Summary of Magnite's Earnings Call Company Overview - **Company**: Magnite - **Industry**: Digital Advertising Technology Key Points DV Plus and Revenue Growth - Magnite has formed monetization partnerships with significant publishers like PINS and X, indicating early revenue contributions from these partnerships [3][4] - The company anticipates an 11% growth in XTAC contribution for 2026, factoring in contributions from the new partner cohort [6] - DV Plus grew by 7% in Q3 2025, with a projected deceleration to 3% growth in Q4 due to macroeconomic factors, Open Path impacts, and a shift to CTV [11][12] Open Web Exposure - Less than one-third of Magnite's business is exposed to the open web, with over 2 trillion ad requests daily, discarding 1.5 trillion due to excess inventory [9][10] - The company has not seen significant impacts from AI on its premium publisher customer base [10] CTV Growth - CTV contribution grew by 15% in one quarter and 25% in Q3, with Netflix and other partners like LG and Roku driving this growth [32][38] - The partnership with Amazon for Prime Video inventory is expected to be a meaningful driver of CTV growth in 2026 [40] SMB Strategy - Magnite acquired Streamer AI to enable SMBs to create high-quality advertisements at low costs, facilitating their entry into the CTV market [46][48] - The company aims to work with regional agencies to help SMBs leverage their advertising capabilities [50][58] Cost Management and Infrastructure - The transition from cloud to on-prem infrastructure is expected to reduce costs significantly, with cloud costs being up to four times higher than on-prem [67][68] - Investments are being made to enhance technology and accelerate product development, particularly in AI [69] Legal and Regulatory Environment - Magnite is closely monitoring the Google antitrust case, with potential behavioral remedies that could benefit the company by reducing tying practices and improving market access [70][79] - The company has entered civil litigation against Google seeking damages for antitrust behavior [82] Capital Allocation - Magnite is focused on tuck-in M&A opportunities with a high bar for acquisitions, while also considering share repurchase programs due to perceived undervaluation [89][90] - The company expects to generate over $150 million to $175 million in free cash flow next year [90] Additional Insights - The company is optimistic about the growth of mobile app advertising, noting increased brand activity in this space [26][29] - The lowering of CTV CPMs, partly due to Amazon's entry, has made it easier for SMBs to engage in CTV advertising [58][61]

Core Insights - Magnite has launched Live Scheduler, a first-of-its-kind solution designed to standardize workflows for monetizing live events, enabling media owners to effectively plan, activate, and measure advertisements around live occurrences [1][3] Group 1: Product Features - Live Scheduler allows media owners to create ad opportunities for upcoming live events, sharing essential details such as event name, timing, sport, league, broadcaster, and concurrency estimates, thereby reducing fragmentation in live streaming [2] - The solution enhances visibility for buyers and demand-side platforms (DSPs), including Amazon DSP, facilitating better planning and pacing of campaigns to engage audiences during peak attention moments [2] Group 2: Technological Foundation - Magnite's existing live infrastructure has supported significant live streaming events globally, and the introduction of Live Scheduler builds on this foundation to address the evolving needs of real-time streaming environments [3] - The Live Stream Acceleration (LSA) technology previously introduced by Magnite has laid the groundwork for Live Scheduler, which aims to eliminate operational barriers for media owners and advertisers [4] Group 3: Industry Impact - The complexity of scaling programmatic activations for live events has been a challenge for advertisers, and Live Scheduler aims to enhance digital precision and flexibility in live campaigns [4] - Live TV remains a powerful medium for audience engagement, particularly during high-impact moments, and Magnite's expanded capabilities are expected to improve the connection between advertisers and live audiences [4]

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Core Insights - Magnite's shares fell 18.5% following the release of its earnings report, despite reporting a revenue of $179.5 million, which is a 10.8% year-on-year increase and slightly above the consensus estimate of $178 million [1] - The adjusted earnings per share were $0.20, meeting analyst expectations, while adjusted EBITDA was $57.17 million, exceeding estimates by 7.7% [1] - The operating margin improved significantly to 14% from 9.3% in the same quarter last year, indicating strong operational performance [1] Market Reaction - The volatility of Magnite's shares is notable, with 37 moves greater than 5% in the past year, indicating that the recent earnings report had a significant impact on market perception [3] - The broader market, particularly the tech-heavy Nasdaq, experienced a decline of approximately 1.4%, influenced by profit-taking and concerns over high valuations in AI-related stocks [4] - Leadership at Goldman Sachs and Morgan Stanley suggested a potential correction in equity markets over the next couple of years, viewing this as a healthy feature of a long-term bull market [5] Stock Performance - Year-to-date, Magnite's stock is down 9.8%, trading at $14.52 per share, which is 45.2% below its 52-week high of $26.52 from August 2025 [6] - An investment of $1,000 in Magnite's shares five years ago would now be worth $1,279, reflecting a modest growth over the long term [6]

Group 1 - The article does not provide any relevant content regarding the company or industry [1]

Core Insights - Magnite reported quarterly earnings of $0.20 per share, matching the Zacks Consensus Estimate and showing an increase from $0.17 per share a year ago [1] - The company achieved revenues of $166.78 million for the quarter ended September 2025, exceeding the Zacks Consensus Estimate by 2.33% and up from $149.43 million year-over-year [2] - Magnite's stock has increased by approximately 5.1% since the beginning of the year, while the S&P 500 has gained 15.1% [3] Earnings Performance - The company has surpassed consensus EPS estimates two out of the last four quarters [1] - Magnite has topped consensus revenue estimates three times over the last four quarters [2] Future Outlook - The sustainability of the stock's price movement will depend on management's commentary during the earnings call [3] - Current consensus EPS estimate for the upcoming quarter is $0.38 on revenues of $196.79 million, and for the current fiscal year, it is $0.88 on revenues of $667.07 million [7] Industry Context - The Internet - Software industry, to which Magnite belongs, is currently ranked in the top 34% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked using tools like the Zacks Rank [5][6]

Financial Data and Key Metrics Changes - Q3 2025 total revenue was $179 million, an increase of 11% from Q3 2024 [19] - Contribution ex TAC was $167 million, up 12%, exceeding guidance [19] - Adjusted EBITDA grew 13% to $57 million, resulting in a margin of 34% [21][19] - Net income for the quarter was $20 million, compared to $5 million in Q3 2024 [21] - GAAP earnings per diluted share were $0.13, up from $0.04 in Q3 2024 [21] Business Line Data and Key Metrics Changes - CTV contribution ex TAC was $76 million, up 18% year-over-year or 25% excluding political [19][21] - DV+ contribution ex TAC was $91 million, an increase of 7% or 10% excluding political [20][21] - The contribution ex TAC mix for Q3 was 45% CTV, 39% mobile, and 16% desktop [20] Market Data and Key Metrics Changes - Health and fitness, shopping, and technology were the strongest-performing categories, while automotive was one of the weakest [20] - Ad spend from top holding companies grew nearly 20% in Q3 year-over-year [9] Company Strategy and Development Direction - The company is focusing on expanding its CTV business and enhancing its technology offerings, including AI integration [8][15] - Plans to integrate AI assistance and workflows into Clear Line, powered by the acquisition of Streamer.ai [8][15] - The company is optimistic about growth opportunities with major partners like Netflix and Roku [5][6] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth potential from the Google Ad Tech trial, indicating that any market share shift could significantly benefit the company [17][18] - The company anticipates contribution ex TAC growth for 2026 to be at least 11%, with a focus on maintaining margin expansion [27][39] Other Important Information - The company has a cash balance of $482 million at the end of Q3, up from $426 million at the end of Q2 [22] - Capital expenditures for Q4 are expected to be approximately $23 million, with a full-year estimate of $80 million [23][26] Q&A Session Summary Question: Impact of The Trade Desk's changes on Magnite - Management noted that they have worked with major buyers to reconnect Magnite as a preferred supply path and believe the impact has been limited to DV+ [30] Question: Growth of DV+ with Amazon - Management confirmed strong spend from leading DSPs, particularly Amazon, and highlighted the importance of partnerships in driving growth [33] Question: AI integration and its impact - Management discussed the integration of AI technologies and the potential for increased efficiency and monetization through new products [15][36] Question: Google Ad Tech case updates - Management remains optimistic about the outcomes of the case and believes it presents a generational opportunity for the company [39] Question: CTV market dynamics and CPM trends - Management indicated stability in CTV CPMs and does not foresee significant downward pressure on revenues from lower-cost ad units [42] Question: CapEx and employee growth - Management explained that the increase in CapEx is aimed at securing data center space and enhancing technology capabilities, while also planning to add personnel to support growth initiatives [44]

Q3 2025 Financial Performance - Contribution ex-TAC reached $166.8 million, a 12% increase year-over-year[16] - CTV Contribution ex-TAC was $75.8 million, up 18% year-over-year[16] - DV+ Contribution ex-TAC was $90.9 million, a 7% increase year-over-year[16] - Net income was $20.1 million, or $0.13 per diluted share, compared to $5.2 million, or $0.04 per diluted share in Q3 2024[16] - Adjusted EBITDA was $57.2 million, a 13% increase year-over-year, with a 34% Adjusted EBITDA margin[16] - Non-GAAP earnings per share were $0.20, compared to $0.17 for Q3 2024[16] Q4 2025 Guidance - Total Contribution ex-TAC is projected to be between $191 million and $196 million, representing growth of 6% to 9%[19] - CTV Contribution ex-TAC is expected to be between $87 million and $89 million, representing growth of 12% to 14%[19] - DV+ Contribution ex-TAC is anticipated to be between $104 million and $107 million, representing growth of 2% to 5%[19] Full-Year Expectations - The company continues to expect total Contribution ex-TAC growth above 10%[22] - The company expects mid-teens percentage growth of Adjusted EBITDA[22]

Business Overview - The company is the world's largest independent omni-channel sell-side advertising platform, processing trillions of ad requests per month[115]. - The company operates globally with established presences in North America, Australia, and Europe, and is developing its presence in Asia and South America[119]. - The shift towards digital advertising is expected to continue, with a growing percentage of advertising dollars being spent through digital channels[121]. Revenue Growth - The company anticipates that CTV will be a significant driver of revenue growth for the foreseeable future[124]. - Revenue for the three months ended September 30, 2025, increased by $17.5 million, or 11%, compared to the same period in 2024, driven by growth in CTV and mobile revenue[151]. - Revenue for the nine months ended September 30, 2025, increased by $34.4 million, or 7%, compared to the same period in 2024, with CTV and mobile revenue contributing $16.2 million and $15.2 million, respectively[152]. - The company expects revenue growth for the full year 2025, with CTV and mobile being the primary growth drivers[156]. Financial Performance - Income from operations for the three months ended September 30, 2025, increased by 66% to $25.0 million compared to $15.1 million in the prior year[149]. - Revenue for the three months ended September 30, 2025, was $179,494 thousand, an increase of 11% compared to $162,003 thousand for the same period in 2024[175]. - Gross profit for the three months ended September 30, 2025, was $110,138 thousand, reflecting an 11% increase from $99,459 thousand in the prior year[175]. - Contribution ex-TAC for the three months ended September 30, 2025, was $166,779 thousand, up 12% from $149,428 thousand in the same period last year[175]. - Net income for the three months ended September 30, 2025, was $20,058 thousand, a significant increase of 285% compared to $5,214 thousand in the prior year[175]. - Adjusted EBITDA for the three months ended September 30, 2025, was $57,171 thousand, representing a 13% increase from $50,564 thousand in the same period of 2024[175]. - For the three months ended September 30, 2025, Adjusted EBITDA increased by $6.6 million to $57.2 million compared to the prior year period[185]. - For the nine months ended September 30, 2025, Adjusted EBITDA increased by $28.0 million to $148.4 million compared to the prior year period[185]. Expenses - Cost of revenue for the three months ended September 30, 2025, increased by $6.8 million, or 11%, primarily due to a $5.6 million increase in cloud hosting, data center, and bandwidth expenses[157]. - Cost of revenue for the nine months ended September 30, 2025, increased by $6.1 million, or 3%, with significant increases in software costs and personnel costs, partially offset by a decrease in traffic acquisition costs[158]. - Sales and marketing expenses for the three months ended September 30, 2025, increased by $0.8 million, or 2%, mainly due to a $2.6 million increase in personnel costs[160]. - Sales and marketing expenses for the nine months ended September 30, 2025, increased by $5.3 million, or 4%, primarily driven by an $8.3 million increase in personnel costs[161]. - Technology and development expenses decreased by $8.9 million, or 12%, for the nine months ended September 30, 2025, primarily due to decreases in software and personnel costs[163]. - General and administrative expenses decreased by $2.8 million, or 4%, for the nine months ended September 30, 2025, mainly due to decreases in refinancing expenses and facilities-related costs[166]. Legal and Regulatory - The U.S. District Court ruled that Google violated federal antitrust laws, which is expected to positively impact the company's business prospects[132]. - The company filed a lawsuit against Google seeking damages for alleged anticompetitive conduct, which could improve its market share in open-web display[134]. Market Challenges - Macroeconomic challenges such as inflation and trade wars may negatively impact ad budgets and slow ad spend growth through the company's platform[135]. Strategic Initiatives - The introduction of the next generation SpringServe CTV platform is expected to enhance connections for buyers and streamline workflows for sellers[124]. - The company is investing in the development of identity and audience solutions to adapt to the decreased reliance on third-party cookies[127]. - Supply Path Optimization efforts are expected to deepen relationships with buyers and increase revenue opportunities for seller clients[129]. Cash Flow and Liquidity - As of September 30, 2025, the company had cash and cash equivalents of $482.1 million, with $69.1 million held in foreign currency[186]. - For the nine months ended September 30, 2025, net cash provided by operating activities was $107.7 million, down from $120.5 million in the prior year[203]. - Cash flows used in investing activities for the nine months ended September 30, 2025, were $63.7 million, compared to $40.7 million in the prior year[205]. - Cash outflows from financing activities for the nine months ended September 30, 2025, were $47.0 million, up from $19.4 million in the prior year[207]. - The company expects to meet its liquidity requirements for at least the next twelve months from existing cash and cash equivalents and cash generated from operations[192]. Debt and Obligations - The balance of the Convertible Senior Notes was $204.5 million as of September 30, 2025, maturing in March 2026[193]. - Total future lease obligations and other non-cancelable agreements as of September 30, 2025 amount to approximately $1,019.8 million[211]. - The company has a principal commitment of $205.1 million under Convertible Senior Notes due in 2026[211]. - The company has non-cancelable obligations under a cloud-managed services agreement with minimum spend amounts over three years[213]. - The company has no outstanding borrowings under the 2024 Revolving Credit Facility as of September 30, 2025[222]. Foreign Exchange and Interest Rate Risks - An immediate 10% adverse change in foreign exchange rates would result in a foreign currency loss of approximately $8.2 million as of September 30, 2025[226]. - The annualized impact to interest expense for each 100 basis points increase above the SOFR Floor on the 2024 Term Loan B Facility is approximately $3.6 million[223]. - Interest expense, net decreased by $2.2 million for the three months ended September 30, 2025, compared to the prior year, primarily due to refinancing[168]. - Foreign exchange (gain) loss, net changed by $3.4 million for the three months ended September 30, 2025, compared to the prior year, influenced by currency exchange rate movements[169]. Other Income and Expenses - Other income decreased by $1.2 million for the three months ended September 30, 2025, due to lower rental income from real estate leases[171].

Revenue and Growth - Revenue for Q3 2025 was $179.5 million, an 11% increase year-over-year[6] - Contribution ex-TAC for Q3 2025 was $166.8 million, up 12% year-over-year, exceeding guidance of $161 to $165 million[6] - Contribution ex-TAC attributable to CTV was $75.8 million, an 18% increase year-over-year, exceeding guidance of $71 to $73 million[6] - Full-Year 2025 expectations for total Contribution ex-TAC are between $191 million and $196 million, representing growth of 6% to 9%[6] - Contribution ex-TAC attributable to CTV for Q4 2025 is expected to be between $87 million and $89 million, representing growth of 12% to 14%[6] - The company anticipates total Contribution ex-TAC growth above 10%, or mid-teens excluding political[6] - The company reported a total of $508,597 thousand in revenue for the nine months ended September 30, 2025, compared to $474,202 thousand for the same period in 2024, reflecting a growth of 7.3%[30] - Revenue for the nine months ended September 30, 2025, increased to $508,597,000, up 7.3% from $474,202,000 in the same period of 2024[37] Profitability - Net income for Q3 2025 was $20.1 million, compared to $5.2 million in Q3 2024, representing a 285% increase[8] - Adjusted EBITDA for Q3 2025 was $57.2 million, up 13% year-over-year, with a margin of 34%[6] - Adjusted EBITDA for the three months ended September 30, 2025, was influenced by revenue of $179,494 thousand, a 10.2% increase from $162,003 thousand in the same period of 2024[30] - Net income for the three months ended September 30, 2025, was $20,058 thousand, compared to $5,214 thousand for the same period in 2024, representing a significant increase[30] - Non-GAAP income for the nine months ended September 30, 2025, was $80,141,000, compared to $55,011,000 in the same period of 2024, reflecting a 45.6% increase[42] - Basic earnings per share for the three months ended September 30, 2025, was $0.14, compared to $0.04 for the same period in 2024[30] - Basic earnings per share for the nine months ended September 30, 2025, was $0.15, compared to a loss of $0.10 per share in the same period of 2024[36] - Non-GAAP earnings per share for the three months ended September 30, 2025, was $0.20, compared to $0.17 in the same period of 2024[44] Expenses and Liabilities - Total expenses for the three months ended September 30, 2025, were $154,453 thousand, an increase from $146,880 thousand in the same period of 2024[30] - Stock-based compensation expense for the three months ended September 30, 2025, was $18,044 thousand, slightly down from $18,670 thousand in the same period of 2024[31] - Total liabilities as of September 30, 2025, were $2,112,739 thousand, compared to $2,086,550 thousand as of December 31, 2024[28] Assets and Cash Flow - Total current assets as of September 30, 2025, were $1,725,514 thousand, up from $1,703,180 thousand as of December 31, 2024[28] - Cash and cash equivalents as of September 30, 2025, were $482,127 thousand, compared to $483,220 thousand as of December 31, 2024[28] - The company’s total assets as of September 30, 2025, were $2,920,693 thousand, an increase from $2,854,768 thousand as of December 31, 2024[28] - Cash provided by operating activities for the nine months ended September 30, 2025, was $107,711,000, down from $120,504,000 in the same period of 2024[34] - Net cash used in investing activities for the nine months ended September 30, 2025, was $63,741,000, compared to $40,669,000 in the same period of 2024, indicating increased investment[34] - Cash paid for interest decreased to $21,674,000 for the nine months ended September 30, 2025, from $28,748,000 in the same period of 2024, showing improved interest management[35] Shareholder Information - The weighted-average shares used to compute basic earnings per share increased to 143,009,000 for the three months ended September 30, 2025, from 141,270,000 in 2024[44] - The dilutive effect of weighted-average common stock options, RSUs, and PSUs was 10,105,000 for the three months ended September 30, 2025[44] - For the three months ended September 30, 2025, GAAP diluted earnings per share increased to $0.13 compared to $0.04 for the same period in 2024[44] Channel Performance - Contribution ex-TAC from CTV for the three months ended September 30, 2025, was $75,847,000, accounting for 45% of total contribution, compared to 43% in the same period of 2024[46] - Mobile channel contribution ex-TAC for the three months ended September 30, 2025, was $64,428,000, representing 40% of total contribution, consistent with the previous year[46] - Desktop channel contribution ex-TAC for the three months ended September 30, 2025, was $26,504,000, maintaining a 17% share of total contribution[46] - Total contribution ex-TAC for the nine months ended September 30, 2025, reached $474,583,000, a 11.2% increase from $426,744,000 in 2024[46] Strategic Initiatives - The acquisition of streamer.ai is expected to provide early benefits, particularly among SMB advertisers[5] - Adjusted EBITDA margin is expected to expand by approximately 180 basis points[6]