Good evening, and welcome to the Magnite First Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Nick Kormeluk, Head of Investor Relations. Please go ahead, sir.

Thank you, operator, and good afternoon, everyone. Welcome to Magnite's first quarter 2022 Earnings Conference Call. As a reminder, the comparisons you will see in the 10-Q as reported include the financial results of SpotX and SpringServe for Q1 2022, but for the periods prior to the acquisition dates, the results do not include SpotX or SpringServe, which were acquired on April 30, 2021, and July 1, 2021, respectively. During the course of this call, when we refer to the results and associated year-over-year comparisons with the phrase 'as reported,' we are referring to the basis as reported in our 10-Q. When we make comments referring to pro forma comparisons, we are including SpotX and SpringServe for the relevant pre-acquisition period in order to provide a like-for-like comparison. Please keep in mind as it relates to the SpotX and SpringServe acquisitions, prior quarterly results are estimated and unaudited. 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 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 quarter 2022 quarterly report on Form 10-Q and our 10-K. We undertake no obligation to update forward-looking statements or relevant risks. Our commentary today will include non-GAAP financial measures, including revenue 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 incremental metrics to provide greater insights into the dynamics of our business. Please be advised that this additional detail may be one-time in nature, and we may or may not provide an update on the future of these metrics. I encourage you to visit our Investor Relations website to access our press release, financial highlights deck, periodic SEC reports and 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. We delivered strong Q1 results on total revenue, CTV revenue, adjusted EBITDA and free cash flow, and we're providing a positive outlook for Q2. David will provide greater detail on Q1 results and Q2 outlook. I'd like to use my remarks today to focus on our broader strategic view of the industry. Recently, questions have been raised about the relevance of the sell-side platform and where it might fit in a world where sellers can connect directly to buyers. We've said before that we don't see these connections as a threat. And today, I'm going to go further and say that we see them as an indication that the SSP is becoming more valuable than ever and Magnite’s independent omnichannel approach positions us to lead the group long-term. To understand our perspective, I think it's helpful to explore the evolution of Magnite and SSPs more generally. First, I'll focus on the role of the SSP and DSP price, and then I'll transition to CTV. Let's start nearly in the 2000s when programmatic wasn't yet a saying and display publishers made most of their money selling ad inventory directly, which they booked in their primary ad server, usually Google CFP. They sold everything they could direct and threw the remaining impressions known as remnant inventory into the bargain bin, where dozens of ad networks stocked to get first look. It was difficult and inefficient for publishers to predict which of these networks would make them the most money. So in 2007, ad network optimizers such as the Rubicon project emerged to help publishers maximize their remnant yield. In the 2010s, as programmatic buying ramped up and DSPs gradually replaced ad networks, the ad network optimizer retained the SSP, managing yield across all indirect sources and offering an array of additional services, such as tools for private deals, ad quality, billing and reconciliation, and real-time reporting controls. In this era, most publishers partnered with one SSP, relying on them to navigate a rapidly changing space and maximize what was quickly becoming a significant portion of the revenue. In 2015, programmatic truly peaked into high gear when publishers began calling direct and programmatic demand simultaneously, known as header bidding. The practice is difficult to manage, but it finally put programmatic on a level playing field and publishers were leaving far less money on the table. In time, publishers learned that the more SSPs they called in their headers, the more money they made, which transformed what was once a valued one-on-one relationship into a more competitive environment, pushing the SSP to a role that resembled an ad exchange. At this time, we saw an opportunity to embrace the disruption by helping to make header bidding more transparent and flexible. We co-founded prebid.org, an open-source header bidding framework, and launched Demand Manager, a suite of software that makes it easy for publishers to configure and optimize their prebid headers. As header bidding expanded, and even as buyers dramatically limited their connections to only the most credible SSPs, it became increasingly clear to buyers that the header model was inefficient and expensive as it required them to bid against themselves for the same impression across multiple exchanges. The Trade Desk's recent announcement of OpenPass is, in many ways, a response to these inefficiencies by attempting to acquire supply directly from the very largest publishers. Though some publishers will add OpenPass as a demand source, we expect it will be supplementary to other sources and not a replacement for them. After all, it's not just the Trade Desk; even DSPs are seeking direct access to publishers. As a result, large publishers will need to manage and optimize a growing list of newly minted direct connections with buyers, something they can't do by adding another SSP into the header. Instead, we'll need to partner with one scaled, unconflicted SSP to unify the auction, optimize yields, and deliver a full suite of seller-focused tools, including the ability to embrace and activate the shift towards seller-centric audience and identity. In many ways, this is a return to the one-on-one publisher SSP relationship that preceded header bidding. And for several reasons, no platform is better positioned to lead in this role than Magnite. First, our deep expertise in pre-bid, now the preeminent header bidding standard, and our work enhancing it, expanding it with Demand Manager, puts us in a unique position to be the clear leader for yield management across every type of demand, including display, audio, and video. And we've only just begun to scratch the surface on maximizing the value of each impression through machine learning and AI. Second, as the industry moves away from the third-party cookie and other buy-side identifiers towards solutions that are seller-centric, our robust audience technologies, bolstered by our recent acquisitions of Nth Party and Carbon, and our deal management tools, which are among the best in the business, will enable publishers to activate and monetize their audiences across every media type with an eye towards privacy and security. Third, our relationships with brands and agencies are strong and continuously growing, which benefits our seller clients by bringing them new and unique pools of demand. Our recently announced preferred partnership with GroupM is a great example of this. And lastly, Magnite's omnichannel footprint enables us to meet our clients' needs across a wider range of channels and formats, including CTV, which other SSPs talk about doing, but no independent SSP can match our full stack of capabilities in this area. And that's a good transition to CTV, which is fundamentally different from digital video and how it operates. Because CTV is a world in which there's a finite amount of available inventory and viewer experience takes precedence over CPMs, there isn't the same need for header bidding. Direct selling plays a dominant role in CTV and probably always will. Even if the means of executing these direct sales is increasingly programmatic, in many cases, there's no action at all. For this reason, our clients prefer to work primarily with Magnite, and they look to us to provide far more than the highest bid. We have a track record of building custom software and unique features for a broad range of CTV industry players. These range from device manufacturers and OEMs such as LG, Vizio, Samsung, and Roku, to virtual MVPDs such as Fubo, Hulu, Sling, and DirecTV, to digital-first and free ad-supported streaming TV services like Pluto, Tubi, and Crackle, and broadcasters and programmers such as Disney, Discovery, Fox, and A&E. For many of these companies, we're not just helping them sell or serve the ads, but more importantly, to manage a highly complex series of decisions that balance revenue, targeting, and enforcement of business rules, while fiercely guarding viewer experience and publisher data. Moreover, by integrating our proprietary ad service, SpringServe, we offer CTV sellers a holistic yield management solution that drives value across their entire ad business by dynamically allocating between programmatic and non-programmatic inventory, and we are constantly innovating to solve the evolving needs of CTV sellers. For example, through SpringServe's newly announced Binge Watcher product, a tool set to rapidly review creatives and improve the user experience. We see our ability to address the nuanced needs of CTV clients through advanced software solutions as a formidable barrier to entry for our competitors. In the final analysis at Magnite, we believe strongly in two key principles. One, all media, display, CTV, audio, you name it, will be bought, sold, or executed programmatically; and two, sellers will always need a scaled and unconflicted agent to help them make the most of every programmatic opportunity. A bet on Magnite is a bet on these principles. With that, I will hand the call over to David, who will provide additional detail regarding our financial performance and expectations. David?

Thanks, Michael. Despite macro headwinds, we are pleased that Q1 revenue came in consistent with our guidance. Adjusted EBITDA came in above our implied guidance, which resulted in strong cash flow and non-GAAP earnings per share. We also see this translating into solid guidance for Q2, but I'll cover after I discuss the first quarter results. Total revenue for Q1 was $118.1 million. Revenue ex-TAC was $107.1 million, up 79% from Q1 2021 on an as-reported basis and 15% on a pro forma basis. TTV revenue ex-TAC was $42.3 million in Q1 2022, up from $12 million or 253% from last year on an as-reported basis and up 27% on a pro forma basis. Mobile revenue ex-TAC grew 12% and desktop revenue ex-TAC grew 3% year-over-year, both on a pro forma basis. Our revenue ex-TAC mix for Q1 2022 was 40% CTV, 35% mobile, and 25% desktop. Operating expenses, which in our case, include cost of revenue for the first quarter, were $157.9 million versus $74.5 million in the same period a year ago. Increases were primarily driven by the acquisition of SpotX, including the amortization of acquired intangibles and by an increase in personnel-related expenses. Adjusted EBITDA operating expenses, which represents the difference between revenue ex-TAC and adjusted EBITDA, was $78.2 million for Q1, an increase of $3.7 million sequentially, and up from $50 million in Q1 2021, also driven primarily by the acquisition of SpotX in a year-over-year comparison. Costs for the first quarter were lower than expected, primarily driven by slower hiring, consistent with the overall labor market, lower technology and cloud costs, and lower office and travel expenses in the quarter. Net loss was $44.6 million in the first quarter of 2022, as compared to a net loss of $12.9 million in the first quarter of 2021. The increase in net loss was primarily attributable to an increase in amortization of acquired intangibles related to the SpotX acquisition, which had no cash impact. Q1 2022 adjusted EBITDA was $28.8 million, an increase of 208% versus the prior year, resulting in a margin of 27%, as compared to adjusted EBITDA of $9.4 million or a margin of 16% in the first quarter of 2021. This was driven by continued organic revenue growth and by the acquisition of SpotX. Note that we calculate our adjusted EBITDA margin as a percentage of revenue ex-TAC. GAAP loss per share was $0.34 for the first quarter of 2022, compared to GAAP loss per share of $0.11 in the same period in 2021. Non-GAAP earnings per share in the first quarter of 2022 was $0.08, which was up compared to non-GAAP earnings per share of $0.03 reported for the same period in 2021. There are 132.2 million weighted average basic and diluted shares outstanding for the first quarter of 2022. Fully diluted shares utilized for non-GAAP earnings per share were 143.7 million for the first quarter of 2022. Capital expenditures, including both purchases of property and equipment and capitalized internal-use software development costs, were $8.7 million for the first quarter of 2022, in line with our expectations. Operating cash flow was $20.1 million in the quarter, which we define as adjusted EBITDA less CapEx. Our interest expense for Q1 2022 was $7.1 million, of which roughly $5.7 million was cash. At the end of Q1, we had $204.6 million in cash on the balance sheet. For Q1, our cash outflows included $21 million for our acquisition of Carbon. Our priorities for the deployment of capital remain balanced and have not changed. Regarding M&A opportunities, we believe that we have the core assets that we need at this point in time, although we will always consider tuck-ins or aqua hires that would expand our talent pool or accelerate our product features and functionality, such as our recent acquisitions of Nth Party and Carbon. Regarding debt, we continue to reduce our net leverage ratio, which was approximately 3.1x at the end of Q1 compared to 6.2x at the time we closed SpotX at the end of April last year. This represents further progress towards our ultimate goal of 2x or less. As it relates to our $50 million share buyback program announced in December, we repurchased 931,000 shares for $12 million in Q1, leaving $31.9 million in the program at the end of the quarter. In addition, for our regular RSU vesting during the quarter, we utilized the withhold to cover method to cover employee tax withholding 315,000 shares for $4 million. As a result, share dilution was reduced by about 1.2 million shares during the quarter. We expect to continue a balanced approach to reducing leverage and share repurchases throughout the remainder of 2022. I will now share our future expectations. We'd like to reiterate that we expect revenue ex-TAC for the full year 2022 to be well above $500 million. We expect revenue ex-TAC for the second quarter to be in the range of $123 million to $127 million. We expect revenue ex-TAC attributable to CTV for the second quarter to be in the range of $51 million to $53 million. We expect adjusted EBITDA operating expenses in Q2 to be $83 million to $85 million, implying an adjusted EBITDA margin of 33% at the midpoint. The sequential increase in adjusted EBITDA operating expenses is primarily driven by an increase in technology infrastructure costs, hiring, a full quarter impact of our return to office, and the return of travel and marketing events. For the second half of 2022, we expect quarterly adjusted EBITDA operating expenses to increase roughly $3 million to $4 million each quarter. These increases are primarily the result of return-to-office costs and increased head count and other technology operating costs to support our growing business. We continue to expect that CapEx for 2022 will be between $40 million and $45 million. And for 2022, we continue to expect that we will generate over $100 million in free cash flow. We define free cash flow as operating cash flow less cash interest payments. We continue to target long-term annual revenue ex-TAC growth of 25% and adjusted EBITDA margins of 35% to 40%. We're very pleased with our results for the first quarter of 2022, and are optimistic about our growth trajectory, especially in the back half of the year. We have a very attractive financial model and expect increasing flow through over time from revenue growth to adjusted EBITDA margin expansion to free cash flow. With that, let's open the line for Q&A.

Thank you. We will now begin the question-and-answer session. The first question comes from the line of Laura Martin with Needham. Please go ahead.

Hi, there. Let's start with CTV. Do you feel that Netflix adding an ad tier and Disney earlier than that, adding an ad tier is good for the ecosystem's cost per thousand, or bad? And I'm looking sort of short term, long term; could you speak to these big streamers adding ad tiers in the next 12 months?

Hi, Laura, it's Michael. I'll jump on that, and David can pile on if you'd like. I see there's nothing but good. You know how the dollars are just starting to shift from linear into CTV. And I just will be an inexorable march as more and more consumers decide to consume their entertainment, news, sports in that manner. And I think that they're going to be measured in the ad load. And so even though there's scarcity in the market today, it's not exactly inflating prices. I think what was the CPMs now is the advanced targeting that you're able to do versus what Linear always had. So I think over time, even though it's more inventory, I don't see it having a dramatic impact on CPMs because of adding more supply into the marketplace.

David, anything from you?

No, got it covered. No.

Okay. So excellent. That's super helpful. And then secondly, you said in your prepared comments, Michael, that you thought everything was going to be programmatic. And the second thing you said was sellers will always need an independent sell-side platform. So I just wanted to push on that a little bit because we have NBC having a captive SSP and Freewheel and now we have Standard being bought by Microsoft. And I do get questions from investors about why doesn't Disney just buy an SSP and do it itself. So when you said the second thing you see is that the sellers will have to have an independent platform, is that really being borne out by the largest sellers, do you think?

Well, I think our meaning there, Laura, was that the vast majority of publishers don't have the means and/or ability to land a major tech player to bring in-house. There are obviously always examples of folks that do it. And then, of course, the pendulum swings both ways; Microsoft picked up Standard from AT&T, who tried to do it in-house, and that didn't work out so great. And Fox had Unruly, and they've said that, and Altice has been rumored to be looking to move to DSPs. And so, I think these things are somewhat cyclical. But our meaning is that folks have learned when they put all their eggs in one basket in the DV+ world as it relates to Google, a little by little, over the course of 15 years, they learned that it was the most efficient way. And they broke the system by doing pre-bid and bringing header bidding into the world. And I think that it's not lost on folks that if your partner is independent, isn't in conflict if they don't own inventory, and doesn't sell ads against other inventory, then that's transparent and above board. I think that our meaning of that is that the vast majority of publishers need that type of profile of the company.

That was helpful. Thanks very much.

Thank you. Our next question is from the line of Jason Kreyer with Craig-Hallum. Please go ahead.

Hi, thanks for taking the question, guys. So kind of an inline Q1 from the top line perspective, but when we look at the Q2 guide that looks a lot more robust, particularly on the CTV side. So just curious if maybe you can parse out the puts and takes on what you saw last quarter versus how things are progressing kind of a month into Q2 here?

Yes, I'll start and David can contribute as well. Jason, we experienced an impact similar to others due to the crisis in Ukraine, with our CPMs dropping significantly across the board, especially in EMEA. Many large CPG multinational companies halted their spending, which certainly affected our Q1 results. We expect this trend to continue into Q2, but there are some changes to note for Q2. We anticipate that political spending related to the midterms will provide some assistance. Additionally, we've observed a recovery in certain verticals that have not returned to normal since the pandemic. Our managed service business in the CTV sector is also showing strength with the resurgence of key advertising verticals. While we wouldn't say it's a complete recovery, we do see improvements. Therefore, we are optimistic about an uptick in Q2 compared to Q1. David, do you have any additional details to share?

I believe that's correct. I'm still cautiously optimistic about Q2 due to the many factors at play. However, as Michael pointed out, especially in the latter half of the year with the political spending and our GroupM SPO deal, we are continuing in the upfront process. Agencies are likely to push for a greater volume of transactions through programmatic channels. The feedback we’re receiving from agencies suggests some optimism for increased spending and committed budgets in the second half of the year.

David, wondering if maybe you can just quantify that impact that Russia or EMEA might have had in Q1 or your Q2 guide?

We have noticed a few factors affecting our performance. Firstly, we have stopped working with a small number of Russian publishers, which had a minor effect. We have also observed a decline in CPMs, particularly in our DV+ segment in EMEA, likely due to general uncertainty surrounding the situation in Ukraine. Many advertisers prefer not to run ads during such events, leading to a situation where we have more inventory available, but not as much advertising demand. Additionally, the strong dollar has also played a role; while we typically don’t experience significant effects from regular foreign exchange fluctuations, the recent substantial strengthening of the dollar has impacted those CPMs as well.

Perfect. And then just a follow-up for me, so any updates on the relationship with Disney, looking at this two ways. Just first, any indications in your potential involvement with that supported Disney+? And then second, I know we're starting to approach the term on that 18-month agreement from a year ago. So just curious, if you have any thoughts on where that engagement goes from here?

Yes, Jason, the relationship remains incredibly strong. The renewal is coming up, as you pointed out, but we don't perceive any material change there. And as for Disney+, I think it validates the model, the idea of having an ad-supported tier. And although it's obviously Disney's decision and how they go to market with Disney+ and the other streaming assets, our understanding is it's all going to be available through Drax and obviously, we powered a nice chunk of that. And so therefore, we say there's nothing but a positive opportunity.

Perfect. Thank you.

Thank you. Our next question comes from the line of Shyam Patil with Susquehanna Financial Group. Please go ahead.

Hey everyone. Great quarter and outlook. I have a couple of questions. Michael, when you discussed the ecosystem in your prepared remarks, you mentioned that independence is becoming more valuable. You touched on that a bit in the first question, but can you elaborate on the conversations you’re having with your larger publisher partners in light of OpenPass? What do you anticipate regarding the economics and market share for Magnite moving forward, particularly related to OpenPass? For my second question, regarding CTV, how are you approaching pro forma growth throughout the year? I know you're cautiously optimistic and there are many variables. How do you view pro forma growth for CTV over the year? On a high level, what do you consider a reasonable baseline as we look at this business in the coming years? You mentioned market growth rates, but are you still considering growth rates around 30%, 40%, or even 50%? How do you see this growth opportunity unfolding? Thank you.

Yes. Thanks, Shyam. So I'll let David take the pro forma growth for CTV. But as it relates to OpenPass, I think it's in its nascent formation. We have heard much from publishers other than the folks that were listed that were going to take part in the beta. I think that, as we pointed in our remarks, others will seek direct access, particularly agencies. I think agencies feel that part of their value to their advertising clients is their relationship with publishers. The challenges, a lot of them don't have the technology to work directly with publishers. And that's why, I think, you see deals like the GroupM deal that we announced and the OMD deal we talked about in IPG and Avas. That working with a technology partner to try to work their way out of a header bidding open auction and into a more structured relationship with the publisher is a trend that's only going to continue. It adds a degree of complexity for our publishers, and that's why we think that our thesis is that an SSP will never be more valuable, because they are the ones that can help manage this complexity and manage the yield of the complexity. And the other thing that we're seeing in terms of conversations with the publishers is a growing appetite for publisher-centered first-party data. To be completely candid, as long as the third-party cookie exists, it's going to be hard to make that like revolutionary. It might be evolutionary. But once the cookie is deprecated, I think you're going to see a big rush to first-party data being readily used by buyers that's provided by the sell side and tools; the tools that we've acquired are going to play an integral role in that. So quite excited about those developments. And, David, maybe you want to talk about the pro forma growth CTV expectations.

Yes. So we grew pro forma CTV in Q1 at 27%. And as we mentioned, especially in the second half of this year, we have some really significant tailwinds. And so, we see upside certainly to those growth rates. And we've always talked about the CTV business being very volatile; it's nascent. And so that will continue. But we do believe that over time, our growth rates should definitely exceed those of the market, which I think folks handicap in the low 30% range right now. And so, we should take our share and then some as the market continues.

Thank you, guys.

Thank you. Our next question comes from the line of Tim Nollen with Macquarie. Please, go ahead.

Thanks very much. I'd like to pick up on the Q2 guidance again, please. The last couple of quarters, you've talked about a few supply chain issues in the auto business. It sounds like that seems to have moved past you now. And in fact, it used to be something positive. If there's anything you could give us a bit more in terms of that or any other sectors that are affecting your Q2 number, because on a very difficult comparison actually in Q2, I think it's very nice to see a 25% growth forecast for the top line. And then relatedly, the new fronts and the upfronts are upon us now. I just wonder if there's any particular role you could point to that you're playing in that process and if there's any news flow to look forward to as this upfront season is upon us or not? Thanks.

Yeah. I'll start with the...

Yeah.

In Q2, we continue to face challenges, particularly in the auto sector's supply chain, and it's unlikely that these issues will be fully resolved this year, which means we expect ongoing headwinds. The situation in Ukraine is also impacting our EMEA business, and we have taken that into account in our guidance. On a positive note, travel has shown some recovery; while it's not back to pre-COVID levels, we've observed significant improvement and anticipate growth moving forward.

I would say that the biggest difference this year compared to previous years is the involvement of players like Magnite in discussions about programmatic allocations within the upfronts. Looking at the GroupM premium marketplace and their partnership with us, we hope this will influence the movement of ad dollars. Historically, upfronts would wrap up as they always have, with programmatic mostly applying to spot purchases. However, we are seeing more discussions about integrating programmatic into the upfronts and guaranteed buys. This development is still in the early stages, and while it may not lead to a major announcement, we are optimistic it will positively impact our performance in the latter half of the year, as David noted earlier.

Could you clarify if that means you're now doing more direct deals that include a programmatic aspect, which would be beneficial for your business? And are you suggesting that this is preferable to relying on remnant inventory over time?

Yes, that's correct. The buyers have always come out on top in this situation. It has required a shift for sellers, particularly the broadcaster programmers, who had relied on traditional strategies. What we're now seeing is a growing mutual understanding during upfront negotiations regarding the allocation of dollars for programmatic guarantees. For instance, if an agency guarantees a broadcaster $50 million, in the past, there was little interest in having part of that allocated programmatically. However, now there is increasing agreement that this mix will be handled programmatically. This represents the evolution we anticipated in the industry. The recent GroupM deal indicates their strong commitment to conducting business in this manner.

Right. And I presume there’ll be good news. Any news that we do get in the next few weeks or whatever would presumably be good across the next several quarters because these would be deals being struck across the upcoming TV seasons, right, over the next three, four quarters?

That's exactly right.

Thank you. Our next question comes from the line of Matt Swanson with RBC Capital Markets. Please go ahead.

All right. Thank you so much for taking my questions. Michael, if I could ask my quarterly DV+ question. I know last quarter you didn't really want to get into the specifics of the investments. But could you maybe just comment for us, how you feel about the progress you're making on those investments that you've done, or maybe what sort of returns you're starting to see so far?

Yeah, Matt, great question. I think that as we've talked about this in the past, DV+ in a world where you're transacting hundreds of millions of options a day, every little tweak here or tweak there results in improvement. And if you look at the laundry list, it numbers into the hundreds of things that you can constantly be doing; some of it is fixing things. Other is innovating on things, speed of auction, your hardware settings, all the way to making sure that the plumbing is clean and the connections are good with buyers and the sellers. So it's an ongoing effort. I wish there was a seminal product or project that we could point to that once it's completed, it unlocks the floodgates. But it's a constant area of maintenance for us, innovation for us, and admittedly an area that was under maintenance or innovated over the years as we acquired the CTV assets. So we have some catch-up to do. I'm pleased with the focus on it. I think our results can get better and improve over time. So I think that we've analyzed where we can gain improvement and where our highest return for investment will be and are well down the path in those areas.

That's very useful. This question involves both David and Michael. Considering the full year guidance, you mentioned that in Q2 we're beginning to see some political activity. The CTV landscape has changed significantly since the last mid-term elections. It seems that mid-terms may be better suited for you compared to general elections due to the focus on targeted advertising since these are all regional elections. Can you discuss your perspective on political spending this year and whether you anticipate a greater shift toward CTV?

Yes, I think we feel as though if and when we see the impact of political spend for the mid-term, it will be predominantly through CTV. I think there'll be some online video bought as well. But I think CTV will be a primary focus. And you're right, it will be highly directed in those battleground states. And you probably saw a release with that; the folks from scripts who are bundling inventory from other non-script stations to create a bigger pool of available inventory in those markets, and they're working exclusively with us on that. And of course, we have our direct team in the middle market in the states working with the top agencies that are specialized in spend. And so our best guess is that this mid-term probably will behave more like a general election like two years ago than it will like a traditional mid-term, especially as it relates to CTV. So, yes, we're cautiously optimistic that we're going to see some flow through in Q2 and certainly in the back half of the year. I don't know, David, if you have any other thoughts or specifics?

I believe you addressed it well. There should be some impact in Q2, but it won't be very significant. The majority will likely be seen in Q3 and Q4. Regarding the spending volume, as Michael noted, it could be similar to that of a presidential election. Additionally, the recent news about Rovewave could further boost that spending. We'll just have to wait and see.

Thank you. Our next question comes from the line of Vasily Karasyov with Cannonball Research. Please go ahead.

Thank you. Good afternoon. I wanted to ask you a question about political. If you look at broadcasting companies, in years when they have strong political spending, the non-political advertising revenue growth is usually depressed from what they call displacement, right? Because political campaigns pay, are not price sensitive; they just outbid non-political advertisers. So given that you, as an SSP are probably more on the supply-constrained side, are you seeing anything like that? Is this a scenario that you're thinking about that it may not be 100% additive when all the expected political comes in? I know we are in uncharted waters here, but would appreciate your thoughts here.

Yes, Vasily, that's a very insightful point. There are fewer supply constraints in online video, which means there's usually a lot of inventory available, resulting in less displacement. In connected TV, some displacement does occur, but it's offset by the lack of price sensitivity regarding CPMs, leading to higher CPMs overall. Even though inventory in the CTV space is generally tight, not all of it is sold, and there are various times when political advertising may not be as affected. Historically, we have found that any displacement tends to be a net positive due to the rates associated with Magnite.

So if we look at the previous political cycle, did you notice any displacement at all? I'm just curious.

Yeah. I mean, I think that generally speaking, especially if you get into Q4, right at the tail end of the election cycle, those are pretty tight windows anyway. And so there were certainly some displacement there. But, as I said before, it was still a good guide because of the rates that displaced these buyers were significantly higher than the market.

Great. Well, thank you very much.

Thanks.

Thank you. Our next question comes from the line of Nick Zangler with Stephens. Please go ahead.

Yeah. Hey, guys. Thinking about these new AVOD services, you touched on Disney Plus, but with regard to Netflix, maybe Apple TV Plus, just in general, if you could comment on how do you think about your ability to win new business. And for these large streaming services, how long do you suspect it would take to go from having absolutely nothing to something with regard to building an ad business?

Yeah. Hey, Nick, I'll jump on that one. So, yeah, it’s a very fair question. And then, of course, you start to ask, are you launching in the US? Are you launching in foreign countries, if you're never had an ad business before? It's hard to predict how long it would take, especially if you're starting from scratch, but one would say it's obviously a multi-quarter journey, given the fact that you haven't even pitched your customer base on this tier, tried to figure out what the cannibalization might be, etc. So I think that there's a lot more that goes into it, obviously, than just ad technology. But as it does relate to ad technology, I think we are being extraordinarily well-positioned as we talk about all the assets that we have and not just doing the traditional work of bringing demand like an SSP to fill these ad slots, but having the server to actually serve them. And there's one thing everyone needs that it doesn't matter if you're a legacy broadcaster or a new program or a platform, you need an ad server, right? You need something that can serve ads if you're going to get into the ad business. So at the very minimum, we have the leading CTV ad server and especially if you don't have a legacy business, there's not really a need for a server that was built in the online video world that meets the conditions and rules that broadcasters needed to spread the needle between linear and streamed. So I think we feel really good about the company that we've built. And obviously, every day we're helping these new services get off the ground and sell ads. And some of them have a direct sales team where the rules of engagement are quite structured, and others don't have any direct sellers, and they rely upon us for the vast majority of their demand. So I just think it's a validation for the company we've built – it's a validation on the consumer in terms of choices, right? And I think we've really enjoyed the position we have in the marketplace right now.

I agree. It's good to hear. And then just one more for me, you briefly touched on it, but any update just with regard to the construction of the seller-defined audiences, maybe specifically within CTV, utilizing that first-party data from publishers. I know you guys keep making acquisitions here for sure. So are you monetizing audience segmentation and creation at all yet? And maybe you could just comment on the overall roadmap within seller-defined audiences? Thanks.

Yeah. So early days, right, as I said before to one of the other questions, as long as a third-party cookie world exists, it's hard to generate enough urgency on the publisher side because it's a need that necessarily doesn't match what buyers want; but the minute third-party cookies go away, buyers are desperately going to need these targeting parameters. And so that's where the publisher gets in. So what we're doing is building for that future. We know it's coming. We know that it will happen. It will be multiple solutions; but we feel very good about the assets that we have and the work that we're doing right now on those assets. We do a ton of data overlays in CTV right now, some of it first-party, a lot of it third-party. And so I would say CTV's even more advanced than DV+ as it relates to data-oriented packages and quite easier, frankly, and probably more valued audiences just given the logged in nature of the user, right? Many, many open websites and apps don't have a login component, and it makes profiling an audience a little more difficult than the logged-in user approach of CTV. And so yes, I think in CTV, you're going to find that that's going to quickly move to the front and center of buyer needs because of the displacement of the cookie.

Great. Appreciate it, guys. Thanks. Good luck.

Thanks.

Hey, good afternoon, you. Maybe two, if I could. First, on Trade Desk moving away from Google open bidding, I know it's still fairly early, but I'm curious what you're seeing in terms of impact. I think the thinking had been from you and some of your peers that it could be neutral to positive? I'm kind of curious what the early read is there. And then just secondly, any update on the merged platform, taking kind of the best of Telaria, the best of SpotX. I think you've talked about having that out fully in the market, I think it's by Q1 2023. So I'm just curious how that's progressing. And what might happen once that's fully launched? Is there any benefits from a share gain standpoint or from a cost efficiency standpoint? Just any color there would be helpful. Thanks, guys.

Trade Desk has definitely shifted away from open bidding. We’ve noticed that the flow of money from Trade Desk through open bidding has decreased significantly. Over the past year and a half, Trade Desk has approached all the SSPs and publishers, explaining that they're purchasing inventory through various channels. After evaluating their options, they found that the most efficient methods are pre-bid or purchasing via Amazon. Consequently, they are reallocating their spending toward those channels. Therefore, open bidding has not significantly impacted Magnite's revenue from Trade Desk, but it remains challenging to determine if the funds are now flowing through pre-bid. It’s also too soon to assess whether the hundreds of SSPs previously involved in the open bidding program have seen any substantial benefits from the shift to validated SSPs, of which Magnite is one. It’s still early, and we might only observe the impact in pre-bid without recognizing the specific dollar amounts. Regarding platform consolidation, that process continues at a steady pace. The timing depends on when publishers can dedicate resources to transition to the new platform. We have always anticipated that by the end of Q4 and into Q2 would mark the cutoff for migrations. We expect to move clients into the first quarter of 2023. It’s tough to directly associate this with revenue increases at this time, but we’ll be able to provide more insights as the platform is launched. Creating a next-generation platform with all the desired features is likely to lead to increased revenue opportunities due to improved access to inventory. We feel optimistic about the direction we’re headed.

And from a cost efficiency perspective, you'll see that primarily in a more efficient technology infrastructure cost base.

Okay. Got you. That's helpful. And maybe one quick follow-up, and this has been, I think, touched on a couple of times, but I think that my question is, I think when you think about some of the opportunities or changes out there, so Disney launching an AVOD in the US by the calendar fourth quarter or the Warner Discovery merger now being done. When you think about your full-year commentary and guidance, and we don't need to get into specifics, but I guess does that contemplate or take anything into account in terms of some of these incremental perhaps opportunities out there, or would you land one of these or an increased role with one of these be incremental to kind of what you've talked about? Thanks, guys.

I think, Matt, whenever you look at new business opportunities, you kind of bake it into a general forecast. So a lot of our business growth every year, organic is same-store sales, but we always rely upon kind of an unknown number out there that will come from new client relationships. And so I think by and large, it's already baked into the forecast; and these things tend to start off as walk before you run types of relationships. And so I think that I wouldn't necessarily say that a one particular client out there might result in dramatically increased revenue for Magnite. I don’t know, David, if you have a different view on that.

No, I think that's right. I mean, it certainly would add to our ability to take market share. But I think you've covered it.

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

Thank you, Ryan. I'd like to thank every Magnite team member for their hard work and efforts. We have one of the best teams in the industry and their expertise and unmatched customer focus has yielded a very differentiated leading company with comprehensive customer solutions. We continue to see and invest in clear areas for growth in CTV, DV+ in audience and identity. We've established ourselves as a critical long-term partner for many of our publishers and buyers, especially in CTV, and believe much of our future success lies in both our execution and in winning new business. We've never been more excited about the opportunity we have ahead of us. As we look at the back half of the year, we feel strongly that our selection by GroupM and CTV, Disney+ recently announcing an ad-supported alternative, return in verticals such as travel and political spend are tangible examples of growth drivers for the quarters ahead. Almost all CTV streaming services have either launched or announced AVOD offerings, and even the largest subscription CTV streaming service has recently moved from a position of never to actively exploring it. Thank you for joining us for our Q1 results call. We look forward to talking to many of you at virtual investor meetings hosted by SIG tomorrow, conferences by Needham on May 17, and Craig-Hallum on June 1. Have a great evening.

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