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         Magnite's (MGNI) CEO Michael Barrett on Q4 2020 Results - Earnings Call Transcript

         We've recently announced an open beta for our new CTV Unified Decisioning solution. This product is critical to increasing publishers revenue by enabling them to have their direct and programmatic inventory compete for the highest price thus driving higher yields. It is particularly important during the time of increased demand where programmatic CTMS can exceed direct sold CPMS. Many publishers who primarily sold direct missed an opportunity to adjust our strategies and allocate more inventory to programmatic. The product is currently in beta with a handful of clients with positive early results. It is something that we plan to charge for separately and we'll share more specifics in subsequent quarters.



         I'll now shift to give a brief update on our efforts with respect to identity solutions. As you're aware, third-party cookies and IDFA's are going away. And this creates an opportunity for Magnite to bring greater value to publishers. I'm pleasantly surprise at the pace of development of the new identity solutions and the way that the programmatic ecosystem has come together to find open, viable alternatives that work in a privacy compliant manner.

         We believe three primary identity solutions will co-exist and complement each other to replace the current landscape and we're deeply involved in the development of all three. First, and particularly important to us publisher first party data segments that are created within our Magnite marketplace and can be bought at scale across a large number of publishers to find desired audiences.

         Second, open source identifiers such as offered by the Trade Desk and LiveRamp that are based on logged in users will play an important role in the market. We're particularly pleased to see the Trade Desk announced that its Universal ID 2.0 will now live within and be operated by Prebid, an independent organization that we co-founded which is designed to ensure and promote fair and transparent marketplaces across the industry.

         And third, Privacy Sandbox from Google Chrome where the browser preserves identity and creates cohorts or groups. We believe that our platform in scale position us well to provide the infrastructure and tools that publishers need to succeed in the world of identity. Our key growth drivers remain the same. Growing CTV which will continue to be our most compelling opportunity for the foreseeable future further accelerated with the addition of SpotX. Increasing market share gains across all formats and device types as we better service fragments in marketplace as a transparent, independent omnichannel partner. Expanding our software solutions as seen with our new Unified Decisioning product and our Demand Manager offering and lastly, playing a leading role in transforming the landscape of targeted advertising and creating value for our clients with broad reaching identity solutions.



         There were 112.7 million of weighted average basic shares and a 124.4 million diluted shares outstanding for the fourth quarter of 2020. The increase in diluted shares is directly attributable to more in the money options driven by the increase in our share price.



         The SpotX acquisition consideration would have been valued at $1.17 billion based on the value of Magnite stock on the date of signing comprised of $560 million in cash and 40 million shares issued to the RTL Group. This represents roughly 10x multiple of SpotX's 2020 non-GAAP net revenue. Goldman Sachs has provided committed financing for the transaction. I'll now share some indications for our first quarter which I'll remind you of course does not include SpotX. As it is expected to close in the second quarter.



         We expect revenue for the first quarter to be in the range of $58 million to $62 million and we expect CTV to continue a strong year-over-year growth rate. We expect demand manager revenue to roughly double to $8 million in 2021. We expect that adjusted EBITDA operating expenses in Q1 including cost of revenue will be $51 million to $53 million. We expect that CapEx for the full year 2021 be roughly $25 million.

         Shifting now to our long-term financial targets. We continue to target long-term annual top line revenue growth above 20% with an upward bias as broader advertising market more fully recovers from COVID and post-closing on the SpotX acquisition. We're raising our long-term adjusted EBITDA margin targets to 30% to 35% pending our successful acquisition of SpotX to reflect the higher margins from SpotX including achievement of related synergy targets and overall scale and efficiency improvements in our operating leverage.



         Matt, thanks for the questions. So I think that the - it's a great question about the revenue model for CTV and then of course relationships piece of it. But from a revenue standpoint there's no question we see this evolving more as a software/take rate business as you would see in a normal display world where it was almost exclusively take rate driven. Why is that? It's more complex. There's fewer players. There's more needs. There's more software involved and not any great capability within the CTV players from a programming standpoint to build it themselves and so I think that you're going to see evolve overtime more of a hybrid approach where there maybe a fixed fee and then on top of that a take rate if you're brining demand or allowing demand to flow through the pipes. And this will evolve overtime. I don't think anyone should be modeling this hybrid approach by Q4, this year.

         And as is relates to partners, I think CTV will be much more of a monogamous world from publishers to SSP then you see in the display world where it kind of is to their advantage to invite six, seven, eight SSPs to compete in their head or bidding to bring demand and to increase yield that way in an open market as I've said before on a previous question. I don't see this becoming an open market world. It will be private marketplace and when you do a private marketplace deals. You tend to do hundreds of deals and you create a deal library and buyers get used to where this deal library sits and they're generally not sprinkled around 10 SSP players. They're sprinkled around one or two because there's just no advantage to it because they're not open market. The pricing is already been agreed upon. You're just transacting through pipes.

         And so keeping the deal libraries with one or two players, is what's occurring today and I believe is what you're going to see long-term. So I don't see this evolving to 25 SSPs like you would see in the display world.

~ data from Magnite's (MGNI) CEO Michael Barrett on Q4 2020 Results - Earnings Call Transcript