Magnite(US:MGNI)2023-08-09 23:45Financial Data and Key Metrics Changes - Total revenue for Q2 2023 was $153 million, an increase of 11% year-over-year [33] - Contribution ex-TAC grew 9% to $135 million compared to Q2 2022 [43] - Adjusted EBITDA was $37 million with a margin of 28%, negatively impacted by a $4.5 million bad debt expense due to MediaMath bankruptcy [22][48] - GAAP loss per share was $0.54 for Q2 2023, compared to a loss of $0.19 in Q2 2022 [23] - Cash balance at the end of Q2 was $266 million, up from $237 million at the end of the previous quarter [25] Business Line Data and Key Metrics Changes - CTV contribution ex-TAC was $56 million, up 8% from the previous year [18] - DV+ contribution ex-TAC was $79 million, an increase of 10% year-over-year [18] - Contribution ex-TAC mix for Q2 was 42% CTV, 39% mobile, and 19% desktop [18] - Managed service business showed softness due to macro challenges, particularly in the auto and media and entertainment sectors [9][45] Market Data and Key Metrics Changes - International growth rate is more than double that of the US [44] - Travel vertical showed relative strength, while technology and media and entertainment were weaker [44][19] - Political spend represented approximately 3% of CTV contribution ex-TAC in Q3 2022 and 6% in Q4 2022, creating comp challenges [20] Company Strategy and Development Direction - The company is focusing on expanding its DV+ business and enhancing its technology and leadership position in the CTV market [12][16] - New product offerings include ClearLine, a self-service video buying solution, and Magnite Access, a suite of omnichannel audience data and identity products [13][40] - The integration with FreeWheel aims to improve programmatic capabilities for clients, enhancing the overall advertising experience [15][70] Management's Comments on Operating Environment and Future Outlook - Management noted a significant long-term opportunity in the shift to premium programmatic CTV, despite short-term revenue pressures [36][42] - The company expects contribution ex-TAC for Q3 to be in the range of $128 million to $132 million, with CTV contribution expected to be $50 million to $52 million [26] - Adjusted EBITDA is anticipated to be comparable to 2022, excluding the impact of MediaMath bad debt expense [27] Other Important Information - Total operating expenses increased to $224 million, primarily due to $53 million of non-cash accelerated amortization [47] - The company has a new share repurchase program authorizing up to $100 million through August 2025 [25] - Free cash flow is expected to exceed $100 million for the year [27] Q&A Session Summary Question: Can you elaborate on the trade-off happening in connected TV? - Management explained that the forward guidance in CTV is influenced by the managed service business, which has the highest take rate, and the shift towards publisher-sold programmatic deals [54] Question: How does the upfront market's flexibility impact your competitive position? - Management indicated that programmatic is now a significant part of the upfront market, reducing the distinction between upfront and scatter [89] Question: What is the expected contribution from the ClearLine product? - Management noted that while ClearLine's contribution is currently minimal, it has received strong reception and is expected to be a material contributor in the future [67] Question: How does the MediaMath bankruptcy impact your business? - Management stated that most of the spend previously associated with MediaMath has found a home within the DV+ platform [122] Question: What gives you confidence in your fourth-quarter guidance? - Management expressed cautious optimism based on feedback from the sales team and the expectation of a recovery in managed service campaigns [124]