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Hi, everyone. Good to see everyone. If everyone could mute themselves if they're on the Zoom. Thanks for joining. Just wanted to welcome everyone. I'm Jill Hall, head of small and mid-cap strategy within B of A Global Research. So we're very fortunate to have a great two days of executive insights, fireside chats with almost 20 small and mid-cap corporates. It's a great annual event we have every year. And, you know, our analysts have really great breadth of coverage in the small and med-cap space. They cover about 1,000 small and mad-cap U.S. companies. So excited to continue to hear from them. Feel free to reach out to me or to Corporate Access if you need the schedule. If you still want to join any of the sessions that you're not already signed up for, I've had some people reach out to me today, so not too late. Or if we can help you getting in touch with any of The Analysts for any follow-up, or if you'd like to sign up for any of their research on the companies today, as well as our small and mid-cap research, or we also put out a daily compilation on some of the small and Mid-Cap research from our analysts. So with that, thank you for joining. Hope you're able to join some other sessions as well. and I will pass it over to Arthur to do some introductions. Thank you, Jill. So good afternoon, everyone. My name is Arthur Chu, and I'm on the U.S. Internet team here at BFA. I work with Omar Disouki, who leads the video game and advertising technology coverage. The tech stocks that we cover are Magnite, Applovin, and Unity. So we're going to have some time for a live Q&A later, but if you have any questions in the meantime, you'd like to ask, feel free to email me at arthur.chu, that's arthur dot c-h-u at d-f-a dot com, or you can just use the raise hand function on the Zoom call anytime that you have a question. So it's a great pleasure today to have Nick Karbolek, head of investigations at Magnite, with us. Magnite is a leader in programmatic advertising on the supply side, particularly on CTV. And we're buy rated on the stock. We think it is well positioned to be one of the biggest beneficiaries from the CTV industry's transition to programmatic advertising. So welcome, Nick. Thank you, Arthur. And thank you, Jill, for having me today. Yeah, so Nick, we have some generalist investors in the audience today, maybe just for people less familiar with Magnite or supply-side platforms in general. Can you introduce Magnite to the audience? Sure. So Magnite is what's traditionally labeled as a supply platform, right? So effectively, where we initially kind of enter into the industry is really working for publishers and working for, you know, publishers that have inventory across the open internet, connected TV, think of any digital ads that are serviced, you knows, those are ads that we are in market trying to bring demand to. So we operate a marketplace. We bring in demand to match up to be able to get inventory sold for publishers. But our strategic value is really making sure that we can bring it to as many buyers as possible, make a very active bidding on that inventory. A lot of that's tied to bringing in and importing data in to allow data to find users that buyers and brands are specifically looking for so in doing so that's the value that we inject into you know into the market and the value we drive for publishers so whether it's in connected tv you know streaming broadcast tv oems or whether it is you know mobile app or mobile web or even you know web browser or you know digital out of home we service all markets as an omni-channel player i think the area that's most exciting that has a much different market setup than historically the web has is connected tv where the amount of inventory is really concentrated in the hands of 30 large global partners that represent about 80 percent of the world's inventory and it seems like you know every week that goes by there's less of those people because they're consolidating like a roku you know fox for example uh but uh but we we have relationships with all of them with the exception of youtube so we've become the de facto place that anybody that wants to buy connected TV comes to access the CTV market, which is a far cry of where we were a couple of years ago. Got it. So you guys definitely have a very diversified sort of business. I think if you look at the ad tech industry, probably like three to five years ago, I would say the industry has obviously changed a lot since then. So has Magnite. And I think you guys have transformed yourself from a traditional sort of open web SSD to And now I think you're more of a programmatic CTV ad leader. Maybe just tell us a little bit more about that evolution. Yeah, I think the beginnings of CTV, and we made a few acquisitions to get into CTV. But I think it's the nature of relationship of many partners that view themselves as walled gardens have brought us in as a trusted technology partner. So I think that's much different than simply looking at a supply side platform and saying, hey, we'll invite you guys in, throw a bid in. if you guys win, you'll get paid for it. If you guys don't win, then go away and try again next time, right? So I think the strategic nature of the relationship that's evolved comes from initially working with a Disney or a Roku or others in our early days, call it three, five years ago, and showing that we've been brought inside. They want to operate and sell their inventory, but they don't want to simply allow everybody to bid on their inventory. They want their data protected. They don't want anybody to see their user IDs leak out to buyers. But they want to monetize better than they can on their own, either through a direct sales force and insertion orders or doing something self-service on their website. They want to capture programmatic demand from all sources. And their aspirations to grow revenue more has had them lean on us to be the one party that's invited in to be their tech partner, which is why we define the market as almost a winner take most. You may have a couple of partners that you use, but for the vast majority, whether it's ad serving, whether its mediation, whether it's demand generation, whether it's yield management, whether it's identity strategies or audience creation, you don't choose two partners for that. So that's where we've won. And I think what's happening is our evolution over time that people believe or investors may have believed that there was risk to when this industry grew up, right? connected TV grew up, there was always the risk or the fear that people would either A, do this themselves, or B, go to a much, much larger player. Now, there is not a larger player in the space. Our market share has expanded dramatically. Our position in programmatic is large. And we've expanded our Disney relationship. We've expanded a Fox relationship. We've dramatically expanded Roku. We have won Netflix during that particular time. So, we've shown that we are that partner that can execute and bring people to the programmatic market. And the very interesting component to that kind of rewinding to the past was it's also had a halo effect on the DV plus market. And the reason that I say that is you now have people on the TV plus market that looked at how we've partnered on the connected TV side that look at TV plus and have never relied on programmatic demand. And they have said, hey, can we have that type of relationship with you in the past in open web and in DV, what we call DV plus, which is everything excluding CTV, we would be one of a bidder and then it wouldn't be exclusive and you'd have five or six other guys also trying to sell and rep that inventory. What's happened by that halo effect that I'm describing is people have said, we want the same kind of relationship with you that Netflix has. We want you to protect our data. You be the one that connects us to demand. We don't want to have five SSPs. We want to hire you exclusively because we trust you and we think you are best positioned to monetize and bring in all the demand. And we don't need two people to do the same thing. That inserts risks, that inserts confusion. So we want you to be the partner. So our list of commerce media partners has exploded from a United Airlines to a Pinterest, to a Best Buy, to a Redfin, to an Remax, to an Expedia, to PayPal. All of those things have exploded recently to now 21 partners that are now relying on us exclusively to be their programmatic partner bringing in new demand once they've decided that that is a path or a source of revenue that they'd like to be able to tap into. Got it. So it sounds like in the CTV world, the supply side is much more consolidated because a lot of inventory are either with these premium streaming partners or companies like Netflix. So you mentioned some of the key partnerships like Disney, I think you mentioned Roku, you know, Netflix. I think the latest, you know, for the latest you guys also added Samsung ads as a key, you know, partner. Samsung is adopting Spring Server, which is your ad server for placing programmatic ads on the home screen. And I think, you know, you talked about retail media and I think Walmart recently also like picked you guys as the sales ad partner. So it really seems like, you know, Magnet has become like the go-to for these big brands when they're looking for CTV opportunities. Maybe tell us a little bit more about these recent announcements. Like, what are you hearing from partners that they're looking for that, you know, perhaps they can't get elsewhere? Like, would make Magnite offering unique? Sure. No, absolutely. So let me do it maybe reverse order since we were talking a little bit about commerce media. Let me talk, let me tackle Walmart, Walmart Vizio first. So they've been a longstanding partner with VizIO and we've helped, you know, we've been their ad server. We've been there primary SSP selling inventory for them. And that's been a phenomenal relationship and they've been one of our strong customers. What's changed recently is they in the past used a white label DSP that they used from Trade Desk, right? And they kind of parked all their data in that DSP so that you had to buy through that path essentially to be able to access Walmart shopper data on all their Vizio inventory. They kind of broke that data lock a while ago back in April and said, hey, now you can get that same Walmart data on VizIO inventory from a handful of different parties, basically meaning it's not just going to be centered in one DSP. Then it turns around towards, you know, towards CAN, which just happened in June. They announced that they're buying Vibe. So clearly they bought a DSP. They're focused on having and owning their own DSP versus using a white label DSP, and they tapped into us to say we are going to use Magnite to be able to take our user data and be able to take that not only on their own inventory and bring in new DSPs like Yahoo that was announced at the time, but also be able to use their data across being a DSP that could buy on other sources of inventory, open web inventory, non-owned and operated inventory from Vizio. So that's a very, very big expansion of kind of what they would like to do in the market, none of which is running through our numbers as of Q2. So again, that's future opportunity that we think has a lot of promise. And clearly, I think they've got aspirations to want to do something similar to what Amazon has done. And to stand up and buy a DSP, one that's very tightly integrated with what we're doing with them, is a very, very good guide to our long-term prospects of continuing to grow with Walmart Connect. Samsung is another one that you referenced. I think because Samsung was a prior customer, I Think to a large degree, the street really is like, oh, that's great. You got Got some home screen inventory from Samsung from an ad server perspective. Just to clarify, historically, we've done no ad serving with Samsung. They use Publica, which is private equity owned part of IAS. It's kind of the only account that Publica has served recently. But they went to market to bring in somebody to do ad serving for their home screen. Their home screen historically was sold through a direct sales force through insertion orders. and it was ads that they actually ran without having to tap into an ad server to do so. So they went to market, ran an RFP. We won that business for their home screen. You say, hey, great, that's fantastic. Get a little bit of fees for doing that. Samsung has the largest amount of television, smart TVs installed globally at hundreds of millions of televisions. Some numbers say 100, some say 300. It's their number to post and publish. So you can publish the number that you find from whatever source that you have. But they are the largest install base of televisions globally, smart TVs globally. For other TV OEMs, what we have seen is the home screen can represent up to 30% of their ad revenue. So there is a very established channel of buyers who are buying home screen inventory and a track record of that inventory performing from Samsung being the publisher of that Inventory. The fact that we are now the ad server and we are able to sell that inventory as their primary SSP to do so opens up a tremendous amount of additional growth within Samsung as an account for us that, again, had no revenue contributing from ad serving and SSP in their home screen in Q2. So that's another future growth opportunity that's pretty sizable that I think is probably bigger than what the street has recognized or realized when the announcement hit because the folks recognize that we had a relationship with them already. Got it. That's super helpful. I think, Nick, you mentioned something that's really interesting, which is, you know, like, you know, platforms like Black Knight, they allow, they allow, like you know the data on users to be activated across a variety of different platforms for the buy side. I think you're talking about like audience creation, curation. Historically, I think audience curation is, you know is a value sort of a creative component that used to happen like primarily on the buy-side, right? It contributes, you know, significantly DSP take rates, I think, north of, you know, 10%, but increasingly we're seeing, you know, these audience activation taking place, you Know, on the supply side, maybe can you, can you talk a little bit about, you know some of the drivers about, you behind that shift, why is sort of audience creation moving from the demand side to the supply site and you know secondarily, how accretive do you think this could be for SSP take rate? Yeah, no, it's a, it' a great observation and you're a hundred percent correct. A lot of it has to do with what we talked about earlier as market structure. So in open internet, when you have millions of websites and you have millions of apps, it's really, really hard to scale. If you're a large marketer like a P&G, it is really, really hardto find scale within one publisher because the market is so broad and so diverse. So you really looked to DSPs to be able to find signal across thousands of different publishers and find the users that you wanted to beable to effectively run your campaign. So you kind of leaned in there. Publishers were more open to sharing their user IDs on the other side and embracing different identifiers so that they could get access to that demand. And if they had their preference, they would never share their IDs because they believe that that data leakage and loss leads to somebody else being able to buy their user without them having to come back to the same website over and over, whether it's an ESPN or it's a Disney website or New York Times or a Wall Street Journal, you name it. If you learn that ID, you can find Arthur in five other places, maybe cheaper than the Wall Street Journal, and they have the ability to now target you outside of just their website. So in CTV, because the market is so concentrated, that fear that they have in open internet, now they can mandate that that ID does not pass to a user. They have the control and they're controlling how data is used, and they will import identifiers into their walled gardens, but the match is happening inside, and then they report out that, yes, the users were found. So because of where the IDs sit and where the matches take place in CTV, DSPs do not have the same ability to charge for data sets and build data sets to identify users. They still have their IDs of who their buyers are looking for that they can pass, but they're not being sought out after for those data sets. The other element that exists there is you have buyers that have decided they want control of what inventory they are buying. In DSPs, when you would plug in what you're looking for, you might not always know on the other end of that black box where your inventory or what the preferred inventory sources were. Buyers have wanted more control. So agencies have played a role in becoming data providers and even bought data assets like a live ramp and market out there. you've seen them partner with other data vendors and providers so as agencies have tried to play a bigger role in data that's also moved it in that direction and i think they've started to curate and sought to connect with us to be able to then say hey we want to on the other end of that we want to make sure we have which data sources which publishers we are seeking we wantto make sure that those paths are visible seen and we can buy across what we would like and more importantly what they would not like, right? So in that seek for control, that's also moved DD plus to have more creation by the agencies playing an increased roles and brands playing an decreased role in doing so. So for us, there's two parts of our data business that I would reference. If we're using somebody's first party data, which we think is the most valuable data, meaning a publisher knows most about their users, they have credit card info, they Have addresses, they had emails, they know shopping behaviors, they no intent, they No viewing patterns, they Know a lot about them. So that first party data is extremely valuable. We do not charge that first party data. We don't charge a fee for that first-party data. There is a benefit. The better we are at clearing that signal and making it and matching it up with buyer demand, you get a higher CPM for the publisher. So our incentive is to drive higher CBMs to have better targetable inventory to be able to bounce up against. Our take rate then, for example, if you had a Pinterest ad at $4, on top of that, if we could refine and have a very clear signal of who that viewer is and who that Pinterest user is. And we could sell that impression for now $6 because a buyer really, Restoration Hardware really wants it. For that increase, and I'm just making it up, if our take rate was 10%, now we would capture 60 cents as our revenue per impression, as opposed to 40 cents if it was without their data signal coming through. So we get a nice lift from selling the inventory for a higher price And the publisher gains most of those economics by carrying, again, the higher CPM lift that they're getting for us doing so. What we're also doing is allowing data vendors, whether it's a United Airlines or whether it'S a Best Buy or a Remax or Expedia, we're also helping them monetize their data off O&O, off their owned and operated inventory. And in doing so, LG is a perfect example. So LG has ACR, automatic content recognition data, from all the information and all the video that's seen through that glass, they capture that data. We help them sell that data to non-LG inventory. What that does is you might find a category that you're looking for or a viewer that you'RE looking for, for something that you'd like to market in open internet, on another streaming channel, on other TV device. So we will sell their data. And in that case, we will actually get a rev share for them for reselling their data and driving and contributing new revenue to them that they ordinarily wouldn't realize. And because we're as broad as we are, as omni-channel as we are, we're the best position to be a reseller or a data broker for that data elsewhere and share those economics with them. Got it. Understood. And Nick, if we think about like the traditional know, sort of DSP pricing model, you know, off, you know, out of, let's say like take rate of 20%, maybe like 10% of that is like data bottling and all these like audience activation. Are we talking about like, you know a pricing lift or take rate lift is sort of the same, you know, similar magnitude or how should we think about that? Yeah, we haven't quantified it particularly like so it's really hard to understand and try to tease out what CPM lift is with that higher take rate, right? So So in that case, it wouldn't be any higher take rate for us. It's just CPM lift, right? So that CPM left comes through and zero difference to the take rate where we're selling that inventory off property, right. So in Matt, you know, you could have very favorable, rich economics, a 50, 50 split for reselling their data and other locations and other places. That's something that's becoming a very nice contribution to overall revenue. It's not massive. So by no means is it anywhere close to a half of our overall take rate and revenue, but it's definitely been a very nice addition. And it's something that, you know, has other partners seeking us to be a data broker and vendor on their behalf, because it is revenue that comes to them as a new source from nothing. Sure. Got it. I understand. Maybe just, you know, space gear a little bit to, you know, AI, which is, you know, obviously a very highly, you know, follow-up topic. I recall back at the BOV Tech Conference in doing. We talk about this new agentic, you know, agentic ad buying path that you guys, you know, were just rolling out. I think you guys brand it as Magnite orchestration. So maybe just, you start for investors who aren't as familiar with the agentic development in ad tech, what specific problem does it aim to solve? And, you know, why is Magnite uniquely positioned to solve this problem? Yeah, you know, you know, embedded in that, you know, kind of, you know, series of lots of questions. We probably have a two-hour webcast that we could go into. So let me try and stay at a level, make the key points that I need to, but not get too far into the weeds. So we play agentically and we made some announcements back in April with real partners that, you know, that when they signal that they're a partner of yours, like they get a lot of customers, you Know, hitting them consistently and investors asking, you Now, where are you in your journey? Because you're willing to put your name in a press release. So, we announced capabilities across mediation, agentic capabilities across seller agents and across buyer agents. And then we follow that up in, call it the June timeframe right around your conference with an orchestration layer on top of that. So broadly speaking, even if it's not, and again, we think we're positioned really well to have our buyer agents, seller agents, and mediation agents used. But even if we're not used in those cases, and it's a transaction where somebody's buyer agent's talking to a seller agent. We are the ones that are sought out after in order to be the infrastructure layer on which to monetize. You still need things like privacy protection. You can't just share an ID and publishers can violate privacy risk. And they're the ones that have to pay fines across the globe for doing so. Those agents don't know how the money is going to transact and who's going to pay what funds through what workflow and then who's going to end up with the money as a publisher at the end of the day. So there's a lot of infrastructure, even if you make the assumption that we are not involved in a buyer or seller agent. That being said, we think we have a lot of traction and we've announced a lot of partners from an agentic capability. The mediation part of it, the ad serving component from an agentic workflow makes a lot sense. That's just optimizing inventory and ad units to perform the best that they possibly can with demand, different criteria, different workflows, speed to setting those campaigns up, et cetera, et sera. That is something that makes a lot of sense for what we do daily because that's in our purview and that's our general workflow. The other side is the seller agent, the buyer agent. Because we are the end-to-end broker to get somebody desiring to buy to somebody desuring to sell, we sit across that. So if you're a buyer only, all you see is your component of the workflow. If you're an seller only, you only see your component. The fact that we sit cross the entire transaction from intent to offering inventory and the match between them, we are able to solve the workflows across start to finish. Now, that being said, we do not have religion of whether it is our buyer agent, our seller agent. We do have them out in market and you can use yours, you can white label ours, we can give you some of the features that we offer. What our benefit is, is removing friction and then taking share in the agentic world. So we will optimize anybody's buyer agent that connects to ours or another seller agent, our orchestration product, make sure that they all work seamlessly and very, very well together. And you're thinking about this and you're like, well, agentic is really a workflow solution. And your right. And our workflows generally are people setting up and removing friction from APIs. So really what agentic replacing is APIs that require a lot of manual configuration monitoring and compliance and change. We are ideally set it to be the agentic replacing APIs and workflows of all end-to-end solutions. So what I would tell you is that if we're successful in doing that, as agentic share increases over time, whether it takes it from programmatic, which doesn't bring us any net new spend and gives us the same take rate, there may be a cost advantage. But if we are able to take disproportionate share in agentic versus where we sit in programmatic that's a good guy from a market share perspective to us. If we fail, then there's some risk in market share and that others could start to peel that away. So I think we're advantaged from the amount of inventory we represent. There's a lot of unique, exclusive inventory that we only have access to, especially in CTV. So there I would bet, I would say that the probability based on the supply that you have and where you can optimize is probably in a much, much better market position. There's some risk in the non-CTV side because others have access to a lot of similar inventory that we do. So I would say that market share gains are probably the opportunity from the easiest perspective, broadly speaking. The one opportunity that we're really targeting that we talked about at the conference is in agency spend today, there is a significant amount of money that is still tied into manual buys that are coming in through insertion orders. That's tens of billions of dollars that still live and sit within agencies. So let's take a step back and peel back what that means. So today there are brands that walk into their agency partner and have a campaign goal that they'd like to achieve. They hand that over. It's normally a two or three page brief that they hand over to the agency. The agency spends two weeks running around and finding and creating a media plan based on all their extensive history and all the brands that they've worked with and all the campaigns that they run and new inventory that's out there and all the upfront presentations they've listened to. They come up with a media plan. That's the secret sauce. This is, hey, this is where we think you should run your ads to give you the highest ROI of your ad spend. They do that. They comes back. The brand then says, yes, looks good. We approve. Let's run a test. They run a text where they then knock on our door and say, hey we'd like to do a test campaign. It's only a few thousand dollars or ten or twenty or a hundred thousand dollars and let's run it. Then we want to do a very, very deep dive on how this is performing. How is the creative performing? Are we hitting the right audience? Are there refinements that we can make? Are their certain inventory that's not performing? Or there are others that are performing at a really high level. Let's run a test and then analyze those results, refine that campaign, and then rerun a test based on joint adjustments to that campaign that we've now agreed to. They do that three times, each of which is another two week process. So now you're looking at eight weeks from the time that you walked in the door with your campaign goal to the time that you're actually comfortable that you are deploying and running your full ad spend that you'd like to, and it's not this quarter anymore, it's next quarter. What we do is that entire process in 10 minutes. But because we're connected to inventory, any LLM and an agency can do this on their own. You can convert a proposal or program goals into a media plan quickly. But without being tied to inventory, to real live inventory, you can't test, run, rerun, and then modify your creative because we give you your creative tool as well to version it anywhere it needs to go or create different versions of your creative, A, B, test those in real time. So the fact that we're doing all of those things and you can run three tests in 10 minutes and redo all of your Creative and have it ready to go, that's what we're solving for. And that is new spend that already exists within the insertion order market at an agency and allows them to be better, faster, cheaper, and bring it in to the ecosystem quicker. And it's all net new revenue or net new ad spend to us that runs through agentic workflows. That's really the initial area that we think has dramatic inefficiency and what agencies have told us they want help and assistance in unlocking. Got it. Understood. And I think your clear line product also sort of aims to target at the agency spend that's currently tied in utilization orders, right? Like is this agentic buying path sort of considered as an upgrade to the existing clear line products suite? Is that how we should understand it? Yeah. So clear line for us now is an entire product line. There's clear line curation, there's clearline audience activation. You can effectively run an entire deal where you know, if the deal is negotiated in an agency marketplace, they negotiate the price, the volume, and you know what inventory will be purchased. We execute all that programmatically, make sure we find your targets, make Sure, you know you find the users that you're looking for. What clear line allows you to do is at the end of the day be a payment method for that agency, right? So the brand then says, Okay, I've done my transaction, and either clear line or the DSP basically becomes a payment Method at the End of the Day. That's really kind of what that final role is. So yes, You can do that without having to pay, you know, a DSP take rate or do it at the DSP that you'd like to, to either A, get credit for that ad spend as part of a commitment or be able to run it most efficiently for purposes of, you Know, reducing your ad tax. Got it, got it. Can you talk a little bit about the economics of these like eugenic buying solutions? Like, you're obviously, you are monetizing your supply better. You're getting shared there. does the eugenic sort of path or, you know, the eogenic tool also carry some sort of economics by itself? Yeah, I would say, you know, today, if you're, you know, even if you re running it programmatically, which, you know, th-th-the thinking is it's all machines running it, there's still a degree of friction that, you know, is involved and, you know, matching up or sharing deal IDs and making sure those pass through appropriately. There's more on the cost of revenue side in order to support those, you know, from a, you know, a, from, you know, from an economics perspective, you know, we don't charge more or less of a take rate to the publisher. Our deals with publishers are, we get a take grade from them. They're interested in, you know what CPMs we're able to drive for them and how much overall spend we're able to deliver. So if we're continuing to grow their spend and grow their CPMS and, and be an effective partner on the base criteria we're measured, they generally don't come to us and say, we'd like you to do it for a lower fee. They they're really happy that, you know, revenue continues to outpace and grow relative to other players. And that market share position is something that, you know, is highly attractive to them. So it's really more on the cost of revenue side than there is a incremental pricing to using those tools versus using our people. Got it. How, so how should we think about like, you know, eugenic buying versus like DSPs as sort of two different routes of, you know, at purchases, like, do they compete with each other? And I guess, you know, just based off of your client engagement so far, like, have you seen advertisers sort of moving, you know, consider moving some of the budgets over from DSPs to Janik? Yeah, well, let me, maybe let me even take a step even further back, right? So, you Know, I think what traditional DSPs have done, especially in CTV is they've done a very, very nice job of converting very large enterprise type clients, whether it's large brands and large agencies, trying to move and migrate budgets from, you know, from linear into connected TV. They also have done a very nice job in for those same clients to be able to access and find their users in the open web in order to beable to broadly target and satisfy their campaign goals, largely through brand advertising. Much of that hasn't necessarily been, you Know, mid funnel or lower funnel. So they've done a masterful job of, you Now, being able to serve as that customer cohort, which is very concentrated from a buyer perspective. And it's logically who you'd go after. Why wouldn't you spend your time going after the whales out in the industry and secure that business? I think that has played itself out in open internet. So you've kind of had a maturing of that space and that industry in open Internet. I think in CTV, you've also started to see that cohort mature. They migrated over, they're actively spending, and now you're kind of subject to what happens within specific verticals, whether CPG is up or down or autos are up or Down or financial services or healthcare or drug manufacturing, like, you know, you're really subject to how those verticals are performing to kind of what your future is. What's happening in connected TV specifically is you're having new demand come into the market. And that new demand doesn't necessarily come through a traditional DSP path, right? So small and medium businesses don't even know what a DSP is, right. So they want to be able to transact. They want to be able find an audience. They want to generate their creative. At the end of the day, they just want to find the fastest way to spend their ad dollars for the highest return to generate demonstrable and visible increase in sales and earnings and performance. So they don't go to market and as a small and medium business and say, I need to hire a DSP. I need a higher an agency. I need to do my creative. I needed somebody to version it. I needed somebody analyze this data, tell me if it's working or not. They can't hire five different vendors to do that work like a large brand or a large agency can. So what's happening is agencies are trying to cater to some of this on their own, small, medium, and mid-sized agencies by offering all those tools and being a one-stop shop. You're having DSPs like a Mountain or a TV Scientific or a Moloco try to do the market. Amazon's trying to do it because they've got a large installed base of customers. You've got many of our publishers that say, we don't even need that path. We want to offer this self-service. So you have Roku's curated marketplace, you have Warner Brothers' Neo marketplace, you have Disney Drax. I would assume that every large streamer out there, broadcaster, will eventually have a self- service buying option. And by the way, those are marketplaces that we white label and build for them to allow for that self-service to take place and then mix that demand with all other demand sources. So from a demand perspective, we are agnostic to where that demand comes from. And in fact, we were tapped as a partner to help build out all those different demand paths and have no blind spots of how demand enters into CTV. What they're all doing, however, is they have to access that supply from Magnite. So our relationships and being effectively the mediation layer through which the world accesses CTV supply has become increasingly important and doesn't just relegate us to a few DSPs, either ups or downs or a new entrant isn't a risk or a benefit to us. It all flows. So what we've seen in our inflection and overall CTV growth rates is really demand has broadened. SMBs have entered. You have guys like Genius Sports entering into the market as specialists in buying live sports inventory. So the market really is broadening, but they're all coming to us to access the inventory, which is the good guy from the market position that we hold in CTV. Got it. So I have some questions coming through from the audience. The first one is, what are the overall targets or KPIs for how you manage the business? How should we think about the building blocks of the earnings algorithm in future years? Yeah, I would say that at the very highest level, we are very, very motivated to grow ad spend. So from an ad spend perspective, that is our lifeblood. That is our fuel. I don't think you'll ever see in a position where we're willing to sacrifice ad spend and market share loss for take rate expansion. So I think even now when we're probably in a situation from how strong our tech is and the breadth of our partner relationships, we probably have room to raise prices on our rate card for services that we offer in CTV. But we have not and we don't plan to. So I think we're very, very comfortable. Our take rate is something that's not really an important KPI for us, to be honest, because we're not trying to influence or push buyers to buy unnaturally where they don't like to because generally that doesn't end well. So I think that where we'd like to play as being the best tech at the best price. And even when you start to consider, do I want to do this internally? Do I wantto build this myself? We always want that answer to be, no, for this cost, there's no way we'd even consider this doing internally or doing this ourselves or hiring somebody else to be able to do this. And we're measured by how much revenue we drive. And it's not really a, hey, I'm really evaluating, this is a service that I could easily solve for, and I could do it for a cheaper cost. So I think for us, really, it's ad spend, it'S overall revenue growth, you know, those two things being, you Know, heavily linked together, but again, not doing it with take rate expansion, or, you Now, trying to push price increases through, we will bring new services to market that drive new value and things like homes, like doing, you know, home screens for a Samsung and a Vizio and an LG, that's an ad unit that they did internally on their own. That's new incremental revenue. We'd rather define our revenue growth and our success by doing more things for them that we can do more efficiently, drive more revenue and do it for a cheaper cost. Yes, we'll share in those economics, but that's also not a take rate increase. That just broadening the purview to service more inventory for them. So I think margins, we've talked for years about our margin performance. So we've said, what does the operating model look like? We've said above 10%, we start to get very, very high flow through from revenue conversion to EBITDA. This quarter is a great example of what we've set all along is we think that above 10% growth, you start to get about 70, 80, even higher percent flow through for revenue to EBITA. Our beaten Q2 was 10 million on the top line. And that equated to an $8 million EBITDA beat. That's exactly that 80% flow through that we've talked about. So we'd rather continue growing revenue. And as a result, we've taken our EBITda margin guidance up now three times. We started the year where the street was under 35%. Now we've guided to at least 37%. That's a pretty attractive way to see that flow through happening commensurate with our revenue that's inflected higher. We do look at internally very, very carefully. We don't share a whole lot of this externally, but we look at cost to serve and impression. We are constantly inserting rigor to how do you best serve, most efficiently serve each impression that you have in the business, whether it's DV+, whether it CTD, whether it's live sports. So that's a critical function. You've seen us move to a hybrid model in connected TV from being cloud-based before. Even though being cloud based is a bit more agile, the cost benefit of being on-prem for a predictable load and a predictable volume is it's a 70% to 80% cost reduction for your predictable load. So we'd love to hit the cloud for inventory spikes and peaks that we hit, but for our base minimum load annually, we'd like to service that all on-rem because the cost advantage there is massive. Same thing on DV Plus. We do almost that entire market because you don't have those spikes as you do. You have a more predictable pattern of you know, ad impressions that you're supporting and then auctions that you are running. So there it's all on-prem because you don't have those massive sport events where your volumes can go from 2 million to 50 million when people get an alert about a particular game. So we also look for cost per impression to continuously drive that down and generally that's been, you know dropping in the very, very strong double digits, you know, meaning, you know, 30, 40, 50% on a, you know, on an annual basis as we continue to drive costs out of the ecosystem and get more efficient. Got it, got it. And then the second question is, what are some of the main areas of pushback on the story that you hear from investors? This quarter, we didn't get many. So that's a nice place to be, at least this quarter. I think the one question mark that people have is, look, what is the long-term trajectory of our DV Plus business? There's a part of the business that's open web that may be declining annually in the, call it high single digits to maybe 10-ish percent. There's a part of the business that's mobile app. Mobile app actually grew 17% last quarter. Mobile in total grew. The streaming parts of our business in DV Plus, TV streaming over desktop and mobile is healthy. Audio streaming over those devices is healthy, digital out of home is healthy commerce media is healthy so I think not the one pushback but the question is how do we what do we underwrite for growth in DV plus and I would say in the near term as you saw this quarter, you know, flattish is probably the best way to kind of underwrite and de-risk, you know what your outlook is for DV plus, we might get a good quarter where it's up, you know, five or, you know, 5% or so or more, you may get a quarter where it's down to a similar amount, like we've seen, but thinking of that generally is flattash. And then over time, the good parts of it will continue to get bigger. And the small parts, which are about 40% of DV plus will get smaller, you'll get a nice healthy trade off that skews you towards growth from a mixed perspective. And that's excluding if we get any Google remedies that come through or we sign any AI search-related partners that we're actively trying to market and sign. I think that's absent any of those type of growth vectors that start to contribute in that market that are, again, completely outside of numbers today. Got it. That's super helpful. And guys, again. Just a reminder. If you would like to ask questions, please feel free to raise your hand or just email me at arthur.chu at bofa.com. Okay, cool. Let's keep going. So, Nick, you mentioned some of the pushback from investors, I think, you know, one or two years ago, there were a lot of discussions or maybe I should say like fear around, you know, these premium publishers like Disney or Netflix, they're potentially like building out their own sort of programmatic tech stack. I think we've all seen that sort of not being the case. And I think some of these extreme services, they're increasingly reliant on tech partners like Magnite. I guess, first, are you still hearing some of the same sort of concerns from investors? And number two, what are some of takeaways from that episode? Yeah, let me just say, I love that we live in that fear every day. And that's what makes us better. That's what makes us hungrier. That's what helps us innovate. That helps us develop new products and features and to continue to push programmatic. The more and more people rely on us and the more spend we're pushing through programmatically, the lower the chances are that somebody's willing to completely rip and replace and take a chance of doing that on their own. Not because they couldn't. Could somebody try to do it on their on, even if the cost is like we would challenge anybody that our tech spread over all of our clients. If you were one client trying to stand up a similar amount of tech to do that, not leveraged over 30 large partners in the industry, it would cost you dramatically more. So from a cost equation standpoint, I don't think it makes a whole lot of sense. Our modest take rates, I think is also something that plays to our favor that we can still generate very healthy margins on. And the speed of feature development and touching more inventory, I Think is also the thing that just starts to dizzy people to think, how could I, maybe I could do these one or two things, but Magni just came up with 10 other things on their roadmap that they can deliver in the next three months that's going to unlock more revenue. I can't possibly keep pace with that if all I see in my purview is what I'm doing myself. So the reason I said I love that is, again, it drives us to continue to innovate. Our history has been, you know, fears existed, but we've never lost a partner. We have not, we've expanded every single partner relationship that we've had either geographically or vertically or more services that we provide. And we've probably won every account that we have pursued in the last two years. I asked our chief revenue officer, could he recall a single pursuit that we haven't won? And his answer was no. And maybe there was on the tail end something that we didn't necessarily win. But I think that speaks to our continued innovation and our continued fear of just what you mentioned happening and living to make sure that we ensure that doesn't happen by being on the cutting edge of bringing more to market, developing more and leaning in with more and driving more revenue for partners. Yeah. Let me pause here, see if we had any questions from the audience. All right. Let, let, let me start with one more. So Nick, you mentioned the sort of the in-app part of the business within DV+. You know, we've seen some of these like LLM companies like OpenAI or Anthropic venturing into the advertising business. I think, you know, over the past two years, we've all seen how, you knows, search refer traffic has declined. You know? I think with the rise of agents, there's a possibility that we could be actually looking at a future where even apps could be reduced to like APIs or MCPs. So I guess, you're just curious how you guys think this could evolve over the next few years in terms of impact on the digital ad ecosystem. And also, as you guys have these conversations with the model companies, what do you think their strategy is? Do you think they want to become a closed ad ecosystem like the Walt Gardens, or could they be more open source, open platform, where these traditional ad tech intermediaries can also play a role? Yeah, no, I think it's undecided. So I think everybody's going to have their own path. I wouldn't say that there's an opportunity within Google who has the entire stack and has ad server and SSP capabilities and demand capabilities. But I think all others, it's kind of open territory for how they choose to build up their own ads business, either it's on a short-term, medium-term or a long-term basis. So I think the fact that you've heard that some of them have talked to DSPs out there is a good sign that they're exploring that source of demand. And I think that plays to the advantage and say, hey, how do you reach the world demand quicker? How do you start covering some of these infrastructure costs, not through financing in the debt and equity markets, but do so with actual revenue? I thinkthat's a helpful accelerant and a question that's posed that allows an opportunity at least to exist for us to pitch. So I think the market is one that we never played in historically in web search, right? So we play an open web, but we've never had any business in search, right? So if we get tapped, that would be a new incremental market that, again, we've ever serviced and played in historical. I think that our view, at least, is that the app market is pretty well insulated and secure, and everybody providing access to their apps through an LLM is probably a lower risk than obviously what existed in the open web. And we're clearly seeing open web traffic reduced in the marketplace. And that's what kind of drives that area that we talked about earlier, about 40% of our web business that is seeing some degree of pressure out in open market. But even if you're trying to create an advertising plan, the recommendations of LLMs are that you should not spend all your money in one medium and you should look at different mediums. And the ROI is if you are augmenting a CTV, a search, and a social program with some open web advertising, probably even bring some dollars back into open web advertising because they carry low CPMs and they actually have a decent return and they may actually be performant in lower funnel. So you've got different ebbs and flows that I think exist from the market, but we don't see it as all risk. We see there being a definite possibility for opportunity. And to the extent that they end up as front-end engines to be able to start creating campaigns like we're using LLMs as the front end of our buyer agents, I think to the degree that we sit and connect that to inventory that exists, either existing or new, I Think there's a role for us to play. got it um i think we are at time so uh let's maybe just wrap it up here all right nick thank you so much for your time and i really appreciate your insight today yep really appreciate the time and uh look forward to talking to any and all of you in the near future thank you absolutely thanks everybody