Magnite, Inc. (MGNI) August 11, 2026 Conference Transcript

Hi, everyone. Good to see everyone, if everyone could mute themselves, if they're on the Zoom. Thanks for joining. Just wanted to welcome everyone. I'm Jill Hall, head of Small and Mid-Cap Strategy with NBFA Global Research. So, we're very fortunate to have a great two days of executive insights, fireside chats with almost 20 small and mid-cap corporates. It's a great annual event we have every year. And, you know, our analysts have really great breadth of coverage in the small and mid-cap space. They cover about 1,000 small and mid-cap U.S. companies. So excited to continue to hear from them. Feel free to reach out to me or to Corporate Access if you need the schedule, if you still want to join any of the sessions that you're not already signed up for. I've had some people reach out to me today, so not too late. or if we can help you getting in touch with any of the analysts for any follow-up or if you'd like to sign up for any of the research on the companies today as well as our small and mid-cap research or we also put out a daily compilation on some of the small and mid-cap research from our analysts. So with that, thank you for joining. Hope you're able to join some other sessions as well. And I will pass it over to Arthur to do some introductions.

Thank you, Jill. So good afternoon, everyone. My name is Arthur Chu, and I'm on the U.S. Internet team here at BFA. I work with Omar Dasuki, who leads the video game and advertising technology coverage. The ad tech stocks we cover are Magnite, Adplazin, and Unity. So we're going to have some time for a live game day later. But if you have any questions, in the meantime you'd like to ask, feel free to email me at Arthur.Chu. That's Arthur.Chu at BFA.com. or you can just use the raise hand function on a Zoom call anytime that you have a question. So it's a great pleasure today to have Nick Karmonek, Head of Investor Relations at Magnite with us. Magnite is a leader in programmatic advertising on the supply side, particularly on CTV. And we're buy rated on the stock. We think it is well positioned to be one of the biggest beneficiaries from the CTV industry's transition to programmatic advertising. So welcome, Nick.

Thank you, Arthur. And thank you, Jill, for having me today.

So Nick, we have some generalist investors in the audience today, maybe just for people less familiar with Magnite or supply side platforms in general. Can you introduce Magnite to the audience?

Sure. So, you know, Magnite is, you know, what's, you know, what's traditionally, you know, labeled as a supply platform, right? So, you know, effectively, you know, where, you know, we initially, you know, kind of enter into the industry is really working for publishers and working for, you know, publishers that have inventory across the open internet, connected TV. Think of any digital ads that are serviced. You know, those are ads that we are in market trying to bring demand to, right? so we operate a marketplace we bring in demand to match up to be able to get you know inventory sold for publishers but you know our strategic value is really making sure that we can bring it you know to as many buyers as possible make a very you know active you know active bidding on that inventory a lot of that's tied to bringing in and importing data in to allow data to find users that people that buyers and brands are specifically looking for so in doing so that's the value that we inject into the market and the value that we drive for publishers. So whether it's in connected TV, streaming, broadcast TV OEMs, or whether it's mobile app or mobile web, or even web browser or digital out of home, we service all markets as an omni-channel player. I think the area that's most exciting that has a much different market setup than historically the web has is connected TV, where the amount of inventory is really concentrated in the hands of 30 large global partners that represent about 80% of the world's inventory. And it seems like, you know, every week that goes by, there's less of those people because they're consolidating like a Roku, you know, Fox, for example. But we have relationships with all of them, with the exception of YouTube.

So we've become the de facto place that anybody that wants to buy connected TV comes to to access the CTV market which is a far cry of where we were a couple of years ago got it so you guys definitely you know have a very diversified sort of business i think if you look at you know the ad tech industry probably like three to five years ago um i i would say the industry has obviously changed a lot since then um so has magnite and i think you guys you know has transformed yourself from a traditional sort of open web ssp to now i think you're more of a programmatic ctv ad leader Maybe just tell us a little bit more about that evolution.

Yeah, I think the beginnings of CTV, and we made a few acquisitions to get into CTV, but I think it's the nature of relationship of many partners that view themselves as walled gardens have brought us in as a trusted technology partner. So I think that's much different than simply looking at a supply side platform and saying, hey, we'll invite you guys in, throw a bid in. If you guys win, you'll get paid for it. if you guys don't win, then go away and try again next time, right? So I think the strategic nature of the relationship that's evolved is, you know, comes from, you know, initially working with a Disney or a Roku or, you know, others in our early days, call it, you know, three, five years ago, and showing that we've been brought inside. They want to operate and sell their inventory, but they don't want to simply allow everybody to bid on their inventory. They want their data protected. They don't want anybody to see their, you know, user IDs leak out to buyers, but they want to monetize better than they can on their own, either through a direct sales force and insertion orders or doing something self-service on their website. They want to capture programmatic demand from all sources. And their aspirations to grow revenue more has had them lean on us to be the one party that's invited in to be their tech partner, which is why we define the market as almost a winner take most. You may have a couple of partners that you use, but for the vast majority, whether it's ad serving, whether it's mediation, whether it's demand generation, whether it's yield management, whether it's identity strategies or audience creation, you don't choose two partners for that. So that's where we've won. And I think what's happening is our evolution over time that people believe or investors may have believed that there was risk to when this industry grew up, right? Connected TV grew up. There was always the risk or the fear that people would either A, do this themselves or B, go to a much, much larger player. Now, there is not a larger player in the space. Our market share has expanded dramatically. Our position in programmatic is large. And we've expanded our Disney relationship. We've expanded a Fox relationship. We've dramatically expanded Roku. We've won Netflix during that particular time. So we've shown that we are that partner that can execute and bring people to the programmatic And the very interesting component to that, kind of rewinding to the past, was it's also had a halo effect on the DV plus market. And the reason that I say that is you now have people on the DV plus market that looked at how we've partnered on the connected TV side that look at DV plus and have never relied on programmatic demand. And they have said, hey, can we have that type of relationship with you in the past in open web and in DV, what we call DV plus, which is everything excluding CTV, we would be one of a bidder and then you wouldn't be exclusive and you'd have five or six other guys also trying to sell and rep that inventory. What's happened by that halo effect that I'm describing is people have said, we want the same kind of relationship with you that Netflix has. We want you to protect our data. You be the one that connects us to demand. We don't want to have five SSPs. We want to hire you exclusively because we trust you and we think you are best positioned to monetize and bring in all the demand. And we don't need two people to do the same thing. That inserts risks. That inserts confusion. So we want you to be the partner. So our list of commerce media partners has exploded from a United Airlines to a Pinterest, to a Best Buy, to a Redfin, to a Remax, to an Expedia, to a PayPal.

All of those things have exploded recently to now 21 partners that are now relying on us exclusively to be their programmatic partner bringing in new demand once they've decided that that is a path or a source of revenue that they'd like to be able to tap into. got it so it sounds like you know in the ctv world the supply side is much more consolidated you could because a lot of you know inventory are you know either with these uh you know premium streaming partners or you know companies like you know netflix so you mentioned you know some of the key partnerships like you know disney i think you mentioned bloku uh you know netflix i think the latest you know for the latest you guys also added samsung as as a key partner, Samsung is adopting Spring Server, which is your ad server for placing programmatic ads on the home screen. And I think, you know, you talked about retail media and I think Walmart recently also like picked you guys as the sales ad partner. So it really seems like, you know, Magnet has become like the go-to for these big brands when they're looking for CTV opportunities. Maybe tell us a little bit more about these recent announcements. Like what are you hearing from partners that they're looking for that, you know, perhaps it can't get elsewhere. Like what makes Magnite offering unique?

No, absolutely. So let me do it maybe reverse order since we were talking a little bit about commerce Let me talk, let me tackle Walmart, Walmart Vizio first. So they've been a longstanding partner with Vizio and we've helped, you know, we've been their ad server. We've been their primary SSP selling inventory for them. And that's been a phenomenal relationship. And they've been one of our strong customers. What's changed recently is they in the past used a white label DSP that they used from Trade Desk, right? And they kind of parked all their data in that DSP so that you had to buy through that path essentially to be able to access Walmart shopper data on all their Vizio inventory. They kind of broke that data lock a while ago back in April and said, hey, now you can get that same Walmart data on Vizio inventory from a handful of different parties, basically meaning it's not just going to be centered in one DSP. Then it turns around towards CAN, which just happened in June. They announced that they're buying Vibe. So clearly they bought a DSP. They're focused on having and owning their own DSP versus using a white label DSP. And they tapped into us to say, we are going to use Magnite to be able to take our user data and be able to take that not only on their own inventory and bring in new DSPs like Yahoo that was announced at the time, but also be able to use our data across being a DSP that could buy on other sources of inventory, open web inventory, non-owned and operated inventory from Visio. So that's a very, very big expansion of kind of what they would like to do in the market, none of which is running through our numbers as of Q2. So, again, that's a future opportunity that we think has a lot of promise. And clearly, I think they've got aspirations to want to do something similar to what Amazon has done. And to stand up and buy a DSP, one that's very tightly integrated with what we're doing with them, is a very, very good guide to our long-term prospects of continuing to grow with Walmart Connect. Samsung is another one that you referenced. I think because Samsung was a prior customer, I think to a large degree, the street really is like, oh, that's great. You got some home screen inventory from Samsung from an ad server perspective. Just to clarify, historically, we've done no ad serving with Samsung. They use Publica, which is private equity owned part of IAS. It's kind of the only account that Publica has served recently. but they went to market to to bring in somebody to do ad serving for their home screen their home screen historically was sold through a direct sales force through insertion orders and it was ads that they actually ran without having to tap into an ad server to do so so they went to market ran an rfp we won that business for their home screen you say hey great that's that's fantastic get a little bit of fees for doing that samsung has the largest amount of television smart tvs installed globally at hundreds of millions of televisions. Some numbers say 100, some say 300. It's their number to post and publish. So you can publish the number that you find from whatever source that you have. But they are the largest install base of televisions globally, smart TVs globally. For other TV OEMs, what we have seen is the home screen can represent up to 30% of their ad revenue. So there is a very established channel of buyers who are buying home screen inventory. and a track record of that inventory performing, you know, from Samsung being the publisher of that inventory. The fact that we are now the ad server and we are able to sell that inventory as their primary SSP to do so opens up a tremendous amount of additional growth within Samsung as an account for us that, again, had no revenue contributing from ad serving and SSP in their home screen in Q2. So that's another future growth opportunity that's pretty sizable that I think is probably bigger than what the street has recognized or realized when the announcement hit because the folks recognize that we had a relationship with them already.

Got it. That's super helpful. I think, Nick, you mentioned something that's really interesting, which is, you know, like, you know, platforms like Magnite, they allow, they allow, like, you know, the data on users to be activated across a variety of different platforms for the buy side. I think you're talking about like audience creation, curation. Historically, I think audience curation is, you know, is a value sort of a creative component that used to happen like primarily on the buy side, right? It contributes, you know, significantly DSP take rates, I think, north of, you know, 10%. But increasingly, we're seeing, you know, these audience activation taking place, you know, on the supply side. Maybe, can you talk a little bit about, you know, some of the drivers about, you know, behind that shift? Why is sort of audience curation moving from the demand side to the supply side? And, you know, secondarily, how accretive do you think this could be for SSP take rate?

Yeah, no, it's a great observation and you're 100% correct. A lot of it has to do with what we talked about earlier is market structure, right? So in open internet, when you have millions of websites and you have millions of apps, it's really, really hard to scale. If you're a large marketer like a P&G, it's really, really hard to find scale within one publisher, right? Because the market is so broad and so diverse. So you really looked at you look to DSPs to be able to find signal across thousands of different publishers and find the users that you wanted to be able to effectively run your campaign. So you kind of leaned in there. Publishers were were more open to sharing their user IDs on the other side and embracing different identifiers so that they could get access to that demand. And if they had their preference, they would never share their IDs because they believe that that data leakage and loss leads to somebody else being able to buy their user. without them having to come back to the same website over and over, whether it's an ESPN or it's a Disney website or New York Times or Wall Street Journal, you name it. If you learn that ID, you can find Arthur in five other places, maybe cheaper than the Wall Street Journal, and they have the ability to now target you outside of just their website. So in CTV, because the market is so concentrated, that fear that they have in open internet, Now they can mandate that that ID does not pass to a user. They have the control and they're controlling how data is used and they will import identifiers into their walled gardens, but the match is happening inside and then they report out that yes, the users were found. So because of where the IDs sit and where the matches take place in CTV, DSPs do not have the same ability to charge for data sets and build data sets to identify users. They still have their IDs of who their buyers are looking for that they can pass, but they're not being sought out after for those data sets. The other element that exists there is you have buyers that have decided they want control of what inventory they are buying. In DSPs, when you would plug in what you're looking for, you might not always know on the other end of that black box where your inventory or what the preferred inventory sources were. Buyers have wanted more control. So agencies have played a role in becoming data providers and even bought data assets like a live ramp in market out there. You've seen them partner with other data vendors and providers. So as agencies have tried to play a bigger role in data, that's also moved it in that direction. And I think they've started to curate and sought to connect with us to be able to then say, hey, we want to, on the other end of that, we want to make sure we have which data sources, which publishers we are seeking, we want to make sure that those paths are visible, seen, and we can buy across what we would like, and more importantly, what they would not like, right? So in that seek for control, that's also moved DD plus to have more creation by the agencies playing an increased roles and brands playing an increased role in doing so. So for us, there's two parts of our data business that I would reference. If we're using somebody's first party data, which we think is the most valuable data, meaning a publisher knows most about their users, they have credit card info. They have addresses. They have emails. They know shopping behaviors. They know intent. They know viewing patterns. They know a lot about them. So that first-party data is extremely valuable. We do not charge that first-party data. We don't charge a fee for that first-party data. There is a benefit. The better we are at clearing that signal and making it and matching it up with buyer demand, you get a higher CPM for the publisher. So our incentive is to drive higher cpms to have better targetable inventory to be able to bounce up against our take rate then for example if you had a pinterest ad at four dollars on top of that if we could refine and have a very clear signal of who that viewer is and who who that pinterest user is and we could sell that impression for now six dollars because a buyer really restoration hardware really wants it for that increase and i'm just making it up if our take rate was 10 now we would capture 60 cents as our revenue per impression, as opposed to $0.40 if it was without their data signal coming through. So we get a nice lift from selling the inventory for a higher price. And the publisher gains most of those economics by carrying, again, the higher CPM lift that they're getting for us doing so. What we're also doing is allowing data vendors, whether it's a United Airlines or whether it's a Best Buy or a Remax or, you know, or, you know, Expedia, we're also helping them monetize their data off O&O, off their owned and operated inventory. And in doing so, LG is a perfect example. So LG has ACR, Automatic Content Recognition Data, from all the information and all the, you know, all the video that's seen through that glass, they capture that data. We help them sell that data to non-LG inventory. What that does is you might find a category that you're looking for, or a viewer that you're looking for, for something that you'd like to market in open internet, on another streaming channel, on another TV device. So we will sell their data. And in that case, we will actually get a rev share for them for reselling their data and driving and contributing new revenue to them that they ordinarily wouldn't realize. And because we're as broad as we are, as omni-channel as we are, we're the best position to be a reseller, a data broker for that data elsewhere and sharing those economics with them.

Got it. Understood. And Nick, if we think about like the traditional sort of dsp pricing model you know off you know out of let's say like take rate of 20 maybe like 10 of that is like data bundling and all these like audience activation are we talking about like you know um a pricing lift uh or take rate lift in sort of the same you know similar magnitude or how should we think about that yeah we haven't quantified it particularly like so it's really hard to understand and try to tease out what cpm lift is with that higher take rate, right?

So in that case, it wouldn't be any higher take rate for us. It's just CPM lift, right? So that CPM lift comes through and zero difference to the take rate. Where we're selling that inventory off property, right? So in that, you could have very favorable rich economics, a 50-50 split for reselling their data and other locations and other places. That's something that's becoming a very nice contribution to overall revenue. It's not massive. So by no means is it anywhere close to, you know, half of our overall take rate and revenue, but it's definitely been a very nice addition. And it's something that, you know, has other partners seeking us to be a data broker and vendor on their behalf, because it is revenue that comes to them as a new source from nothing.

Sure. Got it. Understood. Maybe just, you know, space gear a little bit to, you know, AI, which is, you know, obviously a very highly, you know, follow-up topic. I recall back at the B&E Tech conference in Bruin, we talked about this new egenic, you know, egenic ad buying path that you guys, you know, were just rolling out. I think you guys brand it as Magnet orchestration.

So maybe just, you know, to start for investors who aren't as familiar with the egenic development in e-tech, what specific problem does it aim to solve? and you know why is magnite uh uniquely positioned to solve this problem yeah you know you know in embedded in that you know kind of you know series of lots of questions we probably have a two-hour webcast that we could go into so let me try and uh and and stay at a stay at a level make the key points that i need to but not get too far into the weeds so uh we play agentically and we made some announcements back in april with real partners that you know that that when they signal that they're a partner of yours like they get a lot of customers you know hitting them consistently and investors asking, you know, where are you in your journey? Because, because you're willing to put your name in a press release. So we announced capabilities across, you know, mediation, you know, agentic, you know, capabilities across seller agents and across buyer agents. And then we follow that up in, you know, call it the, you know, June timeframe, right around your conference with an orchestration layer on top of that. So broadly speaking, even if it's not, and again, we think we're positioned really well to have our, you know, buyer agents, seller agents and mediation agents used but even if we're not used in those cases and it's a transaction where somebody's buyer agents talking to a seller agent we are the ones that are sought out sought out after in order to be the infrastructure layer on which to monetize you still need things like privacy protection you can't just share an id and publishers you know can violate you know privacy risk and they're the ones that have to pay fines across the globe for doing so we don't those agents don't know how the money is going to transact and who's going to pay what funds through what workflow and then who's going to end up with the money as a publisher at the end of the day. So there's a lot of infrastructure, even if you make the assumption that we are not involved in a buyer or seller agent. That being said, we think we have a lot of traction and we've announced a lot of partners from an agentic capability. The mediation part of it, the ad serving component from an agentic workflow makes a lot of sense. That's just optimizing inventory and ad units to perform the best that they possibly can with demand, different criteria, different workflows, speed to setting those campaigns up, et cetera, et cetera. You know, that's something that makes a lot of sense for what we do daily, because that's in our purview and that's our general workflow. The other side is the seller agent, the buyer agent, because we are the end to end broker to get, you know, somebody desiring to buy to somebody desiring to sell. We sit across that. So if you're a buyer only, all you see is your component of the workflow. If you're a seller only, you only see your component. The fact that we sit across the entire transaction from intent to offering inventory and the match between them, we are able to solve the workflows across start to finish. Now, that being said, that being said, we do not have religion of whether it is our buyer agent, our seller agent. We do have them out in market and you can use yours, you can use ours, you can white label ours. We can give you some of the features that we offer. What our benefit is, is removing friction and then taking share in the agentic world. So we will optimize anybody's buyer agent that connects to ours or another seller agent, our orchestration product, make sure that they all work seamlessly and very, very well together. And you're thinking about this and you're like, well, Agentic is really a workflow solution. And you're right. And our workflows generally are people setting up and removing friction from APIs. So really what Agentic is replacing is APIs that require a lot of manual configuration, monitoring and compliance and change. we are ideally set it to be the agentic replacing APIs and workflows of all end-to-end solutions. So what I would tell you is that if we're successful in doing that, as agentic share increases over time, whether it takes it from programmatic, which doesn't bring us any net new spend and gives us the same take rate, there may be a cost advantage. But if we're able to take disproportionate share in agentic versus where we sit in programmatic, that's a good guy from a market share perspective to us. If we fail, then there's some risk in market share and that others could start to peel that away. So I think we're advantaged from the amount of inventory we represent. There's a lot of unique exclusive inventory that we only have access to, especially in CTV. So there I would bet, you know, I would say that, you know, the probability based on the supply that you have and where you can optimize is probably in a much, much better market position. There's some risk in the non-CTV side because others have access to a lot of similar inventory that we do. So I would say that market share gains are probably the opportunity from the easiest perspective, broadly speaking. The one opportunity that we're really targeting that we talked about at the conference is in agency spend today, there is a significant amount of money that is still tied into manual buys that are coming in through insertion orders. That's tens of billions of dollars that still live and sit within agencies. So let's take a step back and peel back what that means. So today there are brands that walk into their agency partner and have a campaign goal that they'd like to achieve. They hand that over. It's normally a two or three page brief that they hand over to the agency. The agency spends two weeks running around and finding and creating a media plan based on all their extensive history and all the brands that they've worked with and all the campaigns that they've run and new inventory that's out there and all the upfront presentations they've listened to. they come up with a media plan. That's the secret sauce that says, hey, this is where we think you should run your ads to give you the highest ROI of your ad spend. They do that. They come back. The brand then says, yes, looks good. We approve. Let's run a test. They run a test where they then knock on our door and say, hey, we'd like to do a test campaign. It's only a few thousand dollars or 10 or 20 or $100,000. And let's run it. Then we want to do a very, very deep dive on how this is performing? How is the creative performing? Are we hitting the right audience? Are there refinements that we can make? Are there certain inventory that's not performing? Are there others that are performing at a really high level? Let's run a test and then analyze those results, refine that campaign, and then rerun a test based on joint adjustments to that campaign that we've now agreed to. They do that three times, each of which is another two-week process. So now you're looking at eight weeks from the time that you walked in the door with your campaign goal to the time that you're actually comfortable that you're deploying and running your full ad spend that you'd like to. And it's not this quarter anymore. It's next quarter. What we do is that entire process in 10 minutes. But because we're connected to inventory, any LLM and an agency can do this on their own. You can convert a proposal or program goals into a media plan quickly. But without being tied to inventory, to real live inventory, you can't test, run, rerun, and then modify your creative because we give you your creative tool as well to version it anywhere it needs to go or create different versions of your creative a b test those in real time so the fact that we're doing all of those things and you can run three tests in 10 minutes uh and redo all of your creative and have it ready to go that's what we're solving for and that is new spend that already exists within the insertion order market at an agency and allows them to be better faster cheaper and bring it in to the ecosystem quicker. And it's all net new revenue or net new ad spend to us that runs through, you know, runs through agentic workflows. That's really the initial area that we think has dramatic inefficiency and what agencies have told us they want help and assistance in unlocking.

Got it. Understood. And I think your ClearLine product also sort of aims to target the agency spend that's currently tied in user orders, right? Like, is this agentic buying paths sort of considered as an upgrade to the existing Clearline product suite? Is that how we should understand it?

Yeah, so Clearline for us now is an entire product line. There's Clearline curation. There's Clearline audience activation. You can effectively run an entire deal where if the deal is negotiated in an agency marketplace, they negotiate the price, the volume, and what inventory will be purchased. We execute all that programmatically, make sure we find your targets, make sure you find the users that you're looking for. What Clearline allows you to do is at the end of the day, be a payment method for that agency. So the brand then says, okay, I've done my transaction and either Clearline or the DSP basically becomes a payment method at the end of the day. That's really kind of what that final role is. So yes, you can do that without having to pay a DSP take rate or do it at the DSP that you'd like to, to either A, get credit for that ad spend as part of a commitment or be able to run it most efficiently for purposes of, you know, reducing your ad tax.

Got it. Got it. Can you talk a little bit about the economics of these buying solutions? Like, you know, obviously you're monetizing your supply better. You're getting shared there. Does the eugenic sort of path or, you know, the eugenic tool also carry some sort of economics by itself?

Yeah, I would say, you know, today, if you're, you know, even if you're running it programmatically which you know the the thinking is it's all machines running it there's still a degree of friction that you know is involved and you know matching up or sharing deal ids and making sure those pass through appropriately there's more on the cost of revenue side in order to support those you know from uh you know from uh you know from an economics perspective you know we don't charge more or less of a take rate to the publisher our deals with publishers are we get a take rate from them they're interested in you know what cpms we're able to drive for them and how much overall spend we're able to deliver. So if we're continuing to grow their spend and grow their CPMs and be an effective partner on the base criteria or measured, they generally don't come to us and say, we'd like you to do it for a lower fee. They're really happy that revenue continues to outpace and grow relative to other players. And that market share position is something that is highly attractive to them.

So it's really more on the cost of revenue side than there is a incremental pricing to using those tools versus is using our people got it um how so how should we think about like you know a genetic buying versus like dsps as sort of two different routes of uh you know app purchases like do they compete with each other and i guess you know just based off of your client engagement so far like have you seen advertisers sort of moving you know consider moving some of the budgets over from DSPs to Janik?

Yeah, well, let me, maybe let me even take a step even further back, right? So, you know, I think what traditional DSPs have done, especially in CTV is they've done a very, very nice job of converting very large enterprise type clients, whether it's large brands and large agencies, trying to move and migrate budgets from, you know, from linear into connected TV. They also have done a very nice job for those same clients to be able to access and find their users in the open web in order to be able to broadly target and satisfy their campaign goals, largely through brand advertising. Much of that hasn't necessarily been mid-funnel or lower funnel. So they've done a masterful job of being able to service that customer cohort, which is very concentrated from a buyer perspective. And it's logically who you'd go after. Why wouldn't you, you know, spend, you know, your time going after the whales out in the industry and secure that business? I think that has been, you know, that has played itself out in open internet, right? So, you know, you've kind of had a maturing of that space in that industry and open internet. I think in CTV, you've also started to see that cohort mature, right? They migrated over, they're actively spending, and now you're kind of subject to what happens within specific verticals, whether CPG is up or down or autos are up or down or financial services or healthcare or drug manufacturing, like, you know, you're really subject to how those verticals are performing to kind of what your future is. What's happening in connected TV specifically is you're having new demand come into the market. And that new demand doesn't necessarily come through a traditional DSP path, right? So small and medium businesses don't even know what a DSP is, right? So they want to be able to transact. They want to be able to find an audience. They want to be able to generate their creative. And at the end of the day, they just want to find the fastest way to spend their, you know, ad dollars for the highest return to generate, you know, demonstrable and visible, you know, increase in sales and earnings and performance, right? So they don't go to market and as a small and medium business and say, I need to hire a DSP. I need to hire an agency. I need to hire somebody to do my creative. I need somebody to version it. I needed somebody to be able to tell me, you know, analyze this data, tell me if it's working or not. They, they, they can't hire five different vendors to do that work like a large brand or a large agency can. So what's happening is agencies are trying to cater to some of this on their own, small, medium, and mid-sized agencies by offering all those tools and being a one-stop shop. You're having DSPs like a Mountain or a TV Scientific or a Moloco try to do that in market. Amazon's trying to do it because they've got a large installed base of customers. You've got many of our publishers that say, we don't even need that path. We want to offer this self-service. You have Roku's curated marketplace, you have Warner Brothers Neo marketplace, you have Disney, Drax. I would assume that every large streamer out there, broadcaster, will eventually have a self-service buying option. And by the way, those are marketplaces that we white label and build for them to allow for that self-service to take place and then mix that demand with all other demand sources. So from a demand perspective, we are agnostic to where that demand comes from. And in fact, we were tapped, you know, tapped as a partner to help build out all those different demand paths and have no blind spots of how demand enters into CTV. What they're all doing, however, is they have to access that supply from Magnite. So our relationships and being, you know, effectively the mediation layer through which the world accesses CTV supply has become increasingly important and doesn't just relegate as to, you know, a few DSPs, you know, either ups or downs or a new entrant, you know, isn't a risk or a benefit to us. It all flows. So what we've seen in our inflection and overall CTV growth rates is really demand is broadened. SMBs have entered. You have guys like Genius Sports entering into the market as specialists in buying sports, live sports inventory. So the market really is broadening, but they're all coming to us to access the inventory, which is the good guy from the market position that we hold in CTV.

Got it, I understand. So I have some questions coming through from the audience. The first one is, what are the overall targets or KPIs for how you manage the business? How should we think about the building blocks of the earnings algorithm in future years?

Yeah, I would say that, you know, at the very highest level, like we are very, very motivated to grow ad spend. So from an ad spend perspective, you know, that is our life blood. That is our fuel. I don't think you'll ever see us in a position where we're willing to sacrifice ad spend and market share loss for take rate expansion. So I think even now when we're probably in a position from how strong our tech is and the breadth of our partner relationships, we probably have room to raise prices on our rate card for services that we offer in CTV, but we have not and we don't plan to. So I think we're very, very comfortable. Our take rate is something that's not really an important KPI for us, to be honest, because we're not trying to influence or push buyers to buy unnaturally where they don't like to, because generally that doesn't end well. So I think that where we'd like to play is being the best tech at the best price. And even when you start to consider, do I want to do this internally? Do I want to build this myself? We always want that answer to be no, for this cost, there's no way we'd even consider this doing internally or doing this ourselves or hiring somebody else to be able to do this. And we're measured by how much revenue we drive. And it's not really a, hey, I'm really evaluating, this is a service that I could easily solve for, and I could do it for a cheaper cost. So I think for us, really, it's ad spend, it's overall revenue growth, you know, those two things being, you know, heavily linked together, but again, not doing it with take rate expansion or, you know, trying to push price increases through. We will bring new services to market that drive new value and things like homes, like doing, you know, home screens for a Samsung and a Vizio and an LG. That's an ad unit that they did internally on their own. That's new incremental revenue. We'd rather define our revenue growth and our success by doing more things for them that we can do more efficiently, drive more revenue and do it for a cheaper cost. Yes, we'll share in those economics, but that's also not a take rate increase, that's just broadening the purview to service more inventory for them. So I think margins, we've talked for years about our margin performance. So we've said, what does the operating model look like? We've said above 10%, we start to get very, very high flow through from revenue conversion to EBITDA. This quarter is a great example of what we've said all along is we think that above 10% growth, you start to get about 70, 80, even higher percent flow through from revenue to EBITDA, our beat in Q2 was 10 million on the top line. And that equated to an $8 million EBITDA beat. That's exactly that 80% flow through that we've talked about. So we'd rather continue growing revenue. And as a result, we've taken our EBITDA margin guidance up now three times. We started the year where the street was under 35%. Now we've guided to at least 37%. That's a pretty attractive way to see that flow through happening commensurate with our revenue that's inflected higher. We do look at internally very, very carefully. We don't share a whole lot of this externally, but we look at cost to serve an impression. We are constantly inserting rigor to how do you best serve, most efficiently serve each impression that you have in the business, whether it's DV plus, whether it's CTV, whether it's live sports. So that's a critical function. You've seen us move to a hybrid model in connected TV from being cloud-based before, even though being cloud-based is a bit more agile, the cost benefit of being on-prem for a predictable load and a predictable volume is it's a 70% to 80% cost reduction for your predictable load. So we'd love to hit the cloud for inventory spikes and peaks that we hit, but for our base minimum load annually, we'd like to service that all on-prem because the cost advantage there is massive. Same thing on DVplus, we do almost that entire market because you don't have those spikes as you do, you know, you have a more predictable pattern of, you know, ad impressions that you're supporting and then auctions that you're running. So there it's all on-prem because you don't have those massive sport events where your volumes can go from 2 million to 50 million when people get an alert about a particular game. So we also look for cost per impression to continuously drive that down. And generally that's been, you know, dropping in the very, very strong double digits, you know, meeting 30%, 40%, 50% on an annual basis as we continue to drive costs out of the ecosystem and get more efficient.

Got it, got it. And then the second question is, what are some of the main areas of pushback on the story that you hear from investors?

This quarter, we didn't get many. So that's a nice place to be at least this quarter. I think the one question mark that people have is, look, what is the long-term trajectory of our dv plus business there's a part of the business that's open web that may be declining annually in the you know call it high single digits to you know maybe 10 ish percent there's a part of the business that's mobile app mobile app actually grew 17 last quarter mobile in total grew the streaming parts of you know our business in dv plus you know tv streaming over desktop and mobile is healthy audio streaming over those devices is healthy digital out of home is healthy commerce media is healthy. So I think not the one pushback, but the question is, how do we, what do we underwrite for growth in DV plus? And I would say in the near term, as you saw this quarter, you know, flattish is probably the best way to kind of underwrite and de-risk, you know, what your outlook is for DV plus. We might get a good quarter where it's up, you know, five or, you know, 5% or so or more. You may get a quarter where it's down to a similar amount like we've seen, but thinking of that generally as flattish. And then over time, the good parts of it will continue to get bigger and the small parts, which are about 40% of DB plus will get smaller, you'll get a nice healthy trade-off that skews you towards growth from a mixed perspective. And that's excluding if we get any, you know, Google remedies that come through or we sign any AI search-related partners that we're actively trying to market and sign. I think that's absent any of those type of growth vectors that start to contribute in that market that are, again, completely outside of numbers today.

Got it. That's super helpful. And guys, again, And yeah, just a reminder, if you would like to ask questions, please feel free to raise your hand or just email me at Arthur.Chu at BFA.com.

Okay, cool.

Let's keep going. So, Nick, you mentioned some of the pushback from investors. I think, you know, one or two years ago, there were a lot of discussions or maybe I should say like fear around, you know, these premium publishers like Disney or Netflix, they're potentially like building out their own sort of programmatic tech stack. I think we've all seen that sort of not being the case. And I think some of these extreme services, they're increasingly relying on tech partners like Magnite. I guess, you know, first, are you still hearing some of the same sort of concerns from investors? And number two, what are some of the takeaways from that episode?

Yeah, let me just say, I love that we live in that fear every day. And that's what makes us better. That's what makes us hungrier. That's what helps us innovate. That's what helps us develop new products and features and to continue to push programmatic. The more and more people rely on us and the more spend we're pushing through programmatically, the lower the chances are that somebody is willing to completely rip and replace and take a chance of doing that on their own. Not because they couldn't, you know, could somebody try to do it on their own, even if the cost is like we would challenge anybody that our tech spread over all of our clients. If you were one client trying to stand up a similar amount of tech to do that, not leveraged over 30 large partners in the industry, it would cost you dramatically more. So from a cost equation standpoint, I don't think it makes a whole lot of sense. Our modest take rates, I think is also something that plays to our favor that we can still generate very healthy margins on. And the speed of feature development and touching more inventory, I think is also the thing that just starts to dizzy people to think, how could I, maybe I could do this one, these one or two things, but Magna just came up with 10 other things on their roadmap that they can deliver in the next three months that's going to unlock more revenue. I can't possibly keep pace with that if all I see in my purview is what I'm doing myself. So the reason I said I love that is, again, it drives us to continue to innovate. Our history has been that fears existed, but we've never lost a partner. We have expanded every single partner relationship that we've had either geographically or vertically or more services that we provide. And we've probably won every account that we've pursued in the last two years. I asked your chief revenue officer, could he recall a single pursuit that we haven't won? And his answer was no. And maybe there was, you know, on the tail end, something that we didn't necessarily win. But I think that speaks to our continued innovation and our continued fear of just what you mentioned happening and living to make sure that we ensure that doesn't happen by being on the cutting edge of bringing more to market, developing more, and leaning in with more and driving more revenue for partners.

Yeah. Let me pause here to see if we have any questions from the audience. All right. Let me start with one more. So, Nick, you mentioned the in-app part of the business within DV Plus. We've seen some of these LLM companies like OpenAI or Anthropik venturing into the advertising business. I think, you know, over the past two years, we've all seen how, you know, search-referred traffic has declined. You know, I think with the rise of agents, there's a possibility that we could be actually looking at a future where even apps could be reduced to, like, APIs or MCPs. So I guess, you know, just curious how you guys think this could evolve over the next few years in terms of, you know, impact on the digital ad ecosystem.

And also, you know, as you guys have these conversations with the the the model companies um what do you think their strategy is like do you think they want to become a closed at ecosystems like the wall gardens or could they be like more open open source open platform where you know these traditional attack intermediaries can also play a role yeah no i think it's i think it's undecided so i think that i think you know everybody's going to have their own path i wouldn't say that there's you know an opportunity with within google who has the entire stack and has you know ad server and ssp capabilities and demand capabilities but i think all others it's kind of open you know open territory for how they choose to you know how they choose to you know build up their own ads business either it's you know on a short-term medium term or a long-term basis so i think the fact that you know you've you've heard that some of them have talked to dsps out there is a good sign uh that they're exploring that source of demand and i think that plays to the advantage and say hey how do you reach the world demand quicker? How do you start covering some of these infrastructure costs, not through financing in the debt and equity markets, but do so with actual revenue? I think that's a helpful accelerant and a question that's posed that allows an opportunity at least to exist for us to pitch. So I think the market is one that we never played in historically in web search, right? So we play in open web, but we've never had any business in search, right? So if we get tapped, that would be a new incremental market that, again, we've never serviced and played in historically. I think that the, you know, our view at least is that the app market is pretty well, you know, insulated and secure and everybody providing access to their apps through an LLM is probably, you know, is probably a lower risk than obviously what existed in the open web. And we're clearly seeing, you know, open web, you know, open web traffic, you know, reduced in the marketplace. And that's what kind of drives that, you know, area that, you know, we talked about earlier, about 40% of our web business that is seeing some degree of pressure out in open market. But even if you're trying to create an advertising plan, the recommendations of LLMs are that you should not spend all your money in one medium and you should look at different mediums. And the ROI is if you're augmenting a CTV, a search and a social program with some open web advertising, probably even bring some dollars back into open web advertising because they carry low CPMs and they actually have a decent return and they may actually be performant in lower funnel. So you've got different, you know, different, I think, ebbs and flows that I think exist from the market. But we don't see it as all risk. We see there being, you know, a definite possibility for opportunity. And to the extent that they end up as front end engines to be able to start creating campaigns like we're using it, you know, we're using LLMs as the front end of our buyer agents, I think, to the degree that we sit and connect that to inventory that exists. uh either existing or new i think there's a there's a role for us to play got it um i think we are at time so uh let's maybe just wrap it up here all right nick thank you so much for your time and i really appreciate your insights today yep really appreciate the time and uh look forward to talking to any and all of you uh in the near future thank you absolutely thanks