Good day, and welcome to the Magnite Fourth Quarter 2022 Conference Call. 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 Fourth Quarter 2022 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 2022 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 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 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. We had a strong finish to the year, with Q4 revenue coming in at the high end of our guidance ranges. Total revenue ex-TAC was up 10%, TTV up 20% and DV+ up 4%. Adjusted EBITDA margin also came in strong at 41%. And for the full year, I'm happy to report that we achieved revenue ex-TAC of $515 million in free cash flow of $106 million, both exceeding our targets. Our outlook on 2023 is positive despite weakness in the overall ad spend environment that began in late Q4 and continued into Q1. We are currently seeing stability at these levels and are cautiously optimistic. David will provide greater detail on our financial results and our Q1 outlook. Our CTV business continued to drive our top line with revenue ex-TAC growth of 20% year-over-year, which we believe outpaced the industry growth in Q4 based on customer feedback and recent industry trends. Just a couple of weeks ago, we announced Magnite Streaming, our next-generation CTV and OTT platform, merging the best features, functionality, and technology for Magnite and SpotX. Magnite Streaming empowers media owners to maximize advertising yield holistically across live and VOD inventory, addressable linear, and CTV and OTT environments while providing insights to more effectively grow their businesses. It also provides advertisers with unparalleled access to CTV and OTT inventory, audience-targeting capabilities, and real-time reporting. We are excited about our new and expanded CTV partnerships, in addition to further traction with those previously announced. Key new partners and expanding relationships I'd like to highlight since our last call are Brightcove, fuboTV, Horizon Media, Criteo, and, last but definitely not least, Disney. First, I'd like to highlight the news in late January that we expanded and renewed our agreement as Disney's global programmatic SSP partner. As you may recall, our relationship with them started with Hulu. We have since grown the relationship to include the full portfolio of Disney properties. In January, ahead of their annual tech and data showcase, Disney's Retiro had a lot to say in articles by variety and Digi Day about a full suite of targeting that will be available on Disney+ in July. We are thrilled to be a partner with Disney in support of their audience and targeting capabilities, which leverage the Disney Select first-party data platform with more than 100 million U.S. household-level ideas. Second, with Brightcove, a global leader in secure streaming technology solutions, Magnite will power advertising across the Brightcove customer footprint, helping them improve fill rates and delivery to increase revenue for their publishing partners. Brightcove saw a significant opportunity to help customers better monetize their advertising businesses, utilizing Magnite's platform and capabilities. Brightcove will also integrate the SpringServe ad server to provide publishers with greater control, insight, and transparency into available ad supply, providing a strategic opportunity for customers to better monetize their video content. We also had another client win on SpringServe with fubo, choosing to implement our ad server for their entire video business. This expansion comes to illustrate just how strategic and important our ad server is to expand and deepen our relationships with our biggest partners. Live sports is one of the largest and most valuable yet complex opportunities in CTV. We continue to make this a priority. Our leading products, such as Bingewatcher and Live Sports Acceleration, or LSA, provide significant opportunities to build on our success with a sports-first live TV streaming platform partner like fubo. The opportunity for CTV and live sports is huge. The creation and need to fill ad slots in real time, coupled with substantial spikes in viewership and tremendous engagement, while requiring adherence to complex rules, make our capabilities extremely attractive and necessary for publishers. The ad dollars chasing sports in CTV are significant, and most sports leagues are looking to capitalize on this opportunity, having recently separated streaming rights from Linear. We see a bright future for Magnite in the world of live sports streaming, and we'll look to build on our success across all sports and leagues. Retail Media Networks are another significant opportunity for us. Increasingly, user identities are being protected by publishers and retailers, and they are looking for a trusted SSP partner to help securely activate audiences on the supply side. Recent initiatives from both Kroger and Criteo highlight our progress in this area. This quarter, we announced the preferred relationship that will enable Criteo's global retail partners to leverage CTV through Magnite. Through collaboration, retailers can drive growth by extending their off-site audiences into addressable CTV environments, in turn providing closed-loop measurement to their brand and agency partners. Criteo is an industry leader in the attractive retail media space, and we are thrilled to help their 160 retail partners expand audience reach and CTV. In addition, we continue to make progress on supply path optimization, or SPO, and announced a multiyear SPO deal with Horizon Media, one of the largest U.S. media agencies. We also continue to see strong traction with previously announced partnerships with FOX, GroupM, VIZIO, and LG. I'd like to specifically discuss the status of our relationships with GroupM and Fox, which we believe will contribute nicely in 2023. Our preferred partnership with GroupM is continuing to scale, gaining momentum as we move into 2023 and a new season of upfronts. GroupM has successfully launched 20-plus premium CTV accounts with more to come. The next phase is launching OLV into the GroupM marketplace, which presents an additional expansion opportunity. We are also very pleased with the progress of our Fox relationship, where we serve as the SSP partner to power programmatic campaigns for OneFOX video inventory across the company's leading entertainment, sports streaming, and news portfolio. The launch is very successful, and it is also now a part of the GroupM premium marketplace. On the DV+ side, we grew revenue ex-TAC 4% year-over-year. This growth builds on Q3 progress despite a tough ad spend environment. Our success is attributable to our continued focus on customer-based improvements to assist buyers in finding and winning, and publishers in monetizing the massive volume of additional impressions we've added since last year. Some examples of recent customer wins include Bud Speed, which is in the early stages of onboarding Demand Manager; the Arena Group, a tech-powered media company, which includes premier publications such as Sports Illustrated, Men's Journal, and Prad, has chosen Magnite as its preferred PMP partner; and Trusted Media brands, which reaches more than 200 million consumers worldwide across every screen, selected Magnite's Demand Manager solution and has seen approximately an 8% CPM lift when using Demand Manager. In closing, I'd like to address the recent news regarding two SSPs exiting the space, EMX declaring bankruptcy and Yahoo! shuttering their SSP business. Some industry pundits have concluded that this might be the beginning of the end for the SSP industry. We couldn't disagree more. What we're seeing now isn't the beginning of the end of the SSP, but the death of the undifferentiated SSP. For years, the market has borne the weight of an array of SSPs with little innovative technology and little more to offer than recirculated DSP demand. Magnite, meanwhile, has been investing in a range of essential sell-side technologies. Demand Manager, to get the most from the header; Carbon RMP to help publishers take back control of audience and addressability as third-party cookies are phased out; SpringServe for CTV ad serving; and a demand facilitation team that delivers proprietary demand at global scale. Add all this to the best yield management tools for every media type, including CTV, OLV, display, audio, native, and digital out-of-home. The Yahoo! decision underlines what we have long known, that it's extremely hard for media owners of any size to build and maintain a sell-side technology stack that can keep up with the industry's endless stream and evolutions. Indeed, it's hard enough for dedicated technology companies to stay ahead of the curve. But no sell-side ad tech company is better positioned than we are to help publishers thrive today and in the future. As supply path optimization accelerates, Magnite stands to gain in several ways: first, as a recipient of additional ad spend when competitive platforms go offline; second, as sellers migrate to the partner that's most differentiated, indispensable, and likely to bolster their bottom lines; and third, as buyers consolidate spend on a select list of SSPs that meet all of their complex criteria. How does this end for the SSP industry? Well, very similarly to the winner-take-most consolidation that we've seen on the DSP side. We are in the late innings of SSP consolidation, and Magnite is poised to be that winner-take-most victor. With that, I'll turn the call over to David.

Great. Thanks, Michael. We are pleased to report another strong quarter and record year for Magnite. Our fourth quarter results for revenue ex-TAC were at the high end of our expectations, and adjusted EBITDA of $64 million generated a strong margin of 41%. Our business model continues to generate strong cash flow, producing $57 million of operating cash flow for the quarter. For the full year 2022, we reported revenue ex-TAC of $515 million, and total ad spend approached $4.5 billion. We also generated full year adjusted EBITDA of $179 million, up 20% year-over-year for a margin of 35%. Total revenue for Q4 was $175 million. Revenue ex-TAC was $157 million, up 10% from Q4 of 2021. Revenue ex-TAC attributable to CTV was $65 million, up from $54 million or 20% from last year. DV+ revenue ex-TAC was $92 million, an increase of 4% compared to Q4 last year. On a sequential basis, Q4 total revenue ex-TAC grew 23% over Q3, generally in line with historical seasonal patterns. Political spend represented less than 4% of our revenue ex-TAC for the quarter. Verticals, such as automotive, travel, and food and beverage, proved resilient and were our top growth verticals, offsetting weakness in retail, technology, and health and fitness. Our revenue ex-TAC mix for Q4 was 41% CTV, 39% mobile, and 20% desktop. Total operating expenses, which includes cost of revenue for the fourth quarter, increased 29% to $204 million compared to $158 million in the same period a year ago. Adjusted EBITDA operating expenses were $92 million, up 11% sequentially from Q3 and up from $75 million from the fourth quarter last year and slightly above our guidance range. The increases were driven by higher cloud and personnel expenses, T&E, and higher engineering team expenses, partially due to lower internally developed capitalized software due to the completion of our new CTV platform. Net loss was $36 million for the quarter. Net income for the fourth quarter was $0.5 million. Adjusted EBITDA was $64 million versus $68 million for the same period last year due largely to cost items mentioned above. Adjusted EBITDA margin was 41% compared to 48% last year. Note that we calculate our adjusted EBITDA margin as a percentage of revenue ex-TAC. GAAP loss per basic and diluted share was $0.27 for the fourth quarter of 2022 compared to a breakeven result for the fourth quarter in 2021. Non-GAAP earnings per share in the fourth quarter of 2022 was $0.24 compared to $0.26 reported last year. Our results for the quarter included $35 million in accelerated amortization related to our CTV platform consolidation. This non-cash expense had a negative impact on GAAP loss per share of $0.27 and a negative impact on non-GAAP income per share of $0.07 in Q4. The reconciliations to non-GAAP income and non-GAAP income per share are included with our Q4 results press release. We expect to recognize additional accelerated amortization expense of $53 million in Q1, $53 million in Q2, and $8 million in Q3 of 2023. There were 134 million weighted average basic and diluted shares outstanding for the fourth quarter of 2022. Fully diluted weighted average shares utilized for non-GAAP earnings per share were 143 million for the fourth quarter. Capital expenditures, including both purchases of property and equipment and capitalized internal-use software development costs, were $7 million for the quarter, for total CapEx of $44 million for the year, better than our expectations. Operating cash flow, which we define as adjusted EBITDA less CapEx, was $57 million for the quarter. Our net interest expense for the quarter was $8 million. At the end of Q4, cash on the balance sheet grew to $326 million, up $73 million or 29% from Q3. Moving on to debt. We continue to reduce our net leverage ratio, which was approximately 2.2x at the end of Q4 compared to 2.6x at the end of Q3. This demonstrates further progress towards our ultimate target of 2x or less. We did not repurchase any shares under our share buyback program during Q4. Earlier this month, our Board approved a new repurchase program, which replaces our prior program. Under the new plan, the company is authorized to repurchase a total of $75 million in common shares and convertible debt through February of 2025. In addition to a strong cash position at the end of the year, we also expect to generate significant free cash flow in 2023. We believe that currently, it is prudent to carry more cash on the balance sheet compared to what we might normally carry. That said, we have the capacity and plan to give debt reduction a higher priority over share repurchases in the near term, although we are not ruling out share repurchases in the future. I'll now share our expectations for the first quarter and our view for the year. Our approach to guidance assumes a continued challenged economic environment. For the first quarter, we expect revenue ex-TAC to be in the range of $109 million to $113 million. We expect revenue ex-TAC attributable to CTV to be in the range of $42.5 million to $44.5 million. This slowing of growth is attributable to an industry-wide slow start to Q1. We expect adjusted EBITDA operating expenses to tick up slightly from Q4 to $92 million to $94 million, which implies adjusted EBITDA margin of approximately 16% for Q1 at the midpoint. For the full year 2023, we continue to expect to grow revenue ex-TAC, despite the global economy and ad spend weakening since our last call. We are cautiously optimistic that CTV growth will improve, both from an industry perspective and from the new and expanded partners, Michael covered earlier. We continue to focus on managing costs with our January reduction in force, which impacted approximately 6% of our workforce. The majority of positions eliminated were from duplicative engineering roles across our two CTV platforms. We expect adjusted EBITDA OpEx to be lower in the second half of the year compared to elevated expenses in the first half as we complete client migrations and support one unified Magnite streaming platform, which we will continue to optimize. This, coupled with a seasonally stronger top line, will result in margins significantly improving throughout the year, with the largest gains in the second half. As we exit 2023, we expect to be back at a run rate in line with our long-term target of adjusted EBITDA margins in the 35% to 40% range. We also expect that our CapEx will be $40 million or less for the full year 2023. For the full year, while we are not providing specific adjusted EBITDA guidance, we are targeting adjusted EBITDA to be approximately the same as 2022. We also expect free cash flow to exceed $100 million this year. Q4 brought a strong finish for Magnite as a leader in CTV and DV+. We are very pleased with our position as we enter the coming year to grow our business, generate strong cash flow, and support accelerating growth and margin expansion as the economy recovers.

The first question comes from Shyam Patil with Susquehanna.

Nice job on the execution. I had a couple of questions. First question, for Q1, as you guys talked about it, it seems like things have started off a bit slow for the industry in terms of ad spend growth. I was just wondering if you've seen any improvement or changes in the growth rates as we've kind of gone from early January to late February? And then second question, Michael, you talked about some of the stuff that's happened in the industry, with a couple of players checking out your focus and strength of SPO and then a large agency relationship that you guys continue to kind of deepen. And I was just curious, can you just talk a little bit more about just, overall, not CTV overall kind of in the SSP side, just how you feel about your ability to kind of gain share, especially from the larger agencies? And anything that could be meaningful for this year?

Yes, I'll begin, and David or Nick can add their thoughts. We're cautiously optimistic because there hasn't been further decline. Discussions with major buyers, agencies, and marketers suggest we've likely seen the worst, and conditions should improve from here. While we’re not expecting an immediate upswing, we believe that late Q4 into Q1 will see us stabilizing at a low point, with hopes for improvement as we progress into Q2 and the upfront period. Regarding the SSP side, as mentioned previously, it seems we're finally experiencing a shift. The initial surge of SSPs when header bidding emerged, along with Google's OB program integrating numerous SSPs, mainly created arbitrage and recycled the same DSP demand found across various platforms. That trend is now starting to diminish. Agencies are taking this seriously, focusing on established brands rather than transient SSPs. Marketers and agencies are willing to work with a select few partners that meet their needs, offer necessary tools, invest in their growth, and demonstrate a commitment to building relationships. We’re witnessing a renewed appreciation for the SSP's value within the ecosystem. As stated on the call, I believe we at Magnite are in an excellent position to capitalize on this shift in sentiment.

Our next question comes from Nick Zangler with Stephens.

It was a strong quarter. Looking at the Q1 '23 guidance, it appears that you're projecting a 3% increase for CTV at the midpoint. Additionally, it seems that DV+ will grow faster than CTV this quarter. Could you elaborate on that? Mobile performed well last quarter, and I'm interested to know if that trend will continue into the new year. As we look further into the year, do you anticipate CTV will continue to lead in growth among the segments? Any insights on the overall trends for CTV, mobile, and desktop given the current fluctuations would be appreciated.

Yes, Nick. I believe the success of DV+ is evident. You've heard us mention before that we may have lost focus, but we are fully committed to improving and we're starting to see some positive signs, although they may not yet show in our financial results. This is evident as we continue to catch up in DV+, and I must say the team is doing a fantastic job. The CTV market is entirely influenced by broader economic conditions, and I have no doubt that CTV will emerge as the fastest-growing segment as we move out of 2023. Typically, budgets allocated for branding and TV advertising are the first to be reduced, while performance-related advertising, which is more aligned with DV+, remains more resilient. When the market shifts back, we are strategically positioned to leverage our partnerships effectively. Our connections within the CTV landscape give us insight into the overall trends, which are consistent across the board. As the economy begins to recover, I expect our growth to surpass industry standards.

The only thing I would add is that the growth in DV+ is slightly masked by the strong dollar. When you account for that, the growth in DV+ is actually closer to 7%. We are excited about the progress we are making there.

Got it. Congrats on that. I wanted to discuss shopper marketing, which is gaining a lot of attention in digital advertising right now. Can you remind us of your involvement in this area? I understand you have a new partnership with Criteo. I've heard from Trade Desk that there is significant adoption of closed-loop feedback, where advertisers are using retailer data to address CAD issues and ad spending. Can you clarify your current situation regarding this? Is Magnite generating additional revenues from shopper marketing, or is this a potential benefit that has yet to materialize for you?

Yes. Nick, I think it's more the latter, yet to play out. We have that nascent relationship with Kroger, the Criteo relationship. So think about our role in the ecosystem of retail media networks or the shopper dollars as the partner of the supply. And so whether that's owned and operated inventory from a Kroger or off-site trying to reach Kroger audiences across the open web, that's what an SSP does, right? And more and more, the folks that have this valuable first-party data are feeling more comfortable assembling the data and assembling the audience segments on the supply side to keep it closer, more protected to the actual publisher. And in this case, a publisher would be Kroger. And so I think we'll play a very valuable role. It's not going to be an end-to-end role. I don't think you're going to see us anytime soon trying to come up with our own closed-loop attribution technology, proprietary technology. I think we know what our role is. It's a valuable role, and we'll participate in the economics of the RMM space.

Our next question comes from Laura Martin with Needham.

Great numbers. Two, just following up on that prior call. Is your point of view, Michael, that Retail Media Networks could be as big a contributor to the top line growth over time as CTV has been? Or are those inherently different total addressable market? Like is one total addressable market bigger or smaller than the other? And then my other question is on the Google-DOJ litigation. Our channel tech in D.C. tell us that at a minimum, the DOJ wants to force Google to spin off its ad server. Second most, they want to have the ad server and the SSP spun off. And in the best of all worlds, they would have them spin off everything in third-party ad tech. Could you walk us through how Magnite benefits if they are forced to spin off their ad server or their ad server and their SSP? I'd be interested in the upside for Magnite from those activities.

Sure, Laura. It's great to hear from you. The Retail Media Network is extremely appealing. We're anticipating an increase in spending, particularly in higher CPMs. Many of the CPG advertisers involved in the Retail Media Network are accustomed to advertising on television, so they will seek partnerships on the buy side to create the attribution loop while still needing access to our robust CTV supply. This is where we come into play, with the potential for increased ad spending, higher CPMs, and possibly better take rates based on our role and the services we provide. We're very excited about the future opportunities within Retail Media. Regarding the Google litigation, you've kept a close eye on it. We have outside counsel involved as well, and the Department of Justice consults with industry experts like us for insights. It's difficult to predict specific outcomes, but we've noted a more transparent and cooperative approach from Google. This could lead to improvements if they can address conflicts of interest with inventory ownership in ad serving across the open web. It's a long process, but we believe there will be benefits for us. Our success with SpringServe in connected television ad serving demonstrates this. This is an area where we don't encounter Google, and we're beginning to see new opportunities that weren't available two years ago.

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

Michael, I just wanted to ask about visibility. I mean it sounds like things kind of decelerated pretty quickly in Q4, have stabilized since. But just wanted some color on if the visibility has changed? Or how much visibility you have now into marketers maybe pulling back on budgets or reaccelerating budgets or just things like that?

Yes, you're right, Jason. It seems like as soon as we finish our call, we start looking ahead to the Q3 earnings. Across the board, we've heard that around mid-December, Q4 didn't perform as expected and struggled towards the end of December, carrying that pressure into Q1. Typically, we gain visibility from insights provided by our agency buyers. We have a demand facilitation team that operates in a somewhat unpredictable market. Insertion orders usually reflect a willingness to commit a certain amount over the coming months, and those bookings have been quite strong. This leads us to believe, aligning with broader industry sentiment, that we are currently at a low point with hopes for recovery coming earlier than many anticipate, which is the second half of the year. However, our forecasting capabilities are no better than anyone else's in this regard.

Fair enough. Maybe two on the updated CTV platform. I'm just curious if the important takeaways indicate anything about talking being low in the first half. We already have the new platforms to understand that.

Jason, I don't know if it's my connection, but I missed that entire question. David, did it come across on your line?

No. Jason, you're cutting out there. If you could repeat it.

Okay. Sorry about that. Are we good now?

Yes. It sounds much better now, Jason.

Okay. Sorry about that. So the two parts on the Magnite streaming platform. Just first, any early takeaways, feedback that you've heard? And then second for David on cost. You talked about lower profitability in the first half of the year. But I know you announced earlier this month that the platform is now available. So I'm just wondering why the higher cost level throughout the first half of the year, why won't we maybe see that cost level start to abate heading into Q2?

Yes, I believe there is a connection between them. Some initial feedback on the streaming platform is quite positive, with several of our partners already using it. Others have been trained and have reviewed it, and they find it has the features that were promised, which they are very excited about. However, it’s still early to identify any performance differences between the two platforms. Just because we've launched and announced it doesn't mean that everything else stops immediately. This ties in well with what David will discuss regarding costs.

One of the challenges with this migration is that we need to operate two complete platforms. As long as there is a customer still using one of these platforms, it must continue to function properly, which requires support from our teams. We have on-premises infrastructure, minimum spending commitments, and data center lease costs, all contributing to the expenses of maintaining both platforms. This creates a situation with duplicated costs. We plan to phase out the second platform early in the third quarter and transition to a single unified platform. This transition is expected to lead to significant cost reductions in the latter half of the year. Additionally, certain aspects of our unified platform will employ cloud resources more extensively than before, particularly for some lower volume, high-value features. Consequently, we anticipate continued benefits and decreases in unit costs throughout the upcoming year, which will contribute to the overall cost reductions we expect in the latter half of the year.

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

Great. Michael, just first, obviously, you guys have done probably a better-than-expected job of birthing sort of organic products. But I do wonder if we do finally get the long-awaited death of the, as you put it, undifferentiated SSP, if you might not get a few panicked or desperate phone calls? And how you might be looking at sort of the marketplace, whether it be from a tech pickup standpoint or just filling in a couple of holes? And then David brought it up, given the dollar, you guys have fully unified platforms now. Internationally, you guys continue to kind of talk about it as an area of opportunity. We hear from our own checks that there's still a lot of distortion, disruption out there that someone could step in and take more advantage of. And so I'm just curious how you're thinking about kind of attacking the broader marketplace, understanding that the macro is super messy everywhere right now?

Yes. So as it relates to this continuing or accelerating supply path optimization, typically speaking, where you see it happen first is in kind of the open auction business. And so what you see as kind of a dislocation in spend, the Magnite platform receiving more bids from DSPs because there's fear platforms to bid and buy from. And that doesn't really require anything other than making sure it's up and going to take advantage of it. The second piece you see to it is the publisher saying, 'Boy, I've been doing this on my own, this piece of it on my own. And man, it requires two engineers and a whole lot of work on my part. And for a modest cost, I can use Magnite technology to help me run my header.' And so then you start to see this kind of second wave where they're choosing fewer partners, but they're really getting back to kind of a winner-take-most SSP relationship where they'll give that SSP their deals business. They'll use the technology from that SSP. Disney is a great example. We built custom software through them. We've talked about that. I think that we're brilliantly positioned, given the size of the company, the scale we have, and the tools and the products that we have, to be able to really start when publishers start to lean in and said, 'Man, why did I think it was smart to run this piece of it myself? How can you help me?' FOX is a good example of that. So I think you're just going to see more and more of that, and that all falls under the umbrella of this reawakening of a value that an SSP that's just not an undifferentiated SSP can bring to a publisher. And we're certainly well poised to take advantage of that. As it relates to the Unified platform, I wonder, Dan, if you could elaborate on that a little bit? I think I know what you're asking about. I don't want to answer the wrong question.

Well, you can answer the question you like, Michael.

But I certainly want to try out the advancement kind of international. I mean to get more aggressive either in CTV now or obviously, you've made some margin roads in DV+, but I'm just trying to get a sense because the international markets have been super distorted in I think, like in Europe, in particular. And we've heard sort of from our checks that there have been some really good opportunities and you can kind of figure out the right way to attack the market. So I'd just love to hear what you guys are kind of doing now that you have a more unified front across the business?

Yes, that's an important point. Some of the businesses, such as SpotX and SpringServe, had minimal exposure to Europe because they were owned by RTL, a German media company, which preferred to use their own in-house tools for the German market. Similarly, Telaria had limited focus on international markets due to their resources. Now, being part of Magnite provides a unified platform that includes all the features from both Telaria and SpotX, along with innovations from SpringServe. This creates new opportunities for Magnite that weren’t available before. We’re observing a trend where publishers are increasingly looking to technology partners, like an SSP, to do more rather than handle things internally. The trend of publishers managing everything in-house is coming to an end. While we are excited about these opportunities, the current tough markets, due to the strong dollar and weak local economies, may slow down any significant acceleration because of the prevailing uncertainty.

Yes. And Dan, I maybe embedded in your question is, is there maybe international M&A opportunities? And the answer there would be no. So we have the assets we need. We have the international team that we want, and we would expect international growth to be organic.

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

Yes, thanks. I think I'll leave off my quarterly DV+ question and join the TV bandwagon here. So how should we think about the partnerships heading into 2023? It seems like every quarter, you have 2 or 3 more announcements. Can you just help us kind of think about both the direct and indirect benefit? And kind of how we should expect these relationships to ramp?

Yes, Matt, great question. We like to describe these partnerships as a progression, starting with initial discussions to deeper commitments. A good example is GroupM, which we first mentioned about six or seven quarters ago. The evolution of that partnership involved selecting a technology partner like Magnite, spreading the concept throughout the GroupM organization, and then presenting the opportunity to their clients and explaining the value of buying through their premium marketplace. It's a process, essentially a sales cycle, some aspects of which we at Magnite can influence, while many are dependent on the publishers or agencies involved. The positive takeaway is that we are witnessing a steady increase in these partnerships, which vary in how quickly they develop; some are straightforward, while others need more customization. So, it’s important to approach each partnership individually. However, it’s certainly better to see this steady progress rather than a lack of activity. This trend highlights the unique advantages of combining SpringServe and Magnite Streaming, which offers a distinct product in the market and is helping us capture market share.

That's helpful. Maybe this has to do with partners and maybe it doesn't. But as we think about heading into 2023, can you just talk about kind of the market momentum around biddable? And if you're seeing any increase in the pace of that transition as more CTV inventory comes online? And then if there's anything kind of around that concept in terms of directionally an expectation for like the blended CTV take rate in 2023 or 2024 that we kind of look out to?

Yes, that’s a great question. These trends are challenging to generalize due to the dynamic nature of the marketplace. However, as we approach the upfront, you can expect a significant increase in demand, although it’s a bit exaggerated to call it a record given the limited biddable inventory in premium CTV categories like plus services and broadcasters. Still, there will be a substantial amount of demand as dictated by the buyers. Every dollar will stretch further in this marketplace, and buyers have long sought the chance to utilize data openly in their bidding processes. The concept of invite-only auctions, which has performed exceptionally well, is likely to expand due to the significant influence buyers have as they enter the market. We are also observing an increase in biddable inventory at CPMs that differ from Q3 prices in the fast service and OEM markets. So yes, biddable inventory is emerging, likely at an accelerated pace due to the challenging advertising economy, and it certainly looks promising for take rates given the value we provide in managing auctions as opposed to simply acting as a technology partner for pre-sold deals by publishers.

Our next question comes from Matt Thornton with Truist.

I have a couple of questions regarding recent events. Michael, you mentioned Yahoo! shutting its SSP, which I assume had a significant market share on the supply side. How do you think that market share will be absorbed? I would expect larger platforms like Magnite to take on some of that share, but I’m interested in your perspective on this and its implications for 2023. Additionally, Roku has recently announced that it will open up to third-party DSP demand, with SpotX being the primary SSP partner. I believe this will be beneficial for SpotX, but I’m eager to hear your thoughts on that as well.

Yes, Matt. I believe it's been mentioned in the trade press that most of Yahoo!'s inventory under exchange consisted of Yahoo! owned and operated inventory. It's reasonable to expect that they will find a way to monetize that, which presents us with an opportunity to access that inventory, likely in a more straightforward manner compared to the previous complexities from various exchanges following their acquisitions. Overall, this is probably a positive development. Concerning the inventory they had on the platform, much of that is inventory we already possess. The situation doesn't necessarily lead to new publisher partnerships since those publishers were exclusively using Yahoo! and are now bringing Magnite into the mix. Essentially, we're closing off another avenue for DSP dollars to reach those publishers, which means a larger share will flow through the remaining SSPs, especially a differentiated player like Magnite. That might be the perspective to take. You also asked about...

Roku.

Yes. Still have a deep partnership with them. I think that it's a little early for us to talk about the nature of the relationship. But suffice to say, a deep partnership with them that's expanding as well.

Our next question comes from Shweta Khajuria with Evercore ISI.

This is Ian Peterson on for Shweta. Quick question here, focusing on Disney. Disney continues to rapidly scale their programmatic offerings and expects to be 40% to 50% programmatic by '24. Can you help us just quantify the impact of this accelerated shift towards programmatic for Magnite? And do you anticipate other AVOD services to follow a similar trajectory as Disney? Or is Disney really the outlier here in the near term? And maybe just lastly, can you tie in Magnite's recently launched streaming platform and how this comes into play here? And maybe can you just highlight a value proposition for AVOD services?

Sure, Ian. Regarding Disney, we've been clear that we are mainly acting as a technology partner to assist with programmatic buys sold by Disney. We believe this leads to a more biddable environment, and with us managing the auction aspect, economic terms improve in regard to take rates. This will unfold over time. Hulu has demonstrated the effectiveness of having biddable inventory compared to traditionally guaranteed pricing of upfront inventory, and I think that's the model Disney will follow. They’re not outliers; they’re just more advanced, with more inventory globally, including Hulu, and they’ve benefited from years of experience in programmatic advertising. In terms of Magnite Streaming, think of it like SpotX and Telaria competing before they merged—each had unique strengths. Now we’re combining the best aspects of both platforms and applying insights from client feedback, especially in areas like live sports streaming. This will not only enhance our current opportunities but also position us well when anyone considers changing ad servers and SSPs, making us a valuable option compared to what each platform offered before the merger.

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, Sarah. For 2023, we expect to continue growing revenue and generating healthy free cash flow while carefully managing expenses. This is reflected in our earlier actions regarding headcount, platform consolidation, a hiring pause, and managing discretionary spending. We are positioning the business to take advantage of increasing growth as the market improves. Our strong leadership position in the CTV ad-supported market and growth in DV+ should help us gain market share in the coming years. We are still in the early stages of ad-supported CTV, as many major market players have just begun scaling their CTV ad businesses, which will lead to growth for many years, particularly for programmatic partners. I want to thank our dedicated Magnite team for their hard work and focus during our comprehensive platform consolidation and customer migrations while navigating tough market conditions. Thank you to our analysts and investors for your ongoing support and for joining our Q4 results call today. We look forward to connecting with many of you at our upcoming investor events. Cannonball will host post Q4 virtual investor meetings tomorrow. We will be attending the SIG Conference in New York on March 2 and the Truist conference in New York on March 7. We will also participate in meetings with RBC in Toronto and Montreal, and on March 8 and 9 in Denver with Benchmark. Have a great evening, and thank you.

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