Magnite, Inc. Q3 FY2023 Earnings Call

Good afternoon and welcome to the Magnite Third Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there'll 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 of Investor Relations. Please go ahead.

Thank you, operator and good afternoon everyone. Welcome to Magnite's third quarter 2023 earnings conference call. As a reminder, this conference call is being recorded. Joining me on the call 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 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 third quarter 2023 quarterly report on Form 10-Q and our 2022 annual report on Form 10-K. We undertake no obligation to provide forward-looking statements or relevant risks. Our commentary today will include non-GAAP financial measures including contribution ex-TAC or less traffic acquisition cost, 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 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 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. I'm happy to report results for Q3 that exceeded our topline guidance for total CTV and DV+ contribution ex-TAC, while delivering strong profitability and free cash flow. Our DV+ business performed very well, delivering contribution ex-TAC growth of 12% despite a depressed CPM market. Moreover, in CTV, we continue to grow our market share with ad spend growing over 20% year-over-year, exceeding industry growth estimates. We were pleased with our execution in the quarter as we continue to solidify our position as the leading independent player in CTV. And as product mix shifts stabilize and macro ad spend returns to normal, we believe our CTV contribution ex-TAC growth will, over time, approach our ad spend growth. In this respect, it's important to remember that we are still in the early days of programmatic CTV. Marquee publishers are just now ramping AVOD and their inventory is limited and in high demand by advertisers. With this dynamic, publishers generally prefer to sell programmatic deals through their direct sales teams. The good news is they are using our technology to execute those transactions. However, as we've explained previously, the programmatic direct business carries a lower take rate versus when we sell the inventory and layer on more services. We believe that as programmatic CTV scales, buyers will want to purchase the majority of their CTV programmatically, using advanced data targeting with embeddable environments, a process that can't be executed using a direct sales team. This evolution will attract a significantly broader advertiser base, increased ad spend, a more competitive CPM environment, and better ROI and COGS for both buyers and sellers. We had some noteworthy customer wins this quarter, announcing that we'd be powering the Disney+ biddable marketplace via Magnite streaming as well as an expansion in our partnership with Paramount advertising. Buyers now have access to all of Paramount's combined streaming offerings, including their IQ program through Magnite. We're also encouraged by the fact that a lot of the growth in our CTV business is being enabled through advanced integrations with our ad server SpringServe. As you know, ad serving puts us one step closer to the publisher and creates a stickier relationship. With SpringServe, our platform is more deeply embedded within the client workflow and becomes a central technology in their overall monetization strategy. The stickiness of the software and development we provide in CTV is far different than a typical SSP model. We are clearly growing share, as shown by our ad spend growth above 20%. This is the result of working with nearly every scale media owner outside of the walled gardens. These clients have continually expanded their relationship with us, both vertically and horizontally. I'll offer two examples. One is a market-leading streamer and media company that started using us in a small part of their US business for workflow and directly sold campaigns. Now, that partner has expanded our services to additional streaming platforms in other countries and now uses us to access biddable programmatic demand through the Magnite SSP. Another example is a market-leading TV OEM that started with us in ad serving. They now use us as their SSP and demand engine as well as a source of incremental revenue to our new CTV Tiles product. This same partner also leverages our audience capabilities to sell and package its first-party data on both its direct properties and through audience extension. These examples are common across our top partners and we have continually shown that as our partners grow their CTV businesses, so do the ways in which they utilize our services. Despite a soft start to Q4, largely driven by macro conditions, we believe we are uniquely positioned to capitalize on the inevitable market turnaround. I'll briefly touch on just a few other things that make me the most excited for 2024. Accelerated supply path optimization with our agency partners, particularly in our curated and often exclusive marketplaces. Consolidated spending on our platform leads to more publisher supply and enhanced margins. ClearLine, our recently launched buy-side tool, is off to a strong start and with additional features and functionality planned for the coming quarters, we expect continued momentum and adoption. If you recall, ClearLine is built to capture linear TV dollars that aren't currently in the CTV ecosystem, a TAM of enormous proportion. And planned innovation across our audience tools, SpringServe ad server, Magnite streaming, and DV+ platforms. With our CTV platform integration behind us, we can now focus exclusively on new innovative products, supporting our unrivaled omnichannel offering and new and existing customer expansion. Although Magnite works with every publisher across the DV+ and CTV landscape, we have tremendous opportunities to grow our existing business and capture new entrants in fast-growing and dynamic markets like CTV. In summary, there's a lot to be excited about our business, our people, our customers, and our partners. I never felt better about our strategic position and ability to grow long-term. We have made the right investments and it's time to put our heads down, work hard, and deliver. We are in a great position to capture an outsized portion of market growth when it inflects by executing and being the best at what we do. With that, I'll turn the call over to David for more details on financials. David?

Thanks Michael. Total revenue for Q3 was $150 million, up 3% from Q3 of 2022. Contribution ex-TAC was $133 million, up 4%. CTV contribution ex-TAC was $52 million, down 6% from $56 million last year. DV+ contribution ex-TAC was $81 million, an increase from $72 million or 12% compared to last year. Both of these exceeded the high end of our guidance ranges. Our contribution ex-TAC mix for Q3 was 39% CTV, 41% mobile, and 20% desktop. Geographically, our international results outpaced our US results led by our DV+ business with new publisher wins and overall volume growth. From a vertical perspective, travel was our strongest performing category, while weaker performing categories included retail, financial services, and media and entertainment related to the actors and writers' strikes. CTV contribution ex-TAC was negatively impacted by expected softness in managed service and by the mix shift. As a reminder, tough political comps from last year negatively impacted Q3 CTV contribution ex-TAC results by roughly 3%. DV+ continued to be an area of strength, with 12% growth in the quarter. We continue to innovate and are excited with the launch of native ad formats across DV+, allowing programmatic demand to target key publishers that offer native formats. We expect to continue to bring new products to DV+ that will enable our publishers to better monetize their supply. Total operating expenses, which includes the cost of revenue for the third quarter were $168 million, similar to the $167 million in the same period last year. Operating expenses for the third quarter this year includes the final $8 million of non-cash accelerated amortization resulting from our platform consolidation. Adjusted EBITDA operating expense was $93 million at the midpoint of our guidance range. Adjusted EBITDA operating expense for the third quarter of last year was $83 million. The year-over-year increase resulted from higher data center and bandwidth costs as well as higher payroll-related expenses. Net loss was $17 million for the quarter compared to a net loss for the third quarter of 2022 of $24 million. Adjusted EBITDA was $40 million and adjusted EBITDA margin was 30% for the quarter. Please note, we calculate adjusted EBITDA margin as a percentage of contribution ex-TAC. GAAP loss for basic and diluted share was $0.13 for the third quarter of 2023 compared to a loss of $0.18 for the third quarter of 2022. Non-GAAP earnings per share in the third quarter of 2023 was $0.12 compared to $0.18 reported last year. The reconciliations to non-GAAP income and non-GAAP earnings per share are included with our Q3 results press release. There were 137 million weighted average basic and diluted shares outstanding for the third quarter of 2023. Fully diluted weighted average shares utilized for non-GAAP earnings per share were 146 million for the third quarter. Capital expenditures, including both purchases of property and equipment and capitalized internally used software development costs, were $8 million for the quarter. Operating cash flow, which we define as adjusted EBITDA less CapEx, was $32 million for the quarter. Our net interest expense for the quarter was $8 million. During the third quarter, we purchased and retired $34 million in face value of our convertible notes using $30 million in cash, resulting in a discount of 14%. Our total par value convertible notes repurchased through the third quarter was approximately $125 million, reducing our total convertible note debt balance from $400 million to $275 million. We have $70 million remaining under our current program for either the repurchase of common shares or convertible debt. Our cash balance at the end of Q3 was $311 million, an increase from $266 million at the end of last quarter. We're very pleased that we reached our initial net leverage target of less than 2x with 1.8x at the end of Q3. We expect to generate significantly increased seasonal free cash flow in Q4. We will continue to evaluate the best use of our cash as it relates to debt reduction and share repurchases. I'll now share our expectations for the fourth quarter and some high-level thoughts for 2024. For the fourth quarter, we expect contribution ex-TAC to be in the range of $158 million to $162 million. We expect contribution ex-TAC attributable to CTV to be in the range of $61 million to $63 million. As a reminder, political comps create a roughly 6% headwind in Q4 of 2023. We expect the contribution ex-TAC attributable to DV+ to be in the range of $97 million to $99 million. We expect adjusted EBITDA operating expenses to be between $94 million and $96 million, which implies adjusted EBITDA margin of approximately 41% for Q4 at the midpoint. Looking ahead to 2024, we expect strong continued ad spend growth, particularly in CTV, total contribution ex-TAC to grow in the high single digits with CTV to grow faster than DV+, adjusted EBITDA margin expansion of 50 to 100 basis points at this level of revenue growth. Double-digit percentage growth of adjusted EBITDA with even higher growth in free cash flow and total CapEx to be in the mid-$40 million range, including property, plant, and equipment and capitalized software. It's worth noting that our guidance reflects some uncertainty in the macro environment, in particular, the potential impact from the Mideast conflict. Overall, the company's performance for the third quarter was better than our expectations. I'm especially pleased that even with the soft macro and with the negative impact of the current CTV revenue mix shift that we've been experiencing, we've been able to continue to generate such strong cash flows. As a result of those cash flows this past year, we were able to retire over 30% of our outstanding converts well before their maturity and achieved our initial net leverage ratio target of less than 2x. I'm confident that our greater than market share ad spend growth in CTV will continue. I'm also confident that we'll continue to expand our CTV partner relationships, leading to CTV revenue growth and closing the gap with our ad spend growth. We continue to have significant opportunities ahead of us and we are uniquely positioned to leverage our capabilities as the leading independent omnichannel SSP. With that, let's open the line for Q&A.

We will now begin the question-and-answer session. Our first question comes from Jason Kreyer with Craig-Hallum. Please go ahead.

Michael can you just step back and maybe just talk about what you see as the evolution of the connected TV transaction model for the industry? And kind of curious on what you think how that migrates from the programmatic execution that seems to be dominating more of that spend today and how that maybe evolves into a more biddable environment down the road?

Yes, absolutely, Jason. That’s a great question. Here’s our perspective on the market. We’re still in the early stages. If you look at our leading CTV revenue publishers on the Magnite platform from two years ago, none of them would compare to the top players we discuss today, such as streaming services and broadcasters. Back then, they were mainly specialized CTV-first entities. It’s not surprising that the larger services are currently engaging their traditional linear advertisers and that they have primarily sold directly to them throughout their history, continuing this approach. However, we’re beginning to see changes, particularly with established services like Hulu, which are becoming more open to biddable formats. This shift is largely driven by buyer demand for data targeting and refined audience definitions from the buy side, rather than just the sell side. We observe a desire among this group of advertisers for more automation, enhanced data targeting, and advanced biddable environments. Importantly, we believe that focusing solely on transitioning a few hundred broadcast advertisers to CTV misses the bigger picture, which involves bringing in around 10,000 new advertisers, primarily those who currently advertise in social video spaces. With advancements like shoppable ads and enhanced targeting capabilities, these advertisers will find CTV to be an effective platform and will prefer biddable environments. They will likely rely on direct sales teams from large broadcasters to engage them. This is where we see a strong role for programmatic advertising. Additionally, as nearly all sports are being streamed under existing contracts, CTV is especially suited for programmatic advertising, particularly during timeouts and overtimes when there’s an opportunity to fill ad gaps. We anticipate seeing significant growth in the CTV market soon, evolving towards a programmatic model similar to what we experience in the DV+ sector, with one key difference: there won’t be multiple SSPs involved. Instead, it will likely be a winner-takes-most scenario, and we believe we are well-positioned for that shift.

Thanks Michael. I wanted to just follow-up on managed service, see if you can give any color on how that progressed through Q3? If there's any indications on how that's going in Q4? And then maybe along with that, just I think some of that spend perhaps has been impacted by some of the strikes that are going on. And so I'm curious if that will continue to pressure spend in that category or if there's any signs that, that could be alleviated?

Yes. I'll let David give some more color. But I would say, Jason, in general, no surprises there. It's behaving as we thought it would. Managed service is impervious to macro headwinds and I would say that we're not the only company citing a Q4 that's a bit weaker than we had anticipated going into Q4 for absolute. And so managed service not an outlier there. I don't know, David, if you have any more details to share.

No, that's right. It's stabilized. And I think what's important is we've tried to take a very cautious approach in our guidance for Q4.

Thank you, gentlemen.

Hey guys. I had a couple of questions. You guys talked about high single-digit growth next year with CTV going faster than DV+, implying, I think, low double-digit growth for CTV, can you maybe just talk a little bit about just what would be the upside factors for CTV in that scenario? And then how you see the Hollywood strikes potentially impacting CTV next year as well? And then just a follow-up, Michael, in your prepared remarks, you talked about the new tech platform and that enabling new products, new offerings, can you just talk a little bit about some specifics there? And any kind of timing on when those might be launched and potentially start contributing to revenue?

Yes, I'll address the latter part first regarding the upside factors for CTV. I believe that throughout 2024, we will introduce some of the innovations we have in store. A key theme will be the closer integration of the SpringServe ad server with Magnet's programmatic streaming platform. We have several clients who utilize both, and enhancing the experience for our clients is a significant goal. This isn't just about aesthetics; it will also improve monetization for publishers. However, this is more of a discussion for 2024, and we will keep you updated on developments each quarter. David, would you like to share your thoughts on CTV for next year?

Yes, sure. And I think what would be helpful is to talk about that would be just set a little background on our perspective for 2024 from a little higher level. We're giving this guidance for 2024. We certainly don't have the same degree of confidence or visibility in 2024, as we do in Q4, just because of the time lag. But we thought it would be super helpful to share some of our thinking around what our financial profile would look like, what our margin will look like and so forth. And so with that in mind, our 2024 revenue guidance certainly reflects caution around the macro, caution in our managed service business, modest expectations from the presidential year. And so if I think about upside from a CTV perspective, certainly, I think if the macro turns around, that certainly pushes more dollars into some of our longer tail, higher take rate channels in CTV. There could be upside from the presidential election as well. So, overall, we've just tried to take a very cautious approach with a focus on giving some visibility around our cost structure.

Thanks. Good afternoon. Michael, you mentioned the closer integration of SpringServe ads with the SSP, and you spent a lot of time discussing the winner-take-most scenario. I noticed the recent press release about Yahoo! DSP fully integrating with the SSP and ad server, along with TradeDesk through their OpenPath solution. I know FreeWheel has been pursuing this as well. It seems like an opportunity to increase ad share through direct integrations. Is that what you're referring to? Could you provide more insight into the reasoning or economics behind these deals?

Yes, Dan. We believe this is a significant development. While it's not a major regulatory trend, some DSPs are looking to connect directly with publishers. In DV+, products like OpenPath from TradeDesk have a pre-bid adapter that allows connections to multiple publishers. However, there's no similar solution in the CTV space. We recognized an opportunity with SpringServe, which connects with all major CTV publishers, to facilitate those connections. This allows us to maintain the economics of those relationships while enabling large DSPs to establish direct connections and demonstrate their effectiveness. We have observed increased spending from TradeDesk post-OpenPath through their regular channels. This is beneficial for our publishers, who want access to these additional budgets because they need to connect directly with DSPs to avoid losing out on revenue. We are pleased to assist our publishers in capturing this revenue while retaining our own economics. Additionally, I think, Dan, this relates to the concept of winner-takes-most. In the future, we will likely see a scenario where only one or one and a half SSPs run a unified auction, even as more publishers become biddable. We believe we are well-positioned to support our clients as this evolves.

Got it. That's helpful. And I know international is kind of tricky ground right now, given both the macro and the conflicts out there. But I mean there's some data out there that suggests you guys took some 10 points of share sequentially in EMEA. And I'm just kind of curious how you're thinking about kind of planting the seeds and continuing to grow kind of ex-US from here?

Yes. And I'll let David talk to some of the specifics, but I was just over there last week, and the team is on fire in London. Some of it, there was quite depressed comps given we're several years now into the Ukraine war and some of that has worked its way through the system in terms of CPM pricing. But we definitely invested in that marketplace. And when you look at Telaria, post-merger with Rubicon now Magnite in SpotX. It was kind of a market that neither one was playing in. And so now you have this legacy Rubicon team being able to take these new shiny tools in their toolkit out to market. And I think that largely explains why you're seeing an acceleration of success there. David, I don't know if you have anything else to add?

I think you've covered it. A couple of specific initiatives. We took over from a reseller in the Nordics. We've opened an office in Sweden. We're seeing some nice progress there. We've opened up an office in India. So, we're also making some modest investments globally that we're excited about and should have greater payoffs in the future.

Hi there. Good morning.

Hey Laura.

Hi. My favorite chart is the net leverage chart, which shows that in two years, you've reduced from six times leverage to 1.8. I know you achieved your goal early of reaching two times. My question is, do you intend to stop here? Will you continue to reduce leverage? Are you aiming for zero leverage, or will you maintain this level and use your capital to buy back shares? Can you tell me your target for net leverage now that you are below 2x?

Yes, Laura, it is great. We're very excited to achieve that initial goal. In the current economic environment, 1x might be the new 2x. We do have aspirations to lower that somewhat. We don't necessarily aim for zero leverage, as there are some benefits to having some debt. So, we will continue to reduce it to some degree, but we won't have the same urgency around it as we have in the past.

Okay, that's very helpful. I have ten more questions, but I'm going to focus on two. The upfronts were really weak for traditional media companies. I'm wondering if a weak upfront, where advertisers didn't commit as much, is beneficial for you because it frees up more money and scatter that you have access to. Additionally, regarding Amazon ads, starting January 1, Amazon will add ads that consumers can avoid by paying an extra $3 a month. Is that a positive or negative for you since Amazon is somewhat of a competitor? These are two separate issues, but I didn't want to ask three questions.

Yes. Regarding the first point, in a typical market, one might assume that when advertisers hold back on their upfront commitments, they do so to have flexibility to enter the spot market, which would generally benefit streaming and Magnite. However, the reality is that the loss in upfront commitments was not due to advertisers reserving dollars for spot but rather a result of them lacking the funds to commit because of broader economic conditions. Overall, it was a disappointing upfront period. That said, programmatic advertising has played a significant role in the upfront presentations, and the line between a poor upfront for streaming and a strong spot market is starting to blur. We'll see how this evolves as advertising spending begins to recover in the macro environment. As for Amazon Ads, in this environment of restrained spending, those advertising dollars will be highly competitive. It's likely that these funds could come at the expense of Paramount, Disney, or NBC Universal. Nevertheless, if we take a longer view, having a large AVOD global service is beneficial for Magnite. The notion that success in the current environment is impossible without a scaled advertising partner resonates with us. Thus, we believe the long-term outlook is positive, and Amazon isn't entirely out of our reach. We can collaborate with them, especially when partners like Disney distribute content on Amazon; we can help them monetize their ad sales effectively. So, we can work with Amazon on the margins.

Thank you very much. Very helpful. Thank you.

Thank you.

Yes, it's great to see the positive results for the quarter. I have a question about last quarter, as you mentioned in the third quarter about managed services and the shift towards premium services, as well as the soft demand affecting spending in CTV. I believe you listed those in order of significance. Regarding your guidance for the fourth quarter, which is down 4%, are these still the same factors impacting performance, and are they ranked in the same order?

I think it’s an interesting dynamic from Q3 to Q4 in CTV. The midpoint of our guidance shows a 4% decrease in Q4 compared to a 6% decline in Q3. When you remove the political comparisons from 2022, we experienced a 3% impact in Q3 and a 6% impact in Q4. If we adjust for those, CTV growth shifts from an adjusted 3% decline in Q3 to a 2% increase in Q4 when we compare the same periods. This adjustment highlights some of the actual growth and acceleration we’re seeing in the CTV business. As for the drivers, I believe the order of those drivers remains fairly accurate.

Got it. Helpful. And then obviously, Hulu goes to Disney, and this was pretty much expected. I'd imagine maybe just a relief in general, so it doesn't go to Comcast, but any benefit that you could point to that you might see as Hulu gets fully brought in by Disney going forward?

Yes, Nick, you're correct. We expected Hulu to remain part of the Disney family. I believe it’s more about business as usual rather than a significant opportunity. However, considering Hulus's size and the potential for brand expansion globally, this is just my speculation. I don’t have any inside information regarding Disney, but there is potential for growth in Hulu's presence and the bundling with other brands that could create more advertising opportunities for us.

Okay. Thank you. Let me try one for Michael, please. Michael, what do you think would drive inflection? Is there a inflection point that you think could drive the gap between ad spend and revenue narrower? And what would that be? What should we be looking out for that gives you confidence that outside of macro, all else equal, this is what's going to help narrow that gap?

Yes, I believe the macroeconomic situation plays a significant role, as we mentioned last quarter. In a typical spending environment, the product mix shift wouldn't be as drastic because media plans would be more varied, including a greater presence of CTV native-first publications and OEMs. These would utilize different products compared to direct sold programmatic from various services. So, the macro environment is certainly beneficial. However, I also think it's about buyer intention. When spending decreases, every dollar carries more weight from an agency perspective, and universally, they've expressed to us, our partners, and publishers a strong desire to pursue more biddable solutions, enhanced data targeting, and increased programmatic options. Ultimately, buyers have significant influence in a market where dollars are limited, which could mark an inflection point, possibly in the near future.

Sorry, let me follow up on that. If that's the case, why would you not be seeing that happening today?

Keep in mind that upfronts are just being placed now, and there's a scarcity of content due to the strikes. This represents another macro challenge, and much of the budget is currently on hold. There have been discussions about executing these funds programmatically, but there isn't a suitable platform available to do so. This contributes to the delay, if that makes sense, Shweta.

Thank you for taking my question. This touches on a point we’ve heard quite a bit about. When considering the FY 2024 guidance framework around CTV growth, can you help us understand your assumptions for take rates in 2024? Is it assumed that there will be no change, a decrease, or an increase as we think about the relationship between that and the strong volume growth?

Do you want to handle that, David?

Yes, certainly. I believe the expected changes in our mix indicate that we anticipate strong growth in our premium channels. Consequently, we expect the overall average take rates to decline slightly. However, the growth in ad spending is quite substantial, and we are seeing significant momentum in that area. As we progress through the year and particularly when we move past the 2022 comparisons into 2024, we are forecasting a growth rate in CTV that is likely in the low to mid double digits. This indicates that CTV growth, as we have projected, will surpass that of DV+, and while our average is in the high single digits, we expect to see double-digit growth in CTV next year.

Yes, that's helpful. And then the context when you're giving on the adjusted EBITDA margins, I know that you pointed out to say specifically at those revenue numbers. You always seem to get a lot of leverage and to deliver that upside to the topline. Can you just help us think a little bit about that? Like are there a bunch of other investment opportunities that you'd like to go after if revenue growth ends up being better than expected? Or do you think we should expect to kind of see that drop straight to leverage?

I believe that with increased revenue growth, we will see a larger portion of that benefit flowing to our profits. There are certain marginal investments we will consider, but we are focusing on the critical investments necessary for our model. Additionally, I want to highlight that we will incur a one-time expense of over $4 million in Q1 for an important event where we will bring the entire company together. While this will negatively impact our margins in Q1, it is expected to contribute nearly 100 basis points to our margin profile for next year. Despite the lower revenue growth rates currently, we continue to anticipate healthy flow-through for our core business.

Thank you for the questions. Michael, I wanted to revisit your earlier point about live sports. I agree that we seem to be at a tipping point, particularly with the potential for a direct-to-consumer ESPN in 2024 and the live sports accelerator product that is currently available. I'm curious about how active the pipeline is for new business in this area and whether it plays a significant role in the business today or is still relatively minor. How much do you think it could contribute to revenue in 2024?

In 2024, it's a challenging situation because not all of the services are available yet. We believe it will be a significant contributor, without a doubt. Currently, there is a bit of a gap in directing programmatic advertising dollars into that space. Typically, demand-side platforms manage campaigns over a set timeframe, aiming for a balanced spending approach; no one wants to exhaust a $1 million budget on the first day. However, sports advertising is quite different, with a massive surge in activity during a Saturday afternoon that quickly disappears. If that opportunity is missed, it's gone. Adjustments to the algorithms are necessary, but everyone is diligently working to improve the situation. From a consumer perspective, if you're watching sports streaming, you can relate to the frustration of seeing endless messages indicating a return to programming. I believe this represents a significant opportunity, particularly since premium publishers are increasingly willing to engage with programmatic solutions, as it makes a lot of sense.

Thanks. And then just another one on the DV+ post just the strength there, 12% growth, is that all mostly volume-driven? What's happening with CPMs on the Disney+, was it a pulse or a minus right now?

Yes, go ahead, David.

You're going to say the same thing. Yes, CPMs are still depressed. And so it's on the volume side.

Okay. So, volume better than the growth offset by maintenance on CPM, that's what's going on.

Yes.

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, Debbie. I would like to thank the Magnite team for their diligent effort required to deliver another strong quarter. I really like the business that we built and how well we're positioned in both CTV and DV+. We remain hard at work delivering solid financial results, building more tech, growing share, and working vigorously with our partners to prepare for the growth that we all know lies ahead. We look forward to speaking with many of you at our upcoming investor events. Macquarie will host our post-Q3 meetings tomorrow. We have a busy conference schedule in November. We'll be attending the Stephens Conference in Nashville on November 14th and 15th; the RBC Conference in New York on the 15th of November; the Craig-Hallum Conference in New York on November 16th. And the Macquarie International Conference in Sydney on November 29th and 30th. We will be hosting an Evercore Bus Tour Meeting at our office in New York on November 29th. Nick will be participating in the Wolfe Research Conference in New York on December 7th, and marketing in San Francisco on December 20th. And a little further out, we will be participating in the Needham Conference in New York on January 18th. Thank you again for joining and have a great evening.

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