Q4 2024 PubMatic Inc Earnings Call
Your operator today joining me on the call are Rajiv go our co founder and CEO and Steve Penciling CFO before we get started I have a few housekeeping items. Today's prepared remarks have been recorded after which rajeev and Steve will host live Q&A, if you're planning to ask a question. Please ensure you set your assumed named to display your full name and firm if he would like to ask.
A question. Please use the raise hand function located at the bottom of your screen a.
A copy of our press release can be found on our website at investors <unk> Com I would like to remind participants that during this call management will make forward looking statements, including without limitation statements regarding our future performance market opportunity growth strategy and financial outlook.
Forward looking statements are based on our current expectations and assumptions regarding our business the economy and future conditions. These forward looking statements are subject to inherent risks uncertainties and changes in circumstances that are difficult to predict.
You can find more information about these risks uncertainties and other factors in our reports filed from time to time with the Securities and Exchange Commission and are available at investors <unk> com, including our most recent Form 10-K, and our subsequent filings on Form 10-Q or 8-K.
Our actual results may differ materially from those contemplated by the forward looking statements. We caution you therefore against relying on any of these forward looking statements. All information discussed is as of today February 27, 2025, and we do not intend and undertake no obligation to update any forward looking statement, whether as a result of new information future developments or.
Otherwise, except as maybe required by law.
In addition, today's discussion will include references to certain non-GAAP financial measures, including adjusted EBITDA non-GAAP net income and free cash flow non-GAAP measures are presented for supplemental informational purposes, only and should not be considered a substitute for financial information presented in accordance with GAAP.
Conciliation of these measures to the most directly comparable GAAP measures is available in our press release and now I will turn the call over to Rajiv.
Rajiv Go: Thank you Stacy and welcome everyone.
<unk> hundred 24 was a year of solid revenue growth and margin expansion driven by strength in C. T V new products and revenue streams at marquee customers choosing <unk> to build and scale their businesses.
Rajiv Go: Revenue growth for the year more than doubled growing 9% over 2023.
Rajiv Go: We delivered expanded adjusted EBITDA margins of 32% and we've returned to our rule of 40 company.
Rajiv Go: This marks our fourth of the last five years that we exceeded this benchmark.
Rajiv Go: These results include a significant headwind in desktop display which started in may of 2024 related to a single DSP partner.
Rajiv Go: In the fourth quarter the impact from the spire delivered a softer than anticipated seasonal uptick.
Rajiv Go: Looking beyond this isolated impact we delivered strong underlying growth in all other areas of the business.
Rajiv Go: We also benefited from significant strength in political ad spend.
Rajiv Go: Excluding revenue from the CSP and political advertising Q4 revenue was up 16% year over year.
Rajiv Go: I'm, particularly pleased with the scale of our CTV business, which represented 20% of our Q4 revenue more than doubling its share of our business versus the prior year.
Rajiv Go: I want to thank the entire team for their hard work and relentless focus on our strategy.
Rajiv Go: As I look ahead to 2025, we are materially different company than we were just a few years ago.
Rajiv Go: Our mix of business has changed and our platform has expanded beyond core SSP technology.
Rajiv Go: A sizable share of our revenue and growth are now driven by high consumer engagement channels, such as CTV mobile App and Commerce media.
Rajiv Go: We now serve four key customer segments publishers media buyers Commerce media networks and curators our data providers.
Rajiv Go: As we deliver value and expand usage with each customer segment the value proposition of our platform to other segments increases, creating a flywheel that accelerates revenue growth and increased profitability.
Rajiv Go: For example, unique demand via our supply path optimization deals and activate solution with Dentsu group M and Mars attracts premium publisher inventory from streamers, like Roku, Tcl and dish TV and mobile apps like audio mob free play in Soundcloud to our platform.
Rajiv Go: Our combined strength of supply and demand attracts high value data providers, like experian, and <unk> solutions and proximate by Comscore.
Rajiv Go: <unk> media companies like into the cart and Western Union, who want to grow their ad businesses.
Rajiv Go: These rich and compelling datasets in turn attract more buyers seeking higher return on AD spend in the open internet and the cycle repeats.
Rajiv Go: Okay.
Rajiv Go: As a result, we have a strong growing footprint across the ecosystem.
Rajiv Go: Key to this is our multiyear investment in product innovation, and our SSP and open Rob proper solution for publishers and supply path optimization and activate for media buyers.
Rajiv Go: And connect for curators and data providers and convert for Commerce media networks.
Rajiv Go: These products have expanded our end customer base and more than doubles, our total addressable market to over 120 billion since the time of our IPO four years ago.
Rajiv Go: In addition, early adoption and prioritization of generative AI throughout our business has led to continued innovation increased productivity and greater operational excellence.
Rajiv Go: His focus is already delivering compelling products with tremendous opportunities in three major areas optimizing and accelerating many internal functions to drive profitability, improving our customer facing products and features to drive more usage, and therefore revenue and building entirely new capabilities that weren't possible before.
Rajiv Go: I will go deeper on the value, we bring to each customer segment as well as our generative AI strategy.
Rajiv Go: Let's start with publishers.
Rajiv Go: The TV and streaming was our fastest growing publisher segment in 2024 with growth exceeding our expectations in the second half of the year as we continue to add top tier broadcasters and streaming platforms like Roku dish media Disney plus at Star in Zuma one.
Rajiv Go: We also added important streamers like vivo in Fremantle, who own valuable content and audiences that are important to add backs.
Rajiv Go: Propelled by the surge of political AD dollars revenue from Omnichannel video reached a high watermark of more than 40% in Q4 of which half with CTV.
Rajiv Go: Our platform is rapidly gaining CTV market share CTV increasingly shifts from insertion order based buying to programmatic.
Rajiv Go: We continue to onboard new streamers, and now work with 80% of the top 30 globally up from 70% a quarter ago.
Rajiv Go: Our robust product capabilities and datasets create sticky customer engagement, whereby streamers are increasingly using our platform to set up and execute their direct sold programmatic deals.
Rajiv Go: For the second half of 2024, we launched a CTV marketplace, which aggregates like inventory across our platform.
Speaker Change: Offering by a specific inventory categories like Gen Z or Hispanic audiences.
Speaker Change: As a result, our streaming partners are accessing incremental had demand.
Speaker Change: This is especially true in the fast growing life sports category, and why leading TV manufacturer in streaming content provider Tcl chose <unk>.
Speaker Change: Our CTV marketplace integrates tcl viewership data and premium inventory with our privacy safe targeting solution.
Speaker Change: According to Jeremy straight Tcl adds as VP and global General manager. The partnership quote allows advertisers to leverage <unk> premium inventory, including their AD supported Tcl television plus app that brings a variety of broadcast sports content and channels to over 24 million viewers to connect with this valuable audience in a more targeted.
Speaker Change: Good and effective way.
Speaker Change: Henkel.
Speaker Change: With live sports is a leading catalyst for our continued CTV growth I'm excited to scale. This partnership and leverage our supply path optimization relationships to help tcl grow its digital ad business.
Mobile App also provides significant opportunity for publishers and App developers to participate in the open internet advertising ecosystem.
Speaker Change: For the full year, our mobile App business grew 16% year over year, driven by our open wrap SDK, leading mobile mediation solution that integrates into mobile apps and provides access to programmatic open internet had demand.
With our recently announced mobile partnership starting to ramp up including our recent expansion into social media with X. We have over 900 mobile App publishers on platform.
Speaker Change: Given this large opportunity in front of us and our leading SDK solution. We believe this channel will continue to grow in the double digits.
Speaker Change: The scale and quality of our premium publishers combined with a robust technology solutions are attracting more advertisers and agencies to consolidate their buying on pragmatic.
Speaker Change: Crossed a major milestone in 2024 with more than half of the activity on our platform, 53% transacted via supply path optimization.
Speaker Change: This was up from a third of activity just two years ago, driven by both new media buyers on platform and expanding customers via multiyear strategic partnerships.
Speaker Change: We have a strong partnership with IPG media brands, who leverages, our sell side technology to enhance advertiser ROI.
Speaker Change: By customizing <unk> algorithms, they have improved cpm's in win rates for clients and most recently utilizing activate as optimized workflows and has improved ipg's ability to meet client performance goals.
Speaker Change: As a result, our partnership with IPG media brands has seen significant growth over the past five years I'm excited to continue to partner and innovate alongside IPG media brands to deliver more value for its agencies and their clients.
Speaker Change: Activate continues to fuel growth across our platform as clients seek greater control and transparency across our advertising supply chains.
Speaker Change: In addition, activate delivers valuable efficiency gains with an average decrease in CPM of 13%.
Speaker Change: This translates to significant cost savings for media buyers and an increase in working media dollars that flow back to our publishers.
Speaker Change: Activate is growing rapidly as a result with significant long term potential.
Speaker Change: <unk> Global agency holding companies now spend AD budgets on activate with several like IPG and dentsu using our platform as a central technology in their own proprietary media buying solutions two.
Speaker Change: <unk> 2024 was a breakout year as we grew the number of activate customers by nearly six X versus the prior year.
Speaker Change: Yeah.
Speaker Change: Retail and Commerce media has emerged as pivotal components of the advertising landscape offering inventory and audience data to brands seeking more impactful and measurable ways to engage consumers at the point of purchase.
Speaker Change: We continued to scale, our commerce media business last year as buyers sat to reach high intent consumers and apply valuable transaction insights across the open internet.
Speaker Change: Similarly, leading commerce media networks like <unk> dollar general and Western Union chose to make their data and audience is available one per metric, where they can grow their offsite media business, while controlling access to their data.
Speaker Change: Oh Commerce media platform convert also enables customers to manage their mix of onsite and offsite media across multiple channels and formats, including CTV online video mobile App and display.
Speaker Change: Intuit for example chose <unk> to help power of SMB media labs.
Speaker Change: First of its kind media network focused solely on small and medium size businesses.
Speaker Change: Through this integration into it makes 36 million identifiers available to advertisers, while keeping the underlying customer data secure on intuit's platform.
Speaker Change: As a result advertisers can execute more effective business to business marketing campaigns across the open internet.
Speaker Change: Much of the success, we have seen across our Offsite Commerce media business is built off of multiyear investments and connect which is now a leading platform for data providers and curators to integrate first party data package inventory sell to and optimize outcomes for their buyers.
Speaker Change: Importantly, sell saturation with first party data is now a critical need for open Internet ad buyers.
Speaker Change: First it drives greater efficiency scale and transparency.
Speaker Change: Data providers gain increased control of their valuable audience data and therefore grow their participation in the open internet.
Speaker Change: And third sell side duration reduces the need for third party cookies and close the performance gap that advertisers typically see between walled gardens in the open internet.
Speaker Change: The creation of <unk>, we believe it will expand buying activity in the open Internet is piracy premium inventory.
Speaker Change: Inventory.
Speaker Change: Strategically.
Speaker Change: These integrations generate incremental revenue from data feeds, but also increasing the value of ad impressions.
Speaker Change: We now have 190 datasets available for buyers on pragmatic.
Speaker Change: Now scaled connect shifts buying activity away from third party cookies to higher ROI data, driven impressions and fuels growth across our platform.
Speaker Change: I am extremely proud of the team and all the hard work that goes into building revenue Jay.
Speaker Change: Generating products like activating connect.
Now with scaled adoption of generative living AI across our engineering team David.
Speaker Change: Several key 2024.
Speaker Change: Well increase engineering productivity by over 15% by applying generative AI technology to our software development testing and release problem. Ah recently, we applied AI technology to customer facing products features that drive more usage and therefore revenue.
Speaker Change: Last quarter I talked about our solution for political advertising, which unlike millions of dollars in political ad spend.
Speaker Change: Just last month, we launched <unk> assistant at Gen. AI powered reporting tool that allows publishers to request any report our data using simple clean Lang language texts queries.
Speaker Change: As a result publishers can streamline analytics enhanced productivity and unlock new growth opportunities by uncovering insights and big data.
Speaker Change: This is a powerful tool that removes barriers to adoption and drive increased platform usage.
Looking ahead, Jenny I will continue to play an important role in our strategic development, we expect to release, a steady cadence of exciting capabilities over the next several quarters with a particular focus on solutions that will automate and streamline processes.
Speaker Change: Greater monetization and AD performance and fuel revenue growth.
As I wrap up I want to leave you with three final thoughts.
Speaker Change: First.
Speaker Change: Our underlying business is strong we.
Speaker Change: We delivered 16% year over year revenue growth in the fourth quarter, excluding the DSP impact and benefit from political ad spend.
Speaker Change: This was well ahead of our internal expectations.
Speaker Change: Additionally, we crossed an exciting milestone as CTV continues to scale and becomes a larger share of our revenue at 20% in Q4.
Speaker Change: And I'd be remiss not to mention our focus on live sports curation and Commerce media.
Speaker Change: Investments in these areas diversify our revenue increased exposure to secular growth areas and provide a long runway for growth.
Speaker Change: With continued momentum across all of these areas, we are targeting our underlying business to grow 15% plus year over year in 2025.
Speaker Change: Second our multiyear investments are delivering profitable growth and just as importantly incremental value to our customers as a leading provider of sell side technology, we will continue to innovate and strengthen our competitive mode.
Speaker Change: And third there is an inherent shifts in the digital supply chain for greater value has now placed on the supply side at the source of first party data.
Speaker Change: The future of the digital supply chain includes data curation AD performance and increased efficiency.
Speaker Change: We have a strong foundation on the supply side and are a trusted strategic partner to many of the world's leading publishers.
Speaker Change: The investments we've made put us at the forefront of this shift and I couldnt be more proud of the business as we are today and the opportunities that now lie ahead of us.
Speaker Change: I'll now turn the call over to Steve to discuss the financials and our operating priorities.
Steve Penciling: Thank you Rajiv and welcome everyone.
Steve Penciling: 1024 marked an important inflection point in <unk> growth trajectory as a result of our focused strategy and multi year investments.
CTV mobile app and our emerging revenues each hit a record share of total company revenue.
Steve Penciling: We achieved an all time high supply path optimization activity.
Steve Penciling: This growth enabled us to offset a revenue headwind from our bidding changed by one of our top DSP buyers had emerged mid year.
Steve Penciling: Let me summarize our major 2024 accomplishments.
Steve Penciling: First we delivered our number one priority to accelerate revenue growth.
Steve Penciling: Total revenues grew 9% more than double the rate of 2023, driven by increases in both monetize impressions and Cps.
Steve Penciling: Excluding the headwind of the DSP change and the tailwind of political advertising full year revenue increased 11% year on year.
Steve Penciling: CTV revenue more than doubled in 2024 and in Q4 reached 20% of total revenue.
Steve Penciling: Mobile App increased 16% and represented 20% of total revenue.
Steve Penciling: Emerging revenue streams doubled in 2024.
Steve Penciling: Spo increased eight percentage points year over year and represented 53% of all platform activity.
Steve Penciling: Second with.
Steve Penciling: We expanded our margins and increased adjusted EBITDA by 23% year over year.
Steve Penciling: Gross margin increased by 250 basis points and our adjusted EBITDA margin by 350 basis points.
Steve Penciling: We shifted our revenue mix to high engagement channels like CTV mobile app and emerging rabbits.
Steve Penciling: We further optimized our infrastructure tightly managed our capex investments and increased engineering efficiency with Gen AI.
Steve Penciling: Third we managed our working capital to fund our growth and execute our share repurchase program.
Steve Penciling: We delivered $73 million in operating cash flow and $35 million of free cash flow.
Steve Penciling: We bought back over 4 million shares in 2024, equating to an 8% reduction in fully diluted shares outstanding.
Steve Penciling: We finished the year with $141 million in cash and marketable securities and no debt.
Steve Penciling: These results taken together are clear proof points of the tremendous opportunities ahead of us.
Steve Penciling: First it is a confirmation that our multi year strategy to invest behind the most important secular growth areas is working.
Steve Penciling: And second it demonstrates we can deliver significant rates of profit and cash flow to fund our growth while steadily reducing our fully diluted average shares outstanding.
Steve Penciling: Turning to our fourth quarter revenue results.
Steve Penciling: Total revenues were below our expectations it was a breakout quarter for CTV.
Steve Penciling: Strong year over year growth for CTV and political advertising helped offset the impact from weak holiday spending by the large DSP buyer that had changed its bidding approach mid may.
Steve Penciling: Based on our long term historical trends Q4 holiday advertising typically increases in double digit percentages versus Q3.
Steve Penciling: The rate of decrease for this DSP was in the single digits and predominantly affected display formats.
Steve Penciling: Excluding revenues from the CSP buyer and the benefit from political advertising, our underlying business grew 16% and represented almost two thirds of total revenues.
Steve Penciling: This underlying revenue growth demonstrates the continued secular mix shift in our business towards high value high engagement formats and channels.
Steve Penciling: Omnichannel video in the quarter reached an all time high of 43% of total revenues.
Steve Penciling: This growth was powered by CTV, which climbed to 20% of total revenue in the quarter benefiting from our growing inventory scale spo.
Steve Penciling: Spo relationships and the uptick in political advertising.
Steve Penciling: Emerging revenues also continued their rapid growth in the fourth quarter more than doubling year over year and rising to 6% of revenues.
Steve Penciling: A particular standout in this category was connect our curation and data business, which grew 140% year over year.
Steve Penciling: As called out display was affected by the low holiday spend by the large DSP buyer and declined 8% year over year.
Steve Penciling: Excluding this buyer all of the display revenues increased over 20% year over year.
Steve Penciling: Moving down the P&L.
Steve Penciling: Over the course of 2024, we aggressively manage our cost of revenue focusing on infrastructure optimization and leveraging prior capex investments.
Steve Penciling: As a result, compared to 2023, where we're able to keep our Q4 and full year cost increases at 3% and 2% respectively.
Steve Penciling: At the same time, we increased grossing processing capacity on our platform by 20%.
Steve Penciling: And reduce the cost of revenue per million impressions by 18%.
Steve Penciling: Operating.
Steve Penciling: For the fourth quarter and the full year were $45 8 million and $186 3 million respectively.
Steve Penciling: Over the course of the year, we made targeted investments in our secular growth areas, which delivered the fastest growth rates for us.
Steve Penciling: On a full year basis operating expenses grew at half the rate as 2023, as we leverage prior investments and gain higher productivity from new team members throughout 2024.
Steve Penciling: Q4, GAAP net income was $13 9 million or <unk> 26 per diluted share.
Steve Penciling: Full year net income was $12 5 million or <unk> 23 per diluted share.
Steve Penciling: Underscoring the benefit we're getting from higher value revenue streams operational efficiency and cost leverage our Q4 adjusted EBITDA came in ahead of expectations at $37 6 million or 44% margin.
Steve Penciling: Full year, adjusted EBITDA was $92 3 million or 32% margin.
Steve Penciling: Turning to cash flow, our long term focus for us.
Steve Penciling: Since going public in December 2020, we have generated over $330 million and net cash provided by operating activities.
Steve Penciling: $175 million of free cash flow.
Steve Penciling: In 2024, we generated $73 4 million and net cash provided by operating activities and free cash flow of $34 9 million.
Steve Penciling: As a reminder, beginning in Q3, we saw an increase in dsos related to the DSP change.
Steve Penciling: We anticipate that this DSO change with normalized mid 2025.
Steve Penciling: Moving to cash and our capital allocation.
Steve Penciling: We have a healthy balance sheet and generate positive cash flow, which supports our long term capital allocation strategy.
Steve Penciling: We ended the quarter with $146 million of cash and market securities and zero debt.
Steve Penciling: Since the inception of our repurchase program in February 2023 through the end of Q4, we have bought back $8 3 million class a common shares for $134 6 million.
As at the end of the fourth quarter, we had $44 million remaining in our repurchase program authorized through December 31 2025.
Steve Penciling: Turning to 2025, we are confident.
Steve Penciling: We are.
Steve Penciling: Yeah.
Steve Penciling: Over the first half.
Steve Penciling: Yeah.
Steve Penciling: Both of them.
Steve Penciling: <unk> spend level.
Steve Penciling: About the Tor.
Steve Penciling: Hum.
The effect.
Steve Penciling: Alright.
Steve Penciling: Thanks.
Steve Penciling: Pulled a fast.
Steve Penciling: Okay.
Steve Penciling: Okay.
Steve Penciling: Okay.
Steve Penciling: Okay.
Steve Penciling: Yeah.
Steve Penciling: Our revenues are growing rapidly and we believe they're important.
Speaker Change: Including investment in customer facing Jenny I products as Rajiv outlined earlier.
Speaker Change: We believe these investments will set us up for our next stage of growth later this year and next by expanding revenues with existing customers and targeting new customers and markets.
Speaker Change: Turning to our financial outlook, the positive trends of 15% plus growth in our underlying business has continued quarter to date.
Speaker Change: At the same time, we are also seeing a continuation of the softer trends at our large CSP that emerged in the latter half of Q4.
Speaker Change: Accordingly in developing our outlook, we are taking a conservative stance with respect to this buyer.
Speaker Change: Assuming its current run rate will continue with limited upward seasonality in 2025.
Speaker Change: With this in mind, we expect Q1 revenue to be in the range of $61 million to $63 million factoring in the DSP headwind noted in double digit percentage growth of our underlying business.
Speaker Change: With our revenue outlook and predominantly fixed cost base, we are estimating our Q1, adjusted EBITDA range to be $5 million to $7 million.
Speaker Change: This outlook includes a negative FX impact predominantly from euro or pound sterling expenses relative to a weakening dollar this quarter.
Speaker Change: Turning to the balance of 2025, we are assuming a continuation of the latest run rates for this DSP and our underlying business grows 15% plus.
Speaker Change: In terms of year over year comparisons. This implies that total company revenue in the first half of the year will be slightly down year over year in the low single digit percentages.
Speaker Change: For the second half, we anticipate total revenue will grow year over year in the high single digit percentages and factors in the tough comp from political.
Speaker Change: For reference political advertising contributed approximately 6% of total revenue in 2024.
Speaker Change: In terms of expenses, we are on track to continue driving operational efficiencies productivity.
Speaker Change: Improvements and targeted investments to drive our secular growth.
Speaker Change: We anticipate our cost of revenue to increase sequentially quarter to quarter in the low single digit percentages similar to 2024.
Speaker Change: We are expecting that our cost leverage and continued mix shift towards high value formats will enable us to increase our full year gross margin rate.
Speaker Change: With respect to Opex from Q2 onwards, we are targeting recorded at eight sequential increases in the low single digit percentages.
Speaker Change: In terms of adjusted EBITDA as we transition through the DSP impact our first half margins will be slightly lower than historical levels with second half margins more in line with historical trends.
Speaker Change: For the full year, we are anticipating the adjusted EBIT margin to be in the high 20% range, which includes several million dollar impact from FX.
Speaker Change: Full year Capex is projected to be similar to 2020 fours level of approximately $80 million with most of our capex anticipated in Q3.
Speaker Change: In terms of free cash flow, we anticipate it will be somewhat lower in the first half until we lap the midyear change in DSP spending and then return to historical levels.
Speaker Change: In closing I want to take the opportunity to briefly summarize.
Speaker Change: 2025, we will have some tough comps, which obscures our underlying healthy growth.
Speaker Change: Overall impact from one large CSP buyer has been significant but it's isolated to one portion of our business primarily desktop display.
Speaker Change: We grew through this impact in 2024, and we expect to do the same in 2025.
Speaker Change: We will lap this change in just a few months and emerge with a largest share of our business coming from key secular growth drivers.
Speaker Change: We are confident in our ability to execute what is within our control and deliver on our growth strategy.
Speaker Change: And finally, we have a strong financial profile and a proven durable model that delivers healthy margins incremental leverage and cash flow and we will manage the business through this priority lists.
Stacy: I'll now turn the call over to Stacy for Q&A.
Stacy: Thank you Steve as a reminder, you can ask a question by raising your hand located on the dashboard Mauritania phone. Please press star nine in the interest of time, we ask that you. Please limit your question to one and one follow up our first question comes from James <unk> of Jefferies. Please go ahead James.
James: Great. Thank you asked the question Steve.
Speaker Change: Steve can you talk a little bit more about the month on month trends.
Speaker Change: It's all throughout the quarter and when you start to see some of the weakness and is there anything you can say just about overall CPM trends.
Speaker Change: Sure and you came in a little bit faint there, but if I Miss the question just call it out but.
Speaker Change: Hi, Jason with respect to the sequential progression throughout fourth quarter for our underlying business CTV mobile.
Speaker Change: All on track with our expectations and really the softness.
Speaker Change: Softness that we saw occur later part of Q4 with the the one DSP, but otherwise the expectations were in line with what we had anticipated and so the the softness was via the DSP and specifically in the display format.
Speaker Change: C. P M. We actually had quite good results over the course of 2024 and a full year basis, our CPM Roth.
Speaker Change: In the fourth quarter, they were positive and for the full year.
Speaker Change: <unk> impressions are were also positive and it really underscores the point that Rajeev and I are made regarding the important progression and traction we've got.
Speaker Change: And our secular growth areas my.
Speaker Change: Ties impressions for CTV doubled.
Speaker Change: And we've seen great growth across the core underlying desk. This is hal.
Speaker Change: The challenging.
Speaker Change: The issue is with us back to the one DSP.
Speaker Change: And we feel that we.
Speaker Change: We have a good handle on it based upon the latest trends that we're seeing we've articulated that in our outlook.
Speaker Change: Our next question comes from Rob Coumarin and Evercore. Please go ahead Rob.
Rob Coumarin: Great. Thank you so much.
Rob Coumarin: I wanted to ask go back to the large CSP partner.
Rob Coumarin: Could you tell us a little bit about me why the impact is limited to display.
Rob Coumarin: And particularly why you think you you saw just were toward the latter part of the quarter.
Rob Coumarin: And then just stepping back a little bit is there do you think there's anything that you need to do with respect to that really should help them with their bid shading algorithms or or wherever it is technically going on or.
Rob Coumarin: Is there any other explanation is there any impairment of the relationship or is it more just a technical.
Rob Coumarin: Bidding issue. Thank you.
Rob Coumarin: Big picture, Rob the ultimate.
Rob Coumarin: Issues that structural change with respect to that DSP in terms of its bidding approach as a reminder, went from formerly first recycled price steady to slightly first.
Rob Coumarin: And that should have a baking in process.
Rob Coumarin: And.
Rob Coumarin: After that change we saw fairly stable results and going into the fourth quarter, we'd anticipated moderate seasonality.
Speaker Change: Yes. It is the case every fourth quarter.
Rob Coumarin: But the seasonality for that particular DST was about half the rate.
Rob Coumarin: Other ideas piece and historically the CSP has been a predominantly display buyer and so that's why you see it.
Rob Coumarin: Coming through the display format now stepping back.
Rob Coumarin: It's a great relationship.
Rob Coumarin: Our long term relationship we're going to be a transition through this.
Rob Coumarin: Particular period of time and a couple of months.
Rob Coumarin: And we're building out incremental opportunities with a buyer so from our perspective, it's really just a year over year comparable challenge and then will be.
Rob Coumarin: On track year over year, starting in the second half.
Rob Coumarin: Now.
Rob Coumarin: Overall company perspective.
Rob Coumarin: Core things that we set out to do in 2024 was to really drive our secular growth areas, which is CTV mobile app.
Rob Coumarin: Emerging revenues and all of that was very successful and.
Rob Coumarin: And so in the Big picture, what's happening by default is we are becoming less dependent on display.
Rob Coumarin: And Ah more indexed to the fastest growing areas as a case in point.
Rob Coumarin: Display now as a desktop display is about 20% of our total revenues a.
Rob Coumarin: A couple of years ago. It was 50 percentage points higher so from our perspective, we're right on the right track in terms of.
Rob Coumarin: Focusing on the fastest secular growth areas and display will continue to be important harbor basis, but a smaller part going forward.
Rob Coumarin: Great if I could try one more.
Speaker Change: Can you talk a little bit more about the data opportunity, what's what are either sort of secular shifts in the industry in terms of.
The address ability there they're driving your your data opportunity and I know you tell us about how you size that or how you think about that opportunity internally. Thank you.
Speaker Change: Yeah sure I can I can take that Rob. So you know broadly speaking what we see is a shift in the industry.
Speaker Change: Towards sell side targeting right and that is instead of applying data.
Speaker Change: Within the DSP applying it on the sell side of the ecosystem. So what's driving that shift is a couple of things one is obviously the cookies under pressure.
Speaker Change: D S piece.
Speaker Change: Primarily our matching datasets from publishers through the SSP with the cookie until those cookie pools are drawing up on the buy side and.
Speaker Change: And then second the industry is shifting towards a variety of first party data sets right so whether that.
Speaker Change: Login users in CTV environment.
Speaker Change: First party publisher data and all of that signal in terms of quality and scale is much stronger on the sell side of the ecosystem.
Speaker Change: And then third when you apply that data on the sell side, it's just far more efficient. So we're able to apply the data and then make sure that the buyers only buying the impressions.
Speaker Change: They want to buy as opposed to sending all of the impressions to a DSP and then having that the timing of glad there. So these are some of the drivers of what's.
Speaker Change: Leading towards a shift a cell site targeting.
Speaker Change: Sure.
Speaker Change: Our competition because we've been working.
Speaker Change: For about half a decade now.
Speaker Change: On this opportunity given that's along the cookie.
Speaker Change: Cookie risk has been out there. So we have significantly diversified our revenues away from cookie dependent advertising bright things like CTV mobile App, Commerce media, which which Steve mentioned, we significantly increased the scale of of identifiers or data that's available on our platform other than the cookies of over nine.
Speaker Change: The percent of impressions now include an alternative signal like a library E trade desk idea et cetera.
Speaker Change: And then third we've invested very significantly in our connect capability set we now have over 190 data partners that are integrated in and.
Speaker Change: Dozens of customers that are using our platform to package inventory and then sell that to buyers and using our platform to manage all of those transactions.
Speaker Change: The last thing I'd, just add about that is it's a great business for us because we not only generate incremental data fees, but all of the transactions concur and SSP.
Speaker Change: He is well and all of that spend is on our platform. So allows us to drive additional revenue to our publishers.
Speaker Change: Great. Thank you very much.
Speaker Change: And our next question comes from Zach Cummins of B Riley. Please go ahead Zach.
Zach Cummins: Hi, good afternoon, thanks for taking my questions.
Zach Cummins: I wanted to focus in on CTV is nice to see that continuing to get traction on that side. So can you just talk about where you're seeing success on the CTV side of it is there a specific category of of of media streamers that that is particularly attractive American I'm, just curious of kind of your runway for growth on CTV over the next couple of years.
Zach Cummins: Sure absolutely. So yes, I think we're obviously youre seeing tremendous results from us in terms of CTV.
Zach Cummins: As reflected by the 20% a revenue metric and then the fact that it more than doubled on a year over year basis, and so you know really what our focus is is that.
Zach Cummins: We have been building for this moment right, which is the shift of.
Zach Cummins: CTV towards programmatic and away from insertion order baseline and we're seeing exactly that happened right now until we really focused on building the very best platform in the market to manage all types of programmatic transactions and so that's whether it's P. M. P. S P D or its open auction.
Zach Cummins: And so what we're finding is that publishers screamers broadcasters more and more of them are using us for their drexel deals because of the quality of our technology.
Zach Cummins: Why workflow transaction management capabilities.
We're not standing still we're augmenting that with Jenny I based solutions.
Zach Cummins: So in terms of the type of publisher I mean, we shared that we're now working directly with 80% of the top 33 months. So a lot of marquee names like Roku dish media Disney plus hop Star Zummo, Tcl and that's just that's up from 70% just a quarter ago. So you've got a lot of very large head broadcasters and streamers as well as more.
Zach Cummins: Kind of mid market.
Zach Cummins: Sized.
Zach Cummins: Creamer, some digital only some coming from the television side so.
Zach Cummins: So we're seeing strong.
Zach Cummins: Strong success across the board and then I think what we've done very differently from others is really talking about dimension data providers.
Zach Cummins: Okay.
Zach Cummins: Okay.
Zach Cummins: Okay.
Okay.
Zach Cummins: Okay.
Zach Cummins: Chemicals drove up against these compelling data sets.
Speaker Change: So I think more broadly as we lap the DSP change from Q2 of 2024, I expect more of our business to be indexed to secular growth drivers CTV as is the largest of those and we see a long runway there with live sports data curation supply path optimization and activate.
Speaker Change: Understood well, thanks for taking my questions and best of luck with the rest of the quarter. Thank you.
Andrew Byrne: Our next question comes from Andrew Byrne JMP. Please go ahead Andrew.
Andrew Byrne: Alright. Thanks, so much for taking my question I wanted to ask about after that you guys talked about <unk> growth.
Andrew Byrne: Can you just help us explain that and then Rajiv just more more strategically talk about the a mark in terms of adding more demand to the platform overall.
Speaker Change: Then Steve one of the key takeaways for me at least was the Gen. II savings. This quarter can you just help frame that cross what's the possibility as we think about models, just proliferating going forward and what that Nomura.
Andrew Byrne: Your Opex line items. Thanks, Mike.
Speaker Change: Yes, absolutely.
Mike: Yeah, why don't I kick it up Andrew and then ill turn it over to Steve. So we're seeing obviously, great success and growth with our with activation.
Steve Penciling: Of course, it's starting from a small base, but we grew that success on a year over year basis, which obviously is very exciting is that every wholesale buying on the platform now. So we're seeing you know Barry.
Speaker Change: Very strong.
Speaker Change: Trajectory with that with that business and really what we're trying to do with activate is to simplify the digital advertising supply chain make it more efficient to make it more transparent and make it more performance.
Speaker Change: And I think that's the broad theme of why we are seeing success here because spo, our spo approach driven by activate is driving performance and its driving efficiency right. So you've probably heard a lot of the agencies talking about growth and the outcomes based business second group out and talked about that yesterday or today as an area that they want to focus on.
Speaker Change: And because with activate we're able to make the end to end transaction a lot more efficient.
Speaker Change: As a natural play to drive performance in the open Internet.
Speaker Change: Now the other reason why I think it's working very well is the approach that we've taken with AD format agnostic, It's AD server agnostic.
Speaker Change: Device consumer device agnostic, so literally all 800 billion AD impressions that are flowing through our platform on a daily basis are eligible to be reactivate.
Speaker Change: So thats resonating with buyers in terms of the simplicity and the scale of it now.
Andrew Byrne: Now in terms of Andrew the other part of your question.
Andrew Byrne: Any dollar that a buyer puts them to activate.
Andrew Byrne: Those dollars only flow into our SSP right because activate as a direct buying a solution built inside of our inside of our SSP and so what that means is that every dollar is unique and incremental spend there.
Andrew Byrne: That only publishers integrated into into <unk>.
Andrew Byrne: We'll see it.
Andrew Byrne: So as an example last quarter we announced.
Andrew Byrne: The dentsu Mercury for media, there new buying system.
Speaker Change: He has built an activate and connect technology from <unk>.
Speaker Change: And then one quarter later you saw that we went from over 70% penetration of the top 30 streamers globally to 80% and so those things go hand in hand, right way than tumor say, okay, well I want to access more density dollars.
Speaker Change: That I need to make sure that my inventories available inside of the <unk> platform. So we think it's a very strong lever for us to continue to grow the supply side of our business and grow our revenues I'll turn it over to Steve for the other part of your question.
Speaker Change: Sure.
Steve Penciling: So Andrew with respect to how we think about.
Speaker Change: Improvements to product over time, absolutely, we anticipate that's going to continue.
Speaker Change: As a reminder to everyone now as a company we have a machine learning in our DNA.
Speaker Change: A product driven organization and we've actually been developing and working with various AI tools for at least two years now and you see the results on the engineering side.
Speaker Change: And most recently in the fourth quarter, we turned it to the revenue side developing a new <unk> product to drive incremental political spend so from us from our perspective.
Speaker Change: Second we see this as a continuing enhancement.
Speaker Change: Enhancement to both the cost side and the revenue side and I would fully expect let's say in a particular year, we might want to add.
Speaker Change: Yes, 5% incremental head count things like the AI initiatives on the engineering side.
Speaker Change: Not necessarily necessitate that so from our perspective, it's going to be an ongoing opportunity to continue to get more efficient.
Speaker Change: And also drive incremental revenue, so I would be.
Speaker Change: Expecting.
Speaker Change: Expecting a let's call it roughly 5% to 50% in any particular year improvements as a result of all the activities we're doing around Gen AI.
Speaker Change: Thank you.
Speaker Change: And our next question comes from Jason <unk> Oppenheimer Go ahead, Jason Hey, guys I'm too worried his birth on the Firstmerit second with DSP as you.
Speaker Change: Or any or is it a risk now or any other dsp's, where they're all now on first bid and then back in when you talk about the investment is behind the biocide products, both R&D and sales and just kind of how that plays out I guess.
Speaker Change: In the next 12 to 18 months.
Speaker Change: Sure I'll take the first part so yes, the DSP changed with the last one to go from.
Your first and second to solely first so as.
Speaker Change: As I pointed out.
Speaker Change: Mid last year. This is something that many other <unk> had already moved to so this is really the final transition.
Speaker Change: With respect to this option change.
Rajiv Go: I'll turn it over to Rajeev for the investment side, Yeah. Thanks, Steve So yes, Jason from an investment perspective, we plan to aggressively.
Speaker Change: Take our spo inactivate.
Speaker Change: Duration Commerce media all of these products to market.
Speaker Change: We made investments in 2024, and two of our sales team to be able to do that we're going to continue to make investments in 2025, expanding our sales team I think we've got pretty good coverage on the Holdco.
Speaker Change: But there is a growing roster of brands that want to engage in spo that are interested in inactivate.
Speaker Change: And mid market agencies have a growing share of the overall spend in the ecosystem. So that's a key target for us.
Steve Penciling: Steve mentioned this earlier, but with respect to Gen. AI, we find that there are obviously productivity opportunities right and so a lot of what we're focused on.
Steve Penciling: In addition to customer facing solutions is solutions that make our own team more efficient. So for instance, Gen AI solutions at our customer success team can use.
Steve Penciling: So that they don't have to manually.
Steve Penciling: Handle queries from customers, but instead, we can automate those things. So I think we're going to find some some good opportunities to shift the mix.
Steve Penciling: But you know what our team is focused on to be more increasingly focused on the buy side of the ecosystem.
Steve Penciling: Yeah.
Speaker Change: And our next question comes from Matt Swanson RBC. Please go ahead Matt.
Matt Swanson: Okay. Thank you.
Speaker Change: Hmm, maybe more of an ecosystem question terms of CTV Rajeev, we've always talked about the idea of it looking a lot more like the open internet over time kind of everything progressing that header bidding at scale strategically is that still kind of like where you're set up or obviously you are seeing some.
Matt Swanson: Some success in more areas than just that.
Matt Swanson: Just curious on how you kind of think the CTV ecosystem evolves at this point.
Matt Swanson: Sure Yeah. So we're still in the transition from predominantly insertion order based buying.
Matt Swanson: Moving into the let's say the preliminary or the nascent transaction types and programmatic and so thats programmatic guaranteed.
Matt Swanson: And one to one private marketplace deals, we are seeing however, more and more opportunity around.
Matt Swanson: Option packages, which is multiple publishers and are putting in a single deal and so we talked about that in terms of CTV marketplace, where we set up a marketplace where buyers can come in and for instance by Hispanic audiences or Gen Z audiences are live sports.
Matt Swanson: And that would be a significant scale of inventory across a number of publishers I think as that gets to scale that will eventually lead to open market transactions.
Matt Swanson: Now part of the opportunity here is to manage all of this from a yield perspective, right, which is a publisher may have sold Nio. They may have sold the PGE European PEO than they've got incremental demand coming in from us from CTV marketplace or from open auction demand so bringing all of these pieces of demand together manage.
Matt Swanson: Adding them in an AD pods, so theres no.
Matt Swanson: Competitive conflict driving the yield to the publisher is delivering on the programmatic guaranteed commitment, but also maximizing yield I think these are all significant technology challenges and opportunities that we're very well positioned to be able to build for and deliver value for our customers and so I think it really just speaks to.
Matt Swanson: The.
Matt Swanson: To the the importance and need a sell side technology within the ecosystem.
Matt Swanson: Okay.
Matt Swanson: No I appreciate that.
Speaker Change: And then Steve I know you always take a lot of pride in your adjusted EBITDA, sorry, I had for another question here on that.
Speaker Change: In a quarter like this where you have a revenue shortfall in adjusted EBITDA still be is that just a testament to how lean are efficiently in the business is running or are there levers that you're pulling mid quarter to kind of control costs on that side.
Matt Swanson: Thanks, Matt.
Matt Swanson: I am very proud of what the team has accomplished and absolutely. It's been a function of long term focus on efficiency.
Matt Swanson: We have a very long multi year a record of delivering EBITDA.
Matt Swanson: And a great fourth quarter and ultimately it comes down to.
Matt Swanson: Understanding that the levers over time, but it's really about the structural aspects of how we built our business and it starts out with the gross margin line.
Matt Swanson: A decade ago, we decided to own and operate our own equipment and we've been yielding the benefit of that ever since that has allowed us to get leverage.
Matt Swanson: Throughout the period throughout a calendar year.
Matt Swanson: And we certainly saw that in 'twenty four as you see the basically cost of revenue line didn't really increase that much year over year, while the impressions actually increased 20%. So it's a function of a lot of hard work focus and a DNA that.
Matt Swanson: Delivering incremental <unk>.
Matt Swanson: Topline and Bottomline is what we focus on it. So we're set up to do that and I fully expect we're going to continue to operate through that priority lands going forward.
Matt Swanson: Thank you thanks.
Speaker Change: Our next question comes from Tim Willi.
Speaker Change: Please go ahead Ken.
Speaker Change: Thanks, guys for taking the question.
Speaker Change: We expect headline growth in the second half of 'twenty five to converge to the 50% core business growth once you lap the DSP bar impact.
Speaker Change: Sure. Thanks, Ken.
Speaker Change: Just as a reminder, we.
Speaker Change: The underlying business is very well set up to grow 50% plus.
Speaker Change: Through the through the year.
Speaker Change: I commented in the prepared.
Commentary that.
Speaker Change: Thus far in the quarter were hitting that mark 50% plus.
Speaker Change: So that will certainly continue.
Speaker Change: Now as we go into the second half as a reminder, we will be lapping a significant political spend that we achieved.
Speaker Change: In the second half of 2024.
Speaker Change: And we were able to achieve that because we're at scale are significant part of that political spend was via CTV.
Speaker Change: And so we certainly were well positioned we developed that Jenny I product to actually incrementally charge that that opportunity also.
Speaker Change: We will be lapping that but I fully expect on a reported basis. The second half of 'twenty five versus the second half of 'twenty four will be in the high single digits.
Speaker Change: And then it'll just depend on sort of the sequencing as the year progresses in terms of either breakout above above that level.
Speaker Change: Thank you and for my follow up how should we think about the mentality of the partnerships to 2025 revenue growth.
Speaker Change: So we have quite a few incremental new partnerships that we've been developing and so.
Speaker Change: It's we're rolling those out.
Speaker Change: Every month every quarter, so I do expect that to adequate mentality in the second half.
Speaker Change: Around CTV business.
Speaker Change: With that Rajeev and I have commented on.
Speaker Change: Thanks, guys.
Speaker Change: Thanks, Ken and thanks.
Speaker Change: Our next question comes from Raytheon, Yes, Amin and James. Please go ahead Michelle.
Speaker Change: Yes. Thank you for taking my questions just going back to.
Speaker Change: The success, you are experiencing or <unk> in CTV.
Speaker Change: What percentage of that of what part of that mix would you attribute the strength in the U S. Political season in the fourth quarter, how do we think about CTV concur.
Speaker Change: Contributor going forward and then I have a follow up.
Speaker Change: Sure. So our CTV political was very important for us, but just to step back.
Speaker Change: Overall, if we exclude the CTV political component of CTV revenues, we still doubled year over year revenue so the underlying momentum.
Speaker Change: Is very strong in our CTV business and so with the political component even faster year over year growth rate.
Speaker Change: Over the course of 2024.
Speaker Change: Medical represented about 6% of revenue.
Speaker Change: And within the CTV.
Speaker Change: Political spend.
That represented a little under a third of the total CTV revenue so an important part of the business.
Speaker Change: And reflects the opportunity we have in front of us and we capitalize on that now going forward I expect us to be able to continue to develop and grow our CTV business. So I would expect from the.
Speaker Change: The unadjusted without political base to grow.
Speaker Change: The teens high teens over time in 2025.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Right.
Speaker Change: Marketing in 'twenty late yesterday, they might in the display world, but there's certainly going to have more than one.
Speaker Change: And part of that is more bids coming for their inventory needs to more yields I think thats very clear.
Speaker Change: And resident point across the ecosystem in terms of how open are open internet advertising is trading. So if you have more than one SSP you've got multiple bids coming in for your inventory in the publisher generates more revenue.
Speaker Change: And then second because of our spo and activate relationships, our curation platform Commerce media platform, if a buyer wants to buy against instant card data our western Union data.
Speaker Change: Then that those bids are going to flow on our platform and so of course.
Speaker Change: Streamer like Roku for instances recently just made this transition.
Speaker Change: It kind of shut down their own walled garden and move to a more open stance with CTV clearly reaping the benefits of it.
Speaker Change: Those are going to drive.
Speaker Change: Significant growth opportunity and runway for us.
Speaker Change: That's very helpful. Thank you and then my follow up is just on the competitive dynamics.
Speaker Change: Wanted to get your thoughts on the competitive landscape, obviously from the FSB side. We're also at the lines between DSP and entities continue to blur. Thank you.
Speaker Change: Sure, Yes, I can take that I mean, I think what theirs are.
Speaker Change: Those lines blurring is not necessarily new if you think about Google DSP, obviously, they've been on buy side and sell side.
Speaker Change: For for a very long time.
Speaker Change: Xander right is on both the buy and sell side Yahoo. Historically was on both the buy and sell side they've exited some of that to.
Speaker Change: So trade desk of course with our with open that.
You know what we're really focused on is how to make the digital advertising supply chain efficient.
Speaker Change: Transparency performing give more control to our end customers in order to drive their own business and that is up from the bottom up right from the infrastructure ownership that Steve mentioned, our control of the network layer the hardware layer as well as the software layer and now building technology applications, including some of the Gen AI applications, where we are.
Speaker Change: Turning on to provide that end to end control and visibility.
Speaker Change: So we think that is a winning combination winning formula.
Speaker Change: Or what both buyers and publishers want to see in order to continue to drive and scale their businesses at the same time I would say the industry continues to consolidate right. So we're seeing an uptick in M&A. So.
Speaker Change: So we feel that given our financial profile, given our scale of relationships technology integrations over 1900 publishers.
Speaker Change: We're in a very strong position to be able to drive that consolidation.
Speaker Change: Okay.
Speaker Change: Great. Thank you.
Speaker Change: Our next question comes from add My Community Lake Street. Please go ahead.
Speaker Change: Yeah I wanted to you gave us a comp for Q3, and Q4, where you excluded the large DSP in the political spend.
It was 17% in Q3, and then 16% in Q4.
Speaker Change: Could you remind me what were those numbers in Q1 and Q2 of 'twenty four.
Speaker Change: Well the political was primarily a second half <unk>.
Speaker Change: And so and the DSP component was I didn't start until the second half. So it's really only relevant in the second half of 2024.
Speaker Change: And because our reported numbers.
Speaker Change: Sure that that's why we decided to break it out beginning in the third quarter.
Speaker Change: And as a reminder.
Speaker Change: The first quarter is trending right on that trajectory, 50% plus for roughly two thirds of our revenues.
Speaker Change: And so really the only noise that we have right now is related to this one DSP and begin any.
Speaker Change: The start of the third quarter, it will be on an apples for apples basis.
Speaker Change: And if I could just add just stepping back as we mentioned that impacted DSP is primarily a display buyers. So the practical impact is that we are deleveraging away from the more cyclical display business and we love getting towards many of the secular growth areas that we've called out CTV mobile App Commerce media duration and you can see.
Speaker Change: Obviously, the strong growth there so while we didn't consciously make this choice after we lap the transition in Q2.
Speaker Change: We're going to come out of it with a faster growing business and more of our resources aligned to the secular growth areas and I think thats unequivocally a good thing.
Speaker Change: Got it thanks.
Speaker Change: And there are no more questions in the queue.
Speaker Change: I'll now turn the call back over to MS <unk> concluding remarks.
Speaker Change: Thank you Stacy and thank you all for joining US today 2024 was an exciting year for us as we more than doubled our revenue growth rate over 2023 and expanded our margins returning to a rule of 40 company.
Speaker Change: 2025 will be equally exciting as we significantly deleveraged away from the cyclical display business and we levered towards key secular growth areas CTV mobile App Commerce median duration.
Speaker Change: For 25, we are targeting accelerated growth of 15% plus in this underlying portion of our business with tremendous opportunity to gain market share.
Speaker Change: We look forward to seeing many of you at upcoming conferences next week, we'll be at the citizens JMP technology conference as well as the Keybanc emerging technology summit.
Speaker Change: Thank you everyone for joining us today and have a great afternoon.