Q1 2026 PubMatic Inc Earnings Call

May 7, 2026

Speaker #1: Call received Goell.

Speaker #2: Hello, everyone, and welcome. We will begin momentarily. Hello, everyone, and welcome to PubMed's first quarter 2026 earnings call. My name is Christian, and I will be your Zoom operator for today.

Speaker #2: Thank you for your attendance today, and as a reminder, this webinar is being recorded. I will now turn the call over to Stacey Clements.

Speaker #1: Good afternoon, everyone, and welcome to PubMed's earnings call for the first quarter 2026. This is Stacey Clements, and I'll be your operator today. Joining me on the call are Rajiv Goell, co-founder and CEO, and Steve Pantelic, CFO.

Speaker #1: Before we get started, I have a few housekeeping items. Today's prepared remarks have been recorded after which Rajiv and Steve will host live Q&A.

Speaker #1: If you plan to ask a question, please ensure you've set Zoom to display your full name and firm, and use the raise hand function located at the bottom of your screen.

Speaker #1: A copy of our press release can be found on the website at investors.pubmedic.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.

Speaker #1: Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy, and future conditions. These forward-looking statements are subject to inherent risks, uncertainties, and changes in circumstances that are difficult to predict.

Speaker #1: You can find more information about these risks, uncertainties, and other factors in our reports filed from time to time with the Securities and Exchange Commission and are available at investors.pubmedic.com.

Speaker #1: 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.

Speaker #1: We caution you therefore against relying on any of these forward-looking statements. All information discussed today is as of May 7, 2026, and we do not intend and undertake no obligation to update any forward-looking statement, whether as a result of new information, future developments, or otherwise, except as may be required by law.

Speaker #1: In addition, today's discussion will include references to certain non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, non-GAAP net income, cash flow from operations, and free cash flow.

Speaker #1: 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.

Speaker #1: This meeting is being recorded.

Speaker #2: Press release. I will now turn the call over to Rajeev.

Speaker #1: A reconciliation of these measures to the most directly comparable GAAP measures is available in our press release. I will now turn the call over to Rajiv.

Speaker #3: Thank you, Stacie, and welcome everyone. We delivered an exceptional first quarter, with revenue and adjusted EBITDA ahead of guidance. These results reflect the continued strength of our business and accelerating adoption of our AI solutions.

Speaker #2: Thank you, Stacey, and welcome, everyone. We delivered an exceptional first quarter with revenue and adjusted EBITDA ahead of guidance. These results reflect the continued strength of our business and accelerating adoption of our AI solutions.

Speaker #3: We delivered 13% year-over-year growth in our underlying business. Emerging revenues grew over 80% year-over-year and climbed to 14% total revenues, aided by agentic OS.

Speaker #2: We delivered 13% year-over-year growth in our underlying business. Emerging revenues grew over 80% year-over-year and climbed to 14% of total revenues, aided by Agentic OS.

Speaker #3: The new strategy we launched in the summer of 2025 is delivering tangible results. We're diversifying our DFP mix and growing in high-consumer engagement channels such as CTV and mobile app, and creating more value for key stakeholders across the advertising ecosystem.

Speaker #2: The new strategy we launched in summer of 2025 is delivering tangible results. We're diversifying our DSP mix, growing in high-consumer engagement channels such as CTV and mobile app, and creating more value for key stakeholders across the advertising ecosystem.

Speaker #3: As a pioneer in AI, our multi-year investments are paying off and fueling new revenue streams, operating leverage, and market-leading advantages that are at an early stage of compounding.

Speaker #2: As a pioneer in AI, our multi-year investments are paying off and fueling new revenue streams, operating leverage, and market-leading advantages that are at the early stages of compounding.

Speaker #3: Agentic AI is emerging thanks to productivity tools. It's a structural shift that is redefining the entire digital advertising market. It simplifies the connections between advertisers and outcomes and transforms how value flows through the ecosystem.

Speaker #2: Agentic AI is more than just a productivity tool. It's a structural shift that is redefining the entire digital advertising market. It simplifies the connections between advertisers and outcomes and transforms how value flows through the ecosystem.

Speaker #3: Over the past two decades, digital advertising has undergone two profound transformations. Each creating markets centered in the hundreds of billions of dollars. The first was real-time bidding, and the second was the shift to mobile conduction.

Speaker #3: Today, a third transformation has been larger magnitude is underway. AI-driven agentic advertising. AI simplifies the ecosystem by automating decisions that once required large teams using fragmented systems.

Speaker #2: Over the past two decades, digital advertising has undergone two profound transformations. Each creating markets measured in the hundreds of billions of dollars. The first was real-time bidding, and the second was the shift to mobile consumption.

Speaker #3: Our platform sits at the intersection of buyers, publishers, and audiences. Enabling us to apply AI at global scale across the entire value chain. From planning and discovery to activation and measurement.

Speaker #2: Today, a third transformation of even larger magnitude is underway. AI-driven Agentic advertising. AI simplifies the ecosystem by automating decisions that once required large teams using fragmented systems.

Speaker #3: Our approach fundamentally changes how value is created. It drives performance that legacy fragmented model is structurally challenged to deliver. Importantly, agentic AI prioritizes outcomes, not interfaces.

Speaker #1: growth. So, you know, I fully anticipate that, you know, along the spectrum of, AI-powered or enabled, you know, for publishers to set up campaigns more quickly, to troubleshoot, to fully agentic, campaigns, you know, are gonna help drive, double-digit revenue growth for us in the second half, amongst all the other, you know, strong momentum that we have in mobile app and CTV.

Speaker #2: Our platform sits at the intersection of buyers, publishers, and audiences. Enabling us to apply AI at global scale across the entire value chain. From planning and discovery to activation and measurement.

Speaker #3: At the same time, AI is leveling the playing field between wall gardens and the open internet. Capabilities that once benefited closed platforms like efficiency, lower operating costs, and strong advertising ROI are now achievable in the open internet, with added benefits of transparency and choice.

Speaker #2: Our approach fundamentally changes how value is created. It drives performance that the legacy fragmented model is structurally challenged to deliver. Importantly, Agentic AI prioritizes outcomes, not interfaces.

Speaker #3: As advertisers allocate spend based on measurable performance, our addressable market expands, and we are well positioned to capture that shift. Importantly, our growth engine is directly aligned with customer outcomes.

Speaker #2: Okay. All right. Thank you.

Speaker #2: At the same time, AI is leveling the playing field between walled gardens and the open internet. Capabilities that once benefited closed platforms, like efficiency, lower operating costs, and stronger advertising ROI, are now achievable in the open internet, with the added benefits of transparency and choice.

Speaker #3: Our next question comes from James Heaney at Jeffrey's. Please go ahead, James.

Speaker #3: We're evaluating our ability to monetize every ad impression we process. We earn revenue only when we deliver superior results for publishers and buyers. As customers see stronger performance, they increase usage, creating a self-reinforcing model where greater adoption and utilization drive both customer ROI and our own profitable growth.

Speaker #4: Yeah. Great. thanks for the question. Rajeev, can you just talk about the momentum that you're seeing within the mid-market? DSP segment, just curious also, over time, how big of a driver, you think that can be for your business compared to maybe the top five DSPs?

Speaker #2: As advertisers allocate spend based on measurable performance, our addressable market expands and we are well-positioned to capture that shift. Importantly, our growth engine is directly aligned with customer outcomes.

Speaker #1: Sure. Yeah. Thanks, James, for the, for the question. So we are seeing, I think, really tremendous, growth opportunity in that mid-market DSP cohort. and I think it's consistent with where the advertising spend growth is.

Speaker #3: Our agentic OS and activated products extend this alignment further into the value chain. Underpinning this model are five competitive advantages. Assets that are increasingly difficult for new entrants to replicate and that compound over time.

Speaker #2: We're evaluated on our ability to monetize every ad impression we process. And we earn revenue only when we deliver superior results for publishers and buyers.

Speaker #1: You know, if we look at the kind of the Fortune 1,000 advertisers, many of them, you know, large enterprises, they're incumbent brands. Their ad budgets, are pretty stagnant.

Speaker #3: Further, they cannot be bycoded. First is scale. Literally, the entire advertising-supported open internet is available on PubMatic. We have nearly 2,000 premium publishers representing over 100,000 websites, apps, and streamers.

Speaker #2: As customers see stronger performance, they increase usage, creating a self-reinforcing model where greater adoption and utilization drive both customer ROI and our own profitable growth.

Speaker #1: As in many cases, as their, as their revenues are, are quite stagnant. and instead, what we see is that challenger brands, you know, mid-market, upper mid-market, SMB brands, they're growing at a at a much faster pace in terms of their core business.

Speaker #2: Our Agentic OS and Activate products extend this alignment further into the value chain. Underpinning this model are five competitive advantages. Assets that are increasingly difficult for new entrants to replicate and that compound over time.

Speaker #3: Including 28 of the top 30 global streamers. This breadth and depth of access dominate channel inventory is built through years of trust and performance.

Speaker #1: And that means then that their advertising budgets are growing much faster. And in particular, we see that in that upper mid-market category. and as a result, there's a lot of fragmentation, in the DSP space.

Speaker #3: Second is activate. Our direct buying platform was designed from the beginning to drive performance and simplify the complexity of the ecosystem. By connecting ad demand and premium supply in a single environment, advertisers see higher ROI and publishers benefit from increased yield.

Speaker #2: Further, they cannot be vibe-coded. First is scale. Nearly the entire advertising-supported open internet is available on PubMedic. We have nearly 2,000 premium publishers representing over 100,000 websites, apps, and streamers.

Speaker #1: so just in the last year, we've added, over 50 DSPs. We continue to add more, in the first quarter of the year. so we're seeing I think really strong growth there.

Speaker #3: Third is agentic OS and our growing portfolio of AI agents. We have over 20 different operational agents available for media buyers and publishers. With new agents rolling out every month to automate and optimize core advertising workflows.

Speaker #2: Including 28 of the top 30 global streamers. This breadth and depth of access to omnichannel inventory is built through years of trust and performance.

Speaker #1: And I think over time, you know, it'll it'll change the composition of the of the market. It'll diversify the opportunity base for us. I think AI is only gonna enhance that because AI will make it easier for, these DSPs to onboard new clients.

Speaker #2: Second is Activate. Our direct buying platform was designed from the beginning to drive performance and simplify the complexity of the ecosystem. By connecting ad demand and premium supply in a single environment, advertisers see higher ROI and publishers benefit from increased yield.

Speaker #3: Our newest agent enables buyers to discover and activate curated omni-channel supply in seconds through natural language queries. For example, a media buyer simply asks for CTV inventory for male sports enthusiasts.

Speaker #1: That are in that mid-market or, or small, advertiser category. It'll make the, cost of service, the cost of onboarding, lower. so I think we're gonna continue to see that.

Speaker #3: And the agent instantly surfaces relevant opportunities, audience reach estimates, and deal options. This process used to take hours or days and is now reduced to minutes.

Speaker #1: And, you know, I don't know that I have a projection or a forecast of, of what percentage of, of the overall business it could be, but I would just say that I expect it to be, it already is significant, and I expect it to grow as a share, of the total in the in the coming years.

Speaker #2: Third is Agentic OS and our growing portfolio of AI agents. We have over 20 different operational agents available for media buyers and publishers, with new agents rolling out every month to automate and optimize core advertising workloads.

Speaker #3: Fourth, our owned and operated infrastructure. This is a structural advantage in the AI era. Our long-standing collaboration with Nvidia brings advanced GPU technology directly into our platform with a variety of distinct benefits.

Speaker #2: Our newest agent enables buyers to discover and activate curated omnichannel supply in seconds through natural language queries. For example, a media buyer simply asks for CTV inventory for male sports enthusiasts, and the agent instantly surfaces relevant opportunities, audience reach estimates, and deal options.

Speaker #3: GPU technology improves data processing to handle the massive advertising-specific workloads that underpin bidding, pricing, and campaign optimization. Cutting compute time and cost. We're using Nvidia Triton inference server to deploy real-time inferencing for bidding and audience decisioning.

Speaker #2: This process used to take hours or days and is now reduced to minutes. Fourth, our owned and operated infrastructure. This is a structural advantage in the AI era.

Speaker #3: As a result, we process data and train models faster and more cost-effectively than cloud-based alternatives. While also improving model performance. In AI, faster feedback loops lead to better models.

Speaker #3: And better models attract more advertising activity. By owning our infrastructure, we keep the compounding advantage within PubMatic, allowing our competitive modes to widen with every transaction process.

Speaker #2: Our long-standing collaboration with NVIDIA brings advanced GPU technology directly into our platform with a variety of distinct benefits. GPU technology improves data processing to handle the massive advertising-specific workloads that underpin bidding, pricing, and campaign optimization, cutting compute time and cost.

Speaker #3: Our data platform connects is a key input of this flywheel. Comprises the data assets from over 300 data and commerce media partners. It's our fifth competitive advantage.

Speaker #2: We're using NVIDIA Triton inference server to deploy real-time inferencing for bidding and audience decisioning. As a result, we process data and train models faster and more cost-effectively than cloud-based alternatives.

Speaker #3: With faster processing, we are improving our proprietary model training in real-time, resulting in significant performance improvements and better optimization for advertiser return on ad spend.

Speaker #3: Connect is a powerful platform that enables advertisers to shift their audience targeting strategies to the sales side with greater efficiency and reach, which is a further catalyst for activate and agentic OS performance.

Speaker #2: While also improving model performance. In AI, faster feedback loops lead to better models, and better models attract more advertising activity. By owning our infrastructure, we keep that compounding advantage within every transaction process.

Speaker #3: There is no other company that has all five of these components and is innovating at this pace. Further, revenue growth is building and customer adoption continues to scale quickly.

Speaker #2: Our data platform connect is a key input of this flywheel. Comprised of data assets from over 300 data and commerce media partners, it's our fifth competitive advantage.

Speaker #3: PubMatic now has AI-embedded across its entire platform. Publishers use PubMatic AI Assistant to seamlessly make their inventory available to buyers on PubMatic via deals.

Speaker #2: With faster processing, we are improving our proprietary model training in real-time resulting in significant performance improvements and better optimization for advertiser return on ad spend.

Speaker #3: Over 1,000 AI-powered deals have been transacted to date, resulting in millions of dollars in publisher monetization. Similarly, buyers use our AI Assistant's chat-based interface to discover audiences and inventory and activate new advertising campaigns.

Speaker #2: Connect is a powerful platform that enables advertisers to shift their audience targeting strategies to the sell side with greater efficiency and reach, which is a further catalyst for Activate and Agentic OS performance.

Speaker #3: Even more exciting is the adoption of fully autonomous agentic campaigns. We'll launch at CES in January with a single campaign that's now scaled to more than 30 live fully autonomous campaigns from independent agencies, large buying platforms, and global brands across the United States, France, the Netherlands, Australia, and India.

Speaker #2: There is no other company that has all five of these components and is innovating at this pace. Further, revenue growth is building and customer adoption continues to scale quickly.

Speaker #2: PubMedic now has AI-embedded across its entire platform. Publishers use PubMedic AI Assistant to seamlessly make their inventory available to buyers on PubMedic via deals.

Speaker #3: PubMatic is the only platform that has operationalized fully agentic campaigns at scale. Agencies like Butler Till, MIQ, and Breakthrough, a digital media solution provider with more than 1,000 brands and 235 agencies, alongside AMNET and Abovo Maxi and EMEA, are seeing compelling results.

Speaker #2: Over 1,000 AI-powered deals have been transacted to date, resulting in millions of dollars in publisher monetization. Similarly, buyers use our AI Assistant's chat-based interface to discover audiences and inventory and to activate new advertising campaigns.

Speaker #3: A material reduction in fees, more dollars shifting into working media, high-performing KPIs, and 80 to 90% time savings in campaign set. These aren't marginal gains.

Speaker #2: Even more exciting is the adoption of fully autonomous Agentic campaigns. What launched at CES in January with a single campaign has now scaled to more than 30 live, fully autonomous campaigns from independent agencies large buying platforms and global brands across the United States, France, the Netherlands, Australia, and India.

Speaker #3: These are set function efficiency unlocks that validate agentic buying as a value chain shift. I'm incredibly proud of the team and the results we're delivering.

Speaker #3: We have the technology, infrastructure, scale, and innovation to lead this seismic industry shift. At the same time, we continue to strengthen our underlying business.

Speaker #3: The DSP landscape continues to evolve and fragment with the growing share of digital advertising spend coming from outside the Fortune 1000 advertisers. Our growth profile mirrors this trend as we diversify our business and accelerate expansion beyond the largest DSPs.

Speaker #2: PubMedic is the only platform that has operationalized fully Agentic campaigns at scale. Agencies like Butler Till, MIQ, and Breakthrough, a digital media solutions provider for more than 1,000 brands and 235 agencies, alongside Amnet, and Abovo, Max Lead, and EMEA, are seeing compelling results.

Speaker #3: In Q1, activity from mid-market and performance DSPs continued to grow over 20% year over year. Many of these DSPs are also quickly innovating around agentic.

Speaker #2: A material reduction in fees, more dollars shifting into working media, high-performing KPIs, and 80% to 90% time savings in campaign setup. These aren't marginal gains.

Speaker #3: That became the first DSP to connect to PubMatic's PMD deal publishing AI agent via model context protocol. This integration enables their agents to autonomously troubleshoot private marketplace deals adding resolution time from days to minutes, as compared to traditional PubMatic workflows.

Speaker #2: These are step function efficiency unlocks that validate Agentic buying as a value chain shift. I'm incredibly proud of the team and the results we're delivering.

Speaker #2: We have the technology, infrastructure, scale, and innovation to lead this seismic industry shift. At the same time, we continue to strengthen our underlying business.

Speaker #3: This is an exciting area of innovation and demonstrates how existing software interfaces are quickly becoming obsolete. We also continue to innovate with the largest performance DSPs.

Speaker #2: The DSP landscape continues to evolve and fragment with a growing share of digital advertising spend coming from outside the Fortune 1,000 advertisers. Our growth profile mirrors this trend as we diversify our business and accelerate expansion beyond the largest DSPs.

Speaker #3: A significant milestone this quarter was our integration with Amazon's Dynamic Traffic Engine, now launched globally. This integration shares a man-single from Amazon directly with PubMatic so that we can better match inventory to their advertiser demand in real-time.

Speaker #3: Early results are delivering increased monetization for publishers on PubMatic, up to a 10% increase in CPM since its launch. We also deliver growth in high-consumer engagement channels, including CTE and mobile app.

Speaker #2: In Q1, activity from mid-market and performance DSPs continued to grow over 20% year over year. Many of these DSPs are also quickly innovating around Agentic.

Speaker #2: AdRoll became the first DSP to connect to PubMedic's PMP deal troubleshooting AI agent via model context protocol. This integration enables their agent to autonomously troubleshoot private marketplace deals cutting resolution time from days to minutes as compared to traditional PubMedic workflows.

Speaker #3: New products like Creative Innovation Suite are now live across agentic OS, enabling brands to connect with viewers across interactive content and devices. For example, a viewer may start a show on their TV, pick up later on a phone, or pause the content to check something online.

Speaker #2: This is an exciting area of innovation and demonstrates how existing software interfaces are quickly becoming obsolete. We also continue to innovate with the largest performance DSPs.

Speaker #3: Our technology lets advertisers deliver consistent story across all of these moments. Premium publishers like Sling, TV, are unlocking more value from their inventory while agencies such as Horizon Media, Cross Media, and Charlie Scott Madison use creative innovation suites to deliver more engaging, measurable campaigns to their clients.

Speaker #2: A significant milestone this quarter was our integration with the Amazon's Dynamic Traffic Engine, now launched globally. This integration shares demand signals from Amazon directly with PubMedic so that we can better match inventory to their advertiser demand in real-time.

Speaker #3: Our live forward marketplace continues to be one of the most powerful ways to reach engaged audiences. Through PubMatic, buyers can access premium CV inventory across major sporting leagues and global events.

Speaker #2: Early results are delivering increased monetization for publishers on PubMedic, up to a 10% increase in CPM since its launch. We also delivered growth in high consumer engagement channels, including CTV and mobile app.

Speaker #3: The scale behind this growth opportunity is significant. We expect the FIFA World Cup alone will bring more than 100 million high-value impressions per day to our platform, with growing demand from buyers across the UK, France, Germany, and Italy.

Speaker #2: New products like Creative Innovation Suite are now live across Agentic OS, enabling brands to connect with viewers across interactive content and devices. For example, a viewer may start a show on their TV, pick it up later on a phone, or pause the content to check something online.

Speaker #3: According to eMarketer, digital live sports viewership is projected to grow 20% between now and 2030. With expansive partnerships across some of the largest premium live sports inventory, coupled with over 300 data partners and innovative CT solutions, we expect live sports to be a strong growth driver over the next several years.

Speaker #2: Our technology lets advertisers deliver a consistent story across all of these moments. Premium publishers like Sling, TV, are unlocking more value from their inventory while agency such as Horizon Media, Cross Media, and Kelly Scott Madison use Creative Innovation Suite to deliver more engaging, measurable campaigns for their clients.

Speaker #3: Our mobile app business grew over 25% year over year, over the past quarter. We deepened our innovations across the mobile ecosystem. We're now live with the three leading global mediation platforms: Apple 11 Max, Google AdMob, and most recently, Unity Level Play.

Speaker #3: PubMatic now has access to over 90% of global SDK inventory. For example, Zynga, a global leader in interactive entertainment that reaches hundreds of millions of players worldwide, has integrated our SDK to provide advertisers with programmatic access to their high-value mobile audiences at global scale.

Speaker #2: Our live sports marketplace continues to be one of the most powerful ways to reach engaged audiences. Through PubMedic, buyers can access premium CTV inventory across major sporting leagues es and global events.

Speaker #3: Much like mobile apps, commerce media also benefits from logged-in user engagement, where buyers can prioritize performance and measurable outcomes. With an accessible market of 18 billion, we see a significant long-term opportunity in commerce media.

Speaker #2: The scale behind this growth opportunity is significant. We expect the FIFA World Cup alone will bring more than 100 million high-value impressions per day to our platform, with growing demand from buyers across the UK, France, Germany, and Italy.

Speaker #3: Fueling this are new partnerships set at scale and audience data to the PubMatic Connect platform. We recently announced an exciting partnership with Walmart Connect, which unlocks new advertisers and new ad spend on our platform, particularly for CTV.

Speaker #2: According to eMarketer, digital live sports viewership is projected to grow 20% between now and 2030. With expansive partnerships across some of the largest premium live sports inventory, coupled with over 300 data partners and innovative CTV solutions, we expect live sports to be a strong growth driver over the next several years.

Speaker #3: Our partnership with Walmart Connect Select integrates their first-party shopper audiences with the media on our transactions for SME enterprise advertisers. I'm also excited to share that we have integrated with payments leader PayPal, integrating the PayPal ads ID.

Speaker #2: Our mobile app business grew over 25% year over year. Over the past quarter, we deepened our integrations across the mobile ecosystem. We're now live with the three leading global mediation platforms.

Speaker #3: This integration brings over 25 billion transactions across 400 million verified PayPal and Venmo accounts to the platform, giving buyers high-value data to activate across the open internet.

Speaker #2: AppLove and Max, Google AdMob, and most recently, Unity Level Play. PubMedic now has access to over 90% of global SDK inventory. For example, Zynga, a global leader in interactive entertainment that reaches hundreds of millions of players worldwide, has integrated our SDK to provide advertisers with programmatic access to their high-value, mobile audiences at global scale.

Speaker #3: It enhances targeting accuracy, verified identity across devices, and true closed-loop attribution in a privacy-safe way. As this partnership scales, we expect it to contribute to emerging revenue streams and deliver incremental margin.

Speaker #3: In closing, we delivered a great quarter. We continue to add marketing partnerships, focus on innovation, and execute across our strategic priorities. AI is an accelerant to our already diverse growth engine.

Speaker #2: Much like mobile app, commerce media also benefits from logged-in user engagement where buyers can prioritize performance and measurable outcomes. With an addressable market of 18 billion, we see a significant long-term opportunity in commerce media.

Speaker #3: The repeating agent we're seeing from customers underscores that this technology is driving performance. Each additional transaction compounds our data advantage, driving superior performance and accelerating organic growth across our core business, including CTV, mobile app, and commerce media.

Speaker #2: Fueling this are new partnerships that add scale and audience data to the PubMedic Connect platform. We recently announced an exciting partnership with Walmart Connect, which unlocks new advertisers and new ad spend on our platform, particularly for CTV.

Speaker #3: With our proven model, differentiated infrastructure, and expanding global footprint, PubMatic is positioned to capture this next transformational shift in digital advertising, creating long-term value for our customers, partners, and shareholders.

Speaker #2: Our partnership with Walmart Connect Select integrates their first-party shopper audiences with the media on our platform, enabling new performance-oriented ad transactions for SMB and enterprise advertisers.

Speaker #3: I'll now turn the call over to Steve, the financials.

Speaker #2: I'm also excited to share that we have integrated with payments leader PayPal, integrating the PayPal Ads ID. This integration brings over 25 billion transactions across 400 million verified PayPal and Venmo accounts to the platform.

Speaker #2: Thank you, Steve, and welcome, everyone. We delivered a strong quarter with Q1 revenue of $62.6 million, and adjusted EBITDA of $2.6 million, both ahead of the preliminary figures we shared on April 22nd and well above the high end of our guidance ranges.

Speaker #2: Giving buyers high-value data to activate across the open internet. It enhances targeting accuracy, verified identity across devices, and true closed-loop attribution in a privacy-safe way.

Speaker #2: Excluding revenues related to the legacy DSP referenced mid-2025, our underlying business grew 13% year over year and represented 83% of our total revenues. This double-digit growth reflects the health of our business, ongoing benefits from our multi-year secular growth investments, and the momentum of our strategic transformation.

Speaker #2: As this partnership scales, we expect it to contribute to emerging revenue streams and deliver incremental margin. In closing, we delivered a great quarter. We continue to add marquee partnerships focused on innovation and execute across our strategic priorities.

Speaker #2: This execution, coupled with the rapid expansion of PubMatic's AI tools and agentic OS, positions us for accelerating double-digit revenue growth in the second half of the year.

Speaker #2: AI is an accelerant to our already diverse growth engine. The repeat engagement we're seeing from customers underscores that this technology is driving performance. Each additional transaction compounds our data advantage, driving superior performance and accelerating organic growth across our core business, including CTV, mobile app, and commerce media.

Speaker #2: The majority of the revenue would be once again flowed through to adjusted EBITDA. Q1 was the 40th consecutive quarter of positive adjusted EBITDA, underscoring the inherent durability of our model, ongoing productivity gains, and expense discipline.

Speaker #2: With our proven model, differentiated infrastructure, and expanding global footprint, PubMedic is positioned to capture this next transformational shift in digital advertising. Creating long-term value for our customers, partners, and shareholders.

Speaker #2: We also generated $10.7 million for year cash flow, 17% free cash flow margin, and return on value to shareholders through the repurchase of 1 million Class A common shares.

Speaker #2: Moving on to the quarterly highlights, our outperformance was driven by double-digit year-over-year growth in total company monetized impressions, reflecting the structural strength of our usage-based model.

Speaker #2: I'll now turn the call over to Steve for the financials. Thank you, Rajiv, and welcome, everyone. We delivered a strong quarter with Q1 revenue of 62.6 million, an adjusted EBITDA of 2.6 million, both ahead of the preliminary figures we shared on April 22, and well above the high end of our guidance ranges.

Speaker #2: Our investments in high-value formats and channels also delivered outsized growth. Combined, revenue from CTV, mobile app, and emerging revenues grew over 20% year over year and represented the majority of total revenues.

Speaker #2: Breaking this down further, strength in CTV was led by the Americas, where revenues grew 13% year over year and represented approximately 80% of total CTV revenue.

Speaker #2: With 28 out of the top 30 global streamers on PubMatic's platform and growing access to live sports, we saw an increase in both the number of CTV advertisers and premium inventory available.

Speaker #2: This execution, coupled with the rapid expansion of PubMedic's AI tools and Agentic OS, positions us for accelerating double-digit revenue growth in the second half of the year.

Speaker #2: Excluding the legacy DSP buyer, global CTV revenues grew 18% year over year. Mobile app extended its momentum as revenue increased over 25% year over year.

Speaker #2: The majority of the revenue beat, once again, flowed through to adjusted EBITDA. Q1 was the 40th consecutive quarter of positive adjusted EBITDA, underscoring the inherent durability of our model, ongoing productivity gains, and expense discipline.

Speaker #2: This growth reflects a ramp-up of strategic partnerships, ongoing product innovation, and continued expansion of our global app publisher base. Notably, mobile apps saw broad-based growth in both video and display.

Speaker #2: We also generated 10.7 million in free cash flow, a 17% free cash flow margin, and returned value to shareholders through the repurchase of 1 million Class A common shares.

Speaker #2: With its sizable scale on our platform, mobile app also meaningfully contributed to our overall display revenues, which grew 5% year over year. Emerging revenue streams were again a standout category, and grew over 80% year over year, and represented 14% of total revenues, driven by increased adoption across our new AI products, including agentic OS.

Speaker #2: Moving on to the quarterly highlights. Our outperformance was driven by double-digit year-over-year growth in total company monetized impressions, reflecting the structural strength of our usage-based model.

Speaker #2: On a global basis, direct buying on Activate grew more than 3x year over year. We also continued to diversify our DSP mix. Q1 ad spend from our mid-market DSP partners was up over 20% year over year.

Speaker #2: Highlighting the impact of our increased focus and investment, accelerating these high-growth innovative partners. Revenues in the first quarter related to legacy DSP buyer were better than expected, as we further optimized our platform to meet the needs of this buyer.

Speaker #2: Breaking this down further, strength in CTV was led by the Americas, where revenues grew 13% year over year, and represented approximately 80% of total CTV revenue.

Speaker #2: With 28 out of the top 30 global streamers on PubMedic's platform and growing access to live sports, we saw an increase in both the number of CTV advertisers and premium inventory available.

Speaker #2: Across our well-diversified portfolio of ad articles, we saw a double-digit percentage growth in health and fitness, technology and computing, and hobbies and interests. This growth helped offset softness in the business and food and drink verticals.

Speaker #2: Excluding the legacy DSP buyer, global CTV revenues grew 18% year over year. Mobile app extended its momentum as revenue increased over 25% year over year.

Speaker #2: Overall, our top 10 ad verticals increased mid-single-digit percentages year over year. Regionally, our APAC and EMEA businesses grew rapidly with year-over-year revenue growth of 25% and 10% respectively, offsetting a 12% decline in the Americas which was primarily due to the steady declines we anticipated from the legacy DSP buyer.

Speaker #2: This growth reflects the ramp-up of strategic partnerships, ongoing product innovation, and continued expansion of our global app publisher base. Notably, mobile apps saw broad-based growth in both video and display.

Speaker #2: Turning to our owned and operated infrastructure, the number of impressions we processed increased 26% year over year through optimization efforts and targeted CAPEX investments.

Speaker #2: With its sizable scale on our platform, mobile app also meaningfully contributed to our overall display revenues, which grew 5% year over year. Emerging revenue streams were, again, a standout category and grew over 80% year over year, and represented 14% of total revenues driven by increased adoption across our new AI products, including Agentic OS.

Speaker #2: The combination of these efforts and AI-driven efficiencies enabled us to manage our cost-to-revenue growth at 2% year over year, despite industry-wide utility cost path throughs from data center colo providers.

Speaker #2: On a trailing 12-month basis, our unit cost declined 20% year over year. Today, we efficiently process over 1 trillion impressions per day, which is a significant asset and long-term revenue opportunity for us as we accelerate our strategic transformation.

Speaker #2: On a global basis, direct buy-in on Activate grew more than 3x year over year. We also continue to diversify our DSP mix, Q1 ad spend from our mid-market DSP partners was up over 20% year over year.

Speaker #2: Our platform is becoming smarter, faster, and more profitable because of the compounding effects of our multi-year investments in AI and advanced computing, growing pool of premium inventory, and 300+ data partnerships.

Speaker #2: Highlighting the impact of our increased focus and investment accelerating these high-growth innovative partners. Revenues in the first quarter related to the legacy DSP buyer were better than expected, as we further optimized our platform to meet the needs of this buyer.

Speaker #2: We'll continue shifting our investment away from predominantly capacity expansion towards targeted GPU-centric infrastructure that supports higher value, differential offers like live sports, CTV, mobile app, and agentic OS.

Speaker #2: Across our well-diversified portfolio of ad verticals, we saw a double-digit percentage growth in health and fitness, technology and computing, and hobbies and interests. This growth helped offset softness in the business and food and drink verticals.

Speaker #2: We believe this approach will be a durable accelerant to growth over the long term and supports the broader industry shift to performance-based advertising. We will also continue to harness AI and automation internally across our company.

Speaker #2: Overall, our top 10 ad verticals increased mid-single-digit percentages year over year. Regionally, our APAC and EMEA businesses grew rapidly with year-over-year revenue growth of 25% and 10%, respectively, offsetting a 12% decline in the Americas, which was primarily due to the spend declines we anticipated from the legacy DSP buyer.

Speaker #2: Last quarter, I called out significant productivity gains in engineering, finance, and legal. We also extended AI operationally across our customer success organization, which is now achieving double-digit productivity gains performing their function.

Speaker #2: Cumulatively, these internal efficiency gains are sizable and allow us to reallocate people and investments toward our biggest revenue growth initiatives. Moving on to operating expenses, total operating expenses in the first quarter marginally increased 3% as compared to last year.

Speaker #2: Turning to our owned and operated infrastructure, the number of impressions we processed increased 26% year over year through optimization efforts and targeted CAPEX investments.

Speaker #2: The combination of these efforts and AI-driven efficiencies enabled us to manage our cost-to-revenue growth to 2% year over year, despite industry-wide utility cost pass-throughs from data center colo providers.

Speaker #2: And include the incremental investments in our buyer-focused sales team and our go-to-market organization. Our productivity gains from AI that I just called out help fund these investments.

Speaker #2: Our total company headcount was down year over year as a result of this disciplined operating strategy. Q1 adjusted EBITDA was 2.6 million or 4% margin, which included a foreign exchange headwind of approximately 1 million due to the weakening US dollar over the quarter.

Speaker #2: On a trailing 12-month basis, our unit cost declined 20% year over year. Today, we officially process over $1 trillion impressions per day, which is a significant asset and long-term revenue opportunity for us as we accelerate our strategic transformation.

Speaker #2: Q1 cabinet loss was 12.5 million, or -27 cents per dividend share. Moving to cash in our capital allocation, our balance sheet remains a core strategic advantage.

Speaker #2: Our platform is becoming smarter, faster, and more profitable because of the compounding effects of our multi-year investments in AI and Invest Computing, growing pool of premium inventory, and 300-plus data partnerships.

Speaker #2: We generated 17.3 million in net operating cash flows in the first quarter, up 11% over Q1 last year, and delivered free cash flow of a 10.7 million, up 47% increase over last year.

Speaker #2: We will continue shifting our investment away from predominantly capacity expansion towards targeted GPU-centric infrastructure that supports higher value, differentiated offerings like live sports, CTV, mobile app, and Agentic OS.

Speaker #2: To underscore our long-term ability to generate cash, since the beginning of 2021 through Q1 2026, we have generated over 429 million in net cash from operations, and more than 232 million in free cash flow.

Speaker #2: We ended the quarter with 145 million in cash and zero debt. Our capital allocation strategy remains disciplined and balanced, focused on long-term shareholder value creation.

Speaker #2: Last quarter, I called out significant productivity gains in engineering, finance, and legal. We also extended AI operationally across our customer success organization which is now achieving double-digit productivity gains performing their function.

Speaker #2: We continue to invest in innovation and infrastructure driving incremental organic growth while maintaining the flexibility to pursue strategic M&A opportunities. We've also made a long-term commitment to return capital to shareholders via our share repurchase program.

Speaker #2: Cumulatively, these internal efficiency gains are sizable and allow us to reallocate people and investments toward our biggest revenue growth initiatives, moving on to operating expenses.

Speaker #2: Since the inception of our repurchase program in February 2023 through the end of Q1, we have bought back 13.5 million Class A common shares for $190 million.

Speaker #2: Total operating expenses in the first quarter marginally increased 3% as compared to last year. And includes the incremental investments in our buyer-focused sales team and broader go-to-market organization.

Speaker #2: We have 85 million remaining in this program authorized through the end of 2026. Moving on to our outlook, we expect Q2 revenue to be in the range of $60 to $70 million, which includes continued momentum from high-value formatting channels and expanded use of our AI tools and agentic OS.

Speaker #2: Our productivity gains from AI that I just called out help fund these investments. Our total company headcount was down year over year as a result of this disciplined operating strategy.

Speaker #2: Q1 adjusted EBITDA was 2.6 million or 4% margin, which included a foreign exchange headwind of approximately $1 million due to the weakening US dollar over the quarter.

Speaker #2: In April, our usage-based model continued to perform well with continued growth in monetized impressions. Ad spend across our top 10 ad verticals was also healthy in April.

Speaker #2: Q1 gap net loss was 12.5 million, or negative 27 cents per diluted share. Moving to cash in our capital allocation, our balance sheet remains a core strategic advantage.

Speaker #2: As a reminder, our Q2 outlook includes the impact from the legacy DSP we called out mid-2025, and which we will lap in Q3. Q2 adjusted EBITDA is expected to be in the range of $8 to $10 million, and assumes a similar FX headwind as Q1.

Speaker #2: We generated 17.3 million in net operating cash flows in the first quarter, up 11% over Q1 last year, and delivered free cash flow of a 10.7 million of 47% increase over last year.

Speaker #2: The sequential margin expansion compared to Q1 reflects our revenue scaling on a largely fixed cost base. Beginning in Q3, we expect to return to revenue growth and accelerate to the second half.

Speaker #2: To underscore our long-term ability to generate cash, since the beginning of 2021 through Q1 2026, we have generated over $429 million in net cash from operations, and more than $232 million in free cash flow.

Speaker #2: With this revenue growth, we anticipate margin expansion supported by targeted investments in sales and AI products, expected discipline, and continued AI-driven cost efficiencies across all functional areas.

Speaker #2: Sequentially, quarterly cost of revenue and operating expenses are anticipated to marginally increase the low to mid-single-digit percentages. Full-year CAPEX is projected to be approximately 16 to 19 million, with the majority of our CAPEX to be invested in AI capabilities and advanced computing infrastructure.

Speaker #2: We ended the quarter with $145 million in cash and zero debt. Our capital allocation strategy remains disciplined and balanced focused on long-term shareholder value creation.

Speaker #2: We continue to invest in innovation and infrastructure to drive incremental organic growth while maintaining the flexibility to pursue strategic M&A opportunities. We have also made a long-term commitment to return capital to shareholders via our share repurchase program.

Speaker #2: strategic transformation. Our growing diversification

Speaker #2: Since the inception of our repurchase program in February 2023 through the end of Q1, we have bought back $13.5 million Class A common shares for $190 million.

Speaker #2: We have 85 million remaining in this program authorized through the end of 2026. Moving on to our outlook, we expect Q2 revenue to be in the range of $68 to $70 million, which includes continued momentum from high-value formats and channels and expanded use of our AI tools and Agentic OS.

Speaker #2: In April, our usage-based model continued to perform well with continued growth in monetized impressions. Ad spend across our top 10 ad verticals was also healthy in April.

Speaker #2: With this revenue growth, we anticipate margin expansion supported by targeted investments in sales and AI products, expect disciplined, and continued AI-driven cost efficiencies across all functional areas.

Speaker #2: Sequentially, quarterly cost of revenue and operating expenses are anticipated to marginally increase in the low to mid-single-digit percentages. Full-year capex is projected to be approximately 16 to 19 million, with the majority of our capex to be invested in AI capabilities and advanced computing infrastructure.

Speaker #2: In closing, Q1 was a strong start to the year, demonstrating both the durability of our model and the momentum-building behind our strategic transformation. Our growing diversification across DSPs, verticals, geographies, and high engagement environments reduces concentration risk and positions us to grow from a broader base.

Speaker #2: As we lap the DSP impact in Q3 and accelerate through the second half, we are well-positioned for both revenue and margin expansion. Importantly, AI is not just a product catalyst; it is a financial lever.

Speaker #2: We are driving new revenue from AI-powered solutions while using AI to expand margins, improve productivity, and fund the investments that drive our next phase of growth.

Speaker #2: With that, I'll turn the call over to Stacey for questions.

Speaker #1: Thank you, Steve. As a reminder, you can ask a question by raising your hand located on the dashboard. Or if you're on your phone, please press *9.

Speaker #1: Our first question comes from Matt Swanson at RBC. Please go ahead, Matt.

Speaker #3: Great. Thank you, guys. I guess just a couple of things. First, Steve, kind of picking up where you left off, the headwind from the DSP last year is obviously made things a little bit murkier to see all the good growth drivers.

Speaker #3: Can you just remind us in terms of timing in Q3? Is Q3 completely neutral? So no more headwind? Or was it at a certain point within the quarter that the headwind really started to pick up, just for us to kind of think about that?

Speaker #4: Sure. Good to reconnect, Matt. We'll see the benefit of lapping it. Not really at the start of the quarter. We saw some of the impact flow in at the beginning of the quarter, but by mid-quarter, we'll be fully lapping the impact.

Speaker #3: Thank you. And then maybe for Ashiv, once we get through that headwind, do you guys will just have to deal with the cyclical, secular conversation everybody else still does?

Speaker #3: So I mean, you've got a lot of really fast-growing segments of your business. And then there's also areas that are growing less quickly. Can you just kind of help us think through how these newer emerging technologies ramp?

Speaker #3: And I guess how you kind of think about those as they become the larger portion of your business and what the timeline would be on that?

Speaker #4: Sure. Yeah. So thanks, Matt. So I think there's a couple of things that give us good confidence to achieve double-digit rate of growth in the second half of the year.

Speaker #4: So first of all, let's start with AI, right? I mean, there's a, as I said in the prepared remarks, there's a huge agentic transformation underway in the industry.

Speaker #4: I think it'll be the it's the third transformation after RTB and mobile. And I think actually it'll be bigger than those two. And so that opportunity for us, which is obviously something we're innovating, very hard against, I think making terrific progress.

Speaker #4: That for us is a huge TAM expansion opportunity because I see AI as much more than just technical revolution, but actually a value chain revolution, where we can connect the buyer and the advertiser much closer together, and increase our TAM.

Speaker #4: And so that's going to cut across every ad format, not just the high-growth formats that we're participating in, like CTV, mobile app, or commerce media.

Speaker #4: So even within display and online video, as we reshape the value chain with agentic execution, there's an opportunity for us to deliver more value across the ecosystem, and for us in turn to capture more value.

Speaker #4: So I'm excited about the AI growth opportunity. And then I'm also excited about the other areas that I mentioned, CTV growth, mobile app growth, which is very strong for the last several quarters, commerce media, where I think we're really gaining steam.

Speaker #4: And then we have our rest of our emerging revenue streams, which is, as Steve noted, grew over 80% year over year in Q1.

Speaker #3: Thank you both.

Speaker #1: Our next question comes from Barton Pocket at Rosenblatt. Please go ahead, Barton.

Speaker #5: Yeah. Thanks for taking the question. Yeah. I was first just wanting to kind of understand in the guide, given the noise around the DSP exit, did you guys tell us what the growth is ex-DSP in your guide for the second quarter?

Speaker #4: No, we didn't share that. But I mean, the trajectory will be similar to what we saw in the first quarter. The reality is, as Rajiv and I have called out, we have a lot of really strong growth drivers.

Speaker #4: And the second quarter is going to be the last full quarter where we're going to be lapping the impact. And so I would expect the midpoint of the guide is in the single-digit range excluding the DSP impact.

Speaker #4: And the boundary, upper boundary, is going to be high single digits. So absolutely, underscoring the fundamental growth that we're seeing in our business. Across the board, which I think is really the important point for investors to understand, it's not just one particular format and channel.

Speaker #4: It's mobile app. It's CTV. Even display showed very strong growth in the first quarter.

Speaker #5: Okay. Because, yeah, I was backing in basically to the numbers that you gave. So just as a follow-up, I mean, it does suggest slower than the really robust 18% growth ex-DSP in the first quarter.

Speaker #5: Is that just conservatism in the guide, or is there something out there that tougher comp or something else less of a contributor that argues for a bit of a slowdown?

Speaker #4: Yeah. Just to clarify the data point, it's actually 13% is what was the data point for the first quarter. No, it's absolutely not. I think we're feeling very good about sort of all the momentum that we're seeing in the business.

Steve Pantelick: To step back, you know, we're not seeing in the macro, but, you know, we're being appropriately prudent given sort of the amount of noise out there, you know, across the globe in terms of impacts from the war and consumer reticence to buy. From my perspective, you know, we are very well set up for, you know, a solid Q2. More importantly, the momentum that we have going into H2. You know, we anticipate, you know, returning to reported growth in Q3 and accelerating to double-digit growth in H2.

Steve Pantelick: To step back, you know, we're not seeing in the macro, but, you know, we're being appropriately prudent given sort of the amount of noise out there, you know, across the globe in terms of impacts from the war and consumer reticence to buy. From my perspective, you know, we are very well set up for, you know, a solid Q2. More importantly, the momentum that we have going into second half. You know, we anticipate, you know, returning to reported growth in the third quarter and accelerating to double-digit growth in second half.

Speaker #4: I'd say if you step back, we're not seeing in the macro, but we're being appropriately prudent given sort of the amount of noise out there across the globe in terms of impacts from the war and consumer reticence to buy.

Speaker #4: But from my perspective, we are very well set up for a solid Q2. And more importantly, the momentum that we have going into the second half, we anticipate returning to reported growth in the third quarter and accelerating to double-digit growth in the second half.

Step back. Um, you know, we're not seeing in the macro but, you know, we're being appropriately. Proven given sort of the uh, the amount of uh, noise out there. Uh, you know, across the globe in terms of impacts from the War, uh, and consumer reticence to buy. But from my perspective, you know, uh, we are very well set up for, uh, you know, a, uh, a solid, uh, Q2. Uh, and more importantly, um, the momentum that we have going into the second half, uh, you know, we anticipate, you know, returning to reported growth in the third quarter and accelerating to uh double digit growth in the second half.

[Analyst]: Okay. All right. Just a one final kind of question. You know, when you're, you know, talking about the kind of growth in AI volume, and you talked about 1,000 kind of campaigns. You know, just to kind of reality check, I mean, this is still like an immaterial percentage of your business, is that correct? You know, what, you know, give us a sense of, you know, the degree of materiality you think we might see in that over the next few quarters.

Speaker #5: Okay. All right. And then just one final kind of question. When you're talking about the kind of growth in agentic volume, and you talked about 1,000 kind of campaigns, just to kind of reality check, I mean, this is still an immaterial percentage of your business.

All right, and then just, uh, one final kind of question. Um, you know, when you're, uh, you know, talking about the kind of growth in atactic volume, and you talked about 1,000 kind of campaigns—

Speaker #5: Is that correct? And what give us a sense of the degree of materiality you think we might see in that over the next few quarters?

You know, just to kind of uh, reality check. I mean, this is still like an immaterial percentage of your business. Is that correct? And you know what, you know, uh,

Give us a sense of, you know, the degree of materiality. You think we might see in that over the next few quarters?

Steve Pantelick: I mean, the way to think about our overall AI set of initiatives, it's not just one particular vector. You know, we're operating and, you know, excelling on a number of different vectors, you know, from a AI-powered, you know, impact on our revenues. It's of course the agentic, you know, campaigns that Rajeev described, but it's also all the other solutions that, you know, help drive our overall emerging revenues. You know, we share the stat that, you know, AI, the emerging revenues grew over 80%, and AI-powered revenues are a big part of that growth.

Speaker #4: So I mean, the way to think about our overall AI set of initiatives, it's not just one particular vector. We're operating and excelling on a number of different vectors.

Speaker #4: From an AI-powered impact on our revenues, it's, of course, the agentic campaigns that Rajiv described. But it's also all the other solutions that help drive our overall emerging revenues.

So I mean, the way to think about our overall AI, uh, set of initiatives, it's not just one particular vector. Um, you know, we're, uh, operating and, um, you know, excelling on a number of different vectors, you know, from an AI-powered, uh, you know, uh, uh, impact on our revenues. It's, of course, the agentic, uh, you know, campaigns that Receive, uh, described.

but it's also all the other solutions that

Speaker #4: We share the stat that the emerging revenues grew over 80%. And AI-powered revenues are a big part of that growth. So I fully anticipate that along the spectrum of AI-powered or enabled, for publishers to set up campaigns more quickly, to troubleshoot, to fully agentic campaigns, are going to help drive double-digit revenue growth for us in the second half, amongst all the other strong momentum that we have in mobile app and CTV.

Steve Pantelick: You know, I fully anticipate that, you know, along the spectrum of AI-powered or enabled, you know, for publishers to set up campaigns more quickly, to troubleshoot to fully agentic campaigns, you know, are gonna help drive double-digit revenue growth for us in H2, amongst all the other, you know, strong momentum that we have in mobile app and CTV.

You know help Drive our overall emerging revenues, um you know, we share the stat that, you know, the emerging revenues, grow great percent and AI powered revenues are a big part of that growth.

[Analyst]: Okay. All right. Thank you.

Speaker #5: Okay. All right. Thank you.

Operator: Our next question comes from James Heaney at Jefferies. Please go ahead, James.

Speaker #1: Our next question comes from James Heaney at Jeffrey's. s. Please go ahead, James.

James Heaney: Yeah, great. Thanks for the question. Rajeev, can you just talk about the momentum that you're seeing within the mid-market DSP segment? Just curious also over time how big of a driver you think that can be for your business compared to maybe the top five DSPs?

Speaker #6: Yeah. Great. Thanks for the question. Rajiv, can you just talk about the momentum that you're seeing within the mid-market? DSP segment, just curious also, over time, how big of a driver you think that can be for your business compared to maybe the top five DSPs?

Rajeev Goel: Sure. Thanks, James, for the question. We are seeing, I think really tremendous growth opportunity in that mid-market DSP cohort. I think it's consistent with where the advertising spend growth is. You know, if we look at the kind of the Fortune 1000 advertisers, many of them, you know, large enterprises, their incumbent brands, their ad budgets are pretty stagnant, as in many cases as their revenues are quite stagnant. Instead what we see is that challenger brands, you know, mid-market, upper mid-market, SMB brands, they're growing at a much faster pace in terms of their core business, and that means then that their advertising budgets are growing much faster. In particular, we see that in that upper mid-market category.

Steve Pantelick: Sure. Thanks, James, for the question. We are seeing, I think really tremendous growth opportunity in that mid-market DSP cohort. I think it's consistent with where the advertising spend growth is. You know, if we look at the kind of the Fortune 1000 advertisers, many of them, you know, large enterprises, their incumbent brands, their ad budgets are pretty stagnant, as in many cases as their revenues are quite stagnant. Instead what we see is that challenger brands, you know, mid-market, upper mid-market, SMB brands, they're growing at a much faster pace in terms of their core business, and that means then that their advertising budgets are growing much faster. In particular, we see that in that upper mid-market category.

Speaker #4: Sure. Yeah. Thanks, James, for the question. So we are seeing I think really tremendous growth opportunity in that mid-market DSP cohort. And I think it's consistent with where the advertising spend growth is.

Speaker #4: If we look at the kind of the Fortune 1,000 advertisers, many of them large enterprises, they're incumbent brands, they're ad budgets are pretty stagnant.

Speaker #4: As in many cases, as they're re revenues are quite stagnant. And instead, what we see is that challenger brands, mid-market, upper mid-market, SMB brands, they're growing at a much faster pace in terms of their core business.

Speaker #4: And that means then that their advertising budgets are growing much faster. And in particular, we see that in that upper mid-market category. And as a result, there's a lot of fragmentation in the DSP space.

Steve Pantelick: As a result, there's a lot of fragmentation in the DSP space. Just in the last year, we've added over 50 DSPs. We continue to add more in Q1 of the year. We're seeing, I think, really strong growth there. I think over time, you know, it'll change the composition of the market. It'll diversify the opportunity base for us. I think AI is only gonna enhance that because AI will make it easier for these DSPs to onboard new clients that are in that mid-market or small advertiser category. It'll make the cost of service, the cost of onboarding, lower. I think we're gonna continue to see that.

Speaker #4: So just in the last year, we've added over 50 DSPs. We continue to add more in the first quarter of the year. So we're seeing I think really strong growth there.

Speaker #4: And I think over time, it'll change the composition of the market. It'll diversify the opportunity base for us. I think AI is only going to enhance that because AI will make it easier for these DSPs to onboard new clients.

Speaker #4: That are in that mid-market or small advertiser category. It'll make the cost of service the cost of onboarding lower. So I think we're going to continue to see that.

Steve Pantelick: You know, I don't know that I have a projection or a forecast of what percentage of the overall business it could be, but I would just say that I expect it to be. It already is significant, and I expect it to grow as a share of the total in the coming years.

Speaker #4: And I don't know that I have a projection or a forecast of what percentage of the overall business it could be. But I would just say that I expect it to be it already is significant.

Speaker #4: And I expect it to grow as a share of the total in the coming years.

James Heaney: Great. That's helpful. Steve, one for you. Just as we think about the H2.

Speaker #6: Great. That's helpful. And then Steve, one for you. Just as we think about the second half environment that you're assuming, yeah, what are kind of your macro assumptions?

Speaker #6: Is there an element of conservatism? I mean, I know you haven't given specific guidance, but anything on the macro? And then also, how are you sizing up political for Q3 and Q4?

Speaker #4: Sure. Let me start out sort of near end. The results that we saw in April, ad spending was healthy. We saw double-digit growth for a number of ad verticals on a year-over-year basis.

Speaker #4: And as a reminder to everybody, we have a very well-diversified set of ad verticals. 20-plus and so strength in one or two or three or four.

Speaker #4: Certainly help offset softness in others. And that's really a function of sort of long-term investments we've made in our publisher base. Tools, etc. So we've been able to navigate and operate in a number of different macro environments.

Speaker #4: And so the environment right now is stable, healthy. And we operate in an environment where we programmatic world, benefits when there is these kinds of stresses because we can show transparency, results, etc.

Speaker #4: So I currently am being I'd say cautiously optimistic about the macro for the balance of the year. Now, set against that, just as a reminder, I've called out as Rajiv, we have a lot of really significant drivers that are going to help us continue to power our results through the course of the year.

Speaker #4: Rajiv has described the AI leadership that we have established. In-market, and that is definitely going to be a tailwind. We just commented on the DSP diversification.

Speaker #4: Many of the new 50 DSPs that we brought in last year were performance-based. So that obviously is a great place to be in a challenging economic environment if that's what happens.

Speaker #4: We continue to see great CTV leadership. We've been investing in cyclic growth areas in emerging revenues. And you can see the tremendous growth that we're seeing there.

Speaker #4: And so overall, the way I think about the second half, we are well-poised in a number of different macro environments to continue to grow.

Speaker #4: We're going to return to growth. And we anticipate, given a stable macro environment, we'll return to double-digit growth. So we're feeling really good about where we are right now as a business.

Speaker #6: Thank you.

Speaker #1: Our next question comes from Rob Coolworth at Evercore. Please go ahead, Rob.

Speaker #5: Great. Thanks for the opportunity to ask a question. Congratulations on the results. Steve, a couple for you. Just any improvement in the trends of the legacy DSP in the quarter?

Speaker #5: Obviously, it was well-publicized that they had some disruption in terms of their direct connects with some of the agencies. And we've heard that that those direct connects may have lost some share of voice within the DSP during the quarter.

Speaker #5: So just wanted to ask on that. The vertical commentary and the macro commentary also, Steve, very helpful. But just wondering, you may broaden that a little bit.

Speaker #5: Did you see any slowdown in March year related to the situation in Iran or fuel prices or anything like that? And some sequence recovery in April?

Speaker #5: Just wanted to give us a little bit of an indication on whether your RSI already saw a slight slowdown and now recovery and maybe that gives you a little bit more confidence in the shape of the macro.

Speaker #5: And then finally, Steve, and sorry to pile all these on, but finally, Rajiv, with all the moves you're making around Agentic AI, just wondering if you can maybe discuss the potential opportunity for you to power ads within the online themselves.

Speaker #5: Are those discussions that you're having or is that an area where you see opportunity? Thanks a lot.

Speaker #4: Sure. Go ahead, Steve.

Speaker #6: Hey, Rob. So great questions. So let me take each one in turn. So with respect to the legacy DSP that we called on mid-2025, part of our performance in the Q1 timeframe was the results were a little bit better than we anticipated.

Speaker #6: And so that was a contributing factor. Not a huge factor, but definitely a good indicator of the progress that we've made. It's because we continue to optimize our platform to meet this buyer's needs.

Speaker #6: And there's a whole host of factors behind that. And I think the takeaway for investors should be that it's we've established a stable business with this DSP.

Speaker #6: After the initial drop back mid-2025. And what I saw in April, similar circumstances. And we're going to lap that in the coming months. And so that'll be one headwind that we won't have.

Speaker #6: And that's going to contribute to our accelerated growth in the second half. Now, second point, around the macro, I do want to underscore again, sort of our diversified ad portfolio across the board, shopping, health, and fitness, food and drink, hobbies and interests, arts and entertainment, etc.

Speaker #6: And what we've seen over a very long timeframe, 15 years, there'll be strength in some and some softness in others. And we really worked hard to make sure that we are not over-indexing in any one area.

Speaker #6: But in the first quarter, across the board, it was pretty healthy. And offset some softness, the softness that we saw in the first quarter that I called out was food and drink.

Speaker #6: It was a little bit soft. The softness in business. And from my perspective, that just normal sort of puts and takes as there's certain pressures across any ecosystem.

Speaker #6: In April, we saw a strong result in the same categories that we saw in the first quarter. So April, we saw more than half of our ad verticals grow very nicely.

Speaker #6: In the maybe a little bit of softness in travel, a little bit of softness in arts and entertainment. But by and large, with our diversified portfolios, not really looking ahead, TBD, but again, I would rather be in our situation in programmatic advertising in a business where we are investing in performance advertising, transparency, data.

Speaker #6: We are tapped into where all the growth is, where advertisers want to invest. Then any other place. Because what's going to happen is there's still going to be advertising if there's pressure on the macro.

Speaker #6: And we're going to based on history, our space, our company has been a beneficiary of that. Over to you, Rajiv. Thanks, Steve. And Rob, just to underscore on the last point Steve was making around performance, I think it's worth highlighting our partnerships that we announced with both Walmart and PayPal.

Speaker #6: So these are obviously commerce media partnerships. But these are, I think, great counterbalances from a performance advertising growth perspective. To any macro uncertainty. So with Walmart, Connect, we're a preferred partner for their Walmart Connect Select product.

Speaker #6: And that's a little bit of mouthful. Of a mouthful. But really, what we're doing there is marrying their shopper audiences, right? So great first-party data.

Speaker #6: One of the largest retailers in the world. Marrying that with our high-quality inventory, CTV, mobile app, web. And giving Walmart advertisers, whether they're enterprise advertisers or small, medium business advertisers, the ability to target those audiences on our platform.

Speaker #6: And so that's a great opportunity to bring performance dollars and to bring incremental ad spend to our platform. And then with PayPal, there are about 25 billion transactions, 400 million verified accounts from PayPal and Venmo.

Speaker #6: And so we're integrating their transaction graph, their ID graph, as well as data into our platform. And again, bringing performance advertising solutions to the market.

Speaker #6: So again, these are, I think, just great opportunities as we scale these for the second half of the year to counteract any potential macro from the broader environment.

Speaker #6: Now, turning to your question around OpenAI and LLMs, I think we all probably saw their $100 billion ambition around advertising. And I think for me, what that indicates is that they're going to have to work with a wide variety of partners across the ecosystem.

Speaker #6: They're going to have to tap into enterprise advertisers, small, medium business advertisers. They're going to have to tap into brand advertising and performance advertising.

Speaker #6: They're going to have to tap into display as well as richer video formats. So it's going to be an ecosystem-wide effort, I think, for them to get to that level.

Speaker #6: And I think we do have an opportunity to partner with companies like that in order to bring the value of our business relationships, our infrastructure, our data, our environmental relationships all to a party like that.

Speaker #6: We've been working with much smaller companies in the space like Context and Dappeer. So we're already innovating on the ad formats and appropriate signals to monetize that kind of inventory.

Speaker #6: And I think that puts us in a good position.

Speaker #1: Great. Thanks very much.

Speaker #4: Our next question comes from Eric Martinuzzi at Lake Street. Please go ahead, Eric. How about that? Can you talk now? All right. I'm going to Eric, I'll put you back in the queue.

Speaker #4: We cannot hear you unless you're on mute. Yes. Now. There you go.

Speaker #5: Sorry about that. Yeah. So I was curious, maybe I missed it. Did you give a net dollar-based retention number for Q1, Steve?

Speaker #3: Yeah. I mean, it was basically flatish. Very similar to our overall reported number. And it reflects sort of the impact from the legacy DSP.

Speaker #3: And I fully anticipate that to return to positive going into the second half of the year.

Speaker #5: Okay. So when you say flatish, it was sequentially up versus Q4? I think Q4 was 96%. So yeah.

Speaker #3: A little bit better. Yep.

Speaker #5: Okay. And then the expectation historically, you guys have been on that kind of definitely above 100. Is that expectation is once we anniversary, the large DSP, that that's what happens?

Speaker #3: Absolutely. I mean, I really it's important to underscore this for everybody on the call. We have made tremendous progress across a number of fronts.

Speaker #3: Focused on secular growth areas and managing through the DSP impact. And so going into the third quarter, we're going to return to year-over-year revenue growth.

Speaker #3: We're going to see revenues accelerate to double-digit rates. Based upon the multitude of initiatives that we've called out and continue to see really great adoption and long-term trajectory ahead of us.

Speaker #5: Okay. And then you had a high-level leadership turnover. That was part of the reason for the prelim results. Just wondering if you can give us an update there specifically with regard to the sort of single uber CRO, any update for us.

Speaker #3: Sure. Yeah. I can take that. So we had we have two tremendous leaders. That have been here for 15 years in one case and 13 years in another.

Speaker #3: That are leading for personal reasons. Pauline, our chief growth officer, has made the difficult decision to leave due to health reasons. And Kyle Dozeman, our America's CRO, is leaving to pursue an entrepreneurship opportunity, which has long been a personal ambition of his.

Speaker #3: Both are still in their roles for a transition period. We've engaged hydrogen struggles to work with us on a global CRO search. So I think there's an opportunity to consolidate some of our revenue-generating functions under a global CRO for improved execution, consistency, and structure.

Speaker #3: At the same time, we've got deep leadership bench and full confidence in the rest of the team. So that search is moving a pace.

Speaker #3: And we're seeing a lot of great quality candidates. I think where we're positioned in terms of the business model in terms of profitability and cash generation the diverse portfolio of growth drivers as well as, of course, our AI leadership is a very attractive combination.

Speaker #3: So I'm looking forward to getting the right person in place in the next couple of months.

Speaker #5: Got it. Thanks for the update.

Speaker #4: Our next question comes from Justin Patterson at KeyBank. Please go ahead, Justin.

Speaker #1: Great. Thank you. And good afternoon. I was hoping you could expand a little bit more on just what you think the business looks like over time as Agentic OS scales and more AI is running through.

Speaker #1: Should we think of any kind of changes in the market structure or, excuse me, the margin structure? And then just the type of client needs you can serve.

Speaker #1: Thank you.

Speaker #3: Yeah. Sure. Why don't I start with that and then Steve feel free to chime in, of course. So I think there's an opportunity to really simplify the complexity that exists in the ecosystem today.

Speaker #3: Today, obviously, we have a highly kind of siloed ecosystem. Advertiser agency, DSP, SSP, publisher, consumer. And then there's other parties like verification and data management, etc.

Speaker #3: And really, what our focus is on and I think it's quite different than what others are doing as it relates to AI but our focus is on applying AI across the full value chain of the ecosystem.

Speaker #3: And I think this is a really important distinction in my opinion, the true value of AI can only be achieved when it's not operating within a silo AI operating within an SSP that connects with AI operating within a DSP.

Speaker #3: But instead, when AI is running end-to-end. When the data is available end-to-end, we see much better outcomes. AI agents running agentically they're going to do their best work, which is both increasing the effectiveness of advertising as well as increasing the efficiency.

Speaker #3: When they're all able to operate much more broadly and much more autonomously against a customer's objective. And so with that in mind, it really opens up a lot more of the addressable market opportunity to us where, for instance, when a customer is using Activate, which is direct buying in our SSP, and then accessing that agentically with Agentic OS, we shared over 30 campaigns that are live.

Speaker #3: Then the customers are seeing tremendous working media efficiencies. So more of their dollars are going to purchasing media. They're seeing 30 to 40 percent improvements in CPMs, 40% more media being able to be bought.

Speaker #3: And importantly, we actually see increases in revenue. Because we're delivering more ROI and we're delivering more value across the ecosystem. And so it's an absolute revenue growth opportunity for us.

Speaker #3: I think the other key point is that I see AI as an opportunity to really level the playing field between walled gardens and the open internet.

Speaker #3: So the when advertisers buying directly in our SSP, it's a single layer of technology and it looks a lot like what the walled gardens leverage to drive ad performance, right?

Speaker #3: When you think about a Meta or a Google or some of those large platforms. And so now the strong advertiser ROI that historically the walled gardens have been at an advantage at we're now seeing that availability to achieve that for advertisers.

Speaker #3: And then lastly, I think what we're also very quickly confronting is that user interfaces are becoming obsolete. So AI agents obviously have no use for them.

Speaker #3: I think humans operating with AI also have decreasing utility from a UI, which I think all of a sudden feels both very constrictive and taxing at the same time.

Speaker #3: We published case studies where clients that are using Agentic OS are seeing 80 to 90 percent time savings for campaign setup when using AI.

Speaker #3: So that's obviously a tremendous value add. And I think we'll have a huge opportunity is a big opportunity within both agencies and advertisers. So let me stop there and turn it over to Steve.

Speaker #5: Sure. Thanks, Rajiv. From our perspective, this is just an ideal opportunity moment in time for our company. Because many of the things that we've been focused on over a decade plus developing, owning, and operating our own infrastructure, being a first mover in leveraging AI capabilities through engineering, now to drive revenues, we've really positioned ourselves to take advantage of the revenue opportunity.

Speaker #5: But also, there's going to be a significant margin opportunity because of the way that we leverage our fixed cost base. And so we're going to be able to continue to manage our costs on a unit basis, but incrementally add these new revenue streams many of them are net new to us as a business.

Speaker #5: So we are very positive about the impact on this generational trend as Rajiv has described it. We're a company that we've been building for years and this is this time that we're going to be able to really take advantage of that.

Speaker #5: For all the reasons that we've cited. So we continue to put incremental resources in the right areas behind secular growth areas into advanced infrastructure.

Speaker #5: And our focus and expense discipline our focus on productivity will help us drive margins as the revenues come emerge from this opportunity.

Speaker #1: Thanks, Steve. Our next question comes from Ken Wu at Wolf. Please go ahead, Ken.

Speaker #6: Thank you for taking my question. Rajiv, can you provide an update on your view of Google's antitrust trial and the potential impact?

Speaker #3: Sure. Yeah. Thank you, Ken, for the question. So we, of course, alongside I think everybody else in the ecosystem, are eagerly awaiting the verdict to in terms of the remedies to come down.

Speaker #3: I think some folks had anticipated that would have already been released. So we're expecting to see it any day or any week now. Obviously, we're waiting to see the extent of structural remedies as well as behavioral remedies.

Speaker #3: Our view is that the behavioral remedies can be implemented quite quickly. It's pretty clear and pretty straightforward. And so we see the potential for opportunity pretty imminently post that verdict.

Speaker #3: Again, subject to what exactly that verdict is. And just as a reminder, we estimate that Google is a 60% market share player in each 1% market share could add 50 to 75 million in revenue to our business with very high margins around 80%.

Speaker #3: And we think there's an opportunity to more than double our share of the market currently 4%. Again, depending subject a little bit to what the exactly the verdict looks like.

Speaker #3: So big opportunity massive opportunity really. And we're waiting for that verdict at any point now.

Speaker #6: Sounds good. That's it from me. Thanks, guys.

Speaker #1: We have time for one more question. Brianna Diaz at Citizens, please go ahead.

Speaker #7: Hi. Thanks so much for taking my question. This is Rajiv. On Agentic OS, it's launched a couple of months ago now. And you've already seen thousands of deals.

Speaker #7: I guess what surprised you the most positively or negatively about how customers are actually using Agentic OS? And how is that real-world feedback shaping where you take the product from here?

Speaker #7: And then just also on Agentic OS, mentioned last quarter that you're still figuring out pricing. Are there any updates to that as to pricing structure or anything that you can share for those deals that are active today?

Speaker #7: Thank you.

Speaker #3: Sure. Yeah. Thank you, Briana. So in terms of what's surprising maybe I'll call it a couple of things. I think there's an ecosystem-wide expectation that the use of AI can lead to efficiency.

Speaker #3: Less kind of manual time less creator time to set up campaigns. Less time reviewing reports things like that. And clearly, we're seeing that. And I spoke to some of the metrics earlier about that.

Speaker #3: But I think what's been a really positive surprise is what we're seeing in terms of the effectiveness of advertising. Which is that we've been able to show that with AI, we're able to optimize things much faster than what humans can do.

Speaker #3: Of course, humans have some built-in let's say biases or preconceived notions. That a machine does not have. And so I've been really pleasantly surprised that we're seeing this dual benefit of both efficiency as well as effectiveness of advertising increasing.

Speaker #3: And I think that's a really powerful opportunity for us. And so we are investing behind that significantly in terms of Steve mentioned earlier using AI internally at PubMedic to create efficiencies so teams are able to take on more work.

Speaker #3: And so we're taking some of that upside opportunity and reinvesting that back into sales back into our GTM and back into product innovation. And that I think is going to be also a key driver of our double-digit growth in the second half of the year.

Speaker #3: Maybe the last quick surprise, Briana, is we're seeing independent agencies really move quickly around AI. The hold codes are focused on it. But they have much bigger teams much bigger systems platforms customer relationships.

Speaker #3: And so they tend to move a little bit more slowly. Although there's definitely I think every hold code is focused on this opportunity. But really the speed with which we're seeing independent agencies is pretty fantastic.

Speaker #3: Let me turn over to Steve to see if he's got any comments on the pricing.

Speaker #2: Sure. Just two brief comments. One, we anticipate the benefit of sort of our activate product which is our buying interface on our platform which is revenue share-based to be sort of that interface with the Agentic buying software.

Speaker #2: So very much consistent with our overall revenue share approach. We are also looking at subscription models in certain cases for our AI-powered tools. And then finally, with respect to sort of the overall benefit to our business just as a reminder when a Agentic buyer comes in utilizes activate the whole I'll use the dollar as an example the whole dollar that gets bought stays within our ecosystem.

Speaker #2: Meaning it accrues to our publishers. As opposed to if that dollar had gone to a DSP we would get our relevant share of that DSP whatever our share of that wallet is.

Speaker #2: So we get both incremental benefit from the revenue share via activate plus all of the revenue share that we normally charge for our supply-side platform.

Speaker #2: So obviously significant incremental upside for us.

Speaker #7: Thank you both.

Speaker #1: Great.

Speaker #2: Thank you.

Speaker #1: Thanks, Steve. We are out of time. So I'm going to turn the call back over to Rajiv for a few closing remarks.

Speaker #3: Thank you, Stacy. We delivered a strong Q1 with momentum continuing into the second quarter. Further, we expect to return to double-digit revenue growth in the second half of this year.

Speaker #3: Along with corresponding margin expansion. Agentic advertising is transforming the industry. It's creating automation and workflow efficiencies that no longer require a software interface. And will materially change the value chain of our industry.

Speaker #3: We are scaling Agentic faster than our peers. And each additional transaction compounds our data advantage. And drives superior performance. I'm looking forward to seeing many of you at upcoming conferences including the Needham Technology Media and Consumer Conference in New York.

Speaker #3: The Jefferies Software Internet and AI Conference in Newport Coast. Evercore's TMT. Global Conference in San Francisco. And Rosenblatt's Age of AI Technology Virtual Summit.