Hello everyone and welcome to PubMatic's Fourth Quarter 2020 Earnings Call. My name is Kara and I will be your operator today. Before I hand the call over to PubMatic team, I'd like to go over a few housekeeping notes. As a reminder, the webinar is being recorded. We'll host a short Q&A after the prepared remarks. If we don't get to your question during today's call, please feel free to send your questions into PubMatic's Investor Relations team at [email protected]. If you have any technical issues, please reach out to [email protected]. We'll do our best to assist you. Thank you for your attendance today. And I will now turn the call over to Dylan Solomon.

Thank you, operator and good afternoon, everyone. Thank you for joining us on PubMatic's fourth quarter and full year 2020 earnings call. Today's prepared remarks have been prerecorded. A live Q&A session will follow. Please note that today's call is being webcast on the Investor Relations section of the company's website. A replay of the webcast will also be available following today's call. Joining me on the call today are Rajeev Goel, Co-Founder and CEO and Steve Pantelick, CFO. Before we start, I would like to remind participants that during this call, management will make forward-looking statements, including without limitation statements regarding our future performance, growth strategy and our guidance for the first quarter and full year of 2021. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and future conditions. These forward-looking statements are subject to inherent risks, uncertainties and changes in circumstances that are difficult to predict. You can find more information about these risks, uncertainties and other factors in our perspectives filed with the Securities and Exchange Commission on December 9th, 2020. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you therefore against relying on any of these forward-looking statements. All information discussed today is as of February 23rd, 2021, and we did not intend and undertake no obligation to update any forward-looking statements, whether as a result of new information, future developments or otherwise, as accepted may be required by law. In addition, today's discussion will include references to certain non-GAAP financial measures. These non-GAAP measures are presented for supplemental informational purposes only, and should not be considered a substitute for financial information presented in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measure is available in our press release filed earlier today at our Investor Presentation, both of which are posted at investors.pubmatic.com. I'll now turn the call over to Rajeev. Rajeev?

Thank you for joining us today. I'm honored to welcome you to our first earnings call as a public company. Before we begin, I want to thank all of those who have supported us over the last 14 years. We have been fortunate to grow with a wonderful team of colleagues, customers, partners, and investors who have helped contribute to our success. We're excited to welcome a new group of shareholders as we embark on PubMatic's next phase of growth. If I were to summarize the state of our business today, we are benefiting from having multiple growth drivers in place and executing well against that. In the fourth quarter of 2020, PubMatic delivered 64% year-over-year revenue growth on a purely organic basis, which contributed to significant operating leverage and profitability. Adjusted EBITDA was $26.9 million or 47.9% margin in the fourth quarter, a 190% increase over $9.3 million in the fourth quarter of 2019. These results reflect rapid growth in the digital advertising market, strong momentum in multiple growth drivers in our business and demonstrate PubMatic's differentiated market position within the digital advertising ecosystem. We exceeded our own expectations for the quarter, as we continue to outpace the industry shift to digital advertising and gain market share. For today's call, I'll start with a brief overview of PubMatic and provide an update on fourth quarter highlights and business trends. Steve will then go through our financial results and talk through guidance, after which we'll be happy to take your questions. PubMatic provides critical infrastructure in the form of a specialized cloud platform that enables real-time programmatic advertising transactions between publishers and the media buying community. Our innovative approach across the digital advertising ecosystem has created a sustainable and resilient business, with 2020 being our fifth consecutive year of positive net income. The power of our infrastructure-driven approach can be seen in our margins, but much of our revenue outperformance flows through to profit. We have a large and increasing market opportunity with multiple growth drivers that we are executing against: new publisher acquisition, growth from existing customers, and strategic initiatives from advertisers and agencies to consolidate ad buying onto PubMatic. Our position as a leading provider of omnichannel solutions and our expertise in extending header bidding technology into new ad formats has accelerated our growth. Mobile, digital video, and over-the-top streaming to connected TV devices represented 65% of our revenue in the fourth quarter as we drive upsell and cross-sell initiatives across our holistic platform. Omnichannel video revenue, which is a combination of short-form video and OTT and CTV grew by over 100% year-over-year in Q4 2020. I will go into detail on each of these growth drivers, but first let me start by outlining some of our core beliefs that guide much of our vision and strategy. First, all advertising will become digital and all digital advertising will become programmatic, which simply means applying automation and data. Programmatic advertising creates better outcomes for consumers, publishers, and advertisers. Second, advertisers prefer the professional brand safe content of the open internet to the user-generated content of the walled gardens, giving a significant opportunity to grow our business. Third, it's difficult to predict which connected devices will be used by consumers in the future. However, consumers will always want to consume media and brands will always want to advertise their products. PubMatic is an omnichannel platform that innovates as consumer behavior evolves. This makes us far more durable than point solutions. Lastly, long-term success in digital advertising and enablement requires a low-cost infrastructure. Every individual ad impression must be processed in real time and generate significant amounts of data. By controlling all layers of our infrastructure stack, including network, hardware, and software, we can operate more efficiently and create better outcomes for our customers. Our core focus is on publishers, which is where our name PubMatic comes from, combining publisher and automatic. The vast majority of publishers don't have the technical capabilities needed to power real-time data-intensive programmatic transactions. PubMatic provides this essential service through our cloud infrastructure via a usage-based business model that aligns our interests with our customers' interests. In addition to providing publishers with our header bidding expertise and technology platform, we increase their revenue by bringing additional data to each ad impression and incremental advertiser demand. Our omnichannel platform is highly efficient and allows us to work with publishers on all of their inventory, across a variety of ad formats, devices, sales channels, and geographies. Because we do not own media properties, we bring an important perspective of independence to the ecosystem. Publishers also benefit from our strong track record of rapid innovation, which helps them compete in this rapidly evolving and growing industry. As of the end of Q4, we work with 1,208 publishers and app developers across various content verticals, including eBay, IBM's the Weather Company, Digital Properties, and we are a leader in mobile partnering with top mobile websites and apps such as The Score, Flipboard, and Unity with their portfolio of games. We are, of course, also integrated with demand-side platforms across the globe to bring ad dollars to our platform and programmatically fill inventory from our publisher customers. Over the past few years, we have strategically extended our infrastructure and business arrangements to advertisers and agencies as they standardize their advertising supply chains on fewer larger incumbent technology providers like PubMatic. We provide inventory quality, transparency, global omnichannel scale and value that encourages advertisers and agencies to spend more with us while increasing their advertising ROI. We believe our specialized cloud infrastructure provides us with a significant competitive moat. We have built our infrastructure footprint over many years, along with deep expertise in continuously optimizing and extending that infrastructure. We believe the capital and expertise requirements, as well as positioning ourselves at the center of all of these transactions and the data they generate, are a significant competitive advantage for us. Our infrastructure-driven approach allows us to generate better customer outcomes through greater control and continuous innovation. The net result is that our customers benefit from our high-performing and efficient infrastructure, and we benefit via increasing revenues and profits. According to eMarketer, global digital ad spend is a $395 billion industry in 2021, and it's expected to grow at a more than 10% rate annually over the next three years. Magna estimates that programmatic or automated approaches to digital advertising will represent 87% of global digital ad spend by 2025, and we believe it will eventually represent the entire digital market. Within the broader digital advertising market, we are focused on three high-growth sectors: mobile app, digital video, and OTT and CTV. Programmatic mobile is a $102 billion market growing at an 11% CAGR. Programmatic digital video or short-form video is a $53 billion market growing at a 17% CAGR, and programmatic OTT and CTV is a $20 billion market growing at an 11% CAGR. We estimate that PubMatic currently has a 2% to 3% share of the addressable programmatic advertising market. We want to grow that share by 10X in the years ahead, gaining market share from both independent solutions and walled gardens. We decisively grew our share of the market in Q4, and we believe we are well-positioned to continue our market share gains given our structural advantages. We also believe the market opportunity is significantly bigger than forecasts, as COVID-19 has accelerated multiple years of consumer behavioral change as people around the world transition more offline activities to online. We anticipate that many of these consumer behavioral changes will stick, driving further acceleration of the digital transformation. One example has been the accelerated growth of e-commerce as people do more of their shopping online, as opposed to going to brick-and-mortar stores, particularly relevant during the Q4 holiday shopping season. Given the pandemic and consumer changes we saw over 2020, the e-commerce or shopping vertical grew nearly 100% on our platform from the first half of 2020 to the second half of 2020. The pandemic has also taught advertisers that they need partners that bring scale and flexibility to seamlessly shift dollars between marketing channels. Over the past year, more advertising decisions had to be made in real-time as budgets and strategy shifted. Physical supply chains impacted the availability of goods for sale, and local shutdowns impacted commerce. These decisions had to be made while maintaining ROI and cost efficiencies, which we believe will benefit PubMatic as a stable and innovative provider of digital advertising infrastructure and technology. Let me turn now to the specific growth drivers at PubMatic. As our addressable market opportunity grows, PubMatic has experienced outsized revenue growth and market share gains as a result of the convergence of three key growth drivers: new publisher acquisition, existing customer growth, and buy-side spend consolidation. These drivers are directly tied to transformative industry trends and give us confidence that we can grow rapidly for the foreseeable future. First, we continue to add new publisher customers. In 2020, we added 368 new publishing partners, including signing Glue TV and WeatherNation in OTT and CTV, and Vungle and PLAYSTUDIOS in mobile app. Our strength in mobile and short-form video formats has paved the path forward for newer growing formats like OTT and CTV, where we are actively pushing the industry towards transparent header bidding. Today, the vast majority of transactions in the OTT/CTV market are via non-programmatic insertion orders, which are transacted manually. We are focused on disrupting the CTV market by bringing our programmatic header bidding technology to this fast-growing market, just as we have successfully done with mobile web, mobile app, and digital video. In 2020, we exited our beta program for our CTV wrapper solution and made the product generally available in Q4. Importantly, our approach extends our existing global infrastructure for publishers and ad buyers, which positions us well to extend our many existing customer relationships into their OTT and CTV inventory. With our header bidding approach, advertisers generate higher advertising ROI and publishers generate increased revenue, which is a win for both parties. In fact, we recently published a case study with a top 10 agency in the U.S., which showed that they were able to increase the impressions they purchased by more than 3X while maintaining flat to slightly lower CPMs, resulting in significantly higher ROI for their advertisers. These early results are strong signals that we are building a better approach to monetizing CTV inventory via our platform. We are now working with over 60 publishers specifically for OTT and CTV as of the end of Q4. I also want to highlight our strong growth in digital video, in contrast to longer format streaming content. Digital video, excluding OTT and CTV, is actually a bigger market and growing more rapidly at roughly three times the size. Digital video is a $53 billion market today, growing 17% annually to $115 billion by 2025, whereas CTV and OTT is a $20 billion market today growing at 11% to $35 billion in the coming years. As I mentioned at the outset, I'm very excited to share that our omnichannel video revenue, a combination of short-form video and OTT and CTV, grew by over 100% year-over-year in Q4 2020. Similarly, mobile monetization via both video and display ads represents a market of over $100 billion today and growing rapidly. It is the majority of our business, and we're excited about the fact that we have multiple growth drivers and we are successfully executing on them to drive our market share expansion. Just as we are rapidly growing our new publisher base, we're also growing revenue from our existing customer base. For the full year 2020, we achieved strong net dollar-based revenue retention of 122%, demonstrating our ability to expand with the needs of our customers and consolidate their business onto our platform. We have increased the value of our publisher relationships by expanding it to high-growth ad formats such as mobile app, video, and connected TV, as well as introducing new products such as our open wrap header bidding wrapper solution. Our extensive customer success teams are specifically tasked with engaging our publisher customers to educate them, learn about their needs, and identify omnichannel opportunities to grow their business and our business via our single integrated platform. Lastly, the consolidation of ad budgets onto fewer sell-side platforms for greater efficiency, innovation, and transparency has been and continues to be a growth driver for our business. Under arrangements broadly known as Supply Path Optimization agreements, we are able to capture a higher share of agency and advertiser ad spend while better servicing our publisher customers and accelerating the growth of our business. For example, one major agency increased ad spend by over 150% year-over-year in Q4 as a result of a supply path optimization deal designed to increase buying efficiency. As buyers allocate a greater share of their ad budgets to PubMatic, it increases our revenue visibility and strengthens our relationships with publishers. We have entered into agreements with all major agency holding companies, as well as large advertisers like Procter & Gamble and Bayer to provide a combination of custom data, workflow integrations, new product features, and volume-based business terms. In Q4 2020, we have made significant progress in ramping our supply path optimization deals, with over 20% of ad buying on our platform through these SPO agreements compared to approximately 10% in Q1 of 2020. All buying on our platform continues through demand-side platforms, and these SPO arrangements complement our DSP partners. In addition to these key growth drivers, the industry continues to evolve and we feel strongly PubMatic is well-positioned to continue to gain market share. For example, consumer identity is driving rapid industry changes, which we believe will grow the size of the open internet advertising market relative to the walled gardens. PubMatic has announced key partnerships with many of the leading identity providers globally, including LiveRamp and The Trade Desk with Unified ID 2.0 through our Identity Hub solution. As we look to 2021, we are extremely excited about the opportunities ahead and acknowledge that some unknowns remain for the global economy due to COVID-19, specifically in our industry. Some verticals within digital advertising are accelerating, while others like travel are yet to return. There are important industry changes underway regarding consumer privacy, which we believe we are well-positioned for. However, within these puts and takes, we remain very optimistic as advertising continues to shift to digital and programmatic continues to grow. We built an incredible company that serves the digital advertising ecosystem uniquely and compellingly in ways that others cannot. Our success would not have been possible without the hard work and dedication of our entire team. We added a net 82 people globally to our team in 2020, onboarding them remotely due to the pandemic. These new employees now create a team size of 548 people around the world as of December 2020, and have been awarded great places to work certifications across three continents. There is so much more to do, and I'm humbled by this incredible team as we begin our journey as a public company. PubMatic is poised to gain significant market share as we continue to consolidate the market. The success of our long-term growth drivers fuels our ambition to grow our market share 10 times what it is today in the years ahead. We have a differentiated cloud infrastructure platform that allows us to drive strong customer retention while quickly innovating to grow our addressable market of ad formats and devices. Lastly, we have a proven ability to consistently drive profitable growth with strong cash flow, which we believe positions us well to keep innovating and delivering for our customers and our shareholders. I'll now turn the call over to Steve Pantelick for the detailed financials.

Thank you, Rajeev and welcome everyone. I am Steve Pantelick, PubMatic CFO. As our first earnings call as a public company, I'm very pleased to discuss our outstanding results for the fourth quarter. We achieved record revenues with growth of 64% year-over-year, net income of $18.8 million, and adjusted EBITDA of $26.9 million. With these results, we entered 2021 with solid momentum across our global business and are actively participating in a large and growing market. As an omnichannel global company, we are well-positioned to grow across platforms and formats with existing and new customers in every major ad market in the world, apart from China. We also anticipate continued expansion of our supply path optimization deals that will drive our growth. Before I jump into the quarterly financials, I would like to briefly recap the five key financial drivers that we believe will lead to the long-term success of our business. First, we have one of the few scale global businesses in our highly fragmented industry. Our specialized cloud infrastructure and local go-to-market presence are geographically distributed in all major ad markets. This allows us to continue expanding across the world with existing and new customers, both effectively and efficiently. Second, the combination of our usage-based model and our ability to retain and grow revenue from existing customers provides a high degree of revenue stickiness and corresponding visibility. Third, we have high gross margins. Our long-term efforts of driving CapEx efficiency, coupled with our workflow automation to manage our growing customer base has led to an average gross margin in excess of 70% over the last nine years. Fourth, our business model is highly efficient. Our model is built on long-term durable structural advantages, emanating from our owned and operated infrastructure and offshore R&D that enables us to consistently invest in technological innovation. Lastly, we generate consistent cash flow through our efficient use of capital expenditures and rigorous working capital management. As a result, 2020 was our seventh consecutive year of positive net cash from operating activities. Now into the quarter. In the fourth quarter, we generated revenue of $56.2 million, a growth of 64% year-over-year. Our top-line growth was driven by several factors, strength across a number of advertising verticals, notably e-commerce, technology, and personal finance; a longer 2020 holiday season compared to 2019; and to a lesser extent, incremental ad spend related to the U.S. presidential election. We also achieved an important milestone in Q4 as the sum of mobile, video, and OTT/CTV revenues represented roughly 65% of our total revenue. A key factor was the growth of our omnichannel video revenues, which is the combination of short-form video and OTT/CTV that grew over 100% year-over-year. Now turning to the full year. Revenue grew 31%, despite the strong headwinds experienced across the ad industry in the first half of 2020. There are a couple of key callouts regarding our 2020 revenue growth: mobile and video grew strongly throughout the year, with market acceleration in the second half; desktop display started to recover in the second half following pandemic-related challenges earlier in the year. With the combined effect of mobile and video plus desktop display recovery, year-over-year total revenue grew 50% in the second half of 2020. An important contributor to these results was our existing customer growth. For the full year 2020, we achieved strong net dollar-based retention of 122%. We also added a significant number of new publishers despite the ongoing pandemic. Overall, we added 368 new publishers and app developers, bringing our total to 1,208 customers at the end of 2020. Revenue growth from existing and new publishers also contributed to reduce revenue concentration of our largest single customer, Verizon Media Group, which accounted for about 20% of revenue in 2020, down from 28% in 2019. It should be noted that while Verizon Media Group revenues were impacted by the COVID-19 pandemic, particularly its desktop display business, we saw a solid recovery in Q4. Another important growth driver for us in 2020 has been our supply path optimization deals with advertisers and agencies. These relationships have served as a catalyst for buyers to consolidate ad dollars onto our platform. Finally, in order to take advantage of our significant opportunities throughout the year, we increased our platform capacity. In total, we increased the number of impressions we processed by 69% from 27.8 trillion in 2019 to 46.9 trillion in 2020. Turning to our gross margins. In Q4, we were able to significantly expand our margins to 80% compared to 73% in the prior year. Our full year gross margin also expanded to 72% compared to 68% in 2019. Our strong gross margins are a direct result of owning and constantly optimizing our infrastructure. Because we focus on platform optimization, cost management, and targeted capacity expansion, we're able to achieve significant operating leverage. Illustrating this point, we successfully reduced our GAAP cost of revenue per million impressions processed by 32% year-over-year. Once we have implemented our planned capacity expansion at a point in time, we achieve leverage because our platform costs are largely fixed in the near term, typically a quarter. When we exceed our revenue targets, as we did in Q4 2020, we achieve high flow-through to profit. With respect to our Q4 operating expenses, the combination of increased headcount for growth and incremental stock-based compensation resulted in operating expenses of $22.6 million, an increase of 18% year-over-year. For 2021, we plan to continue to invest in team members and related investments to drive growth. We will also incur incremental public company costs. Overall, we expect our operating expenses on an absolute dollar basis to increase over the course of 2021. GAAP net income in the fourth quarter was $18.8 million, up 356% year-over-year. It represented 33% of revenue, substantially higher than the prior year net margin of 12%. Full-year net income was $26.6 million, which grew by 301% over 2019. Q4 diluted EPS was $0.34 compared to the prior year's $0.06, and full-year EPS was $0.46 compared to $0.04 for 2019. Adjusted EBITDA in Q4 was $26.9 million or 48% of revenue compared to 27% of revenue in the prior year. This impressive profit result was primarily due to the high flow-through from strong revenue ahead of plan and the cost leverage we achieved on our platform. For the full year, adjusted EBITDA was $50.3 million or 34% of revenue, a substantial increase over 2019's margin of 20%. In summary, our breakout profitability was a result of several key drivers: acceleration of mobile and omnichannel video driven by the increase in open internet activity globally, strong spending in key verticals like e-commerce, incremental ad spending related to the U.S. presidential election in Q4, increased buyer activity due to the supply path optimization agreements signed in 2019 and 2020, and our targeted investments in people and platform capacity. I also want to highlight that our profit growth is a reflection of our long-term focus on growing both our top line and bottom line. This focus has helped us deliver our eighth consecutive year of adjusted EBITDA profitability as of 2020. Turning to cash flow, we generated net cash from operating activities of $24.3 million for the full year 2020. We believe that this cash-generating ability positions us well to take advantage of the long-term trends in digital advertising and capture incremental growth and market share through targeted investments in people, platform capabilities, and capacity. For example, we accelerated capacity investments in 2020 to support our growth in 2021 and beyond. We ended 2020 with cash, cash equivalents and marketable securities of $101 million. Now onto our 2021 guidance. The unprecedented conditions surrounding the pandemic make assessing market conditions unusually difficult, particularly for the second half of 2021. Accordingly, we are providing estimates for Q1 and the full year based on several underlying assumptions that I will summarize. In terms of our revenues, broadly speaking, we see multiple growth drivers for 2021. Coming into the year, we clearly had solid momentum from strength in mobile and omnichannel video, expanding SPO relationships, and favorable trends driving e-commerce. According to a recent eMarketer study, global retail e-commerce sales are projected to grow by almost 50% from 2020 to 2024. Our business is well-suited to take advantage of the e-commerce opportunity. We have top publishers with high-quality ad inventory and audiences that e-commerce advertisers want to reach. In Q1, we are seeing solid momentum, but there is uncertainty around the timing and size of impact from Apple's elimination of IDFA. For Q2, we anticipate an above-average favorable year-over-year comparison, as we will be lapping the early stages of the pandemic when advertising spending was significantly impacted last year. Moving into the second half of the year, due to the combination of uncertainty around macroeconomic conditions, the pandemic, and lapping a very strong growth in the second half of 2020, we think it is appropriate to be conservative in terms of second-half year-over-year guidance. Despite potential countervailing factors that may reduce our growth rates in 2021, such as the elimination of Apple's IDFA and uncertainty about the pandemic status, we remain confident that we can achieve full-year revenue growth of 20% or more. For specifics, for Q1 2021, we expect revenue between $38 million and $40 million, a range of 34% to 41% year-over-year growth, adjusted EBITDA between $8 million and $9 million, or 21% to 23% EBITDA margin. For the full year 2021, we expect revenue between $180 million and $185 million, or a range of 21% to 24% year-over-year, adjusted EBITDA between $45 million and $49 million, or 25% to 27% margin. It should be noted that in 2021 we are incurring public company costs of approximately $7 million. Full-year capital expenditures are expected to be $18 million to $22 million. Depending on growth opportunities, we may accelerate the phasing of our planned CapEx to earlier this year. Overall, we expect to increase the total number of impressions processed in 2021 by over 40%. In closing, we are very pleased with our progress in 2020, but we are even more excited about the opportunities ahead in 2021. Our track record of driving profitable revenue growth and cash flows allows us to continue innovating and delivering for our customers and shareholders. We believe we have the right platform and the right approach to be at the forefront of our industry. With that, I'll turn the call over to our operator to open it up for questions.

We'll be doing a live Q&A with Steve and Rajeev. Your first question comes from the line of Brent.

Good afternoon. Thank you for taking the question. I guess, Steve, just as it relates to the guidance, low twenties of the numbers that you just posted, I think many are trying to understand and reconcile why you would see such a major slowdown. Other companies in the industry like Snap today said that they would grow 50% for the next several years. There's been some very bullish backdrop of ad spend. If you could just maybe discuss your expectations? And then I had a quick follow-up question for Rajeev.

Sure. It’s good to speak with you, Brent. So, the big picture is we really aren't seeing the material slowdown. We are, obviously, coming off a very strong 2020, and we're continuing to guide to 20%-plus growth in 2021 and that is our long-term growth target. The reality is, we do have a strong second half of 2020, which was 50% growth year-over-year. So the comps are going to be tough, but there is no material slowdown from our perspective. We're feeling very good about the growth drivers that we have. Both Rajeev and I commented, we have mobile growing, omnichannel video growing very nicely and we are seeing recovery in our desktop display business. Having said all that, there is a fair degree of uncertainty in the broader macro environment. So, we're being appropriately conservative. And as we go through the year at each of these calls, we'll update the analyst community and the investing public.

Okay. Thanks, Steve. And Rajeev, just on connected TV. Can you just update us on the progress and how you see that progressing through 2021?

Yeah. Absolutely. Hey Brent. Good to reconnect. So, look, I'm really excited by our growth in OTT and CTV. It's one of several high growth drivers in our business. Our CTV strategy really is consistent with how we've approached and scaled other ad formats, such as mobile app or digital video, just to focus on aligning the needs of buyers for transparency and increased ROI from their ad spend with the needs of publishers for increased revenue. Today the vast majority of OTT/CTV transactions are via non-programmatic insertion orders, which is a very manual approach. And we're really focused on where we think the market is heading, which is programmatic monetization with header bidding, using automation and data for better outcomes. So, we started building product for this in 2019. We shipped it in mid-2020 in beta. Now we made our product generally available in Q4 of last year, that’s scaling very nicely to over 60 publishers with rapidly growing volume and continuous innovation. As I mentioned earlier, our omnichannel video revenue, which is a combination of both OTT/CTV and short-form video grew by over 100% year-over-year. So, we are pleased with the progress there and we think it's adding another growth driver to our business alongside mobile app, alongside video, and alongside SPO.

Great. Thank you.

Your next question comes from Andrew.

Hi, guys. Thanks for taking the question. I'm assuming you can hear me, right?

We can, yes.

Just checking. Yeah. Thank you. So, SPO, I think accounted for 20% plus of the platform. Can you talk a little bit about the drivers of SPO adoption and just more recent trends you're seeing there? And then secondly, just following up on kind of the CTV commentary, can you talk about what needs to happen for the product to move more broadly, just from an advertiser as well as a publisher perspective? Like, what needs to happen for CTV header bidding to become more widely available and more commonplace?

Sure. Yeah. Let me start, Andrew, with SPO and then we'll move to the CTV question. So, look, buyers are continuing to consolidate their ad spend onto PubMatic resulting in market share gains for us. We're a leader in executing SPO deals because of the efficiency of our infrastructure, our omnichannel and global scale, and our focus on transparency. We invested significantly in 2020 and continue to invest in 2021 in building out our sales and account management team covering agencies and advertisers who are executing supply path optimization deals. We feel very good about our competitive offering and resulting win rate. Some of the drivers for why buyers are moving in this direction really start with buyers wanting to get their arms around their digital and media supply chain. They want transparency; they want to know where their ads are showing up. They want to know what kinds of audiences they're buying, and what kinds of data they're buying against. They want to know what fees look like in the supply chain. They want to be more efficient. Obviously, coming out of the pandemic, everybody has had to re-look at how to make their businesses more efficient. This means they want to work with fewer, larger platforms that can meet their needs around the world and across a variety of different ad formats. The third thing that they're really looking for is high-quality inventory. They want to ensure they're buying humans and not bots. We put all of that together for these buyers, and I think we do it in a way where we are really focused on innovation on behalf of the buyer so that they get more ROI from their ad budget. When we do that well, it of course means more revenue for our publishers. That's what's driving our market share gains with SPO. Now, turning to your second question around CTV, we look at the drivers there. In every ad format, we've seen that header bidding takes some time to take over the majority or the vast majority of how impressions are transacted in a particular market. This has to do with technology transition, but also people and process transitions; how buyers are used to buying and how publishers are used to selling. We have every confidence that the market will move into a more head bidding-driven, more automated approach that makes a lot of sense. We'll work actively with both the publishers and buyers to see that transition play through.

Great. Thank you.

Your next question comes from Justin Patterson.

Thank you very much. I'm glad. I hope everyone's healthy and well right now. Two, if I can. First, you clearly had a lot of new impressions come on the platform in 2020 and added capacity around that. But given the momentum in the business and the growth of channels like CTV, are you thinking of additional investment in capacity and platform optimization? So, I'll start with that and then I'll have one quick follow-up.

Sure. So good to reconnect, Justin. From our perspective, one of the key ingredients of our ability to be profitable over the long run is to make targeted capacity investments when we see opportunity. And certainly that was the case in 2020 when we increased our impressions by nearly 70%. We've approached the opportunity by ensuring that whenever we do bring on new impressions, we have the competence so we can monetize those very cost-effectively. As we look at 2021, we continue to see significant opportunities across multiple growth factors. We've talked about mobile and omnichannel video, the ramping up of CTV, and, of course, the desktop display recovery. Expects to continue to invest for capacity expansion in the range of about $18 million to $22 million in total across all capital expenditure categories. We believe this will allow us to grow nicely this year and beyond. Additionally, we will take the opportunity to accelerate investment if there's a chance, as we did in 2020.

Got it. Thanks, Steve. And then for Rajeev, I appreciate your comments around privacy during the prepared remarks. I'd love to hear how you're just thinking through the puts and takes around industry spend on targeting and pricing as we have IDFA come into place. And then the growth of these third-party identifiers, the alternatives to the cookies emerge, in some cases considered a threat, and in other cases it sounds like this could be inflationary to the open web. Curious to hear how you think through the puts and takes.

Absolutely. It is an area of high degree of change. We think the identity transition underway is a tremendous opportunity for the open internet to grow its share of the ad market relative to the walled gardens. Advertisers are seeking a combination of brand-safe content with known consumer identity, and that hasn't existed at scale. By moving away from anonymous tracking, like third-party cookies or IDFA to known identity, the open internet is building a better solution. We are excited about the opportunity for that and also our position within that. We are investing heavily behind this opportunity, and we have created multiple solutions. First, as an infrastructure provider to the ecosystem, we've partnered with leaders such as Trade Desk and Unified ID 2.0, LiveRamp, Criteo, and many others. We've created a software layer for publishers that allows them to integrate and manage all of these identity solutions seamlessly. No matter which solution an advertiser is working with, the publisher can access their budgets. This is a unique solution seeing high uptake from our publishers that sets the groundwork for a transition to known identity. Second, we recognize that both publishers and advertisers have valuable first-party data on their users. We have built a solution being used by both segments of the market, allowing them to target audiences when they aren't logged in. We believe the ROI benefits from this transition will increase ad spend and utilization of our infrastructure, benefiting both our customers and us. We're omnichannel, which means we aren't overly exposed to any single ad format or device, allowing us to leverage various formats for advertisers' and agencies' campaigns.

Great. Thank you both.

Your next question is from Brian Schwartz.

Steve, just wanted to ask you two quick ones. First, I wanted to follow-up on the guidance. With the top line, what are you assuming in terms of a recovery from those distressed industry customers? Are you baking in any type of recovery from those publishers and travel or those distressed areas of the economy in your 2021 guidance?

Sure. I'll take that first one. We do see some recovery later in the year. We've already seen recovery on desktop display, which hit pretty hard in Q2 of 2020. We saw a robust recovery in Q4. We see that continuing in the first quarter. Those hard-hit industries are starting to recover and plan for the future. We do think there will be recovery, albeit not as robust as, let's say, e-commerce and personal finance technology areas. Our omnichannel capability enables us to address diverse advertising needs globally, giving us confidence we can exceed our long-term growth targets of 20%-plus this year.

Thanks, Steve. The one follow-up was just on the margin guidance. It looks like you're investing more here, which is great. We're happy to see that. Can you talk a little bit about where you're investing in terms of your growth investments in 2021? You're guiding to down margins here versus 2020, so can you shed a little light on where that spending is going?

I am fairly confident that we'll be able to achieve the long-term target EBITDA margin of 30% this year and beyond. Where we're investing aggressively is around growth, particularly in engineering. We're going to be hiring new engineers predominantly out of our company in India. The second area is sales and marketing growth around the globe to support our new initiatives around identity, audience offerings, and the continued growth of mobile and omnichannel video. Our investments are focused on growth and people, with some spending on capacity. I am confident in our ability to maintain our established margins.

If I may add a bit more color, Brian. We anticipate a significant shift in the internet opportunity as consumers increasingly leverage the online space. They're engaging in new activities on the internet that they didn't before, which creates long-term growth opportunities. Thus, to Steve's point, we are not just investing for 2021, but we are taking advantage of the shifts in consumer behavior aimed at driving market share expansion in the years to come.

As a public company, we expect to incur added costs of about $7 million this year, which contributes to operating expense and stock-based compensation being higher than a year prior. This will normalize in 2022 and beyond.

Thank you very much.

Can you guys hear me?

Yes, we can.

Yes.

A couple of questions. Good quarter guys. First on the Q4 upside, any more additional color you can provide on budget flushes? I think you mentioned e-commerce was very strong. Any other verticals you would call out and also maybe around direct response versus brand? For Rajeev, circling back to CTV quickly, it seems a bit of a debate about header bidding versus private marketplace as a longer term. Is there a difference of views for how advertisers and publishers are thinking about this?

Hello, Aaron. Good to connect again. We had an outstanding fourth quarter driven by various factors. Mobile and omnichannel video continued to perform well; part of our business accelerated over 100%. E-commerce is a very important ad vertical, as well as technology and personal finance business advertising. We felt growth was broad and not limited to one specific area. Additionally, we observed recovery in desktop display, indicating that we're figuring out how to operate successfully in the COVID world. I'm optimistic these trends will carry into this year, although we don't anticipate repeat of spending like that during the U.S. presidential elections.

On the CTV question, we engage in both private marketplace and header bidding transactions. Advertisers prefer the transparency and efficiency of header bidding, which enables them to spend more due to higher ROI and better revenue for publishers. However, a publisher's goals can sometimes affect this process; they may focus on certain sales tactics with goals set annually. Buyers prefer the automated and efficient approach, and we have full confidence that this market will transition into a more efficient header bidding methodology, bringing multiple benefits for both parties.

Got it. Thank you.

That concludes the Q&A portion of today's call. I'll now turn the call back over to Rajeev for any closing remarks.

Great. Thank you everyone for joining us here on our first earnings call today. We're extremely excited with our performance and momentum going into 2021. I'm grateful for the hard work and dedication of the entire PubMatic team. As we highlighted, we have multiple growth drivers we're executing against, expanding our market share, and our infrastructure-driven approach drives better outcomes for our customers and increases revenue and profit for us. We look forward to seeing you at our upcoming investor events. Have a great day.