Well, hello everyone, and welcome to PubMatic's Second Quarter of 2022 Earnings Webinar. My name is Kelsey, and I will be your operator today. Before I hand the call over to the PubMatic team, I'd like to go over just a few housekeeping notes. As a reminder, this webinar is being recorded. After the speakers’ remarks, there will be a Q&A session and if you plan to ask a question, please ensure you've set your Zoom name to display your full name and your firm. If you would like to ask a question, please use the raised hand function located at the bottom of your screen. We thank you all for your attendance today. And I will now turn the webinar over to Stacie Clements with The Blueshirt Group. Stacie, please go ahead.

Thank you, operator, and good afternoon, everyone. Thank you for joining us on PubMatic's earnings call for the second quarter ended June 30, 2022. Joining me on the call are Rajeev Goel, Co-Founder and CEO, and Steve Pantelick, CFO. Today's prepared remarks have been recorded, after which Rajeev and Steve will host live Q&A. A copy of our press release can be found on our website at investors.pubmatic.com. 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, market opportunity, growth strategy, and financial outlook. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy, and other 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 and uncertainties and other factors in our reports filed from time to time with the Securities and Exchange Commission, including our most recent Form 10-K and any subsequent filings on Form 10-Q or 8-K, which are on file with the Securities and Exchange Commission and are available at investors.pubmatic.com. 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 August 8, 2022, and we do not intend and undertake no obligation to update any forward-looking statements, whether as a result of new information, future developments, or otherwise, except as may be required by law. In addition, today's discussion will include references to certain non-GAAP financial measures including adjusted EBITDA and non-GAAP net income. These non-GAAP measures are presented for supplemental information 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 measures is available in our press release. And now I will turn the call over to Rajeev.

Thank you, Stacie, and welcome, everyone. We delivered another terrific quarter with revenue growth and profitability exceeding our expectations. Our compelling combination of durable, profitable growth once again demonstrates our market leadership based on our differentiated infrastructure-driven approach to digital advertising. Organic revenue grew 27% year-over-year, well above market growth rates. In fact, we saw an acceleration in year-over-year growth as the quarter progressed, with June being our strongest month of the quarter. Our results demonstrate the number and magnitude of growth opportunities we have incorporated into our business. For Q2, key growth drivers that exceeded our expectations include broad strength in the Americas region, CTV publisher acquisition and existing publisher expansion, and Supply Path Optimization. We also benefited from a well-diversified portfolio of advertisers, with over 20 verticals contributing to growth. Our pace of growth reflects market share gains and our continued industry consolidation. GAAP net income margin was 12% and adjusted EBITDA margin was 37%. Our margin levels highlight the leverage in our model which, importantly, allows us to invest for the future, even during periods of macroeconomic uncertainty or downturn. We believe this is a strategic advantage as we’re able to invest in our platform, solutions, and go-to-market efforts in a way that others may not be able to in uncertain times. Just as importantly, we generate healthy cash flows. I’m incredibly proud of what our team has achieved in Q2. This quarter was our most challenging yet since our IPO, given the number and magnitude of macro-events that are buffeting the economy, including inflation, rising interest rates, war in Europe, and ongoing supply chain disruptions. These challenges required us to be nimble and agile in order to serve our customers well and grow our business in a highly efficient manner. We've rapidly developed software, leveraged our full operational control of our infrastructure, and continued to scale our go-to-market presence around the world. I co-founded this company under the premise that programmatic advertising has the potential to fuel the endless potential of digital content creators. The news cycle over the past few months has reinforced this idea, with some of the world’s most premium content companies announcing plans for programmatic advertising to be a critical component of their growth strategy. At PubMatic, we’ve built our business on the belief that all advertising will be digital, and all digital advertising will be transacted programmatically, and this is quickly becoming reality. However, there are other crucial dynamics at play in our industry. With the rapid expansion of the digital advertising ecosystem, we are seeing both accelerated innovation and increased fragmentation across the supply chain, with new solutions emerging and M&A shaking up the market. At the same time, our industry is attracting more scrutiny from privacy and antitrust regulators around the world. As a result, our customers are increasingly looking for independent, unbiased solutions to help them navigate these changes and maximize the value of their advertising strategies. As champions of the open internet, we have developed the technology to enable both our customers, and us, to succeed. We are building the supply chain of the future; one that is transparent, efficient, effective, privacy-compliant, data-rich, and environmentally sustainable. Our focus on delivering the leading technology infrastructure to power this future is resonating with both new and existing customers, and is a key driver of our continued success. This summer, I spent considerable time working outside of the U.S. for the first time since the pandemic. I visited with customers, prospects, and partners at Cannes Lions, the first in-person global gathering of media and advertising leaders from around the world since 2020, where there was an overwhelming interest from our existing customers to find new opportunities to grow our relationship and from prospects wanting to take advantage of our technology and infrastructure. I also spent time in London, Madrid, and Milan, meeting with team members and customers from across the region. In fact, at one point I visited five countries in five days. I met with publishers, advertisers, agencies, DSPs, and online retailers. A consistent theme across many of my meetings is that they are consolidating their business relationships to fewer, larger platforms. They no longer want to manage hundreds of vendors in their digital advertising supply chain but are instead focused on deepening their use of key technology partners to create more efficiencies within their business while generating superior outcomes. I came away optimistic for deeper Supply Path Optimization partnerships with agencies and advertisers as our prior experience indicates that in times of economic stress, these entities lean into nimble, technology-driven partners that can increase their efficiency, help them save on operational costs, and enable new revenue streams. PubMatic is a leader in this consolidation, as evidenced by our rapid growth, ongoing market share expansions, and strong Net Dollar Retention rate. Our deep and longstanding customer relationships and track record of solid performance create opportunities for expanded use of our platform. Increasing access to valuable inventory and our ability to generate high-margin revenue for publishers is fueling growth. For the trailing twelve months, net dollar retention was 130%, a standout achievement among our software peers. On the buy-side of the ecosystem, consolidation is manifesting itself in several ways. In Q2, supply path optimization, or SPO, represented approximately 30% of total activity on our platform, up from 24% a year ago. In addition, the efficiency of our platform and the access to inventory and audiences from top publishers is reinforcing the value of our platform to both publishers and buyers. DSP partners are also engaging in consolidation, allocating more impression capacity to the PubMatic platform because of the quality of our inventory and the efficiency of our platform. For example, in Q2, a major DSP nearly doubled the impression capacity allocated to PubMatic versus Q1, which allowed us to grow their spend with PubMatic considerably. Importantly, this fuels our flywheel. As we attract more spend from buyers, publishers increase their revenue from PubMatic, which causes them to add more inventory formats, geographies, or properties to our platform, which in turn provides us with an increased ability to invest and innovate. We view this as a significant moat that we continue to scale as we secure growing capacity share from many of the largest DSPs. With top publishers and buyers actively consolidating their spend onto PubMatic, our runway for growth has never been clearer. I remain as optimistic as ever that we will meet our long-term market share goals of 20% plus. Customers and partners value our global, omnichannel scale as well as our robust solutions that solve for the future of audience addressability. They also benefit from the efficiencies gained from our owned and operated infrastructure, superior ROI outcomes, and our ability to invest in continued innovation on their behalf. As macro uncertainties continue to unfold, it’s possible that the efficiencies gained from our platform accelerate consolidation. By partnering with us, less capital is needed for publishers or buyers to build out addressability solutions, proprietary header bidding wrappers, or inventory connections. In addition, buyers and publishers gain efficiencies from our already-scaled owned and operated infrastructure which would take them years to achieve on their own. In an environment where investment and resources carry greater discipline, partnering versus building could be a strategic decision that accelerates industry consolidation onto those platforms that provide the most value. Our omnichannel approach gives buyers flexibility as consumer trends shift. It also instills resilience as we are not dependent on a single format or channel for growth. CTV, one of the fastest-growing formats, has been getting a lot of attention in the market over the past couple of years, and rightly so. The rapid consumer behavior shift towards streaming has unlocked tremendous opportunity for the market, and we have certainly benefited from that momentum. In Q2, we saw an increase of over 150% year over year in our CTV business and we monetized inventory from 196 publishers as our pace of CTV new publisher acquisition accelerated. At the same time, the bigger market opportunity will remain in programmatic online video ad spend, which represents three to four times that of CTV and OTT. Our combined omnichannel video, including CTV, represented over 30% of revenue in Q2. As we move towards a post-cookie world, third-party data is increasingly becoming less sustainable and relevant. Instead, the value of data is shifting to the sell side of the ecosystem, which is at the nexus of the publisher and the consumer. We see a significant role to play as a result of being a leading technology provider to top publishers around the world. For this reason, we have been investing in industry-leading solutions in this area for over three years now. We recently launched Connect, a comprehensive and fully integrated platform for media buyers to seamlessly connect with their target audiences across the open internet. Connect combines known identity, first and second-party data, contextual signals, seller-defined audiences, and modeled audiences into one platform with robust reporting and transaction management capabilities. Buyers are seeing the benefits of activating this data on the sell-side, closer to the consumer, in terms of both scale and performance. Sunscreen brand Banana Boat was able to achieve better campaign performance for a video ad campaign by activating Lotame’s Panorama ID through our Connect platform, outperforming even cookie-based channels. This case study not only demonstrates the value of PubMatic’s Connect solution, but also how our technology prepares customers for the pending deprecation of the cookie. Lotame is one of multiple identity and data providers currently available to be targeted through Connect. Our ability to connect audiences and media is driving further ad spend consolidation on our platform and will likely be a further driver of SPO. IPG’s Matterkind and Omnicom Media Group’s PHD Media have seen significant results for their clients through Connect. Additionally, major agency holding companies, such as Havas Media Group, are expanding their supply path optimization partnerships with PubMatic to take advantage of the cookie-less benefits of Connect, in addition to our omnichannel scale, efficiency, and nimble technology development. As more ad dollars flow into the open internet, buyers and publishers are seeking transparent and efficient advertising solutions. Our unique approach to digital advertising provides infrastructure in which all stakeholders benefit, which is all the more valuable in today’s dynamic economic environment. A further driver of our industry consolidation is the sustainable way in which we are building the digital advertising supply chain of the future, as our customers and partners are increasingly seeking responsible technology partners. Along with our commitment to delivering value to our customers, we remain committed to the sustainability of the environment in which we all live. This quarter, we announced that the energy used across our data centers is now 100% renewable energy. This is something we have been working towards for several years. With this announcement, any advertiser or agency looking to buy media sustainably, and there is a rapidly growing group of buyers that are, can now do so on the PubMatic platform. As we look to the second half of the year, we will continue to see macro challenges. Q3 has typically been the most challenging quarter to forecast, so we’re being prudent in the very short term as advertisers adjust to the macro environment. As we take a broader, six-month view, we are confident in our ability to operate with the same agility we always have. History has proved our resilience through peaks and valleys, as our business is increasingly well diversified across verticals, ad formats, and channels. Moreover, we have a significant number of growth opportunities that we are well positioned to take advantage of. Despite the near-term economic uncertainty, we know our usage-based model drives market share gains as we consolidate the space. With consolidation comes greater visibility, diversity in the business, and a widening competitive moat. It also fuels a high degree of profitability which allows us to focus on the long term, creating value and innovation across the digital advertising ecosystem at every step. Before I turn it over to Steve, I want to give special thanks to our team for their strong execution in a challenging environment. Their commitment to our customers and partners is unwavering. The digital advertising landscape continues to evolve at a rapid pace, with growth to be had across formats, channels, geographies, and new addressable markets like retail media. I couldn’t be more excited for the future and how we are positioned for continued consolidation and market leadership. I also want to welcome Shelagh Glaser and Jacob Shulman to our Board of Directors and our Audit Committee. Shelagh brings decades of financial experience from her work at Intel and currently as CFO of ZenDesk. Like Shelagh, Jacob brings more than 25 years of experience building financial infrastructure and driving growth at multinational enterprises. Jacob currently serves as CFO of JFrog. As we build for the future and continue to scale our business, their additions bring deep expertise to our organization. Let me now turn it over to our Chief Financial Officer, Steve Pantelick, to provide additional detail.

Thank you, Rajeev, and welcome everyone. Our second quarter results exceeded our expectations and were noteworthy in light of the macro challenges across the globe. We delivered $63 million in revenue, representing year-over-year growth of 27%. GAAP net income was $7.8 million, or 12% margin, and fully diluted EPS was $0.14. Adjusted EBITDA was $23 million, or 37% margin. Our cash flow from operations was $20.5 million. The second quarter marks our eighth straight quarter where we grew significantly above our long-term growth target of 20% plus, our 13th straight quarter of positive GAAP net income, and our 25th consecutive quarter of positive adjusted EBITDA. These results, once again, underscore the durable nature of our revenue and profit growth built on the multiple growth drivers embedded in our business. They also vividly illustrate our diversified business within the open internet, as well as our team’s ability to consistently execute our business plan while navigating through obstacles and changing conditions. Turning to the highlights in Q2, we saw the importance and value of being a scaled, omnichannel platform. Overall, advertiser usage increased in terms of the number of advertisers spending on our platform and average dollars spent. Each of our top 10 ad verticals grew double digits year-over-year. In aggregate, ad spend for the top 10 verticals increased more than 40%. Shopping continued to be a strong performer while Travel extended its recovery and increased by over 100%. Food & Drink and Arts & Entertainment were also among the fastest-growing categories. Automotive and Personal Finance, also included in our top 10 verticals, grew at a slower pace. In terms of the progression of ad spending through the quarter, we saw softness early in Q2 for some verticals that was more than offset by strength elsewhere. This underscores the advantage of operating a platform with diverse business activity that appeals to a broad range of brand and performance advertisers across both physical goods and services. In Q2 our year-over-year growth accelerated led by mobile and omnichannel video, which increased 43% year-over-year. This growth was on top of the prior year’s growth of more than 100%. Overall, mobile plus omnichannel video represented a record high 72% of our total revenues. The star of the quarter was omnichannel video, which grew 58%. Within omnichannel video, CTV revenues increased more than 150% year-over-year. Underscoring the diverse activity on our platform, our total display business also accelerated compared to Q1 and increased 19% year-over-year. In terms of our regional growth, there was some softness in EMEA and APAC, but all regions grew double digits. Americas delivered above expectations. Supply Path Optimization relationships continue to play a key role in terms of our growth and revenue stickiness as advertisers and agencies expand usage of our platform. In Q2 we signed new SPO deals, renewed existing agreements, and expanded activity via these deals. We plan to continue investing behind this opportunity focused on helping buyers find the right audiences and media on our platform. The proportion of SPO activation to total ad spend increased from Q1 and represented approximately 30% of activity on our platform. An important indicator of publisher satisfaction and usage of our platform is net dollar-based retention. On a trailing twelve-month basis, net dollar-based retention was 130%. As communicated in prior quarters, this metric has normalized now and Q2 2020 results are no longer in the comparison set. Our continued success in achieving high gross margins is the result of our strategy and execution. We aim to put into service our planned maximum capacity every calendar year by the beginning of Q4. Once capacity is put in place it becomes a fixed cost in the near term that we then leverage over the succeeding periods. In seasonally lower spend periods such as Q1 and Q2, our gross margins are typically lower than second-half levels. As the year progresses, the combination of ongoing infrastructure optimization, the expansion of activity with our new and existing customers, and higher seasonal ad spending results in significant gross margin leverage. By owning and operating our infrastructure we have been able to drive down our unit costs. Over the last two years, we have reduced our cost of revenue per million impressions processed by approximately 50%. Our experience has shown us that the return on investment for incremental capacity is high and typically pays for itself on a cash basis in months. With this cost advantage, where we see incremental revenue opportunities, we will expand our processing capacity and further increase our competitive moat. In Q2 we continued making investments in innovation and adding go-to-market team members. These investments coupled with our focus on operational excellence, have been instrumental to our strong financial results. Operating expenses in the second quarter were $34.3 million, up 30% year-over-year, reflecting a combination of increased headcount for growth and stock-based compensation. Excluding stock-based compensation, Q2 operating expenses increased 27%. Q2 GAAP net income was $7.8 million. Non-GAAP net income, which adjusts for stock-based compensation, the unrealized gain or loss on equity investments, and related income tax effects, was $13.0 million or 21% of revenue. Diluted EPS was $0.14 and non-GAAP diluted EPS for Q2 was $0.23. Turning to our cash flow, we generated net cash from operating activities of $20.5 million in Q2. Our free cash flow was $5.7 million. We ended the quarter with cash, cash equivalents, and marketable securities of $183 million and no debt. Now, looking to the second half of the year, we have been closely monitoring recent trends. Based on our assessment of the uncertain economic environment and factoring in both headwinds and tailwinds, we are taking a conservative approach to our guidance. In terms of headwinds, we are anticipating further softening of European consumer demand amid worsening economic conditions stemming from uncertainty around energy supplies to high inflation and rising interest rates. In the APAC region, as a result of periodic COVID-induced lockdowns that affect both the supply chain and consumer activity, we expect muted ad spending through the end of the year. In the Americas, we anticipate some limited softness but are assuming generally stable economic conditions for the balance of the year. In terms of tailwinds, we continue to see strong momentum with our SPO relationships, continued growth of our online video and CTV businesses, and incremental political ad spend that will offset some of these challenges. We also anticipate continued benefits from PubMatic’s diversified business within the open internet ecosystem. Taking these headwinds and tailwinds into consideration, beginning in Q2, we proactively initiated several cost-saving measures. We re-prioritized our hiring for the balance of the year and moved some incremental hiring to 2023, as well as reduced a portion of discretionary expenses such as marketing and travel. Including savings achieved in Q2, we anticipate unlocking several million dollars of savings by the end of the year relative to our original planned expenses. We proactively took these steps because a hallmark of our long-term success has been agile execution in a changing environment, coupled with our dual focus on revenue growth and profitability, which ensures we have the resources to consistently invest for future revenue opportunities. For Q3, specifically, we expect revenue of between $66 and $68 million or 15% at the midpoint for year-over-year growth. Keep in mind that we're comparing against a 54% growth rate from Q3 last year. On a two-year stacked basis, our guidance translates to approximately 70% growth. We expect Adjusted EBITDA between $23 and $25 million, or approximately a 36% margin at the midpoint. For Q4, we are adopting a conservative outlook as well based on the challenging economic factors cited earlier. To be clear, we remain optimistic about growth from our SPO relationships, continued ramp-up of our omnichannel video business, and incremental political ad spending. Based on our revenue overachievement in Q2 and the de-risking of our second half, we are revising our full-year revenue guidance to $277 million to $281 million or 23% growth at the midpoint. With digital advertising slated to grow approximately 12% in 2022, we are well positioned to continue to grow our market share. With the operating expense savings already in process, we anticipate that total second-half GAAP operating expenses will be lower than previously communicated. We now expect full-year operating expenses to increase approximately 30%. Due to the timing of investments, Q3 operating expenses will increase at a slightly faster rate year-over-year and Q4 expenses will increase at a slower rate. As a result of our increasing global scale and favorable revenue mix towards high-margin video formats combined with the cost optimization plans in place, we are increasing our full-year Adjusted EBITDA range to between $103 million and $108 million, or 38% margin at the midpoint. As has been the case in previous challenging environments we have successfully managed through, we will continue making targeted, high ROI investments in pursuit of long-term market share gains. Our investment plans come from the conviction that we are still in the early days of our growth and we see clear benefits from consistently investing to capture these large opportunities ahead of us. As previously shared, approximately 40% of our CapEx this year is focused on driving the newest and fastest-growing segments of our business including new SPO capabilities, CTV expansion, and private marketplace scaling and efficacy. This latter category, for example, grew over 150% this past quarter and is becoming an increasingly important part of our business. We anticipate CapEx between $33 million and $36 million this year. Based on timing of equipment availability and shipments, the bulk of our CapEx will occur this quarter and will reduce our free cash flow. We anticipate a return to a more typical pattern of free cash flow generation in Q4. Looking ahead, as video and other high-value formats become a greater share of our revenue mix, and as we continue optimizing new infrastructure, we anticipate that our CapEx to revenue ratio will decline. With regard to the strengthening of the U.S. dollar, we anticipate the impact on our revenues to be neutral to positive because the transactions flowing through our platform are largely denominated in U.S. dollars. On the expense side, we also expect the U.S. dollar’s strength relative to the Indian rupee and UK British pound sterling to have a neutral to positive impact. In closing, our second-quarter results underscore the strength of our platform, and our team’s ability to consistently execute our business plan while navigating through challenging conditions. These factors give us confidence in our long-term prospects. We believe we have the right platform and the right approach to be at the forefront of our industry. We have built a business with structural advantages emanating from our owned and operated infrastructure and offshore R&D that enables us to expand our competitive moat and consistently invest in innovation on behalf of our publishers and buyers. We see a long runway of growth ahead of us as our Total Addressable Market continues to grow and we are well positioned with multiple growth drivers. We are consolidating the sell side as one of the few scaled, global omnichannel platforms. And our profitability gives us a high degree of agility and the ability to consistently invest for long-term market share gains. With that, I will turn the call over to Stacie to open it up for questions.

Thank you, Steve. Our first question today comes from Shweta Khajuria of Evercore. Please go ahead, Shweta.

Shweta, please go ahead with your question. You are now live.

Oh, I'm sorry. Can you hear me?

We can, yes.

Sorry about that. Okay, thanks Stacie. Okay. A couple of questions from me please. So can you please talk about the macro environment that you're seeing quarter-to-date right now? So in the third quarter A, across geographies where is the most headwind you're seeing APAC or Europe? B, across channels, and C, also across verticals? So which verticals are the weakest so far? And where do you see ongoing strength? That's the first question. And then the second is, could you please quantify the FX impact on your revenue and EBITDA in terms of dollar or percentage on your growth? Thank you.

Sure, it's nice to reconnect. Let me start with what we've observed so far this quarter. First, we are seeing two primary trends. Firstly, as I mentioned in my prepared remarks, there has been some softness in a few areas during Q2, which has persisted, especially in personal finance and hobbies. These trends have remained weak and in some cases, they've slightly worsened. Secondly, categories that were previously strong, such as shopping and technology, have also shown some signs of weakness over the past few weeks. Upon reviewing these recent data points, we have noted that advertisers are continuing to spend based on their business results. While some are reducing their budgets, others are still spending, and this varies on a case-by-case basis. What we're noticing in some situations is a cautious approach as advertisers evaluate their respective opportunities and challenges. The advantage we have as a diversified business is that we tend to perform relatively well in this type of environment. Regarding geographic weakness, we continue to observe softness, particularly in EMEA and APAC. Although there is some weakness in the Americas, we currently expect a fairly stable economic environment for the remainder of the year without major changes. In terms of performance by format, we are experiencing strong results in the video category, specifically omnichannel video, which includes online video and CTV, and we anticipate this will continue throughout the year. Additionally, when looking at areas of softness, display or non-video formats are the ones we're noticing some challenges.

Okay, thank you, Steve. And then could you please quantify the FX impact on revenue?

Sure. The benefit that we have as a company is that the large majority of our transactions are denominated in U.S. dollars. So we are actually seeing relatively limited FX impacts, and that's on the revenue side. And we're also seeing relatively limited impacts on the expense side, because our functional currency is the U.S. dollar. So overall, FX is neutral to positive to PubMatic.

And that was in Q2 and you expect that for the remainder of the year?

Yes, absolutely.

Okay. Thanks a lot, Steve.

Thank you, Shweta. Our next question comes from Brent Thill at Jefferies.

Good afternoon. When you think about some of the areas that you showed really good strength maybe perhaps better than a lot of us had anticipated, what do you think held up? What were the installations in your model and the areas that perhaps you maybe chimed through that some of the fear of the digital ad space that slowed down? Why are you not maybe seeing it to the same level as others have seen it?

Sure. Hey Brent, nice to connect with you. So I'll start out just why we had such a good Q2 note. You heard comments from Rajeev and I, but I'll just underscore a couple of really important points. We saw significant growth in our omnichannel video business. It was up nearly 60% in Q2. And that was actually on top of over a 100% year-over-year growth in the prior year for the same period. The other aspect is that our mobile plus omnichannel video is now at a record high of over 70% of revenue. So what that demonstrates or illustrates is that we are indexed to the most favorable, fastest-growing formats. And that's really a function of us being an omnichannel platform, and we're able to deliver and offer to our advertisers the ability to reach the end consumer wherever they might be, which happens to be in mobile and omnichannel video. The other facet that was a notable strength in Q2 was the strength of our Americas business, and that helped offset the softness that we saw in EMEA and APAC. Now, specifically, in terms of where we're seeing strength, I'd say the strong performance in Q2 and anticipate continued strength as the year progresses in shopping, travel was very strong for us, and arts and entertainment, food and drink. Other areas though that were a bit softer, still growing double digits in the Q2 was auto and personal finance. And as I mentioned a moment ago, we are seeing some softness in personal finance, which is not surprising given a lot of the challenging economic environments for folks and what they're reading in the newspaper, etc. So overall we believe that we are performing relatively better because of our diverse advertiser base and the fact that we're an omnichannel platform and not to mention the fact that we've been consistently investing in these growth areas. And just a final point I'll make is, when we are looking at these opportunities, we don't sort of wake up and start to invest and try to go after that. This is something we've been doing for many years. And for example, through the first half of this year we increased our engineering headcount by over 30%. And if we compare to our headcount in engineering to the end of 2020, we've almost doubled that headcount. So by virtue of our strong profitable model, incremental cash flow, we've been consistently investing to take advantage of these opportunities.

Yes, great. I just want to emphasize the number of growth drivers we have incorporated into our business. We are well prepared for various scenarios that may arise. Although we cannot predict the exact economic conditions, we are confident in the high-margin business we have built and the strong relationships we have developed with publishers and buyers over many years. This gives us confidence in the resilience of our business. In uncertain economic times, we often see customers and prospects seeking more assistance from us, rather than less. For example, our CTV publisher acquisition accelerated in the second quarter compared to the first quarter and the previous quarter as well. This is partly because some publishers are looking to us for support during the current or expected economic challenges. Likewise, buyers will benefit from increased supply path optimization, which will enhance their operational efficiency and effectiveness. Overall, these trends are very positive for us, and I anticipate that more customers and prospects will be inclined to work with us.

Yes Rajeev, as a follow-up on CTV, can you share your current perspective on what you're observing? It seems like things are going really well. What is the upcoming direction for this segment of the business?

And then maybe the last thing to comment on Brent as it relates to CTV is, obviously we saw the news with Netflix partnering with Microsoft. We have a very positive relationship with Microsoft and we look forward to the opportunity to expand our relationship with them as they work through their plans for Netflix. But I think more broadly, Netflix has moved into ad-supported streaming will put pressure on many other content owners to embrace an ad-supported model, which is something that I would expect us to benefit from. In fact, we've already seen some major content owners accelerate their ad-supported streaming timelines in response to what Netflix is up to.

Thanks gentlemen.

Our next question comes from Matt Swanson at RBC. Please go ahead, Matt.

Yes. Thank you. And thank you guys and congratulations on the quarter, especially in this macro environment. Rajeev, if I could follow up on Brent's question on CTV and I think taking your last point maybe half step further, there's a lot of premium inventory that's going to be heading into the market over the next year. How do you think this can maybe accelerate the move towards header bidding? Like you mentioned before, there's going to be a lot more services. Are you going to want to buy direct off 20 different platforms? Do you see this kind of accelerating the market towards your vision?

Yes, I think you spot on Matt. So, remember, our focus, our vision has been really around building an efficient auction marketplace, whether it's programmatic guaranteed deals, private marketplace deals, or other types of transactions. And the reason is that, we firmly believe that that type of auction environment, the transparency and efficiency that it delivers is really the only way to scale a tens of billions of dollars CTV industry that's going to have, we think thousands of apps or content owners on the supply side, and then tens of thousands, maybe hundreds of thousands of advertisers on the demand side. And so when somebody like Netflix comes in, I think it does a couple of things. It brings more supply, more inventory into the market because Netflix is going to be going after I would imagine linear cable TV budgets, not just digital ad budgets. And so if you are a broadcaster that has been leaning away from streaming, now your core business may be under attack, so you've got to respond and go on the offensive. And then it also brings a lot more choice to the buyers. So the buyers are going to be sitting there saying, okay, I have more places than ever to buy from. And so a couple of things happen in that situation. One is, they need help from technology specialists like us to bring that inventory to market in a consistent, transparent fraud-free way and that's obviously one of the things that we specialize in. And so that's key outside of, let's say the top 10 or top 15 players. And then second is the complexity of waterfalls and direct deals starts to really take its toll from an operational perspective when you have more and more media companies, more and more publishers involved. And so that's again where that auction-based environment that allows sellers to sell directly, but to transact in a very efficient way, that's again a kind of a key benefit. So we think, as I mentioned in the prepared remarks, more and more of the industry is moving towards digital of course, but more and more is moving towards programmatic and we should be a major beneficiary of that.

Yes, that's super helpful and then maybe flipping to Steve, so I mean, looking at your guide, obviously a lot better than most of us expected, and I know you kind of personally took a lot of pride in during the beginning of the pandemic to be able to show that adjusted EBITDA profitability still. So when we think about looking forward and kind of balancing the macro challenges, cost savings with the opportunity in front of you, like how are you thinking about protecting margins while continuing to invest in the places you need to grow?

Yes, let me let Steve take that from a short term and maybe I can round it out afterwards.

Okay, great. So Matt, the way that we're thinking about it is that: number one, relying on the strength of our business model, which emanates from the fact that we own and operate our equipment so we can constantly optimize it. We're not dependent on others to drive down our own costs. So that's something we've consistently done. We did it again this past quarter and I anticipate our ability to continue to do that going forward. And so we have very robust gross margin. And then in terms of thinking about the balance between investment and adjusted EBITDA profitability, we feel like we're in a good spot right now in terms of knowing which of those product opportunities are clearly high ROI for us. We understand the path to go from input to output and so we have been selectively making those investments. I described some of those around the engineering team a couple moments ago. And so you factor in strong foundational business that's diverse on GO and a format basis, coupled with the strength of the model, we feel very good about continuing to invest and deliver adjusted EBITDA margins in the high 30s, the guidance that calls for the midpoint of 38%. And so of course, there's always going to be a need to constantly triangulate and assess what's going on a macro level, but we start out from a very strong position. We have a significant amount of cash, no debt, and a real clear path to incremental revenue. So that's how we're balancing out. And I think my expectation is that, I'm bullish on gross margin trends and adjusting EBITDA trends.

Yes, thanks, Steve. Yes, and I’ll just to kind of give a little bit of a broader perspective on that. Matt, I mean, I think, as you highlighted, we did, I think some very different things when COVID first hit, right? Which was to use the strength of our ongoing profitability and cash flow, as well as our balance sheet to actually be able to invest into the opportunity and drive rates of growth that were roughly 2x the rate of the market. And I think this, whatever economic environment, whatever word you want to use, to describe it and what may be coming is not that different in the sense that, we approach it from a really strong position financially and we are focused on our long-term market share objective of 20%. We’re at 3% to 4% as of the beginning of the year and so we're going to look at this environment as a further opportunity to grow that share and really think about what are the right priority investments that can help us, make sure that we're well positioned whenever the economy returns to solid growth.

Thank you for the time guys.

Our next question comes from Andrew Marok from Raymond James. Please go ahead, Andrew.

Hi guys. Thanks for taking my questions. I've been bouncing around between a couple of calls, so apologies if anything has already been covered. First, can we talk about the cookie deprecation deadline and did that push impact conversations around Identity Hub or Audience Encore at all? Do you feel a lessening urgency around the cookie transition or is that really highlighting the need to prepare? And second, can you talk a bit more about your SPO 2.0 relationships? Obviously SPO trending really well in 2Q, but just those next-level deals. I know the GroupM deal kind of being the most prominent. I guess how those are going in general, how those are taking share and outlooks for that over the course of the next 12 to 18 months. And do they present an increased value proposition in times of macro weakness? Thank you.

Yes, great. Andrew, so let me start with the first question on the cookies. So obviously, Google announced that they're going to delay by roughly a year, the timeline for the deprecation of the cookie. I think anytime I hear that something is two years out it means obviously there's a high degree of uncertainty, right? Even around that timing. So we could maybe think about that as a minimum expectation of timing but would not be surprised if it was longer than that. But I would say that we don't really expect that timing to affect us, based on the multi-year investment we've made in addressability solutions and our Connect offering, we feel like we're in a leadership position to manage the transition. There's an increasing number of customers and prospects that are adopting cookie alternatives and I think what's different now than maybe a year ago is that we have case studies and data that really demonstrate the efficacy of these approaches. For example, the banana boat case study that we released recently. And I think these are pretty powerful and demonstrating that there are better solutions out there and that they can scale. So there's a segment of the market now that's basically saying, Hey, this is not about replacing the cookie kind of getting back to something that we already had, but instead it's about having a better solution that respects consumer privacy but also continues to allow for the delivery of relevant ads to consumers, and in some cases where the relevancy is even higher. And I think a key point to keep in mind here is that there will be a transition with buyers moving their activity from the buy-side of the ecosystem in terms of data and how they apply it to the sell-side of the ecosystem, and we're in a strong position to capitalize on this. So, while maybe it would've been nicer, if they kept to the original timeline, we look forward to the whole industry moving on to sustainable solutions. Right now, turning to your second question around SPO just going to – my notes here, how the kind of next level of deals are taking shape. I mean, I think the common characteristic in deals where we are building on some initial SPO relationship and going deeper is that there is significant custom workflow or development work that goes into place. So whether it's GroupM or others these are all about the buyer consolidating even further based on success that they've already seen with us. And so that means they're going to go deeper in terms of how SPO drives their business. And so that invariably means some level of customization of the technology or infrastructure or workflow that's underlying that relationship. And so those can take time because we've got to build code and implement it and things like that. But it certainly makes for a much stickier and I think longer-term relationship, and so we are very happy to and excited to invest in those types of SPO renewal and expansion opportunities. And Steve highlighted some of the growth in engineering and, a meaningful chunk of that engineering growth is targeted towards these very deep relationships.

Great, thank you.

Thanks, Andrew.

Our next question comes from Justin Patterson at KeyBanc.

Great, thank you very much. Rajeev, I was hoping you could provide an update on just where you are in retail media. I know you'd called that a growth initiative on the prior call, so any updates on how that's trending would be great to hear? And then Steve, I appreciate the full-year guidance in there. I know you talked about a conservative outlook for Q3. When we look at just the implication for Q4, it still implies a fairly healthy sequential uptick. So curious what you're seeing right now to give you some comfort around Q4? I know political in the past wasn't a huge channel for you. So any more details on how you're thinking about Q4 would be appreciated. Thank you.

Yes, let me address the first part regarding retail and then I’ll hand it over to Steve. Justin, in terms of retail, I believe we are still in the early stages, and we are having numerous conversations in the market. Retailers are seeking a diverse range of solutions, and there are no standard models or approaches to retail media at this point. While some patterns may be beginning to surface, we are still in the initial phase. Our focus is on listening and building as we engage with these customers, identifying commonalities and patterns, and exploring ways to develop solutions that can effectively address the needs of our retail clients. We are committed to putting in the necessary work. Overall, I would say we are still in the early phases, and I anticipate that we will have more insights to share in the coming quarters. Steve, over to you.

Sure. So Justin, as you mentioned, we are adopting a cautious outlook for the second half of Q3, particularly. Nevertheless, there are several factors that give us confidence for Q4, primarily stemming from the growth drivers we already have established. We anticipate some additional activity, but we expect continued robust growth across multiple areas. The peak season aligns with our expectations in terms of spending. Overall, our baseline assumption for Q4 is that economic activity in the Americas will remain fairly stable. The data we are observing supports this perspective, showing that the labor market remains strong, consumer spending is healthy, inflation expectations seem to be decreasing, and individuals are still adjusting to the post-pandemic landscape. It’s important to note that while we don’t expect everything to be entirely smooth, we believe our business is well-prepared to handle any fluctuations. To emphasize a few points, our business is diverse, we have a strong usage-based model that aligns with our publishers’ success, and we possess significant cash and manageable debt, allowing us to continue investing and seizing opportunities. Regarding advertising spending, the fourth quarter typically sees peak spending in various categories, including technology, arts and entertainment, and food and beverage, among others. We have a well-diversified advertiser base and an omnichannel platform that connects with all the publishers where advertisers wish to be. We have also assessed our business by region and observed strong net dollar retention, which I anticipate will persist. We're seeing increased SPO activity, with a notable rise in Q2 that I expect will continue throughout the year, along with a record performance in omnichannel video and mobile. Historically, when we look back over nearly the past decade, there has been a consistent 25% to 30% increase in both up and down markets relative to Q3. Additionally, seasonal trends and the index we observe suggest incremental activity related to CTV, political ad spending, and SPO expansion. To properly contextualize our guidance, it’s based on the expectation of continued stability in the Americas, which all indicators suggest will occur. Rajeev, would you like to add anything?

No, I think you covered it well.

Great, thank you very much.

Our next question comes from Andrew Boone at JMP. Please go ahead, Andrew.

Hi guys. Thanks for fitting me in and I'll keep it just to one. The general consensus out there is just that consumers were out more in 2Q. And so I want to juxtapose that with just the reacceleration of impression growth that we saw in the quarter. Can you just double click on that? Is that just more agency SPO contracts in the past that are just maturing? Is there something else to highlight in just how we should think about the underlying acceleration for impression growth? Thanks so much.

So part of it clearly is us going out and very proactively adding new publishers. We commented on the expansion of our CTV publishers. Also just the activity of consumers, going into sort of mobile environments on app and then of course, online video, which was really the star of the quarter. So the cumulative impact of sort of you have the supply and then the demand via our SPO increase. And then underneath it, as I've shared in the past, we have been consistently investing in infrastructure because we can optimize it and then get yield on that over the long run. And again, we proved that with our reduced cost of revenue per million impressions in Q2. So think of it as our focus on high ROI opportunities. We are indexed to the fastest-growing formats. We have the wherewithal to invest and take advantage of it when we do have those opportunities. And that's something that we're going to obviously be prudent and very judicious about when we look at opportunities through the balance of the year, but we feel like we're in a good spot in terms of balancing off investment and infrastructure, the mix that we have towards video, and then of course the fact that we are investing for the next leg of growth across multiple areas.

Great, thank you, Steve. Our next question comes from Jason Helfstein of Oppenheimer.

Hey, I'll stick to one since we're coming on the hour. Rajeev, maybe you can comment, your publisher client wins, where are they coming from? Are these new publishers, are these publishers who previously only sold direct, is this share lost by competitors? Is it all the above? Just maybe elaborate on that a bit. Thanks.

Sure. Yes, I mean, it's a bit Jason, of all of the above. We have specific go-to-market efforts around the world in all of the markets that we're operating in, focused on omnichannel publishers, CTV-only publishers, mobile app-only publishers, and then mid-market publishers as well. So it's a pretty significant pool that we're going after. But we don't sign up anybody and everybody; we have a pretty rigorous process of vetting publishers before they get assigned to a salesperson and we're vetting for quality for scale. Our view on, are these profitable impressions that we can bring on from that publisher. And then we also are talking to the buy-side constantly to say, okay, who are you spending on that we don't have for you right now that you would like to be able to buy through us. And then we go and go after those publishers as well. So it's a pretty, pretty mature process at this point. But there's a, as we add more and more ad formats, right. CTV obviously being the latest. But we're never, I would say we're never fully penetrated even in display or online video or mobile app, which are formats that we've had on the platform for many years now. So we're constantly going after these new publishers that we think will be profitable additions to us.

Thanks.

And our last question today comes from Vasily at Cannonball. Please go ahead Vasily.

Thank you very much. Rajeev, I believe this question is directed at you. It relates to the overarching topic of retail media. To clarify for those who may not be familiar with the terminology, is it true that whenever there is a demand-side platform, there also needs to be a supply-side platform? I'm raising this because some of the demand-side platforms are discussing programmatic shopper marketing, which presents a significant opportunity. Can you explain whether there is a theoretical role for a supply-side platform within that value chain? If so, how do you view your position in that context?

Yes, absolutely. It is indeed correct to say that whenever there's a Demand-Side Platform (DSP), there must also be Supply-Side Platform (SSP) functionality, which can be fulfilled by a company like ours. It's quite rare for a publisher to create this on their own, unless they're a large entity like Facebook or a two-sided company like Google that offers both DSP and SSP capabilities. An SSP is essential for bringing inventory to the programmatic market, which involves the infrastructure needed to describe the impression, make it available for bidding, conduct the auction, and manage transactions afterward, including aspects of shopper marketing. This is part of why we see a significant opportunity in retail media, as those impressions must go through an SSP. There are substantial opportunities in using alternative user identification methods beyond cookies, such as logged-in users or first-party data, an area we have developed significantly over the years with our Connect offering. Additionally, most consumers engage with retailers in an omnichannel manner—using mobile apps, mobile web, or desktops—depending on price and buying considerations, which aligns with our strengths. Lastly, agencies are showing growing interest in this sector. For instance, Omnicom has recently made numerous announcements related to shopper and retail media. We are increasingly integrated with agencies through supply path optimization, allowing us to identify their needs and opportunities. The retail media category is worth over $140 billion, and while we're still in the early stages, we believe there is immense growth potential ahead.

And regarding your position relative to your competitors here, who are your competitors, because you don't hear a lot about, sort of explanations Rajeev just gave?

Yes, I think it's not, let's say the traditional rest of the SSP category that we see it's more so companies like Criteo for instance, right, that are, I think, squarely focused on retail media. But I think we come at it from a different perspective than they do. Obviously, they have a long history of advertising relationships from their retargeting business. But I think their technology stack looks quite different than ours. And I think there'll be a lot of opportunities where there will be more than one company could be us and EO or us and somebody else that's involved in helping that publisher or that retailer monetize.

Thank you very much. Very helpful.

Yes, thanks Vasily.

And that was our last question for this afternoon. So Rajeev, I'm going to hand it back over to you for closing remarks.

Great. Well, thank you everyone for joining us today. We delivered another strong quarter of revenue growth and profitability ahead of our expectations, demonstrating the number and magnitude of growth opportunities we have incorporated into our business. And so, our results indicate our business is omnichannel and diverse, which provides a level of resiliency in the face of near-term macroeconomic uncertainty. We continue to focus on the long-term opportunity in front of us. And I look forward to connecting with many of you at upcoming investor conferences. Thank you all.