Good afternoon, everyone, and welcome to PubMatic's Earnings Call for the First Quarter of 2025. This is Stacie Clements with the Blueshirt Group, and I'll be your operator today. Joining me on the call are Rajeev Goel, Co-Founder and CEO; and Steve Pantelick, CFO. Before we get started, I have a few housekeeping items. Today's prepared remarks have been recorded, after which Rajeev and Steve will host live Q&A. If you plan to ask a question, please ensure that you've set your Zoom name to display your full name and firm, and use the raise hand function located at the bottom of your screen. A copy of our press release can be found on our website at investors.pubmatic.com. 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 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 reports filed from time to time with the Securities Exchange Commission and are available at investors.pubmatic.com, including our most recent Form 10-K and any subsequent filings on Forms 10-Q or 8-K. 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 May 8, 2025, and we do not intend or undertake no obligation to update any forward-looking statement, 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, non-GAAP net income, and free cash flow. 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 measures is available in our press release. And now I will turn the call over to Rajeev.

Thanks, Stacie, and welcome, everyone. We are pleased to have exceeded our guidance in Q1 on both the top and bottom line, driven by the secular growth areas in our business. Excluding the affected DSP and political spend, year-over-year revenue growth accelerated to 21%, up from 17% in the second half of last year. We saw particular strength in CTV, which grew over 50% year-over-year. Also driving strength in Q1 was supply path optimization, or SPO, which represented a record at over 55% of total activity as agencies and advertisers prioritized the efficiency, data, and high ROI that the PubMatic platform delivers. This success highlights the clear differentiation of our platform. The investments we've made in Activate for SPO, Convert for commerce media, and Connect for curation are resonating with key stakeholders across the digital supply chain, including publishers, media buyers, commerce media networks, and curation and data partners. Further, these investments are driving significant growth while also diversifying our business, creating sticky customer engagement and fueling performant advertising on our platform. Our business continues to shift to secular growth areas, which is an important transformation that will provide resiliency as we navigate the current ad spend environment. Moreover, there are two significant and recent developments that provide long-term tailwinds to our business. First, the verdict in the Google AdTech antitrust case will provide us with a more level playing field in the open internet. This is somewhat dependent on the timing and outcome of appeals and remedies, but the court's decision forces a major shift in the market as publishers and buyers opt for independent and transparent solutions. As a leading SSP provider, PubMatic is already positioned to take advantage of this structural shift. Second, Google recently announced that third-party cookies will continue in the Chrome browser. We have built an innovative platform around a variety of data solutions over the past five years, which will continue to drive growth in newer media environments like CTV and commerce media, while at the same time, browser-based content and ad monetization will now continue without dramatic interruption. The fundamentals of our business are strong. Looking beyond the isolated impact of the single DSP buyer, which we will lap in just a few weeks, and the tailwinds from political advertising last year, our business is performing well and on track to grow 15% plus with healthy margins and cash flow. Moreover, our durable financial profile positions us well for macroeconomic uncertainty, which we believe creates more opportunities for us. Our strength lies in maintaining focus and executional rigor while being adaptable and agile. This is a familiar playbook for us, one we use to successfully manage through the great financial crisis and the COVID-induced recessions. Coming out of both periods, we significantly accelerated growth and drove durable market share gains. This was largely due to our agile approach to going after secular growth drivers and our ability and will to invest responsibly through each downturn. Although we're not immune to some of the potential negative effects of the economic environment, we firmly believe that digital advertising will come out of this period bigger than before, with an accelerated shift to programmatic and a heavy reliance on AI-driven solutions. Periods of economic stress are terrific opportunities for us to deepen our relationships with customers. Publishers need our help more than ever to drive monetization of their inventory and audiences, and buyers will lean into the flexibility and accountability of programmatic advertising. Our plan is to once again leverage the many factors within our control and position ourselves to drive accelerated market share over the medium term. Given our past success in doing this, coupled with a large and growing total addressable market (TAM), we plan to manage the business under the following three guiding principles. One, anticipate where advertising growth will move to as the market rapidly evolves. Two, closely manage costs in order to preserve agility and protect our balance sheet and our free cash flow. And three, align the mix of investment and resources towards the high growth opportunities so our growth accelerates on the other side. Based on our prior experience, we know that the market will rapidly evolve. We intend to continue to play offense, which will position us for accelerated growth once we emerge from a cautious macro environment. We are preparing for more pronounced shifts in ad spend in key programmatic-driven areas. First, we anticipate an acceleration of the ad spend shift from linear TV to streaming. Based on the current economic environment, there's a growing likelihood that advertisers will step back from making significant upfront commitments in exchange for the flexibility that the spot market offers. The spot market will be heavily transacted programmatically, whereas the upfront market is not. Programmatic also brings a higher degree of measurement and accountability. Our platform is already scaled for this dollar shift, given the investment we have made in buyer and seller relationships in CTV and premium online video, PMP and PG capabilities, AI solutions for deal management and optimization, and more. Recall that PubMatic has over 80% penetration of the top 30 streamers. Second, we anticipate a more pronounced shift from upper funnel advertising strategies to lower funnel. In other words, a shift from brand advertising to performance. This will ultimately benefit new performance channels in the open internet, like commerce media and advanced data and targeting solutions. In both areas, we have made significant advancements with our Convert and Connect solutions, including innovation around first-party data and identifiers. Third, we anticipate increased spend consolidation as ad budgets come under greater scrutiny and marketers seek greater efficiencies. SPO initiatives are a clear and obvious way for marketers to offset any potential decline in their ad budgets. With Activate, buyers can consolidate ad spend, access curated audiences, increase performance, and gain tangible cost and operational efficiencies, which will better position them to maintain and grow their businesses. And finally, AI-driven capabilities that can both drive growth and create efficiencies will be increasingly attractive to both new and existing customers. Over the past several years, we fully embraced generative AI, expanding our multi-decade focus on machine learning. The investments we've made are now translating into a steady stream of customer solutions. Yesterday, we announced the industry's first GenAI-powered end-to-end platform that gives buyers direct access to nearly the entire open internet. Our technology simplifies and optimizes every stage of the media buying process, from inventory discovery and forecasting to curation, activation, and performance optimization. By unifying supply-side intelligence with AI-powered buying tools in a single platform, we aim to deliver greater efficiency, ease of use, and better outcomes for advertisers and agencies. With anticipated shifts in ad spend, this unified experience gives buyers exactly what they need to plan and refine campaigns with unprecedented ease. By simply describing their ideal inventory in natural language, our generative AI models instantly create optimized deal packages, eliminating manual workflows, reducing time to launch, and improving targeting precision. Buyers can then seamlessly activate those deals either through Activate, gaining full supply chain transparency, control, and efficiency or push them to their DSP of choice. GroupM, a global partner and early adopter of our Activate platform, is among the beta testers of this unified experience. Andrew Meaden, GroupM's Global Head of Investment, explained, 'our long-standing partnership with PubMatic is based on a shared commitment to privacy-first, AI-powered innovation, and helps us stay ahead in a rapidly evolving industry. PubMatic's new unified platform will help us deliver smarter, more efficient campaigns for our clients'. As AI becomes foundational to programmatic success, PubMatic is uniquely positioned to lead with differentiated technology, a scaled platform, and a commitment to delivering tangible business outcomes for both buyers and publishers. Our second priority is to safeguard our balance sheet and free cash flow while remaining agile in order to capitalize on opportunities as they arise. We will tightly manage costs and use our well-honed playbook to drive continued OpEx and CapEx efficiencies. We're also intently focused on generating efficiencies through the use of GenAI across our business operations, as I mentioned last quarter. Its application within our engineering organization is allowing us to accelerate innovation without expanding headcount, generating improved productivity and faster deployments. By tightly managing costs and driving efficiencies, we're able to shift our growth investments to the areas with the highest returns. In particular, we are expanding the scale and specialization of our global sales organization, including the team that serves agency holding companies to drive growth in SPO and Activate, our independent agency and advertiser sales team, which we believe represents an incremental $15 billion addressable market for SPO in the next few years, sales specialists dedicated to specific products such as Activate, CTV, commerce media, online video, and mobile approximately, and finally, our curation sales team, as sell site targeting becomes more prominent, and data partners and curators look to activate their first-party data on the PubMatic platform. This disciplined and forward-looking framework aligns with the growth opportunities we see across our key customer segments. On the publisher side of our business, we have deepened our relationships with leading CTV platforms. Our partnership with Spectrum Reach, the advertising division of Charter Communications, brings greater demand efficiency and robust curation across their CTV marketplace, while our work with TCL is helping to drive advertiser access to live sports streaming, a segment that is both rapidly growing and notoriously challenging to monetize effectively. We're not just seeing strong growth in the U.S., but also in key international markets like Europe, Australia, India, and Japan. For example, we recently expanded our partnership with the BBC to monetize their free ad-supported streaming channels. We're also seeing a broader trend with traditional broadcasters globally turning to PubMatic to drive monetization of their increasingly streaming-based consumption. On the demand side, we are seeing momentum accelerate across agencies, advertisers, and DSPs. We have seen activity from mid-market DSPs that specialize in performance marketing almost triple on a year-over-year basis. These platforms are rapidly scaling their spend on PubMatic, thanks to our premium supply, addressable audiences, and full funnel capabilities. Additionally, as I predicted a few quarters ago, we are seeing a marked increase in SPO activity with direct advertisers, both at the head of the market and among the next tier, as they take a more active role in their buying strategies and consolidate around trusted, performance-oriented partners. In recognition of the performance impact PubMatic is driving for advertisers, PubMatic received the Supply Path Optimization Award as part of AdExchanger's 2025 Programmatic Impact Awards for how we helped Mars PetCare exceed sales goals. In addition, Kroger Precision Marketing, looking to improve its customer acquisition marketing by eliminating unnecessary supply chain efficiencies, partnered with PubMatic to target and curate data on the sell side. Not only did our solutions boost video performance, but Kroger also consolidated ad spend on PubMatic, reducing its supply partners by more than 70%. According to KPM's Manager of Media Activation and Buying, 'PubMatic has consistently been achieving efficient supply path strategies backed by data, especially in online video, where their performance outshines competitors. Their platform helps us exceed our goals and solve our inefficiency challenges'. More broadly, commerce media continues to be one of the fastest-growing segments in programmatic, and we expect that trend to accelerate due to its measurable performance. With the investments we've made, commerce media networks can monetize both their audience data off-site as well as their on-site inventory in a privacy-safe, efficient way. In fact, our platform gives commerce companies full control over their data and direct access to premium demand and transparent reporting while giving buyers greater efficiency and performance. For example, a leading casual dining brand reduced customer acquisition costs by 11% by leveraging Instacart's audience segments across our premium inventory. Previous campaigns that relied on DSP-based audience targeting struggled with data leakage and low match rates, which resulted in higher costs and limited reach. We are seeing similar trends with data partners and curation platforms who are increasingly pivoting towards sell-side targeting. This shift is being driven by structural industry changes, the shift away from third-party cookies, growing sensitivity around data privacy, and advertiser demand for more transparent performing paths to inventory. As a result, sell-side activation is emerging as the preferred model, and PubMatic has built a unified AI-powered platform that is delivering clear performance gains. Publishers using our curation tools have seen up to 10% revenue gains due to an increased diversity of buyers and higher CPMs. At the same time, data owners are able to build new and scaled revenue streams. By expanding opportunities for our customers, we're able to generate incremental revenue through both SSP and curation-related transaction fees. These quarterly highlights are just a handful of examples of how we're creating value across the entire supply chain. As audience targeting strategies continue to shift to the sell side, PubMatic's end-to-end tools, including our new AI buyer platform, along with our scale and track record of innovation, make us an ideal partner to support customer growth. We have a leading market position and are growing high double digits in key secular areas of the business. Highlighting the confidence in our strategy and our strong financial profile, the Board of Directors has expanded our repurchase plan by an incremental $100 million. While the current environment has a degree of uncertainty, we firmly believe it also serves as a catalyst and will accelerate the shift to programmatic that will benefit our business and create outsized shareholder value over the long term. I'll now turn the call over to Steve for the financials.

Thank you, Rajeev, and welcome everyone. We delivered a strong quarter with revenue ahead of expectations, driven by significant growth in the long-term secular drivers of our business, CTV, SPO, and our emerging revenue streams. These drivers accelerated the growth of our underlying business to 21% year-over-year, up from 17% in the second half of last year. This excludes the large DSP buyer and political advertising, and now accounts for 70% of all revenue. Our growth clearly demonstrates the benefits we're gaining from increased scale, our winning product suite, and investments in our go-to-market teams. We also exceeded our adjusted EBITDA expectations as a result of our increasing mix towards secular growth drivers, ongoing optimization of our infrastructure, impact from prior investments, and increased engineering efficiency with GenAI. Turning to the revenue breakdown for Q1. Once again, our secular growth areas powered our business. Omni-channel video revenues in the quarter grew 20% year-over-year and represented 40% of total revenues in the first quarter. This was driven by strong CTV revenues, which increased over 50% year-over-year. Emerging revenue streams more than doubled year-over-year. Within this category, Connect, our curation and data business, continued its rapid revenue growth trajectory at over 100% year-over-year, as buyers are increasingly using PubMatic to target audiences on the sell side. Revenue from display, which was disproportionately impacted by the large DSP buyer, declined 10% year-over-year. Excluding this buyer, all other display revenues grew strongly at over 20% year-over-year. Q1 total revenue, inclusive of the impact from the DSP buyer, declined 4%. Our underlying business, excluding this DSP and political advertising, increased 21%. Notably, March was a strong month and delivered better than expected results, which led to our overachievement for the quarter. Ad spend for our top 10 ad verticals grew in the mid-single-digit percentages year-over-year. Within the top 10, health and fitness, food and drink, style, and aggregate increased over 10%. We saw softer trends for technology and computing and automotive, which declined by over 10%. On a regional basis, both Americas and EMEA declined slightly, while APAC grew over 8% year-over-year. As a reminder, we have limited exposure to China-based advertisers. Turning to adjusted EBITDA, we significantly exceeded the upper end of expectations due to higher total revenues and the continued mixed shift to high-value channels and formats. Q1 adjusted EBITDA was $8.5 million, or 13% margin, and was our 36th straight quarter of adjusted EBITDA profitability. This result included a foreign exchange impact of approximately $1 million due to the weakening U.S. dollar over the quarter. Our long track record underscores the intrinsic strengths of our durable business model. Over the last decade, we have executed our strategy of owning and operating our programmatic infrastructure, combined with a singular focus on operational excellence. This approach has enabled us to consistently drive productivity. Over the last two years, on a trailing 12-month basis, we increased the number of impressions processed by 60%, while managing our GAAP cost of revenue to an increase of 16% over this same period. We are also leveraging AI in our engineering organization, as well as across business functions. These efforts further allow us to accelerate our programmatic capabilities and expand our go-to-market efforts while tightly managing costs. Total operating expenses in the first quarter were $50 million and reflected cost savings, as well as the cumulative impact from investments in the high-growth secular areas that are driving the double-digit percentage growth in our underlying business. Q1 GAAP net loss was $9.5 million, or minus $0.20 per diluted share. Moving to cash and our capital allocation, we have a healthy balance sheet and generate positive cash flow, which provides financial stability, but at the same time allows us to consistently invest for revenue growth. Over the last four years, we have produced nearly $350 million in net cash from operations and more than $180 million in free cash flow. In the quarter, we generated $15.6 million in net cash provided by operating activities and free cash flow of $7.3 million. We ended the quarter with $144.1 million in cash and marketable securities and zero debt. Given this strength, we continue to deploy our capital to maximize shareholder value. Since the inception of our repurchase program in February 2023 through the end of Q1, we have bought back 8.7 million Class A common shares for $138.2 million. We had $36.8 million remaining authorized through the end of 2025. On May 7th, our board of directors authorized a $100 million expansion of the repurchase program and extended it through the end of 2026. Our guiding principles that Rajeev outlined position us well for the current macro environment and the significant growth opportunities ahead. History shows that uncertain times lead to rapid industry shifts and accelerated adoption of new tools and platforms. Our track record demonstrates we can successfully navigate these periods while continuing to strategically invest to take advantage of the opportunities that emerge. We are taking a proactive approach by implementing a number of savings initiatives, unlocking incremental productivity gains, and expanding AI adoption. This allows us to continue innovating and expanding our global sales team while managing our cost structure. We expect operating expenses to increase sequentially in the low single-digit percentages over the course of 2025. Turning to the latest trends we are seeing, April revenues were in line with our expectations. We delivered over 15% growth in our underlying business. Total revenues inclusive of the DSP headwind were flat year-over-year, reflecting an improvement from the first quarter's year-over-year decline. As a reminder, we have a well-diversified platform with over 20 different ad verticals and more than 50,000 advertisers spending on our platform every month. In April, we saw the benefits from this diversification. Our health and fitness and arts and entertainment verticals increased over 20% year-over-year in aggregate, which helped offset softness in verticals such as CPG heavy shopping vertical and automotive, which declined 10% year-over-year. For Q2, we expect revenue to be in the range of $66 million to $70 million and assumes 15% plus year-over-year growth of our underlying business. The low end of this range reflects conservatism in the event that a slowdown in ad spend were to develop for the remainder of Q2, which again we are not currently seeing. We expect our Q2 adjusted EBITDA to be in the range of $9 million to $12 million, which factors in an incremental impact of continued weakness of the U.S. dollar. Looking to the second half of the year, based on the strong trends we are seeing in our underlying business, combined with the go-to-market and innovation investments we are making, we expect our online revenues to continue growing 15% plus. We remain confident that we will deliver second half year-over-year revenue growth, which includes a 5 to 7 percentage point headwind from political spend in the back half of 2024. In terms of CapEx, through a combination of optimization efforts and cost-saving measures, we anticipate reducing our full-year CapEx by at least 15% to $15 million. In closing, I want to take the opportunity to summarize the key takeaways. Our company delivered a strong first quarter. We stayed focused on driving our long-term secular growth areas and exceeded our expectations with 21% growth for our underlying business. We have implemented a prudent operational plan that allows us to continue investing behind the fastest growing programmatic opportunities while also protecting our profitability and balance sheet. This, coupled with our durable business model, gives us confidence that we can successfully navigate the current environment and be well positioned for future market share gains.

Thank you, Steve. As a reminder, you can ask a question by raising your hand located on the dashboard. Our first question comes from Eric Martinuzzi at Lake Street. Please go ahead, Eric.

Hey, congratulations on the strong first quarter results and the good outlook for Q2. I wanted to start off with one of the issues you highlighted in your prepared remarks, Rajeev, regarding the Google antitrust ruling. Curious to know if you've had direct interaction with the DOJ as they've looked to size up potential remedies to the monopolistic behavior?

Sure. Yeah, Eric, what I can say is that I think the DOJ is making its rounds in terms of talking to witnesses that testified in the trial itself as they figure out what the remedy strategy is. I think you saw that posted in terms of their filing on Monday. I think more broadly, what the verdict has crystallized for the whole ecosystem is that Google is not the immovable object that it once was. When I talk to customers, both on the sell side and the buy side, people are starting to prepare for the uncertainty of what lies ahead, knowing that there could be a spin-out. Is there going to be innovation? Do you want to put all of your eggs into the Google basket? Why not start growing faster with the alternatives that you know are already here in that scale, like PubMatic? We think we have about a 4% share of the market; Google's got roughly 60%. We think there's a lot of potential share up for grabs as early as next year with every 1% share that we can pick up equating to $50 million to $75 million of net revenue to us. I think it's a pretty significant opportunity.

I wanted to shift gears and discuss the traction you've seen with SPO. Achieving that 55% is quite an impressive feat. It's been fascinating to watch SPO's development over time. Looking ahead, what do you believe is the potential for SPO? Additionally, regarding the most recent quarter, what is the breakdown of new buyers versus existing ones in that 55%?

Sure. On the first part of your question, and thank you for the compliment there. We think long-term SPO could be as high as 75% share of the business. We've made a lot of progress, as you mentioned. I think we were in the roughly 30% two years ago. There's still, I think, a lot of runway to go. Obviously, gains will slow as we get higher and higher. Where we see opportunity is in a couple of different areas. One is just continuing to grow the spend that's coming under our existing relationships, which are primarily with big agency holding companies. We all know who those are. GroupM, for instance, we mentioned them in our GenAI buyer solution release yesterday. That's an example of potential for continued growth with an existing customer, agency holdco in that case. We are also expanding our sales team to go after more advertisers and independent agencies where we think there's a lot of SPO runway ahead. That, I think, would be both growth in terms of new dollars as well as growth in terms of SPO dollars.

Got it. Thank you.

Thank you. Our next question comes from Zach Cummins at B Riley. Please go ahead, Zach.

Hi. Good afternoon, Rajeev and Steve. Thanks for taking my questions. Steve, my first question is really, can you give an update on how volumes trended with your key DSP partner here in the first quarter? I know you mentioned a 10% decline in overall display revenue. Was there a more outsized impact, whether that be in desktop display versus mobile display?

What we're actually seeing, and I've commented on this in the past, is that there's been quite a bit of stability. One of the drivers of our exceeding our expectations in the first quarter was a little bit better results from that DSP buyer. From our perspective, it's unfolding exactly as we had anticipated and slightly to the upside. We think we're going to have a solid second half with this buyer. As a reminder to everyone, we're going to be lapping that impact mid-year, so the end of Q2. As we've shared in the past, we continue to have a great relationship with the buyer. We're expanding in multiple new areas. We feel really good about where we are right now.

Just a quick add there, Zach. We've seen, for instance, CTV growth with this buyer has grown dramatically on a year-over-year basis. There's plenty of growth opportunities with this DSP buyer in general beyond the technical auction shift.

Got it. My one follow-up question, Rajeev, is interesting to see the strong traction you're getting with these mid-market DSPs. Can you just talk about how those relationships have really evolved and where you can see this going now that you're starting to get traction at that mid-market level?

Yeah. I think four or five years ago, the DSP space was pretty heavily consolidated. I think that's the perception in the market. It was probably not too far from reality. Now we fast-forward to today, and what we see is that there's a lot of actually change in the DSP market. There's been a lot written about the growth of Amazon. We know where the antitrust verdict is with Google. Then we're seeing with the rise of CTV, a lot more performance buying, for instance, happening in CTV. We're seeing that money has shifted. The share of ad budgets controlled by the big five or six agency holdcos is actually shrinking over time from something like 40% to 30% in the last decade. What that means is that there's a big mid-market of advertisers and agencies that are not tied to the decisions that those big holding companies have made. They're making their own decisions. We're seeing a lot of growth and potential there. That's not only in the U.S., but it's around the world. We're really focused on bringing those DSPs onto our platform, making sure that we're growing our share of revenue with them.

Great. Thanks for taking my questions. Best of luck with the rest of the quarter.

Our next question comes from Simran Biswal at RBC. Please go ahead.

Hey, guys. This is Simran on for Matt Swanson. Thanks for taking your question and congrats on the quarter. Just one for me. Can you talk about the macro environment and spend and what you're seeing at a high level with the uncertainty as we think about the rest of the year? Then, to that point, just double-clicking on the resiliency around some of these growth drivers like CPP and emerging products.

Sure. Why don't I start with that and then, Steve, I'll turn it over to you. Let me just talk a little bit about what we're seeing from a macro perspective, Simran. I do think advertisers are intensively scenario planning for the future. They've certainly had practice with that with COVID in 2020 and then the recession that never came in 2023. I think one of the things that advertisers have learned is really the trade-off of pulling back on ad spend with respect to negatively affecting their own top-line growth and market share. As Steve highlighted, we're not seeing a pullback so far in the quarter. We're not seeing anything that gives us pause right now. April came in well, and we're not hearing from customers that they are pausing or delaying ad spend at scale. Now, looking through to the other side, I think there's a number of trends or shifts that I see and expect, all of which I think will benefit us. First of all, we anticipate a shift from linear TV into streaming. As the upfronts are getting underway, I can imagine that many advertisers are not super keen to commit significant upfront budgets and they want flexibility; they want agility, which means they'll be able to buy more in the spot market or scatter market, which really favors programmatic. I think that's significantly to our benefit. We've got 80% penetration of the top 30 streamers. I think we're going to see a shift from upper funnel to lower funnel or brand to performance. We've got a lot of solutions there, to your point on resiliency around CTV, commerce media, advanced data, and targeting. We've got Convert, Connect, and other products and our performance DSP activity tripled on a year-over-year basis. I think we're also going to see marketers say, one way to offset pressure on ad budgets is spend consolidation or SPO. That can continue to grow as a share of the business. Of course, we've got Activate in our new launch, so we're really excited about that. I think more broadly, AI solutions focused on growth and efficiency will be increasingly attractive. Buyers and publishers alike will be willing to try new solutions. I think that favors our AI-driven development. Let me turn it over to Steve.

Sure. Just to tack on to what Rajeev has described, which lays the real foundation of how we think about the second half. Number one, really to emphasize the point that over the last couple of years, we've been diversifying our customers, publisher base, branded publishers, buyers, commerce media networks, data curation partners. The business we are today is very different from what we were a couple of years ago. That gives us a lot of confidence in terms of being able to be resilient and be agile. Then there's the overarching points around just this secular shift in the market towards CTV and high engagement formats like mobile apps, all areas that we're very well positioned in and growing. When we think about the second half, we're confident that we're going to be able to grow our underlying business 15% plus and be able to continue to grow through. It's a function of both the momentum we have as well as the continued investments that we're making. Of course, our ability to execute, which we've proven time and time again, in terms of navigating uncertain environments as we have today.

Next up, we have Jacob Armstrong from KeyBanc. Please go ahead, Jacob.

Hi, this is Jacob on for Justin. We've made a lot of progress with on-channel video. As you approach and surpass, this is about 50% of the mix, how do you think about letting those higher CPMs drop through to margins versus reinvesting for future growth? Thank you.

Sure. Rajeev and I could tag team, but let me just give you a perspective from where I sit, the CFO's seat. What we're doing as a business to build on the themes that we've shared is we're looking for and identifying the fastest growing areas, secular growth areas. You hit the nail on the head. Omni-channel video is certainly one of them, and double-clicking CTV. CTV, we had a great first quarter growing revenues over 50%, and so significant momentum. We've also been expanding in a number of other areas. You heard the announcement that we had yesterday, the first end-to-end AI-enabled buying platform that we think is going to position us well. When we think about investment, it's always a function of are we having adequate resources to make sure we're capitalizing on the best growth opportunities? The answer is yes, we believe we are doing that. Number two, our focus is obviously getting continued productivity out of the organization to help fund that. We've been sharing data over the years in terms of our strength in managing our infrastructure. The stat that I shared in the prepared comments, increasing our impression capacity by 60% while keeping our cost of revenue 16% is a significant delta that allows us to reinvest in the business. As long as we keep on seeing the opportunities to drive those secular growth areas, we're going to keep doing that. At the same time, we're obviously very cognizant of managing the bottom line, and we've done that consistently over many years. Very long track rate of adjusted profitability. We're going to always balance in terms of funding growth and appropriately managing the bottom line. We think we have a right mix between the two. Anything you want to add, Rajeev?

Yeah, I think we are very focused on growing that video business just because there's still so much runway ahead of us. We are 80% penetrated with the top 30 streamers. When we think about CTV, we mentioned CTV grew over 50% year-over-year. But there's still a lot more premium content to add like sports, traditional broadcasters in some parts of the world are just getting going with streaming, and they're more and more using PubMatic to drive monetization of their streaming-based consumption. As an example, we added the fast, the free ad-supported TV channels of the BBC out of the UK, and then we're just seeing tremendous momentum from Activate in our CTV marketplace. I think there's a lot of growth opportunity for us to go after.

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

Thanks so much for taking the question. One on guidance and one strategic. Rajeev, you talked about how curation and data and all of the other newer products that you guys have launched over the last three years is improving ROIs across the platform. What do you think is next? How do you drive that over the next two years, and then how do you think about that maybe in five years? Give us a near and medium-term roadmap. And then, Steve, I would love to just better understand the bridge from what is that normalized, strong 21% growth that you guys talked about in the quarter versus the GAAP result that got put up. Can you just help us understand the breakdown of what is political versus what is that one-time DSP? And then just connect that to 15% growth you guys are targeting for 2025. Thanks so much.

Great. Let me start on the first part, just in terms of how do we continue to grow ROIs on the platform. So I think there's three key drivers. So number one is data, as you mentioned. So with the on and off again, cookie deprecation process, I think we certainly have been investing a lot in bringing first-party data and identity data onto our platform. And so that is a key ingredient to driving performance. One of the reasons that walled gardens do so well is you're logged in as a consumer into those environments. And so they can use that to target and drive strong performance. We're now seeing a lot more first-party data, whether it's CTV or it's commerce media driven or mobile app environment. We're seeing a lot of that data in the open internet on our platform, which creates a great background for driving performance. Second is just driving efficiency across the supply chain. So bringing the sell side and the buy side closer together creates a lot of operational efficiency, creates a lot of fee efficiency, and it also accelerates the feedback loop of sell side to buy side or buy side to sell side so that you can drive performance. And that's exactly what we've been doing with Activate and supply path optimization. Our announcement from yesterday, we think we'll move that forward materially as there's clearly a trend in the ecosystem towards buyers and sellers looking to transact with fewer intermediaries or fewer hops in between. And then I think the last piece is really to build performance solutions in terms of helping buyers optimize whatever the outcome is that they're looking for. So it could be closed-loop attribution in the case of commerce. It could be a cost per action or cost per customer acquisition. And I think the framework that we've laid around data and supply chain efficiency activate in our SSP gives us the ingredients to drive that over the next couple of years.

Thanks, Rajeev. So with respect is just helping understand the bridge between the 15% plus growth and our total reported numbers. So as a reminder for everyone who's not familiar, mid-last year, there was a change in one of the DSPs in terms of how they bid on our platform. We'd anticipated that that would have an impact in the second half of ‘24 and the first half of ‘25. And how it's unfolded is exactly as we had anticipated. We're going to be growing through that. And a couple of key points are to note; the 15% plus growth that we anticipate is the large majority of our best is 70% of our revenues. And we're going to be lapping that anniversary of the DSP change mid-year. That impact that we are growing through in the first half of this year is about $15 million to $20 million. So when you think about us putting up decent total reported numbers, and then in April, as I shared, we were flat year-over-year inclusive of that shows the strong momentum that we have. And then as everyone's familiar, there was a big amount of political spending last year. In the second half of the year, we're going to be lapping that. That represents a headwind about 6% to 7% of overall revenues. But we expect that even with that headwind, we're going to be able to grow with the core momentum of 15% plus, absorbing that headwind on a positive year-over-year basis in the second half. And it's a function of the points that we've articulated; one, the diversified business that we built, the focus on the fastest growing areas with video growing double digits. And then, of course, other parts of our business doing quite well, the emerging revenues doubling year-over-year. So I expect as we end the year, it's going to be much more apparent in terms of what the total business looks like. And then going into ‘26, it's going to be a clean comparison, and we expect to be growing in the double digits.

Great, thank you.

Thanks, Steve. I'm now going to turn the call back over to Rajeev for closing remarks. Go ahead, Rajeev.

Thank you, Stacie. And thank you all for joining us today. We delivered a strong first quarter, and ad spend trends to date remain consistent. While the current environment has a degree of uncertainty, we firmly believe it also serves as a catalyst that will accelerate the shift to programmatic. This, together with opportunities from the recent Google verdict, position as well for long-term growth. Our prudent operating plan allows us to continue investing in secular growth opportunities while also protecting our balance sheet and cash flow while expanding our repurchase program. We look forward to seeing many of you at upcoming conferences, including Evercore's Nothing But Net Conference and Jeffrey's Public Technology Conference. We'll also be on the road in several cities over the next few weeks. Thanks, everyone, for joining us today and have a great afternoon.