybe if we had payment involved here, we haven't had to deal with an improving macro for quite some time could you just talk a little bit about what your approach to guidance says with some of the momentum we're seeing in the market.
Matthew John Swanson: Yeah.
David L. Day: And I want to caveat a little bit. The macro is improving, but we wouldn't characterize it by any means as full steam ahead. So if we take a vertical view, for example, there was some strength in the automotive sector, a lot of electric cars sitting on lots that need to be sold. Financial food and beverage, you know, a lot of CPG folks need to maintain support for increased prices, you know, which they've had to put in place as a result of inflation.
Speaker Change: And I don't want a caveat a little bit yeah, the macros, improving but I you know we wouldn't characterize it.
David L. Day: By any means is as you know full steam ahead. So if we take a vertical view for example.
David L. Day: There was some strength in.
David L. Day: Automotive.
David L. Day: A lot of our electric.
David L. Day: Electric cars sitting on lots that need to be sold.
David L. Day: Financial food and beverage you know a lot of CPG folks.
David L. Day: We need to maintain support for.
David L. Day: Increased prices you know, let's say if I had to put in place as a result of inflation.
David L. Day: But, you know, we're also seeing some weaknesses in technology, in particular; I think WPP and a few others have called that out. And entertainment, we still haven't fully recovered from some of the strike issues last year.
David L. Day: We're also seeing some some weaknesses in our technology in particular, I think W. P. P and a few others have called that out.
David L. Day: Entertainment, we still haven't fully recovered.
David L. Day: From some of the strike issues last year, and so I think from a guidance perspective.
David L. Day: And so from a guidance perspective, I think we remain cautiously, you know, optimistic. So we certainly, you know, we appreciate the improvements that we have in place. And, you know, for future potential there. But, but I think cautiously optimistic is a way to describe it. Also, you know, we've spoken in the past about managed services and, you know, how that business is a little more volatile than some of the other businesses.
David L. Day: I think we remain.
David L. Day: Cautiously optimistic so we're certainly we.
David L. Day: We appreciate the improvements so we have in place.
David L. Day: And you know them for future potential there, but but I think cautiously optimistic is a way to describe it.
David L. Day: Also you know we've spoken in the past about managed service and you know how that business is there's a little more volatile.
David L. Day: Some of the other businesses.
David L. Day: And so as we look forward to this year and in that group in particular, it's obviously it continues to be a super important.
David L. Day: And so, as we look forward to this year, in that group in particular, it's obviously continues to be a, you know, super important value add for the company. But it's, you know, we had kind of stronger comps early in 2023, the first half of 2023. So that's a little depressing now, from a growth perspective, not personally depressing. And, you know, that those comps ease up in the second half of the year. And so for managed service specifically, perhaps a little extra bit of conservatism given that volatility, but we would also see some strengthening throughout the remainder of the year.
David L. Day: Value add for the company, but it's we had kind of stronger comps.
David L. Day: Early in 2023 first half of 2023, so that's a little depressing now are from a growth perspective not personally depressing.
David L. Day: And you know that those comps ease up second half of the year and so for managed service specifically you know, perhaps a little extra bit of conservatism given that volatility but.
David L. Day: We would also see some strengthening our throughout the remainder of the year.
Matthew John Swanson: That's really helpful, Culler. And then, Michael, also super helpful, Culler, when we talked about the direct connections and you kind of outlining your value proposition with those key points. But could you maybe dive a little deeper into Disney specifically?
Speaker Change: That's really helpful color and then Michael also Super helpful color, when we talked about the direct connections when you kind of outlining your value proposition with those key points.
Matthew John Swanson: But could you maybe dive a little deeper into Disney specifically, it's a really close relationship and just maybe talk all kind of the messaging that you've heard from them and just kind of how much and aligns.
Michael G. Barrett: You know, it's a really close relationship. And maybe talk about kind of the messaging that you've heard from them and just kind of how much it aligns with you. Yeah, so I mean, we talked a little bit about
Michael G. Barrett: With your view.
Michael G. Barrett: Yeah, so, I mean, we talked a little bit about, I guess it was off-cycle earnings calls compared to this the first time on earnings, but the relationship actually is kind of portrayed as a contraction where it's actually more of an expansion. We're actually working with them now through our managed service team. We are working with them on political advertising and remain their sole SSP partner. They own their own ad server, so if they were using a commercial ad server, more than likely, it would have been a connection through Spring Serve into their commercial ad server, but because they own their own ad server, I think they felt as though they had the technical capabilities to do a connection with the two largest DSPs, and been kind of intimated that it begins and ends there.
Speaker Change: Yeah. So I mean, we talked a little bit about I guess it was off cycle of earnings calls who is the first time I earnings but the.
Michael G. Barrett: The relationship actually it's kind of been portrayed as a contraction where it's it's actually more of an expansion.
Michael G. Barrett: We're actually working with them now through our managed service team.
Michael G. Barrett: We are working with them and political advertising and remain there so SSP partner they own their own AD server. So if they were using a commercial AD server more than likely it would have been a connection through spring serve into there.
Michael G. Barrett: Commercial AD server, but because they own their own AD server I think they felt as though they have the technical capabilities to do a connection with the two largest dsp's.
Michael G. Barrett: It's a lengthy process. You know, I commented earlier about the risk of implementation because of the length and the expense of it. They're not going to even lift a finger on the trade desk integration until 2025. And so, I think it's an experiment. I'd probably do it if I were them because it's been pitched as incremental demand. Why wouldn't you as a publisher? But I do think they're quite unique in the sense that they do own their ad server, and they do have engineers to do these kinds of things.
Michael G. Barrett: We kind of intimated that it begins and ends there are it's a lengthy process. You know I had commented earlier about the risk of implementation and the length and the expense of it there.
Michael G. Barrett: They're not going to even a lift a finger on the trade desk and integration until 2025, and so so I think it's it's an experiment I'd I'd, probably do it if I were them because it's been pitts's incremental demand why wouldn't you as a publisher, but I do think they are quite unique in the sense that they do on their AD server and they.
Michael G. Barrett: Do have engineers to do these kinds of things so.
Michael G. Barrett: Our Disney relationship remains incredibly strong we are talking about workflow for 2025, and you know I do think that our they're an outlier as it relates to most of the top streaming services.
Michael G. Barrett: So, you know, I think our Disney relationship remains incredibly strong. We are talking about work for 2025. And, you know, I do think that they're an outlier as it relates to most of the top streaming services.
Michael G. Barrett: Yeah.
Speaker Change: Thank you.
Operator: The next question comes from Zach Cummins of B. Riley FBR. Please go ahead.
Michael G. Barrett: The next question comes from Zach Cummins of B Riley FBR. Please go ahead.
Zachary Cummins: Hi, good afternoon. Thanks for taking my questions and congrats on a strong start to the year. I was really hoping you could just further unpack some of the assumptions you're making for CTV business. It obviously seems like some tailwinds from live sports and some easier comps as you go into the second half of the year. But I'm just curious of your approach to CTV, specifically as you're setting guidance for the remainder of this year.
Zachary Cummins: Yeah, Hi, good afternoon, Thanks for taking my questions and congrats on a strong start to the year.
Zachary Cummins: I was really hoping you could just further unpack some of the assumptions, you're making for CTV business. It obviously it seems like some tailwind from live sports and some easier comps as you go into the second half of the year, but just curious if your approach to CTV, specifically as you're setting your guidance for the remainder of this year.
David L. Day: Yeah, I mean, I think our approach, you know. We continue to be bullish about the recovery in the programmatic component of CTV. Q1 was an exceptionally strong quarter from a CTV perspective. And as we talked about, the programmatic CTV component will continue to grow in double digits and again, be offset by declines in Q2 that'll be a little bit, in managed service, will be a little bit greater than Q1. And so as we look forward, we would expect that continued CKB programmatic growth, and we'll get a little bit of a boost, particularly in the second half of the year, from political, where And if when we're to assume that, say, that doubles in this, in this next cycle, most of that hitting the second half of the year, you know, that's also factored in into our guidance.
Speaker Change: Yeah, I mean, I think our approach you know we continue to be bullish about the recovery.
David L. Day: In the programmatic component of CTV are Q1 was just it was an exceptionally strong quarter from a CTV perspective.
David L. Day: And as we talked about we continue progress of programmatic CTV component too.
David L. Day: You know continue to grow in double digits and again offset by a.
David L. Day: Declines in Q2, there'll be a little bit.
David L. Day: Managed service will be a little bit greater than that in Q1, and so as we.
David L. Day: Look forward, we would expect that continued see heavy programmatic growth.
David L. Day: And we'll get a little bit of a boost in particularly in the second half of the year from political where.
David L. Day: Now, we we've talked about political spend levels in the past 2022, and 2020 of roughly $10 million.
David L. Day: For the company and if one were to assume.
David L. Day: That are let's say that doubles and this in this next cycle most of that hitting in the second half of the year now that's also factored in into our guidance.
David L. Day: Yeah.
Zachary Cummins: Understandable. And just one follow-up question is around capital allocation. And nice to see that you're targeting a net leverage ratio closer to one times at the end of this year. But as you continue to strengthen the balance sheet, how do you balance the idea of share repurchases versus continuing to pay down debt?
Speaker Change: Understood and just my one follow up question is around capital allocation and nice to see that you're targeting on.
Zachary Cummins: Net leverage ratio closer to one times at the end of this year, but.
Zachary Cummins: As you continue to.
Zachary Cummins: Strengthening the balance sheet, how do you balance thinking of share repurchases versus continuing to pay down debt.
Zachary Cummins: Yeah.
David L. Day: Yeah, that's a really good question. And, you know, I guess the first point is that we're just thrilled to be in that position. And, you know, with the refinancing of our debt, the removal of a springing covenant related to our converts, and the progress on this net leverage ratio, as you mentioned, it opens up a lot of possibilities for us. So, yeah, we have a program in place for $125 million that could be used for convert repurchase or for share buyback. Given where the converts are trading, you know, it's not favorable for us to take them off the market at this time.
Speaker Change: Yeah. That's a really good question and you know I guess the first point is we're just we're thrilled to be in that position and you know with the refinancing of our debt are removing removal of a springing covenant related to our converts.
David L. Day: And the progress on this net leverage ratios you mentioned.
David L. Day: You know, it's it opens up a lot of possibilities for us so.
David L. Day: Yeah, we have a program in place for $125 million program that could be used for convert repurchase or for share buybacks.
David L. Day: Given where the converts are trading.
David L. Day: You know its not favorable for us to take them off the market at this time and so you know it would lend ourselves to consider share repurchases.
David L. Day: And so, you know, it would lend us to consider share repurchases more significantly. You know, so I would say it probably wasn't on the table in 2023, at least not very significantly. I think, you know, that's a growing area of focus for us, although, you know, facts and circumstances as we move forward will determine, you know, if we take action or not.
David L. Day: More significantly.
David L. Day: You know so well.
David L. Day: I would say it probably wasn't on the table in 2023 at least very significantly I think.
David L. Day: That's a growing area of focus for us although <unk>.
David L. Day: Facts and circumstances as we move forward, we will determine if we take action or not.
David L. Day: Yeah.
Zachary Cummins: Okay. Well, thanks for taking my questions and best of luck with the rest of the quarter.
Speaker Change: Understood well, thanks for taking my questions and best of luck with the rest of the quarter.
Speaker Change: Thanks, Ed.
Operator: The next question comes from Dan Kurnos of The Benchmark Company. Please go ahead.
Zachary Cummins: The next question comes from Dan <unk> of the Benchmark Company. Please go ahead.
Daniel Louis Kurnos: All right, thanks. I'll take a stab at this, trying to listen to like four calls at once.
Daniel Louis Kurnos: Alright, Thanks, I'll take a stab at this trying to listen like for calls at once Michael It sounds like you guys did another deal small, but with one of the the linear players. We know you already have a relationship with Scripps in particular, but it feels like they're all trying to come online and it's sort of a you know.
Daniel Louis Kurnos: Michael, it sounds like you guys did another deal, small, but with one of the linear players. We know you already have a relationship with Scripps, in particular, but it feels like they're all trying to come online. And it's sort of a facilitation of the move to streaming, but also an untapped opportunity that a lot of your peers or others aren't going after. So just kind of curious about that particular opportunity, the political aspects that I wanted to get into, but it sounds like a lot of agencies are actually trying to transact politics on almost a purely programmatic basis, particularly in the CTV universe.
Daniel Louis Kurnos: Facilitation of the move to streaming but also an untapped opportunity with a lot of your peers or others arent going after so I'm just kind of curious about that particular opportunity and David you just kind of mentioned the.
Daniel Louis Kurnos: Political aspect that I wanted to get into but it sounds like a lot of agencies are actually trying to.
Daniel Louis Kurnos: Transact political on almost a purely programmatic basis, particularly in the CTV universe. So I guess that could be a boon depending on how many dollar shift there, but just curious if that's what you're seeing and if you're sort of negotiating some of the deals.
Daniel Louis Kurnos: So I guess that could be a boon depending on how many dollars shift there, but just curious if that's what you're seeing and if you're sort of negotiating some of the deals on kind of that premise.
Daniel Louis Kurnos: Under that premise.
Michael G. Barrett: Yeah, so yeah, Dan, I think local as it relates to streaming is a story that's not well told, and that's on us as much as anyone, and we look forward to talking much more about that because we do have a lot of momentum in that area, and we think it's really promising. And I think you're right. It's kind of a green space for us in terms of being able to secure a lot of that business and relationships.
Speaker Change: Yeah, So yeah, Dan I think local is it.
Michael G. Barrett: It relates to streaming is for is a story, that's not well told and that's on us as much as any one and look forward to talking much more about that because we do have a lot of momentum in that area. We think it's really promising and I think you're right. It's it's kind of a green.
Michael G. Barrett: Space for us in terms of being able to secure a lot of that business and relationships.
Michael G. Barrett: And as it relates to politics, and I'll let David opine, but, you know, it's going to be a very backloaded spend. And so anything that we talked about politics is kind of conjecture because it ain't flown yet. And so we think it's going to be big; we have built it into some of the forward-looking guidance. But how big? When? Who's it going to come from? How much of it's programmatic? It's all very encouraging, but it's still kind of on the come.
Speaker Change: And as it relates to political and I'll, let David opine, but.
Michael G. Barrett: You know, it's going to be a very back loaded spend and so anything that we talked about political is kind of conjecture because any flown yet and so we think it's going to be big we have built it into some of the forward looking guide.
Michael G. Barrett: But how big win.
Michael G. Barrett: Who is it going to come from how much of its programmatic, it's all very encouraging, but it's still kind of on the come.
David L. Day: Yeah, and you know, we've got a crack political facilitation team in place, so we're, you know, we have very established relationships with those players. And we have tried to take a, you know, I think a fairly modest approach in our guidance. And so to your point, it could create an upside, certainly in the latter half of the year.
David: Yeah, and we've got a crack a political facilitation team in place. So were you know you know we have very.
David L. Day: Established relationships with those players and.
David L. Day: And we have tried to take a I think a fairly modest approach in our guidance and so to your point.
David L. Day: You know it could create an upside certainly in the latter half of the year.
Daniel Louis Kurnos: All right. Thanks, guys. I appreciate it.
Speaker Change: Alright, Thanks, guys appreciate it.
Speaker Change: Thanks, Dan.
Daniel Louis Kurnos: Okay.
Operator: Our next question comes from Omar Esouki of Bank of America. Please go ahead.
Daniel Louis Kurnos: Our next question comes from Omar <unk> of Bank of America. Please go ahead.
Arthur Chu: Hey guys, this is Arthur Omer. Thanks so much for taking my question and congratulations on the strong results. Let me do just a quick follow-up on the MediaOcean partnership. Michael, you talked about automating insertion orders through the ClearLine integration.
Omar Esouki: Hey, guys. This is Arthur off Omar. Thanks, So much for taking my question and congrats on the strong results.
Arthur Chu: Maybe just a quick follow up on the media Ocean partnership Mike could you talk about automating insertion orders through the clear line integration.
Arthur Chu: How should we think about the economic implications of that? Like should we think about higher take rates on these direct deals from your existing customer base? Or is this expected to be something that's also going to drive incremental market share growth because you're offering easier access for these new buyers to execute the deals programmatically? Yeah, so I think the way to think about it is this way:
Arthur Chu: Should we think about the economic implications of that like should we think about higher take rate on these direct deals from your existing customer base or is.
Arthur Chu: Is this expected to be something that's also going to drive incremental market share growth because you know you're offering ease of access for these new buyers to execute with yours programmatically.
Michael G. Barrett: Yeah, so I think the way to think about it is, obviously, there's the take rate that's involved in the transaction that is on the Magnite side, and I would imagine that there'll be a buy side fee associated with using this tool from MediOcean. So obviously, as a partnership, there's shared economics on the buy side piece of it, and on the sell side piece of it, that's economics. So I think, you know, anything that would flow through it is found money, and it would be profitable in terms of both a take rate and a buy side pay.
Arthur Chu: Yeah. So I think the way to think about it is obviously there is the take.
Michael G. Barrett: Take rate that's involved in the Transat.
Michael G. Barrett: Transaction that is on the magnetic side.
Michael G. Barrett: And.
Michael G. Barrett: I would envision that there'll be a.
Michael G. Barrett: Buy side fee associated with using this tool for media Ocean. So I, obviously as a partnership I shared economics on the on the buy side piece of it and then the sell side piece of it that's.
Michael G. Barrett: <unk> economic so I think you know anything that would flow soon is found money and it would be accretive in terms of a both a take rate and a bioscience right.
Michael G. Barrett: Yeah.
Speaker Change: Got it thank you.
Michael G. Barrett: This concludes our question and answer session. I'd like to turn the call back over to Michael for any closing remarks.
Michael G. Barrett: This concludes our question and answer session I'd like to turn the call back over to Michael for any closing remarks.
Michael: Thank you Andrea.
Michael G. Barrett: I'd also like to say thank you to the Magnite team for delivering a great quarter that exceeded expectations. The performance of our team around the world has established a very solid foundation to build on for the remainder of the year and beyond.
Michael: I'd also like to say, thank you to the magnate team for delivering a great quarter that exceeded expectations.
Michael: Performance of our team around the World has established a very solid foundation to build on for the remainder of the year and beyond.
Michael G. Barrett: We look forward to speaking with many of you at our upcoming investor events. Cannonball will host our post-Q1 virtual investor meetings tomorrow. We will be attending the Needham Conference in New York on May 14th and 15th, the B. Riley Conference in Beverly Hills on May 22nd and 23rd, and the Craig Hallam Conference in Minneapolis on the 29th. The Evercore Conference in New York, also on May 29th, and the B of A Conference in San Francisco on June 5th.
Michael: We look forward to speaking with many of you at our upcoming Investor events Cannonball, we'll host our post Q1 virtual investor meetings Tomorrow we.
Michael G. Barrett: We will be attending the Needham conference in New York on May 14th and 15th.
Michael G. Barrett: The B Riley conference in Beverly Hills on May 22nd and.
Michael G. Barrett: 23rd and the Craig Hallum Conference in Minneapolis on the 29th.
Michael G. Barrett: The Evercore conference in New York also on May 29th in the Bofa Conference in San Francisco on June the fifth.
Michael G. Barrett: We'll also be participating in meetings with Benchmark in Milwaukee and Chicago on June 11th and 12th, and we'll be in London on June 18th. Lastly, Benchmark will be hosting a live CAN webcast on Wednesday, June 19th. Have a great evening, and thank you for listening.
Michael G. Barrett: We will also be participating in meetings with benchmark in Milwaukee in Chicago on June 11th and 12th and will be in London on June 18th Lastly, benchmark will be hosting a live from can webcast on Wednesday June 19th.
Michael G. Barrett: Have a great evening and thank you for listening.
Operator: The conference is now concluded. Thank you for attending today's presentation, and you may now disconnect.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.
Music: ?? ?? ?? ?? ?? ?? ?? ?? ??
Music: [music].
Music: Yeah.
Music: [music].