Q3 2024 Magnite Inc Earnings Call
and others.
Speaker Change: Thank you operator, and good afternoon, everyone. Welcome to magnates third 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.
Speaker Change: 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.
Speaker Change: 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 actual results performance or achievements to be materially different from expectations or results projected or implied by forward looking statements a discussion of these and other risks uncertainties and assumptions is set forth in the.
Speaker Change: Companys periodic reports filed with the SEC, including our third 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 were less traffic acquisition costs.
Speaker Change: Adjusted EBITDA, a 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.
Speaker Change: 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 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.
Today's call to learn more about masonite I will now turn the call over to Michael. Please go ahead Michael.
Michael Barrett: Thank you Nick we are pleased to deliver another strong quarter as CTV grows and a strong beat in adjusted EBITDA, allowing us to boost full year numbers for the quarter.
Michael Barrett: Our year over year growth rate in contribution ex Tac from C. P J accelerated to 23% from the 12% growth rate in Q2.
Michael Barrett: Strong CTV performance was driven by overall AD spend growth increasing programmatic adoption by the industry's largest players.
Michael Barrett: AD serving strength and solid contribution from political.
Michael Barrett: Our growth rates and contribution ex Tac from C. T V.
Michael Barrett: And AD spend has significantly narrowed.
Michael Barrett: Showing a stabilization in our mix and corresponding take rate.
Michael Barrett: Robust programmatic CTV adaption is also continuing across a broad set of partners.
Michael Barrett: As volumes continue to scale and CPM pressures persist our clients are increasingly looking for us to help them add value to their inventory by layering on data to target and segment audiences.
Michael Barrett: It is critically important for these partners utilized programmatic selling to reach all demand sources, including SMB advertisers that didn't historically play in linear.
Michael Barrett: We believe these trends are very powerful and expanding industry usage of programmatic and growing our accessible Tam.
Michael Barrett: Partners more fully embracing programmatic.
Michael Barrett: Include Roku Netflix Paramount.
Michael Barrett: Warner Discovery and Disney.
Michael Barrett: Next I want to highlight our Netflix and Disney partnerships.
Alex: Alex This rollout magnate powered programmatic solutions continues to ramp and we anticipate the partnership to grow in revenue contribution through 2000 Twenty's fast.
We recently announced the two year extension and expansion of our relationship with Disney.
Alex: They recently signed deal now expands our partnership to include live sports like College football.
Alex: Our Latin American region in podcast for ESPN and ABC news.
Alex: We will also make Disney inventory available to clear line.
Alex: Magnate will continue to be a key partner for Disney and the years to come and we are pleased to further broaden our partnership.
Alex: We are also seeing a nice boost from my sports this summer and fall.
Alex: Recent areas of growth our college football NFL.
Alex: From the top Mvpds and Olympics internationally.
Alex: This is a market that is beginning its journey to programmatic and our industry, leading tech offering combined with our scale to monetize real time inventory is unmatched.
Alex: We expect growth in live television and live sports to continue with more sports and more partners in the coming years. This is a key investment focus for the company.
Alex: We are.
Alex: We are optimistic about the commerce media vehicle being a powerful long term growth driver and I'm working many new opportunities in this space.
Alex: Our partnership with United Airlines announced December is progressing well.
Alex: We are now powering AD, serving and personal devices on hundreds of planes and look forward to expanding beyond personal device entertainment to include seatback screens in 2025.
Alex: Clear line, our self service direct buying platform is continuing to grow and gain traction. We now have more than 20 agencies and brands Bang through clear line.
Alex: We need to ramp their efforts.
Alex: I want to double click on our CTV AD, serving business, which has been operating at nearly twice the AD impression volume from a year ago.
Alex: Our software is deeply embedded with within our partner workflows.
Alex: Go to market solutions as a core part of their operations comparable to enterprise software solutions, it's very sticky and allows us to provide superior overall monetization.
Alex: Our market leadership position in CTV continues to get stronger and we remain extremely focused and innovative features and services that will extend our lead into the future.
Alex: Evidence of this is there are deep and evolving partnerships with the likes of Netflix Disney Roku.
Alex: Your brother's discovery, Paramount and Fox Samsung LG Vizio.
Alex: The fastest growing accounts this quarter included Roku Warner Brothers Discovery Disney and L. G.
The solid portion of this growth comes from our spring serve and magnate streaming SSP combination.
Alex: Which gives us a competitive advantage as it programmatic first partner and is a major differentiator.
Alex: Now to D V plus Q.
Alex: Q3, once again finished in line with our expectations with contribution ex Tac growth of 5%.
Alex: Okay.
Alex: <unk> to growth our investments in emerging formats, such as native audio podcasts and digital out of home.
Alex: Our volume of AD requests continues to grow and we continue to get much more efficient with our cost per AD requests coming down by approximately 30% versus last year.
Alex: Our improving efficiency is driven by filtering.
Alex: <unk> traffic shaping and AI.
Alex: Another tailwind eating or a D V plus N P. TV businesses is the increased importance of sell side audience aggregation.
Alex: A practice that is commonly referred to as curation.
Alex: In simple terms duration is the selective packaging of AD inventory using audience data to help advertisers to reach audiences. They may otherwise miss for sellers. It means driving substantially higher yields on impressions that might have gone unsold.
Alex: As AD age recently noted theres, an ongoing industry shift toward curation on the sell side.
Alex: And it's being fueled in part by signal loss on the demand side, where data collection is becoming more restricted.
Alex: Due to privacy changes in browsers and devices.
Alex: We'd add to this that within the sell side Theres no better home for curation and the SSP.
Alex: Where it's easiest for premium publishers to ally with their peers to attract spend they'd have a harder time getting individually.
Alex: In fact.
Alex: Magnates revenue from sheer rating publisher audiences has grown over 100% year over year.
Alex: It's early days and we anticipate this growth to continue.
Alex: Foreseeable future given our strong tool set and unrivaled publisher footprint.
Alex: Just last week a.
Alex: Forrester report evaluating 10, Ssp's highlighted curation is one of the top three capabilities publisher should prioritize to drive higher yields and differentiate themselves.
Alex: Not only did magnate received the highest possible score for curation, but I am proud to say, we also achieved the highest overall score for the totality of our current offering.
Alex: Expanding our leadership in curation is critical and is another example of how our omnichannel footprint well enabled capabilities for both C. T V. N D V plus that no one else has and will drive outsized market share gains.
Alex: In closing, we delivered strong Q3 results and Q4 guide.
Alex: The strategic investments, we've made to create the world's leading programmatic CTV platform are clearly paying off.
Alex: We're confident that our strong finish to the year.
Alex: It's an exciting time for the role of programmatic and the evolution of see TV advertising.
Alex: And as the industry scales and it involves dominion thousands of new buyers.
Alex: We are also optimistic about 2025 as programmatic continues to gain steam in CTV we were.
Alex: Ramp up new and existing partners.
Alex: And see continued acceleration in sports and for the growth of clear line.
Alex: With that I'll turn the call over to David for more detail on the financials David.
David Day: Thanks, Michael.
David Day: The third quarter was another strong quarter for Mac night, beating the high end of CTV topline expectations and exceeding adjusted EBITDA expectations are.
David Day: Our results drove very strong free cash flow during the quarter, our strong financial performance debt refinancing and early achievement of net leverage ratio goals.
David Day: Have allowed for a tighter focus on equity dilution management.
David Day: Our business is in a very solid position and we are set up for a strong Q4, which is reflected in our updated guidance.
David Day: Total revenue for Q3, it was $162 million up 8% from Q3 2023.
David Day: Contribution ex Tac was $149 million up 12%.
David Day: C. T V contribution ex Tac was $64 $4 million up 23% year over year and again above the top line above the top end of our guidance range.
David Day: AD spend growth and strong momentum with our spring serve AD, serving and programmatic growth drove the outperformance in the third quarter.
And you can plus contribution ex Tac was $85 million, an increase from 81 million or 5% compared to the third quarter last year.
David Day: Our contribution ex Tac mix for Q3 was 43% C T V, 40% mobile and 17% desktop.
David Day: From a vertical perspective as expected political was our strongest performing category at approximately three 5% of contribution ex Tac.
David Day: News and retail were strong as well categories did not perform as well, where food and beverage and health and fitness.
David Day: Total operating expenses, which includes cost of revenue for the third quarter were $147 million.
Greece from $168 million for the same period last year.
David Day: The 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.
David Day: Adjusted EBITDA operating expense for the third quarter was $99 million well below the low end of our guidance range.
David Day: In Q3, we had a temporary benefit of approximately $1 5 million and lower rent related expenses from one of our offices.
David Day: The increase from $93 million last year. It was primarily driven by personnel class software cost and cloud costs.
David Day: Net income was $5 2 million for the quarter compared to a net loss for the third quarter of 2023 of $17 5 million adjusted.
Adjusted EBITDA grew 26% year over year, and was 51 million with a margin of 31, 34%, which compares to $40 million and a margin of 30% last year.
David Day: As a reminder, we calculate adjusted EBITDA margin as a percentage of contribution ex Tac.
David Day: GAAP earnings per basic and diluted share was four cents for the third quarter of 2024 compared to a loss of 13 cents for the third quarter of 2023.
David Day: non-GAAP earnings per share in the third quarter of 2024 grew 42% and was 17 cents compared to 12 cents last year.
David Day: A reconciliation to non-GAAP income and non-GAAP earnings per share are included with our Q3 results press release.
David Day: Operating cash flow, which we define as adjusted EBITDA less capex was $40 million.
Speaker Change: [laughter] excuse me for the quarter.
Speaker Change: Overall cash generation was very strong in the third quarter and our cash balance at the end of Q3 was $387 million, an increase of 61 million or 19% from the end of Q2.
Speaker Change: Increase was due to strong results and typical seasonality in our business, partially offset by share repurchases.
Speaker Change: Capital expenditures, including bulk purchases of property and equipment and capitalized internal use software development costs were $10 million for the quarter, bringing the total to 40 million year to date.
Speaker Change: Our net interest expense for the quarter was $7 million.
Speaker Change: We're pleased to report that our net leverage ratio was 0.9 acts at the end of Q3, a sequential improvement from 1.3 acts at the end of Q2. This adult achieves our goal of less than onex ahead of schedule.
Speaker Change: I'd also like to highlight that we repriced, our $364 million term loan b debt at Sofa, plus $3 75, a 75 basis point reduction.
Speaker Change: This will decrease interest expense by roughly $2 $7 million annually.
Speaker Change: We're very focused on managing shareholder dilution after having successfully solidified our capital structure.
Speaker Change: During the third quarter magnate utilized approximately $14 million to effectively reduce dilution for shareholders by 1.1 million shares.
Speaker Change: Year to date through November six our repurchase program and withhold to cover activity have effectively reduced dilution by $2 9 million shares for $32 million.
Speaker Change: We expect net share dilution in 2024 to be approximately 2% excluding potential additional activity under the repurchase program.
Speaker Change: Through November six we have plenty of additional capacity with $110 million remaining in our authorized repurchase program.
Speaker Change: I'll now share our expectations for the fourth quarter and updated guidance for the full year.
Speaker Change: For the fourth quarter, we expect contribution ex Tac to be in the range of $182 million to $286 million.
Speaker Change: Contribution ex Tac attributable to see T V to be in the range of $75 million to $77 million.
Speaker Change: Reflecting year over year growth of approximately 20% at the midpoint.
Contribution ex Tac attributable to deviate plus to be in the range of 107 $209 million.
Speaker Change: We anticipate adjusted EBITDA operating expenses to be between 102, and $104 million, which implies adjusted EBITDA margin of approximately 44% for Q4 at the midpoint.
Speaker Change: For the full year, we're raising our expectation for contribution ex Tac to now grow between 11 and 12%.
Speaker Change: We're raising our expectation for adjusted EBITDA margin to expand 150 to 200 basis points over 2023, we're raising our expectations that adjusted EBITDA will now grow more than 15% year over year and raising our expectations for free cash flow to grow approximately 20%.
Speaker Change: And we now expect total capex to be about $50 million.
Speaker Change: We also expect to be net income and EPS positive for the full year on a GAAP basis.
Speaker Change: Q3 was another solid quarter for Mac night, and I'm very pleased with our consistent results, we have momentum and significant opportunities ahead and I'm looking forward to a strong finish we expect for 2024.
Speaker Change: With that let's open the line for Q&A.
Speaker Change: Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad. If you are using a speakerphone. Please pick up your handset before pressing the keys is that anytime you have a question has been interesting you would like to withdraw your question. Please press star.
Speaker Change: Then to please ask one question and one follow up question at this time, we will pause momentarily to assemble our roster.
Speaker Change: Our first question is from Laura Martin with Needham and company. Please proceed.
Laura Martin: Great Great numbers you guys. My two questions are these all at the same time that leverage 0.9 times are we on our way to zero. It sounds like you guys ever given your strong free cash flow.
Laura Martin: My first question. My second question is on generative AI what are the things. We're seeing is that companies that are using generative. They are growing their cost much slower than they are growing revenue.
Laura Martin: Wondering how you guys are using generative AI and what the roadmap for that is so we can get cost growth.
Laura Martin: More operating leverage into the model. Thank you.
Laura Martin: Great I'll take the first one this is David Yeah, No, we're really happy with where our balance sheet. Our capital structure is at this point in time I think our goal was to get to you know onex, our net leverage ratio of onex or below we're happy with where we're at and in some ways. Our pivot is turning a little bit too.
Laura Martin: To equity dilution management, and so I suspect that our net leverage ratio will.
Laura Martin: It could come down overtime, but there also will be a focus on the share repurchases.
Speaker Change: Yeah, and Hey, Laura I'll take the January to May I question, Yes. So it's a journey for us as a company. We started a task force within the company comprised of engineering and go to market folks product et cetera.
Speaker Change: Look at a slew of tools that are out there as well as their own development. As you know we have a very large data science team.
Speaker Change: A lot of the machine learning that we're doing isn't true generative AI to speak of but that's really where it's driving our cost efficiencies as we kind of pointed out our volume on the D. V. Plus platform continues to go through the roof, but our cost of processing has come down roughly 30 per.
Speaker Change: <unk> largely because of machine learning filtering et cetera.
Speaker Change: And we haven't talked about AI that we've pushed to our customers in the form of demand manager, that's going over very well and creating revenue lifts up to 30% for some of our customers. So it's like most companies. It's a work in progress and we see a lot of the efficiency is going to be gained internally.
Speaker Change: Probably there is software development on our team's front, but we'll have more to say on that.
Speaker Change: The coming quarters.
Speaker Change: Our next question is from Sean Patel with Susquehanna. Please proceed.
Sean Patel: Hey, guys nice job on the quarter I had a couple of questions.
Speaker Change: Michael you talked about I think both of these topics in your prepared remarks I just wanted to see if you could give little more color on.
Netflix.
Speaker Change: Obviously, a great great great relationship.
Speaker Change: I'm wondering if you could provide any more color on just how you expect that to ramp and <unk> next year and then also in kind of beyond that and then on Disney.
Speaker Change: Really good to see that partnership expansion I guess could you talk a little bit about just.
Speaker Change: You know what what what led them to select Mcknight for these additional areas and just you know what they really liked about the company and the technology that led to the the renewal and just and I guess, maybe just kind of related to that just.
Speaker Change: Do you expect further.
Speaker Change: You know revenue growth from this relationship kind of over time. Thank you.
Speaker Change: Okay.
Speaker Change: Yeah, great questions.
Speaker Change: As it relates to Netflix as you talked about.
Speaker Change: No we're.
Speaker Change: Very careful on our messaging there are a lot of folks ask us a lot about Netflix.
Speaker Change: And I'm, not suggesting you're doing that.
Speaker Change: To get a read through I mean, Netflix add business more so than.
Speaker Change: I read through on magnates business. So I think what we standby is that.
Speaker Change: We're with them there were so programmatic partner on the sell side as they expand into foreign markets, we are going with them.
Speaker Change: The extension of the implementation has been seamless to date.
Speaker Change: They are in the very early stages of selling programmatic themselves.
Speaker Change: But we stand by the estimate that well win.
Speaker Change: When 2025 dust settles that Netflix could very well be one of our it's not the biggest customer of magnate.
Speaker Change: And as it relates to Disney.
Speaker Change: Thank you.
Speaker Change: You got to look at the length of our relationship with Disney and all the software that we've helped build for them that they use internally under Drax and I. Just think it's it's more of an extension of the relationship that we've had as opposed to.
Speaker Change: A full blown RFP, but I think Disney has gotten very comfortable with what they want to do a proprietary and what they want to be able to offer their customers, but don't necessarily want to build it themselves and so as you start to look at the expansion of the relationship I think those are very good indicators that magnate as a trusted partner.
Speaker Change: There is and will be for years to come.
Speaker Change: Great. Thank you guys.
Speaker Change: Our next question is from Jason prior with Craig Hallum Capital Group.
Speaker Change: Pete.
Speaker Change: Great. Thank you Michael there's been a lot of focus on direct connections over the last couple of quarters. Just wondering if you can maybe revisit that and give us give.
Speaker Change: Give us your thoughts on how direct connections evolve over the long term.
Speaker Change: Yeah.
Speaker Change: As you will know Jason.
Speaker Change: You know a little bit different for both platforms right. So D V plus it.
Speaker Change: It does just kind of federal there are it's a little bit easier to do a direct connection.
Speaker Change: Because of pre bid software being predominantly used by all DB plus kind of publishers.
Speaker Change: And you know as we said there hasn't been much change in the kind of cheap pipe strategy that trade desk is deployed.
Speaker Change: <unk> for the direct connection the second pay to compete in the unified auction that is pre bid and continue.
Speaker Change: Continue to see them.
Speaker Change: Large amounts of spend from trade desk.
Speaker Change: In the pre bid.
Speaker Change: Unified auction area.
Speaker Change: And as it relates to a C. T V. There is no pre bid so to speak.
Speaker Change: So it's a bespoke kind of connection to each player's AD server.
Speaker Change: And in many cases as you know, whereas as a primary AD server.
Speaker Change: Or where the programmatic layer by which the DSP would connect through to the AD server.
Speaker Change: Arago, we don't see much loss in economics before magnate in a direct connection scenario in CTV by the trade desk.
Speaker Change: In non proprietary AD serving a.
Speaker Change: CTV players and then even in those cases, you're dealing with it to paint a scenario. So you know I think that one of the things that get slightly inflated is the success that the trade desk is seeing with greater matching with you I D and I think a lot of people.
Speaker Change: Oh, you I D N C. T V equals direct connection which is very very far from the truth like look at Roku for instance, Roku talks about you I D and how it's helping them generate more revenue through the trade desk, but.
Speaker Change: But keep in mind, you I D isn't a direct connect in new ideas surface buying magnate to the trade desk through Roku and so I don't I think people, sometimes think you Ids mentioned magnet gets cut out of the picture and it's and it's far from the truth.
Speaker Change: Thank you a lot of good color on you'd talked a little bit about curated audience to just.
Speaker Change: Curious I would think that that's you know.
Speaker Change: Relatively nascent in terms of adoption there but can.
Speaker Change: Can you talk about where there is some early success as far as you know DB plot, CTV and and in kind of the scale of publishers that are looking at something like a curated audience solution.
Speaker Change: Yeah I'll tell you. It's incredible you know so Jason we've been talking about this whole kind of moving audience targeting to the sell side and.
Speaker Change: I think that the.
Speaker Change: What's been the hindrance to that is there's still third party cookies right and most publishers like Hey until the third party Cookie goes away I'm going to continue to transact away I always dead, but now that they feel that it is going away, even though the tick up with.
Speaker Change: Chrome deprecation of cookies and they are really leaning into it. So we've seen and it is early days and it's early revenue, but we've seen a big explosion in it from a theory to reality and so you're seeing.
Quite a bit of publishers.
Speaker Change: Publishers adapting it I mean again she reason is youre looking for finite audience is left handed jugglers.
Speaker Change: And there's only so many that any publisher would have but its a magnate can group together thousand publishers now all of a sudden you have this curated left handed juggler segment that has scaled and buyers now can take advantage of that and of course in it.
Speaker Change: C. T V. A lot of that World is first party data and almost everything's curated and in that respect. So we think it's a logical outcome of what we've been talking about and that is when third party cookies go away. The signal loss goes away. That's how that's the buy side has operated since the dawn.
Speaker Change: On a DSP is we really think this is a very encouraging opportunities for publishers and their partners like a magnet to be able to participate in those economics. So early days, but very encouraging the direction, it's heading it.
Speaker Change: Alright, I appreciate all your thoughts Michael Thank you.
Michael Barrett: No problem.
Speaker Change: Our next question is from Tim Nolan with Macquarie. Please proceed.
Speaker Change: Hey, Thanks, very much Michael could you talk a little bit more about E transfer, they're shifting to morbid programmatic. It was only a year or so ago that there's this weird sort of fluctuation with a lot of direct sales.
Speaker Change: What's I think coincide with linear TV advertising being soft and.
Speaker Change: Well, it's having their pumps at the time, but now linear television advertising is still soft there's a lot more demand. So a lot more supply on the market from the likes of Amazon Prime and so on and see TV and I think there's been a shift toward using morbid it tools, which should be good for you for your business and for your take rate and I Wonder if you could just give us an update on transitions in the industry. Please.
Speaker Change: Yeah. It can really good observation are in certainly publishers.
Speaker Change: Buyers have always wanted to be able to activate programmatic buys in kind of a biddable fashion, because they're very used to that and they think it drives value for their their advertisers.
Speaker Change: And you know the top premium publishers have been reluctant to play in that game for for a number of reasons largely driven by that's just not what they've done historically, so they much prefer to try to sell everything direct and I think in an environment, where we've had a surplus of CTV inventory. It's suppose two years ago. When you had when.
Speaker Change: It was a it's supply constrained.
Speaker Change: Youre not surprisingly seeing behavior shifts more towards what the buyers want.
Speaker Change: And you're still seeing youre seeing it definitely occur more I mean, you know the Oems the fast the streaming.
Speaker Change: Streaming first.
Speaker Change: Players and then if you look at the plus.
Speaker Change: Streamers the premium are big.
Speaker Change: You know programming.
Speaker Change: You know legacy broadcast folks bidding.
Speaker Change: Bidding biddable programmatic is becoming something that they're leaning into but certainly still not be prevalent way.
Speaker Change: Conduct business with the buyers. So we're all a long way of saying, there's still a lot of weight room to grow in there, which I think is good from a magnate economic standpoint.
Speaker Change: And am I right in thinking that where CTV initially was a little bit.
Speaker Change: They were dilutive to your take rate versus online and mobile a few years ago now with more bid work it should be actually positive for your take rate.
Speaker Change: The balls.
Speaker Change: Yeah, I think you're right and as it evolves I think we've always made a point of saying that.
Speaker Change: It's not that we were in your extreme take rate pressure from the marketplace. It's just that the type of product that's been popular.
Speaker Change: Namely among the plus services has been you know publisher sold programmatic, which carries you know very low take rate visa the magnate sourcing demand and bring it to those publishers. So I think you're right.
Speaker Change: You're exactly right I think we're on the low end of our historic could take rate in CTV and that will only improve as more biddable becomes activating.
Speaker Change: Great great. Thanks very much.
Speaker Change: Thanks.
Speaker Change: Our next question is from Omar just Sue he with Bank of America. Please proceed.
Speaker Change: Hey, Thanks, a lot for taking my question.
So happy to hear about the the extension of the Disney and I was just wondering you know if you could talk a little bit about the economics and if if you can't do so in absolute terms, possibly.
Speaker Change: In relative terms, you know versus the you.
Speaker Change: You know kind of the prior deal or relationship you had with them.
Speaker Change: And in particular, you know as the take rate changing at all.
Speaker Change: Or were there any other kind of value exchanges in this extension.
Omar Sue: Yeah Omar I, you know, obviously can't go into great detail on that but.
Omar Sue: Face to say in a disease.
Omar Sue:
Omar Sue: The products that we sell to Disney carry with it.
Omar Sue: Take rate bands that are similar to other a premier clients. So in other words it.
Omar Sue: Disney is predominantly sourced or on demand through their sales team, whether its programmatic or if it's direct sold and in those cases, that's again, a very low range of our take rate.
Omar Sue: As you look at the expansion of our opportunities.
Omar Sue: Some of those expansion opportunities carry with it the concept of magnate, bringing demanded and when that happens. It comes at a more attractive take rate just like it would for any other publisher. So I think the expansion opportunities are great. It's a validates our partnership and the strength of it.
Omar Sue: But more importantly, it probably does carry with it more attractive economics when they start to light up so I think net net we view Disney is a big revenue grower for for magnet and in the years to come.
Speaker Change: Okay, that's really good to hear and if I could just ask a quick follow up.
Speaker Change: You know please feel free to skip this question if its been asked before.
Speaker Change: You know do you have any kind of update on your views you know given.
Speaker Change: I guess, the recent regulatory decisions and court decisions regarding Google and and S. S piece and I apologize again, if this question's been asked already.
Speaker Change: No Walmart has them and ask them and.
Speaker Change: No real update obviously, you know the the AD Tech trial piece of it is.
Speaker Change: Is the remedies are going to be argued are coming soon and I think theres been a slight delay in it but you know listen I think that you know as we all know this is going to be several years in the making before the dust settles.
Speaker Change: We can't imagine that when the dust settles its not more attractive for magnate to be able to compete in an industry, where Google has a stranglehold on share on the D V plus side, we've been very successful in competing against them on the CTV side, but on the D V plus side we.
Speaker Change: Think there's significant.
Speaker Change: Navigant opportunity for growth when some of the structural inefficiencies in the marketplace get worked out.
Speaker Change: Impossible to tell when that might be but.
Speaker Change: We think all in all we're quite positive about the direction it's heading in.
Speaker Change: Okay, good to hear and thanks for taking my questions.
Speaker Change: Thanks Omar.
Speaker Change: Our next question is from Dan prognosis with the benchmark company. Please proceed.
Dan Prognosis: Yeah. Thanks, Michael.
Speaker Change: Michael it's kind of touched on this and you raised the sort of confusion issue, which I think is very prevalent out there.
Speaker Change: Maybe it would be helpful. If you updated your thoughts on you know given the increasing prevalence of one P AD tech stacks, how much do you think the split the volume ends up being between the two how much they lean on kind of three P versus one P and obviously, there's been noise on you know who has better signals.
Speaker Change: Strength, you know between the two and I think you guys have argued that you guys pretty much win every a b tests. So I'd love to hear kind of your thoughts there and then separately. We continue to hear from other E comm guys Uber or Lyft for example that they're willing to test out more programmatic. So it feel.
Speaker Change: Like United is just scratching the surface of what you can do and kind of broader E comm, but love to hear you know what youre thinking about incremental use cases is just the whole ecosystem continues to move more programmatic.
Speaker Change: Yeah. Thanks, Dan So on their first party data versus third party data I think you have to look at it in two buckets I.
Speaker Change: I think that third party data it will it will be very prevalent and D V plus.
Speaker Change: You know the the if you look at the traditional D V plus publisher, whereas they do have a relationship with their end user obviously the consumer the consumer.
Speaker Change: It seems that content.
Speaker Change: Oftentimes, it's not a lagged and registered relationship.
Speaker Change: And therefore, some of the fidelity of the signals are arent nearly as strong as if you were to have a lagged in relationship or even at.
Speaker Change: Our credit card relationship in that obviously isn't in CTV world and so I think in C. T V. It would be predominantly a first party world and in the cases of third party I think you'll we'll see that's coming from the advertiser. So there's a lot of activity in clean rooms, where your math.
Speaker Change: King you know bank of America, you know our customers with a you know a paramount audience and trying to create that audience segments, specifically for Bofa and that's just an example, that's not a real life setting and so I think when you start to look at it will play.
Speaker Change: Very big role in creating signals in the D V plus world, but that's going to be a portfolio of world isn't that give me one killer.
Speaker Change: Does that give me one killer data signal, that's going to replace the deprecation of a.
Speaker Change: Third party cookies.
Speaker Change: And we will party bogie part of that portfolio of solution, but I think in C. T V. You're going to see a very very strong first party world and will be front and center of that.
Speaker Change: As it relates to Commerce media, you know you'd give me a good example, Uber and you know you can see it through across all kind of.
Speaker Change: The travel industry per se anyone that owns their own screens, you're starting to see a real appetite to get into the Congress media business.
Speaker Change: And I think that we are extra.
Speaker Change: Expertly positioned as you look with the Windows very contested RFP with United.
Speaker Change: We have a video AD server, we have video monetization capabilities in the programmatic area. We are extremely experienced in this stuff and we can bring demand for them and so I think that unlike some of the initial forays in kind of retail kind of a recap.
Speaker Change: D networks English commerce travel.
Speaker Change: Network business will be very much the sell side focused business and I think we're very well positioned to capitalize on that.
Speaker Change: Super helpful. Thanks, Michael.
Speaker Change: Thanks.
Speaker Change: Our next question is from shred it cause area with Wolfe Research. Please proceed.
Speaker Change: Hi, guys. This is Brian Cross got persuaded thank you for taking the questions and congrats on the quarter I just wanted to see if you could provide an update on trade desk and open Pat if there's any impact you're seeing there I know you've mentioned in the first quarter that you're gaining share and D V plus an accelerated growth or just any update on that commentary and then we appreciate it.
Speaker Change: The color on the verticals in the quarter just wanted to see if you have any incremental color on.
Speaker Change: How those turned the corner.
Speaker Change: Yeah.
Speaker Change: Sure, Brian I'll take the first and I'll, let David talk about the verticals Yeah, No real update on open past again, it's it's here to stay we participate in the economics of open path on the CTV side, and we have a our share of spend with trade desk continues to.
Speaker Change: Growing the D V plus side, so we feel as though.
Speaker Change: You were well positioned as a you know kind of a leading omnichannel SSP.
Speaker Change: And David I don't know if you have any more color on the verticals.
David Day: Yeah, I mean, I think a couple of things I think first to too when you think about verticals for us we're not disproportionately dependent on specific verticals, we have such a big footprint that you know overall spend our advertising spend in general you know.
David Day: Our our spend tends to mimic that and so when we talk about strength and and and weaker verticals. It's it's more on the margin. They're not you know always huge huge driver. So some context, there I think I'm, obviously political you know being a 3.5% of our total revenue for the quarter.
David Day: With significant and news in retail where the other strongest verticals are.
David Day: News, a weird [laughter], where youre talking about this earlier Hurricanes Ah you know drove a little more news and and probably politics are.
David Day: As well so.
David Day: That's a I think that's that's yeah, that's the insight that we have.
Speaker Change: Our next question is from Zach Cummins with B Riley. Please proceed.
Speaker Change: Hi, good afternoon. Thanks.
Speaker Change: Thanks for taking my questions.
Speaker Change: Is there any way you could provide any sort of incremental update around the media Ocean partnership I know it was something announced earlier this year, but any sort of incremental update on that would be appreciated.
Speaker Change: Yeah. Thanks, Jack I'm, you know as we said before we think it's a great partnership.
Speaker Change: Filled with opportunity for both of us, but caution that from a sales cycle standpoint, and an activation.
Speaker Change: Standpoint that it's it's going to take some time and so I think we're pretty much right, where we thought we would be we have folks are sampling. The tool we have folks you know actively.
Speaker Change: Coursing a spend through it.
Speaker Change: And it's more kind of a test mode and probably doesn't you know activate in terms of the you know any substantial spend until you get into the kind of Q1 and Q2 timeframe of next year.
Speaker Change: Understood that's helpful and.
Speaker Change: Realizing that D V plus it is facing some near term headwinds what what's the right way to think about the sustainable growth rate in that business. As we go forward from here just curious of how you're thinking about incrementally investing in opportunities on that side.
Speaker Change: Do you want to handle that.
Bob: Sure Bob.
Bob: [laughter] excuse me.
Bob: Yeah I think.
Bob: Yeah, I think I think we feel we feel good about D V plus there's no reason that we can't continue to be a share taker and you know depending on the strength of the macro and overall spend are we certainly think that our D V plus growth rates could it could increase from the level that they're at now.
Bob: Ah, we're investing and new formats and the curation that Michael mentioned earlier, we think we have the the scale and the footprint and the technology that that could be an additional driver for us both in the space AR and am.
Bob: And also for taking share.
Bob: Yeah.
Speaker Change: Understood well, thanks for taking my questions and best of luck with the rest of the quarter.
Bob: Thanks Zack.
Speaker Change: Our next question is from Matt Swanson with RBC capital markets. Please proceed.
Speaker Change: Hey, guys. This is brendan on for Matt and Thanks for taking the question congrats on that myself for my first one it seems like you guys are partnered with almost everyone. In C. T B well what would you say is the strategy to grow the partnership here.
Speaker Change: Yeah, great observation, there arent too many folks that we arent their primary programmatic partner. So I think what the strategy is is that.
Speaker Change: We ride the maturation of programmatic with our partners so.
Speaker Change: Particularly for the time.
Speaker Change: Premium partners plus services programmatic right now is almost exclusively.
Speaker Change: Sold by the publisher and Ah when we don't source the demand and you know our take.
Speaker Change: Take rate is in the lower range of our take rates.
Speaker Change: But as it becomes more biddable as more advertisers not just linear broadcast advertisers, but advertisers that you now have.
Speaker Change: Traditionally the social.
Speaker Change: Or O L D.
Speaker Change: In open web as they start to pest C. T V and use it as a performance kind of middle funnel bottom funnel advertising vehicle.
Speaker Change: That's where we start the paper and the demand we bring those advertisers in and that.
Speaker Change: It significantly improves the economics, so I think that the idea is to.
Speaker Change: Importantly, we then went out there which are you know check that's occurred and now go with them on the journey and help them bring them more monetization capabilities and there you'll see the profile of our the economics improve substantially.
Speaker Change: Great. That's really helpful. And then one more for me do you see pressure on non political spend did you see that towards the end of October and how are you thinking about it coming back on guidance and then thinking more broadly how it's tracked loved one month or two.
Speaker Change: Or has that momentum come Q3 kind of controlled.
Speaker Change: Yeah. So on the political side, there's always going to be dislocation rate.
Speaker Change: So there's a finite amount of add times in CTV and when political comes in and it does push out other folks also given the fact that it was like.
Speaker Change: Most of the elections in this country quite contentious.
Speaker Change: The mood of the programming.
Speaker Change: Generally speaking with something that folks are kind of shut down and so we did see a shutdown of like general add a brand spend which we anticipate to return.
Speaker Change: So youre going into the holiday season.
Speaker Change: Drink that Q4 is always been there so we anticipate that that will.
Speaker Change: We will come back.
Speaker Change: Sure.
Speaker Change: Second part of the question.
Speaker Change: David do you have any color as it relates to that.
Speaker Change: Yeah.
Speaker Change: As I mentioned, a political is about 3.5% of our total revenue in Q3 and since since the last elections over I guess, we can talk about the political in the past tense here.
Speaker Change: You know in absolute terms are we more than doubled Q3 spend are concentrated in the pre election.
Speaker Change: Frame and so if I, if I pan back Big picture.
Speaker Change: We had expectations of political coming in at around 20 million of contribution ex Tac for the year and we came in right around those expectations.
Speaker Change: Great. Thanks, guys Congrats again.
Speaker Change: Thanks.
Speaker Change: Our next question is from Robert <unk> with Evercore ISI. Please proceed.
Speaker Change: Hi, good afternoon. Thanks for taking our questions wanted has quickly if you have any update on the managed service business in the quarter and then also wanted to ask a follow up on curation, maybe from a more of an advertiser perspective, our understanding is that you know with one of the major D. S piece in there sort of a preferred Ids solution there, there's probably a policy.
<unk> on the use of third party data segments are you seeing any advertisers trying to get ahead of that and I'm wondering if there's anything you might be able to share in terms of your share gain opportunity.
Speaker Change: If you're a.
Sort of lighting up these audience segments of it are different SSB solution isn't.
Speaker Change: Take rate opportunity or uplift opportunity or anything else you can tell us about that thank you very much.
Speaker Change: Sure I'll take the curation piece and then David you can talk about managed service yeah. So Dan curation relative early stages really has gained popularity and you know there used to be attendant services a ton of that.
Speaker Change: See networks, but there's some more network model somewhere you know more of an exchange model, but at this S. P. O has continued with major buyers basically let's just say you were a company that had.
David Day: Player technology that are in our publisher would use you play your your your video player technology.
David Day: In return they would give you a instead of paying for the technology or they pay a little bit for the technology, but they give you some AD slots in it.
David Day: So theres a case of technology, and then Theres a case of unique ad units.
David Day: So some folks have unique spaces on the page increasingly when buyers are saying and particularly the large agencies as like we would just as soon conduct that through our exchange relationship that we have in place. So why don't you just go to magnate and then Magna will then activate two there.
David Day: Marketplace, these especially in its a special technology et cetera, and therefore.
Therefore.
David Day: I will buy that way, that's one quite common way of that occurring the other is the targeting solution of less finding our audience segments and banning them together I'm not aware of any restrictions visa b, a DSP, allowing that to occur.
David Day: Generally speaking, it's not coming from the DSP per se, but it's coming from the advertiser behind the DSP and they're the ones that are driving that demand. So I I feel.
David Day: Feel hard pressed to believe that they would limit that if theyre finding success of that and trained.
David Day: Trained at trying to find the audience out there they're looking for that's you know quite quite finite.
David Day: We weren't able to stretch it across thousands of publishers.
Speaker Change: Got it thank you.
Speaker Change: And on the managed services front in the third quarter. Our managed service was about 4% of our total contribution ex Tac and that's down about 20% a year over year as we look forward to the to the fourth quarter. We would also expect managed service to be down.
Speaker Change: And those levels or perhaps even even greater.
Speaker Change: So what's going on as you recall managed services, primarily our mid.
Midmarket sales folks who are are are helping agencies and other buyers who don't have the in house resources to run programmatically.
Speaker Change: But many of those agencies and buyers are.
Speaker Change: Our growing.
Speaker Change: And their ability to to run programmatic and so we're seeing some of those dollars shift into programmatic. The good news is.
Speaker Change: Most of the time that's continues they continue to work with us and so these relationships are very important from our managed service team, but you are seeing are as we expected our that that business activity, becoming programmatic, which is at a slower take rate. So in the short term.
Speaker Change: You know it it hurts us.
From a take rate perspective, and a contribution ex Tac perspective, but we believe these players over time are going to continue to grow in their programmatic and that's certainly offsets are a negative component about over overtime.
Speaker Change: And.
Speaker Change: So we will continue we believe that.
Speaker Change: Managed service will continue to become a smaller and smaller portion of our overall contribution that's ex Tac as we continue to move forward.
Speaker Change: Got it thank you very much.
Speaker Change: Thanks.
Speaker Change: Our next question is from Alex <unk> with Wells Fargo Securities. Please proceed.
Speaker Change: How much could we see be couple quick on the 30% reduction in cost per AD requests year over year, that's usually a pretty meaningful it is pretty meaningful improvement I think you called out filtering and traffic shaping Suez two drivers in the prepared remarks could you maybe just spend a little bit more time, just a lot of reading on what specifically.
Speaker Change: That means or what functionally changing there and then secondly, just any any feedback on how gross spend trended in the quarter relative to country next time would be helpful. Thanks.
Speaker Change: Yeah great.
Speaker Change: I'll touch on the the efficiency gains on the D V plus platform and then have David expand upon that and talk about gross spend mm.
Speaker Change: But essentially you know our costs are right.
Speaker Change: When we receive an AD request.
Speaker Change: That carries with it a cost structure to it.
Speaker Change: But when you bring that AD requests.
Speaker Change: To the exchange and run an auction.
Speaker Change: And you're saying that I had requested that to multiple DSP is obviously, that's a different cost profile.
Speaker Change: So what you really wanted to do is figure out what are the most sought after and request the ones that had been purchased in the past, whether it's a region whether its a device type whether it's a.
Speaker Change: Inventory type.
Speaker Change: And for those that have never been bought make sure that they don't make it to auction where your costs escalate and so so that most of the filtering and filtering in the shaping occur when the trillions of AD requests hit the front door and then you smartly allocate to.
Speaker Change: <unk> DSP number too because DSP number two loves this type of inventory, we will send them that inventory first because we think we will have a higher win rate. So all of this is going on in real time every day Recalibrated every 10 minutes based upon the trailing 10 minutes of activity.
Speaker Change: And that has really helped us to become so much more efficient with our on Prem boxes I don't know David if you have more to add there or about the gross spend.
David Day: Yeah, No I think you are I think you've covered it from a gross and AD spend perspective, we'll look at a D V plus and C. T V separately from a D V plus perspective in general our AD spend you know.
David Day: Gross roughly it at similar rates.
David Day: As our as our revenue growth as our contribution ex ex Tac N C. T V. As we've we've talked about AD spend continues to grow at higher rates than our CTV contribution ex Tac growth, but the difference between those growth rates are.
David Day: Has narrowed as our contribution ex Tac has has lifted up closer to the AD spend run rates and so we're starting to see a little.
David Day: A little bit more stabilization, there still a gap between those growth rates, but we're seeing more stabilization.
Speaker Change: Thank you so much.
Speaker Change: Thank you.
Speaker Change: Our next question is from Max Mccandless with Lake Street Capital markets. Please proceed.
Speaker Change: Hey, guys just one from me if we go back to that does the Disney renewal and you guys talked about sourcing your own demand and taking a higher take rate on that is that something you weren't previously doing or can you help me understand if that's something new you're doing with Disney I guess anywhere any comments you can provide thanks.
Speaker Change: Yeah, I think at Max.
Speaker Change: Good observation I think it.
Speaker Change: The state route was more.
Speaker Change: A statement about.
Speaker Change: It was two fold number one it's just the growing evolution.
Speaker Change: Premium publishers willingness to do programmatic in a bit of a fashion, where you know when the first foray into programmatic. It was very much you know audience as defined by the publisher.
Speaker Change: Pricing set by the publisher and a one to one relationship in terms of even though it was just executed programmatically right. They knew the advertiser. They created the audience segment for them. It was just pushed through our pipes. So in that scenario, we're kind of providing value, but kind of the loan.
We're running a value and now that you're getting into more biddable opportunities. Even if it's led by the probably sure when youre doing biddable it carries with it a higher value perception.
Speaker Change: Invite only auctions, even you know it could be 80.
Advertisers bidding in the same segment.
Speaker Change: It's a different profile so the maturation of the Disney relationship is not unlike any of the other relationships we have with the premium publishers are just yet.
Speaker Change: A growing acceptance that our biddable is a very viable way to increase yield and please buyers on the some of the properties that we expanded our relationship with.
Speaker Change: And Disney particular are in markets that are either a emerging.
Say for instance, audio or be in international markets that may or may not have the same kind of sales.
Speaker Change: Sales footprint that you might have in North America.
Speaker Change: <unk> lend themselves more naturally to programmatic demand is being sourced by magnate.
Awesome. Thanks, guys.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: My next question is from Tim Nolan with Macquarie. Please proceed.
Speaker Change: With large brick drivers.
Speaker Change: Yes.
Speaker Change: Tim are you on the line.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: We already had Tim.
Speaker Change: A question for he had some of them.
Speaker Change: Operator, we can go ahead and we can go ahead and move on to the next one if there's no. Others. Then we can wrap up yes. This will conclude the question and answer session I would like to turn the conference back over to Michael Barrett for any closing remarks.
Michael Barrett: Thank you Sherry before wrapping up I would like to thank the great Magnay team around the world for their dedication and very hard work for delivering another strong quarter that exceeded expectations. Our team's success is publicly recognized by securing the highest score in the current offering category of the 10 vendors evaluated.
Michael Barrett: Weighted in the Forrester wave sell side platforms Q4, 'twenty 'twenty four report so congratulations to all of the magnitude.
Michael Barrett: We look forward to speaking with many of you at our upcoming Investor events, we are participating in or at Wells Fargo virtual meetings Tomorrow Truest Virtual conference on November 12, Cig meetings in Boston and the 13th.
Michael Barrett: Remember.
Michael Barrett: Seaport Virtual conference on November the 18th Craig Hallum Conference in New York on November 19th RBC Conference in New York on November 20th Macquarie Conference in Sydney.
Michael Barrett: Remember 20th Wells Fargo Conference in Wrenches Palace or days on December 3rd.
Michael Barrett: Wolfe Conference in New York on December 4th Evercore meetings in San Francisco on the 19th of December and the Scotia Bank Conference in San Francisco on December the 10th Thank.
Speaker Change: Thank you all for joining and have a great evening.
Speaker Change: Thank you and everyone else has left the call.
Speaker Change: Thank you. This has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change #100: It looks like no one else is going to join this call.
Speaker Change: Goodbye.
Speaker Change: [music].