Q3 2025 Magnite Inc Earnings Call
Speaker #3: Good day , and welcome to the Magnet Q3 2020 Earnings Conference Call . All participants will be in listen only mode . Should you need assistance , please signal a conference specialist by pressing the star key .
Speaker #3: Followed by zero . After today's presentation , there will be an opportunity to ask questions , to ask a question you may press star , then one on a touch tone phone .
Speaker #3: To withdraw your question , please press star . Then two . Please note this event is being recorded . I would now like to turn the conference over to Nick , an investor Relations .
Speaker #3: Please go ahead .
Speaker #4: Thank you . Operator , and good afternoon , everyone . Welcome to MAGNITE, INC. third quarter 25 Earnings conference call . As a reminder , this conference is being recorded .
Speaker #4: Joining me on the call today are Michael Barrett CEO and David Day , our CFO . I would like to point out that we have posted financial highlights slides on our Investor Relations website to accompany today's presentation .
Speaker #4: Before we get started , I will remind you that our prepared remarks and answers to questions will include information that may be considered to be forward looking statements , including , but not limited to , statements concerning our anticipated financial performance and strategic objectives , including the potential impact of macroeconomic factors on our business .
Speaker #4: These statements are not guarantees of future performance . They reflect our current views with respect to future events and are based on assumptions and estimates and subject to known and unknown risks , uncertainties and other factors that may cause our actual results .
Speaker #4: Performance or achievements to be materially different from expectations or results projected or implied by forward looking statements . A discussion of these and other risks , uncertainties and assumptions is set forth in the company's periodic reports filed with the SEC , including our quarterly reports on Form 10-q and our 2024 Annual Report on Form 10-K .
Speaker #4: We undertake no obligation to update forward looking statements or relevant risks . Our commentary today will include non-GAAP financial measures , including contribution or less traffic acquisition costs , adjusted EBITDA and non-GAAP income per share .
Speaker #4: Reconciliations between GAAP and non-GAAP metrics for our reported results can be found in our earnings press release and in highlights deck that is posted on our Investor Relations website .
Speaker #4: At times . In response to your questions , we may offer additional metrics to provide greater insights into the dynamics of our business .
Speaker #4: Please be advised that this additional detail may be one time in nature , and we may or may not provide an update on the future of these metrics .
Speaker #4: I encourage you to visit our Investor Relations website to access our press release . Financial highlights deck periodic SEC reports and the webcast replay of today's call .
Speaker #4: To learn more about MAGNITE, INC. . I will now turn the call over to Michael . Michael , please go ahead .
Speaker #5: Thank you . Nick . Q3 came in strong and we once again exceeded total top line expectations with CTV contribution growing 18% and 25% excluding political TV continued to perform well , growing in line with expectations .
Speaker #5: Adjusted EBITDA was also strong at 57 million , beating expectations resulting in a margin of 34% . Our performance in CTV was driven by growth of our largest publisher partners , significant traction with agency marketplaces , clear line adoption , positive SMB trends and programmatic expansion in live sports .
Speaker #5: Our most significant growth came from the industry's largest players , including LG , NBCu , Netflix , Roku , Vizio , Walmart , and Warner Bros .
Speaker #5: Discovery . Regarding Netflix , we've supported the expansion of their ads business to all ad supported markets . The pacing of the Netflix ramp has gone very well , and we remain excited about our continued growth opportunity with them in 2026 .
Speaker #5: Roku is also Roku also continues to be a very fast growing publisher , with Roku Exchange , where magnate is the preferred programmatic partner .
Speaker #5: This quarter . In particular , demonstrated great momentum where our partnership saw meaningful traction in sports and in attracting SMBs to their platform .
Speaker #5: We continue to explore areas for further expansion of our relationship to drive more revenue for them , Warner Bros . Discovery has also made great progress with its neo platform , launching in September , neo , a new ad platform , will provide buyers direct access to Warner Bros .
Speaker #5: Entire premium video inventory through one simplified and intuitive user interface where Magnite is helping to power transactions , clear Line continues to gain momentum with over 30 clients , and we recently rolled out a number of key enhancements to the product .
Speaker #5: Earlier this year , we announced that Native home screen units are available through clear line . This update will enable buyers and curators to discover , package and activate inventory in one platform with the most comprehensive access to differentiated supply , unique first party data in content signals .
Speaker #5: Finally , we also announced plans to integrate AI assistants in Agentic workflows into clear line , which will be powered in part by technology from our acquisition of streamer AI , which we announced in September .
Speaker #5: As I've mentioned before , the CTV advertising opportunity for small and medium sized businesses is enormous . But it's historically been bottlenecked by complexity and high costs to address this , streamer , AI gives small businesses the tools to create production quality CTV commercials in minutes .
Speaker #5: And in an extremely cost efficient manner . We're licensing streamer to large media owners , commerce players , agencies , DSPs and other media buyers so they can help their SMB clients easily break into CTV advertising in the response has been very positive .
Speaker #5: We've announced two client wins since the acquisition . ITV , which is the UK's largest commercial broadcaster , and Wolt , which is part of DoorDash with many more to come .
Speaker #5: We are seeing agencies becoming more active in their programmatic efforts , and it's driving spend now . We have long supported agencies and have dedicated teams in place to support their growth in efforts in this area .
Speaker #5: As evidence of this acceleration , ad spend from top hotels grew nearly 20% in Q3 year over year , a significant driver of our growth with agencies is from magnets powered by our marketplaces .
Speaker #5: These private label marketplaces allow agencies to connect directly with publishers to develop curated pools of inventory that are enriched by proprietary data . Our DSP agnostic and maximize working media spend .
Speaker #5: Our combined CTV ad serving and SSP platform spring serve continues to be a significant differentiator for us , with publishers as well as offering a leading ad server in CTV spring serve plays a crucial role as the mediation layer for publishers .
Speaker #5: In addition to supporting traditional DSP to SSP connections , our unique position enables us to provide a direct connection for buyers directly into the ad server .
Speaker #5: We just added direct access product to our list of direct integrations that include Amazon apps , Yahoo's Backstage and Trade desks , Open Path Spring Serve also allows publishers to maximize their yield by unifying demand from these direct ad server integrations directly amongst buyers that connect through our SSP .
Speaker #5: Live sports continues to drive growth in our business , and we see tremendous potential in the future as programmatic adoption continues to escalate .
Speaker #5: We have seen new contributions , notably from Disney of NFL and college football , as well as Major League Baseball and the WNBA .
Speaker #5: Our live stream accelerator product , which was specifically developed for live sports , is currently utilized by numerous partners globally . Leaders in this area are choosing magnate because of our unique tech and continued commitment to invest in this area .
Speaker #5: On the DV plus side of the business, Q3 contribution was up 7% or 10%, excluding the impact of political activity last year. Our business continues to benefit from ramping partners as well as new client wins.
Speaker #5: A notable update is that our partnership with Pinterest began to ramp in Q3 in particular , we've been really pleased with the progress of our commerce , media offering as our roster of partners continues to grow .
Speaker #5: We've announced partnerships with Best Buy , Remax , Western Union , PayPal , and Connective Media by United Airlines , Commerce entities are attracted to the unique technology magnet provides .
Speaker #5: They each have some form of O and O inventory , and leverage magnet Dvd+ or spring serve tools for monetizing or ad serving in addition , these entities possess valuable first party data and are utilizing clear line to layer their first party data on top of third party supply for curation .
Speaker #5: The first party data enriches the supply and allows commerce entities to package their media with data to extend their overall footprint . Our fastest growing format and TV plus in the third quarter was audio .
Speaker #5: We are gaining traction in this area and see it as a significant opportunity in the future . Earlier this year , Spotify announced its new Spotify ad exchange , or SACs , in selected magnet as its global programmatic partner .
Speaker #5: SACs is integrated spring serve to power its omnichannel advertising across audio , video and native display . Acast , a leading podcast monetization platform , announced a partnership with magnet during the third quarter , as well .
Speaker #5: This strategic collaboration will make Acast podcast inventory , which includes more than 140,000 podcasts and more than 1 billion listens . Quarterly available to advertisers thru magnets , infrastructure .
Speaker #5: Turning to AI , we delivered another quarter of progress and have an increasingly clear view of how Agentic technologies will show up across the industry and in our products .
Speaker #5: In October in industry association , comprised some of the industry's best regarded executives introduced the ad context Protocol , or Adcp , a proposed standard for how buy and sell side agents will transact .
Speaker #5: When you look into the structure , you see that the agents are designed to operate on top of the transactional infrastructure that exists today .
Speaker #5: Much of which which we built . As always , these transactions must be vetted , negotiated , processed , and cleared , and a privacy compliant manner .
Speaker #5: Jobs we excel at . We envision the new world as one where sell side assets in particular , are going to be even more valuable , and especially magnets with our strong publisher relationships , SPO partnerships and leading technology a key focus of our AI efforts involves the integration of the model context protocol or MCP , a generalized open standard that lets agents and llms connect to external systems and data .
Speaker #5: The AI business . We recently acquired streamer is built on MCP , and we've wired its foundation into clear line , enabling partners like the aforementioned ITV and Wolt to generate CTV creative , receive campaign recommendations and place buys .
Speaker #5: Clear line is the first of several magnet products to integrate MCP . This work will enable agents to that automate tedious tasks such as set up and adjustment to surface valuable insights and drive increased monetization while freeing partners valuable time .
Speaker #5: Beyond agents , we continue to strengthen the machine learning that powers many of our products and operations , improving optimization , raising win rates , and lowering unit costs .
Speaker #5: We're also applying AI across our internal operations , combining process redesigns with efficiency gains , and investing in the platform services and training our teams need to serve our growing partner list without meaningfully increasing headcount .
Speaker #5: Next , I want to provide an update on the Google AdTech trial . As you likely know , Judge Brinkema concluded a two week trial on the remedies phase of the DOJ's case in early October .
Speaker #5: The post-trial briefing is recently been filed . In closing , arguments are scheduled for November 17th . After that , it will likely take some time for Judge Brinkema to issue a final order outlining the remedies she'll put in place at this stage .
Speaker #5: Having found that Google had illegally engaged in a series of anti-competitive acts to establish monopolies in the ad exchange and ad server market , both structural and behavioral remedies remain on the table .
Speaker #5: Structural refers to the forced divestiture of parts of their ad tech business, and behavioral being a set of rules and practices designed to rectify and prohibit Google's illegal, anticompetitive conduct.
Speaker #5: We think there are merits to both types of remedies, and we have confidence that the court will reach the right outcome. The remedy hearings in September did not change our positive outlook about remedies.
Speaker #5: Ultimately , our point of view is that any decision that helps restore competition and eliminates Google's self-preferencing behavior will be a big win for the open internet , as well as MAGNITE, INC. specifically to that point .
Speaker #5: As we said previously , every 1% of market share that shifts to MAGNITE, INC. as a result of these remedies could mean 50 million of additional contribution .
Speaker #5: Tack on an annualized basis and at a very high 90% plus flow through margins . Needless to say , we're watching developments in this case very closely .
Speaker #5: On a related note , we recently announced that we had filed our own lawsuit against Google relating to its anticompetitive conduct . The suit , which seeks financial damages as well as other remedies , is a follow on action to the DOJ litigation and builds on the allegations proved in that case .
Speaker #5: The complaint further details how Google's illegal conduct served to to provide magnate and other independent players the opportunity to compete fairly and grow their businesses while harming advertisers and publishers alike .
Speaker #5: We're at the early stages of the process and will provide further updates on the litigation as it progresses . With that , I'll turn the call over to David for more detail on financials .
Speaker #5: David .
Speaker #4: Thanks , Michael . As Michael mentioned , we had a very strong Q3 with standout performance in CTV , achieving 18% contribution growth or 25% excluding political exceeding our expectations .
Speaker #4: Cvd+ performed well and was in line with our guide . Adjusted EBITDA was solid as well , growing 13% to 57 million and beating expectations , resulting in a 34% margin .
Speaker #4: We're pleased with these results , particularly the acceleration in CTV growth , which was significantly above market growth . Total revenue for Q3 was 179 million , up 11% from Q3 of 2024 .
Speaker #4: Contribution was 167 million , up 12% , exceeding the high end of our guidance range . CTV contribution was 76 million , up 18% year over year or 25% excluding political .
Speaker #4: Exceeding the top end of our guidance range . As I mentioned , TV plus contribution was 91 million , an increase of 7% or 10% excluding political from the third quarter of last year .
Speaker #4: This result was in line with our guidance range . Our contribution mix for Q3 was 45% . CTV , 39% mobile and 16% desktop from a vertical perspective , health and fitness shopping and technology were the strongest performing categories , while automotive was one of our weakest performing categories .
Speaker #4: Total operating expenses , which includes cost of revenue , were 154 million , an increase from 147 million for the same period last year .
Speaker #4: Adjusted EBITDA , operating expense for the third quarter was 110 million , in line with expectations and an increase from 99 million in the same period last year .
Speaker #4: The increase was primarily driven by personnel expenses and higher cloud and data center costs, supporting the growth of our CTV business and investment in CTV-related features and functionality.
Speaker #4: Our net income was 20 million for the quarter , compared to net income of 5 million for the third quarter of 2020 . For , as I previously mentioned , adjusted EBITDA grew 13% year over year to 57 million , reflecting a margin of 34% .
Speaker #4: As a reminder , we calculate adjusted EBITDA margin as a percentage of contribution ex TAC GAAP earnings per diluted share were $0.13 for the third quarter of 2025 , compared to $0.04 for the third quarter of 2024 .
Speaker #4: non-GAAP earnings per share for the third quarter of 2025 was $0.20 , compared to $0.17 last year . The reconciliation to non-GAAP income and non-GAAP earnings per share are included with our Q3 , Q3 results .
Speaker #4: Press release . Our cash balance at the end of Q3 was 482 million , an increase from 426 million at the end of the second quarter .
Speaker #4: Operating cash flow , which we define as adjusted EBITDA , less CapEx , was 39 million . Capital expenditures , including both purchases of property and equipment and capitalized internal use software development costs , were 18 million .
Speaker #4: In addition , as Michael mentioned earlier , we acquired streamer for $10 million as we discussed our technology team has made significant progress improving operational efficiency and reducing per unit cloud costs , which is allowing us to manage significant increases in ad request volumes with modest total cost increases .
Speaker #4: As part of our ongoing efforts to enhance efficiency and maximize the value of our hybrid infrastructure , we've been evaluating the optimal allocation of on prem and cloud resources .
Speaker #4: As a result , we decided to increase our CapEx investment by 20 million this quarter . Specifically , investing in two new data center build outs in Ashburn , Virginia and Santa Clara , California to secure future data capacity needs .
Speaker #4: We now expect CapEx for Q4 and the full year to be approximately 23,000,080 million , respectively , for 2026 and beyond . We believe this increased investment will lead to additional efficiencies and plan to reinvest some of the savings in critical growth areas .
Speaker #4: We expect CapEx to be in the 60 million range in 2026 . Net interest expense for the quarter was 5 million , net leverage for the quarter was well below our goal of less than one X , and came in at 0.3 X at the end of Q3 , down from 0.6 at the end of the second quarter .
Speaker #4: Just as a reminder , the 205 million principal balance of our convertible notes is a current liability on the balance sheet as the notes mature .
Speaker #4: This coming March , we plan to pay off the converts with cash at maturity and have sufficient liquidity to do so . During the first three quarters of the year , we repurchased or withheld over 3.3 million shares for approximately 50 million .
Speaker #4: We have an 88 million remaining in our authorized share repurchase program , which we will continue to deploy opportunistically . I will now share our thoughts about the fourth quarter and outlook for 2026 .
Speaker #4: Consistent with last quarter , and given the concentration of political spend in the fourth quarter last year , we will provide guidance both with and without political contribution .
Speaker #4: Back to show underlying business performance for the fourth quarter , we expect contribution to be in the range of 191 to 196 million , which represents growth of 6 to 9% , or 13 to 16% , excluding political contribution attributable to CTV to be in the range of 87 to 89 million , which represents growth of 12 to 14% , or 23 to 25% when excluding political and dvd+ our our guide reflects slightly lower growth versus the year to date performance due to a couple of factors .
Speaker #4: First , in October , we've seen some additional drop in vertical spend in automotive and some additional weakness in technology and in home and garden , indicating a slightly softening macro environment .
Speaker #4: We're also seeing some spend movement from online video to CTV , which makes a ton of sense given more competitive CTV CPMs and expanded SMB access to CTV inventory .
Speaker #4: Lastly , we've seen some near-term pressure from a recent feature change by top DSP partner affecting all Ssps . Despite these factors , we're still experiencing or expecting growth in DV plus and expect contribution for Dv+ to be in the range of 104 to $107 million , which represents growth of 2 to 5% , or 7 to 10% , excluding political .
Speaker #4: We anticipate adjusted EBITDA operating expenses to be between 112 and 114 million , and CapEx of approximately 23 million , including the incremental investment mentioned earlier for the full year 2025 , which is implied in the Q4 guide .
Speaker #4: We continue to expect total contribution growth above 10% or mid-teens , excluding political adjusted EBITDA to grow in the mid-teens , representing increased margin expansion of approximately 180 basis points at the midpoints .
Speaker #4: And we're raising CapEx to be approximately $80 million. Now, turning to 2026, I want to point out that our estimates do not include any potential market share gains as a result of remedies from the Google ad tech trial.
Speaker #4: We currently expect contribution growth for 2026 to be at least 11% . We also expect to get back into our target margin range , which is 35% at the low end , inclusive of a sizable investment in people .
Speaker #4: We are making to support our growth initiatives and CapEx to be approximately 60 million . The third quarter was really positive for Magnite .
Speaker #4: As we continue to see significant traction from our partners and from our strategic initiatives . I'm excited about the progress in our business and look forward to continued momentum into 2026 .
Speaker #4: With that , let's open the line for Q&A .
Speaker #3: We will now begin the question and answer session to ask a question . You may press star , then one on your touch tone phone .
Speaker #3: If you are using a speakerphone , please pick up your handset before pressing the keys . If at any time your question has been addressed and you would like to withdraw your question , please press star then two at this time we will pause momentarily to assemble our roster .
Speaker #3: Our first question comes from Shyam Patel of Susquehanna . Go ahead , please .
Speaker #6: Hey guys , nice job on the quarter . Michael . I have a question for you . You know , a fairly kind of kind of recent question or even discussion has been around the Trade Desk and Open Path and the potential impact to magnet just given , some of the some of the impact that we've seen it have on others in the industry .
Speaker #6: Can you just talk about this and maybe just also talk about your value add to the ecosystem ? Thank you .
Speaker #5: Yeah , thanks for the question , Sean . The yeah . So in late Q3 , Trade Desk software changed to their operating system .
Speaker #5: That prioritized open path as the default path for supply . And since that occurred , we've worked with all of our major buyers , which include agency holding companies to reconnect magnet as a preferred supply path .
Speaker #5: And as we noted in the script , magnet powers many of the buyer marketplaces . So connection to magnet is essential for their business .
Speaker #5: So , you know , so there was impact . We project impact for Q4 and that's kind of softer TV guide that we put forth .
Speaker #5: But we do feel as though the bulk of the impact has already occurred , that it's been limited to DV plus . We've been able to work with our largest buyers again , many of the agency holding companies to reconnect magnet , and we feel confident going forward that that will mitigate any negative financial impact .
Speaker #5: In out quarters . You know , I will say we definitely support Trade Desk goal of cleaning up the ecosystem and cutting out supply players that provide very little value .
Speaker #5: And I assure you , this move will do that . But I also think this shows magnates importance to the buyer buying community .
Speaker #5: The profile of the media that we supply the services that we provide , building their businesses , or buyer marketplaces on our rails , and obviously the importance that we bring to the supply side .
Speaker #5: So I think that certainly magnets proven it's efficacy in the industry . And I think that the strength of those relationships will help us mitigate any headwinds that come from this changes or other changes for other DSPs .
Speaker #6: Thank you . Michael .
Speaker #5: Welcome .
Speaker #3: The next question comes from Dan Kurnos of the Benchmark Company. Go ahead, please.
Speaker #7: Thanks , Michael . Just to obviously tack on to that , I don't want to read too much into the press release , but , you know , you said Divi .
Speaker #7: Divi continues to perform well , growing in line with expectations driven by exclusive partner expansion . I think we all believe Amazon is your fastest growing DSP partner , and it seems like you're gaining share across kind of dv+ with them as they expand .
Speaker #7: So maybe your thoughts as they press their own DSP in your partnership . There and then secondarily , you know , SMB is becoming a real thing now , you know , I think people forget how deeply integrated spring serve is with all of the DSPs .
Speaker #7: But just kind of your thoughts on where you're at from the SMB marketplace , from an integration perspective , how you're attacking the market directly , and if you want to bring up some of the streamer AI stuff again , that's fine too .
Speaker #7: Thank you .
Speaker #5: Yeah , thanks for the question , Dan . Yeah , listen , our our spend from deleting DSPs remain very strong . You know , we are closing that gap that we had highlighted .
Speaker #5: You know , multiple quarters ago where the total ad spend was outpacing the contribution stack growth . And that's , that's narrowed . But we still have a very healthy spend pattern .
Speaker #5: And with all DSPs and Amazon in particular , is having a banner year . And we really enjoy that partnership both with Amazon as a buyer of inventory .
Speaker #5: And Amazon as a publisher , where we can help them monetize the inventory , there in the SMB is a very exciting chapter .
Speaker #5: Obviously , partners like mountain are doing phenomenal job and buying a lot of supply from us . And the idea of streamer is to help folks like that .
Speaker #5: Not just mountain , but other DSPs that may not have the tools to attract SMB dollars or , you know , merchant agencies .
Speaker #5: And so the idea is that we offer . This this streamer product to those folks that have direct relationships with SMB . The idea isn't for us to be chasing SMB ourselves , but to make sure that that spend winds up on our platform .
Speaker #5: And that's why we're super excited about the streamer acquisition , because it accomplishes that . In addition , as we pointed out , we get the side benefit of having this AI infusion , this AI first way of thinking into our technology organization .
Speaker #5: And you see that already clear line is being built on MCP rails . And so it's going to help accelerate our total kind of AI Agentic focused business .
Speaker #5: So very , very happy with that acquisition .
Speaker #7: Super helpful , Michael . And despite all the noise , it's really nice print and outlook . Thank you .
Speaker #5: Thanks , Dan .
Speaker #3: Next question comes from Jason Cryer of Craig-hallum . Go ahead please .
Speaker #8: Thank you guys . So Michael , I appreciate the comments on AI . And you talked about Adcp . You mentioned the sell side's role becoming more important and maybe can you just expand on how .
Speaker #8: Magnet's role changes in a more authentic world ?
Speaker #5: Yeah , thanks , Jason . Obviously , you know , early days and a lot of this is just exists on whiteboards . But I do think that the shift that we've seen in a non agentic world , the idea of first party data owned by the large media companies becoming extraordinarily important .
Speaker #5: And their desire to keep that data as close as possible to the supply side. So we're playing a huge role in the audience creation business today.
Speaker #5: And we see that as we see that as accelerating . I think that the key really , as you look at CP , at CP , you start to realize that the idea of inventory sitting way over here in dollars from buyers sitting way on the other side of an exchange , you start to see a world where they're they're co-mingled and the as you start to look at the value , the idea of whoever has the access to that valuable supply as it gets co-mingled , has a leg up .
Speaker #5: And so we feel very bullish about not just our prospects, but the prospects for the supply side in this new kind of agentic world.
Speaker #8: Appreciate that . I wanted to follow up on live sports is the kind of your perspective on on supply and demand , because it seems like there's a there's a ton of demand for more dollars flowing into live sports .
Speaker #8: Curious , the perspective you get from publishers moving inventory into programmatic or even moving inventory into biddable , and how that progresses over time ?
Speaker #5: Yeah , I mean , it's . Thanks , Jason . It's accelerating for sure . And it is playing a meaningful impact to our revenue .
Speaker #5: You know , again , let's be careful here . I don't think the Super Bowl is going to be programmatic anytime soon . But we're seeing , you know , a ton of inventory from college football .
Speaker #5: We're seeing NFL inventory . And so it's not just relegated to second tier leagues or sports , if you will . And it's very , very early .
Speaker #5: Right . Programmatic is not being utilized to its fullest capacity . So we're at the early stages of this and we're pleased with , you know , our product lead in this area .
Speaker #5: We talked about . LSA in the script . And you know Disney is really been a key partner in the expansion of our footprint in sports inventory programmatically .
Speaker #5: So we we feel real good about where we stand in it . And the Tam that's associated with it .
Speaker #8: Great . Thanks , Michael .
Speaker #5: Thanks , Jason .
Speaker #3: The next question comes from Shweta Khajuria of Wolfe Research . Go ahead please .
Speaker #9: Okay . Thank you for taking my question . Michael , could you please talk to where we stand on Google ad tech case ?
Speaker #9: There is this , you know , rising level of expectation that maybe structural breakup is not going to happen . And even on the behavioral side , perhaps expectations have come down a little bit .
Speaker #9: Is there any reason to think that ? And where do you think how do you think it went . And any update on the timeline from your vantage point ?
Speaker #9: And then the second question I have is on 2026 guidance , guidance , David , is it possible to comment on what's baked into your guidance and what would drive upside from your base case ?
Speaker #9: Thanks .
Speaker #5: Yeah . Hey , it's Michael . Yes . No , we were very encouraged by the remedies hearings . It pretty much stayed to the script .
Speaker #5: The DOJ was pressing for structural changes . Google was recommending behavioral and we've always , I think , been very clear that we .
Speaker #5: Don't view structural as the only way to win in this scenario , that a level fair playing field is exactly what we're looking for with Judge Brinkema is very aware of , and I think we feel very good about the direction it's heading .
Speaker #5: Structural or behavioral . So I think our outlook on it remains unchanged in our outlook has always been quite positive . And we think it's a generational opportunity for a company like Magnite .
Speaker #4: Great . And Shweta , on the on the guide for 26 , I think I think a number of items as a general matter , we've we've tried to be somewhat conservative , given the , you know , continued tenuous nature on the on the macroeconomic environment .
Speaker #4: We have $0 baked into that for any Google remedy outcomes . You know , again , we're trying to be modest . So there's midterm elections .
Speaker #4: And so we've taken a fairly modest approach there . You know we'll see . You know what kind of competitive races we have when when when that comes around .
Speaker #4: And I think the other factor is , you know , we have we have a number of tailwinds around some of these deals that we've signed commerce , media , you know , we've got , you know , these AI initiatives , the challenges .
Speaker #4: It's so hard in this space to to sort of peg , you know , the timing of when some of those might , might accelerate .
Speaker #4: And so I think we've we've layered in modest , you know , expectations on those fronts . And so I think that could also create , you know , potential upside .
Speaker #4: There .
Speaker #10: Thanks, Michael. Thanks, David.
Speaker #3: The next question comes from Laura Martin of Needham . Go ahead please .
Speaker #11: Hi there . Yes . So Michael , for you you guys represent primarily premium CTV ad units . And what I'm interested in is there's excess supply in CTV generally because there's fast channels selling CTV ad units at six and $7 .
Speaker #11: My question is , can your CPMs and ad units , are they immune or is there bleeding into those lower ? Are they competing with those lower cost ad units which puts downward pressure potentially on your rev share over time .
Speaker #11: And then for David going to push on you a little bit , you just raised the CapEx to 20 million in Q4 . And in your last breath , you said you were adding FTEs .
Speaker #11: So what we've seen when guys raise their CapEx estimates generally is they cut FTEs . They use capital to actually replace FTEs . So why do why are you projecting both more growth in CapEx and faster full time equivalent employee growth ?
Speaker #11: I would love clarity on that . Thanks , guys .
Speaker #5: Yeah . Thanks , Laura . Yeah . As it relates to the CTV , CPM trends , we've seen a bit of stability for the last several quarters , and there are definitely trade in bands .
Speaker #5: Right . Like so you have the super premium . You have premium and then you have a broader batch of inventory . You know , maybe in the fast channels and you know , they've been pretty steady and consistent .
Speaker #5: You may have buckets of dollars flow in each of those channels, but generally speaking, I think people are aware of what the value of a Netflix ad is compared to.
Speaker #5: Perhaps a added unspecified program in a free TV watch channel . Not that it doesn't have value , it just has a different value .
Speaker #5: You also keep in mind that these folks have great first party data , which helps really differentiate themselves from , you know , free TV , where folks don't necessarily have to be registered or you have their personal information .
Speaker #5: And so that valuable first party data helps separate it as well . So yeah , I don't see this as a race to the bottom or an existential threat to our revenues in the coming quarters .
Speaker #4: Great . And on the CapEx discussion , yeah . Good question . And so I'll bifurcate kind of the discussion into the are really two separate decisions .
Speaker #4: So the first side on the CapEx , we we had two primary objectives . The first was to secure additional space on the East Coast and on the West Coast for future expansion .
Speaker #4: And so , as you know , there's some scarcity and data centers for space . And we wanted to make sure and , you know , lock down the expansion space that we need looking out the next couple of years .
Speaker #4: And so there's some overhead infrastructure and other things that are related to that . And this is all under the umbrella of optimizing our hybrid infrastructure .
Speaker #4: So as you know , in CTV , we run a hybrid infrastructure with significant activity on the cloud . But moving to a greater proportion of our activity on prem , which is cheaper .
Speaker #4: And so a portion of that CapEx expansion went directly to additional machines . Moving on prem to move processing volume , or processing from the cloud to on prem .
Speaker #4: And so the financial result of that is would normally be margin , greater margin expansion in 2026 . So these machines are going in place late this year early early next year .
Speaker #4: And so that would be the normal output . And what we're saying is as a separate decision , we have so much potential and opportunity on the CTV front that we felt like it was important to to accelerate some of our investment activities .
Speaker #4: So , so , so that is adding software engineers , product folks to focus and accelerate audience work , live sports development , clear line , and then also AI implementation .
Speaker #4: So both in our product but also for our internal efficiencies . And so for some of those categories , you need some some upfront investment to get the payoff in the future .
Speaker #4: And so so it's kind of two separate , you know , you know decisions going on there . And we're just allocating some of that additional margin to some really important investment initiatives .
Speaker #4: Hopefully that helps .
Speaker #11: Yeah . Thank you .
Speaker #3: The next question comes from Barton Crockett of Rosenblatt . Go ahead please . .
Speaker #12: Okay . Great . Thanks for taking the questions . First , I wanted to ask about the the outlook in 26 on Cxt growing at least 11% , as you put it .
Speaker #12: And that would be including the contribution from political . So maybe Ex-political it's at least like 910% or something like that . In 2025 .
Speaker #12: You're ex-political growth rates . You say , is mid-teens . So ex-political you're talking about a slowdown . And I'm just wondering what's behind that .
Speaker #12: Why the slowdown is that conservatism , or is there something happening with autos or the Trade Desk tariffs ? So that's the first question .
Speaker #4: Yeah , I think I think there's an element of conservatism in there . I would say also , Dvd+ was particularly strong in 2025 .
Speaker #4: And so there's sort of , you know , maybe a little reversion to the mean , you know , we kind of target that at , you know , mid-single digit growth .
Speaker #4: And so I think that's , you know , that's that's part of that equation as well .
Speaker #12: Okay . All right . That's helpful . And then Michael , on the the antitrust , you know , I think one of the hopes is that there could be an impact in 2026 , which was always predicated on the idea of behavioral that could be implemented quickly enough to actually matter in 2026 .
Speaker #12: Structural , of course , could be appealed and would take a long time . So it was never in the view that it could impact 2026 .
Speaker #12: So I'm just curious , based on what's happened with some of the discussion around some of the technologies , Prebid maybe is a middleware .
Speaker #12: Other things . How do you feel now about the possibility of there being behavioral remedies that could impact 2026 PNL for you guys ?
Speaker #5: Yeah , a great question , but look , it's obviously not included in the guide because there's just too many unknowns . But we always have felt that we if the rulings were if they paced along the timeline that we expected and they are that a judgment would be rendered in 2026 , first half of it and the belief that even if there were , the judgment was structural , that behavioral remedies would be put in place throughout the appeals process .
Speaker #5: So we still feel relatively good that we'll see impact from this in 2026 . But I think we've always been pretty clear that no one should be thinking about it .
Speaker #5: In the first half of the year . They should be thinking about it in the second half of the year .
Speaker #12: Okay , but just to follow up on that technologically are the things that are being discussed , looked at that you see as likely things that could be done quickly .
Speaker #5: Yeah , the most common ones , I think , are , you know , when it's related to the sell side . Yes , the buy side probably requires a little bit more , but it would .
Speaker #5: Yeah . I'm sorry . Unified pricing . Yeah . So that would be something that could be done quite quickly . I was just I'm sorry , I was talking to our general counsel is the expert in the matter .
Speaker #5: Probably be answering the question , not me , but yeah , the unified pricing would be a big win . And that is something that could be done quickly .
Speaker #12: Okay . That's great . Thank you .
Speaker #13: Thanks for .
Speaker #3: The next question comes from Zach Cummings of B Riley . Go ahead please .
Speaker #14: Hi . Good afternoon . Thanks for taking my questions , David . I think you mentioned in the script that some of your CTV strength was actually partially driven by by some of your budgets from like mobile video actually moving into that direction .
Speaker #14: Is this a dynamic that that you think could continue moving forward or more kind of a one time thing that we we experience here in recent months ?
Speaker #4: No , I think it's a dynamic that moves forward . I do want to be clear . That was sort of in a in a bucket of a handful of items .
Speaker #4: I would not call any of these , you know , any kind of earth shattering volumes . It's just , you know , a little bit more on the margin .
Speaker #4: But we do think especially in the , I guess , in the , in the the shorter term , that there's a shift in budgets , you know , that will continue with the SMB into the CTV space .
Speaker #4: You know , it's a it's a new Tam for the company . And and so but initially I think the initial budgets probably are a little bit cannibalistic .
Speaker #4: And then I think it draws from budgets that are outside of of our ecosystem . So I think it's net net over time .
Speaker #4: It's a very positive development .
Speaker #14: Understood . And my follow up question is just around Netflix . It seems like that relationship is progressing along pretty nicely . I mean , any insight into how you think about ramping that up , whether that's just executing now that you're live in all their ad supported markets or additional features you plan on helping them roll out on their ad platform , any incremental color there would be great .
Speaker #5: Yeah , we've always been pretty clear about that . Their story to tell . So , you know , they did highlight their success programmatically in Europe , international markets .
Speaker #5: And so that's the big driver of relationship and will continue to be so . But yeah I mean it's it's the relationship is incredibly strong .
Speaker #5: And expectations are exactly where we thought we would be at this time of the year .
Speaker #14: Great . Thanks for taking my questions and best of luck with the rest of the quarter .
Speaker #5: Thank you .
Speaker #3: The next question comes from Robert Culbreth of Evercore ISI . Go ahead please .
Speaker #15: Great . Thank you very much . Wanted to go back to the Trade Desk , change beyond the open path issue . It seems like they they and others are somewhat focused on dealing with the issue of reselling , particularly just given the changes to Prebid transaction ID of late .
Speaker #15: Just , you know , wondering given your direct publisher footprint , if you think there could ultimately be an opportunity to win some share in the market as the demand side looks at the issue of reselling , particularly given that there's reduced transparency around the transaction , ID , thank you .
Speaker #5: Yeah , that's a great question , Robert . And I think we're very excited about it . You know , we're often painted as the foil to Trade Desk or Trade desk .
Speaker #5: You know , encroaching on our turf . But I would say 99% of the stuff that Jeff does is brilliant . And we are so supportive of cleaning up the system .
Speaker #5: So if that is reselling and again , let's be clear , we don't believe Magnite is a reseller . I think the term applies to others , but we are principal .
Speaker #5: We work directly with the publishers . We have a direct relationship and we work with the top tier biggest brands in the world .
Speaker #5: So I think anything that helps clean up the system that gets rid of the obvious that the redundancy , I mean , the traffic that we have to process , that is redundant traffic that is multiple bids , you know , it's just a spewing of inventory of the same unit across the system .
Speaker #5: Anything that can clean up a duplication or reselling is something we lean into . And we would definitely be a beneficiary of that action .
Speaker #15: Got it . Thank you very much .
Speaker #3: Our next question comes from Tim Nolan of SSR . Go ahead please .
Speaker #4: Great . Thanks , Michael .
Speaker #16: I'd like to come back to the discussion of the ad agencies , which you spoke about a little bit in your prepared remarks .
Speaker #16: You know , there's been a there is a lot of change going on in the agency landscape not to pick on names , but WPP and Dentsu are going through some turmoil right now .
Speaker #16: Omnicom and IPG are about to close . This big merger publicist is riding high , and it has a lot of its own in-house adtech .
Speaker #16: I'm not trying to single out the agencies in terms of what you're going to reply to , but my question is , with so much change going on amongst the agencies , does it create an opportunity for you to strengthen your SPO ties ?
Speaker #16: What can you do with them given so much disruption in the market , including to their businesses ? Are there things you can do to help them ?
Speaker #16: And in turn , things they can do that help you with supply path optimization ?
Speaker #5: Yeah . Tim . Great question . And I'll take a cut at it . We're also very fortunate to have our president of revenue here .
Speaker #5: Sean Buckley . And so I'll let him jump in on it as well . But yes , I mean , these agencies obviously are going through some challenges .
Speaker #5: Their media business is in the programmatic space in particular , had lost some relevance . They had ceded a lot of that control to the DSPs .
Speaker #5: And so we have seen over the last several years a very lean in increased awareness of supply side , how they can regain those relationships with those publishers that trust them , how they can renegotiate proprietary data , lay over their own data , get preferred pricing .
Speaker #5: And all of this has to be done in an efficient manner , technological manner . And that makes us so important in that piece for them .
Speaker #5: From a strategic standpoint . So yeah , I think our value is only growing in importance for the holding companies . And we are very leaned in .
Speaker #5: And as we stated , we have a big team that works with them on a daily basis . I don't know if you want to add any more color .
Speaker #16: No , I .
Speaker #17: Totally agree . There's been a theme of the agencies really leaning in and working more with supply side technology in a , in a in a big way .
Speaker #17: I also think they've obviously either invested in or built out proprietary data products , and we've spent a lot of time integrating those products into our technology .
Speaker #17: And so we're very excited about the future we have with the agencies and holding companies .
Speaker #16: Great . Thanks very much .
Speaker #5: Thanks , Tim .
Speaker #3: The next question comes from L . Nibber of Lake Street Capital Markets . Go ahead please .
Speaker #18: Hey guys . Thanks for taking my questions regarding Google . I'm wondering if you guys are seeing a shift in publisher RFP activity or deal flow towards magnet .
Speaker #5: Are you regarding specifically the adtech DOJ trial ?
Speaker #18: Yep . Correct .
Speaker #5: Yeah . No . So to date , I mean , obviously we have strong publisher relationships , but to date there hasn't really been any movement because the structure remains the same .
Speaker #5: Right . And so until that structure is either changed through the diversification divestiture or through behavior patterns , any of the share gains that we're seeing against our competitors aren't coming from from Google .
Speaker #5: They're coming from the open web . And so all that is upside for us .
Speaker #18: Gotcha . Okay . That's it for me . Congrats again on the quarter .
Speaker #5: Thank you so much . Okay . Well thanks all for .
Speaker #3: I would like to turn the conference back over to Michael Barrett , CEO for any closing remarks .
Speaker #5: Thank you . Cindy , I want to thank all of you for joining us today and for your continued support . Our business is performing well , particularly with our growth trends in CTV .
Speaker #5: We're encouraged by the momentum from our partners , who include the world's leading streamers , our team is constantly innovating and enhancing our industry leading technology .
Speaker #5: I'm excited about the new functionality and improvements that I discussed, which will further benefit our partners. We are very well positioned to build on our accomplishments and take advantage of the opportunities for growth and market share gains ahead.
Speaker #5: I'll turn it back over to Nick to cover our upcoming marketing events .
Speaker #4: Yeah . Thanks , Michael . We look forward to speaking to any of you at our upcoming events . We have the SSR event virtually hosted by Tim Nolan tomorrow .
Speaker #4: That's a virtual NDR . We have the Seaport Virtual TMT conference on the 17th of November . Craig-hallum in New York on the 18th of November , Wells Fargo in the Rancho Palos Verdes Estates at on the 18th of November , the RBC Conference in New York on the 19th of November , Stevens , virtually on the 21st a West Coast roadshow on the week of December 8th , and finally Raymond James in New York on December 9th .
Speaker #4: Thank you all and have a great evening .