PUBM - NASDAQ

Hello, everyone, and welcome to PubMatic's Fourth Quarter and Full Year 2024 Earnings Call. My name is Kelsey, and I will be your

Good afternoon, everyone, and welcome to PubMatic's earnings call for the fourth quarter and full year 2024. This is Stacie Clements with the Blueshirt Group, and I'll be your operator today. Joining me on the call are Rajeev Goel, Co-Founder and CEO and Steve Pantelick, CFO. Before we get started, I have a few housekeeping items. Today's prepared remarks have been recorded, after which Rajeev and Steve will host live Q&A. [Operator Instructions]. A copy of our press release can be found on the website at investors.pubmatic.com. I would like to remind participants that during this call, management will make forward-looking statements, including, without limitation, statements regarding our future performance, market opportunity, growth strategy and financial outlook. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and future conditions. These forward-looking statements are subject to inherent risks, uncertainties and changes in circumstances that are difficult to predict. You can find more information about these risks, uncertainties and other factors in our reports filed from time to time with the Securities and Exchange Commission and are available at investor.pubmatic.com including our most recent Form 10-K and our subsequent filings on Form 10-Q or 8-K. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you therefore against relying on any of these forward-looking statements. All information discussed is as of today February 27, 2025 and we do not intend, and undertake no obligation, to update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law. In addition, today’s discussion will include references to certain non-GAAP financial measures, including adjusted EBITDA, non-GAAP net income and free cash flow. These non-GAAP measures are presented for supplemental informational purposes only and should not be considered a substitute for financial information presented in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measures is available in our press release. And now, I will turn the call over to Rajeev.

Thank you Stacie, and welcome everyone. 2024 was a year of solid revenue growth and margin expansion, driven by strength in CTV, new products and revenue streams, and marquee customers choosing PubMatic to build and scale their ad businesses. Revenue growth for the year more than doubled, growing 9% over 2023. We delivered expanded adjusted EBITDA margins of 32%, and we returned to a rule of 40 company. This marks our fourth of the last 5 years that we exceeded this benchmark. These results include a significant headwind in desktop display, which started in May of 2024 related to a single DSP partner. In the fourth quarter, the impact from this buyer delivered a softer than anticipated seasonal uptick. Looking beyond this isolated impact, we delivered strong underlying growth in all other areas of the business. We also benefited from significant strength in political ad spend. Excluding revenue from this DSP and political advertising, Q4 revenue was up 16% year-over-year. And I’m particularly pleased with the scale of our CTV business, which represented 20% of our Q4 revenue, more than doubling its share of our business versus the prior year. I want to thank the entire team for their hard work and relentless focus on our strategy. As I look ahead to 2025, we are a materially different company than we were just a few years ago. Our mix of business has changed, and our platform has expanded beyond core SSP technology. A sizeable share of our revenue and growth are now driven by high consumer engagement channels such as CTV, mobile app and commerce media. We now serve four key customer segments: publishers, media buyers, commerce media networks, and curators or data providers. As we deliver value and expand usage with each customer segment, the value proposition of our platform to other segments increases, creating a flywheel that accelerates revenue growth and increases profitability. For example, unique demand via our Supply Path Optimization deals and Activate solution with dentsu, GroupM and Mars attracts premium publisher inventory from streamers like Roku, TCL, and Dish TV, and mobile apps like Audiomob, Freeplay and Soundcloud to our platform. Our combined strength of supply and demand attracts high-value data providers like Experian, NCSolutions and Proximic by Comscore, and commerce media companies like Instacart and Western Union, who want to grow their ad businesses. These rich and compelling data sets in turn attract more buyers seeking higher return on ad spend in the open internet. And the cycle repeats. As a result, we have a strong, growing footprint across the ecosystem. Key to this is our multi-year investment in product innovation in our SSP and OpenWrap wrapper solution for publishers, in Supply Path Optimization and Activate for media buyers, in Connect for curators and data providers, and Convert for commerce media networks. These products have expanded our end customer base, and more than doubled our total addressable market to over $120 billion since the time of our IPO 4 years ago. In addition, early adoption and prioritization of generative AI throughout our business has led to continued innovation, increased productivity and greater operational excellence. This focus is already delivering compelling products, with tremendous opportunities in three major areas: optimizing and accelerating many internal functions to drive profitability, improving our customer-facing products and features to drive more usage and therefore revenue, and building entirely new capabilities that weren’t possible before. I will go deeper on the value we bring to each customer segment as well as our generative AI strategy. Let’s start with publishers. Connected TV and streaming was our fastest growing publisher segment in 2024, with growth exceeding our expectations in the second half of the year as we continued to add top tier broadcasters and streaming platforms like Roku, Dish Media, Disney+ Hotstar and Xumo. We also added important streamers like Vevo and Fremantle who own valuable content and audiences that are important to ad buyers. Propelled by the surge of political ad dollars, revenue from omni-channel video reached a high-water mark of more than 40% in Q4, of which half was CTV. Our platform is rapidly gaining CTV market share as CTV increasingly shifts from insertion order-based buying to programmatic. We continue to onboard new streamers and now work with 80% of the top 30 globally, up from 70% a quarter ago. Our robust product capabilities and datasets create sticky customer engagement whereby streamers are increasingly using our platform to setup and execute their direct sold programmatic deals. In the second half of 2024, we launched a CTV Marketplace which aggregates like inventory across our platform, offering buyers specific inventory categories like Gen

Thank you, Rajeev, and welcome everyone. 2024 marked an important inflection point in PubMatic’s growth trajectory as a result of our focused strategy and multiyear investments. CTV, mobile app and our emerging revenues each hit a record share of total company revenue, and we achieved an all-time high of supply path optimization activity. This growth enabled us to offset a revenue headwind from a bidding change by one of our top DSP buyers that emerged mid-year. Let me summarize our major 2024 accomplishments. First, we delivered our number one priority to accelerate revenue growth. Total revenues grew 9%, more than double the rate in 2023, driven by increases in both monetized impressions and CPMs. Excluding the headwind of the DSP change and the tailwind of political advertising, full year revenue increased 11% year-on-year. CTV revenue more than doubled in 2024 and in Q4 reached 20% of total revenue. Mobile app increased 16% year-over-year and represented 20% of total revenue. Emerging revenue streams doubled in 2024. SPO increased 8 percentage points year-over-year and represented 53% of all platform activity. Second, we significantly expanded our margins and increased adjusted EBITDA by 23% year-over-year. Gross margin increased by 250 basis points and our adjusted EBITDA margin by 350 basis points. We shifted our revenue mix to high engagement channels like CTV, mobile app and emerging revenues. We further optimized our infrastructure, tightly managed our CapEx investments, and increased engineering efficiency with Gen AI. Third, we managed our working capital to fund our growth and execute our share repurchase program. We delivered $73 million in operating cash flow and $35 million in free cash flow. We bought back over 4 million shares in 2024 equating to an 8% reduction in fully diluted shares outstanding. We finished the year with $141 million in cash and marketable securities and no debt. These results, taken together, are clear proof points of the tremendous opportunities ahead of us. First, it is confirmation that our multi-year strategy to invest behind the most important secular growth areas is working. And second, it demonstrates we can deliver significant rates of profit and cash flow to fund our growth, while steadily reducing our fully diluted weighted average shares outstanding. Turning to our fourth quarter revenue results. While total revenues were below our expectations, it was a breakout quarter for CTV. Strong year-over-year growth for CTV and political advertising helped offset the impact from weak holiday spending by the large DSP buyer that had changed its bidding approach mid-May. Based on long-term historical trends, Q4 holiday advertising typically increases in double-digit percentages versus Q3. The rate of increase for this DSP was in the single digits and predominantly affected display formats. Excluding revenues from this DSP buyer and the benefit from political advertising, our underlying business grew 16% and represented almost two-thirds of total revenues. This underlying revenue growth demonstrates the continued secular mix shift in our business toward high-value, high-engagement formats and channels. Omni-channel video in the quarter reached an all-time high of 43% of total revenues. This growth was powered by CTV which climbed to 20% of total revenue in the quarter, benefiting from our growing inventory scale, SPO relationships, and the uptick in political advertising. Emerging revenues also continued their rapid growth in the fourth quarter, more than doubling year-over-year and rising to 6% of revenues. A particular standout in this category was Connect, our curation and data business which grew 140% year-over-year. As called out, display was affected by the low holiday spend by the large DSP buyer and declined 8% year-over-year. Excluding this buyer, all other display revenues increased over 20% year-over-year. Moving down the P&L. Over the course of 2024, we aggressively managed our cost of revenue focusing on infrastructure optimization and leveraging prior CapEx investments. As a result, compared to 2023, we were able to keep our Q4 and full year costs increases at 3% and 2%, respectively. At the same time, we increased gross impression capacity on our platform by 20% and reduced the cost of revenue per million impressions by 18%. Operating expenses for the fourth quarter and the full year were $45.8 million and $186.3 million, respectively. Over the course of the year, we made targeted investments in the secular growth areas which delivered the fastest growth rates for us. On a full year basis, operating expenses grew at half the rate as 2023, as we leveraged prior investments and gained higher productivity from new team members throughout 2024. Q4 GAAP net income was $13.9 million or $0.26 per diluted share. Full-year net income was $12.5 million or $0.23 per diluted share. Underscoring the benefit we are getting from higher value revenue streams, operational efficiency and cost leverage, our Q4 adjusted EBITDA came in ahead of expectations at $37.6 million, or 44% margin. Full year adjusted EBITDA was $92.3 million or 32% margin. Turning to cash flow, a long-term focus for us. Since going public in December 2020, we have generated over $330 million in net cash provided by operating activities and $175 million in free cash flow. In 2024, we generated $73.4 million in net cash provided by operating activities and free cash flow of $34.9 million. As a reminder, beginning in Q3, we saw an increase in DSOs related to the DSP change. We anticipate that this DSO change will normalize mid 2025. Moving to cash and our capital allocation. We have a healthy balance sheet and generate positive cash flow which supports our long-term capital allocation strategy. We ended the quarter with $140.6 million in cash and marketable securities and zero debt. Since the inception of our repurchase program in February 2023 through the end of Q4, we have bought back 8.3 million Class A common shares for $134.6 million. As of the end of the fourth quarter, we had $40.4 million remaining in our repurchase program authorized through December 31, 2025. Turning to 2025, we are confident that our growth strategies are on track and we are well-positioned to execute them. Over the first half of 2025, as previously called out, we will be transitioning through the lower year-over-year spend levels by this DSP buyer until we lap it at the end of Q2. This headwind will predominantly affect the display portion of our business and accelerates our revenue shift towards the fastest growing secular categories of CTV, mobile app and our emerging revenues. Outside of this near-term DSP headwind, our revenues are growing rapidly and we believe we are at an important inflection point. In Q3 and Q4, our underlying business, excluding the DSP buyer and political, grew 17% and 16%, respectively. This year, we are targeting this portion of our business to grow 15% plus year-over-year. To support this level of continued growth and deliver healthy margins we are adopting a two-pronged operating strategy. First, we will leverage the investments made in sales and technology and selectively add specialists to support the fastest growing areas. In 2024, we achieved a material breakthrough in terms of scale and growth in high engagement channels, and we are on track to continue this momentum. Second, we will significantly expand our usage of Gen AI to drive efficiency and growth, including investment in customer-facing Gen AI products as Rajeev outlined earlier. We believe these investments will set us up for our next stage of growth later this year and next by expanding revenues with existing customers and targeting new customers and markets. Turning to our financial outlook, the positive trends of 15% plus growth in our underlying business have continued quarter-to-date. At the same time, we are also seeing a continuation of the softer trends for the large DSP that emerged in the latter half of Q4. Accordingly, in developing our outlook we are taking a conservative stance with respect to this buyer and are assuming its current run rate will continue with limited upward seasonality in 2025. With this in mind, we expect Q1 revenue to be in the range of $61 million to $63 million factoring in the DSP headwind noted and double-digit percentage growth of our underlying business. With our revenue outlook and predominantly fixed cost base, we are estimating our Q1 adjusted EBITDA range to be $5 million to $7 million. This outlook includes a negative FX impact, predominately from euro and pound sterling expenses relative to a weakening dollar this quarter. Turning to the balance of 2025, we are assuming a continuation of the latest run rates for this DSP and our underlying business grows 15% plus. In terms of year-over-year comparisons, this implies that total company revenue in the first half of the year will be slightly down year-over-year in the low single-digit percentages. For the second half we anticipate total revenue will grow year-over-year in the high single-digit percentages and factors in the tough comp from political. For reference, political advertising contributed approximately 6% of total revenue in 2024. In terms of expenses, we are on track to continue driving operational efficiencies, productivity improvements and targeted investments to drive our secular growth. We anticipate our cost of revenue to increase sequentially quarter-to-quarter in the low single-digit percentages, similar to 2024. We are expecting that our cost leverage and continued mix shift towards high value formats will enable us to increase our full year gross margin rate. With respect to OpEx, from Q2 onwards, we are targeting quarter-to-quarter sequential increases in the low single digit percentages. In terms of adjusted EBITDA, as we transition through the DSP impact, our first half margins will be slightly lower than historical levels, with second half margins more in line with historical trends. For the full year, we are anticipating the adjusted EBITDA margin to be in the high 20% range, which includes several million dollar impact from FX. Full year CapEx is projected to be similar to 2024's level of approximately $18 million, with most of our CapEx anticipated in Q3. In terms of free cash flow, we anticipate it will be somewhat lower in the first half until we lap the mid-year change in DSP spending and then return to historical levels. In closing, I want to take the opportunity to briefly summarize. 2025 will have some tough comps which obscures our underlying, healthy growth. The overall impact from one large DSP buyer has been significant, but it's isolated to one portion of our business, primarily desktop display. We grew through this impact in 2024, and we expect to do the same in 2025. We will lap this change in just a few months and emerge with a larger share of our business coming from key secular growth drivers. We are confident in our ability to execute what is within our control and deliver on our growth strategy. And finally, we have a strong financial profile and a proven, durable model that delivers healthy margins, incremental leverage and cash flow and we will manage the business through this priority lens. I'll now turn the call over to Stacie for Q&A.

Thank you, Steve. [Operator Instructions] Our first question comes from James Heaney at Jefferies. Please go ahead, James.

Great. Thank you guys for the question. Steve, can you talk a little bit more about the month-on-month trends that you saw throughout the quarter and when you started to see some of the weakness? And is there anything you could say just about overall CPM trends as well?

Sure. You came in a little bit faint there, but if I missed the question, just call it out. But James, with respect to the sequential progression through fourth quarter, for our underlying business, CTV, mobile, all on track with our expectations and really the softness that we saw, occur in latter part of Q4 with the one DSP. But otherwise, the expectations were in line with what we had anticipated. And so the softness was via the DSP and specifically in the display format. In terms of CPMs, we actually had quite good results over the course of 2024. On a full year basis, CPMs were up. In the fourth quarter, they were positive. And for the full year, monetized impressions were also positive. And it really underscores the points that Rajeev and I have made regarding the important progression and traction we've got in the secular growth areas. Monetized impressions, for CTV doubled, and we've seen great growth across the core underlying business. And so the challenging issue is with the spec to the one DSP, and we feel that we have a good handle on it based upon the latest trends that we are seeing. We’ve articulated that in our outlook.

Thank you, Steve. Our next question comes from Rob Coolbrith at Evercore. Please go ahead, Rob.

Great. Thank you so much. I wanted to ask or go back to the large DSP partner. Could you tell us a little bit about maybe why the impact is limited to display, and particularly why you think you saw it just toward the latter part of the quarter? And then just stepping back a little bit, is there -- do you think there’s anything that that you need to do with respect to that relationship to help them with their bid shading algorithms or whatever is, technically going on, or is there any other explanation? Is there any impairment of the relationship or is it more just a technical sort of bidding issue? Thank you.

Yes, the big picture, Rob, the ultimate issue is that structural change with respect to that DSP in terms of its bidding approach. As a reminder, went from formally first and second price bidding to solely first. And that's sort of a baking in process. And after that change, we saw fairly stable results. And going into the fourth quarter, we had anticipated moderate seasonality as is the case every fourth quarter. But the seasonality for that particular DSP was about half the rate as other DSPs. And historically, this DSP has been a predominantly display buyer. And so that’s why you see it coming through the display format. Now stepping back, it's a great relationship. It’s a long-term relationship. We are going to be transitioned through this particular period of time in a couple of months. And we are building out incremental opportunities with the buyers. So from our perspective, it’s really just a year-over-year comparable challenge and then we’ll be on track year-over-year starting in the second half. Now, from an overall company perspective, the core things that we set out to do in 2024 was to really drive our secular growth areas, which is CTV, mobile app, emerging revenues and all of that was very successful. And so in the big picture, what's happening by default is we are becoming less dependent on display and more indexed to the fastest growing areas. As a case in point, display now is a -- desktop display is about 20% of our total revenues. A couple of years ago, it was 15 percentage points higher. So from our perspective, we are right on the right track in terms of focusing on the, the fastest secular growth areas and display will continue to be important part of our business, but a smaller part going forward.

Great. If I could try one more, can you talk a little bit more about the data opportunity? What’s -- are there sort of secular shifts in the industry in terms of addressability that are driving your data opportunity? And anything you tell us about, how you size that or how you think about that opportunity internally? Thank you.

Yes. Sure. I can take that, Rob. So, broadly speaking, what we see is a shift in the industry, towards sell side targeting, right? And that is, instead of applying data, within the DSP, applying it, on the sell side of the ecosystem. So what’s driving that shift is a couple of things. One is, obviously, the cookie is under pressure, and DSPs, primarily are matching datasets from publishers, through the SSP, with the cookie. And so those cookie pools are drying up on the buy side. And then second, the industry is shifting towards a variety of first-party, datasets, right? So whether that's, logged in users and a CTV environment, or first-party publisher data. And all of that signal in terms of quality and scale is much stronger on the sell side of the ecosystem. And then third, when you apply that data on the sell side, it’s just far more efficient, right? So we are able to, apply the data and then make sure that the buyer is only buying the impressions, that they want to buy as opposed to sending all of the impressions to a DSP and then having the targeting applied there. So these are some of the drivers, of what's leading towards the shift of sell side targeting. And we think we are in a really strong position because we've been working for about half a decade now on this opportunity, given that's how long the cookie risk has been out there. So we've significantly diversified our revenues away from cookie dependent advertising, right? Things like CTV, mobile app, commerce media, which, which Steve mentioned. We've significantly increased the scale of identifiers or data that's available in our platform, other than the cookie. So over 90% of impressions now include an alternative signal, like a live ramp ID or trade desk ID, etcetera. And then third, we've invested very significantly in our connect capability set. We now have over 190 data partners that are integrated in, and dozens of customers, that are using our platform, to package inventory, and then sell that to buyers and using our platform to manage all of those transactions. And I think the last thing I just add about that is it’s a great business for us because we not only generate incremental, data fees, but all of the transactions, incur an SSP, fee as well. And all of that spend is on our platform, so it allows us to drive additional revenue to our publishers.

Great. Thank you very much.

And our next question comes from

Yes. Hi. Good afternoon. Thanks for taking my questions. I just wanted to, focus in on CTV. It was nice to see that continuing to get traction on that side. So can you just talk about where you're seeing success on the CTV side of it? Is there a specific category of media streamer that is particularly attracted to PubMatic? And just curious of kind of your runway for growth on CTV over the next couple of years.

Sure. Absolutely. So, yes, I think we are obviously -- you’re seeing, tremendous results from us in terms of CTV, as reflected by the 20% revenue metric and then the fact that it, more than doubled on a year-over-year basis. And so, really, what our focus is that, we have been building for this moment, right, which is the shift of CTV towards programmatic and away from insertion order baseline. And we are seeing exactly that happen right now. And so we've really focused on building the very best platform in the market to manage all types of programmatic transactions. And so that’s whether it’s PMP, it’s PG, or it’s open auction. And so what we’re finding is that publishers, streamers, broadcasters, more and more of them are using us for their direct sold deals because of the quality of our technology, UI workflow, transaction management capabilities, and we are not standing still. We are augmenting that with Gen AI based solutions. So in terms of,

Understood. Well, thanks for taking my questions, and, best of luck for the rest of the quarter.

Thank you.

Thanks.

Our next question comes from Andrew Boone at JMP. Please go ahead, Andrew.

Hi. Thanks so much for taking my question. I wanted to ask about Activate, right? You guys talked about 6x growth. Can you just help us explain that? And then, Rajeev, just more strategically, talk about the unlock in terms of adding more demand to the platform overall. And then, Steve, one of the key takeaways for me at least was the Gen AI savings this quarter. Can you just help frame that for us? What what’s the possibility as we think about models just proliferating going forward and what that can unlock for your OpEx line items. Thanks so much.

Yes. Absolutely. So, yes, why don’t I kick it off, Andrew, and then I’ll turn it over to Steve. So we are seeing obviously great, success and growth with Activate. Of course, it’s starting from a small base, but we grew that 6x on a year-over-year basis, which obviously is very exciting. We’ve got every, holdco buying on the platform now. So we are seeing very, very strong, trajectory with that business. And really what we are trying to do with Activate is to simplify the digital advertising supply chain. Make it more efficient, make it more transparent, make it more performance. And I think that’s the broad theme of why we are seeing success here because SPO or SPO approach, driven by Activate is driving performance and it’s driving efficiency, right? So you probably heard a lot of the agencies talking about growth in their outcomes based business. I think GroupM talked about that yesterday or today as an area that they want to focus on. And because with Activate, we are able to make the end-to-end transaction a lot more efficient, it’s a natural play to drive performance in the open Internet. Now the other reason why I think it’s working very well is the approach that we’ve taken. It’s ad format agnostic. It’s ad server agnostic. It’s device -- consumer device agnostic. So literally, all 800 billion ad impressions that are flowing through our platform on a daily basis are eligible to be bought via Activate. And so that's resonating with buyers in terms of the simplicity and the scale of it. Now in terms of, Andrew, the other part of your question, any dollar that a buyer puts into Activate, those dollars only flow into our SSP, right? Because Activate is a direct buying solution built inside of our, inside of our SSP. And so what that means is that every dollar is unique and incremental spend, that only publishers integrated into PubMatic, we will see. And so, as an example, last quarter, we announced, that dentsu's Mercury for Media, their new buying system, is built on Activate and Connect Technology from PubMatic. And then one quarter later, you saw that we went from over 70% penetration of the top 30 streamers globally to 80%. And so those things go hand in hand, right? Where then streamers say, okay, well, I want to access more dentsu dollars, then I need to make sure that my inventory is available inside of the PubMatic platform. So we think it’s a very strong lever for us to continue to grow the supply side of our business and grow our revenues. I’ll turn it over to Steve for the other part of your question.

Sure. So, Andrew, with respect to how we think about the improvements of [indiscernible] over time, absolutely, we anticipate that’s going to continue. And just as a reminder to everyone, as a company, we have machine learning, in our DNA, a product driven organization. And we've actually been developing and working with various AI tools for at least 2 years now. And you see the results on the engineering side. And most recently in the fourth quarter, we turned it to the revenue side, developing a new Gen AI product to drive incremental political spend. So from us, from our perspective, we see this as a continuing enhancement to both the cost side and the revenue side. And I would fully expect, let’s say in a particular year, we might want to add 5% incremental headcount. Things like, the AI initiatives on the engineering side would not necessitate that. So from our perspective, it’s going to be an ongoing opportunity to continue to get more efficient and also drive incremental revenue. So I would be expecting, let’s call it roughly 5% to 15% in any particular year improvements as a result of all the activities we are doing around, Gen AI.

Thank you.

And our next question comes from Jason Helfstein at Oppenheimer. Go ahead, Jason.

Hey, thanks. Two questions. Just first, on the first bid, second bid DSP issue, are any is this a risk now with any other DSPs or they’re all now on first bid? And then second, can you talk about the investment just behind the buy side products, both R&D, sales and just kind of how that plays out, I guess over the next 12 to 18 months? Thanks.

Sure. I will take the first part. So yes, the DSP change was the last one to go from first and second to solely first. So, as I pointed out mid last year, this is something that many other DSPs had already moved to. So this is really the final transition with respect to this auction change. Great. I’ll turn over to Rajeev for the investment side.

Yes. Thanks, Steve. So, yes, Jason, from an investment perspective, we plan to aggressively take our SPO and activate curation, commerce media, all of these products to market. We made investments in 2024 in terms of our sales team to be able to do that. We are going to continue to make investments in 2025, expanding our sales team. I think we’ve got pretty good coverage on the holdcos [ph], but there’s a growing roster of brands that want to engage in SPO that are interested in Activate and mid market agencies, have a growing share of the overall spend in the ecosystem. And so that’s a key target for us. Steve mentioned this earlier, but with respect to Gen AI, we find that there are obviously productivity opportunities, right? And so a lot of what we are focused on, in addition to customer facing solutions is solutions that make our own team, more efficient. So for instance, Gen AI solutions that our customer success team can use, so that they don’t have to manually handle queries from customers, but instead we can automate those things. So I think we are going to find some, some good opportunities, to shift the mix of what our team is focused on, to be more increasingly focused on, on the buy side of the ecosystem.

And our next question comes from Matt Swanson at RBC. Please go ahead, Matt.

Thank you. Maybe more of an ecosystem question in terms of CTV. Rajeev, we've always talked about the idea of it looking a lot more like the open Internet over time, kind of everything progressing to better bidding at scale. Strategically, is that still kind of like where you’re set up for? Obviously, you're seeing some, some success in more areas than just that. Just curious on how you kind of think the CTV ecosystem evolves at this point.

Sure. Yes. So we are still in the transition from predominantly insertion order based buying, moving into the, let’s say, the preliminary, or the nascent transaction types and programmatic. And so that's programmatic guaranteed, and one to one private marketplace deals. We are seeing, however, more and more opportunity around, auction packages, which is multiple publishers, in a single deal. And so we talked about that in terms of CTV marketplace, where we've set up a marketplace where buyers can come in and for instance, buy Hispanic audiences or Gen

No. I appreciate that. And then Steve, I know you always take a lot of pride in your adjusted EBITDA, so I'd throw another question to you on that. In a quarter like this where you have a revenue shortfall and adjusted EBITDA still beats, is that just a testament to how lean and efficiently the business is running or are there levers that you’re pulling mid quarter to kind of control costs on that side?

Thanks, Matt. I am very proud of what the team has accomplished and absolutely, it’s been a function of long-term focus on efficiency. We've have a very long multi year record of delivering EBITDA and a great fourth quarter. And ultimately it comes down to understanding the levers over time, but it’s really about the structural aspects of how we built our business. And it starts out with the gross margin line. A decade ago, we decided to own and operate our own equipment and we’ve been dealing the benefit of that ever since. That’s allowed us to get leverage throughout the period, throughout the calendar year. And we certainly saw that in 2024 as you see the basically cost of revenue line didn't really increase that much year-over-year, while the impressions actually increased 20%. So it's a function of a lot of hard work focus and a DNA that delivering incremental top line and bottom line is what we focus on. And so we are set up to do that and I fully expect we are going to continue to operate through that priority lens going forward.

Thank you.

Thanks, Steve. Our next question comes from Kenneth Wu at Wolfe. Please go ahead, Ken.

Thanks for taking the question. Should we expect headline growth in the second half of '25 to converge to the 50% for business growth once you’ve lapped the DSP buyer impact?

Sure. Thanks, Ken. The -- just as a reminder, we -- the underlying business is very well set up to grow 50% plus through the year. I commented in the prepared commentary that thus far in the quarter, we are hitting that mark 50% plus. And so that will certainly continue. Now as we go into the second half, as a reminder, we will be lapping a significant political spend that we achieved in the second half of 2024. And we were able to achieve that because we are at scale. A significant part of that political spend was via CTV. And so we certainly were well-positioned. We developed a Gen AI product to actually incrementally charge that opportunity. So we will be lapping that. But I fully expect on a reported basis, the second half of '25 versus the second half of '24 will be in the high single digits. And it will just depend on sort of the sequencing as the year progresses in terms of the breakout above that level.

Thank you. And for my follow-up, how should we think about the incrementality of new partnerships to 2025 revenue growth?

So we have quite a few incremental new partnerships that we've been developing. And so, it’s we are rolling those out, every month, every quarter. So I do expect that to add incrementality in the second half, particularly around the CTV business, that Rajeev and I have commented on.

Thanks, guys.

Thanks, Ken.

And our next question comes from Mauricio Munoz at Raymond James. Please go ahead, Mauricio.

Yes. Thank you for taking my questions. Just going back to the success you experienced in 4Q and CTV, how -- what percentage of that or what part of that mix would you attribute to the strength in the U. S. political season in the fourth quarter? How do we think about CTV as a contributor going forward? And then I have a follow-up.

Sure. So, CTV political was very important for us. But just to step back, overall, if we exclude the CTV political component of CTV revenues, we still doubled year-over-year in revenue. So the underlying momentum is very strong in our CTV business. And so with the political component even faster year-over-year growth rate. And over the course of 2024, political represented about 6% of revenue. And within the CTV political spend, that represented a little under a third of the total CTV revenue. So an important part of the business and reflects the opportunity that we had in front of us and we capitalize on that. Now going forward, I expect us to be able to continue to develop and grow our CTV business. So I’d expect from the unadjusted without political base to grow the teens, high teens, over time in 2025 and beyond.

Yes. Mauricio, maybe I’ll just add a qualitative comment to that. We see a couple of trends in play here. So one is that every publisher is moving towards having more than one SSP in CTV. I don’t think they’re going to have 15 or 20, like, they might in the display world. But they’re certainly going to have more than one. And part of that is more bids coming for their inventory leads to more yields. I think that’s a very clear and resonant point across the ecosystem in terms of how open Internet advertising is trading. So if you have more than one SSP, you’ve got multiple bids coming in for your inventory and the publisher generates more revenue. And then second, because of our SPO and Activate relationships, our curation platform, our commerce media platform, if a buyer wants to buy against Instacart data or Western Union data, then those bids are going to flow on our platform. And so, of course, a streamer like Roku, for instance, who’s recently just made this transition, as if kind of shut down their own walled [ph] garden and moved to a more open stance with CTV and clearly reaping the benefits of it, those are going to drive significant growth opportunity and runway for us.

That was very helpful. Thank you. And then my follow-up is just on the competitive dynamics. I just wanted to get your thoughts on the competitive landscape. Obviously, from the SSP side, but also as the lines between DSPs and SSPs continue to blur? Thank you.

Sure. Yes. I can take that. I mean, I think, look, there’s -- those lines blurring is not necessarily new. If we think about Google DSP, obviously, they’ve been on buy side and sell side for a very long time. [Indiscernible] right, is on both the buy and sell side. Yahoo, historically, was on both the buy and sell side. They’ve exited some of that. So Trade Desk, of course, with OpenPath. So what we are really focused on is how to make the digital advertising supply chain efficient, transparent, performant, give more control to our end customers in order to drive their own business. And that is from the bottom up, right, from the infrastructure ownership that Steve mentioned, our control of the network layer, the hardware layer, as well as the software layer and now building technology applications, including some of the Gen AI applications we are working on, to provide that end-to-end control and visibility. So we think that is a winning combination and winning formula, for what both buyers and publishers want to see in order to continue to drive and scale their businesses. At the same time, I would say the industry continues to consolidate, right? So we are seeing uptick in M&A. So we feel that given our financial profile, given our scale of relationships, technology integrations over 1,900 publishers, we are in a very strong position to be able to, to drive that consolidation.

Great. Thank you.

Our next question comes from Eric Martinuzzi at Lake Street. Please go ahead, Eric.

Yes, I wanted to -- you gave us a comp for Q3 and Q4 where you excluded the large DSP and the political spend. I think it was 17% in Q3 and then 16% in Q4. Could you remind me what were those numbers in Q1 and Q2 of '24?

The political was primarily a second half development. And so-- and the DSP component was didn’t start until the second half. So it’s really only relevant in the second half of 2024. And because our reported numbers would have obscured that, that's why we decided to break it out beginning in the third quarter. And as a reminder, the first quarter is trending right on that trajectory, 15% plus for roughly two-thirds of our revenues. And so really the only noise that we have right now is related to this one DSP. And beginning, the start of the third quarter, it’ll be on an apples for apples basis.

And, Eric, if I could just add, just stepping back, as we mentioned that impacted DSP is primarily a display buyer. So the practical impact is that we are deleveraging away from the more cyclical display business and releveraging towards many of the secular growth areas that we've called out, CTV, mobile app, commerce media, curation. And you could see, obviously, the strong growth there. So while we didn’t consciously make this choice, after we lap the transition in Q2, we are going to come out of it with a faster growing business and more of our resources aligned to the secular growth areas. And I think that’s unequivocally a good thing.

Got it. Thanks.

And there are no more questions in the queue. At this time, I’m going to turn the call back over to Rajeev for closing remarks.