Hello everyone, and welcome to PubMatic's first quarter 2021 earnings call. My name is Kara, and I will be your operator today. Before I hand the call over to the PubMatic team, I'd like to go over a few housekeeping notes. As a reminder, this webinar is being recorded. After the speaker remarks, there will be a Q&A session. If you plan to ask a question, please ensure you've set your Zoom name to display your full name and firm. If you would like to ask a question during this time, please use the raise hand function located at the bottom of your screen. Thank you for your attendance today, and I will now turn the call over to Stacie Clements with The Blueshirt Group. Thank you, operator, and good afternoon, everyone. Thank you for joining us on PubMatic's earnings call for the first quarter ended March 31st, 2021. Joining me on the call are Rajeev Goel, Co-Founder and CEO, and Steve Pantelick, CFO. Today's prepared remarks have been recorded, after which Rajeev and Steve will host live Q&A. A copy of our press release can be found on our website at investors.pubmatic.com. Before we start, I would like to remind participants that during this call, management will make forward-looking statements, including without limitation, statements regarding our future performance, growth strategy and financial outlook. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other 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 annual report on Form 10-K for the year ended December 31st, 2020, which is on file with the Securities and Exchange Commission and is available at investors.pubmatic.com. Additional information will be set forth in our quarterly report on Form 10-Q for the quarter ended March 31st, 2021. 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 today is as of May 13th, 2021, 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. These non-GAAP measures are presented for supplemental informational purposes only and should 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. With that, I will now turn the call over to Rajeev. Thank you, and welcome everyone. We delivered another quarter of strong results with performance on both the top and bottom lines above guidance, driven by multiple growth drivers, continued rapid innovation on our platform, and a distinct business model that addresses a large and rapidly growing digital advertising market. We had a great quarter as we continued to increase our market share. Revenue in the quarter grew 54% year-over-year, totaling $43.6 million. Net income in the quarter was $4.9 million or 11% profit margin, and adjusted EBITDA was $14.5 million or 33% EBITDA margin. Looking ahead, we believe we are well-poised to continue gaining market share as a result of two primary factors, the multiple organic growth drivers we have in place across our business, as well as the economic reopening in the U.S. and in other markets around the world. Consequently, we are raising our guidance for the full year. We now expect revenue growth of approximately 33% year-over-year, and adjusted EBITDA margin of approximately 28%. Underpinning our outstanding results is our owned and operated cloud infrastructure built specifically for digital advertising. This infrastructure-driven approach serves as a flywheel that allows us to grow top-line revenue, leverage our largely fixed cost structure to drive profitability, and reinvest in innovation for our customers to again, drive top-line revenue. Let me further explain. Digital advertising is unique in its real-time and data-intensive nature. This has never been more true with the rapid increase in impressions caused by header bidding and the rapid growth in media consumption driven by the pandemic, particularly in mobile, video, and CTV. We believe that an infrastructure-driven approach to digital advertising creates outsized value. Being the best at efficiently collecting and analyzing data requires controlling all layers of the infrastructure stack: network, hardware, and software. Our approach provides us with several key benefits and a significant competitive moat compared to our peers. First, we're able to generate superior outcomes for our customers, specifically increased revenue for our publishers and higher advertising ROI for media buyers. Alternatively, operating in public cloud infrastructure only allows for control of the software layer, which would limit our ability to generate superior customer outcomes. Second, controlling all layers of the tech stack allows us to rapidly innovate, which benefits our customers who rely on us for best-in-class technology. We deploy new capabilities, features, and algorithm updates on a daily basis across our global infrastructure. In an evolving landscape, we believe our platform enables continuous innovation and future-proofs our business and that of our customers. Third, by owning all layers of the infrastructure stack, we are well-positioned to continuously drive down costs by becoming more efficient, a benefit to our customers and to us. We have a demonstrated track record of continuous reductions in our unit infrastructure costs, which enables us to deliver a healthy profit while also investing for long-term success. Taken together, we believe our infrastructure-driven approach creates a significant competitive moat around our business. Our efficiency advantage allows us to be transparent with buyers, which in turn causes them to spend more on our platform. As they spend more on our platform, our publishers benefit with increased revenue. Even as our addressable market opportunity continues to grow, PubMatic is delivering outsized revenue growth. In 2020, PubMatic's revenue grew 31% over 2019, well above the digital advertising market's growth of 12%. We expect to deliver outsized revenue growth in 2021 as well, driven by the convergence of three key trends. The economic reopening driving omni-channel growth in digital ad spend, continued growth and evolution of the connected TV and over-the-top streaming ad markets, and continued ad spend consolidation by agencies and advertisers. Let me dig into each of these trends in more detail. Significant portions of the global economy, including the U.S., are set for rapid reopening following the anticipated lifting of COVID-19 related lockdowns as people start to travel, seek entertainment, and dine out. With GDP on the rise, eMarketer is projecting growth in global advertising spend to accelerate from 13% in 2020 to 20% in 2021. Mobile advertising, in particular, is expected to grow 23% worldwide this year, and more than half of our business is mobile. Several verticals tied to the reopening, such as food and drink, as well as style and fashion, are rapidly growing ad spend on our platform. We expect several other verticals that have not yet accelerated to do so in the coming months. We expect these trends to create significant tailwinds for us in 2021. Our omni-channel platform is particularly well-suited for the current environment as advertisers can reach consumers wherever they may be consuming media, at home, at the office, or out and about, as each geographic market we participate in evolves on its own reopening path. Furthermore, we maintain the belief that COVID-19 has pulled forward multiple years of consumer behavioral change as people around the world are transitioning more offline activities to online. We anticipate that many of these consumer behavioral changes will stick, driving further long-term acceleration in digital advertising spend. As a leading provider of omni-channel advertising solutions, we are present where consumers are spending time, at home on a laptop or connected TV, outside of the home on mobile devices, or at the office while working, making us more durable than point solutions. Programmatic OTT and connected TV is another area of rapid growth and innovation that positions PubMatic for continued market share gains. This global market was estimated by eMarketer to be $20 billion in 2020, growing at an 11% CAGR over the medium term. The faster-growing portion of this market is programmatic CTV, estimated to be almost $7 billion in the U.S. in 2021, which equates to year-over-year growth of more than 50%. This impressive growth rate suggests that the industry is early in the transition from linear TV to over-the-top streaming connected TV devices. As a pioneer in programmatic CTV, we are one of the first to introduce a CTV header bidding product, enabling ad buyers to benefit from the same efficiencies they enjoy in other formats using unified auctions. More recently, we have built particular strength in biddable and fixed price private marketplace deals, as well as open market transactions. There are many public examples of major content owners like Disney or NBC and agencies like Omnicom and GroupM speaking to the power and growth of biddable CTV. After almost a year in market, our OpenWrap OTT header bidding wrapper continues to gain momentum and ad buyers are seeing results. For example, a large advertiser ran a head-to-head test using our solution and another SSP's tag-based integration. Our solution outperformed across all relevant metrics, demonstrating significant advantages to CTV header bidding. We produced 40% more bid opportunities and 14x higher total win rates than the tag integration. They also benefited from more efficient CPMs due to transparent and dynamic bid opportunities as compared to fixed fee deals. These are the same types of benefits we have seen from header bidding in all other major ad formats. We also recognize the importance of brand safety and control across all digital formats. We recently announced our fraud-free CTV program for ad buyers, which extends our existing rigorous inventory review process to in-demand CTV inventory. We believe this will enable buyers to embrace the full potential of programmatic bidding and allow us to further accelerate our growth. In the first quarter, we experienced strong sequential growth in our OTT CTV business, growing 55% over Q4 2020, and we monetized CTV inventory from over 80 publishers, including new publisher additions like Meredith Local Media Group and Local Now. These results provide us with a further tailwind for growth as ad buyers continue to shift toward automated biddable buying of this high-value inventory. As buyers make this shift, publishers are meeting their programmatic buying demands while generating increased revenue and delivering increased ROI to advertisers on our platform. The third growth driver fueling our market share gains is the consolidation of ad budgets onto fewer sell-side platforms for greater efficiency, innovation, and transparency. This has been and continues to be a growth driver for our business. Under arrangements known broadly as Supply Path Optimization or SPO agreements, we're able to capture a higher share of agency and advertiser ad spend while better servicing our publisher customers and delivering increased ROI and innovative solutions to ad buyers. A growing portion of our business comes from SPO deals. In the first quarter of 2021, we nearly doubled the share of ad spend on our platform that is via SPO agreements as compared to the first quarter of 2020. We are collaborating with major agencies such as Havas and Publicis Media Asia Pacific to provide a combination of custom data and workflow integrations, new product features, and volume-based business benefits to their advertisers. In March, we announced that GroupM selected PubMatic to be a global preferred SSP partner, with our publisher partners gaining access to unique quality ad spend at scale from their broad portfolio of global advertisers. GroupM will gain programmatic advantages, given more efficient access to globally scaled brand safe inventory across OTT/CTV, mobile app, mobile web, and desktop for video and display advertising. Consolidation continues across the industry, this partnership and others like it will help to ensure that we provide our publisher customers access to a growing share of ad spend from leading global brands. I'd like to turn now to a potential future growth driver that we are investing heavily behind. The industry continues to evolve, we believe the disruption caused by rapid changes to audience addressability and the pending deprecation of the cookie and other anonymous identifiers will benefit PubMatic as the value proposition for the open internet grows relative to the walled gardens in the eyes of advertisers. We have invested heavily behind this opportunity for several years and continue to do so. I'm pleased to share that today, the majority of revenue on our platform now has alternative identifiers to the third-party cookie and Apple IDFA, which underscores the leadership position we have taken in the addressability transition. Having alternative identifiers available at scale, in many cases, identifiers that provide greater addressability than anonymous identifiers like the third-party cookie, provides an environment to drive even greater utilization of our infrastructure. We expect these identifiers to grow the share of spend in the open internet and on our platform in particular. We've achieved this milestone through long-term investment in a portfolio of solutions that together meet the growing and evolving needs for audience addressability. Our Identity Hub solution scaled to well over 175 publishers, including Cox Automotive in the U.S. and Time Out in the U.K., allows them to seamlessly integrate, optimize, and manage multiple leading identity providers globally, such as LiveRamp Authenticated Traffic Solution, and The Trade Desk Unified ID 2.0, along with a dozen others. Identity Hub is also now pre-integrated with our OpenWrap solution, one of the more widely used prebid-based header bidding wrappers, which has been deployed in 34 countries around the world. This solution creates more value for publishers with registered or subscribed users. Our Audience Encore solution allows buyers to access high-quality publisher first-party data to execute effective and privacy-safe advertising campaigns at scale. We have a variety of data partners in the retail, CPG, healthcare, automotive, and other industries. For example, we recently announced a partnership with Samba TV to integrate their extensive first-party connected TV data to deliver TV audience targeting to omni-channel programmatic advertising buyers. This partnership allows European advertisers to reach audiences based on TV viewing behaviors and drive incremental reach by targeting audiences that are not exposed to linear TV advertising. We're also investing in contextual solutions to improve advertising efficacy. Fourth, we are working with Google and the World Wide Web Consortium on Google's Privacy Sandbox proposals, including FLoC. Audience addressability is something that publishers need to solve for, and we understand that it will not be a one-size-fits-all approach. With our long-term investment in this area with a portfolio of solutions, we think we are well-positioned to help our publisher and buyer customers find highly relevant audiences at scale and improve the efficacy of the open internet as compared to today. Together, these trends are fueling growth across all segments of our customer base in all ad formats we serve. As a result, a corresponding increase in utilization of our infrastructure drives our profit growth and cash generation. As we look forward to the rest of the year, we are confident in our strategic growth drivers and our ability to continue to gain market share. We outperformed in the first quarter. This, coupled with advertising dollars beginning to flow back into the ecosystem as global economies recover, gives us the confidence to raise our full-year outlook. We are successfully executing against multiple organic growth drivers, leading to strong growth and market share gains, and we expect that to strengthen as the economic reopening in the U.S. and elsewhere accelerates. Our continued success fuels our ambition for significant market share gains in the years ahead. We have a differentiated cloud infrastructure platform that allows us to drive strong customer retention while rapidly innovating to grow our addressable market of ad formats and devices. We have a proven ability to consistently drive profitable growth with strong cash flow, which we believe positions us well to keep innovating and delivering for our customers and our shareholders. I see a lot of growth opportunities ahead of us, which I am excited about. I'll now turn the call over to Steve Pantelick to walk through the detailed financials. Thank you, Rajeev, and welcome everyone. As you see from our reported numbers, PubMatic achieved outstanding financial results with first quarter revenue and adjusted EBITDA above guidance, growing significantly compared to the prior year, and importantly, growing organically faster than the market. At the same time, we continue to invest for future growth. We are expanding our solutions across platforms and formats, adding new customers, increasing the capacity of our infrastructure, and expanding our engineering and go-to-market teams. We believe these investments give us a powerful network effect with more visibility to scale, drive increased revenues from existing customers, and operating a highly profitable platform that benefits our customers and us. Revenue in the first quarter was $43.6 million, an increase of 54% over Q1 last year. Net income was $4.9 million, an increase of 444% over the prior year, and adjusted EBITDA was $14.5 million, 183% higher than Q1 2020. These top and bottom line results reflect the strength of our platform and high profit flow through embedded in our business model. Before we jump into the quarterly financials, I'll recap the five key financial drivers that we believe will drive the long-term success of our business. First, we have one of the few scaled global businesses in our highly fragmented industry that offers an omni-channel solution for publishers and buyers. Our specialized cloud infrastructure and global go-to-market presence is geographically distributed in all major ad markets apart from China. This framework allows us to continue expanding across the world with existing and new customers, both effectively and efficiently. Second, the combination of our usage-based model and our ability to retain and grow revenues from existing customers provides a high degree of revenue stickiness and corresponding visibility. Third, we have built a business that consistently delivers high gross margins. Fourth, our business model is embedded with durable structural advantages emanating from our owned and operated infrastructure and offshore R&D that enables us to cost effectively invest in technological innovation. Lastly, we generate consistent cash flow through rigorous working capital management and efficient capital expenditures. Now turning to the highlights for Q1. Our revenue growth was driven by broad strength across advertising verticals, demonstrating our ability to participate in the economic reopening occurring in the U.S. and other markets we participate in. Apart from the political and travel ad verticals, spending in nearly every vertical was up 50% or higher versus Q1 2020. Notably, through the first quarter, we saw significant sequential improvements in such ad verticals as automotive, food and drink, and style fashion as reopening trends emerged. Ad spending was particularly strong for our mobile and omni-channel video businesses, with combined revenues growing 83% year-over-year. As a reminder, omni-channel video is the sum of online digital video plus OTT/CTV. In aggregate, our mobile plus omni-channel video revenues represented approximately 63% of our total revenues in the first quarter. Looking at just the OTT/CTV format, we delivered 55% growth sequentially versus Q4 2020, with the number of publishers monetizing inventory via OTT/CTV formats growing to over 80 in the first quarter. Since we first launched our header bidding solution for OTT/CTV in mid-2020, we have seen rapid growth in revenues. In the first quarter, we also saw continued recovery in our desktop business with revenue growth of 26% over Q1 of last year. Our Verizon Media Group revenues grew over 20% year-over-year and represented approximately 20% of total revenues in the first quarter. As a reminder, this concentration level is down from 2019, when VMG represented 28% of revenue. We continued to benefit in the quarter from strong existing customer revenues. For the 12 months ending Q1 2021, net dollar-based retention was 130%, significantly up from the comparable period a year ago. Another long-term growth driver continues to be our Supply Path Optimization deals with advertisers and agencies. We have seen these relationships serve as a catalyst for buyers to consolidate ad dollars onto our platform, with spending coming via SPO deals nearly doubling since Q1 2020. To rapidly scale and take advantage of these growth opportunities, we continue to invest in increased platform capacity. As a result, we processed over 18 trillion impressions in the first quarter, double what we processed for the same period last year. Turning to our Q1 gross margins. We delivered 72% margin compared to 65% in the prior year. Our long-term strategy of owning and optimizing our purpose-built infrastructure enables us to reduce our unit costs. Illustrating this point, we successfully reduced our cost of revenue per million impressions processed by approximately 40% year-over-year. Once we have implemented our targeted capacity expansion at a point in time, we achieve leverage because our platform costs are largely fixed in the near term, typically a quarter out. When we exceed our revenue targets, as we did in Q1 2021, we benefit from high flow through to profit. With respect to our Q1 operating expenses, the combination of increased headcount for growth, incremental public company costs, and stock-based compensation resulted in operating expenses of $24.7 million, up 43% year-over-year. Net income in the first quarter was $4.9 million, up 444% year-over-year. It was 11% of revenue, substantially higher than the prior year net margin of 3%. Q1 diluted EPS was $0.09. Adjusted EBITDA in Q1 was $14.5 million, or 33% of revenue, compared to 18% of revenue in the prior year, primarily due to the high flow-through from strong revenue ahead of plan and the cost leverage we achieved on our platform. To summarize, our strong quarterly performance was a result of several key drivers. Acceleration of mobile and omni-channel video driven by the increase in open internet activity globally. Strong spending across nearly all ad verticals. Increased revenues from existing customers supported by Supply Path Optimization agreements signed in 2019 and 2020. Our targeted investments in people and platform capacity. Turning to our cash flow. We generated net cash from operating activities of $12.7 million for Q1 2021. We ended Q1 2021 with cash and equivalents, and marketable securities of $110 million. Now on to our Q2 and full year 2021 guidance. Overall, given our strong Q1 performance, latest trends in Q2, and increased visibility for the balance of the year, we are increasing our full year guidance for revenue and adjusted EBITDA. To set the context, we are experiencing favorable macroeconomic conditions. At a fundamental level, we believe that the total amount of time people spend online has accelerated faster than expected. Of course, it remains to be seen to what degree this current acceleration of online behaviors will continue and when the pandemic will end. Nevertheless, we are seeing the preliminary stages of a robust reopen in the U.S. And in selected major ad markets around the world, and we believe this trend will benefit PubMatic and its customers. Currently, in Q2, we are seeing sequential progress compared to Q1. We anticipate an above average favorable year-over-year comparison as we will be lapping the early stages of the pandemic when advertising was significantly impacted last year. As referenced earlier, we see encouraging signs with respect to reopening tailwinds helping our revenues. Partially offsetting these positive trends is the impact from Apple's elimination of IDFA, which did not occur in Q1 as originally anticipated and is now rolling through the ecosystem. We have factored the IDFA impact into our guidance. Because we are an omni-channel platform, we are well-positioned to partially offset this impact as advertisers shift to alternative high ROI formats and channels that we serve. Looking at the full year, we are raising our prior guidance because of the solid momentum we're currently seeing. It is important to note, should inflation occur and CPMs increase for advertisers, our usage-based model allows us to participate in that revenue upside. That said, we remain prudent and keep a slightly conservative stance due to the combination of uncertainty around macroeconomic conditions and the reality that some parts of the world are still suffering from the worst effects of the pandemic. Also, keep in mind that year-over-year percentage comparisons in the second half of the year may appear less robust as we lap very strong growth that included one-time effects such as carryover spending from the first half of 2020 and Q4 political ad spend. On a two-year stack basis, i.e., if we add our 2020 second half growth, plus our guidance for the second half of 2021, the total cumulative revenue growth is anticipated to be 67%. On the investment side, for the remainder of the year, we plan to add more capacity and people than originally anticipated as we see new opportunities to drive our profitable growth. We also expect incremental costs related to the return to our offices around the globe and higher T&E as our team reengages in person with customers around the globe. Overall, we expect our operating expenses on an absolute dollar basis to increase over the course of 2021. In terms of specifics. For Q2 2021, we expect revenue between $45 million- $46 million, a range of 70%-75% year-over-year growth. We expect adjusted EBITDA between $14 million and $15 million or above a 30% margin. For the full year 2021, we are raising our revenue target by $15 million and now expect revenue between $195 million and $200 million or 31%-34% year-over-year growth. We are also raising our adjusted EBITDA target by $9 million and expect adjusted EBITDA between $54 million and $58 million or 27%-29% margin. For the remaining three quarters of 2021, as a reminder, we are incurring new public company costs of approximately $6 million. We are increasing our full year capital expenditures to capture the increased growth opportunities and make advanced purchases to mitigate risk of chip shortages over the coming nine months. As a result, we expect to have CapEx between $23 million and $27 million for the full year. It should be noted, we expect a significant amount of this accelerated capacity to largely come online in Q3, and consequently, there will be short-term below-trend Q3 gross margin due to higher depreciation costs, but which will normalize over the succeeding several quarters. We don't see this affecting our calendar year gross margin rate target. Overall, we expect to increase the total number of impressions processed in 2021 by over 60% compared to 2020. In closing, we are pleased with our progress in the first quarter of 2021, but we are even more excited about the opportunities ahead of us for the remainder of this year. We are proactively taking advantage of the shift to identity in the open internet. We are growing our mobile and omni-channel video businesses, expanding our SPO relationships, increasing revenues with existing publishers, and adding publishers in existing and new geographic markets. Our track record of driving profitable revenue growth and cash flows allows us to continue innovating and delivering for our customers and shareholders. We believe we have the right platform and the right approach to be at the forefront of our industry. With that, I'll turn the call over to the operator to open it up for questions. Thank you, Steve. As a reminder, you can ask a question by raising your hand located on your dashboard. Okay, your first question comes from Brent Thill at Jefferies. Brent, you're on the line. Good afternoon, guys. Thanks so much. Maybe one for Rajeev and then a follow-up for Steve. Rajeev, just on the overall demand environment is obviously really robust, and I think many are asking the durability and the sustainability of what we're seeing and what you're seeing, and signs that you think this is more durable than just a quick flashback. Sure. Yeah, absolutely. I think we see multiple signs in terms of the durability of our model, as well as the durability of spend growth, and therefore, our revenue. I called out a number of reopening verticals that are growing on our platform, like food and drink, style and fashion, automotive. There are other verticals that have not yet accelerated that are tied to the reopening. We expect those to start to accelerate. At the same time, all of the verticals that grew very rapidly last year during the pandemic, those continue to be strong. I think that really signifies that consumer behavior has shifted quite a bit from offline activities to online activities. We do think there's been a significant pull forward or shift in that consumer behavior that will stick. That's what we're seeing in the macro environment. I think where we have positioned our business is really to benefit from all of these trends. I think what we've shown is that we have a very diversified omni-channel business. Whether the consumer is at home, watching a connected TV device or on a laptop, or they're out and about on a mobile device, or now maybe going back to the office, we're able to be in front of that consumer on the websites and media that they're consuming as reopening happens, as guidance shifts, like we just heard from today from the CDC. I think we're gonna be in a strong position to be with that consumer where they're consuming media, and then bring advertiser spend to the platform as a result. Great. Real quick for Steve, just good first half expense control and EBITDA growth, but I think we all completely understand they have more expense coming back into the model given the return. Is there anything else in terms of big investments we should consider that will come back that will impact EBITDA in the second half of the year? The investments that we do anticipate are already factored into the guidance that I've given. To reinforce the points that I made, we see tremendous growth opportunities, so we continue to invest in people, particularly in technology, and go-to-market folks around the world in specialized areas like CTV. We are absolutely focused on investing in growth as number one, and that is for people. Also, as I indicated, continued capacity expansion. With respect to sort of the reopening costs, people going back into offices, we'd assumed a normalization in the second half of the year. I currently don't anticipate any surprises. Thank you. Thanks, Brent. Your next question comes from Justin Patterson at KeyBanc. Justin, you're on the line. Thank you very much, and hope you're all healthy and well. Rajeev, could you talk about discussions you've had with advertisers and publishers, and just how those have evolved around both the iOS changes and the Privacy Sandbox proposals? Is this something that's influencing the pace of change in the industry and helping with both adoption of Identity Hub and Audience Encore? Then for Steve, how should we think about the returns around the CapEx investments and the opportunities to grow impressions ahead? Thanks so much. Yeah, absolutely. Hey, Justin. Thanks for the question. I would say, broadly speaking, there's a degree of iteration and experimentation across the ecosystem as the whole industry transitions from anonymous tracking, whether it was the third-party cookie or the Apple IDFA towards a different set of solutions. I think what's clear is that there will not be a one size fits all kind of single solution. What we are doing with publishers and buyers, whether it's advertisers or agencies, as you mentioned, is really to position ourselves to be at the forefront of innovation and be leading the conversation in the industry, and innovating with our customers and with our partners. The way that we have approached that, and we've been investing here for two or three years now in anticipation of this change coming, is to build out a portfolio of solutions. I think you see the strength of that in the metric that we shared, that the majority of revenue on our platform now has alternative identifiers. I think what's particularly exciting about that is these alternative identifiers are, in many cases, better or more granular than the past identifiers, the anonymous identifiers, and they also include consumer consent. The consumer is aware of what's happening, and they have a choice to make in that process. I think what we're going to find is that the open internet will take share as we come through this transition. Our goal is to make sure that PubMatic, in particular, continues to grow its market share. Justin, with respect to your question around return on investment on our capacity expansion. We've been managing our owned and operating infrastructure for close to a decade. We've become very proficient at, A, managing sort of the initial outlay, tying it to the opportunity that we see and then finding ways to optimize it. As a reminder, our gross margin has averaged over a nine-year period, 70% or higher. It's a function of focus and then, of course, ensuring that we are always taking a very close look at the demand side and the supply side and ensuring that we have the capacity in place. Historically, we typically see return on our investment over the course of succeeding three to four quarters, and I don't see that really changing. One change that I indicated in my comments was that we are doing some advanced purchasing to counteract any potential effect from chip shortages, our growth is not constrained. That will have a short-term impact on gross margin, but I expect that to normalize relatively quickly as our top line grows. Thank you very much. Your next question comes from Andrew Boone at JMP. Andrew, you're on the line. Thanks for taking the question, guys. I have two, please. I think you said SPO deals doubled from a year ago. Can you just dive into what you attribute that increase of SPO to? I guess kind of looking forward, what inning are we in as we think about SPO kind of looking ahead? Then I'll ask a second one after this. Sure. Yeah. Just to repeat the metric, we nearly doubled to almost doubled the share of spend on our platform, coming from Supply Path Optimization deals, SPO deals, in Q1 2021 compared to Q1 2020. The drivers of these are, I think across the ecosystem, there's a desire for the ecosystem to be more efficient and more transparent. I think what we have focused on for several years now is really to position PubMatic to be the SSP of choice for the buy side of the ecosystem. Because if we can do that, we can generate more revenue for our publisher customers. We've really focused our platform on doing that. It starts with our infrastructure advantage, owning and operating our own infrastructure. Steve highlighted some of the ways that we make that very efficient. That efficiency allows us to be very transparent with buyers. Buyers, of course, are craving transparency because there has been a history in this industry of arbitrage or opacity. We can go to the buyers and say, "Hey, look, we can show you all of the things that you want to understand about where your media spend is going and how those budgets are being allocated." Second, because of that efficiency, we're also able to make our partners more efficient. The buyers that we work with, we're able to make their systems more efficient because of the efficiency of our platform, what inventory we choose, what parameters we decide to send to the buyers. Lastly, we have a global omni-channel platform, which means we're able to meet the needs of many buyers across a variety of ad formats and geographies. I think all of those things combined make us a very compelling choice for agencies and for advertisers to consolidate spend on. To the second part of your question, I think we're pretty early still in this trend. I could see over the next several years, getting to maybe the majority of spend on our platform or half of the spend on our platform being through these Supply Path Optimization agreements. I just wanted to go back to Justin's question on kind of 50%+ of revenue now from alternative IDs. Can you talk about kind of the benefit to CPMs there, Steve? I think the guide kind of implies kind of a mid-teens kind of decline in CPMs if I think about 60% impression growth. Secondly, how does that get to 100% kind of before 2022 and the deprecation of cookies? Is that a realistic goal, or how do we think about full coverage? Well, there's a couple questions there, but let me first focus on some of your model questions on the impact for the full year. We anticipate adding significantly more than 60% impressions. I really don't see any significant degradation to CPMs. It's an evolving picture, depending on when capacity comes online. I'm feeling very positive about the status of CPMs. With respect to the rate at which identity comes into play, it really is a function of the overall ecosystem adopting the core principles. The reality is, I think publishers in the open internet recognize the significant upside. We have multiple case studies and examples where when you bring in identity into the open internet, CPMs absolutely go up. Net-net, I'm not concerned about CPMs. In fact, it's really been quite stable for the first quarter, our CPMs this year relative to last year. I would expect a normal cycle to unfold. One other point that you didn't ask, but I'll add with respect to inflation, if inflation does affect CPMs, because we have a usage-based model, we will be able to participate in that scenario. Andrew, on the other part of your question, we've reached that point where the majority of revenue has alternative identifiers, and that rate is growing pretty rapidly. I don't see it as our needing to get to 100%. We'll, of course, continue to push that higher towards that. The reason is that advertisers will go to where the opportunity, the ROI lies. If the majority of revenue has these alternative identifiers, and we can hopefully lead the industry in this area, then I expect advertisers to shift their ad budgets to those impressions that have these identifiers. That's pretty similar to what we saw with GDPR in Europe a couple of years ago, where not all impressions were consented out of the gate. Those impressions that were very quickly got bid up and started to accumulate the lion's share of advertiser budgets. All right. Thank you, guys. Thank you. Your next question comes from Andrew Marok at Raymond James. Andrew, you are on the line. Hi, guys. Thanks for taking my question. You've talked a bit about some of your investments that you've been planning to make. I guess, could you give us a little sense of kind of the prioritization of some of those investments? With the reopening strength kind of coming back, is there any alteration to your thought on your go-to-market strategy or any particular pockets that you wanted to lean into on that? Andrew, do you want to take the first part? Yeah, I can take the second. Yeah. I'll take the first thing. In terms of the prioritization, absolutely, growing the size of our technology team in India is a priority. Adding select go-to-market professionals around the globe, driving our identity solution, driving the CTV business, and then, of course, the normal support functions around the globe. What I'll add is we added about 40 people in the first quarter, and we anticipate to continue to add people throughout the course of the year. People that are gonna help us take advantage of the significant growth opportunities ahead of us is sort of priority number one. Priority number two is to keep on increasing capacity of our infrastructure. In the first quarter, we nearly doubled the number of impressions we had versus last year, 18 trillion that we processed. We expect to keep on expanding that through the course of this year. We're gonna front-end load it a bit because of the potential exposure around chip shortages. It's really those two areas that we're gonna focus on. Focus on growth. We have a very profitable business model, last year was our ninth straight year of adjusted EBITDA profitability. We're confident that we're gonna be able to grow profitably. Andrew, on the second part of your question, I think one of the big shifts will really be around our employees, our team members, making a mental adjustment to being back in the office and in entertainment with clients, engaging with clients in person. I think we've all gotten very used to the Zoom approach to conducting meetings. I think that will be a mental shift that will take some time. In terms of the buy side and the sell side, on the sell side, I don't see a shift in terms of the publishers that we're going after, either who they are or the channels that they're in, mobile, CTV, et cetera. On the buy side, I think there will be an expansion of verticals, which is already underway to go after some of the reopening verticals that have been dormant for maybe the last 12-14 months. Travel would be a good example of that or food and drink, where we will be more active in terms of engaging with advertisers around Supply Path Optimization. I think the key benefit here is that structurally, we have a global platform. We're an omni-channel platform. There are no significant structural changes that we need to make because I think we'll continue to be very present wherever the consumers are and then wherever the advertisers want to put ads in front of those consumers. Great. Thank you. Your next question comes from Jason Helfstein at Oppenheimer. Thanks, guys. Two questions. One, how are you thinking about servicing CTV publishers as they try to move more spending into a digital upfront and kind of the idea of a private marketplace? Because that is still where the bulk of the money is, and so how you try to capture that. Secondly, how many preferred SSP deals would be practical for a large global agency? You highlighted GroupM. Should they have one deal like that? Should they have three? Just how do you think about that? Thank you. Yeah, absolutely. With respect to, let me start on your CTV question, and the upfront. We're seeing strong growth in our CTV business in both private marketplace deals as well as open market spending, which we're very excited about. I would say that we view ourselves really as pioneering the future of CTV, building the foundation for where the market is headed, not necessarily where it is today. I think we would all probably agree that the industry is still very early in the transition of TV from linear to digital. The majority of TV spend is still linear, although it's transitioning rapidly. Today, the lion's share of digital ad spending is on insertion orders or fixed price PMP deals, and this is what's driving transactions in the upfronts. I would expect to see more data-driven decisions being made in the future, whether it's audience targeting or it's CPM and pricing decisions. We are starting to see the transition to a bid environment emerge, and we're firmly pushing the industry in this direction with our own technology and our own approach. I think even Roku commented on this in their earnings call last week, where they mentioned that they see the market evolving to include a spectrum of advertiser prices managed in an auction environment. I think that's something that we've really been saying from the beginning. I think this approach may be a little bit slower to evolve, but we see it as ultimately being a bigger opportunity in the long run. You can start to see that in our results with the spend growing sequentially 55% from Q4 of 2020 to Q1 of 2021. On the other part of your question around how many preferred SSPs an agency might have. I think where we are with Supply Path Optimization is that agencies are moving from having several dozen SSPs that they may be spending across, not by design, but just kind of by happenstance or by accident. That could be anywhere from two or three dozen to, I've seen situations where agencies are spending on 50, 60 platforms globally, to typically a single-digit number. That number can be anywhere from three to seven SSPs, somewhere in that kind of ballpark. I think it does not make sense for an agency to consolidate down to one single SSP. That would probably create a level of supply chain risk that they don't want to take on. I think there are some variations, enough variations between some of the major SSPs that that's unlikely. I think to really get the benefits around efficiency, innovation, and transparency, it does mean moving down to a couple of SSPs, and that's how we see most of these agencies evolving. Thank you. Your next question comes from Shweta at Evercore. Shweta, you're on the line. Great. Thank you. Let me try two, please. A follow-up on the GroupM partnership. What does it mean for your business where you say GroupM, you are a preferred partner for them. What does that mean? How meaningful is this partnership for you? Second is, could you remind us what SPO contracts usually include? I know there are some volume discounts, what else do contracts typically include? Actually third, if I may, please. How big is travel for you? Do you hopefully see a recovery? You're not the only one. I know The Trade Desk also commented on it. How impactful will it be? How impactful is the recovery going to be for you? Thanks. Sure. Maybe I can take the first two, then Steve can comment on the travel vertical. In terms of what does it mean for GroupM? What it means is that we've entered into a partnership with them, where we are innovating for them, building certain technology capabilities that they need to better plan, better execute, streamline delivery of advertising. We are giving them levels of transparency, data and reporting insights, and efficiency that they could not gain through their normal work with many different SSPs. What that means for us is that we see significant growth in volume of spend on our platform, which in practical terms means we're growing the share of spend that we have from GroupM. As we do that, then publishers want to work even more with us because they know that we're a source of the budgets, the significant budgets, of course, that GroupM has. It's important to note that we've entered into this agreement with them. It does take time to execute and ramp up the rollout of this type of agreement. We have to engage with GroupM and their team members in a variety of different markets around the world. In different countries in Europe, in the U.S., in Asia. That takes time, and that's team member to team member between our local team members and GroupM's. These agreements can take several quarters to sign, and then I would say similar timeframe to start to ramp up. Typically speaking, what do these contracts include? To your second question. They can include volume-based commercial agreements, so things like volume-based pricing arrangements. They can include transparency clauses in terms of data that we'll make available. They can also include custom technology features that we commit to build for a particular buyer. Those would be the main categories of things that a typical deal can include, and some deals will include some or all of those components, and other deals will include others. With respect to your question, Shweta, on the travel vertical, the way that we look at it is that it's actually a net positive for the company because it's been relatively nascent over the last nine months, 12 months, as it has been for most. Overall, as the proportion of the total ad spending, it's in the single digits. Having said that, one thing that I want to emphasize regarding our ad verticals is that we have quite a degree of diversity of spending across all ad verticals. We really do get to participate in many facets of the reopening and of course, continued growth in the leading sectors like shopping and technology, et cetera. Overall, the top six or seven ad verticals that we have represent about 60%+. Very nice, diverse portfolio that we have. I expect travel to become a bigger part of the business over time. Thanks, Rajeev. Thanks, Steve. Thank you, Shweta. Your next question comes from Vasily at Cannonball. You're on the line. Good afternoon. Congratulations on good results. Can you hear me? Yes, we can, Vasily. Okay. Sorry. The question I had was about connected TV. We see some players being demand-constrained, some are inventory-constrained, supply-constrained. I was wondering, as you are growing your connected TV business, where are you on that spectrum? How are you going to grow out of these imbalances, I guess, what the plan is? Yeah, I can take that. Our CTV business, just like any of the other ad formats that we transact in, digital video, mobile web display, mobile app display and video, et cetera, they're all really marketplace businesses built around an auction platform. We have a sell side, and we have a buy side, right? Key to our scaling of any of these formats is to build both in parallel. We are now monetizing CTV inventory from over 80 publishers as of the end of Q1, and we continue to grow the advertiser base. We shared the case study in the prepared remarks earlier as a demonstration of the power of the auction model and the auction approach. Yeah, I think unlike others, given we have an auction-based platform, we don't see the types of temporary constraints that others might see. What would happen in our platform is that buyers would simply bid up the inventory if there was a short-term supply constraint. Because of our usage-based model, we would benefit from that just as the publisher would benefit in terms of greater revenue. We've seen that in practice. I recall many years ago, when Michael Jackson passed, for instance, it was a record day for maybe two years on the PubMatic platform in terms of volume. There was so much media consumption around that event. What it demonstrated is that an auction environment is really the right approach to maximizing the benefit for both the buyer and the seller. That's why, as I said earlier, that's where we're focused because we think that's where the bigger opportunity lies long term. The quick follow-up, if I may. In terms of the CTV inventory, are you more skewed towards linear on linear inventory from the MVPDs or AVODs? Where are you? Yeah. We are focused on the MVPDs as well as, I would say, high-quality audiences or high-quality channels. For instance, we cited TV Space in our S-1 document from late last year. I think we're going after really the Tier 1 and the Tier 2 segments of channels, broadcasters, and apps in the CTV and OTT space. Thank you very much. Thank you. Your last question comes from Matt Swanson at RBC. Matt, you're on the line. Hey, Matt. You might be on mute. You can also press star nine to unmute. Okay. We got you now, Matt. Yeah. I have learned nothing over the last year and a half in the pandemic. Thank you for taking my questions. I apologize for that. Speaking of pandemic, Steve, could you talk a little bit about the recovery and more on, like, a geo- by- geo and vertical- by- vertical basis, what we've learned through these kind of early stages of the recovery that could be applied to some geos and verticals that haven't recovered as quickly? Sure. What we saw in the first quarter was a lot of the beaten-down verticals like travel, style and fashion, home and gardening, all of those starting to come back pretty nicely. I had mentioned in my comments that nearly all the ad verticals that we participate, nearly 20, all of them were on a year-over-year basis, grew 50% or more. It really is a situation where it's not just the stalwarts like shopping and technology that continue to perform well, but many of these others that are starting to burgeon and improve. We saw that steadily through the first quarter. I fully expect that to continue as we go forward. Now, from a geographic perspective, the terrific news from our side is that we are seeing growth in every major region, even in APAC, and strong results in EMEA, et cetera. I think the way to frame out what we are experiencing is that as an omnichannel company with what I call a very robust existing customer base. As a reminder, our net dollar-based retention was 130% for the trailing 12 months. We have the engine of our existing customers, we have the applicability of mobile and video formats in a pandemic emerging world, and we have the benefit of SPO deals coming on board. We really are firing on all cylinders as a company, and we don't anticipate that necessarily slowing down. Thank you. If I could add just one more quick one for Rajeev, it's based around the CTV opportunity and kind of thinking about the fact that all of your competitors also see these TAM growth rates. How do you leverage, one, the advantage of being independent versus some of the competitors in that space? To Steve's point about investing in the space, how do you build competitive moats and differentiation early on to kind of make sure you maintain that position that we've talked about? Sure. Yeah. I think by virtue of being independent, it means that we're unconflicted, right? In terms of serving the needs of our customers. I referenced earlier one of the challenges in the industry has been opacity, arbitrage, things like that. I hear from agencies all the time that one of the reasons they engage in things like Supply Path Optimization with us is that we don't own media, right? We have no incentive to put spend from an advertiser on one impression versus another. We treat them all equally, and we're willing to be very transparent about that. I think independence helps to a very significant degree when you're thinking about branding budgets in particular that are flowing through CTV. The metrics on how to measure the return they're not the same. They're not as clear as they might be in performance-based advertising. Buyers want to know that the technology partners that they're working with are unconflicted and really are looking out for their interests. I think that's really where the independence piece comes into our benefit. In terms of the competitive moat, I think where our moat lies today and will continue to lie is really in our infrastructure-driven approach, where we're able to innovate extremely rapidly because we own all layers of the infrastructure stack. We are shipping code across our global platform on a daily basis. We're making our platform more efficient, more transparent in driving superior outcomes because we own all of that infrastructure. That is really what drives a competitive moat over the course of days, weeks, months, and quarters as we continue to innovate and build a strong reputation in the industry. I think that metric that Steve just shared, obviously the 130% net dollar-based retention, is I think a great metric around how we're performing in that regard. Thank you. This concludes the Q&A portion of our call today. I'll now turn the call back over to Rajeev for closing remarks. Thank you. Well, I want to thank you all for joining today. We're very excited about our market share expansion and the number and magnitude of growth opportunities ahead of us. Steve and I look forward to connecting with many of you in the coming days. Thank you all.