Magnite, Inc. Price & Performance (MGNI)

A discussion of these and other risks and uncertainties and assumptions is set forth in the company's periodic reports filed with the SEC including our 2024 Annual Report on Form 10 ks. We undertake no obligation to update forward looking statements. Our commentary will include non GAAP financial measures, including contribution ex TAC or less traffic acquisition costs, adjusted EBITDA and non GAAP income Reconciliations between GAAP and non GAAP metrics for our reported results can be found in our earnings press release and in the financial highlights deck that posted on our Investor Relations website. To provide greater insights into the dynamics of our business. Please be advised that this additional detail may be one time in nature and we may or may not provide an update on the future of these metrics. I encourage you to visit our Investor Relations website to access our press release, financial highlights deck, periodic SEC reports and the webcast replay of today's call to learn more about Magnite. I will now turn the call over to Michael.

Thank you, Nick. We once again exceeded top line guidance growth in CTV for Q4.

And although our Q4 results in DV plus were disappointing, I'm very proud of the terrific year that our team produced. We generated contribution ex TAC of $6.00 $7,000,000 in processed ad spend of over $6,000,000,000 We generated adjusted EBITDA of $197,000,000 and $118,000,000 of free cash flow all record highs for Magnite. These results demonstrate that we've made the right long term investments are focused on the right part of the market and are making tremendous progress. We are very confident in our future. For Q4, CTV contribution ex TAC increased 23% year over year. Outpacing our guidance of 18% to 21% and for full year 2024 CTV contribution ex TAC grew 19%. In contrast, our DB Plus business in Q4 came in lighter than we expected at 1% contribution ex TAC growth as a result of some unusual spend patterns post election. This caused total Q4 results to come in below our range. That said, we're happy to report that DBplus has rebounded nicely to start 2025 and David will walk through more details in his remarks. In contrast to DV plus our CTV business continue to grow with significant momentum. Performance was driven by overall ad spend growth, and a stabilizing year over year average take rate illustrating a better product mix.

Our most significant growth in Q4 came from Roku, LG, VIZIO, Walmart, Disney, Fox, Warner Discovery and Paramount. Netflix continues to ramp and we remain bullish about our Netflix opportunity. As they significantly grow their global ad tier and corresponding ad revenue. They will be a key programmatic partner as they expand the rollout of their ad platform in 2025. Live Sports had strong growth in the fourth quarter and we expect that to continue. We are encouraged by Disney's focus on live sports, and NCAA football specifically in Q4 and their pending acquisition of Fubo, to become one of the market's largest live TV subscriber bases. We also continue to strengthen our international sports business with the addition of new partners including FIFA and Sky New Zealand. Lastly, we announced a deal with DIRECTV to expand our partnership in their streaming business on top of our efforts in satellite TV. Clearline our self-service direct buying platform posted very strong growth in Q4 and is showing great promise for 2025. The agencies and brands we work with continue to ramp their buying. And when buyers use Clearline, not only do we buyers also leverage our data leading to additional revenue opportunities.

Clearline along with Springserve also power our agency marketplace These marketplaces, which are leveraged by Group M and Horizon among others, provide agencies with their own end to end private label platform and establish direct connections with sellers. Allowing more spend to go to working media. We believe agency marketplaces are differentiated product offering for Magnite and will contribute nicely to our growth throughout 2025. Now to DB Plus. As I mentioned earlier, to start 2025, the business has resumed growing at healthy pace in the mid to high single digits. We've seen this rebound broadly across verticals and we're also seeing some benefits from ramping new deals. Leading us to believe that the business has normalized after the unusual Q4 trend we experienced. Audio which is part of our DV plus supply footprint continues to be a solid growth driver and we see our partners focusing more and more on programmatic ad revenue. We are excited about the growth opportunities with partners such as iHeart and Spotify this year and beyond. As this channel grows, Now I'd like to turn to AI. Where we have some really exciting new initiatives. Have a long history of using machine learning neural networks and sophisticated data science to optimize our data centers and efficiently process trillions of ad requests per day.

These tools reduce our costs and the cost for buyers allowing them to spend more across Magnite. In addition, these tools that power operational efficiencies for clients behind the scenes, in 2025, we will be released a number of new client facing tools powered by generative AI. As an example, we recently launched in beta A generative AI feature for our curator product that allow buyers to quickly and easily identify the optimal audience while improving match rates. Other AI powered tools include in DBplus, a yield optimization engine for our demand manager header bidding solution and in CTV, [indiscernible] for automating and standardizing content classification signals. We are optimistic that these tools will help drive significant value and look forward to additional AI driven product releases throughout 2025. These advances will just further solidify us as the leading independent SSP. Before I turn the call over to David, I'd like to address head on comments by The Trade Desk in their earnings call two weeks ago regarding their Openpath initiative in CTV and the presumption that it will ultimately displace SSPs. Large parts of this argument are flat wrong before I get into our points of contention, first a point of agreement.

I can't blame them for thinking most SSPs are headed for a relive's. But it's not because the SSP models inherently flatter inefficient It's because most SSPs tech is undifferentiated and outdated. Most of our competitors in the streaming space have taken display advertising technology and hacked it into working with CTV. Because they have no CTV ad server, they're limited to acting as a reseller of non unique inventory in an open market capacity. It's a low value practice. Meanwhile, our CTV offerings are purpose built for this space. Including our streaming SSP platform and critically our SpringServe ad server. Which is the industry's leading programmatic mediation layer. Magnate doesn't need to rely on reselling inventory because our tech has earned us direct relationships with every major streaming platform other than YouTube and over 90% or 75,000,000 European households EMEA's big five countries.

Which is amazing if you think about it. Trade Desk also argue that OpenPath is more efficient for sellers and avoids the unnecessary fees and middlemen. [indiscernible] The Trade Desk charges so as a healthy fee to use OpenPath. In addition to their fees in the buy side. In reality, the economics are unchanged for publishers. How is that more efficient? Moreover, they claim that each seller using OpenPath would be better served conducting its own yield management. This misses the very obvious fact that most sellers don't have this technology and would be incredibly expensive and inefficient to build in house. Building their own tech wouldn't be just inefficient, but disadvantageous As none have access to the reams of pricing data then for Magnite's yield management systems. As a result, sellers will be far more likely to leave money on the table. This is why sellers connecting to OpenPath continue to find enormous value in using SpringServe. Further, the Trade Desk argument ignores the importance of diversity of demand. While they are obviously a huge player, no one DSP can represent all the world's demand for every geo and use case.

In addition to established DSPs, we are seeing an explosion of DSPs focused on SMBs and These essential demand sources aren't accessible through OpenPath and it's impractical to think sellers will tap into all of them by integrating and managing dozens of direct connections. That is exactly what Magnite is built for. Simply put, OpenPath doesn't replace the need for yield managed or remediation levels. So even as OpenPath grows, Magnite's technology will still be used and valued by publishers in the vast majority of OpenPath's CTV transactions. But a future dominated by OpenPath is not in the best interest of sellers. Trade Desk talks a lot about objectivity but let's be clear. As a DSP, DaraLegion slides at the buy side. Despite their marketing effort, OpenPath is not about providing long term value to sellers. About extracting more fees from every transaction that runs through their platform. It's about accelerating the commoditization of sellers inventory and data. We've seen what happens when one player becomes too dominant on both the buy and the sell side of this industry and sellers always end up getting the short end of the stick. As a sell side company, Magnite's mission is to protect the interests of media owners.

Like The Trade Desk, we believe in the open Internet. But we also believe that for it to thrive, there must be a healthy and fair value exchange between buyers and sellers. That's the future that technology like Spring Serve enables and that's the future we'll always be working towards. In closing, we delivered strong Q4 CTV results With overall quarterly results being negatively impacted by DV plus's post election spending pause. However, our recent trends give us comfort that DB Plus headwinds not structural as we've seen a normalization of trends in Q1. The strategic investments we've made to create the world's leading programmatic CTV platform are clearly paying off and we are incredibly excited for the remainder of 2025. I'll turn the call over to David for more detail on the financials. Thanks, Michael. The fourth quarter was unusual for Magnite Magnite.

We continued with very significant momentum in our CTV business and came in above the high end of top line expectations with 23% year over year growth in contribution ex tax, As Michael mentioned, however, experienced an unusual post election pause in our DB Plus business during the fourth quarter. In the run up to the election, we saw normal levels of paid impressions and CPMs in our non political business. With CPMs roughly flat year over year. Immediately following the election, CPMs dropped significantly 15% to 20% down through the end of the quarter. As a result, we did not see the normal holiday ramp in our DBplus business resulting in 1% growth for the quarter and the underachievement compared to our expectations. This was radically different from our experience in both the 2020 and 2022 election cycles And this trend was consistent with the weaker than expected results reported by other open Internet industry players.

When all of a sudden done, we saw soft vertical demand in DV plus in 13 of the 18 categories we track in particular, we witnessed pullbacks in consumer categories, health and fitness, retail, automotive and food and beverage. Other than the benefit from political, the only other bright spot was technology. As Michael mentioned and as I'll highlight in guidance, DB Plus has returned to mid to high single digit growth in Q1, which gives us some comfort that lower than expected DB Plus results in Q4 were an anomaly. Turning now to full year results. Generated record contribution ex TAC of $6.00 $7,000,000 and processed ad spend of over $6,000,000,000 We also generated record adjusted EBITDA of $197,000,000 and $118,000,000 of free cash flow. Ended the year with $483,000,000 in cash and our net leverage ratio has been reduced to 0.4x. Our business is performing well and our capital structure is robust. Total revenue for Q4 was $194,000,000 up 4% from Q4 twenty twenty three. Contribution ex TAC was $180,000,000 up 9%. CTV contribution ex TAC was $78,000,000 up 23% year over year and again above the top end of our guidance range. Ads Bank growth and strong momentum with our Spring Serve ad serving drove the outperformance in the fourth quarter.

CV Plus contribution ex TAC was $102,000,000 increase of 1% from the fourth quarter last year as we discussed. Our contribution ex tax mix for Q4 was 43% CTV 40% in mobile and 17% desktop. From a vertical perspective, as expected and as we discussed last quarter, political was the strongest performing category at approximately 6.5% of contribution next tax Total operating expenses, which includes cost of revenue, for the fourth quarter were $154,000,000 a slight increase from $152,000,000 for the same period last year. Adjusted EBITDA operating expense for the fourth quarter was $104,000,000 within our guidance range. The increase from $95,000,000 last year was primarily driven by personnel, software and Bob costs. I'd like to touch on our tech stack cost initiatives that particularly impact our CTV profitability and scale. First, our tech team continues to make gains in reducing per unit cloud cost which have allowed us to manage significant ad request volume increases with modest cost increases. To this end, our cost per ad request in 2024 has decreased 26% in DBplus and 45% in CTV.

Our focus on scale improvement and efficiency is one of our top priorities. These efforts will continue in 2025. [indiscernible] In addition to our per unit cloud cost efforts, we also been increasing our focus on optimizing our hybrid structure to move additional functions from cloud to on prem. Expect that these initiatives will lead to increasing margin expansion rates in 2026 and beyond With some potential for benefit the second half of this year, we will have more to report in coming quarters on these efforts.

Net income was $36,000,000 for the quarter, compared to net income of $31,000,000 for the fourth quarter of twenty twenty three. Adjusted EBITDA grew 9% year over year to $77,000,000 reflecting a margin of 42% which compares to $70,000,000 last year. A reminder, we calculate adjusted EBITDA margin as a percentage of contribution ex tax GAAP earnings per diluted share increased 50% and was $0.24 for the fourth quarter of twenty twenty four compared to $0.16 for the fourth quarter of twenty twenty three. Non GAAP earnings per share in the fourth quarter twenty twenty four grew 17% and was $0.34 compared to $0.29 last year.

Reconciliations to non GAAP income and non GAAP earnings per share are included with our Q4 results press release. Operating cash flow, which we define as adjusted EBITDA less CapEx was $64,000,000 for the quarter.

Cash generation was very strong in the fourth quarter and our cash balance at the end of Q4 was $483,000,000 an increase of $96,000,000 or 25% from the end of Q3. Capital expenditures, including both purchases of property and equipment, and capitalized internally used software development costs were $12,000,000 for the quarter bringing the total to $52,000,000 for the full year. Our net interest expense for the quarter was $5,000,000 As mentioned, our net leverage ratio was 0.4x at the end of Q4 a sequential improvement from 0.9x at the end of Q3. We continue to focus on managing shareholder dilution after having [indiscernible] lowered our For the full year 2024, our repurchase program and withhold to cover [indiscernible] have effectively reduced dilution by 3,200,000.0 shares for $37,000,000 As a result, the increase in total shares outstanding at the end of twenty twenty four was limited to 2% compared to the end of twenty twenty three. We currently have $110,000,000 remaining in our authorized share repurchase program which we will look to deploy strategically I'll now share our expectations for the first quarter of twenty twenty five and our current thoughts about the full year. For the first quarter, we expect contribution ex TAC to be in the range $140,000,000 to $144,000,000 contribution NextTAC attributable to CTV to be in a range of $61,000,000 to $63,000,000 contribution ex TAC attributable to DBplus to be in the range of $79,000,000 to $81,000,000 Full year, we anticipate total contribution ex tax to grow above 10% or mid teens, excluding political.

Adjusted EBITDA to grow in the mid teens with adjusted EBITDA margin to expand at least 100 basis points over 2024, and free cash flow to grow in high teens to 20%. In addition, we expect total CapEx to be approximately $60,000,000 supporting our Tech Stack efficiency efforts Overall, the fourth quarter and full year 2024 were strong for Magnite, despite the unexpected volatility in the post selection DBplus results. We had some very significant wins during the year, including Netflix, and continue to add cutting edge capabilities to our industry leading CTV toolset. We've also set a high priority on the cost efficiency of our tech stack and have made significant strides this year. The team is performing well and we are excited about what the future holds in 2025 and beyond. And with that, let's open the line for Q and A. We will now begin the question and answer session. The first question comes from Jason Kreier Craig Hallum. Please go ahead.

Great. Thank you, guys. So obviously ended the year on a strong note in Connected TV, but the guide for Q1 seems to reflect a little bit of a slowdown there. So just wondering if you can get a little context on what you're seeing in the early stages of '25?

Yes, I'll take that. I think well in DV plus let's split the businesses there. We're actually actually seeing a nice rebound especially from Q4. And so as mentioned, we're seeing current growth in the mid to high single digits. And so that's we think running nicely. And CTV, we've typically had Q1 is kind of a low point in our year over year growth. And I don't know if you got anything else, Michael, you want to add, but Yes. No, I think it's within expectations. Pretty market representative, yes.

Okay, got it. Thank you. I wanted to touch on some of the stuff you talked about SMBs, you had kind of highlighted working with some partners. To bring greater budget online and allow that kind of cohort of the industry that has participated in CTV in the past to give them access to that. So just wondering if you can talk about what your role is there and kind of what you're seeing and what the timing looks like for those entities to be able to participate? Yes, great question, Jason. I think we're relatively early stages there, right? There's it's kind of a two part move. First, these newer entrants have to bring on board these performance advertisers that generally are used to the metrics of the DBplus world, right?

And so the ability to the impact of a CTV ad coupled with advertising on DV plus it's the same time and weighing whether or not that's more effectatious is the start of a journey. But there is a ton of appetite. And I think if you read every Q4 or even earlier earnings from any of the big streamers, they've all kind of pinned their hope on hey, we're not just looking to shift dollar for dollar from linear to streaming. We need to expand the pie going to be successful at tech companies. And so they're really leaning into a world 10,000 advertisers, not 500 advertisers. So the whole industry is kind of leaning into that. And our role specifically is to bring that great supply to them. There's no way they can create direct relationships, plug in directly access all the supply that we can globally. And so we're a quintessential SSP in that respect. But as I mentioned in our script, a uniquely advantaged SSP giving our programmatic mediation layer with all the top streamers.

All right. Thank you.

The next question comes from Dan Kurnos The the benchmark company.

Great. Thanks. Good afternoon. Michael, maybe just on just how should we think over the medium term about the growth of your CTV ex TAC business now that you have all these wins? I mean, obviously, it's going to be lumpy with Netflix and timing is hard. So maybe kind of spread that out for us so we can get sort of a normalized rate? And then on some of the data initiatives, are we talking utilizing the data you have to improve the conversion or drive more business wins? Or are you talking about new business lines that can actually add incremental revenue to the growth story?

Yes, Dan. Great question. So CTV growth rate, I think we've been pretty consistent in saying we have every expectation to outgrow the market. That market number is bouncing all around given the economic backdrop of the last eight quarters or so. But I think we've seen the latest folks that we use mid teens and so we fully expect on a full year basis, sure there'll be market quarter differences, but to outpace the market in that respect. And as far as the inventory coming online, That's it's hard to project that largely because some of that's just out of our control and it's 100% go to market strategy for some of our newer streaming partners. But again, as it specifically relates to Netflix, feel very comfortable that our statements that we originally said stand and that is exiting 2025 they'll be one of our largest CTV clients David had some point to add about comps.

Yes. I was just going to say, also if you think about our guide for 2025, and the political comp, if you strip out political, our guide conservative, what I would say, guide not knowing the ramp of Netflix and others, would imply closer to 20% CTV growth next year. And so important to just to keep that political comp in mind.

Yes. And Dan, lastly on the data piece of it. Yes, data is a it's a new bucket of revenue opportunity for us as you know very well. Most data surcharges or data sales have occurred at the DSP level on the buy side. And we're seeing a big up take of our curation tools and buyers coming in and utilizing our data warehouse, if you will, our data storefront And in that instance, our publishers and us can Thank you, both. Appreciate it, guys.

The next question comes from Laura Mark with Needham and Company. Please go ahead.

Hi there. My first one is on Gen AI. I wanted to drill down there a little more. It sounds like you're introducing a bunch of products in twenty five and I'm interested do you expect those to bring in new clients to increase the revenue per existing client? Lower client churn.

And then related to the cost side of Gen AI, you did $56,000,000 of CapEx in 2024.

How much do you I'm very surprised you're going on prem because a lot of this Gen AI stuff is with a large language model that's housed at Google or Amazon or over at OpenAI. So I'm curious as to bringing on prem increasing your CapEx on on prem versus using the cloud. So could you so that's my first question, is could you talk a little more about your Gen AI strategy in 2025, please?

You bet, Laura. I'll jump on the first part of the question and let David answer the second part. I would say generally speaking the tools that we have launched in that are on the launching pad are definitely with an eye toward existing clients to make their life easier, to make it more efficient, and to have them spend more. So I would say the general focus of the first wave generation is to increase revenue with existing clients.

Great. And on the CapEx we had $52,000,000 in CapEx in 2024 And as you highlighted, we did we do expect about $60,000,000 in 2025. That's actually not related to our the Gen AI efforts. It's really more related to Primarily our CTV business that primarily runs today on AWS. AWS per unit costs, even as they're being optimized, for certain applications can be up to 8x more expensive than bringing those those activities on prem. And so there's actually a very significant ROI from that incremental CapEx spend and the ability to bring some of that activity on prem. So it's really the CapEx is much more about our optimization efforts of our tech stack and actually giving us greater opportunity to expand our margins as we swap out more expensive AWS cloud costs in the future to cheaper on prem costs.

And as it relates to the specific tools you talked about, we believe the economic packaging of those tools can push the cost of the additional servers for the specific tools onto the end user. And so therefore, we don't anticipate tens of millions incremental costs as it relates to cloud usage because of LLMs.

Okay, super helpful. And then my second one is, I understand you feel like you're provoked by the Trade Desk comments. And I appreciated your sort of pushback on why SSPs are still required. I guess my question my big picture question is, is the open Internet healthy? Have the largest DSP and the largest SSP sort of in a public war now of words about the relative usefulness of their [indiscernible] but they are part of an ecosystem. And I'm just wondering do you feel that the rise of Amazon's competitive layer is sort of threatening the open Internet and slow in growth, which is creating more friction among the open Internet ecosystem? Do you feel the open Internet is healthy in today's world?

Well, I think it's very healthy, Laura.

And I also think that this isn't some back alley fight between us and Trade Desk. Jeff has a very clear view of how he thinks the world is going to play out and he thinks it's going to end with his thriving open Internet. We have the exact same world view. We differ as to how it gets there and who enjoys the spoils of that. But largely speaking, yes, Amazon can suck dollars out of what so called open Internet, But more and more what we're seeing is Amazon is a buyer of open Internet inventory They may have incredibly sophisticated buying capabilities, but they are very intent on being the largest general DSP in the world and that would have to include buying open area inventory. So we have very tight partnership with them and they're fast growing on our platform. And I think they're more of a more of a validation of the open Internet than someone that is trying to underpin it.

Thank you very much.

The next question comes from Swayra Kajuria with Wolfe Research. Please go ahead. Thanks a lot for taking my question. Let me try two please. On OpenPath, Michael, you gave a very great, I guess, a lot of good color. And I think that was My question for you is, so how should we think about you talked about publishers end up getting about the same amount of revenue irrespective of whether they go through a Magnite or an SSP versus OpenBaaS So could you please help us understand that? And second, is on CPMs What drove the CPM pressure in the fourth quarter? And what gives you confidence right now? Is it simply a function of CPM's bouncing back and things are back to normal. Any comment there would be helpful. And how did you see that what did you see through the quarter to date? So how did January trend versus February?

And then if I could please try a third one, Could you please help us unpack your 2025 guidance a little bit to the degree that you can comment [indiscernible] How should we think about that Thanks a lot. [indiscernible] OpenPath economics. I think what wasn't broadly understood was that, when a publisher engages with Openpath, there is a fee that they are charged by Trade Desk. That fee can range as high as high as high, mid single digits to mid single digits. Depending on the type of service we provide for our CTV publisher, it's just an absolute swap out of our costs to Trade Desk costs. So in terms of fees, and in terms of the tightening of the supply chain, the economics really are unchanged to the publisher. We've heard this from multiple publishers. So So ultimately, there's no huge savings here. For advertisers and or publishers. And so that's what I was bringing to light that the statement that this is a sweeping recalibration of efficiency it is for one player. As it relates to the CPMs, I'll defer to David. He has all the data. [indiscernible] at the highest level, there was just a drop in demand in November and December.

One can speculate where that came from, were there concerns about having a messy election results or it's hard to speculate. But the fact was that there was just less demand in the fourth quarter running up to the holidays in the DB Plus business. In January, February, we have seen significant rebound. So that demand has come back CPMs have improved. And so that gives us confidence going forward. And it also helps it's an unusual year end. We have an extra month where we're reporting. So we're two months into our quarter. And so we have some reasonable visibility that that that rebound has sustained for a a good part of this quarter and it gives us additional confidence. And then from third question on the from a guidance perspective, incrementality with our deals new deals. I mean, we we've talked in very general terms about what the impact [indiscernible] so we attempt to be somewhat conservative in the guidance that we're giving. If you're talking about incrementality from a flow through, what is interesting that at current revenue growth rates, we have a certain financial and flow through profile, but incremental revenue on top of that baseline flows through to EBITDA at a much higher rate.

And so to the extent we have upside, you'll see better impact and proportionate better proportionality on the impact on EBITDA. Okay. That's helpful. Thanks, Michael. Thanks, David.

The next question comes from Matt Swanson with RBC Capital Markets. Please go ahead.

Yes. Thank you so much for taking my question. Maybe following up just where you were there, David, on the drop of demand you saw in November, December.

It just it didn't seem like it really impacted CTV. Or did you see a similar dynamic, but it just outperformed anyway due to the strength? Trying to kind of put some guardrails around that?

Yes. No, we didn't really see the same impact I mean, it is a very different world with lots of demand coming in. And so so if there was some impact, it was certainly masked by other growth in demand and we feel like there's we're kind of a share gainer in that space. Could it have grown higher in that quarter? Maybe. But we didn't see drop in CPMs or any similar kind of activity in CTV.

And then maybe one for both of you that's kind of different version of Schueto's question. The secular growth drivers that you called out for being investments in 2025, we talked AI, curation, Clearline, Agency Marketplaces. We spent a lot of time on CTV, but how should we think about those in terms of how long just in whatever color you guys are comfortable with?

Yes.

I mean, I'll handle the opener. I think with many of these partnerships as we talked about, they're very strategic and will be longer term, mid term to fully ramp. A lot of these partnerships very dependent upon our partner in terms of selling it through. I think agency marketplaces are a great example of that. We've been working with Group M now for maybe going close to four years. And for the first two years, it was a concept that was pitched to their clients their clients dabbled with it and now it's a roaring marketplace. And so I think a lot of these examples like the Uniteds of the world, even in Netflix, Media Ocean, etcetera, These just take longer to play out. So I wouldn't anticipate a hockey stick happening any particular quarter for any of these. They just simply grow and add to the general revenue growth that we kind of anticipate in 2025.

Thank you.

The next question comes from Shyam Patil with Susquehanna. Please go ahead.

Hey, this is Aaron on for Shyam. Thanks for taking our questions.

Maybe for starters, I just wanted to double click on DV plus and the volatility that you saw post election. How did the CPM and demand drop off that you saw In 4Q compared to prior election cycles, What do you think caused that?

Yes, I'll take that. Yes, as we mentioned earlier, I think it was very different than 2022 and twenty twenty cycles. So in those cycles, we did there was actually increased the CPMs did not really drop And so it was dramatically different from that perspective. And as far as the cause, again, We know what the output is. One can speculate as to the cause, whether folks just wanted to stay out of the market assuming that there'd just be really challenging political or what you may. But we saw the drop and now we've seen recovery. And so I don't have a lot better insight than what others might speculate. I don't know Michael if there's anything else that No, it's just look at like any political season, we know political spend crowds out consumer ad spend. It gets pretty expensive and it's tough to compete against political. So it's quite common to see some larger advertisers pause and then kick in with their seasonal advertising in December after the general election. We just didn't see that. And it's a unique phenomenon. And the fact that the advertising resumed in January, kind of and the fact that this happened exactly the day at the election, we had this cratering of CPMs, kind of all fingers point to the election.

But it's hard for us to get any more definitive or have any other theories because frankly we're out of them.

We have correlation, causation is another level.

Got it. And then if I could ask a second question.

Appreciated the commentary in response to the OpenPath comments from The Trade Desk. Michael, I guess I'd be curious to hear What would you highlight as the top two or three differentiators of Magnite SSP versus OpenPath.

Well, I think it's pretty clear that OpenPath is a very valuable source of demand. It begins and ends there. The demand is the lifeblood for publishers. However, it's just one DSPay. And as Jeff pointed out, if you're going to do this, you better build your own yield management as a publisher. And we kind of vociferously disagree with that publisher as a capability to build yield management, let alone have the data that we have to feed yield management. I would say largely speaking, we our biggest value above OpenPath is we bring the world's demand We bring every DSP under the sun.

Global demand Trade Desk isn't even operating in Latin America. We are. So we absolutely can bring all this demand and we add yield management to it. And so we're making sure that we're keeping the buyers honest and the posh is getting the best possible rate. And so that is not what OpenPath is. OpenPath is just a pipe of demand. Valuable demand, but think we could argue for the same fee you get Trade Desk and the world's demand with yield optimization.

That's helpful. Thank you both.

The next question comes from Eric Martinuzzi Lake Street. Please go ahead.

Yes, just one question clarification. You mentioned political at 6.5%. Contribution ex TAC in Q4.

What was it for the year? For the year, it was 3.2%. Got it. Thanks.

You bet. The next question comes from Zach Cummins with B. Riley FBR. Please go ahead.

Hi, good afternoon. Thanks for taking my questions. I just wanted to ask about the CTV business. Have you seen any I mean worth calling out mix shift within that business? It seems like it relatively stable throughout 2024. So just curious of how you're thinking about that mix moving forward in 2025 and beyond?

Yes, I think that's a pretty accurate statement. Like if you look at mix of where the revenue comes from, what types of publishers and the mix of products that they use from us, it's been quite stable. We think in 2025 on the margin, we'll be bringing more demand as a Magnite as opposed to publisher sold programmatic. We think that the expansion of media plans will bring on publishers that rely a lot more upon us for demand. Than perhaps Disney relies upon us for demand. So I think that over time, we totally anticipate that mix changing. But I think as you go through 2025, still the bells of the ball or the big premium streamers that everyone wants in their media plans in those [indiscernible] we prefer to sell their programmatic deals direct. Understood. And just one quick follow-up. Just curious of your recent partnership announcement with X, Can you talk about your role in that partnership and kind of how we should think about potential contribution from that over time?

Yes, it was the partnership announcement that wasn't a partnership announcement. It was a press article. So we're kind of somewhat limited to describe the deal. I think you can probably further information downstream, but that was a little premature. But again, a reporter doing what a reporter does. Understood. Well, thanks for taking my questions and best of luck with rest of the quarter?

Thanks, Zach. Thank you. The next question comes from Omar D'Souki with Bank of America.

Hey, guys. This is Arthur on for Omar. Thanks for taking the question. So David, I wanted to touch on your comment about being able to lower your cost per ad request meaningfully by, I guess, optimizing the number ad requests you sent to DSPs. How should we think about the seeding that efficiency improvement? Because it sounds like in theory, you have a model that's able to predict how DSPs are going to respond to various different ad requests, your model should be able to like keep on getting better as you ingest more data into feedback loop. So in theory, like your efficiency should just keep on getting better. I guess, what are your thoughts on that notion? Where do you see the sitting of that efficiency gain and where do you think you are on that curve?

Yes. I think there's a couple of elements to those efficiency gains. And it's interesting that you highlighted something that we've actually been doing for a long time. So there's a there's a brains so there's a core cost of processing an ad request and a core cost of sending that ad request out out to DSPs and that so there's a core cost to that. But there's brains behind that and how efficiently you filter what's valuable and where it should be sent. And so that part we've been actually working on on, we've had going for a long time and that's been part of our significant success What and that will continue to grow and to improve over time. But there's some step function gains in one on the per unit costs and utilizing the cloud We're relatively new to that in the last couple of years as we've acquired our CTV businesses and put them together in Magnite Streaming and with SpringServe, And so we continue so there's some upside there. And then really the big step function is certain of those activities can be run much more efficiently on prem. And we're just in the phase now of really sorting that out and optimizing that.

And so I think that's where that's where the biggest gains will come over [indiscernible] And so it's a very long answer and way of saying a lot of good things have happening. I think the quantification of what that means when, I think we'll have more to discuss in the coming court. Quarters as we get further through that work and have better visibility.

And we definitely intend to continue to improve upon the unit cost but corresponding to that is we are doubling, tripling volume. And so you're going to always see kind of a steady layer of cost It's just that we're going to be able to do twice as much. And our lifeblood is all in volume. So that's a really good thing. You shouldn't expect this to go to zero because we're going to be taking on more and more volume. At affordable cost.

Got it. Thank you very much guys. Appreciate it.

This concludes our question and answer session. Would like to turn the conference back over to Michael for any closing remarks.

Thank you, Megan. Thank you all for joining us and your support. We have a very exciting 2025 ahead of us that I feel very good about. The Magne team is performing at a high a very high level and I love our resilience even when the market throws us challenges like in Q4 and our ability to bounce back quickly. We look forward to speaking with many of you at our upcoming investor events We are participating in the Susquehanna Conference tomorrow benchmark meetings in Boston on March 6, Craig Hallum Meetings In Chicago and Minneapolis on the March Bank of America meetings in New York on March 19, RBC meetings in Kansas City in Denver on March 25 and twenty six, and B. Riley meetings in San Francisco on March 31. Thank you all for joining and have a great evening.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.