MAGNITE, INC. Q3 FY2024 earnings call

• CTV growth: Year-over-year growth rate in contribution ex-TAC from CTV accelerated to 23% from 12% in Q2, driven by ad spend growth, programmatic adoption, ad serving strength, and political. Strong partnerships with Netflix, Disney, Roku, etc. - DV+ performance: Finished in line with expectations with 5% growth in contribution ex-TAC, driven by investments in emerging formats, and 30% reduction in cost per ad request due to filtering, traffic shaping, and AI. - Curation: Sell-side audience aggregation (curation) is growing, with Magnite's revenue from curating publisher audiences up over 100% year-over-year. - Partnerships: Extensions with Netflix and Disney, growth in programmatic CTV adoption across partners, and ClearLine platform growth.

For the third quarter, CTV contribution ex-TAC was $64.4 million, up 23% year-over-year, making up 43% of the contribution ex-TAC mix. DV+ contribution ex-TAC was $85 million, an increase from $81 million or 5% compared to the third quarter last year, making up 40% of the mix. Mobile was 40% and desktop was 17% of the contribution ex-TAC mix. Vertically, political was the strongest performing category at approximately 3.5% of contribution ex-TAC, while food and beverage and health and fitness were weaker.

• Fourth quarter: Contribution ex-TAC expected $182M-$186M; CTV contribution ex-TAC $75M-$77M (20% YOY mid-point); DV+ contribution ex-TAC $107M-$109M. - Full-year 2024: Contribution ex-TAC growth 11%-12%, adjusted EBITDA margin expanded 150-200 basis points, adjusted EBITDA growth >15%, free cash flow growth ~20%, total CapEx >$50M, GAAP net income and EPS positive.

• Regulatory risks: Pending remedies from ad tech trial involving Google and SSPs, which could impact the industry and Magnite's position. - Macroeconomic factors: Impact on ad spend, especially with political spend being a temporary driver. - Dependence on key partnerships: Any changes in partnerships with major clients like Netflix, Disney could affect performance.

Q: Net leverage 0.9x, are we on our way to zero?

A: David Day says they're happy with net leverage at 0.9x, focusing on equity dilution management.

Q: How are you using generative AI?

A: Michael Barrett says they have a task force looking at generative AI tools, with efficiencies gained through machine learning and software development.

Q: Color on Netflix partnership ramp?

A: Michael Barrett says Netflix partnership is ramping, with expectation it will grow as they expand into foreign markets.

Q: Disney partnership expansion economics?

A: Michael Barrett says expansion opportunities carry more attractive economics when demand is brought in by Magnite.

Q: Impact of regulatory decisions on Google and SSPs?

A: Michael Barrett says no real update, but anticipates positive outcome for Magnite in the long run.

Q: Mediaocean partnership update?

A: Michael Barrett says it's a great partnership but will take time to activate substantially.

Q: Pressure on non-political spend?

A: Michael Barrett says political causes dislocation but expects holiday season spend to return.

Q: 30% reduction in cost per ad request?

A: Michael Barrett explains filtering, traffic shaping, and real-time recalibration contribute to efficiency.