Magnite Aktie

Good day, and welcome to the Magnite First Quarter 2026 Earnings Conference Call. [Operator Instructions] please note this event is being recorded. I would now like to turn the conference over to Nick Kormeluk, Investor Relations. Please go ahead.

Thank you, operator, and good afternoon, everyone. Welcome to Magnite's First Quarter 2026 Earnings Conference Call. As a reminder, this conference call is being recorded. Joining me on the call today are Michael Barrett, CEO; David Day, our CFO. I would like to point out that we have posted financial highlight slides on our Investor Relations website to accompany today's presentation.

Before we get started, I'll remind you that our prepared remarks and answers to questions will include information that might be considered to be forward-looking statements, including, but not limited to, statements concerning our anticipated financial performance and strategic objectives, including the potential impacts of macroeconomic factors on our business. These statements are not guarantees of future performance. They reflect our current views with respect to future events and are based on assumptions and estimates and subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from expectations or results projected or implied by forward-looking statements.

Discussion of these and other risks, uncertainties and assumptions is set forth in the company's periodic reports filed with the SEC, including our quarterly reports on Form 10-Q and our 2025 annual report on Form 10-K. We undertake no obligation to update forward-looking statements or relevant risks. Our commentary today will include non-GAAP financial measures, including contribution ex-TAC or less traffic acquisition costs, adjusted EBITDA and non-GAAP income per share.

Reconciliations between GAAP and non-GAAP metrics for our reported results can be found in our earnings press release and in the financial highlights deck that is posted on our Investor Relations website. At times, in response to your questions, we may offer additional metrics to provide greater insight into the dynamics of the business. Please be advised that this additional detail may be onetime in nature, and we may or may not provide an update on the future of these metrics. I encourage you to visit our Investor Relations website to access our press release, financial highlights deck, periodic SEC reports and the webcast replay of today's call to learn more about Magnite.

I will now turn the call over to Michael. Please go ahead, Michael.

Thank you, Nick, and thanks, everyone, for joining us today. We delivered a strong first quarter, exceeding expectations across both revenue and profitability. Top line came in ahead of consensus with DV+ outperforming our guide and CTV in line. Adjusted EBITDA exceeded consensus by $5 million, driven by earlier-than-expected cost efficiencies, and we are encouraged by the margin expansion we are seeing. Importantly, the broader market trend remains unchanged. A dollars continue to shift towards streaming. In Q1, CTV contribution ex-TAC grew 30% and represented 51% of total, maintaining the momentum we saw in the back half of 2025. That strength was broad-based. We saw continued growth across leading publishers, including LG adds, Netflix, Paramount, Roku, VIZIO, Walmart and Warner Bros. Discovery. Our top 10 accounts grew in the mid-30% range year-over-year with the rest of the base growing in the mid-20s.

This is not isolated performance. It reflects a platform that is gaining share as the market scales. The acceleration we're seeing in CTV is not surprising. We are materially outpacing the market, and we believe that is sustainable. This is driven by both new wins and expanding partnerships, but more fundamentally by SpringServe. SpringServe has evolved from a best-in-class ad server into the operating system for CTV monetization. We sit at the center of the transaction, unifying demand, optimizing yield, managing ad experience and orchestrating data across the workflow. There are point solutions in the market, but no other scaled platform in CTV combines ad serving, mediation and monetization infrastructure in a single unified layer.

For publishers, this drives higher yield and better control. For buyers, it provides a direct path to the broadest set of premium inventory. And this capability scales across every cohort we serve. We support OEM monetization across home screens and emerging formats, partner with streamers to build and support their offering and help broadcasters optimize their sales efforts, particularly as live and SMB demand grows. And in live TV, where performance requirements are highest, our differentiation is even more pronounced. Live sports remains one of the largest and least penetrated opportunities in programmatic. We are seeing strong traction here, including more than 80% growth year-over-year in revenue from March Madness.

On the demand side, buyer marketplaces are scaling, ClearLine adoption is increasing and buyers are prioritizing more direct and efficient access to premium CTV supply. We are also seeing commerce media emerge as an important driver across both DV+ and CTV. These partners are bringing valuable first-party data and incremental demand into the ecosystem, increasingly activating across streaming environments. Our recent announcements with Expedia Group, Walmart Connect and Roku Qurate show further traction on the commerce media front. Across all of these areas, our role is consistent. We are the infrastructure layer that connects the ecosystem. As our capabilities expand, so does our position. We are increasingly the single entry point for buyers to access premium CTV inventory at scale, becoming the easy button for CTV. And as the market consolidates around scaled platforms, we believe our lead is durable and widening.

Turning to DV+. DV+ declined 5% in Q1, which was better than expected. While budget shifts towards CTV continue, we remain confident in the long-term role of DV. Trends improved exiting Q1 and into Q2 with signs of stabilization driven by mobile and app, online video, audio and commerce media. Mobile and app grew 8% year-over-year and remains a durable growth segment, supported by deeper integrations and new publisher and DSP onboarding. Commerce Media continues to build momentum with 21 partners and 13 now deployed and ramping, expanding both our demand footprint and data capabilities across DV+ and CTV. On the Google Ad tech remedies, our view remains unchanged, and we continue to believe the potential upside is meaningful.

Stepping back, what ties this together is how our platform is evolving, particularly with AI. We are embedding AI across the platform to improve how media is bought and sold. At the core, AI enhances how inventory is valued, how campaigns are executed and how decisions are made in real time. For publishers, AI is improving monetization through dynamic pricing and demand optimization. And with ClearLine, AI is simplifying activation, curation and optimization for buyers, reducing friction and enabling faster execution.

Across the platform, we are beginning to see the emergence of agigentic workflows, enabling greater automation and efficiency for both buyers and sellers. What matters is not a single feature. It's how these capabilities work together across our scaled infrastructure. We are already seeing adoption from the leading players across the ecosystem using our AI to automate workflows, act on real-time signals and improve performance. This is still early, but the direction is clear. AI is increasing efficiency, expanding working media and driving more volume through platforms like ours. This is a tailwind for Magnite.

Before I conclude, I want to address David's retirement. As previously announced, David has decided to retire after more than 13 years of exceptional service. He has been an invaluable partner and a steady leader whose financial stewardship helped shape Magnite into the company we are today. We are grateful for his leadership and for his commitment to ensuring a smooth transition as he remains in his role through September 30, while we evaluate internal and external candidates. On behalf of the Board and the entire Magnite family, I want to thank David and wish him and his family all the best.

With that, I'll turn the call over to David for more details on the financials.

Thanks for those kind words, Michael. I appreciate it. We're off to a good start to 2026. Q1 total contribution ex-TAC grew 10% and came in at the top end of our guidance range. As Michael mentioned, CTV increased an impressive 30% year-over-year, and DV+ declined 5%, but exceeded our previous expectations. We're pleased with the results and are encouraged by the many positive catalysts that are driving momentum in our business.

Total revenue for Q1 was $164 million, up 6% from Q1 2025. Contribution ex-TAC was $161 million, up 10% at the high end of our guidance range. CTV contribution ex-TAC was $82 million, up 30% year-over-year. DV+ contribution ex-TAC was $79 million, a decrease of 5% from the first quarter last year. Our contribution ex-TAC mix for Q1 was 51% CTV, 34% mobile and 15% desktop. From an overall vertical perspective, health and fitness, retail and food and beverage were the strongest performing categories, while automotive and technology were our weakest performing categories.

Total operating expenses, which includes cost of revenue, were $157 million, flat from last year. Adjusted EBITDA operating expense for the first quarter was $118 million, $4 million better than our guide and an increase from $109 million in the same period last year. Operating expense was better than expected due to significant improvements in cloud spend and some early AI-related productivity gains.

Our net income was $4 million for the quarter compared to net loss of $10 million for the first quarter of 2025. Adjusted EBITDA grew 16% year-over-year to $43 million, reflecting a margin of 27% as compared to 25% in Q1 last year. As a reminder, the first quarter is always seasonally our lowest margin quarter. We calculate adjusted EBITDA margin as a percentage of contribution ex-TAC.

GAAP earnings per diluted share were $0.03 for the first quarter of 2026 compared to a net loss of $0.07 for the first quarter of 2025. Non-GAAP earnings per share for the first quarter of 2026 were $0.13 compared to $0.12 in Q1 last year. The reconciliations to non-GAAP income and non-GAAP earnings per share are included with our Q1 results press release. Our cash balance at the end of Q1 was $185 million, a decrease from $553 million at the end of the fourth quarter. The drivers of the change were the $205 million payoff of our convertible debt, planned capital expenditures, share repurchases and normal seasonality in working capital. Operating cash flow, which we define as adjusted EBITDA less CapEx, was $23 million.

Capital expenditures, including both purchases of property and equipment and capitalized internal use software development costs were $20 million, in line with the expectations we discussed last quarter. Net interest expense for the quarter was $5 million. Net leverage was 0.7x at quarter end, consistent with our target of less than 1x. During the first quarter, we repurchased or withheld over 2.2 million shares for approximately $29 million. As of quarter end, $186 million remained available under our current repurchase authorization, which is effective through February of 2028.

Now that we repaid our convert, we plan to be more aggressive with share repurchases given our expected free cash flow generation. As discussed last quarter, our capital allocation strategy aims to return approximately 50% of free cash flow to shareholders via share repurchases. We believe our shares currently trade at very attractive levels. I will now share our expectations for the second quarter of 2026 and our current thoughts for the full year in a mixed macro environment.

For the second quarter, we expect contribution ex-TAC to be in the range of $177 million to $181 million, which represents growth of 9% to 12%. Contribution ex-TAC attributable to CTV to be in the range of $90 million to $92 million, which represents growth of 26% to 29% DV+ contribution ex-TAC to be in the range of $87 million to $89 million, which represents a decline of 4% to 2%. We anticipate adjusted EBITDA operating expenses to be in the range of $115 million to $117 million, which implies adjusted EBITDA margin of 34% to 36% -- and for the full year 2026, we reaffirm total contribution ex-TAC growth to be at least 11%, reaffirm adjusted EBITDA percentage growth in the mid-teens, raise adjusted EBITDA margin to be at least 35.5% from greater than 35%, raise free cash flow growth to be in the mid-30% range from greater than 30% and reaffirm CapEx of approximately $60 million, a reduction from prior year. I want to point out that our estimates do not include any potential market share gains as a result of remedies from the Google Ad tech trial.

Lastly, a note regarding our tax position. We would not expect to have any significant increases in cash taxes. Finally, on a personal note, I'm incredibly pleased with our performance and the robust financial position the company maintains today. It is from this position of strength that I decided to retire, marking the end of what has been the most rewarding chapter of my professional life. My journey here from the early days of Rubicon Project through our 2014 IPO, transformative merger with Palaria and the acquisitions of SpotX and SpringServe has been an exhilarating ride. And I'm immensely proud of the durable company we've built, our winning culture and our world-class finance team.

While I am looking forward to spending more time with my family, I will continue to energetically serve as CFO through September 30 to ensure our momentum continues uninterrupted and to assist Michael and the Board in identifying my successor. I leave with full confidence that Magnite is extremely well positioned to lead the future of digital advertising. Thank you all for an unforgettable decade-plus partnership.

And with that, let's open the line for Q&A.

[Operator Instructions].The first question today comes from Dan Kurnos with Benchmark.

Let me be the first, David, to wish you the best. It's been a pleasure working with you. Michael, let me jump in and just kind of unpack DV+ a little bit for a second. Your comments suggest that we're still seeing mix shift to CTV, but your guide suggests -- I mean you talked about stabilization, your guide is almost flat in 2Q. I'm just trying to figure out how much of that is sort of these Commerce Media wins backing up here and how you think that might trend as we kind of proceed through the year, understanding there's uncertainty in the macro and the pressures that we're still seeing in sort of the traditional desktop business?

Yes, Dan, no issue. I didn't say it was a pleasure to work with me. So that's kind of hurting. But yes, no, good observation. We do think we've seen stabilization return to DV+ driven largely by -- it's a portfolio, right? And so the open web display certainly understage, but other pockets, mobile, app, Commerce Media, as you pointed out, audio are growth areas for us. So I do think macro weighs heavy on DV+ particularly, but seeing it return to flattish is something that I think would still outperform market, and that's kind of where I think we should be in either one of our businesses.

I promise you, Michael, when you eventually someday down the line, retire, I'll say very nice things about you. The other thing that I wanted to ask about just quickly since you brought up sports, live sports and some of the drivers there. Obviously, we have a very big event coming up the summer World Cup. I know you've been asked about it before. We're kind of a month out now. We're starting to get to see a little bit more what Fox's strategy is there, and we're finally going to get real games on Tubi. We -- they have DTC out there now. So just curious how we should be thinking about sort of the impact of that event. And it seems like every time we get one of these big events, even starting with Olympics this year, and you mentioned March Madness, more and more inventory shifts to programmatic. So I don't know if you think that, that's also an incremental catalyst for more inventory to keep moving in that direction.

Yes. No, it will certainly be a good guy for us. And I do think given the volume of games and some of the added ad breaks, for instance, the mandatory water breaks, that's going to be a big ad load there. So I think that, yes, we're expecting good things from it. I'm not so sure it will be something that we'll be citing as a comp issue in 2027, but it will certainly be part of the portfolio of the sports that's going to add to the revenue growth.

The next question comes from Shyam Patil with Susquehanna.

Congrats on the results and David, on your retirement as well. I had a couple of questions. I guess the first one, David, in your remarks, you talked a little bit about just kind of a side comment almost about kind of the uncertain macro. And I was just curious, did this have any impact on you guys in 1Q or 2Q? Obviously, very strong results, but would they have been even better if it weren't for some of the macro events? And then second one, Michael, obviously, very strong CTV growth, very strong outlook as well for CTV. Is there any reason to think that CTV can't continue to grow at these levels going forward, maybe kind of on a secular level? And then just related, how are you guys thinking about just the secular profile for desktop and mobile?

Great. Yes. On the macro front, it certainly wasn't, I'd say, an overwhelming drag on the quarter, but you see it in a couple of verticals, in particular, automotive, most importantly, and that's a large vertical, and that was down significantly. Technology also. So you see some impacts from -- there's still some overhang from some of the tariff challenges, supply chain challenges and then just uncertainty with things in the Mid East. So those are the data points underlying my comment. And so it's not booming, but it's -- we're not prognosticating doom and gloom either.

Yes, Shyam, on the CTV front, yes, we're really pleased with the growth rates and feel very strongly that they're sustainable. The market as a whole looks like from peer reports and analyst expectations, it's growing in the low teens. So we're significantly outperforming market growth, and that's been a goal, stated goal of ours. And I think that will continue just given the penetration that we have with all the top streamers, their growth profiles and increasing wins across the globe. It's pretty much an untold story for us is the success of these streamers that are U.S.-based. When they go international, we go with them. And then they have the added benefit of disrupting the local market and they're forced to adopt programmatic and forced to adopt streaming. So it's a real positive story for us internationally.

And as far as DV+ is concerned, yes, it's -- that's a difficult one because, again, it's a portfolio. But in terms of the high-growth areas, certainly, in-app mobile is a huge growth category. Audio, very promising growth category. Things like even digital out-of-home, you see all the outdoor companies report how fast that's growing. So yes, we think that DV+ as a whole is an important part of the business and will be a positive contributor. -- just kind of hard to swag it in terms of what you should expect going forward on a specific basis.

The next question comes from Jason Kreyer with Craig-Hallum.

Michael, I wanted to ask on AI. I know you've brought some new solutions to market in the last several weeks. I'm just curious, can you talk about maybe demand and adoption trends of AI-enabled tools? And maybe just give some perspective on what pain points you think exist in the industry that you can leverage AI to help make those more efficient.

Yes. Great question, Jason. Wow, no love for David. AI is -- 2026 will be the story of AI with modest amounts of revenue flowing through. There's several working initiatives, several different standards out there. A lot of it is replacing direct sold. So not even truly the programmatic real time, but bringing more dollars into the programmatic ecosystem because it's so much easier to do it gentically. I think the biggest benefit you're going to see from it is workflow and productivity because these are easier to use instead of toggling between 13 different dashboards and you can just natural language ask the agent to perform a task, it really will free up a lot of bandwidth for the traders. It will be more efficient. There'll be more working media going to it. And I think we're exceptionally well positioned from the tools that we built and the tools that we are building to be able to catch it when the dollars start to flow. And I would imagine in 2027 won't be the year of the story of AI, it will actually be resulting in real revenue. And I think, again, we're really well positioned to take advantage of that.

And David gets his own question. So David, congratulations on your retirement. It's been my pleasure working for you for most of that 13 years. So question for you. So I wanted to touch on the EBITDA OpEx that came in better for Q1. You're guiding for that better for Q2. And I know you called out like the cloud and AI benefits. How durable are those savings? And do you think there's more to squeeze out of that as we move forward?

I think as a general matter, the savings are very durable. The primary driver of those savings are kind of 2 fronts. One is moving some of our activity from the cloud to on-prem. And also our dev team is doing a great job in optimizing how we run more efficiently on the cloud. So I'm really excited about that. Now that said, we do have some resources into our product development later in the year. We've got a lot of new business and volume increases. And so I wouldn't go too crazy with lowering costs, but the trend line is definitely durable, and we have more to come on that front as we continue to -- we'll have a new data center in Northern California that will come online later in the year and lots of opportunity, particularly as we spring into 2027 on the margin expansion front.

The next question comes from Laura Martin with Needham.

I have 2. One is Taboola said on their call this morning that they see programmatic workflows being replaced by Agentic. You just mentioned that you thought it might be additive. But why don't we have Agentic buy-side agents sort of talking directly to Agentic sell-side agents in the ad business and therefore, getting rid of most of the 40% to 50% take rate that currently sits in the open web programmatic ecosystem. That's my first question. And then my second question is on pricing power. Maybe, David, this is you, and goodbye. It was wonderful working with you. I'm not sure who this is for. But on the pricing, one of the things that came out of possible is everybody is introducing AI products. Nobody is charging for them. They are all just table stakes, and they're sort of making everybody's products more interesting, more automated, higher returns on ad spend. But -- so that's my question. Are we actually going to get price uplift by all these AI innovations? Or is it just going to become table stakes and we spend money in AI, but we don't actually get any revenue upside?

Laura, it's Michael. I'll grab the first one. Yes. So certainly, that's been an overhang for a lot of companies, software companies about Agentic replacing the need for those companies. And I really feel as though, as we said in our previous quarter script and this one that AI is a real tailwind for us. It makes things easier to work with. It makes our publishers have to go from 12 different dashboards, a SpringServe dashboard, a DV+ to one, and they can execute more seamlessly. The agent to buyer connection and the talking of the 2 makes a ton of sense. But who's to say that, that buyer agent isn't ours that they're utilizing just like they utilize ClearLine.

So I think there's a real upside there. But also, if you want to conduct conversations, execute plans and buy programmatically from tens of thousands of buyer agents, that's where we really shine, right? We make sure that those are the agents you want to talk to that it's Disney inventory. We're collecting payment. We're policing fraud, our plumbing, our bandwidth, our servers are all being utilized to make it happen. And so we just feel that it's going to be more volume on the platform than we've ever seen. And yes, we will charge for that and it will improve our margin profiles, not be a pressure on it.

Yes. I think Michael kind of hit it, just building on that. Yes. And particularly as you look at, for example, in CTV, where we do have lower take rates at the moment, but those are stabilizing and there's so much value add as we provide those additional value-added services, we only see those increasing in the future. And I think that will be -- that value add will be accelerated with the AI implementations that we're making.

The next question comes from Naved Khan with B. Riley.

A couple of questions from me and David, all the best. One question I had is just around the commerce media. And I guess you guys have talked about how you 21 partners now you deployed 13. Can you give us a sense of the scale that this business is at currently and how fast it might be going? And then in terms of the live sports, you guys called it out as a pretty sizable opportunity. Can you just maybe talk about the penetration levels and where we are with respect to penetration of live sports with programmatic and where it could be over time?

Yes, Sure, Naved. This is Michael. Yes, Commerce Media is super exciting for us. Obviously, we mentioned the number of partners and that total keeps growing. And I think the most important thing about Commerce Media isn't necessarily the number of partners, but it's how quickly the strategy has changed for the Commerce Media players. Chapter 1 of Commerce Media was take my valuable retail data, park it in one DSP and then force all the advertisers that want to utilize that data to go through that DSP. And now you're starting to see that unwind and the strategy now is keep the data as close to the retail media partner working with an SSP like Magnite. That way, you can democratize it and allow multiple DSPs to access it in a safe privacy compliant way. So that is the most exciting, I think, change that we're seeing and a huge tailwind for us there.

As far as the contribution Commerce Media is doing, it has been a significant contributor and will even expand because a lot of these players are now just adding CTV to the inventory mix. Think about it, they start with their owned and operated inventory. And then they go off that and typically, that's been in the DV+ world. And now their advertisers are saying to them, "Hey, I do a lot of advertising on TV. I want to do that with your data. And so we're the perfect on-ramp for that to occur. So really excited about the prospect of even further growth given CTV being part of the story, essential part of the story for most of these commerce media partners.

Yes, in live sports, boy, we're just scratching the surface. I mean, live sports as a consumer, you see live sports everywhere in streaming. But programmatically, very, very little inventory is bought and sold programmatically. So when we cite games like 80% plus for March Madness, it's miniscule compared to the opportunity that's coming. And so super excited about World Cup and the false slate of sports. And little by little, it's getting more programmatically driven, and it's a big, big tailwind for us in that respect.

The next question comes from Shweta Khajuria with Wolfe Research.

This is Ken on for Shweta. Congrats, David, on the retirement. Two for me. Michael, can you provide us an update on the impact of OpenPath, particularly with smaller advertisers and agencies? And David, can you provide the puts and takes of EBITDA in the second half of 2026.

Yes. So OpenPath, I think we've talked about it ad nauseam, came as a shock to the system a couple of quarters ago. We pretty much stated that all the big buyers from the agencies that use Magnet as an invaluable partner had flipped us back on. I think you can see in our results that it's certainly not deteriorating. So I think that the OpenPath extinction events is come and gone, and we're still here and doing quite well. Great. And EBITDA in the second half, as we mentioned, we expect 11% or greater growth on the top line. So we'll have -- we're stable, steady.

And then as I mentioned on the cost side, we've got some nice savings on the one hand with our cloud usage, but we've got some kind of volume growth and some resources that will sort of be neutralizing some of that savings at least this year. And as I mentioned, the EBITDA margin is increasing. We'd expected something north of 35% and expect 35.5% this year. So that's increasing. So we're in a great spot. The -- and what's really great is our margin -- EBITDA margin is increasing and it's cost driven at this point. And so to the extent that we do have upside on the revenue line, that upside will flow almost 100% to free cash flow in the business. So I feel like we're really well positioned.

The next question comes from Robert Coolbrith with Evercore ISI.

Congratulations on a great run to David and best wishes on your retirement. Michael, you're great too. I want to ask a little bit on AI creative generation. Just wanted to ask for any update on the role you're playing there. And we're beginning to see more tools released sort of general availability. Just wondering if you're beginning to see more AI-generated creative showing up in the market. What do you think that sort of -- if that catalyzes incremental demand, incremental creative refresh, what does that do for CTV? And then maybe another related question on AI. Just we've heard some speculation about different ad tech players that could play in terms of monetizing some of the AI engine inventory itself. Do you think there's an opportunity for Magnite there?

Yes. Robert, the -- so as you know, we purchased a couple of quarters ago, a company called Streamer, which is one of the leading tools out there that allows small- to medium-sized businesses to create a TV ad to track it, to measure it and to buy it, obviously, on our platform and our access to the premium streamers. And that product is really taking off. It's -- our role with that product isn't to chase down the small- to medium-sized business. It's to put those tools in the hands of folks that have those relationships -- so there are either huge aggregators that have the relationships and now we are bringing that demand onto our platform or there are publishing partners that kind of hang that as they're self-serve. And when they have relationships with small advertisers, they go and use the tool. So it's really turned out to be a wonderful acquisition, and we're starting to see the benefits of that reflected in the growth rates of CTV. And I'm sorry, the second point was.

Just on the themselves, the OpenAIs and so forth, if there's an opportunity potentially for Magnite there.

Yes. No, I certainly think there is. I think the encouraging thing is it's very early, but you're seeing in these early stages that the ones that are ad-supported are reaching out for third-party demand. And that history is pretty clear. Initially, if you're just going to work with DSP, maybe there's not a need for someone like a Magnite, but you start to work with 3, 4, 5, 6, 7 and then you do it globally and they have specialty DSPs. I think we feel very encouraged with the initial direction about some of the folks leaning into third-party demand. And in that case, SSPs become invaluable. And I think we're well positioned to take advantage of that when the time is right.

The next question comes from Barton Crockett with Rosenblatt.

Two, if I could. Let me see -- first is just to get your perspective on an environment that I think there's kind of a collusion of views that maybe this is more removing, which is that we could be moving to a world where agencies would be working with a single integrated interface through Quad or something to place basically outcome-driven marketing dollars across a range of environments, whether it be the social media walled gardens like Meta or the search environments, AI environments like Google Gemini or open web. And in that environment, we're simplified at the agency and the front end is not what we see today, but something different built on an LLM. In your view, does that have any impact on take rates any impact on revenue flows? Do you think that's where it's going?

I certainly think that's a world view that a lot of people share, more simplified buying tools for agencies that actually deliver upon the stated goal for the marketer. I think that our role remains quite valuable and necessary in that world, right? Again, we're the system of record. We're the rails upon which the transactions take place. It's one thing to have an agent talk to another agent, but if they're involved in a complex transaction and in real time, doing it trillions of times a day, you really need the infrastructure, and that's where we shine. The impact to our take rate, I don't think there's any change in what we do in that world. It's just probably easier for seller and buyer less interfaces to go through, less knobs and tools. So perhaps freeing up more working media there. But our role remains kind of unchanged as that system of record. So I feel confident in our durability as it relates to take rates.

Okay. And then switching gears on Google AdTech antitrust. I think we're sitting here in May, and we still don't have a decision on the remedies. If a remedy decision were to come out today, what's your sense of when you could begin to see the impact of that? Is it something that now is pushed into 2027 or any thoughts of -- obviously, part of that is a view of what the remedies could or should be. But your sense of how much time it would take to kind of implement given all the legal waiting periods and technological considerations.

Yes. Great question, and I think you hit the nail on the head. It really does depend upon the remedy. Some are just behavioral in nature. Some would require Google to do technical work to make it happen. And I think even in their case, they cited a 6- to 9-month window for changing 2 of the things that they were talking about. So -- but I definitely think that there'd be some instant gains there. Again, keep in mind, we see all the inventory -- we bring it to auction and our win rate is very low when it comes against -- when it goes up against Google. And so therefore, if there was a behavior change there, it could be somewhat instantaneous the impact that we'd see. So I certainly don't think any of the benefits from the ruling is pushed out -- all of it is pushed out to 2027. Obviously, we're a little disappointed that there hasn't been a ruling, but I completely anticipate favorable ruling for us and impact in 2026.

The next question comes from Matt Swanson with RBC Capital Markets.

This is Simran on for Matt Swanson. Congrats on the quarter and congrats, David. Just one for me. So going back to CTV and DV+ for a second. We've been seeing how CTV has been hitting an inflection point for the business. And then last quarter, we started talking about the accelerated reallocation of budget to -- from DV+ to CTV. So while there's like the areas of growth in mobile and commerce for DV+, to what extent does this reallocation remain a headwind? And has that accelerated this quarter? And do you expect it to continue for the year?

Yes. Great question. I don't know if we've seen an acceleration, and you can see the freshening of DV+' growth rate exceeding our expectation. So I think there's a stabilization. I do think that a big slug of that portfolio in DV+, the type of media is open web is display. And I think it's safe to say that that's going to be a negative grower. But could that be outpaced by mobile app? Could that be outpaced by audio, Commerce Media, digital out-of-home, certainly. So I think our long-term expectation for DV+ is it's a grower, but it's certainly not going to have the profile of the CTV growth rate. And increasingly, our revenue balance will be more CTV than DV+ for the company.

The next question comes from Elle Niebuhr with Lake Street Capital Markets.

Just a quick one from me. Just looking at how CTV is becoming over 50% of that total contribution ex TAC number. How should we look at incremental margins on CTV versus DV+? Is there a mix shift that's kind of structurally lifting the margins by itself? Or are there some offsetting costs?

Yes, I'll take that. Yes, it's generally equal. So we don't see -- it doesn't create headwinds by having a greater proportion of our business be CTV. And in fact, as we mentioned earlier, we've got significant gains in the cost basis on our CTV business with our cloud costs going down. And so it won't be one of the more significant drivers. It's a good question, but we see it more as kind of neutral.

This concludes our question-and-answer session. I would like to turn the conference back over to Michael Barrett for any closing remarks.

Thank you, operator. The CTV's long-awaited ramp in programmatic has clearly arrived and the investments we've made over the past several years are now translating into profitable, scalable growth. We believe CTV is in a powerful phase of its evolution. The shift to programmatic is real. And as the channel matures, it is increasingly taking share from both linear, television and other digital formats. Before we close, I want to thank our team at Magnite. The progress we've discussed today is a direct result of your hard work, innovation and commitment to our partners. Your efforts continue to position us at the center of this transformation. We're confident in the momentum of the business and in the long-term opportunity ahead. Thank you for joining us today. We look forward to updating you next quarter. With that, I'll turn it back over to Nick to cover our upcoming marketing events.

Thanks, Michael. We look forward to seeing many of our upcoming investor events. Just to kind of tick through them for your info and the participation. We have a post-Q1 virtual NDR tomorrow hosted by B. Riley. We have an in-person AI tech demo with SSR in New York City on May 12. We're at the Needham Conference in New York on May 13; B. Riley Conference in Marina Del Ray on May 20 and 21, RBC Busward New York on May 27; Craig-Hallum Conference in Minneapolis on May 28; BofA Conference in San Francisco on June 2; Rothschild Redburn Investor Meeting in San Francisco on June 3. Evercore's Conference in San Francisco on June 3 as well. Toronto NDR with RBC on June 9; Chicago NDR with Benchmark on June 10, the ROTH Virtual Ad Tech Summit on June 15 and analyst and investor meetings with a variety of our covering analysts in Cannes on the week of June 22. Thank you, and have a great evening. Look forward to seeing many of you at our events.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Hello, and welcome to the Magnite Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Nick Kormeluk of Investor Relations. Please go ahead.

Thank you, operator, and good afternoon, everyone. Welcome to Magnite's Fourth Quarter 2025 Earnings Conference Call. As a reminder, this conference call is being recorded. Joining me on the call today are Michael Barrett, CEO; and David Day, our CFO. I would like to point out that we have posted financial highlight slides on our Investor Relations website to accompany today's presentation. Before we get started, I will remind you that our prepared remarks and answers to questions will include information that might be considered to be forward-looking statements, including, but not limited to, statements concerning our anticipated financial performance and strategic objectives, including the potential impacts of macroeconomic factors on our business.

These statements are not guarantees of future performance. They reflect our current views with respect to future events and are based on assumptions and estimates and subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from expectations or results projected or implied by forward-looking statements. A discussion of these and other risks, uncertainties and assumptions is set forth in the company's periodic reports filed with the SEC, including our quarterly reports on Form 10-Q and our 2025 annual report on Form 10-K.

We undertake no obligation to update forward-looking statements or relevant risks. Our commentary today will include non-GAAP financial measures, including contribution ex-TAC or less traffic acquisition costs, adjusted EBITDA and non-GAAP income per share. Reconciliations between GAAP and non-GAAP metrics for our reported results can be found in our earnings press release and the financial highlights deck that is posted on our Investor Relations website.

At times, in response to your questions, we may offer additional metrics to provide greater insights into the dynamics of our business. Please be advised that this additional detail may be onetime in nature, and we may or may not provide an update on the future of these metrics. I encourage you to visit our Investor Relations website to access our press release, financial highlights deck, periodic SEC reports and the webcast replay of today's call to learn more about Magnite.

I will now turn the call over to Michael. Please go ahead, Michael.

Thank you, Nick, and what an end to 2025. We exceeded consensus expectations for both the quarter and the full year. In a mixed macro environment, our results reflect the durability of our model and the accelerating shift towards streaming. In Q4, CTV contribution ex-TAC grew 32% ex political, meaningfully above our guide. That acceleration began in Q3 and strengthened into year-end. As we enter 2026, CTV is now larger than DV+ making streaming the majority of our business. That is a defining moment for Magnite.

The long anticipated ramp of programmatic CTV is no longer emerging. It is underway at scale. Adoption is broad-based across media owners, agencies and DSPs. We saw strong growth from many of the largest players in the industry, including LG Ads, Netflix, Paramount, Roku, VIZIO, Walmart and Warner Bros. Discovery. TV OEMs are leaning aggressively into programmatic across home screens, pause ads, data enablement and marketplaces. Programmatic enablement in live sports continues to expand across the largest global streamers. On the demand side, the largest global agencies are now driving meaningful volume through buyer marketplaces and DSP-agnostic pipes powered by Magnite.

ClearLine activation continues to gain momentum as buyers increasingly seek direct, transparent and efficient access to premium streaming supply. Stepping back, the industry trajectory is unmistakable. Consumers have moved to streaming. Time spent has already shifted. Advertisers are following and dollars are now catching up. CTV combines the brand impact of television with the precision and measurability of digital. As inventory has scaled and pricing has normalized, CTV has become accessible to a broader range of advertisers from global brands to performance marketers to SMBs.

For Magnite, this shift is structurally advantageous. In DV+, we operate in a highly competitive market where we hold mid-single-digit share. In CTV, our share is multiple times better. As dollars migrate into streaming, they moved into a segment where we have deeper integrations, stronger publisher relationships and differentiated infrastructure.

Now turning to DV+. DV+ grew 4% ex-political in Q4, modestly below expectations, and that pressure has increased in Q1. We observed accelerated budget reallocation from DV+ into CTV across agencies, DSPs and brands. This trend has intensified in Q1. This makes sense as CTV becomes more measurable and performance-driven and inventory scales, dollars are naturally consolidating into streaming environments. Within DV+, there are encouraging signs.

Our mobile in-app business remains healthy. Commerce Media partnerships are gaining momentum with more than 15 partners announced, 11 of which are deployed and ramping, including United Airlines, PayPal, Pinterest and Best Buy. These partnerships combined owned inventory with first-party data layered through ClearLine curation. We do not believe that the decline in search referral traffic is impacting our DV+ business. Our footprint remains diversified across open web, mobile app, online video, audio and digital out-of-home. In fact, our DV+ supply continues to expand with ad requests growing over 30% year-over-year in Q4 and at similar rates in Q1. Our DV+ business has never been supply constrained.

Now turning to AI. There has been speculation that generative AI and agent-based buying could disintermediate infrastructure platforms. We believe what is actually unfolding reinforces the importance of scaled sell-side infrastructure. In Q4, we embedded an advertising context protocol or AdCP based seller agent directly into SpringServe and executed what we believe was the industry's first agent-to-agent campaign. Scope3 served as the buyer agent on behalf of MiQ with media running across LG and Warner Bros. Discovery inventory.

While still early, this marks an important milestone. It represents the first step toward a future where buyer and seller agents can interpret campaign briefs, intelligently match inventory with audiences and ultimately transact media in a more automated and efficient fashion. Magnite is uniquely positioned on the sell side. We believe we will be long-term winners in digital advertising, given our differentiated access to supply, scaled and interoperable data assets and ability to apply AI across the end-to-end workflow.

Layering AI into that ecosystem modernizes the buying experience, streamlining historically manual insertion order processes, matching briefs with audiences and inventory at scale and enhancing traditional programmatic execution. Even in a world of autonomous agents, infrastructure becomes more critical, not less. Agents may interpret intent, but they still rely on scaled marketplaces to clear transactions, enforce auction mechanics, ensure compliance, manage fraud prevention and handle financial settlements. As the ecosystem evolves toward potentially thousands of buyer and seller agents, aggregation and interoperability become essential.

You cannot have a market where every agent negotiates bilaterally with every other agent. Standards-based scaled platforms are required to make that system function. That is the role Magnite plays. In Q1, we are continuing to run test campaigns and refine the AdCP framework. It's early, but we are encouraged by the progress and view this as a meaningful step toward a more intelligent and efficient advertising marketplace. AI is not displacing our infrastructure. It is increasing throughput across it.

Lastly, on DV+, we continue to await the court's final order in the Google AdTech remedies phase. We believe remedies could create meaningful share reallocation opportunities. As we have stated, every 1% of market share gained could represent approximately $50 million of incremental contribution ex-TAC annually at very high incremental margins. We remain prepared. To conclude, we are in the early innings of a multiyear replatforming of television and video advertising. Streaming is now the dominant form of video consumption.

CTV represents the majority of digital video time spent, yet ad dollars still lag engagement. Industry forecasts call for sustained double-digit CTV advertising growth for years to come with tens of billions of dollars expected to shift from linear television and fragmented digital channels into streaming environments. Magnite sits at the center of that shift. CTV is now the majority of our business. We are deeply integrated with the largest streaming publishers and OEMs in the world. We operate in premium, largely logged-in environments that are inherently more defensible and more measurable.

And as dollars consolidate into CTV, they move into a segment where our market share is meaningfully higher and our infrastructure is embedded. At the same time, automation and AI are increasing efficiency across the ecosystem, expanding working media and driving more volume through scaled platforms like ours. Secular CTV growth, expanding total addressable market, increasing automation, strong share position. Those forces are durable. We believe Magnite is fundamentally -- we believe Magnite is foundational to how the next era of advertising will transact, and we have never been more confident in our strategic position.

With that, I'll turn the call over to David for more detail on the financials. David?

Thanks, Michael. As Michael mentioned, we had a strong Q4 and finish to the year with a great performance in CTV, achieving 20% contribution ex-TAC growth or 32% excluding political, significantly exceeding our expectations. CTV reached 48% of our total contribution ex-TAC for Q4. DV+ came in below expectations, declining 1% and up 4%, excluding political. Adjusted EBITDA grew 9% to $84 million, resulting in a 43% margin. We're pleased with the results, particularly the continued acceleration in CTV growth we saw in Q4. For the full year, contribution ex-TAC totaled $670 million, a year-over-year increase of 10% or 14%, excluding the impact of political.

For CTV in 2025, we achieved contribution ex-TAC of $304 million, an increase of 17% or 22% excluding political. And for DV+, we reported $365 million for the year, growth of 5% or 8% ex political. We processed total ad spend approaching $7 billion. Adjusted EBITDA for the full year 2025 was $232 million, an increase of 18% from 2024, resulting in an adjusted EBITDA margin for the year of 34.7%. Total revenue for Q4 was $205 million, up 6% from Q4 2024. Contribution ex-TAC was $195 million, up 8%, within our guidance range and up 16%, excluding political.

CTV contribution ex-TAC was $94 million, up 20% year-over-year or 32% excluding political, significantly exceeding the top end of our guidance range. DV+ contribution ex-TAC was $101 million, a decrease of 1% or an increase of 4%, excluding political from the fourth quarter last year. This result was below our guidance range. As Michael noted, we saw a growing spend shift from DV+ to CTV. Our contribution ex-TAC mix for Q4 was 48% CTV, 37% mobile and 15% desktop. From a vertical perspective, retail, health and fitness and financial were the strongest performing categories, while automotive was again one of our weakest performing categories.

In DV+, we saw additional weakness in technology and food and beverage. Total operating expenses, which includes cost of revenue, were $153 million, a slight decrease from $154 million for the same period last year. Adjusted EBITDA operating expense for the fourth quarter was $111 million, $1 million better than the low end of our guidance range and an increase from $104 million in the same period last year. The increase was primarily driven by higher cloud and data center costs and higher personnel-related expenses supporting the growth of our CTV business and investment in CTV-related features and functionality and was better than expected due to lower personnel expenses, including slower-than-anticipated hiring.

Our net income was $123 million for the quarter compared to net income of $36 million for the fourth quarter of 2024. This was driven by a $90 million onetime tax benefit resulting from the release of the valuation allowance on our deferred tax assets. As background to the release, we met the specific accounting criteria of 12 quarters of cumulative positive pretax income and the necessary expectations for future profitability. Adjusted EBITDA grew 9% year-over-year to $84 million, reflecting a margin of 43%.

As a reminder, we calculate adjusted EBITDA margin as a percentage of contribution ex-TAC. GAAP earnings per diluted share were $0.80 for the fourth quarter of 2025 compared to $0.24 for the fourth quarter of 2024. Non-GAAP earnings per share for the fourth quarter of 2025 was $0.34 compared to $0.34 last year. Reconciliations to non-GAAP income and non-GAAP earnings per share are included with our Q4 results press release. Our cash balance at the end of Q4 was $553 million, an increase from $482 million at the end of the third quarter. Operating cash flow, which we define as adjusted EBITDA less CapEx, was $61 million.

Capital expenditures, including both purchases of property and equipment and capitalized internal use software development costs were $23 million, consistent with the expectations we discussed last quarter. Debt interest expense for the quarter was $4 million. Net leverage for the quarter was 0, down from 0.3x at the end of Q3. As a reminder, the remaining $205 million principal balance of our convertible notes is a current liability on the balance sheet as the notes mature this quarter. We plan to pay off the converts at maturity with cash on hand next month.

As you know, $400 million in converts were part of our original financing for the SpotX acquisition and when all is said and done, provided capital at an extremely favorable rate. During 2025, we repurchased or withheld over 5.2 million shares for approximately $79 million. We're also announcing a new 2-year share repurchase plan today, which authorizes the repurchase of common stock with a value up to $200 million. Following the repayment of our convert, we plan to be more aggressive with share repurchases given our future expected significant and consistent free cash flow generation.

Our capital allocation strategy will target approximately 50% of free cash flow generation to be returned to shareholders via share repurchases over time, provided our share price provides a reasonable return compared to our estimated intrinsic value. Note also that M&A opportunities may arise in the future that might change our perspective. I will now share our expectations for the first quarter of 2026 and our current thoughts for the full year. For the first quarter, we expect contribution ex-TAC to be in the range of $157 million to $161 million, which represents growth of 8% to 10%.

Contribution ex-TAC attributable to CTV to be in the range of $81 million to $83 million, which represents growth of 28% to 31%, surpassing 50% of total contribution ex-TAC for the first time. DV+ contribution ex-TAC to be in the range of $76 million to $78 million, which represents a decline of 6% to 8%. We anticipate adjusted EBITDA operating expenses to be approximately $122 million, which implies adjusted EBITDA margin of over 23%. As a reminder, the first quarter is always seasonally our lowest margin quarter.

For the full year 2026, we anticipate total contribution ex-TAC growth to be at least 11%, adjusted EBITDA percentage growth in the mid-teens, adjusted EBITDA margin greater than 35% free cash flow growth greater than 30% and CapEx of approximately $60 million, a reduction from prior year. I want to point out that our estimates do not include any potential market share gains as a result of remedies from the Google AdTech trial.

And finally, regarding our tax position, we would not expect to have any significant increases in cash taxes for the next few years. We are proud of our team's execution and our resulting fourth quarter and full year results. We believe we are very well positioned to continue winning and thriving with the changes that are taking place in the programmatic ecosystem. We continue testing and implementing the right AI capabilities to build on Magnite's industry-leading platform and making strategic investments to improve our efficiencies.

With that, let's open the line for Q&A.

[Operator Instructions] Our first question comes from Laura Martin of Needham.

Congratulations, good numbers. I wanted to talk about the breadth of CTV and how much of that is sustainable. So ex political, CTV up 32% in growth. Can you break down how much of that is SMBs? How much is by vertical? You named a lot of really big studio companies that are growing. I'm really interested in what's growing and whether you see that continuing? That's my first question.

Yes. Laura, great question. I'll handle it first and maybe David will dive in with some specifics. We really haven't gotten into breaking it out. Lord knows we have hard enough time figuring out TV and CTV buckets, let alone getting a little bit more specific on the CTV. I will say, and you did see the announcement from MNTN recently about their direct connection into us as their first platform to do so. So that's a very encouraging sign of a high-growth area of performance-oriented SMBs.

But we are seeing just across the board. You don't grow at 32% and not have everything firing at all cylinders. So big branded advertisers that used to advertise in TV, we had cited a big shift from performance advertisers that were digital online video, digital display shifting into CTV throughout all of our channel checks, the same note was sung by every major agency brand, marketer, the appeal of CTV, the pricing, the performance metrics of it, it's really just increasing in velocity of appeal. So we're just seeing it across the board, Laura.

Okay. Great. And then my second question is about risk. It feels like, Michael, you're moving more towards an infrastructure. You have a lot of really specific deep infrastructure integrations into some of these large CTV performers. Do you get the sense that elongating your client relationship time, increasing your lifetime value and lowering the risk of investing in Magnite as a stock?

Well, no question. You hit the nail on the head, and I think we tried to harp on that in the call in the script. We look so different in CTV than we do perhaps even in DV+ and display. We are highly differentiated. We have a leading programmatic ad server that's coupled with the leading SSP platform. We're building more and more tools. We have a buying tool, ClearLine that's integrated across the board. So we look quite different and unique and with an enjoyable moat that we built in CTV, which is, as you know, the fastest-growing segment in the digital advertising sector.

Our next question comes from Dan Kurnos of Benchmark StoneX.

Michael, let me just stick with the CTV question for a second. Is there any way to kind of parse out the mix shift to CTV versus your organic partner growth like what you had before? Because there's a clear acceleration, I think, on both fronts. And how much of that is coming from live events?

Yes. So live is an increasing contributor each quarter. So that's definitely a good guide for us. As it relates to parsing it out. David, do you want to say -- kind of the dollar shift that we saw from DV+ into CTV and that to give you some idea of the baseline growth level versus the accelerated?

Yes. I guess -- I mean, if you just look at the expectations versus consensus for like Q1, for example, you've got DV+ $8 million or $9 million lower and CTV higher by that same amount. But I'm not sure you can differentiate spend shift versus organic because the spend shift is rolling into our organic numbers and is rolling through all of those same -- obviously, all of those same partners. But it is a very dramatic shift, right? Go ahead.

Yes. No. So I was saying if you looked at it -- let's just say if the expected performance is 20% and it winds up being 32%, it's pretty easy to parse it out as to what the accelerant was from a spend shift from platform to platform.

Yes. No, that's helpful color. I mean I'm just trying to make sure to flag, I guess, the underlying is still growing ex the shift. So I just want to [indiscernible].

Very much so. Yes, very much so. Just think a little bit -- the thing here from a larger perspective from what we talk about is those very marketers that are making up a number, say someone spends $100 less, they're just spending it differently, allocating it differently. And good news for us are allocating into the faster-growing platform that you certainly look ahead 3 to 5 years from a CAGR standpoint, it's going to be super impressive. So number one, the allocation is happening on our platform. So we're catching dollar for dollar, and we're still having that organic growth on the CTV side that's far exceeding the marketplace. So both very positives for us.

Yes. And just to layer on I say layer on to Laura's point, it's derisking. So $1 of CTV revenue and growth is more protectable and sustainable in some ways than DV+, which just can be a little bit more volatile. And so we love where this is heading ultimately.

And not to add, David, I mean, I guess the next question I'd ask is like, I mean, margins are still improving, but there's always been a question around take rate and economics and you're still driving margins higher. So some of that's been your cost to take out, cost to serve initiatives, but just maybe any comments you guys have on that would be great.

Yes. And in fact, and we talked about this a little bit last -- I think, the last quarter or 2, because of the opportunity that we have in CTV, we've actually made some additional internal investments into CTV, so into engineering, into accelerating some of our feature and functionality in the CTV business.

And so all things being equal, our margin expansion could have been even greater in 2026. But with the -- so we'll still expand margins. But with this opportunity in CTV, it's sort of a little bit of a onetime shot on the headcount and continuing to make the improvements on our tech stack infrastructure, as you mentioned, getting better leverage out of that to really set us up for more rapidly expanding margin in future years.

Our next question comes from Shyam Patil of Susquehanna.

I had a couple of questions. I guess, maybe following along the lines of the previous 2 as well. What do you guys think is the right way to think about CTV growth and then DV+ growth kind of going forward? I know you gave kind of 1Q outlook and kind of high level for the year for overall. But what's -- if we kind of look at the 2 businesses, like what's the right way to think about the growth rate kind of going forward on a sustainable basis?

I know, Michael, you said CTV is a double-digit grower. And obviously, we've seen that strong growth rate. And then just a follow-up just on OpenPath, can you just maybe talk about that a little bit, just kind of the impact that you had seen? It seems like that situation might be behind us now. Maybe if you could just talk about that and if you think that, that's been resolved and kind of behind us or if there's potentially anything to be aware of on that front?

Yes, sure. Great questions, and I'll let David jump in on some of it. Yes, certainly, if you look at CTV, the market from an estimate standpoint has always been probably lagging the actual growth rates. But I think some of the latest numbers out there are in the mid- to low teens and certainly at 32%, that's far exceeding market growth. And that's where we expect to be given our market position. So I think a growth rate in the high teens, 20s is very sustainable given the secular shift that's going on.

And as it relates to DV+, I think it's fair to remind everyone the diverse portfolio that DV+ is. Certainly, there's desktop and mobile web, and that is definitely under pressure. You have all sorts of things happening there and the big budget shifts that we talked about that we caught on the CTV side were essentially coming from that bucket. But you also have emerging categories like audio, digital out-of-home, mobile app, which you look at the numbers at levels putting up mobile app for a long time was kind of out of our reach because the brand advertising that we source really couldn't compete with the app install.

And now it's much -- it's been on a better level playing field than it ever has. And so we view that as a big opportunity for us. We're deploying our SDK. We're partnering with AppLovin. We're partnering with Unity. We're partnering with all the big players, and we think that, that's a big growth area for us. So where does that net out? It's hard to say. But I think the encouraging thing is from a growth profile for Magnite, any weakness that we are seeing in DV+ is manifesting itself in the CTV bucket.

So again, if the budget is $100, we're catching the $100. It's just being allocated differently by the marketer. So it's a little hard to put a growth rate on DV+. But if you parse it all out, there's going to be growers like mobile app that's going to be in the teens, and there's going to be desktop mobile web that's probably flattish to slightly down, if that's helpful. And you would also ask about OpenPath. Yes, as you noted, OpenPath has been around for years.

The reason why it became a subject of focus last quarter was the Kokai deployment and OpenPath being a default we have painfully walked through in the Q&As in the script about our efforts to turn that around with our biggest buyers. By most degrees, we've been successful in that. And the longer tail of OpenPath users, those smaller advertisers, smaller agencies, we had always said that, that was going to be more of a street fight. So OpenPath has played out exactly as we thought it would. It's a modest impact in terms of the DV+ performance has no impact on the CTV performance. And everything that we said we were going to do, we did.

And I think OpenPath has been with us for years and will continue to be with us for years. I think if anything, we've proven that it's not an existential threat to the business that we have embedded ourselves with our largest buyers to the degree that we become invaluable to them to execute their programmatic businesses.

Our next question comes from Jason Kreyer of Craig-Hallum.

So Michael, you talked about running volumes through AdCP. Just curious what you think the evolution is on that front? And what is the client interest in running volumes through AI agents?

Yes. So interest is very high. Reality, very little and budgets are being allocated to it. I think to frame it correctly is think of this as a massive remodeling of your house, but we're not knocking it down and building a brand-new house. So I think that it's all going to sit on top of the existing infrastructure in the industry. Hundreds of millions of dollars have been invested by Magnite alone to make programmatic work. And what AI agents are going to do is make it work better. It's going to alleviate menial tasks from the traders, the planners, the ops people, and it's going to put more working dollars to play, which is awesome.

And we feel it's all going to flow through our pipes. And so I think we're doing the exact appropriate amount of investment in it and we are ready to catch the dollars when they come scaled, but that is not going to happen any coming quarter. So interest high, execution actually putting your money where your mouth is, is not high, but we believe we're in a great position technically and from a market position to take advantage of this next wave of innovation.

Is that more likely to occur on the DV+ side or on the CTV side?

Well, I think across the board, I mean, the world I described, there's a lot of heavy lifting that goes on in terms of planning campaigns, introducing opportunities for publishers, publishers, introducing opportunities for buyers, making sure it works. Line item broken here, this deal doesn't work here, why doesn't it work? 20 hours of troubleshooting to figure out and then half the budget is already not been spent and you're wasting time. And so I think there's all sorts of efficiencies that are in play across both platforms with an agentic approach as the UI level and then the plumbing and the infrastructure powered the way it used to be, the way Magnite does it.

A quick follow-up for David. The EBITDA OpEx is a pretty big jump from Q4 to Q1. Just curious if you can maybe talk about what investments are embedded in there?

Yes. And if you recall, we kind of have that jump literally every year. You have personnel raises effective January 1 that kick into place. You also have employer taxes that kick into place and some of those are attached to some annual grant vesting in that Q1. We have an off-site that occurs in the first quarter of the year. Certain years, it's full company and certain years, it's the commercial team. And so you just got a number of those things. And then the other component there would be some of the investment that I mentioned earlier, which is engineering and product talent for supporting the pace of development and velocity in our CTV business. And so those kind of make up that increase.

Our next question comes from Shweta Khajuria of Wolfe Research.

Okay. Let me try 2, please. I have a follow-up on the prior one. So Michael, if you could please explain the context protocol, like how it works, what the real value proposition is and what your differentiated advantage is there? And as it relates to CloudX, is that a competitive product? Is that even related? How should we think about how all this evolves in an agentic world?

And what the impact will eventually be? Is it that you're going to get greater share of ad dollars? Is it that the TAM will expand? Like how should we think about the impact and how it works? And then the second question I have is just on the AdTech case, you touched on it in your prepared remarks. What is the base case expectation at this point? What should investors be expecting in terms of a realistic outcome? And if you have any sense on the time line, that would be great, too.

Yes, sure, Shweta. So yes, so AdCP is kind of -- it's a protocol that allows agents to talk to agents. And so there's nothing particularly -- there's nothing particularly unique about that. It's making sure your program can be agentic. It's making sure your platform can have agents talk to each other. So I think that what we were -- we -- given the size of our platform and the appeal of the types of publishers we have, we are approached by Scope3 first to execute that.

So I think it's illustrative of the fact that we're prepared for -- to move beyond the API world and get into the MCP, AdCP world where agents are talking to agents and need a point of connection as opposed to APIs where it was more people connecting to machines. So I think that we feel very good about that. Where I think our point of differentiation will lie not just in our readiness, but I think in this the vast amount of data that we sit on in the years and years of the data that we have, when we can help our publishers and help our buyers from an inventory discovery, price discovery to maximize yield for publishers from mediation, I think that, that's where the magic really happens.

So anyone can build an agent, the question is what data is that agent working on. And I think we feel that we sit on this repository of data across tens of thousands of publishers, many, many years of data worth to be able to inform decisions. We've also organized the taxonomy of all the publishers on our platform so that if someone is looking for sports enthusiasts or auto enthusiasts that the same protocol exists across all publishers, so we can scale these what would be very niche buys across agents. So feeling very good about that.

You also asked about CloudX. Obviously, that's more germane in the mobile area, but we're integrated into CloudX right now, which is a newer mediation platform for mobile app. So we're excited. We know the guys well. I think it's just another opportunity to gain access to a super fast-growing area of the DV+ business, which is app, and we are working closely with them. So it's a good thing for us, not kind of a disintermediation by any stretch. And lastly, in the AdTech case, very hard to pick timing. The expectation is it's any week now, but that could be delayed a little bit longer as it relates to predicted outcome. Again, that's a little difficult.

I think given the types of conversations that were had in the final prejudgment hearing between Google and the DOJ, it certainly seemed that given the questions from Judge Brinkema that structural was probably not going to be the likely outcome that behavioral remedies were. I think some people misinterpret that as that's not a good guy for Magnite or their peers, which we couldn't disagree with more violently. We were always expecting behavioral, and we thought that as long as through behavioral or structural, it really didn't matter to us as long as the playing field was more level that we would be a huge beneficiary of that, and we still believe that to this day.

Our next question comes from Matt Swanson of RBC Capital Markets.

This is Simran on for Matt Swanson. Congrats on the quarter. It seems like you guys have hit this tipping point in CTV, which has been great to see. What would you think from an ecosystem standpoint has changed? And how much would you attribute to the secular market shift versus your growing company-specific moat?

Yes. Thanks for the question. I think David touched upon that way, gave the specifics about -- perhaps it was -- the $9 million came from the DV+ platform, and that was placed on -- the expected $9 million that we thought were going to be spent on DV+ was now spent on CTV. But that's on top of an already high growing base of organic spend there. So I think no matter how you look at it, you take the $9 million off, you put it back on DV+, you're still looking at a 20-plus percent grower, which is significantly above market average.

So I think that you're right about the tipping point. It's just -- it's being accelerated by a spend shift from one platform to the other, but it's inherently a much higher growing platform to begin with. And as we pointed out a couple of times, with a much, much bigger moat for us. It's an area where we're very differentiated, deep integrations with all the top streamers, ad server capabilities quite different from the DV+ market.

Got it. That makes sense. And then on the progress with these partnerships and integrations, could you double-click on the ramp of some of these and maybe touch on Netflix specifically or any other partners that have progressed particularly well?

Yes. So particularly in the streaming area, when we do our script and we talk about the largest -- the most impactful clients of that quarter, we talked LG Ads, Netflix, Paramount, Roku, VIZIO, Walmart, Warner Bros. Discovery. So really across the board, we're seeing. In terms of the commerce partner, in the DV+ part of the script that we talked about, you see United Airlines, which has taken a while to ramp, but it's now contributing well.

PayPal, Pinterest, Best Buy has taken a while, but all these have different flavors of ramp to them. if someone is in the ad business to begin with, having them allow programmatic into their world that tends to impact the revenue line quicker than if, say, you're in United Airlines, you've never been in the advertising business and you're starting from scratch, that's a longer gestation period. So they each have their different flavors. But from time to time, we'll cite the ones that are active and contributing, and that was the list there.

Our next question comes from Barton Crockett of Rosenblatt.

I wanted to ask about your kind of view of the future with AI, given that that's what's really driving all the stocks. And I know there's been some questions on it, but I want to see if you can give us your view of how this evolves in this way, which is, do you see AI as a force for compression of take rates throughout the kind of ad tech sector generally? Do you see this evolving to a circumstance where perhaps LLMs are a front end for ad plans and then SSPs are kind of a processing agent, so maybe DSPs get squeezed. Or do you think that DSPs and SSPs are main kind of players and maybe the smaller competitors in both sectors get squeezed or any other kind of circumstance? How do you see this evolving in terms of players and take rates?

Yes. That's a great question. I think that -- I think if you look at an agentic world and you see where the value is created, there's still a tremendous amount of value being created by Magnite, not just in the plumbing piece of it, but in educating these seller agents with the data that we have to make informed decisions on pricing to mediate the buyer agents that come in. I think what you really generally see, again, is a renovation of this house, not a leveling of it, and it's a much more efficient world where folks are being freed up to do much more sophisticated tasks as opposed to this back and forth of campaign management, fixing broken line items, all that kind of stuff.

So I think that what you'll see is far more media going to work. I think you'll see certain people in between the agents become less valuable. But I think that if you look at the top DSPs and what they have built and the rails that they run on and the top SSPs like a Magnite and what we've built that the value creation is the same, if not greater. So I don't necessarily see a take rate impact in the future -- an agentic future for a Magnite.

Okay. All right. Now the other topic I was curious about on antitrust there's been essentially an adoption of behavioral remedies in Europe with Google essentially just kind of moving to adopt some of the key things that could be coming here. Do you -- would you agree that that's kind of a fair description? And if so, are you seeing any impact in terms of share shift in Europe from what Google has been doing over there?

Yes, great question. I don't know if that's -- it's astute observation, but I'm not so sure it's the exact remedies behaviorally that is being sought here in the states. So let's just say it's a portion of that package, the lowest hanging fruit of the package, and it's also the one that requires kind of the most lift on the publisher side. So what we have seen is the publishers that actually readjust the rankings of the exchanges and readjust the price floors that there is improvement, but that's a process, right?

And this came down in Q4. So no one really starts to monkey with things during Q4, just given how important the quarter is. So we'll see that play out. But I think it's just kind of scratches the surface of what the DOJ is looking for here and what Judge Brinkema has been alluding to. So I think it's not apples-to-apples to compare Europe to the United States.

[Operator Instructions] Our next question comes from Robert Coolbrith of Evercore ISI.

Just to go back to the CTV strength. Any key unlocks, whether it's around demand partners, supply partners or maybe things that maybe had happened earlier in the year where the momentum just sort of built up in Q4 and surpassed your expectations. Just wondering if we could maybe take another crack at that. And then secondly, on the agentic piece, is there anything that can come into the market incrementally in terms of volumes that remain sort of offline negotiated, inserted via IO, whether that's through some sort of electronic data interchange or fax or whatever, things that can come into the market incrementally, the net new to programmatic from the sort of agentic shifts in the market?

Great. Yes, I'll take the last first. Certainly, I think that, that is an area of hope, right? There is still a tremendous amount of dollars that are frozen in the linear world that are insanely rate sensitive. So it just -- it's more of an automation as opposed to agentic. But if you can build tools that allow at a very efficient pricing, allow those dollars to be transacted programmatically that is something we've been trying to affect clear line for a couple of years now.

So I think if you can make it even easier and add an agentic piece to it, that could make it that much easier to have it talk directly to the ad server, have it inserted into the ad server. I think that, that's something that is of appeal that it's not just all biddable. It's not just programmatic that is taking insertion orders and just taking the people out of it and making it automated. So we have high hopes for that occurring, and I think it will be very beneficial to the Magnite platform. And I'm sorry, Robert, the first question again was?

Just want to take another crack at the CTV question about the inflection point. Was there any demand partner unlock, supply partner unlock that drove the variance versus your expectations for the quarter? Anything that may have happened in prior quarters that in retrospect, when you look at it, you're like, okay, that unlocked in Q2, but it ramped in a big way in Q4 beyond our expectations. Just wanted to get a sense of unlock or anything that was sort of beyond [indiscernible].

I would say broad-based across the board. Obviously, certain DSPs have become stronger. You look at the strength of an Amazon in the space, that's been impressive. Certainly, MNTN, we've talked about them in the partnership that they've delivered. But I think across the board, you've seen strength in DSPs. I think one of the things that could be the unlock, Robert, is the upfront negotiations. So they went stronger than anticipated. But the big question mark was how much was streaming going to be a part of it because all these guys, the big ones still run linear businesses.

And I think what we're finding out is streaming played a huge role in the upfront and you're starting to see that come to fruition because those dollars don't get spent until the second half of the year into the first quarter of the year. So I think that, combined with some of the strengths of particular partners has really led to outside growth in addition to the platform switch from the DV+ spending in the open web and now spending in CTV. You add those all together and you get turbocharged growth rates.

Our next question comes from Eric Martinuzzi of Lake Street.

Regarding the CTV outperformance, I think your comment on verticals was that there was retail strength, health and fitness, financial. And then you talked about weakness in auto tech and I can't recall the third one. But there was -- just wondering if your -- the guide has any change in the assumptions for those verticals. Is it status quo maintained? Or is there an expectation of recovery in some of the weaker verticals?

Yes. I think yes, I think status quo is sort of what we've been seeing. So I would say the trends that we saw latter half of November and December are kind of continuing across the board into this first quarter. So no significant changes on those trends.

Our next question comes from Omar Dessouky of Bank of America.

So Netflix, I think, recently said that they expect their ad business to double in size in 2026. So I wanted to ask you how you're thinking about your contribution from Netflix as you progress through 2026 and how that might affect the overall take rate of your business? And then I have a follow-up.

Sure. Yes. I think that Netflix has been a terrific partner. We anticipated them to exit this year as one of our top, if not top on a run rate basis partner, and that certainly has come to fruition. And so we are anticipating a bigger year for them this year given their aspirations in the space. And I don't -- from a concentration standpoint, the take rate varies, obviously, on the services that we provide. In some markets, we do more than others. And so therefore, I think from a blended standpoint, take rate isn't going to impact the overall up or down.

Okay. On Netflix in particular, so how do we think about CTV growth as we kind of progress through 2026, right? It looks like you had a nice acceleration for the last couple of quarters. Should we kind of think of an acceleration for the next few quarters as well as you try to upsell your products, as Netflix gets bigger? Is that kind of the outlook for how you expect the year to pan out?

Do you want to grab that, David?

Yes, sorry. Just clarify when you say CPV growth?

Yes. So year-on-year. So if you look at the year-on-year growth in...

No, on CPV -- I mean, we have CPM's take rate. I just want to make sure we're talking the same language.

Growth in contribution ex-TAC.

Okay. All right. Yes, I think -- I mean, I think we're still -- so there's -- so I think what you're getting at is sort of mix changes overall. And I think in our take rates. And so I think you're still -- I think our take rates on a blended mixed basis in CTV have shallowed out. So they're becoming fairly stable. But there still is a significant influx of what I would call premium inventory at our lower take rate tiers. And so I would expect -- and we're having the contribution ex-TAC growth rates that we are even at those lower levels.

So I would expect that bottoming out to sort of -- I think that continues. And then I think just from a mix perspective, we have opportunity to grow those take rates in the coming time. I wouldn't see -- I don't see a huge inflection an increase in that average take rate in CTV in the near term, but we're building the foundation and the opportunity to provide those additional services on the demand side and so forth where we do make a slightly higher take rate as we go forward.

Our next question comes from Zach Cummins of B. Riley Securities.

I'll keep to one question just given the extent of the call. But David or maybe Michael could address on this. Just curious of the strength you've been seeing with agencies, particularly in agency marketplaces. Can you talk about the opportunity that you have there, specifically as maybe more ClearLine adoption with some of these key agency partners?

Yes, Zach, we're very enthused by the adoption and the volume. These things take a while to get going. There's a bit of a sell-in process from agency to their clients. And so it's kind of a crawl walk run. And the ones that have been up the longest are at run right now and the others are in various stages.

So I think that super encouraged by the model, super encouraged by the contribution for the company and I think the stickiness is what really matters that when they build their business with Magnite as the backbone of their programmatic marketplaces, we become more than just a vendor or a partner that can be put in competition every quarter. We become much more of a partner that's a much more strategic longer-term partner, which isn't the easiest thing to do, particularly in the DV+ world. So they've been essential to our growth and the success of ClearLine.

This concludes our question-and-answer session. I would like to turn the conference back over to Michael Barrett for any closing remarks.

Thank you, operator. Before we close, I want to thank our investors and our team. To our shareholders, thank you for your continued confidence and long-term partnership. We remain focused on disciplined execution and building durable value. To our employees around the world, thank you. CTV becoming the majority of our business, the acceleration across streaming and our early leadership in AI-driven transactions are direct results of your innovation and commitment.

The shift towards streaming and automation is structural and still in its early innings as ad dollars move into CTV, they move into an environment where Magnite has scale, deep integrations and meaningful market share. We believe we are building foundational infrastructure for the next era of advertising, and we are confident of our best days are ahead. Thank you for joining us. We look forward to updating you next quarter.

I'll turn it back over to Nick to cover our upcoming marketing events. I'll hand those to [indiscernible].

Thank you, Michael. Yes. Sorry. So upcoming schedules, we've got Susquehanna Conference now virtually tomorrow. We've got meetings in San Francisco with Needham on March 5, Sydney roadshow on March 11, meetings in Boston with Bank of America on March 17, an investor lunch with Susquehanna on March 19, Kansas City with RBC on March 24, Dallas and Houston with Stephens on the 25th and 26th of March and then San Diego and L.A. with Wolfe on the 30th and 31st. Thanks again all for joining.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.

Good day, and welcome to the Magnite Q3 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Nick in Investor Relations. Please go ahead.

Thank you, operator, and good afternoon, everyone. Welcome to Magnite's Third Quarter '25 Earnings Conference Call. As a reminder, this conference is being recorded.

Joining me on the call today are Michael Barrett, CEO; and David Day, our CFO.

I would like to point out that we have posted financial highlight slides on our Investor Relations website to accompany today's presentation.

Before we get started, I will remind you that our prepared remarks and answers to questions will include information that may be considered to be forward-looking statements, including, but not limited to, statements concerning our anticipated financial performance and strategic objectives, including the potential impact of macroeconomic factors on our business. These statements are not guarantees of future performance. They reflect our current views with respect to future events and are based on assumptions and estimates and subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from expectations or results projected or implied by forward-looking statements. A discussion of these and other risks, uncertainties and assumptions is set forth in the company's periodic reports filed with the SEC, including our quarterly reports on Form 10-Q and our 2024 annual report on Form 10-K. We undertake no obligation to update forward-looking statements or relevant risks.

Our commentary today will include non-GAAP financial measures, including contribution ex-TAC or less traffic acquisition costs, adjusted EBITDA and non-GAAP income per share. Reconciliations between GAAP and non-GAAP metrics for our reported results can be found in our earnings press release and in the financial highlights deck that is posted on our Investor Relations website. At times, in response to your questions, we may offer additional metrics to provide greater insights into the dynamics of our business. Please be advised that this additional detail may be onetime in nature, and we may or may not provide an update on the future of these metrics. I encourage you to visit our Investor Relations website to access our press release, financial highlights deck, periodic SEC reports and the webcast replay of today's call to learn more about Magnite.

I will now turn the call over to Michael. Michael, please go ahead.

Thank you, Nick. Q3 came in strong, and we once again exceeded total top line expectations with CTV contribution ex-TAC growing 18% and 25%, excluding political. DV+ continued to perform well, growing in line with expectations. Adjusted EBITDA was also strong at $57 million, beating expectations, resulting in a margin of 34%.

Our performance in CTV was driven by growth of our largest publisher partners, significant traction with agency marketplaces, ClearLine adoption, positive SMB trends and programmatic expansion in live sports. Our most significant growth came from the industry's largest players, including LG, NBCU, Netflix, Roku, Vizio, Walmart and Warner Bros. Discovery.

Regarding Netflix, we've supported the expansion of their ads business to all ad-supported markets. The pacing of the Netflix ramp has gone very well, and we remain excited about our continued growth opportunity with them in 2026. Roku is also -- Roku also continues to be a very fast-growing publisher with the Roku Exchange, where Magnite is the preferred programmatic partner. This quarter, in particular, demonstrated especially great momentum where our partnership saw meaningful traction in sports and in attracting SMBs to their platform. We continue to explore areas for further expansion of our relationship to drive more revenue for them. Warner Bros. Discovery has also made great progress with its NEO platform launching in September. NEO, a new ad platform, will provide buyers direct access to Warner Bros. entire premium video inventory through one simplified and intuitive user interface where Magnite is helping to power transactions.

ClearLine continues to gain momentum with over 30 clients, and we recently rolled out a number of key enhancements to the product. Earlier this year, we announced that native home screen units are available through ClearLine. This update will enable buyers and curators to discover, package and activate inventory in one platform with the most comprehensive access to differentiated supply, unique first-party data and content signals.

Finally, we also announced plans to integrate AI assistance and Agentic workflows into ClearLine, which will be powered in part by technology from our acquisition of streamer.ai, which we announced in September. As I've mentioned before, the CTV advertising opportunity for small and medium-sized businesses is enormous, but it's historically been bottlenecked by complexity and high cost. To address this, streamer.ai gives small businesses the tools to create production quality CTV commercials in minutes and in an extremely cost-efficient manner. We're licensing Streamer to large media owners, commerce players, agencies, DSPs and other media buyers so they can help their SMB clients easily break into CTV advertising, and the response has been very positive.

We've announced two client wins since the acquisition, ITV, which is the U.K.'s largest commercial broadcaster, and Wolt, which is part of DoorDash with many more to come. We are seeing agencies becoming more active in their programmatic SPO efforts, and it's driving spend now. We have long supported agencies and have dedicated teams in place to support their growth efforts in this area. As evidence of this acceleration, ad spend from top holds grew nearly 20% in Q3 year-over-year.

A significant driver of our growth with agencies is from Magnite's powered buyer marketplaces. These private label marketplaces allow agencies to connect directly with publishers to develop curated pools of inventory that are enriched by proprietary data are DSP agnostic and maximize working media spend.

Our combined CTV ad serving and SSP platform, SpringServe, continues to be a significant differentiator for us with publishers. As well as offering a leading ad server in CTV, SpringServe plays a crucial role as the mediation layer for publishers. In addition to supporting traditional DSP to SSP connections, our unique position enables us to provide a direct connection for buyers directly into the ad server.

We just added Viant's Direct Access product to our list of direct integrations that include Amazon APS, Yahoo's Backstage and Trade Desk's OpenPath. SpringServe also allows publishers to maximize their yield by unifying demand from these direct ad server integrations directly amongst buyers that connect to our SSP.

Live sports continues to drive growth in our business, and we see tremendous potential in the future as programmatic adoption continues to escalate. We have seen new contributions notably from Disney of NFL and college football as well as Major League Baseball in the WNBA. Our live stream accelerator product, which was specifically developed for live sports is currently utilized by numerous partners globally. Leaders in this area are choosing Magnite because of our unique tech and continued commitment to invest in this area.

On the DV+ side of the business, Q3 contribution ex-TAC was up 7% or 10% excluding the impact of political last year. Our DV+ business continues to benefit from ramping partners as well as new client wins. A notable update is that our partnership with Pinterest began to ramp in Q3.

In particular, we've been really pleased with the progress of our Commerce Media offering as our roster of partners continues to grow. We've announced partnerships with Best Buy, RE/MAX, Western Union, PayPal and Connective Media by United Airlines. Commerce entities are attracted to the unique technology Magnite provides. They each have some form of O&O inventory and leverage Magnite DV+ or SpringServe tools for monetizing or ad serving. In addition, these entities possess valuable first-party data and are utilizing ClearLine to layer their first-party data on top of third-party supply for curation. The first-party data enriches the supply and allows commerce entities to package their media with data to extend their overall footprint.

Our fastest-growing format in TV+ in the third quarter was audio. We are gaining traction in this area and see it as a significant opportunity in the future. Earlier this year, Spotify announced its new Spotify Ad Exchange or SAX, and selected Magnite as its global programmatic partner. SAX has integrated SpringServe to power its omnichannel advertising across audio, video and native display. Acast, a leading podcast monetization platform, announced a partnership with Magnite during the third quarter as well. This strategic collaboration will make Acast podcast inventory, which includes more than 140,000 podcasts and more than 1 billion listens quarterly available to advertisers through Magnite's infrastructure.

Turning to AI. We delivered another quarter of progress and have an increasingly clear view of how Agentic technologies will show up across the industry and in our products. In October, an industry association comprised of some of the industry's best regarded executives introduced the Ad context protocol or AdCP, a proposed standard for how buy and sell-side agents will transact. When you look into the structure, you see that the agents are designed to operate on top of the transactional infrastructure that exists today, much of which we've built. As always, these transactions must be vetted, negotiated, processed and cleared in a privacy-compliant manner, jobs we excel at. We envision the new world as one where sell-side assets, in particular, are going to be even more valuable and especially Magnite with our strong publisher relationships, SPO partnerships and leading technology.

A key focus of our AI efforts involves the integration of the Model Context Protocol, or MCP, a generalized open standard that lets agents and LLMs connect to external systems and data. The AI business we recently acquired, Streamer, is built on MCP, and we've wired its foundation into ClearLine, enabling partners like the aforementioned ITV and Volt to generate CTV creative, receive campaign recommendations and place buys.

ClearLine is the first of several Magnite products to integrate MCP. This work will enable agents to that automate tedious tasks such as setup and adjustment to surface valuable insights and drive increased monetization while freeing partners valuable time. Beyond agents, we continue to strengthen the machine learning that powers many of our products and operations, improving optimization, raising win rates and lowering unit costs.

We're also applying AI across our internal operations, combining process redesigns with efficiency gains and investing in the platform services and training our teams need to serve our growing partner list without meaningfully increasing headcount.

Next, I want to provide an update on the Google Ad tech trial. As you likely know, Judge Brinkema concluded a two-week trial on the remedies phase of the DOJ's case in early October. The post-trial briefing has recently been filed and closing arguments are scheduled for November 17. After that, it will likely take some time for Judge Brinkema to issue a final order outlining the remedies she'll put in place. At this stage, having found that Google had illegally engaged in a series of anticompetitive acts to establish monopolies in the ad exchange and ad server market, both structural and behavioral remedies remain on the table, structural referring to the forced divestiture of parts of their ad tech business and behavioral being a set of rules and practices designed to rectify and prohibit Google's illegal anticompetitive conduct.

We think there are merits to both types of remedies and have confidence that the court will reach the right outcome. The remedy hearings in September did not change our positive outlook about remedies. Ultimately, our point of view is that any decision that helps restore competition and eliminates Google self-preferencing behavior will be a big win for the open Internet as well as Magnite specifically. To that point, as we've said previously, every 1% of market share that shifts to Magnite as a result of these remedies could mean $50 million of additional contribution ex-TAC on an annualized basis and at a very high 90% plus flow-through margins. Needless to say, we're watching developments in this case very closely.

On a related note, we recently announced that we had filed our own lawsuit against Google relating to its anticompetitive conduct. The suit, which seeks financial damages as well as other remedies, is a follow-on action to the DOJ litigation and builds on the allegations proved in that case. The complaint further details how Google's illegal conduct served to provide Magnite and other independent players the opportunity to compete fairly and grow their businesses while harming advertisers and publishers alike. We're at the early stages of the process, and we'll provide further updates on the litigation as it progresses.

With that, I'll turn the call over to David for more detail on financials. David?

Thanks, Michael. As Michael mentioned, we had a very strong Q3 with standout performance in CTV, achieving 18% contribution ex-TAC growth or 25%, excluding political, exceeding our expectations. DV+ performed well and was in line with our guide. Adjusted EBITDA was solid as well, growing 13% to $57 million and beating expectations, resulting in a 34% margin. We're pleased with these results, particularly the acceleration in CTV growth, which was significantly above market growth.

Total revenue for Q3 was $179 million, up 11% from Q3 of 2024. Contribution ex-TAC was $167 million, up 12%, exceeding the high end of our guidance range. CTV contribution ex-TAC was $76 million, up 18% year-over-year or 25% excluding political, exceeding the top end of our guidance range, as I mentioned. DV+ contribution ex-TAC was $91 million, an increase of 7% or 10%, excluding political from the third quarter of last year. This result was in line with our guidance range.

Our contribution ex-TAC mix for Q3 was 45% CTV, 39% mobile and 16% desktop. From a vertical perspective, health and fitness, shopping and technology were the strongest performing categories, while automotive was one of our weakest performing categories.

Total operating expenses, which includes cost of revenue, were $154 million, an increase from $147 million for the same period last year. Adjusted EBITDA operating expense for the third quarter was $110 million, in line with expectations and an increase from $99 million in the same period last year. The increase was primarily driven by personnel expenses and higher cloud and data center costs supporting the growth of our CTV business and investment in CTV-related features and functionality.

Our net income was $20 million for the quarter compared to net income of $5 million for the third quarter of 2024. As I previously mentioned, adjusted EBITDA grew 13% year-over-year to $57 million, reflecting a margin of 34%. As a reminder, we calculate adjusted EBITDA margin as a percentage of contribution ex-TAC.

GAAP earnings per diluted share were $0.13 for the third quarter of 2025 compared to $0.04 for the third quarter of 2024. Non-GAAP earnings per share for the third quarter of 2025 was $0.20 compared to $0.17 last year. The reconciliations to non-GAAP income and non-GAAP earnings per share are included with our Q3 results press release.

Our cash balance at the end of Q3 was $482 million, an increase from $426 million at the end of the second quarter. Operating cash flow, which we define as adjusted EBITDA less CapEx, was $39 million.

Capital expenditures, including both purchases of property and equipment and capitalized internal use software development costs were $18 million. In addition, as Michael mentioned earlier, we acquired Streamer for $10 million.

As we've discussed, our technology team has made significant progress improving operational efficiency and reducing per unit cloud costs, which is allowing us to manage significant increases in ad request volumes with modest total cost increases. As part of our ongoing efforts to enhance efficiency and maximize the value of our hybrid infrastructure, we've been evaluating the optimal allocation of on-prem and cloud resources. As a result, we decided to increase our CapEx investment by $20 million this quarter, specifically investing in two new data center build-outs in Ashburn, Virginia and Santa Clara, California to secure future data capacity needs. We now expect CapEx for Q4 and the full year to be approximately $23 million and $80 million, respectively. For 2026 and beyond, we believe this increased investment will lead to additional efficiencies and plan to reinvest some of the savings in critical growth areas. We expect CapEx to be in the $60 million range in 2026.

Net interest expense for the quarter was $5 million. Net leverage for the quarter was well below our goal of less than 1x and came in at 0.3x at the end of Q3, down from 0.6x at the end of the second quarter. Just as a reminder, the $205 million principal balance of our convertible notes is a current liability on the balance sheet as the notes mature this coming March. We plan to pay off the converts with cash at maturity and have sufficient liquidity to do so.

During the first three quarters of the year, we repurchased or withheld over 3.3 million shares for approximately $50 million. We have an $88 million remaining in our authorized share repurchase program, which we will continue to deploy opportunistically.

I will now share our thoughts about the fourth quarter and outlook for 2026. Consistent with last quarter and given the concentration of political spend in the fourth quarter last year, we will provide guidance both with and without political contribution ex-TAC to show underlying business performance. For the fourth quarter, we expect contribution ex-TAC to be in the range of $191 million to $196 million, which represents growth of 6% to 9% or 13% to 16%, excluding political. Contribution ex-TAC attributable to CTV to be in the range of $87 million to $89 million, which represents growth of 12% to 14% or 23% to 25% when excluding political.

In DV+, our guide reflects slightly lower growth versus the year-to-date performance due to a couple of factors. First, in October, we've seen some additional drop in vertical spend in automotive and some additional weakness in technology and in Home and Garden, indicating a slightly softening macro environment. We're also seeing some spend movement from online video to CTV, which makes a ton of sense given more competitive CTV CPMs and expanded SMB access to CTV inventory.

Lastly, we've seen some near-term pressure from a recent feature change by a top DSP partner affecting all SSPs. Despite these factors, we're still experiencing -- or expecting growth in DV+ and expect contribution ex-TAC for DV+ to be in the range of $104 million to $107 million, which represents growth of 2% to 5% or 7% to 10%, excluding political.

We anticipate adjusted EBITDA operating expenses to be between $112 million and $114 million and CapEx of approximately $23 million, including the incremental investment mentioned earlier.

For the full year 2025, which is implied in the Q4 guide, we continue to expect total contribution ex-TAC growth above 10% or mid-teens, excluding political, adjusted EBITDA to grow in the mid-teens, representing increased margin expansion of approximately 180 basis points at the midpoint. And we're raising CapEx to be approximately $80 million.

Now turning to 2026. I want to point out that our estimates do not include any potential market share gains as a result of remedies from the Google Ad tech trial. We currently expect contribution ex-TAC growth for 2026 to be at least 11%. We also expect to get back into our target margin range, which is 35% at the low end, inclusive of a sizable investment in people we are making to support our growth initiatives and CapEx to be approximately $60 million.

The third quarter was really positive for Magnite as we continue to see significant traction from our partners and from our strategic initiatives. I'm excited about the progress in our business and look forward to continued momentum into 2026.

With that, let's open the line for Q&A.

[Operator Instructions] Our first question comes from Shyam Patil of Susquehanna.

Nice job on the quarter. Michael, I have a question for you. A fairly kind of recent question or even discussion has been around The Trade Desk, Kokai and OpenPath and the potential impact to Magnite, just given some of the impact that we've seen it have on others in the industry. Can you just talk about this and maybe just also talk about your value add to the ecosystem?

Yes. Thanks for the question, Shyam. Yes, so in late Q3, Trade Desk made a software change to their operating system that prioritized OpenPath as a default path for supply. And since that occurred, we've worked with all of our major buyers, which include agency holding companies to reconnect Magnite as a preferred supply path. And as we noted in the script, Magnite powers many of the Holdco buyer marketplaces, so connection to Magnite is essential for their business. So there was impact.

We project impact for Q4 and that kind of softer DV+ guide that we put forth. But we do feel as though the bulk of the impact has already occurred that it's been limited to DV+. We've been able to work with our largest buyers, again, many of the agency holding companies to reconnect Magnite. And we feel confident going forward that, that will mitigate any negative financial impact in out quarters.

I will say we definitely support Trade Desk's goal of cleaning up the ecosystem and cutting out supply players that provide very little value. And I assure you this move will do that. But I also think this shows Magnite's importance to the buying community, the profile of the media that we supply, the services that we provide building their businesses, by our marketplaces on our rails and obviously, the importance that we bring to the supply side.

So I think that certainly, Magnite's proven its efficacy in the industry. And I think that the strength of those relationships will help us mitigate any headwinds that come from these changes or other changes for other DSPs.

The next question comes from Dan Kurnos of The Benchmark Company.

Michael, just to obviously tack on to that. I don't want to read too much into the press release, but you said DV+ continues to perform well, growing in line with expectations, driven by exclusive partner expansion. I think we all believe Amazon is your fastest-growing DSP partner, and it seems like you're gaining share across kind of DV+ with them as they expand. So maybe your thoughts as they press their own DSP and your partnership there?

And then secondarily, SMB is becoming a real thing now. I think people forget how deeply integrated SpringServe is with all of the DSPs, but just kind of your thoughts on where you're at from the SMB marketplace from an integration perspective, how you're attacking the market directly. And if you want to bring up some of the streamer AI stuff, again, that's fine, too.

Yes. Thanks for the question, Dan. Yes, listen, our spend from the leading DSPs remain very strong. We are closing that gap that we had highlighted multiple quarters ago, where the total ad spend was outpacing the contribution ex-TAC growth. And that's narrowed, but we still have a very healthy spend pattern. And with all DSPs, and Amazon, in particular, is having a banner year, and we really enjoy that partnership both with Amazon as a buyer of inventory and Amazon as a publisher where we can help them monetize the inventory there.

And the SMB is a very exciting chapter. Obviously, partners like Mountain are doing a phenomenal job and buying a lot of supply from us. And the idea of Streamer is to help folks like that, not just Mountain, but other DSPs that may not have the tools to attract SMB dollars or merchants or agencies. And so the idea is that we offer the streamer product to those folks that have direct relationships with SMBs. The idea isn't for us to be chasing SMBs ourselves, but to make sure that, that spend winds up on our platform. And that's why we're super excited about the Streamer acquisition because it accomplishes that.

In addition, as we pointed out, we get the side benefit of having this AI infusion, this AI-first way of thinking into our technology organization. And you see that already ClearLine is being built on MCP Rails. And so it's going to help accelerate our total kind of AI agentic focused business. So very, very happy with that acquisition.

Super helpful, Michael. And despite all the noise, really nice print and outlook.

Next question comes from Jason Kreyer of Craig-Hallum.

So, Michael, I appreciate the comments on AI, and you had talked about AdCP. You had mentioned the sell-side's role becoming more important. And maybe can you just expand on how Magnite's role changes in a more agentic world?

Yes. Thanks, Jason. Obviously, early days and a lot of this exists on whiteboards, but I do think that the shift that we've seen in the non-agentic world, the idea of first-party data owned by the large media companies becoming extraordinarily important and their desire to keep that data as close as possible to the supply side. So we're playing a huge role in the audience creation business today. And we see that as accelerating.

I think that the key really as you look at AdCP, you start to realize that the idea of inventory sitting way over here and dollars from buyers sitting way on the other side of an exchange, you start to see a world where they're comingled. And the -- as you start to look at the value, the idea of whoever has the access to that valuable supply as it gets comingled has a leg up. And so we feel very bullish about not just our prospects, but the prospects for the supply side in this new kind of agentic world.

Appreciate that. I wanted to follow up on live sports is kind of your perspective on supply and demand because it seems like there's a ton of demand for more dollars flowing into live sports. Curious the perspective you get from publishers moving inventory into programmatic or even moving inventory into biddable and how that progresses over time.

Yes. I mean it's -- thanks, Jason. It's accelerating for sure, and it is playing a meaningful impact to our revenue. again, let's be careful here. I don't think the Super Bowl is going to be programmatic anytime soon, but we're seeing a ton of inventory from college football. We're seeing NFL inventory. And so it's not just relegated to second-tier leagues or sports, if you will. And it's very, very early, right? Programmatic is not being utilized to its fullest capacity. So we're at the early stages of this, and we're pleased with our product lead in this area. We talked about LSA in the script. And Disney has really been a key partner in the expansion of our footprint in sports inventory programmatically. So we feel real good about where we stand in it and the TAM that's associated with it.

The next question comes from Shweta Khajuria of Wolfe Research.

Okay. Michael, could you please talk to where we stand on Google AdTech case? There is this rising level of expectation that maybe structural breakup is not going to happen and even on the behavioral side, perhaps expectations have come down a little bit. Is there any reason to think that? And where do you think -- how do you think it went? And any update on the time line from your vantage point?

And then the second question I have is on 2026 guidance. David, is it possible to comment on what's baked into your guidance and what would drive upside from your base case?

Shweta, it's Michael. Yes, no, we were very encouraged by the remedies hearings. It pretty much stayed to the script. The DOJ was pressing for structural changes. Google was recommending behavioral. And we've always, I think, been very clear that we don't view structural as the only way to win in this scenario that a level fair playing field is exactly what we're looking for, what Judge Brinkema is very aware of. And I think we feel very good about the direction it's heading, structural or behavioral.

So I think our outlook on it remains unchanged, and our outlook has always been quite positive, and we think it's a generational opportunity for a company like Magnite.

Great. And Shweta, on the guide for '26, I think a number of items. As a general matter, we've tried to be somewhat conservative given the continued tenuous nature on the macroeconomic environment. We have zero dollars baked into that for any Google remedy outcomes. Again, we're trying to be modest. So there's midterm elections. And so we've taken a fairly modest approach there. We'll see what kind of competitive races we have when that comes around.

And I think the other factor is we have a number of tailwinds around some of these deals that we've signed, Commerce Media, we've got these AI initiatives -- the challenge is it's so hard in this space to sort of peg the timing of when some of those might accelerate. And so I think we've layered in modest expectations on those fronts. And so I think that could also create potential upside there.

The next question comes from Laura Martin of Needham.

Yes. So, Michael, for you, you guys represent primarily premium CTV ad units. And what I'm interested in is there's excess supply in CTV generally because there's FAST channel selling CTV ad units at $6 and $7. My question is, can your CPMs and ad units, are they immune? Or is they're bleeding into those lower -- are they competing with those lower-cost ad units, which puts downward pressure potentially on your rev share over time?

And then for David, I'm going to push on you a little bit. You just raised the CapEx to $20 million in Q4. And in your last breath, you said you were adding FTEs. So what we've seen when guys raise their CapEx estimates generally is they cut FTEs. They use capital to actually replace FTEs. So why do -- why are you projecting both more growth in CapEx and faster full-time equivalent employee growth? I would love clarity on that.

Yes. Thanks, Laura. Yes, as it relates to the CTV CPM trends, we've seen a bit of stability for the last several quarters. And there are definitely trade-in bands, right? Like so you have the super premium, you have premium and then you have a broader batch of inventory maybe in the FAST channels.

And they've been pretty steady and consistent. You may have buckets of dollars flow in each of those channels. But generally speaking, I think people are aware of what the value of a Netflix ad is compared to perhaps an ad in an unspecified program in a free TV watch channel. Not that it doesn't have value, it just has a different value.

You also keep in mind that these folks have great first-party data, which helps really differentiate themselves from free TV, where folks don't necessarily have to be registered or you have their personal information. And so that valuable first-party data helps separate it as well. So, yes, I don't see this as a race to the bottom or an existential threat to our revenues in the coming quarters.

Great. And on the CapEx discussion, yes, good question. And so I'll bifurcate kind of the discussion into -- there are really two separate decisions. So the first side on the CapEx we had two primary objectives. The first was to secure additional space on the East Coast and on the West Coast for future expansion. And so as you know, there's some scarcity in data centers for space, and we wanted to make sure and lock down the expansion space that we need looking out the next couple of years. And so there's some overhead infrastructure and other things that are related to that. And this is all under the umbrella of optimizing our hybrid infrastructure.

So, as you know, in CTV, we run a hybrid infrastructure with significant activity on the cloud, but moving to a greater proportion of our activity on-prem, which is cheaper. And so a portion of that CapEx expansion went directly to additional machines moving on-prem to move processing volume AR processing from the cloud to on-prem. And so the financial result of that is -- would normally be margin -- greater margin expansion in 2026. So these machines are going in place late this year, early next year. And so that would be the normal output.

And what we're saying is as a separate decision, we have so much potential and opportunity on the CTV front that we felt like it was important to accelerate some of our investment activities. And so that is adding software engineers, product folks to focus and accelerate audience work, live sports development, ClearLine and then also AI implementation. So both in our product, but also for internal efficiencies. And so for some of those categories, you need some upfront investment to get the payoff in the future. And so it's kind of two separate decisions going on there, and we're just allocating some of that additional margin to some really important investment initiatives. Hopefully, that helps.

The next question comes from Barton Crockett of Rosenblatt.

First, I wanted to ask about the outlook in '26 on CXT growing at least 11% as you put it. and that would be including the contribution from political. So maybe ex political, it's at least like 9%, 10% or something like that. In 2025, your ex political growth rates, you say is mid-teens. So ex political, you're talking about a slowdown. And I'm just wondering what's behind that? Why the slowdown? Is that conservatism? Or is there something happening with autos or The Trade Desk tariffs? So that's the first question.

Yes. I think there's an element of conservatism in there. I would say also DV+ was particularly strong in 2025. And so there's sort of maybe a little reversion to the mean. We kind of target that at mid-single-digit growth. And so I think that's part of that equation as well.

Okay. All right. That's helpful. And then Michael, on the antitrust, I think one of the hopes is that there could be an impact in 2026, which was always predicated on the idea of behavioral that could be implemented quickly enough to actually matter in 2026. structural, of course, could be appealed and would take a long time. So it was never in the view that it could impact 2026.

So I'm just curious, based on what's happened with some of the discussion around some of the technologies, prebid maybe as a middleware, other things, how do you feel now about the possibility of there being behavioral remedies that could impact 2026 P&L for you guys?

Yes. Great question, Barton. Look, it's obviously not included in the guide because there's just too many unknowns. But we always have felt that we -- if the rulings were -- if they paced along the time line that we expected and they are, that a judgment would be rendered in 2026, first half of it, and the belief that even if there were the judgment was structural that behavioral remedies will be put in place throughout the appeals process.

So we still feel relatively good that we'll see impact from this in 2026. But I think we've always been pretty clear that no one should be thinking about it in the first half of the year, they should be thinking about in the second half of the year.

Okay. But just to follow up on that, technologically, are the things that are being discussed, looked at that you see as likely things that could be done quickly?

Yes. The most common ones, I think, are when it's related to the sell side, yes. The buy side probably requires a little bit more, but it would -- yes, I'm sorry. Unified pricing, yes. So that would be something that could be done quite quickly.

I was just -- I'm sorry, I was talking to our General Counsel, who is the expert in the matter, probably be answering the question in not me. But yes, the unified pricing would be a big win, and that is something that could be done quickly.

The next question comes from Zach Cummins of B. Riley.

David, I think you mentioned in the script that some of your CTV strength was actually partially driven by some of your budgets from like mobile video actually moving into that direction. Is this a dynamic that you think could continue moving forward or more kind of a onetime thing that we experienced here in recent months?

No, I think it's a dynamic that moves forward. I do want to be clear that was sort of in a bucket of a handful of items. I would not call any of these -- any kind of earth-shattering volumes. It's just a little bit more on the margin. But we do think, especially in the -- I guess, in the shorter term that there's a shift in budgets that will continue with the SMBs into the CTV space. It's a new TAM for the company. And so -- but initially, I think the initial budgets probably are a little bit cannibalistic and then I think it draws from budgets that are outside of our ecosystem. So I think it's net-net, over time, it's a very positive development.

Understood. And my follow-up question is just around Netflix. It seems like that relationship is progressing along pretty nicely. I mean any insight into how you think about ramping that up, whether that's just executing now that you're live in all their ad-supported markets or additional features you plan on helping them roll out on the ad platform? Any incremental color there would be great.

Yes. We've always been pretty clear about that's their story to tell. So they did highlight their success programmatically in Europe, international markets. And so that's the big driver of the relationship and will continue to be so. But yes, I mean, it's -- the relationship is incredibly strong and expectations are exactly where we thought we would be at this time of the year.

The next question comes from Robert Coolbrith of Evercore ISI.

I wanted to go back to the Trade Desk change. Beyond the OpenPath issue, it seems like they and others are somewhat focused on dealing with the issue of reselling, particularly just given the changes to prebid transaction ID of late. Just wondering, given your direct publisher footprint, if you think there could ultimately be an opportunity to win some share in the market as the demand side looks at the issue of reselling, particularly given that there's reduced transparency around the transaction ID.

Yes, it's a great question, Robert. And I think we're very excited about it. We're often painted as the foil to Trade Desk or Trade Desk encroaching on our turf. But I would say 99% of the stuff that Jeff does is brilliant, and we are so supportive of cleaning up the system. So if that is reselling -- and again, let's be clear, we don't believe Magnite is a reseller. I think the term applies to others, but we are a principal. We work directly with the publishers. We have a direct relationship, and we work with the top-tier biggest brands in the world.

So I think anything that helps clean up the system that gets rid of the obfuscation, that the redundancy, I mean, the traffic that we have to process that is redundant traffic that is multiple bids just skewing of inventory of the same unit across the system, anything that can clean up the duplication or reselling is something we lean into, and we would definitely be a beneficiary of that action.

Our next question comes from [ Tim Nolan of SSR ].

Michael, I'd like to come back to the discussion of the ad agencies, which you spoke about a little bit in your prepared remarks. There's been a -- there is a lot of change going on in the agency landscape, not to pick on names, but WPP and Dentsu are going through some turmoil right now. Omnicom and IPG are about to close this big merger. Publicis is riding high and it has a lot of its own in-house ad tech. I'm not trying to single out the agencies in terms of what you're going to reply to.

But my question is, with so much change going on amongst the agencies, does it create an opportunity for you to strengthen your SPO ties? What can you do with them given so much disruption in the market, including to their businesses? Are there things you can do to help them and in turn, things they can do that help you with supply path optimization.

Yes, Tim, great question. And I'll take a cut at it. We're also very fortunate to have our President of Revenue here, Sean Buckley. And so I'll let him jump in on it as well.

But yes, I mean, these agencies obviously are going through some challenges. Their media businesses in the programmatic space, in particular, have lost some relevance. They seeded a lot of that control to the DSPs. And so we have seen over the last several years, a very lean in increased awareness of supply side, how they can regain those relationships with those publishers that trust them, how they can renegotiate proprietary data lay over their own data, get preferred pricing. And all of this has to be done in an efficient manner, a technological manner, and that makes us so important in that piece for them from a strategic standpoint. So yes, I think our value is only growing in importance for the holding companies, and we are very leaned in. And as we cited, we have a big team that works with them on a daily basis.

I don't know, Sean, if you want to add any more color.

No, I totally agree. There's been a theme of the agencies really leaning in and working more with supply-side technology in a big way. I also think they've obviously either invested in or built out proprietary data products, and we've spent a lot of time integrating those products into our technology. And so we're very excited about the future we have with the agencies and holding companies.

The next question comes from [ L Niber ] of Lake Street Capital Markets.

Regarding Google, I'm wondering if you guys are seeing a shift in publisher RFP activity or deal flow towards Magnite?

Are you -- regarding specifically the ad tech DOJ trial?

Yes, correct.

Yes. No. So, to date, I mean, obviously, we have strong publisher relationships. But to date, there hasn't really been any movement because the structure remains the same, right? And so until that structure has either changed through divestiture or through behavior patterns, any of the share gains that we're seeing against our competitors aren't coming from Google. They're coming from the open web. And so all that is upside for us.

Okay. That's it for me. Congrats again on the quarter.

I would like to turn the conference back over to Michael Barrett, CEO, for any closing remarks.

Thank you, Cindy. I want to thank all of you for joining us today and for your continued support. Our business is performing well, particularly with our growth trends in CTV. We are encouraged by the momentum from our partners who include the world's leading streamers. Our team is constantly innovating and enhancing our industry-leading technology. I'm excited about the new functionality improvements that I discussed, which will further benefit our partners. We are very well positioned to build on our accomplishments and take advantage of the opportunities for growth and market share gains ahead.

I'll turn it back over to Nick to cover our upcoming marketing events.

Yes. Thanks, Michael. We look forward to speaking to many of you at our upcoming events. We have the SSR event virtually hosted by Tim Nolan tomorrow, that's a virtual NDR. We have the Seaport Virtual TMT Conference on the 17th of November, Craig-Hallum in New York on the 18th of November, Wells Fargo in the Rancho Palos Verdes Estates at -- on the 18th of November, the RBC Conference in New York on the 19th of November, Stephens virtually on the 21st, a West Coast roadshow on the week of December 8; and finally, Raymond James in New York on December 9. Thank you all, and have a great evening.

This conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good afternoon, everyone. We have people rolling in, but thanks for joining. Wrapping up the day here with Michael Barrett from Magnite, and looking forward to the conversation. Thanks for joining us.

Thanks so much for having us.

All right. Let's start with, just Magnite typically thought of as a traditional SSP platform. The business has evolved into a lot more than that, I think, over the last few years.

So just to start off with how it's evolved, where you're focused right now, the kind of the key business drivers and where you see the business going from here?

Yes. So I think when people think your traditional SSP kind of born in the desktop era, you thread together tens of thousands of websites in plug-in DSP demand and one looks like the other, pretty hard to differentiate in that world.

And so what we saw was the streaming opportunity CTV. And we were that the SSP that I just described at Rubicon Project. And so we decided we went through the traditional build buy partner scenario to try to get into the streaming business, and we decided the best path was buy.

And so we were -- we acquired Telaria, then we acquired SpotX and then we acquired SpringServe the ad server. So if you start to look at the assets that we have and the products that we have, it's quite different than the SSP of old. And what we are finding is the top streaming clients are looking for anything. But old -- SSP. They're looking for a new version of that. Some of them need answering. Great. We've got it. Some of them need elements of ad serving and an SSP platform. We got that.

And so we're finding it's a very modular customized taking everything off the shelf that we have, but people want to utilize it slightly different. And so the ability for us to be able to do that has, in large part 1 as a lot of these deals that we've announced, Netflix being a tentpole deal. And it was because of our capability and our ability to be facile in terms of how they think of us, how they can use us as opposed to just being this dumb pipe, the pipes and DSP demand.

Got it. If I just think about your business between the 2 segments CTV and DV+, which will dig into each. Just what's the breakup in terms of like clients or a lot of advertisers using both? Or are they kind of CTV only or DV+ only? And I don't know how to measure investors think about like the growth rates, opportunities, the take rates and some of the financials around that. And we'll dig into some of the details.

Yes. No, really good question. So there's definitely overlap between the 2 platforms from a publisher perspective. So if I'm Disney, I have a bunch of websites. I have online video, and I have all streaming don't use us for all that. And so well, the Paramount, the Warner Bros, Discovery, et cetera. But then there will be exclusive DV clients that have no streaming business and then streaming folks that have no legacy website business.

So I would say that the thesis of being able to be 1 platform that can house anything that can be bought or sold programmatic has played out. But particularly on the buy side, which, again, we don't get paid by buyers, but we have to run this robust marketplace, and it's a 2-sided marketplace.

And so agencies come to us and say, wow, I can get everything here. I can get some of the exclusives you have, and I can get all the CTV I want and I can get the DV+ I want. This is perfect. Like there's not many platforms that look like you, I will concentrate my spend on you.

So it's really played out this whole thesis of having a robust business across the board is really pay down on the buy side.

Got it. Okay. That makes sense. And so let's start with CTV or dig into it a little bit more. And maybe just broadly with the biggest growth drivers have been that business has grown really nicely. What are the most important things to know, and I want to dig into some of the partnerships and differentiation there.

Well, certainly, account wins leads to the growth. We are the programmatic -- preferred programmatic or exclusive programmatic partner of all the top streamers. And we also think of the CTV world as just that direct-to-consumer brands, the Disneys Netflix's, et cetera, but there's a thriving, vibrant streaming business on the OEM, so Roku, LG, Vizio, Samsung. And we work very closely with them as well.

And so we put ourselves in a position to prosper from kind of the tailwinds because we're in early days of programmatic early days of streaming, early days of streaming advertising -- early days of streaming advertising programmatic. And so the -- just the growth of programmatic, the adoption of programmatic by existing customers is going to be an immense tailwind for us in the out [ quarter -- orders ]. And then talk about the explosion of different amortizer profiles, like small- to medium-sized businesses coming on, that will be a huge growth driver because it will report in more demand, more demand will be biddable. It'll be a higher take rate for us because it's biddable.

So yes, we really think we're positioned incredibly well. You're not going to win in Netflix every year because there's not Netflix's every year to win. And then I should mention also the global expansion of all of our partners. So it's all started in North America. It all started as U.S. only. And now you have Paramount going international Warner's going international, Disney going international, Netflix International and that we just go along for the ride. We already have in place there. We've been thriving those markets in DV+. We have boots on the ground. We know the local DSPs, so we can just flip the switch and we're live.

What's your international mix?

75-25, but international growing faster than U.S. right now. .

Okay. Are there any roadblocks internationally? Like when you talk about biddable and more moving programmatic SMBs, whatever it is, like all these growth drivers in the U.S., are they similar internationally? Are they a few years behind?

Well, in some markets, more advanced. So if you look at Australia and New Zealand, where we've been -- we're the programmatic ad server of choice in that -- those markets -- they've been early adopters, so broadcasters are early adopters of streaming. And you look at other markets they're laggards. And there were sometimes when we look at a market and say, boy, I don't think we'll ever crack that. It's 3 broadcasters, they really enjoy 1/3, 1/3, 1/3 market share. There's no incentive for them to bring in outside tech.

They're very comfortable in the way they're doing business and then all of a sudden, the party ends because Netflix crashes, Disney comes in or Paramount, Warner's. And so all of a sudden, they start to scramble and they're like, oh, god, we actually have to have a stream with strategy. And I think you see it playing out in a market like France, where we had signed TF1, and now TF1 be distributed by Netflix.

And so it is going to be strange bed fellows in these emerging areas, but I think we're really well poised to take advantage of it.

Okay. Let's pull on this ride a little bit. I guess there's been a thesis that SSPs would be disintermediated, particularly with some of the larger streamers that have their own tech stacks. And you've made a number of partnerships with big tech players in the streaming side.

What is it about what you're bringing to them to help kind of investors understand that Magnite plays that role? With these larger players who have their own tech stack to what do you bring to the table that's allowed you to build those relationships.

Yes. And I think you have to look at it pragmatically. We're not a huge company, but we're 1,000 people regularly spend $60 million to $80 million in R&D, whether it's CapEx software, capitalized software development, cloud costs, whatever the case might be. and have been at this for 15 years. And so it's -- it'd be kind of silly to think that you could hire 10 crack engineers and look to switch and do what we do. And so I think that, generally speaking, what folks have centered on is, let's do what we do really well and what is that? It's the consumer experience. It's the is -- on the screen. If I want to do really cool special ads, I don't want my vendor telling me, oh, my ad server doesn't do that. So maybe I want to build my own ad server and I want to protect my data. The last thing I want to do is -- have any data leakage.

So I want to keep that really close. But if I'm going to go programmatic, and I want to introduce global DSPs, and I want to have 60 DSPs eventually when I'm up and going and build that layer of safety and build the brand safety and build all the tools, the collections, all that yield optimization -- and running huge auctions. I think generally speaking, they say that's where it feels that I can have a valued partner. So we haven't seen anyone go that next step and very few can build a server. So the vast majority, I think Disney is an outlier because of largely the acquisition of Hulu and that came with technology. So Hulu's it stand-alone? How do you have technology in Netflix, obviously, a huge technology shop, it's themselves. So but I don't know if you could look at a Fox or Warners and say, oh, yes, you're going to spend $100 million in building and ad server and justify that. So I think that we feel very comfortable in the value that we provide and the fees that we charge to provide that.

Got it. But even with Netflix, which is a technology shop, you have a relationship there.

Yes.

So tell us about that and kind of -- I think it's still early days and they're -- opening up there at ecosystem. How is that going, the role you're playing and how is that relationship building out?

Yes. So it's going swimmingly. I mean we're very cautious when we talk about partnerships, specifically a Netflix. We always say it's kind of their story to tell. So us parting what's already public, I think, is fair game. But we've walked people through the RFP process before. And when they reset the industry to -- and they chose to switch from Microsoft to a new partner.

They were very clear about what they were going to do and what they were good at, and it was all the things I described before, consumer experience, ad experience, they needed to build the ad server to ensure that they were always going to be able to do what they want to do for the consumer.

So don't -- you come in and selling ad answer. I need a programmatic partner that does the following. And definitionally, I would say 2/3 of the questions in the RFP related to ad serving. So we didn't have ad serving capability, it's going back to the modularity of our offering, we wouldn't have been able to win the RFP. So we didn't sell them an observer. We sold them the platform, but it's a platform that a programmatic ad serving capabilities.

And so we have been at it for a couple of years. They're hired tremendous talent. They build fast. We work very closely with them. We've gone into all the international markets with them. And -- from a size perspective, we've said on many occasions that there's very good chance likelihood that Netflix exit the year as our largest client, if not, one of our largest clients on a run rate basis.

Got it. Okay. And still early days with...

Yes. Very much so.

Another large recent partner is Amazon. Can you tell us a little bit more about that relationship? And does that have the opportunity to be similar scale size as Netflix?

Yes. I mean -- so already, it is, but you have to look at net -- Amazon, not necessarily just as the publisher but as the DSP. So Amazon is a DSP. Historically, had spent the majority of the dollars on Amazon owned and operated platforms. Than in the display area, they said, oh, why don't we follow these Amazon users when they go off Amazon, try to get them back on classic retargeting. .

And they were very high bidders. They knew the person, they knew what they abandoned the shopping cart, they would be the highest bidder. So they came to us and said, hey, can we work with you on your supply footprint so that we can buy Amazon users across the Open Web. So they became quickly and they only authorized a handful -- 3 to the exact platforms to do that with.

So of all the platforms they chose us as 1 of the 3. So we get an outsized share of their spend. And then CTV rolls along, and they say the exact same thing, all the big [ CTV ] advertisers are advertising through the Amazon DSP that are buying Amazon owned and operated prime, et cetera, they also want to buy a bigger footprint, hey, we'll come to you and we'll buy your CTV inventory because, you prove partner, and we know you and can trust you guys.

So on the buy side, they're 1 of our fastest-growing largest DSPs on this publisher side, men as a publisher, they've come to us and said, you know what, we probably could monetize your inventory by bringing in greater demand than just the Amazon DSP because traditionally, each is on DSP where you can get their inventory. So why don't we start, not with the top-tier stuff.

But we'll start with the Amazon Fire inventory, and we'll start with the inventory piece of that, that your partners Magnite the Peacock of the world, the MAXs they have inventory share. They have it over there. Why don't we work with you for you to grab it and help them monetize that. And so we're the only person that's allowed to do that for them.

And so yes, it's a multifaceted partnership and growing very fast, probably a bit of a stretch to say that we've become their in-house SSP and be there be the only SSP, but yes, we're -- we enjoy the partnership we have.

All that is done programmatically?

Yes.

And when you talk about that the shift to programmatic so the Amazon Fire inventory that's holding...

Yes, they're very much a programmatic first shop. And so they probably have the highest percentage of programmatic activity than anyone in that space does.

Got it. Okay. shift slightly and talk about agency partnerships and agencies, obviously, a big part of this ecosystem as well. And you've got some relationships there. I think you white label some data products for them. Can you talk about the kind of agency workflow and partnerships and what that opportunity is for you guys?

Yes. So I mean I think agencies have been unrecorded saying that they were a little casual in the early days of programmatic that kind of eroded a lot of their value proposition. So they used to be the guys that would help you plan your media and they would bundle together your spend and you add $10 million to spend $20 million had $100 million, I'll bring it to market as 1 and get the best deals. So I'm not only planning our media, I will also get the best priced media.

That all blew up in the programmatic world because they kind of see it all to the DSP. They're like, DSPs are great. They can buy across 200 sites, but meanwhile, they were diluting the spend of each campaign and the DSPs are making all the decisions. They are deciding what inventory to buy, they're deciding what price because it was open biddable. So it really hurt their media planning businesses. So they sat down and they said, what's a way to rectify this. And so they came to us and they said, you know what, why don't I get into the exchange business?

I'll create the GroupM Exchange, WPP media now. And I'll curate it. I'll get the best deals with those publishers because I know them all. and I'll run the tech is if I'm running it, but you wait label a tome so that I can then justify it to my clients well lit curated the household names that you know at the best rates and I will charge you a slight technology fee, just like you pay an SSP.

So think of me as your SSP exchange. And these are kind of all walk run because there's a whole level of trying to convince the client that it's in their best interest, but they've really taken off. And that model, the general model that I pictured or painted is being applied across all the holding companies now.

So does that mean the holding companies are actively building their own DSPs and then leveraging you guys for them...

They'll still use a DSP. They're building their own exchanges. And so they'll still use whatever DSP they've licensed and the real value they're bringing is this well like curated safe environment with really good media rates.

Okay. So I think to DV+, I mean, that business is growing as well. The slower growth area of digital. Tell us about that business and what's driving the strength there?

I think a couple of things. I mean, account wins. And so you would think it's super saturated. But every once in a while, you get a new type of client, like maybe it's an audio client like a Spotify or a social client like a Pinterest where all of a sudden, you used to think, well, that's not really open web this on TV, but it is. And so you get that kind of momentum from client wins, but you also get the impact of what we were talking about before and the supply path optimization.

So that -- those agency marketplace or the definition of supply path optimization. They're telling their clients that they're going to consolidate their spend on 1 platform. Now it's labeled their platform, but it's our platform that's powering it. And so in hundreds and millions of dollars get concentrated on 1 platform, all of a sudden, there's a virtuous cycle where publishers are then, well, I have to be on that platform and all that spends on that platform. If all that spends on that platform, it transacts.

And so I think what you see is us gaining share because of those dynamics where we're winning accounts but we also are consolidating the spend across the industry level. So we have much more ads been going through than our nearest competitor, and that just kind of starts the cycle of growth.

Understood. Shifting a little bit more talk about Google. I had a lot to say there. Maybe just to start with the news from the other day, if any thoughts on that, if that impacts you guys at all? I know the ad tech trial is the 1 that has more of an impact. What are your thoughts there expectations? Are you kind of beginning to leverage that at all? Are you waiting to see what happens? What's that opportunity? I know you put some numbers around it.

Yes, we think it's real and it's a substantial kind of generational opportunity. If you kind of look at it from a market share standpoint, the court documents gave us a great insight you're ever going to get into the size of the business, and it's slightly dated because lot of it is 2022, et cetera. But their market share in the DV+ world, open Internet, if you will, is 60% in RSV. And we're by far the largest second player and their biggest competitor. So quite a disparity -- so anything falls off the truck life is better than it is today.

The search ruling is really quite distinct from the ad tech. And our outside counsel has cautioned us to draw any lines like, oh, they're being lenient. They're not going to do structural behavioral remedies in the ad tech. They're quite different in both cases, they were determined to be running a monopoly. In 1 case, it was a legal monopoly but had to be addressed in the other case, in a legal monopoly. So that's the ad tech. So quite different.

So we -- the remedy hearing starts in a couple of weeks, and I should last a couple of weeks with a ruling to be quickly handed down -- it's called the rocket docket for a reason. It moves fast and the judge there is phenomenal. So there's a likelihood that by the end of the year, you kind of understand if it's structural, there's no question there'll be a appeals process.

So if they -- if the court dictates as remedy that you have to sell the ad server in the exchange, and you got to get out of the business, they'll definitely appeal. But in the interim, we've been informed that in all likelihood, behavioral remedies are put in place during the appeals process.

So the behavioral remedies would level the playing field. And if you look at our business, we see all the impressions that they see. We take those impressions to auctions just like they take them, we just win a lot less when they're running the auction. And so if these behavioral remods are put in place, while they're appealing structural, it should have the impact that we're looking for, for our business.

And as we said, every 1% shift in share is $50 million in contribution to the business at almost 100% margin flow through because we're already doing the work. And if the hire separate salespeople to build more boxes, it's already there to be had in a higher win rate.

Are advertisers preparing for this in any way that you're speaking to? And does any of this have an impact for YouTube as well? Do you think YouTube can open up? Or -- it's more just for that tradition?

Yes. Again, YouTube wouldn't be a part of the argument about the tech monopoly. Would they be more persuaded to be more open perhaps. But -- and from an advertiser standpoint, I think that generally speaking, the advertisers that use DV360 are often concerned why $0.85 of their dollar is going to at and not to all the other exchanges.

So I think they'd probably applaud it. And publishers have intimated that we always think of the -- our DV+ business in the Open Web is all auction-based, right? This crazy auction where we're processing trillions of ad requests, and it's true. That's the business. But if you're talking about a premium publisher like a New York Times or CNBC or Reuters, whomever they have a really big chunk of their revenue in what they call deals business.

So it kind of owns programmatic guaranteed where it's not biddable, they create a deal ID, and it's always on and buyers buy it that way, agencies by it that way. That business is largely out of our control because it's so much easier to do when they add servers connected to the exchange. If that connection was decoupled or we were able to, from a behavioral remedy, be able to access the deals and make it easy for publishers. I would venture that the vast majority would switch because they've been trying 2 for years. It's just too much friction in the process. So there's a fair amount of excitement around that as well.

That's the share gain opportunity you talked about? Or is that in the...

Yes. That in a fair auction really results in which should be not a 60% market share versus a 6%.

Okay. I think it was at earnings, you mentioned potentially civil lawsuit as well. What's that about? And anything you can share on that? I know some of the -- that's a sensitive topic, but...

Yes. No update there other than to say that we filed lawsuits, and we believe there's merit in those lawsuits.

Okay. Let's shift to Gen AI for a little bit. Let's start on the -- again, I guess, title and just the impact of search and Gen AI overviews, sending less traffic out to the open web and very regular question these days from investors on what that impact means for publishers and what it means for [indiscernible] for you guys.

Yes, it's going to be very real. -- prior to these chat agents, the ChatGPTs of the world in therapy perplexity. They Google used to spider your website. Every 2 times they spider it, they would send you 1 search referral. Mans down. So they would. So that's not too onerous, right? They would crawl your website, refresh their search results, and every second time they would send you a search referral traffic.

Right now, with Gemini baked into Google Search, the spider site 19 times and send you on search referral and it gets even worse ChatGPTs like [ 60-1 ] and anthropic and those guys are 600 and 900 to 1. So the spider residents and send you on search referral. So it's real, like and it's -- and they're already feeling it. Where are the pockets that are going to feel worse kind of the longer discovery places that aren't booked more the bigger brands, the ones we tend to work with have an audience, built an audience, people go to them with a regular habit. Sometimes they're logged in, sometimes there's user names passwords.

And so they kind of will fare better. They won't be immune from it. They could also have another leg in the revenue stool, the search engines answer engines. Now the Agentic search is now talking about compensating them on a license basis or a per query basis. they're actually been talking about creating an auction where they'd be it against each other for a certain query and see who the highest payer win we get to spider today. But at any rate, it's kind of encouraging that there could be another revenue stream because relying upon 100% in advertising hasn't been great for them anyway.

But we feel as though, from our business, we can't talk about ad tech in general, but Will we process so much inventory, that if our inventory on the Open Web have tomorrow and budgets remain the same. Our win rate would just go up because we'd be bringing fewer impressions, and it wouldn't impact our business.

And to frame it, our desktop web exposure is 17% of the business. So we're not talking about half of our business here. Our DV+ portfolio includes audio. So that's net search referral based mobile app, net search referral based, a lot of mobile web isn't search referral base. So I think that we feel quite comfortable that will bear well that's not to diminish the impact it could have on individual publishers. But I think because we have a broader portfolio in global kind of reach in nature, we're kind of insulated a bit from that downdraft.

Okay. Understood. Let's shift to internal Gen AI development products, maybe some of the key things you guys are working on how it's impacted pay, on the product and revenue generation side. And then the other side that's been talked about a lot is on driving efficiencies and cost savings and what you're implementing and seeing there?

Yes. So from the client-facing AI tools, we have several out today, more to come most of them fall kind of fall in the category of search and discovery. So being able to identify audiences faster, assemble audience segments quicker, being able to more efficiently find things that normally would take much longer to do.

And so days are kind of the heart of our kind of curation products where folks are able to come in, assemble custom audiences quickly on the fly and buyers are able to buy it quickly. And so we're really excited about those tools and excited about the list that we have that will be coming out. I think that there's also going to be wonderful opportunities from kind of small aqua hire M&A because this will lead into what we're doing as an organization.

I don't know about you guys at Citi or anyone else, but what we have kind of found through our journey of trying to make the workforce more efficient and more productive is that early-stage start-up guys that we found early on that had a particular service or product that the bigger guys didn't have 6 months later, the bigger guys had it.

And so you -- we do a lot of business with Amazon, a lot of businesses with Oracle, a lot of business at Salesforce, a lot of business with Microsoft and Amazon. And we're kind of finding that these guys, if they don't have it today, they're going to have it tomorrow. So it's kind of making our job a little bit easier in terms of testing and one of our biggest concerns is data leakage and the sanctity of our customers' data.

If these big guys have already gone through that process, and we can trust them explicitly then we are finding it a lot easier to adapt those big products as opposed to these bespoke boutique startups, which I don't think it's unimaginative. I think we're just finding great value from those other products. And I think it also creates, again, going back to Aqua hires.

A lot of these folks will need to find a home. There's great talent in those shops. And I think we're going to take full advantage of the balance sheet and the momentum of the company to be able to take grow our kind of AI presence that way, too.

Okay. So maybe just a follow-up on M&A. I was going to go there. So it sounds like a real focus on AI. Any other areas where you're focused on in M&A? I mean kind of kicked off this conversation, just talking about Magnite being a roll-up of rate of M&A products?

Yes. I think we've been pretty clear to investors for the last couple of years that the days were suing for defense are over. We have what we need. We can do it organically. It's been a journey to put it all together. We never intended to buy it and let it all run separately. And so that journey is at its completion.

Now it's innovation time, it's playing offense. That said, anything that can advance our product road map. If we have something on there that our customers desire is going to take 3 quarters to build, but the guy sitting right over there, we can buy the company and accelerate that. Those would be the kinds of initiatives I think you should look from us going forward, which will require increasing debt will all come out of cash flow will require equity. So I think that our M&A story is going to be a measured 1 going forward.

Okay. Any questions from the audience? Okay. So let me just follow up on that and just if you can just talk a little bit about kind of margin profile expectations, margin expansion anything like that, how you get there and kind of free cash flow generation? How should investors do that?

Yes. I think they should think of it as a highly leveraged business, and that is once we invest in the core infrastructure, the people, give everyone their raises every year. the simple fact is, is that it's a business that if you drop 2 more billion ad spend on top of it. And we've talked about all the drivers where that could come from that it doesn't require a $0.01 more of investment that we have the boxes, we have the capacity we have the individuals. We have the relationships with the customers. It's just processing more and If you look at ours is a pretty seasonal business because it's advertising if you look at Q4 that could look like great margins always go over 40% and adjusted EBITDA. And -- now and the costs don't go up. It's just more revenue dropping on top of it.

So I think we feel as though we've got what we need. It's not going to require -- it's not going to hire a lockstep $100 million investment to get the next $1 billion in spend. It's just going to -- and we're right at that cusp right? We're running ahead from analyst consensus on margins this year. And I think the work that we do in teaming cloud costs and bringing more on-prem coupled with just the momentum we have in the business that will bring more spend to the platform, it becomes a really attractive story from a margin standpoint.

Fantastic. That's our time, and that's a day. Thanks, Michael. Thanks for the conversation. Helpful.

Appreciate it.

Thank you.

[Audio Gap] Omar Dessouky, I'm a senior analyst and the U.S. Internet team. I cover 2 sets of companies, video games and interactive entertainment as well as advertising technology. The ad tech stocks that I cover are AppLovin, DoubleVerify, Unity and Magnite, which I've been very pleased to cover. And today, I have the CEO of Magnite with me, Michael Barrett.

So yes, we've been a fan of the stock for a while now, and the call seems to have been right. I think investors are very happy with the stock performance as well. But today, we want to catch up with Michael about 2 things. We're going to talk a little bit about like an update about the DV+ segment and the implications of the Department of Justice case. And then second, we're going to take a little bit of a different tack and talk about growth drivers for CTV, things that Magnite in particular, with its sales force has the capability to drive high growth for a very long time. So with that, I guess I'll start questions. Thank you.

Thanks, Omar.

Thanks, Mike, for coming.

So the result of the DOJ case came out last night, and they seem somewhat favorable to Google. Is there any read-through from that case to the ad tech antitrust case at all?

In that, we can piece together different courts, different judges, kind of different remedies that they were looking to seek. I mean both are -- the commonality is there's some structural remedies being proposed by the DOJ, but I wouldn't -- we'll be racking our brains for better part since the ruling [ came out for now ], and we don't see much of a [indiscernible] outside council, which probably is more important than what I think.

And obviously, since the last time we talked, it's now a couple of months later, I think the behavior remedies, the case that pertains to Magnite and supply side platforms, is going to be in September, like later in September, if I'm not mistaken, in September.

Yes, the 22nd, it begins, right? And the expectation there is that it's called the rocket docket for a reason. It's supposed to be pretty fast moving. The judge has been -- she's been exemplary in terms of our understanding of what is a very complex, murky world ad tech. So it wouldn't be without reason to have a ruling come down. Obviously, it's been found guilty, so sound about whether it's guilty or not guilty. It's whether or not the revenue should be structural or behavioral. And DOJ would like structural. Google has countered with -- we don't have to break it up. We'll behave this way, and this should be fine for the industry.

Frankly, we don't have a point of view because if the behavioral remedies are put in place, it's good news for Magnite. But the -- even if structural is recommended from the bench, we've been told that it's not without precedent that behavioral remedies are put in place during the appeals process, which you can bet there'll be an appeals process. So Instead of thinking about this as a 2-, 3-year payout when it finally settles behavioral remedies light up the minute, the ruling comes down and we think that's very beneficial to Magnite.

And since we last talked in June, have your thoughts about the timing of those behavioral [indiscernible] changed at all.

No, I think it's aggressive to think that it could be something that impacts the current year, but if behavioral remedies are put in place, it will definitely have an impact in 2026.

And I've also noticed that there are a number of lawsuits now against Google, [ OpenX ], for example, and then some civil litigation. What is what should investors read into from that?

That there's merit that we've looked at it closely that we believe there's merit in those suits in that we reserve our judgment as to whether to proceed or not there.

Got it. Okay. So DV+, your segment that focuses on the OpenWeb, there seem to have been some share gains recently. And I was wondering if the share gains are a function more of switching between vendors or more ad spend through Magnite or both.

Yes, it kind of gets -- one begets the other, right? You win big accounts like a Pinterest that excites advertisers to programmatic advertisers to run through Magnite because it's the only way they can get the inventory, more dollars run through it, the next big publisher a Spotify or [ RE/MAX ] sees that. And so it's just kind of a cycle that we've been through. We've been beneficiaries of this supply path optimization, where the big agencies, the holding companies, all of which are here today, they basically want to work with fewer vendors and want to have more strategic relationships.

And so with every one of the holding companies, we have that kind of preferred relationship which we're not talking about a modest shift [ to spend ], we're talking to hundreds of millions of dollars in shift. So if all of a sudden, you have that dollar if you have that spending power that bid density on your platform, it just begins more supply. So it's just kind of virtuous cycle that we've been benefiting from over the last 24 months.

Got it. Very, very clear. Yes. So it sounds to me like the industry structure is consolidating a little bit, the long tail is kind of coming on.

Correct. Yes, yes, there's no question. If you look at our growth rate and the growth rate of the industry that we're taking share. Some folks who said, oh so it's already happening, you're taking share from Google, but that hasn't budged. Google share is still at 60%, we're still at 6%. So the shares coming from the longer tail, as you pointed out.

So let me shift now to CTV where I think a big -- really big part of the thesis here, the long-term growth thesis is, although certainly, your comments on OpenWeb are very positive. So I think on the last call, you continue to mention that CTV ad spend still grows faster than revenue, okay? But you're seeing the gap narrow. So I want to maybe think out a little bit further a couple of years. Do you see a world where CTV revenue growth could greatly exceed CTV ad spend?

I could see a world where it would be on par I don't know if I want to see a world where our growth rate in ad spend is flattening and we're making it back up on margin. I think that what we would look for in ideal scenario is comparative growth rate that if ad spend is growing at 15%, ad spend is growing at 15%, so that it's equalized in that respect.

Okay. And correct me if I'm wrong, but the -- a big part of the revenue growth would be upselling, right? It's moving to higher take rate services and functionalities. So I'd like to dig into that a little bit. This leveling off or potentially slight outgrowth of revenue versus ad spend, there are endogenous and exogenous factors that would compel your growth. And I'd like to dig into this a little bit. For example, these would be things like sales motion and innovation. So could you describe to us a little bit the customer upsell process, both from your perspective as well as the customers' perspective.

Yes, sure. So we're fortunate enough to have relationships with just about everyone other than YouTube [indiscernible] where they're -- in most cases, they're primary if not exclusive, programmatic partner. And you have to think that the programmatic universe isn't kind of as homogenous as the OpenWeb. You have your linear broadcast -- legacy broadcast guys with streaming services, they have a different kind of complexion in terms of how they go to market, what they prioritize -- and then you have some of the digital first, more of the OEM guys, the Roku, Samsungs, LG, [ VIZIOs ]. People I don't think appreciate how much inventory that they have that they brought to market.

And then, of course, you have Amazon and Netflix that are kind of digital-first, but much more of a consumer-oriented streaming service. With the big streamers, the Disneys, the Paramounts and Warner Bros, they very much early days of programmatic, and they probably think it's early days right now, want to emulate the sales strategy that they have deployed for the last 50 years, and that is they have a very talented team of salespeople. They have deep relationships with the top 500 leading national advertisers, and they want to be able to pitch their dwindling linear along with the growing streaming to be able to yield maximize across the entire Disney portfolio, not necessarily top tick this impression on this show on this programmatic channel.

Where do we get involved in that in terms of helping them through that life cycle. Well, first off, the initial stages enabling programmatic. So plumbing. We're a plumber. We come in. We make it happen so that if they want to do programmatic and they want to do it, publisher sold, they are able to talk to their agency counterpart, set the price, set the targeting parameters and then we execute for them. And then it's largely where we find ourselves with those -- that cohort right now. But if you look at some of them, like for instance, to be at Fox, Pluto at Paramount, even Hulu at Disney, kind of different brands than the [ Mothership ], very much digital-first and very fast growing.

So much more open to, hey, what can programmatic do for me more than me trying to direct sell, biddable. And they're like No, we're not doing the open wild west like the web. I'm not having some slacky ad run in my high produced content. So generally speaking, the first step is invitation-only biddable Invitation-only auction. Those 80 advertisers, I'm comfortable with those 80. Let's see if bidding real-time on impressions yields greater than me selling at $15 because that's historically what I sold it for [indiscernible] what they're saying is Yes, it does, that there are some $70 impressions in there because that buyer knows that, that person is in market for a European luxury automobile, so they're going to be higher. And then there are some that are below $15. But when you -- when it does settles, there's better return on ARPU.

And so getting customers comfortable to be able to break what has been a 50-year cycle of selling as much as [indiscernible] upfront, and then worrying about the leftovers, now holding back from the upfront deliberately to yield maximize downstream that's a journey. And we -- I think our sales team does a wonderful job with data statistics with the help of the DSP community because they want to do that as well, trying to educate them on what the rate yield management is in terms of inventory management. Contrast that to the digital first, the OEM guys they're very big in timetable. And our role there is as their principal programmatic partner is to make sure that we bring as much demand as possible for them.

Okay. Very interesting. So let me make sure I think I understood that correctly. So there's a risk trade-off essentially in the mind of the publisher. They're used to doing 1 thing -- things a certain way. They're used to having a certain price knowing beforehand, some kind of a guarantee. Yet they're still reserve some and they're experimenting essentially. You're enabling that experimentation. And then there's also a consultative process where you kind of trying to move them along into more programmatic direction?

Yes, that's exactly right.

Got it. And is there, I guess, any way that -- how would we -- how would we think about the pace of that evolution of thought? Maybe any particular publishers that you would consider leaders or laggards if you don't want to mention them. right? Because I, as a sell-side analyst, I want to try to track the pace of movement here to try to figure out like how long it's going to be and eventually what kind of growth rate we can see.

Yes. It's a great question and without getting too much into specifics on individual media owners. You definitely see more experimentation when they have some flexibility on the brand. So in other words, I cited before, Disney's Hulu which isn't exactly equal to Pluto or to be being fast channels and Hulu being subscription, but certainly not -- it certainly doesn't have the legacy media brand associated with it, which I think gives them from a go-to-market more flexibility to say, okay, you want to do that, you can do that here.

And they can learn from that, and they can see [ OmyLord ] we used to sell it for $15. Now we're getting to $17.50 for it if we do 2/3 biddable, 1/3. And so I think the evolution is in pace. You saw a programmatic play a huge role in the [ afference ] this year. Every [ afference ] presentation programmatic was front and center because that's what the buyers want. The buyers will accelerate this as well. And that is we're really just talking in this conversation, the traditional broadcast buyer.

What's super exciting is there is a world of advertisers that have never been able to advertise on linear [ and ] broadcast or cable because of the barriers to entry. The spots were too expensive creating creative that can be accepted by the big broadcasters way too prohibitive. And so now you see with the utilization of technology, AI tools for creative for tracking for measurement for attribution, you're starting to see the growth of DSPs like Mountain, TV Scientific, bringing social advertisers to TV.

And that's really where the [indiscernible] because they only are biddable. They don't know how else to do it. That's their playbook from Instagram, so they want to take it over and apply it to TV. And because of the excess supply of inventory out there right now, the price points are low enough for those performance advertisers to be able to have a good experience. And so I think one of the stories in the next several years is going to be moving from an arena of 500 national advertisers to 10,000 advertisers, many of them SMBs that are advertising on TV for the first time.

So I come back once again to sales. I guess, how is Magnite kind of staffed for that opportunity? Like I think when we look at your results, I think that the margin guidance you gave implied that you're going to be investing in the second half. How do you think about the sizing of your sales force and basically to kind of potentially push this opportunity and accelerated growth for you?

Yes. I think we are fully leveraged on our sales team in that it's not a question of adding more bodies. Rare instances, we recently opened an office in [indiscernible] we opened an office in India, and we opened an office in Norway. Those are kind of rare examples because we're very global as it is. So those are just some spots where we wanted boots on the ground. But generally speaking, we have a buy-side team, we call it demand facilitation that talks to agencies that talks to marketers that have in-house they're programmatic. They talk to mid-tier agencies in kind of the flyover states. And they talk to the DSPs.

And so we are able to bring that demand with the current sales force that we have, that the that world that we're talking about in 3 years from now, at tens of thousands of advertisers, they're going to be aggregated by DSPs. They're going to be aggregated by merchant aggregators. And so it's our job to make sure the plumbing is there for them, that it works that they're getting the right signals, we are not going to deploy and are many people chasing 10,000 advertisers.

As it relates to increased investment in the second half of the year, and we really haven't signaled a number, but that relates more to infrastructure pulling forward infrastructure investments because of what we are seeing when we are able to take some of the traffic off the cloud and put it on our prem -- on-prem. So if we know it works, and we know we have budgeted for 2025 x amount why wouldn't we pull over some debt if that means that payoff is that much quicker for us.

Got it. And so there are 2 sides to this market, the buy side and the supply side. I think you ran through a little bit of both. I'm still -- I still would like to better understand the connection like you -- you don't actually make any money off of the -- I shouldn't say it that way, but you don't...

It's true. They don't pay us. They have a lot of people calling and people that don't us [indiscernible] business model.

No, I'm trying to get at, you invest, where you invest against switch customers and you consider both sides of the market, your customers to some sense, right?

100%. Yes, you have to -- in order to create the smart place for our publishers to get the -- our job is to make sure our publisher has access to all the demand that there's out there. And we're not doing our job. People aren't going to just be in a path to Magnite. And so we make sure when our publisher [indiscernible] world's demand is bidding on their inventory.

Got it. So the investment you make in facilitating demand helps increase the value of the SSP to the publisher.

100% and increases our new wins with new clients because they look at it and say, wow, all that spend is -- they see a public company how much spend goes through our pipes in any given year, like, wow, it's 3x more than anyone else in your space, we cannot be there.

Got it. Well, another driver of growth is innovation, and maybe we could switch to that. So I noticed we had a quick chat in the hallway here, and I was asking about the general availability of spring surf and you rebranded, it sounded like. And I thought that was an interesting anecdote about kind of customer perceptions in the sales process, but touches a little bit on innovation as well. Why did you guys decide to do that?

Yes. There were a number of reasons and just to back up a bit, spring servers are ad server in connected television. So it's not a general ad server. It doesn't compete with [ GAM ]. It competes with [ 3 wheel ]. So it just does streaming high-value video. And when we first brought it to market, we were like, hey, we have an ad server, and we have an SSP. If you don't need an ad server, just pick this, if you need an ad server, pick that. If you need an ad server and an SSP, pick them both.

And it started to confuse people because a lot of the capabilities in the ad server were also some of the capabilities that we had in the streaming platform. So what we said was, why don't we just bring it together, call it [ all spring serve ]. So it's an SSP without serving capabilities. And if you don't want it as a primary answer or just don't flip that button, just use it as an SSP. But what we have found is generally speaking, people use elements of the ad server even if they have an ad server because of what it can do, how it can increase monetization. And so it just made all the sense in the world to bring it together. It's also a huge competitive advantage.

As I cited [ FreeWheel ] is our largest competitor in that market. But if you look at any of the other SSPs, they don't have ad serving capabilities. And so by incorporating that into the it kind of cuts the legs out from underneath them because now they have SSPs that are -- do not have the feature set that we do -- and we don't argue about whether it's ad serving or not any longer.

Well, that's really interesting. So you're putting a more powerful tool in the hands of your customers whether or not they use the entire functionality sounds like which will probably put you in a better competitive position because they can...

Very unique competitive position and by going out there and [ selling ] it as such, it really makes them ask harder questions of the competition as to why they would you use them if they don't have XYZ feature.

Very interesting. So maybe another 1 that I heard you talk about recently is some of your investments in artificial intelligence. And I'd like to maybe open a discussion about how these new AI capabilities basically make your products more sticky? That's potentially a very huge theme. Could you walk us through your thinking there?

Yes. I think -- and there's [ still ] more to come, but the ones that we've kind of centered on kind of all fall in the same kind of neighborhood. And that is making traffic making sense of this vast amount of traffic that we have on the platform. usually through the lens of, hey, I'm looking for a mom of young kids help me do that. And so AI tools, agenetic tools are able to spider the tens of thousands of sites that we have on the platform and be able to look for context. Oh, there's an article about parenting. that's a good environment to put an ad in or a signal from that publisher that says, hey, it's a mom with young kids because we're a registered site, and we know that profile.

And being able to assemble that audience segment and put it in front of the buyer as fast as we can, leads to a better buying experience leads to better monetization for our disparate publishers that couldn't sell that segment on their own until we brought it together as 1 segment across 10,000 publishers and we participate in the economics of an enhanced CPM, if not an outright economics of a data deal that if we imported like ACR data and put it on it. So generally speaking, the agentic work that we're doing right now is in, we call it curation. It's in building audience segments, discovering audiences for buyers to help them find it, buy more from us, and we become that trusted source of where they want to buy from.

Does this apply to both CTV and OpenWeb?

Yes. Last quarter alone, we added 50 curators, which we would never -- these are folks that specialize in doing that and then they go out to an advertiser and say, hey, would you like that, and we actually process the transaction and participate in those economics. We couldn't have -- it wouldn't have been possible to do that on just 1 of the 2 platforms that's across both.

Okay. And when you say you added 50 curators, I'm not sure I follow what -- because I just don't know the industry [indiscernible]

Yes. It's a funny term. maybe think of it like this. think of them as old school ad networks where they used to have to go door-to-door to sign up a publisher takes out the special ad unit. Like our ad unit is this. It's nonstandard and it dances and giggles. And it publishes like, okay, sure, I'll sign up to be part of your network. Then they'd have to go to the agencies and say, hey, I got this great network of this great ad, would you like to buy it? And that's how it used to work. Today, that same person is a special creative, we'll just go to Magnite put it in the marketplace. Publishers will say, yes, it looks pretty cool. Click, click, click. They'll sign up 1,000 publishers and then we'll merchandise it to the buy side and they'll -- they're the technology piece to it. They made it happen because they came with the innovative technology sound motion, whatever it was, and they don't have to hire a sales team for the supply. They don't have the higher sales team for the demand because all the agencies are saying, hey, great idea, just [indiscernible] Magnite and we'll buy it off [ of ] Magnit because they've collapsed our partners to 2 partners.

So that's a big growing business for us, which is nice. But even more, I think, impactful is that all that used to take place in the DSP, right? That's what the DSPs to do in a third-party clicky world, assemble your audiences in your DSP and then buy those audiences from an SSP. Now you're buying the audience from an SSP and assembling the audience on the SSP which we've been talking about for the last 24 months, that is a trend that is significant for Magnet and significant for the SSPs because we were always 24 months ago, we were the dumb pipes and the DSP was the brains and we are commodities. And I think little by little, what you're seeing is, wow, those guys are a lot more strategic than I thought, and I think you're starting to see that reflected in the energy around the story.

When I was listening to you now, I think I heard you talk mostly about creatives and what these curators create is creative. But why does that make them curators -- because when I hear the word curator, help me if I'm thinking about it incorrectly, it sounds to me like curation means you're looking at the audience and assembling audiences on the supply side. So that was the part that I'm missing.

Yes. In some of them, are technology companies that allow for the -- they're your video player. So they come in and they don't pay me for the video player, give me a slug your inventory. Where the curation comes in is you have this cool ad unit. It's across 10,000 publishers now they've adopted it. But I don't want to just buy a cool ad unit. I want to buy a cold unit that reaches moms with kids. So then the curation occurs on top of it that [indiscernible] they use our tools exactly to slice it in and say, okay, for $100,000, I got [indiscernible]

[indiscernible] Okay. That seems pretty powerful. And you said you signed up 50, in a very short period of time. So how long is this ramp?

There's always going to be diminishing scale. I mean our goal [indiscernible] 1,000 and have 500 [indiscernible] any revenue because we're literally getting people into business. We're putting them into business. So we'll obviously focus on the folks that have real demand behind them, like, hey, we prove this. The agency wants it, if enough publishers adopt it, they will spend on your platform. So we're prioritizing it based upon how much spend we feel they can bring to Magnite. So the number isn't finite, but it's not infinite either.

So we've covered a lot of things here, and it seems to me that there's a pretty strong trend of kind of value converging on the supply side and specifically on Magnite. And when a solution becomes industry standard, it becomes more sticky like it seems like you're becoming you would think that at some point, you would have more pricing power. And I wonder like how that potentially looks? Is it purely like kind of an upsell mix process -- or what elements of pricing power does Magna have once it becomes such an entrenched player?

Yes. So great question. And I think that -- if you look at the 2 businesses, again, the DV+ business very mature, legacy Rubicon started 2008 public in 2012 or '13. So it's I think we celebrate in that business stable take rates. The idea is that our value has been earned over the years. in that. We don't go through this savage cycle every year where people are trying to pound down the take rate. It's like it's a given. So that, to me, is great because with all the spend that we're adding on to it, it's just once you get to a certain point, that's ripping it 90% of margin.

CTV, it's a story of upsell and not necessarily pricing power, like just turning to Paramount and say, hey, your 3% is now 8%, take it or leave it. It is paramount -- we've talked about the journey. You're selling a lot of stuff programmatically direct. One you try billable auction, we'll rent it for you. We'll only invite the same advertisers you want for that service, we charge you x. So I think it's more walking them up to programmatic food chain so that the -- at the ultimate level, the service that they'll be using from us is significantly higher take rate than the service we're using today.

And do take rates ever change at all right? I mean, like you said, at 1 time in the past, I guess people try to pound them down, but is there a potential that they would ever go up, even if for like a small minuscule amount -- or is the goal generally just to kind of set a certain service level at a certain take rate and leave it there, so it becomes industry standard and easy for people to transact on.

I think for our strategic relationships, we're very pleased with where we are today, and we're not looking to see the marketplace power of Magnite walk it up much higher. A lot of publishers in a world of hurt. We don't want to be the guy to put the other nail in the coffin, if you will. But when we aren't used as a strategic partner, and we're just thrown in the mix as just another SSP, the traditional header bidding, web display, browser-based I'm always going to keep 8 guys in there and Magnite, I don't care what you say to me, you're just another SSP, I'm going to run you in competition in a unified auction against everyone else. That's when we say then, well, there's no take rate then because if we win the auction, what do you really care if I'm taking 50% or not, it's a unified auction.

And so we'll monitor the take rate on our side with a variable take rate. If it's an auction with low we can take a higher take rate. If it's an auction with high demand, we'll take a lower take rate, but will variable. And you'd be surprised at how many people are indifferent to take rates in that world. They're just like, you're right. to unified auction, you win, you win. I wish I had the 50% take rate you took, but he still won. And so it's the highest price that I could possibly get. So the marketplace is telling me take that offer.

Interesting. Okay. Well, we have 3 minutes left here. And maybe I'll just ask the last question here. Netflix has been doing programmatic now for a couple of months, I think. Any early learnings that you have from your partnership there that you can let us know about?

Yes. So we're very careful when we talk about specific partners, in particular, in Netflix. So we always kind of say it's their story to tell. But parroting what they've already said is, I think, fair game. And it took a and then to move off of the previous partner, Microsoft, onto our stack and their stack because they built their own ad server. Folks in North America first then went to EMEA and now in APAC. And it's been a tremendous relationship. They've hired some amazing talent on the technical side. We work extremely well and close to them. We're onboarding more supply -- more demand partners in international markets that aren't necessarily just the same big guys that are in North America. And I think that they're new to programmatic, too. their ad business is 2-plus years old, but it was never programmatic. They didn't do any -- it was all direct. And so they're kind of new to the programmatic rhythms and are being very careful about how they perceive the consumer experience, all that kind of stuff. But as we've said based upon what we're seeing they're going to exit the year as our largest client, if not one of our largest clients. On a run rate basis -- on a run rate basis, correct.

Okay. Well, a lot to look forward to, great potentially structural opportunity here. So thanks again, Michael, for were coming and I really enjoy the interesting conversation.

Outstanding. Thanks, Omar.

All right.

Good day, and welcome to the Magnite Q2 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Nick Kormeluk in Investor Relations. Please go ahead.

Thank you, operator, and good afternoon, everyone. Welcome to Magnite's Second Quarter 2025 Earnings Conference Call. As a reminder, this conference is being recorded. Joining me on the call today are Michael Barrett, CEO; and David Day, our CFO. I would like to point out that we have posted financial highlight slides on our Investor Relations website to accompany today's presentation.

Before we get started, I will remind you that our prepared remarks and answers to questions will include information that might be considered to be forward-looking statements, including but not limited to statements concerning our anticipated financial performance and strategic objectives, including the potential impact of macroeconomic factors on our business. These statements are not guarantees of future performance. They reflect our current views with respect to future events and are based on assumptions and estimates and subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from expectations or results projected or implied by forward-looking statements. A discussion of these and other risks, uncertainties and assumptions is set forth in the company's periodic reports filed with the SEC, including our first and second quarter 2025 quarterly reports on Form 10-Q and our 2024 annual report on Form 10-K. We undertake no obligation to update forward-looking statements or relevant risks.

Our commentary today will include non-GAAP financial measures, including contribution ex-TAC or less traffic acquisition costs, adjusted EBITDA and non-GAAP income per share. Reconciliations between GAAP and non-GAAP metrics for our reported results can be found in our earnings press release and in the financial highlights deck that is posted on our Investor Relations website. At times, in response to your questions, we may offer additional metrics to provide greater insights into the dynamics of our business. Please be advised that this additional detail may be onetime in nature, and we may or may not provide an update on the future of these metrics. I encourage you to visit our Investor Relations website to access our press release, financial highlights at periodic SEC reports and the webcast replay of today's call to learn more about Magnite.

I will now turn the call over to Michael. Please go ahead, Michael.

Thank you, Nick. Q2 came in strong, and we exceeded total top line guidance with CTV contribution ex-TAC growing 14% or 15%, excluding political and DV+ growing 8%. Adjusted EBITDA also came in significantly above expectations at $54 million, growing 22% with a margin of 34% versus 30% in Q2 last year. Our CTV business continued to produce strong results driven by new and expanding partnerships, positive SMB trends, growth in agency marketplaces, and programmatic growth in live sports.

Let's go one by one, starting with the industry's largest streamers where we continue to deepen our relationships. Our most significant growth came from Roku, Netflix, LG, Warner Bros. Discovery and Paramount this quarter. Warner Bros. Discovery announced their NEO platform during the upfronts in Q2. This is a new programmatic ad platform that allows CTV buyers direct access to WBD's entire premium video inventory through one simplified and intuitive user interface. The programmatic component is powered by Magnite.

One of the most compelling future sources of CTV growth will be midsized direct-to-consumer brands, and we see that trend gaining momentum now. This segment of the market has been unlocked by a number of critical factors. The technology to run programmatically has matured and been implemented by the largest publishers Inventory is scaled and CPMs have normalized to drive higher return on ad spend. Additionally, AI has dramatically reduced ad creative production costs and targeting ease all making CTV become a desired and high-performing channel, delivering strong results for digital-first advertisers.

We are very pleased to see an SMB-focused DSP partner, [ Mountain ] go public this quarter, which further shows that the entry of SMBs into CTV is very real. We see the SMB segment exploding over the next 3 to 5 years through newer specialized DSPs at TV scientific vibe, streamer and more, and they'll all need access to premium CTV supply through an integrated ad server and SSP. That's exactly where Magnite is positioned to lead with its SpringServe product. We continue to deepen our partnerships with the largest agency holdcos as we recently announced another buyer marketplace with Dentsu in EMEA. This continues to show our unique strength with agencies who can leverage our end-to-end technology to create curated packages of CTV inventory to drive greater returns for their clients.

Next, I'll talk about live sports. You've heard me say that we are in the early days, and that remains true. However, each year, we cycle a sport season programmatic grows as an effective go-to-market tool to sell more inventory. I would position this as a growth opportunity that is great promise with most of the leading players choosing Magnite due to our unparalleled tech and continued commitment to invest in this area. Our newly announced deal with FanDuel sports network, who produces over 3,000 live sporting events year-round in local markets is yet another example of a partner who chose Magnite and is already operating at scale.

On the CTV technology front, we moved to general availability for our combined CTV platform with streaming and ad serving, now branded as SpringServe. As a reminder, this is a unique combination of our ad server and streaming platform that truly gives us a competitive advantage, while improving our internal operating efficiency.

Now to DV+, DV+ contribution ex-TAC was up 8% this quarter, driven mostly by new product functionality and also by early contributions from recently announced partners. Additional publisher launches that are expected to start or ramp this year include Spotify, T-Mobile and Redfin. We're also seeing share gains in DV+ from some of the largest DSPs. We have also seen significant success in the commerce media space. Our expanded partner list now includes Western Union, PayPal and Connected Media by United Airlines as well as recently announced RE/MAX. We will be monetizing RE/MAX's on-site digital inventory and activating their homebuyer via our curation tools, look for Commerce Media to be a continued growth area for Magnite.

On the DSP side, Magnite continues to benefit from supply path optimization. DSPs are rapidly consolidating their spend to a handful of platforms, platforms that can provide access to all types of programmatic media in a safe and transparent environment. Magnite is uniquely positioned to capitalize on this spend consolidation. A great example of this is our growing partnership with Amazon, both as a DSP and a publisher. We've mentioned before that Magnite is 1 of only 3 platforms approved for Amazon DSP spend which has resulted in significant growth. As a publisher, we are thrilled they chose us to help monetize their own inventory on their fire platform. We believe this is a strong indication of how important magnet is to generating demand in the CTV ecosystem.

We're pleased to report continued growth in our Curator product. Our curated marketplace enables global holding companies, data providers and specialized curators, whether focused on contextual targeting, optimization or advanced creative execution to operate and scale their businesses seamlessly on our platform across all inventory types and screens. Since the start of Q2, we've onboarded almost 50 curators with the vast majority transacting across multiple formats, including CTV, display and online video. This momentum underscores the market demand for sophisticated curation tools that live on the supply side.

Shifting to an update on AI. We continue to develop and embed AI capabilities as a core product focus. I'll provide an update on some of the capabilities we highlighted on our previous call as well as some new offerings. First, we expanded our neural net and machine learning systems to shape the outbound connections to our CTV buyers. Our industry-leading traffic shaping sends the most relevant available supply to bandwidth and strained DSPs, allowing them to more efficiently discover inventory and increase their spend on our platform. Second, our AI-powered audience discovery feature within our curator marketplace tool is expanding to incorporate third-party data in addition to our proprietary segments, making it even easier for users to identify high-value audiences aligned with their campaign objectives. And third, we're in the process of launching an LLM that uses AI to automatically categorize CTV inventory into contextual segments. Making it more addressable and driving increased campaign reach and monetization compared to current manual categorization methods.

We're very excited with the progress we've made in incorporating AI into our technology, and we'll continue to roll out AI agents and automated optimization as core components of our product road map.

The last topic I want to briefly cover is the antitrust ruling against Google in the DOJ case which we believe will likely change the entire landscape of the Operate Internet and drive significant upside for our DV+ business. As a reminder, the court found that Google had engaged in illegal monopolistic practices with respect to its ad server and ad exchange, also known as an SSP. It's clear that for years, Google has been engaging in illegal practices that resulted in an unfair auction within its ad server, which disproportionately drove volume through its SSP at the expense of rival SSPs like Magnite. The court also found that Google had illegally leveraged their control of advertising demand to artificially prop up their own ad exchange and publishers from freely choosing what SSPs or ad server to work with. We are highly encouraged by the court's ruling and believe that it will drive beneficial changes to the open Internet and result in a more fair and transparent process that yields greater returns for publishers and advertisers.

We remain focused on preparing our business for potential outcomes of the remedy phase, which is set to commence on September 22. In their initial filings, the DOJ is seeking both structural and behavioral remedies. On the structural side, they are seeking a divestiture of both Google's SSP and ad server. On the behavioral side, they have proposed a series of remedies to address Google's unfair auction practices as well as prohibitions on preferential routing of advertising demand or time demand access to publishers use of Google Supply side products. While the specific timing and nature of the remedies remain uncertain, and Google has already indicated an intent to appeal the decision, we believe any remedy that results in a more level playing field will be highly beneficial for our business and significantly improve our opportunity to monetize publishers' inventory and correspondingly increase our win rate. It's very possible that market share could begin to shift away from Google as soon as early 2026, as there have been indications that behavioral remedies will be implemented even during an appeals process.

We estimate Google's Exchange currently controls close to 60% share in the DV+ market. As the second largest player in this space, with share only in the mid-single digits. And given our leading technology and de publisher relationships, we believe that we are exceptionally well positioned to capture any shift in market share that occurs as a result of Google ceasing its legal practices without any meaningful changes to our existing cost structure. Based on our estimates of the market, we expect that every 1% share shift in the market could result a $50 million of additional contribution ex-TAC on an annualized basis.

One last thing to note, while the court's findings are focused on equitable remedies going forward, any civil damages that we could potentially realize would require us to file a separate action, which we believe has significant merit.

Before turning the call over to David, I want to point out that even with some lingering tariff pressures, we are expecting to see second half 2025 growth rates accelerate, especially when looking at CTV ex political. We also intend to continue to invest in our live TV, ClearLine and Curation offerings as we believe these represent a very attractive growth area where we can increase our market share.

With that, I'll turn the call over to David for more details on the financials.

Thanks, Michael. As Michael mentioned, we had strong revenue growth in Q2 as macro downsides were not as pronounced as initially feared. We saw stronger than market growth in DV+ due to several product enhancements and momentum from a number of recent deals we signed. Adjusted EBITDA was also significantly above guidance, growing 22% over the second quarter of last year with a margin of 34% compared to 30% last year. Very pleased with these results and in particular, the continued strong growth in DV+.

While some tariff-related pressures persist, the overall ad spend environment appears less volatile. Given our current view and assuming that this level of stability continues, we are reinstating our expectations for full year results, which I will cover in more detail later in my remarks. Total revenue for Q2 was $173 million, up 6% from Q2 of 2024. Contribution ex-TAC was $162 million, up 10% exceeding the high end of our guidance range. CTV contribution ex-TAC was $72 million, up 14% year-over-year or 15% excluding political and at the top end of our guidance range. DV+ contribution ex-TAC was $90 million, an increase of 8% from the second quarter last year and above the top end of our guidance range. Our contribution ex-TAC mix for Q2 was 44% CTV, 39% mobile, and 17% desktop.

From a vertical perspective, technology, health and fitness and financial were the strongest performing categories while auto was the weakest. Total operating expenses, which includes cost of revenue, were $151 million, a decrease from $153 million for the same period last year. Adjusted EBITDA operating expenses for the second quarter was $108 million, better than we expected and an increase from $102 million in the same period last year. The majority of the favorability in our guidance was driven by lower cloud computing costs and other employee-related expenses. As we've discussed, our technology team continues to make strong progress in reducing per unit cloud costs allowing us to manage significant increases in ad request volumes with only modest cost increases. Improving scale and operational efficiency remains one of our top priorities for 2025 and [indiscernible] the progress our tech team is delivering.

The majority of our 2025 capital expenditures will be used to support our hybrid infrastructure strategy as we shift additional functions from the cloud to on-premises. We expect these initiatives to drive meaningful margin expansion in 2026 and beyond, and we're seeing some early benefits now. Our net income was $11 million for the quarter compared to net loss of $1 million for the second quarter of 2024. As highlighted in my intro, adjusted EBITDA grew 22% year-over-year to $54 million reflecting a margin of 34%, which compares to $45 million and a margin of 30% last year. This was a result of both higher revenue and disciplined investment and cost management efforts. As a reminder, we calculate adjusted EBITDA margin as a percentage of contribution ex-TAC.

GAAP earnings per diluted share was $0.08 for the second quarter of 2025 compared to a loss of $0.01 for the second quarter of 2024. Non-GAAP earnings per share for the second quarter of 2025 was $0.20 compared to $0.14 last year. Reconciliations to non-GAAP income and non-GAAP earnings per share are included with our Q2 results press release. Our cash balance at the end of Q2 was $426 million, a slight decrease from $430 million at the end of the first quarter, decrease was due primarily to small timing differences in working capital flows. Operating cash flow, which we define as adjusted EBITDA less CapEx was $34 million.

Capital expenditures, including both purchases of property and equipment and capitalized [indiscernible] software development costs were $20 million. Net interest expense for the quarter was $5 million. Net leverage was 0.6x at the end of Q2, no change from the end of the first quarter. As a reminder, the $205 million principal amount of our convertible notes is now classified as a current liability on the balance sheet as the notes mature in March of 2026, we intend to pay off the converts with cash at maturity and have ample liquidity to do so.

During the quarter, we repurchased or withheld over 800,000 shares for approximately $11 million. As of today, we have $88 million remaining in our authorized share repurchase program which we will continue to deploy opportunistically.

I'll now share our thoughts about the third quarter and outlook for the full year. While the macro appears to stabilized somewhat, we remain cautious with our Q3 and full year expectations. Given the concentration of political spend in the third and fourth quarters last year, we will also provide our guidance with both with and without political contribution ex-TAC to show underlying business performance.

For the third quarter, we expect contribution ex-TAC to be in the range of $161 million to $165 million, which is 9% growth at the midpoint and 13% when excluding political. Contribution ex-TAC attributable to CTV to be in the range of $71 million to $73 million, which is nearly 12% growth at the midpoint but over 18% growth when excluding political. Contribution ex-TAC attributable to DV+ to be in the range of $90 million to $92 million which is 7% growth at the midpoint and 10% when excluding political. And we anticipate adjusted EBITDA operating expenses to be between $109 million and $111 million.

For the full year, we anticipate total contribution ex-TAC growth above 10% or mid-teens, excluding political, adjusted EBITDA to grow in the mid-teens and we are increasing our adjusted EBITDA margin expansion guidance to at least 150 basis points from 100 basis points previously and free cash flow to grow high teens to 20%. In addition, we expect total CapEx to be approximately $60 million for the year, although we continue to opportunistically evaluate an acceleration of incremental CapEx investment as we transition to on-prem.

We are pleased with our second quarter results with our continued execution on strategic initiatives, and we're confident in our ability to successfully navigate through the current environment. I'm also pleased with the progress our team continues to make in our tech stack cost efficiency efforts, which will help expand margins and support investments in growth areas.

With that, let's open the line for Q&A.

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Shyam Patil of Susquehanna.

Congrats on the great quarter and outlook. I had a couple of questions. First one, you guys have had a lot of exciting new partnerships and customer wins over the past few quarters. And it really seems like your positioning in the market is being validated pretty strongly, if not inflecting upward. Maybe, Michael, can you talk about this and just the broader momentum you're seeing?

And then my second question, Michael, I know you talked about Google in the prepared remarks. Just maybe what's your thinking in terms of kind of base case on what happens and kind of the benefit to Magnite? And then you talked about civil damages. I'm just kind of curious what that could look like as well.

Yes. Good questions. So yes, we have posted up a number of exciting wins and really thrilled with the traction in the marketplace. I think if you broadly look at them, particularly the ones on the CTV side, but not just related to CTV, you're seeing a trend where folks are utilizing pieces of our product stack to help build their programmatic business on, and this kind of modular approach that we can approach the marketplace is quite unique and it's not just a one-size-fits-all approach. And so I think what we're finding is success in that approach, success and the investments that we made in our product, the acquisitions that we've made. And we find ourselves in relatively rarefied air where the competitive set is quite lean at that point. And I would expect to see more continued success in that area.

As it relates to Google, it's kind of difficult to crystal ball it, just given the fact that the remedies are out there, but haven't been ruled by the judge. And so I would imagine at that juncture when the remedies are put forth we'll probably have a stronger opinion as to what it might look like. And as it relates to any possible litigation in the civil action, I just we'll stick with the verbiage that we use in the script, and that is we're looking at it, and we think there's a lot of merit there.

The next question comes from Shweta Khajuria of Wolfe Research.

This is Ken on for Shweta. Just one for me, what is driving the reiteration of the prior guide given the raise in Q3?

Yes, I'll take that. Yes. I think it's interesting. After our last earnings call, as we went through May and June, I think the overall ad spend market was sort of moderate, soft to moderate, but it was much more at least stable than what we had feared. So I think we kind of had bigger fears throughout that quarter. And there's -- even though the ad spend market isn't robust at this point of time, it's become much more stable. And so that's given us comfort to reiterate or to put back into place our perspective for the full year.

We're also super excited about, of course, the growth in CTV, you can see some of the acceleration, and we gave some numbers to back out political, so you can see the kind of organic growth and acceleration in that business but we're particularly happy with the DV+ business. We were initially more concerned that, that business could be more volatile and with potentially more downside. But the team has really done a fantastic job. We've got some new product releases. We're getting some more momentum on some of our recent deals. And so there's actually more strength, I think, in that DV+ than we even anticipated. And so a combination of all those factors helped us to feel comfortable that we could kind of get something out there for the full year. Again, assuming that this current environment kind of continues the way that it's going right now.

Our next question comes from Dan Kurnos of The Benchmark Company.

Obviously, a great quarter again, guys. So Michael, I mean, I guess I'll start it off and just say, yes, Google is getting sued. They're also trying to stuff the home TV+ industry into an AI mode box. So we can debate whether or not they should be allowed to put their crawler and their AI on one consolidated platform. But how do you guys think about the development of Agentic in the marketplace and your ability to continue to monetize DV+ if that becomes an increasing source of traffic and usage from consumers?

And then you spent a good amount of time talking live sports, Michael, and I appreciate that. And I guess, we've got [ ESP FDC ], we've got Fox B2C and Peacock has had an absolute killer upfront. And so how should we think about the contribution this year from live sports is it's almost all being done programmatically now like -- or at least the newer offerings. So just help us think through potential even as early as this year from that platform?

Yes. Thanks for the question, Dan. Yes so AI is definitely the Agentic chat tools that consumers are using business, they're using. There's no question that search [indiscernible] traffic has gone down for our clients that primarily browser-based websites. Important to note, and David gave the mix before in his part of the script, our business is pretty well diversified. We have a lot of mobile app business, obviously, CTV is impacted by this directly. And if you note the types of publishers we have, we have quite a lot of top brand globally known brands, media companies, where they truly are destination sites and weren't as reliant upon search referrals. And so there's a bit of protection there for them in terms of their future prospects for the business. And lastly, we do work with a broad, broad swath of top publishers produces an awful lot of ad inventory. We'll process plus $1.5 trillion ad requests today. I'd love to say we sell every one of those requests, but obviously, we don't.

And therefore, even if there was some deterioration in terms of traffic, which led to less adds going to auction. It probably just kind of increases our win rate as a percentage of traffic that we bring also probably lowers our processing costs. We haven't seen budget shift, we haven't seen buyers shy away from OpenWeb. And so I think we feel pretty good about where we stand today. And lastly, it's pure conjecture, but I don't think every one of these popular chat agents are going to be able to stand up and ad business besides of Google's, every one of them hiring 5,000 to 7,000 salespeople, the technology involved in it. They'll obviously have to have an ad play. And I fully anticipate that we'll be able to play in that game as them as publishers and us as sources of demand. So it could be new found publishers for us.

And as for Live Sport, yes, it is early and look at it's super encouraging that the sports rates are being won by streamers consumers have cut cord and they voted that streaming is the way to go. The FanDuel isn't insignificant, as you know, they are a huge regional sports network in baseball, and we are participating in that as we speak. And so I think that -- we'll be able to dimensionalize the numbers in the not-too-distant future, but it's still pretty early days in terms of contribution.

The next question comes from Jason Kreyer of Craig-Hallum.

So a question on the DV+ side. You've seen some really interesting engagements with platform companies earlier this year, Pinterest last quarter, companies that have historically filled ad slots internally. So just curious like what is happening on that front? And why is Magnite finally getting a seat at the table where you haven't before? And if you think this trend continues to other platforms?

Yes, great question, Jason. I mean from our observation, I think 1 of the things that folks have come to realize that own platforms like that, that maybe we're trying to run kind of a walled garden approach and that only demand source by their direct teams or any self-serve tools that they would have, which the only demand that could come. And I think there's just sort of 2 kind of revelations. Number one, you're severely under monetizing your inventory if you're not plugging in third-party demand, and I think some folks have learned it the hard way. And the second is there's less and less of a desire among the advertising community to kind of do these direct kind of historically high COGS way of interacting with sales folks.

And so I think programmatic is definitely desired by agencies, desired by marketers. And they have gotten very comfortable working with a handful of partners, thankfully, Magnite one of them. So when folks do go to open up and they talk to their agency partners and their marketers they tell them, well, most of our business runs on Magnite. And so it kind of puts us in a pole position to be their inaugural partner as they open up. And yes, we're thrilled with the announcements you've made and it would completely expect more announcements to come.

Appreciate that. And then just a quick follow-up. So Netflix has fully rolled out the Netflix ad suite. Just curious, as you're integrated in that, how that process has gone for Magnite? And if there's been any incremental visibility into what your role looks like?

Yes. It continues to be an incredible partnership. We're thrilled to be a part of their story, emphasizing the fact that it is their story. So we just reiterate the things that Dave talked about and you're right about the rollout and our presentation in that rollout and we maintain what we said all along that they're a very important revenue client for us. And as we exit the year, we feel comfortable in saying that they could be one of our biggest clients on a run rate basis.

The next question comes from Barton Crockett of Rosenblatt.

I wanted to probe a little bit more some of the antitrust commentary, which obviously holds out a transformational kind of opportunity for you guys which makes the commentary about 2026 kind of interesting. The idea that behavioral remedies could be implemented while an appeal is outstanding. What is your basis for suggesting that? Is that some commentary from the judge or some interpretation of legal precedent. What is your basis for thinking that, that could in fact happen, and we could, in fact, begin to see this next year?

Barton is luck we have it. I have our General Counsel in the room, and Aaron is going to answer that for you.

Yes. I would say that in a case like this, where the court is found that there's a legal practices that need to be rectified if there were remedies put in place now, pending an appeal there's no reason why a court wouldn't want those revenues to take place as soon as possible to remedy the illegal conduct, notwithstanding the appeal. But that being said, there's obviously a lot of unknowns here as well. So we're, like everyone else, anxiously awaiting the decision. But I think that based on guidance we've received, there's a very realistic possibility that the behavioral remedies would be in place during the state of an appeal.

Okay. So you've received some guidance that supports us. Okay. And then in terms of just on the legal front since we have the attorney here. The idea of looking at the merit of civil litigation for the damages that you guys have suffered, what would be kind of the ideal timing to think about that, knowing that Gannett's already filed knowing that there could be a statute of limitations and yet there's some benefit to having violations found by the DOJ. So what would be your sense of what would be kind of the [indiscernible] in terms of timing if one were to pursue something like this?

Yes. I think just as Michael said, at this time, we can't really comment any further on timing or specific intentions other than we're obviously considering all our options, and we do think there's a lot of merit. And as you've mentioned, there have been other participants that have already filed suit. So we're clearly aware of that and honoring it.

Okay. All right. And then if I could switch a little bit to kind of a related issue. So DV+ has been trending positively while the network business, the Google reports has been negative, do you think those 2 things are related? And are we already beginning to see some of the benefit to DV+ from the market digesting the issues at Google?

Yes. Interesting question, Barton. I don't believe so. I think they're not correlated. This has come from a lot of -- as you know, relatively new to the story, but DV+ has been a journey for us, and I just couldn't be more proud of the team behind it. And it is a whack-a-mole business. It is 1,000 things on your checklist and then even the next checklist and it's 1,000 and so little things that matter. And I think our team is just operating at such a high level and the Magnite story resonates in the marketplace. So I really do think that if there's share shift, it isn't coming from Google, it's coming from our competitors.

The next question comes from Laura Martin of Needham.

Congratulations on your numbers. I'd like to start with the Amazon comments. I was really intrigued by your Amazon is because back to your point, you both can sell their inventory and you can use their DSP interacts with you. Do you think over time Amazon could be a bigger client than Netflix for you from a revenue point of view?

Laura, it's Michael. Great observation, hard to speculate. I would think that, that would be pretty far fast to think that anytime soon that they would open up their owned and operated so that it would equal the Netflix opportunity. But we are elated to be a partner there on both sides of the marketplace, and it's certainly a meaningful relationship.

That's all. And then on [ Mountain ], I agree with you. I'm very excited about the opportunity for small and medium businesses coming to Connected Television. I thought it was interesting that you brought it up because I thought of Mountain went direct and got direct ad units from Paramount and Peacock. And it sounds like from your comments that they are actually their DSP that they're actually buying ad inventory from you. So can you just confirm that?

Yes. And I can't speak for the entirety of their business. But for years now, they've been a classic DSP running through Magnite to get access to CTV supply. And you have to keep in mind, Laura, that you still own me $5 in that bet when I bet that small to medium-size businesses will make up a big part of CTV and you said they wouldn't.

And I'm happy that you're right and that I'm wrong. Thank you.

The next question comes from Matt Swanson of RBC Capital Markets.

Great. David, maybe we could start on the outperformance that we've seen in the margins, especially on the side you're talking about kind of getting your public cloud and your on-prem data structure in order. What about the margin improvement do you think is sustainable in terms of maybe like spending kind of like a new base rate? And is there anything about the outperformance this quarter, year-to-date, that is more onetime in nature?

Yes. There's a couple of variables at play here. For the quarter's performance, there was a component of that beat that I think is sustainable going forward. Part of that was related to some [indiscernible], which were more of a timing basis. And so those will come back in Q3, and so we factored that into our guidance. And then the other variable is we are adding some investment on our engineering and sales teams in the latter half of the year to really focus on some of our high opportunity areas in ClearLine, Curator, Live Sports and so forth. And so we'll still have some margin -- some of the of the gross margin benefits will be offset by some of those other investments and changes. But overall, we're still early in this process. It's first or second inning, I think, in our opportunity on the tech stack costs. And so there's a lot of work and analysis going on right now, looking at potentially accelerating some CapEx investment and other things. And we'll -- we're working through that and have a much better visibility as we get further towards the end of this year.

That's really helpful. And then, Michael, maybe a high-level CTV question. I kind of think back to 2021-ish time line when [indiscernible] came in. And it feels like so much of the way the market's developed is kind of the way that you or we all do for with everyone being ad supported now, you guys now partnered with, I think, it's 29 of the top 30 publishers seeing SMB spend come in Live Sports switching over. Like what do you think are the major limiting factors or I guess, chokepoints in demand coming faster to CTV at this point?

Yes. Great question, Matt. I think the one I put my finger on is there's still linear around. I mean core cutting continues to accelerate. But so the largest players in the streaming market are also the largest broadcasters and therefore, there's this balancing act of trying to feed to malls. And so it just isn't as pure swish coming over go-to-market practices, we kind of prohibit sometimes just buying streaming you have to buy the programming across both platforms.

And I also think some of it the industry don't fall in streaming. Measurement, it remains to be a big challenge, right? You're going through upheaval right now with Nielsen's Panel and being able to tie the traditional measurement from linear to streaming is a challenge. Attribution is something that everyone is working on, but there has to be common standards. So some of it is the poor brand manager that for years has spent money on broadcast now spending in linear in asking the right questions like, well, how impactful is it? Is it better? Is it worse? Is it the same? And as an industry, we've got to work -- we've got to work harder at making that answer easy for folks to spend.

Next question comes from Robert Coolbrith of Evercore ISI.

Two, please. I wanted to go back to Shyam's question on the partner [indiscernible] and the strength there. Maybe adjacent to that, if you had to take a weighted average right now across the partner set in terms of where they are on programmatic penetration, in terms of percentage [indiscernible] however you want to put it. Maybe if you could talk a little bit more about that and what you think can unlock or accelerate more engagement from those partners with programmatic?

And then a second one in relation to the Google ad tech outcomes, assuming we do get your meaningful remedies, equitable revenue that you put it. Are there any other product opportunities, market segments or regional opportunities that you might choose to lean into in a scenario like that?

Yes. Thanks, Robert. Yes. On the first one, if you go back 2 years ago, was definitely the belief in the marketplace that upfronts were kind of the enemy of programmatic that marketers are committing upfront dollars and that necessarily means it's direct sold by the publisher, and therefore, it's out of the hands of programmatic. And if you fast forward, you go to any agency -- any media companies upfront presentation being lead with programmatic capabilities. So it's definitely getting there. Buyers want it, sellers want it as well. It's just that there's broadcast TV has been sold for well over 70 years, and it's -- there's a way of doing it the industry set up to do that.

And there's obviously some hesitancy to lean 100% in hesitancy to play with biddable because, hey, upfronts, upfront, biddable might be better, it may not be better. But little by little, the guys are doing it. And you see guys like Hulu that have been at it for longer than anyone and how advanced that they become and new entrants that come into the industry, whether it's Amazon or Netflix that are just more technology-focused and programmatic first focus.

So I think you're seeing an acceleration and we really do believe in the future where it can be bought and sold programmatically in an extreme environment, it will be, and it will be biddable and it will be performing for the advertiser, and it will be the best ROI for the publisher. And I think we're, every quarter marching closer to that world.

As it relates to Google, the question was are there other opportunities that would be opened up? And I think that it's possible, but I really do believe that if all we do is stick to our knitting and there's a share shift of what we do today from their 60% in our high single digits that will keep us fine for a number of quarters before we had to look at edge cases where we could pick up additional revenue.

The next question comes from...

I was just curious about some of the AI capabilities you're developing on your own platform. Can you just speak to specifically the LLM you were talking about kind of the use states you could drive on that whether it be efficiency or incremental revenue?

Yes. So in that particular instance, what we cited was the ability to crawl through content video content primarily on the CTV platform and it really is amazing and it really does hold back spend, how difficult it is to find consistent labeling of video, even especially in libraries. And so part of the challenge has been, if I want to be in a certain environment in a video show, hobbling that together through mechanical ways of like looking at taxonomies, the taxonomies are different between different media companies. So if you can build this agent that can spider all the content and pick up the signals that you're looking for and you can craft and create your own segments on the fly in real time it saves a ton of time for discovery.

And obviously, you're now getting a bigger targeting targetable audience which will lead to more revenue spent on the platform. So super excited about that particular use of the LLM, but there'll be many, many more that we'll be able to tack on to that.

The next question comes from [indiscernible] of Lake Street Capital Markets.

Congrats. In regards to M&A, are there any areas of the technology platform that are of particular interest?

Yes. Great question. I think our stand on M&A hasn't really changed much in the last 1.5 years, and that is we really truly believe we have all the assets that we need that our success can come organically. That said, like any technology company, we have a road map that is far greater than what we can actually execute on in any given quarter. So if we were able to come across an opportunity where we could advance that road map, through acquisition, it's something we would definitely entertain.

But to size that, I think aquahire not swing for the fence huge purchase. Again, we went through that phase very happy we went through that phase, but very happy we were not in that phase any longer. So I think that's what you should expect from us from an M&A standpoint.

Awesome. That's it for me, and congrats again.

This concludes our question-and-answer session. I would now like to turn the conference back over to Michael for any closing remarks.

Thank you, operator, and thank you all for joining us and your support. We feel very good about accelerating growth trends in the back half of the year, aided this year [indiscernible] by the numerous new and expanding partnerships. We're also excited about our DV+ opportunity as we look forward to the judge's ruling on remedies in the Google trial.

I'll turn it back over to Nick to cover our upcoming marketing events. Nick?

Thanks, Michael. We look forward to seeing many of you at our upcoming events coming up. Evercore Virtual MDR is tomorrow, [ e-Bank's Conference ] in Park Cities on August 11 and 12. [indiscernible] Virtual TMT Conference on the 13th. Rosenblatt's Virtual Technology Summit on the 18. B. Riley meetings in L.A. and San Diego in the 19th and 20th. Wells Fargo meetings in Baltimore and Philadelphia on the 26 and 27. BofA in New York on September 3. Benchmark in the City on September 4. B. Riley's Conference in New York on September 10. The Wolfe Conference in San Francisco on September 10. Yes, we will be in both cities at both times with different teams. Lake Street Conference in New York on September 11. Craig-Hallum meetings in Milwaukee and Chicago on September 17 and 18. Stephens meetings in Houston on September 22. Rosenblatt meetings in Dallas and Atlanta on September 23 and 24. And Redburn meetings in Denver on the 30.

Thank you, and have a great evening.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.