Q1 2025 PubMatic Inc Earnings Call

<unk> located at the bottom of your screen a copy of our press release can be found on our website at investors got somatic dot 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.

We're looking statements are based on our current expectations and assumptions regarding our business the economy and future conditions.

Forward looking statements are subject to inherent risks and uncertainties and changes in circumstances that are difficult to predict.

Can find more information about these risks uncertainties and other factors in our reports filed from time to time with the Securities Exchange Commission and are available at investors thought somatic dot com, including our most recent Form 10-K and any subsequent filings on forms 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 today is as of May eight 2025, and we do not intend or undertake no obligation to update any forward looking statement, whether as a result of new information future developments or otherwise except.

As may be required by law in.

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. These 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.

Reconciliation 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: Thanks, Stacie and welcome everyone.

Rajiv: We used to have exceeded our guidance in Q1 on both the top and bottom line driven by the secular growth areas in our business, excluding the effect of DSP and political spend year over year revenue growth accelerated to 21% up from 17% in the second half of last year.

Rajiv: We saw particular strength in CTV, which grew over 50% year over year.

Rajiv: Also driving strength in Q1 was supply path optimization, or spo, which represented a record at over 55% of total activity as agencies and advertisers prioritize the efficiency data and high ROI that the <unk> platform delivers the success highlights the clear differentiation of our platform.

Rajiv: The investments, we've made and activate for spo convert for Commerce media and connect for duration are resonating with key stakeholders across the digital supply chain.

Rajiv: <unk> media buyers Commerce media networks, and curation and data partners.

Rajiv: Further these.

Rajiv: These investments are driving significant growth, while also diversifying our business, creating sticky customer engagement and fueling performance advertising on our platform.

Rajiv: Our business continues to shift to secular growth areas and important transformation that will provide resiliency as we navigate the current AD spend environment.

Rajiv: Moreover, there are two significant and recent developments that provide long term tailwind to our business.

Rajiv: First the verdict in the Google AD Tech antitrust case will provide us with a more level playing field in the open internet. This.

Rajiv: This is somewhat dependent on the timing and outcome of appeals and remedies, but the courts decision forces a major shift in the market as publishers and buyers up for independent and transparent solutions.

Rajiv: As a leading SSP provider <unk> is already positioned to take advantage of the structural shift.

Second Google recently announced that third party cookies will continue in the chrome browser.

Rajiv: We have built an innovative platform around a variety of data solutions over the past five years, which will continue to drive growth in newer media environments like CTV and commerce media, while at the same time browser based content and AD monetization will now continue without dramatic interruption.

Rajiv: The fundamentals of our business are strong.

Rajiv: Looking beyond the isolated impact of the single DSP buyer, which we will lap in just a few weeks and the tailwind from political advertising last year.

Rajiv: Our business is performing well and on track to grow 15% plus with healthy margins and cash flow.

Rajiv: Moreover, our durable financial profile positions us well for macroeconomic uncertainty, which we believe creates more opportunities for us.

Rajiv: Our strength lies in maintaining focus and execution rigor, while being adaptable and agile.

Rajiv: This is a familiar playbook for us when we used to successfully manage through the great financial crisis, and the Covid induced recessions.

Rajiv: Coming out of both periods, we significantly accelerated growth and drove durable market share gains.

Rajiv: This was largely due to our agile approach to going after secular growth drivers and our ability and will to invest responsibly through each downturn.

Rajiv: Although we're not immune to some of the potential negative effects of the economic environment. We firmly believe that digital advertising will come out of this period bigger than before with an accelerated shift to programmatic and the heavy reliance on AI driven solutions.

Rajiv: Periods of economic stress are terrific opportunities for us to deepen our relationships with customers.

Rajiv: Issuers need our help more than ever to drive monetization of their inventory and audiences and buyers will lean into the flexibility and accountability of programmatic advertising.

Rajiv: Our plan is to once again leverage the many factors within our control and position ourselves to drive accelerated market share over the medium term.

Rajiv: Given our past success in doing this coupled with a large and growing Tam we plan to manage the business under the following three guiding principles.

Rajiv: One anticipate where advertising growth will move to as the market rapidly evolves.

Rajiv: To closely manage costs in order to preserve agility and protect our balance sheet and our free cash flow.

Rajiv: And three align the mix of investment and resources towards the high growth opportunities. So our growth accelerates on the other side.

Rajiv: Based on our prior experience, we know that the market will rapidly evolve.

Rajiv: We intend to continue to play offense, which will position us for accelerated growth once we emerge from a cautious macro environment.

Rajiv: We are preparing for more pronounced shifts in AD spend and key programmatic driven areas.

First we.

Rajiv: We anticipate an acceleration of the AD spend shift from linear TV to streaming.

Rajiv: Based on the current economic environment, Theres, a growing likelihood that advertisers will step back from making significant upfront commitments and exchange for the flexibility that the spot market offers.

Rajiv: The spot market will be heavily transacted programmatically, whereas the upfront market is not.

Rajiv: Programmatic also brings a higher degree of measurement and accountability.

Rajiv: Our platform is already scaled for this dollar shift given the investment we have made and buyer and seller relationships and CTV and premium online video.

Rajiv: PMT NPG capabilities.

Rajiv: AI solutions for deal management and optimization and more.

Rajiv: Recall that <unk> has over 80% penetration of the top 30 streamers.

Rajiv: We anticipate a more pronounced shift from upper funnel advertising strategies to lower funnel in other words, the shift from brand advertising to performance.

Rajiv: This will ultimately benefit new performance channels in the open Internet by Commerce media and advanced data and targeting solutions.

Rajiv: In both areas, we have made significant advancements with our convert and connect solutions, including innovation around first party data and identifiers.

Rajiv: Third we anticipate increased spend consolidation as AD budgets come under greater scrutiny and marketers seek greater efficiencies.

Rajiv: Spo initiatives are a clear and obvious way for marketers to offset any potential decline in their AD budgets with activate buyers can consolidated AD spend access curated audiences increased performance and gained tangible costs and operational efficiencies, which will better position them to maintain and grow their businesses.

Rajiv: And finally, AI driven capabilities that can both drive growth and create efficiencies will be increasingly attractive to both new and existing customers.

Rajiv: Over the past several years, we fully embraced generative AI expanding our multi decade focus on machine learning.

Rajiv: The investments we've made are now translating into a steady stream of customer solutions.

Rajiv: The day, we announced the industry's first Gen. AI powered end to end platform that gives buyers direct access to nearly the entire open internet.

Rajiv: Our technology simplifies and Optimizes every stage of the media buying process from inventory discuss discovery and forecasting to curation activation and performance optimization.

Rajiv: By unifying supply side intelligence with AI powered buying tools in a single platform, we aim to deliver greater efficiency ease of use and better outcomes for advertisers and agencies.

With anticipated shifts in AD spend this unified experience gives buyers exactly what they need to plan and refine campaigns with unprecedented needs.

Rajiv: I simply describing their ideal inventory in natural language, a regenerative AI models instantly create optimized deal packages, eliminating manual workflows, reducing time to launch an improving targeting precision.

Buyers can then seamlessly activate those deals either through activating gaining full supply chain transparency control and efficiency.

Rajiv: Or push them to their DSP of choice.

Speaker Change: <unk> a global partner an early adopter of our activate platform is among the beta testers of this unified experience Andrew meeting group Ams Global head of investment explained quote.

Speaker Change: Our longstanding partnership with pragmatic is based on a shared commitment to privacy first AI powered innovation and helps US stay ahead in a rapidly evolving industry.

Speaker Change: <unk>, new unified platform will help us deliver smarter more efficient campaigns for our clients and quote.

Speaker Change: As AI becomes foundational to programmatic success <unk> is uniquely positioned to lead with differentiated technology, a scaled platform and our commitment to delivering tangible business outcomes for both buyers and publishers.

Speaker Change: Our second priority is to safeguard our balance sheet and free cash flow, while remaining agile in order to capitalize on opportunities as they arise.

We will tightly manage costs and use our well honed playbook to drive continued opex and capex efficiencies.

Speaker Change: We're also intently focused on generating efficiencies through the use of Gen AI across our business operations as I mentioned last quarter.

Speaker Change: This application within our engineering organization is allowing us to accelerate innovation without expanding head count generating improved productivity and faster to points.

Speaker Change: Okay.

Speaker Change: By tightly managing costs and driving efficiencies, we're able to shift our growth investments to the areas with the highest returns in particular, we are expanding the scale and specialization of our global sales organization, including the team that serves agency holding companies to drive growth in spo and activate.

Speaker Change: Our independent agency and Advertiser sales team, which we believe represents an incremental 15 billion addressable market for <unk> in the next few years.

Speaker Change: Sales specialists dedicated to specific products, such as activating CTV Commerce media online video and mobile App.

Speaker Change: And finally, our duration sales team as sell side struggling becomes more prominent and data partners integrators look to activate their first party data on the <unk> platform.

Speaker Change: This disciplined and forward looking framework aligns with the growth opportunities, we see across our key customer segments.

Speaker Change: On the publisher side of our business, we have deepened our relationships with leading CTV platforms.

Speaker Change: Our partnership with spectrum reach the advertising division of charter communications brings greater demand efficiency and robust curation across our CTV marketplace, while our work with Tcl is helping to drive advertiser access to live sports streaming the segment that is both rapidly growing and notoriously challenging to monetize effectively.

Speaker Change: We're not just seeing strong growth in the U S. But also in key international markets like Europe, Australia, India and Japan.

Speaker Change: For example, we recently expanded our partnership with the BBC to monetize their free AD supported streaming channels.

Speaker Change: We're also seeing a broader trend with traditional broadcasters globally, turning to <unk> to drive monetization of their increasingly screaming based consumption.

Speaker Change: On the demand side, we are seeing momentum accelerate across agencies advertisers and DSP.

Speaker Change: We have seen activity from Midmarket DSP that specialize in performance marketing almost tripled on a year over year basis.

Speaker Change: These platforms are rapidly scaling their spend on komatik thinks for a premium supply addressable audiences and full funnel capabilities.

Speaker Change: Additionally, as I predicted a few quarters ago, we are seeing a marked increase in spo activity with direct advertisers both at the head of the market and among the next year as they take a more active role in their buying strategies and consolidate around trusted performance oriented partners.

Speaker Change: In recognition of the performance impact <unk> is driving for advertisers somatic received the supply path optimization award as part of AD exchanger as 2025 programmatic impact awards for how we helped Mars petcare exceed sales calls.

Speaker Change: In addition, kroger precision marketing looking to improve its customer acquisition marketing by eliminating unnecessary supply chain efficiencies.

Speaker Change: With <unk> targeting curate data on the sell side.

Speaker Change: Not only did our solutions boost video performance, but Kroger also consolidated AD spend on pragmatic, reducing its supply partners by more than 70%.

Speaker Change: According to <unk> manager of media activation and buying quote Comatic has consistently been achieving efficient supply path strategies backed by data, especially in online video.

Speaker Change: Their performance our Chinese competitors their platform helps us helps us exceed our goals and solve our inefficiency challenges end quote.

Speaker Change: More broadly commerce media continues to be one of the fastest growing segments in programmatic and we expect that trend to accelerate due to its measurable performance.

Speaker Change: With the investments we've made commerce media networks can monetize both their audience data offsite as well as their onsite inventory in a privacy safe efficient way and.

Speaker Change: In fact, our platform gives commerce companies full control over their data and direct access to premium demand and transparent reporting, while giving buyers greater efficiency and performance.

Speaker Change: For example, a leading casual dining brand reduce customer acquisition costs by 11% by leveraging <unk> audience segments across our premium inventory.

Speaker Change: Previous campaigns that relied on DSP based audience targeting struggled with data leakage and low match rates, which resulted in higher cost and limited reach.

Speaker Change: We are seeing similar trends with data partners and curation platforms, who are increasingly pivoting towards sell side targeting this.

Speaker Change: This shift is being driven by structural industry changes the shift away from third party cookies growing sensitivity around data privacy and advertiser demand for more transparent performing paths to inventory.

Speaker Change: As a result cell site activation is emerging as the preferred model and <unk> has built a unified AI.

Speaker Change: High power platform that is delivering clear performance gains.

Speaker Change: Publishers using our creation tools have seen up to 10% revenue gains due to an increased diversity of buyers and higher CPM.

Speaker Change: At the same time data owners are able to build new and scaled revenue streams by.

Speaker Change: By expanding opportunities for our customers, we're able to generate incremental revenue through both SSP and curation related transaction fees.

Speaker Change: These quarterly highlights are just a handful of examples of how we're creating value across the entire supply chain.

Speaker Change: As audience targeting strategies continue to ship to the sell side <unk> end to end tools, including our new AI Baidu platform, along with our scale and track record of innovation make us an ideal partner to support customer growth.

Speaker Change: We have a leading market position and our growing high double digits in key secular areas of the business highlights.

Speaker Change: Highlighting the confidence in our strategy and our strong financial profile. The board of directors has expanded our repurchase plan by an incremental $100 million.

Speaker Change: While the current environment has a degree of uncertainty we firmly believed it also serves as a catalyst and will accelerate the shift to programmatic that will benefit our business and create outsized shareholder value over the long term.

Steve: I'll now turn the call over to Steve for the financials.

Steve: Thank you Rajiv and welcome everyone.

Steve: We delivered a strong quarter with revenue ahead of expectations driven by significant growth in the long term secular drivers of our business.

Steve: CTV spo and our emerging revenue streams.

Steve: These drivers accelerated the growth of our underlying business to 21% year over year up from 17% in the second half of last year.

Steve: This excludes the large DSP buyer in political advertising and now accounts for 70% of all revenue.

Steve: Our growth clearly demonstrates the benefits were gaining from increased scale, a winning product suite and investments in our go to market teams.

Steve: We also exceeded our adjusted EBIT expectations as a result of our increasing mix towards secular growth drivers.

Steve: Ongoing optimization of our infrastructure.

Steve: Impact from prior investments and increased engineering efficiency with Gen AI.

Steve: Turning to the revenue breakdown for Q1, once again, our secular growth areas powered our business omni.

Steve: Omnichannel video revenues in the quarter grew 20% year over year and represented 40% of total revenues in the first quarter. This was driven by strong <unk> TV revenues, which increased over 50% year over year emerging revenue streams more than doubled year over year within this category connect our curation and data business continued its rapid revenue growth trajectory.

Steve: At over 100% year over year.

Steve: As borrowers are increasingly using pub matic to target audiences on the sell side.

Steve: Revenue from display which was disproportionately impacted by the large GSP buyer declined 10% year over year.

Steve: Excluding the spire all other display revenues grew strongly at over 20% year over year.

Steve: Q1, total revenue inclusive of the impact from the DST buyer declined 4%.

Steve: Our underlying business, excluding this DSP and political advertising increased 21%.

Steve: Notably March was a strong month and delivered better than expected results, which led to our overachieve in for the quarter.

Steve: AD spend for our top 10 AD verticals grew in the mid single digit percentages year over year.

Within the top 10 health and fitness food and drink style and fashion in aggregate increased over 10%.

Steve: We saw softer trends for technology, and computing and automotive which declined by over 10%.

Steve: On a regional basis, both Americas, and EMEA declined slightly while APAC grew over 8% year over year.

Steve: As a reminder, we have limited exposure to China based advertisers.

Steve: Turning to adjusted EBITDA, we significantly exceeded the upper end of expectations due to higher total revenues and the continued mix shift to high value channels and formats.

Steve: Q1, adjusted EBITDA was $8 5 million or 13% margin and was our 36th grade quarter of adjusted EBITDA profitability.

Steve: This result included a foreign exchange impact of approximately $1 million due to the weakening U S dollar over the quarter.

Steve: Our long track record underscores the intrinsic strengths of our durable business model.

Steve: Over the last decade, we have executed our strategy of owning and operating our programmatic infrastructure.

Steve: Bind with a singular focus on operational excellence.

Steve: This approach has enabled us to consistently drive productivity.

Steve: Over the last two years on a trailing 12 month basis, we increased the number of impressions process by 60%, while managing our GAAP cost of revenue to an increase of 16% over the same period.

Steve: We are also leveraging AI in our engineering organization as well as across business functions.

Steve: These efforts further allow us to accelerate our programmatic capabilities and expand our go to market efforts, while tightly managing costs.

Steve: Total operating expenses in the first quarter were $50 million and reflected cost savings as well as the cumulative impact from investments in our high growth secular areas that are driving the double digit percentage growth in our underlying business.

Steve: Q1, GAAP net loss was $9 5 million or minus <unk> 20 per diluted share.

Steve: Moving to cash and our capital allocation, we have a healthy balance sheet and generate positive cash flow, which provides financial stability at the same time allows us to consistently invest for revenue growth over the last four years, we've produced nearly $350 million in net cash from operations and more than a $180 million of free cash flow.

Steve: In the quarter, we generated $15 6 million in net cash provided by operating activities and free cash flow of $7 3 million.

Steve: We ended the quarter with $144 1 million in cash and marketable securities and zero debt.

Steve: Given the strength, we continue to deploy our capital to maximize shareholder value.

Steve: Since the inception of our repurchase program in February 2023 through the end of Q1, we bought back $8 7 million class a common shares for $138 2 million, we had $36 8 million remaining authorized through the end of 2025.

Steve: On May seven our board of directors authorized a $100 million expansion of the repurchase program and extended through the end of 2026.

Steve: Our guiding principles that Rajiv outlined position us well for the current macro environment and the significant growth opportunities ahead.

Steve: History shows that uncertain times lead to rapid industry shifts and accelerated adoption of new tools and platforms. Our track record demonstrates we can successfully navigate these periods, while continuing to strategically invest to take advantage of the opportunities that emerge.

Steve: We are taking a proactive approach by implementing a number of savings initiatives.

Steve: <unk> incremental productivity gains.

Steve: And expanding AI adoption.

Steve: This allows us to continue innovating and expanding our global sales team, while managing our cost structure.

Steve: We expect operating expenses to increase sequentially in the low single digit percentages over the course of 2025.

Steve: Turning to the latest trends we are seeing.

Steve: April revenues were in line with our expectations we.

Steve: We delivered over 50% growth in our underlying business.

Steve: Total revenues inclusive of the DSP headwind were flat year over year, reflecting an improvement from the first quarter of year over year decline as a reminder, we have a well diversified platform with over 20 different AD verticals to more than 50000 advertisers spending on our platform every month in April we saw the benefits from this diversification.

Steve: Our health and fitness and Arts and entertainment verticals increased over 20% year over year in aggregate, which helped to offset softness in vertical such as CPG heavy shopping vertical and automotive which declined 10% year over year.

Steve: For Q2, we expect revenue to be in the range of $66 million to $70 million and assumes 15% plus year over year growth of our underlying business. The low end of this range reflects conservativism in the event that a slowdown in AD spend where to develop for the remainder of Q2, which again we are not currently see.

Steve: We expect our Q2 adjusted EBITDA to be in the range of $9 million to $12 million, which factors in an incremental impact of continued weakness of the U S. Dollar.

Steve: Looking to the second half of the year based on the strong momentum we are seeing in our underlying business combined with the go to market and innovation investments. We are making we expect our online revenues to continue growing 15% plus.

Steve: We remain confident that we will deliver second half year over year revenue growth, which includes a 5% to seven percentage point headwind from political spend in the back half of 2024 in terms of Capex through a combination of optimization efforts and cost saving measures, we anticipate reducing our full year capex by at least 15% to <unk>.

Steve: <unk> million dollars.

Steve: In closing I want to take the opportunity to summarize the key takeaways.

Steve: Our company delivered a strong first quarter.

Steve: We stayed focused on driving our long term secular growth areas and exceeded our expectations with 21% growth for our underlying business.

Steve: We have implemented a prudent operational plan that allows us to continue investing behind the fastest growing programmatic opportunities, while also protecting our profitability and balance sheet.

Steve: Coupled with our durable business model gives us confidence that we can successfully navigate the current environment and be well positioned for future market share gains.

Stacy: I will now turn the call over to Stacy for questions.

Stacy: Thank you Steve as a reminder, you can ask a question by making a can located on the dashboard and our first question comes from Eric <unk> Lake Street. Please go ahead Eric.

Speaker Change: And congratulations on the strong first quarter results and the good outlook for Q2 I wanted to start off with the one of the.

Speaker Change: Issues you highlighted in your prepared remarks, rajeev regarding the Google antitrust ruling curious to know if you've had direct interaction with the kind.

Speaker Change: Kind of Doj as they look to kind of size of potential remedies to the monopolistic behavior.

Speaker Change: Sure Yeah, Eric what I can say is that.

Speaker Change: The Doj is making its rounds in terms of talking to.

Speaker Change: Witnesses that testified in the trial itself.

Speaker Change: As they figure out what the remedy strategy is and I think you saw that you saw that posted.

Speaker Change: In terms of their filing on Monday.

Speaker Change: More broadly what the verdict is crystallized for the whole ecosystem is that Google is not the immovable object that it once was and when I talk to customers. Both on the sell side and the buy side people are starting to prepare for the uncertainty of what lies ahead knowing that there could be a spinout is there going to be innovation do you want to put all of your eggs into the Google basket until.

Speaker Change: Why not start growing faster with the alternatives that you know we're already hearing that scale like cosmetic.

Speaker Change: And we think we have about a 4% share of the market Google's got roughly 60%.

Speaker Change: And so we think theres a lot of potentially share up for grabs as early as next year.

Speaker Change: With every 1% sure that we can pick up equating to 50 to 75 million of net revenue to us. So we think it's a pretty significant opportunity.

Speaker Change: Gotcha, and then I wanted to shift gears and talk about the traction that you've had about 55% number.

Speaker Change: Pretty amazing accomplishment and it's been interesting to see the progress of spo over time over the long term, where do you think spo kind of what is the ceiling for that and then just commenting on the most recent quarter, what's the mix of new borrowers versus old in that 55% sure yes. So.

Speaker Change: On the first part of your question and thank you for the compliment there. So we think long term spo could be as high as 75%.

Speaker Change: <unk> of the business. So we've made a lot of progress as you mentioned I think we were in the roughly <unk> <unk>.

Speaker Change: Percent two years ago.

Speaker Change: And there is still I think a lot of runway to go obviously the share will gains will slow as we get higher and higher.

Where we see opportunity is in a couple of different areas. So one is just continuing to grow the spend that's coming under our existing relationships, which are primarily with big agency holding companies right and so we all know who those are group.

Speaker Change: <unk> for instance, we mentioned them.

Speaker Change: Jen AI buyer solution released yesterday. So that's an example of potential for <unk>.

Speaker Change: Continued growth with an existing customer.

Speaker Change: <unk> also in that case, but we are also expanding our sales team to go after more advertisers.

Speaker Change: And independent agencies, where we think theres a lot of spo runway ahead, so that I think would be both growth in terms of new dollars as well as.

Speaker Change: Ah.

Speaker Change: Growth in terms of spo dollars.

Speaker Change: Got it thank you.

Speaker Change: Thank you. Our next question comes from Zach Cummins with B Riley. Please go ahead back.

Zach Cummins: Yes, hi, good afternoon, Rajeev and Steve Thanks for taking my questions, Steve but my first question is really can you give an update on how volumes trended with your key DSP partners here in the first quarter.

Speaker Change: In terms of I know you mentioned, 10% decline in overall display revenue was there more outsized impact whether that'd be in desktop display versus mobile display.

Zach Cummins: No.

Zach Cummins: What were you actually seeing and I've commented on this in the past is that theres been quite a bit of stability and one of the drivers of our exceeding our expectations in the first quarter was a little bit better results from that DST buyers. So.

Zach Cummins: From our perspective.

Zach Cummins: Unfolding exactly as we had anticipated.

Zach Cummins: Turning to the up side and so we think we are.

Zach Cummins: It could have a solid second half with this buyer as a reminder to everyone. We're going to be lapping that impact mid year. So the end of Q2.

Zach Cummins: So as we've shared in the past.

Zach Cummins: You need to have a great relationship with the buyer, we're expanding in multiple new areas. So we feel really good about where we are right now yes.

Zach Cummins: Yes, just a quick add theirs.

Zach Cummins: We've seen for instance, CTV growth with this buyer.

Zach Cummins: Grown dramatically on a year over year basis. So there is there's plenty of growth opportunities with this DSP buyer in general.

Zach Cummins: Beyond the technical option shift.

Speaker Change: Got it and then my one follow up question Rajeev is interesting to see the strong traction youre getting with these mid market DSP is I mean can you just talk about.

Speaker Change: How those relationships are really evolved and kind of where you can see this going now that youre starting to get traction at that mid market level.

Speaker Change: Yeah, I think four or five years ago. The DSP space was pretty heavily consolidated right and I think that's the perception in the market and it was probably not not too far from reality.

Speaker Change: Now we fast forward to today and what we see is that there's a lot of actually change in the DSP market right. So there's been a lot written about the growth of Amazon.

Speaker Change: We know where the antitrust verdict is with with Google.

Speaker Change: And then we're seeing I think with the rise of CTV a lot more performance buying for instance happening in CTV.

Speaker Change: We're seeing that money has shifted so the share of AD budgets controlled by the big five or six agency hold codes is actually.

that there's a big mid market of advertisers. [inaudible]

Speaker Change: that are not tied to the decisions that those big holding companies have made and they're making their own decisions. So we're seeing a lot of growth and potential there and that's not only in the US but it's around the world.

Speaker Change: and so we're really focused on bringing those DSPs onto our platform, making sure that we're growing our shares of revenue within.

Speaker Change: Great. Well, thanks for taking my questions and best of luck with the rest of the quarter. Thanks, Zach. Thanks.

Speaker Change: And our next question comes from Simran Biswala, RBC. Please go ahead.

Simran Anand: Hey guys, it's the December non format Swanson, thanks for taking your question and to wrap on the quarter.

This one for me, can you talk about...

Speaker Change: The Math O environment, and spend in what you're seeing at a high level with the uncertainty as we think about the rest of the year. And then to that point, just double-cooking on the resiliency around some of these growth drivers like CTP and emerging products.

Speaker Change: Sure, why don't I start with that and Steve, I'll turn it over to you. So let me just talk a little bit about what we're seeing from a macro perspective simmering. So I do think advertisers are intensively scenario planning for the future, and they certainly have practice with that with COVID in 2020 and then the recession that never came into 2023.

Speaker Change: And I think one of the things that advertisers have learned is really the trade-off of pulling back on that spend with respect to negatively affecting their own top-line growth in market share.

Speaker Change: And so Steve highlighted, we're not seeing a pullback so far in the quarter. We're not seeing anything that gives us pause right now. People came in well and we're not hearing from customers that they are pausing or delaying at spend at scale.

Speaker Change: Now, looking through to the other side, I think there's a number of trends or shifts that I see and expect, all of which I think will benefit us. So, first of all, we anticipate a shift from linear TV into streaming, you know, as the upfronts are getting underway, I got to imagine that many advertisers. [inaudible]

You know, we're not super keen to commit [inaudible]

Significant upfront budgets.

Speaker Change: and they want flexibility, they want agility, which means you'll be able to buy more in the spot market, which you know, scatter market, which really favors programmatic. And so I think that's giving it to our benefit, you know, with that 80% penetration of the top 30 streamers.

Speaker Change: As a share of the business and of course, we've got activate in our in our new launch we're really excited about that and then I think more broadly AI solutions focused on growth and efficiency will be increasingly attractive and buyers and publishers alike will be willing to try new solutions and so I think that favors our AI driven development, let me, let me turn it over to Steve.

Steve: Sure, Yes, just to tack onto what Rajiv has described which lays the real foundation of how we think about the second half.

Steve: <unk> really to emphasize the point that over the last couple of years, we've been diversifying our customers.

Steve: Publisher base branded publishers buyers Commerce media networks data curation partners. So the business. We are today is very different what we were a couple of years ago. So that gives us a lot of confidence in terms of.

Steve: Being able to be resilient as the agile.

Steve: And then there is the overarching points around just this secular shift in the market towards CTV and high engagement formats like mobile App.

Steve: All areas that we're very well positioned and growing and so when we think about the second half we're confident that we're going to be able to grow our underlying business, 15% plus and be able to continue.

Steve: Continue to grow through and it's a function of both the momentum we have as well as the continued investments that we're making and of course.

Steve: Our ability to execute which we've proven time and time again in terms of navigating.

Steve: Uncertain environments as we have today.

Steve: Yeah.

Steve: Thanks, guys.

Speaker Change: Next up we have Jacob Armstrong from Keybanc. Please go ahead Jacob.

Speaker Change: Hi, This is Jacob on for Justin.

Speaker Change: We've made a lot of progress with Omnichannel video.

Speaker Change: As you approach and surpass.

Speaker Change: About 50% of the mix, how do you think about letting those higher gpm's drop through to margins versus reinvesting procedure growth.

Speaker Change: Thank you.

Speaker Change: Sure.

Speaker Change: And I can tag team, but let me just give you a perspective from where I sit the CFO seat so.

Speaker Change: What we're doing as a business to build on the themes that we've shared is.

Speaker Change: We're looking for and identify the fastest growing area of secular growth areas and.

Speaker Change: You hit the nail on the head Omnichannel.

Speaker Change: And with video is certainly one of them.

Speaker Change: Double clicking CTV.

Speaker Change: CTV, we had a great first quarter growing revenues over 50%.

Speaker Change: So.

Speaker Change: Significant momentum.

Speaker Change: But we've also been expanding in a number of other areas.

Speaker Change: You have heard the announcement that we had yesterday.

Speaker Change: First end to end AI enabled buying platform.

Speaker Change: That we think is going to position us well and so when we think about investment. It's always a function of are we having adequate resources to make sure. We're capitalizing on the best growth opportunity. The answer is yes. We believe we are doing that number two our focus is obviously getting continued productivity out of the organization to help.

Speaker Change: On that and we've been sharing data over the years in terms of our strength and managing our infrastructure.

Speaker Change: The stat that I shared in the prepared comments.

Speaker Change: Increasing our impression capacity by 60%, while keeping our cost of revenue.

Speaker Change: <unk> percent is a significant delta that allows us to reinvest in the business and so as long as we keep on seeing sort of the opportunities to drive those cyclical growth areas, we're going to keep doing that at the same time, we're obviously very cognizant of managing the bottom line and we've done that consistently over many years.

Speaker Change: Long track record of adjusted EBITDA profitability, and so we're going to always balance in terms of.

Speaker Change: Funding growth and then appropriately managing the bottom line, we think we have the right mix between the two.

Speaker Change: Anything you want to add.

Speaker Change: Yes, I think.

Speaker Change: We are very focused on growing that video business just because it's it's just still so much runway ahead of us. So we are 80% penetrated with the top 30 streamers Zig about CTV mentioned CTV grew over 50% year over year, but theres still a lot more premium content to add live sports traditional broadcasters in some part.

Speaker Change: So the world are just getting going with streaming and they're more and more using somatic to drive monetization of their streaming based consumption. So as an example, we added the fast the free AD supported.

Speaker Change: <unk> channels of the BDC out of the U K.

Speaker Change: And then we're just seeing tremendous momentum from activate in our CTV marketplace.

Speaker Change: So I think there is there is a lot of growth opportunity for us to go after.

Speaker Change: Our next question comes to enter their own at JMP. Please go ahead Candice.

Candice: Thanks, a lot for taking my question.

Candice: One on guidance and one strategic Rajeev, you talked about how curation and data and all of the other.

Candice: Newer products you guys have lost over the last three years is improving kind of borrow asking across the platform.

Candice: What do you think is next right like how do you drive that over the next two years and then how do you think about that maybe in like five years right. So give us a kind of a near and medium term road map and then Steve I would love to just better understand the bridge from what is kind of that normalized strong I think 21% growth you guys talked about in the quarter versus kind of the.

Candice: GAAP result that got put up can you just help us understand the breakdown of kind of what is political versus kind of what is that one time DSP and then just connect that to kind of 15% growth you guys are targeting for 2020. Thanks so much.

Steve: Yeah, Great. So let me start on the first part is just in terms of you know how do we continue to grow ROE is on the platform. So I think there's three key drivers. So number one is data as you mentioned.

Steve: So with the on and off again cookie.

Steve: Deprecation process I think we certainly have been investing a lot.

Steve: In bringing.

Steve: First party data and identity data onto our platform and so that I think is a key ingredient to driving performance one of the reasons. The walled gardens do so well as you are logged in as a consumer into those environments. So they can use that to target and drive strong performance. We're now seeing a lot more first party data, whether it's CTV or its commerce media driven or.

Steve: Mobile App environment, we're seeing a lot of that data.

Steve: The open Internet on our platform, which creates a great background for driving performance.

Speaker Change: He is just driving efficiency across the supply chain, so, bringing the sell side and the buy side closer together that creates a lot of operational efficiency efficiency creates a lot of fee efficiency and it also accelerates the feedback loop sell side the buy side.

Steve: Our buy side sell side, so that you can drive performance and that's exactly what we've been doing with activate and supply path optimization. Our announcement from yesterday, we think we'll move that forward materially as there is clearly a trend in the ecosystem towards.

Steve: Buyers and sellers looking to to transact.

Steve: With fewer fewer intermediaries or fewer hops in between.

Steve: And then I think the last piece.

Steve: It is really to build performance solutions in terms of helping buyers.

Steve: Optimize whatever the outcome is that theyre looking for so it could be closed.

Steve: Closed loop attribution in the case of Commerce.

Steve: It could be cost per action or cost per customer acquisition.

Steve: And I think the framework that we've laid around data and supply chain efficiency.

Steve: Activate in our SSP.

Steve: It gives us the ingredients to drive that over the next couple of years.

Steve: Okay.

Steve: Thanks, Rajiv so Andrew with respect to just helping to understand the bridge between the 50% plus growth and our total reported number so as a reminder for everyone who is not familiar mid last year. There was a change in one of the DSP in terms of how they bid on a platform we'd anticipated that that would have an impact in the second half of 'twenty four in the first half of <unk>.

Steve: Five <unk>.

Steve: How it unfolds as exactly as we had anticipated we're going to be growing through that and the key point a couple of key points to note the 50% plus growth that we anticipate is.

Steve: The large majority of our vessels, 70% of our revenues.

Steve: And we're going to be lapping that.

Steve: Anniversary of the DSD change mid year.

Steve: That impact that we are growing through in the first half of this year.

Steve: It's about 15% to $20 million. So when you think about us putting up.

Steve: Decent total reported numbers and then in April as I shared we're flat year over year inclusive of that shows the strong momentum that we have and then as everyone's familiar with.

Steve: Amount of political spending last year in the second half of the year, we're going to be lapping that.

Steve: That represents a headwind about six ish.

Steve: 6% to 7% of overall revenues, but.

Steve: But we expect that even with that headwind, we're going to be able to grow.

Steve: With the core momentum of 50% plus.

Steve: Absorbing that headwind.

Steve: On a plus positive year over year basis in the second half.

Steve: Functional data points that we've articulated one.

Steve: The diversified business that we built.

Steve: The focus on the fastest growing areas with video growing double digits, and then of course other parts of our business doing quite well the emerging revenues doubling over year over year. So I expect as we end the year.

Steve: It's going to be much more parity in terms of what the total business looks like and then going into 'twenty six is going to be a clean comparison.

Steve: And we expect to be growing in the double digits.

Steve: Great. Thank you.

Steve: Thanks, Steve.

Steve: I'm now going to turn the call back on Makena. He for closing remarks go ahead Rajiv. Thank you Stacy and thank you all for joining US today, we delivered a strong first quarter and AD spend trends to date remained consistent while the current environment has a degree of uncertainty. We firmly believe it also serves as a catalyst that will accelerate the shift to programmatic.

Steve: Together with opportunities from the recent Google verdict position us well for long term growth our prudent operating plan allows us to continue investing and secular growth opportunities, while also protecting our balance sheet and cash flow, while expanding our repurchase program.

Steve: We look forward to seeing many of you at upcoming conferences, including Evercore is nothing but net conference and Jefferies Public Technology Conference will also be on the road in several cities over the next few weeks. Thanks, everyone for joining us today and have a great afternoon.

Steve: Thank you.