Hello, everyone, welcome to PubMatic's second quarter 2023 earnings call. My name is Catherine, I'll be your Zoom operator today. Thank you for your attendance today. This webinar is being recorded. I will now turn the call over to Stacy Clements with The Blueshirt Group. Good afternoon, everyone, and welcome to PubMatic's earnings call for the second quarter ended June 30, 2023. 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. If you plan to ask a question, please ensure you've set your Zoom name to display your full name and firm, and use the Raise Hand function located at the bottom of your screen. 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. These 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 reports filed from time to time with the Securities and Exchange Commission, including our most recent Form 10-K and our subsequent filings on Forms 10-Q or 8-K, which are on file with the Securities and Exchange Commission and are available at investors.pubmatic.com. 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 August 8, 2023. 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 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. Now I will turn the call over to Rajiv. Thank you, Stacie, good afternoon, everyone. We drove strong results with outperformance on the top line, driven by the strength of our omni-channel platform and deep relationships with customers and partners. Adjusted EBITDA was $12.0 million, which includes the impact from a demand-side platform customer that filed for bankruptcy. Excluding this impact, Adjusted EBITDA would have been $17.7 million, highlighting the strength of our business model and our ability to drive incremental profit and generate healthy free cash flow. As we highlighted at the beginning of the year, we continue to focus on deepening our customer relationships and making highly focused innovation investments that we believe will position us for outsized share gains when digital ad spend growth inevitably turns upward. This strategy continues to yield results and is strengthening our position within the ecosystem. We continue to build deeper, stickier relationships with customers. At the same time, we are adding new publishers and buyers to our platform. Our total number of active customers grew 13% year-over-year, and we are now monetizing inventory from over 1,750 publishers. In the last year, we've also increased the number of advertisers on the platform by almost 30%. New product innovation is driven by the same land and expand approach. The two major technology launches we have announced this year, Activate and very recently Convert, each significantly expand our total addressable market while providing incremental growth opportunities with our existing customers. We do all of this on our owned and operated infrastructure, which allows us to deliver productivity and efficiency gains that we anticipate will improve margins in the future. These efficiencies also benefit our customers, which in turn drive greater customer success and expansion on the platform. In the near term, the current digital advertising environment continues to be fluid. Many advertisers remain cautious about the economic environment as they closely manage ad budgets in case of a potential recession, particularly around brand advertising. In addition, current supply growth is outpacing ad budget growth. Combined, these two factors are resulting in an industry-wide downward impact on CPMs or ad pricing in the short term. This will normalize once ad budgets stabilize and start to grow. As a result, impression volume on the PubMatic platform continued to grow in the second quarter. However, CPMs were softer than expected, particularly in June, with continued downward trends in July. Despite these headwinds, we remain in a leadership position. We have increased capacity on our platform toward higher value formats, optimizing for impressions that command higher overall CPM. I am confident in our growing list of wanting to gain market share, sustainable financial profile, and our deep technology is widening our competitive moat. What's more, we benefit from industry-wide shifts and consolidation. The current macro environment is forcing publishers and buyers to do more with less. Publishers are looking to better monetize their inventory across a wider set of channels and formats, and they are abandoning homegrown technology and increasingly relying on technology providers such as ourselves. At the same time, buyers are seeking greater efficiencies and control across their digital advertising supply chains. Both require integrating leading global, omni-channel, and transparent technology solutions that are market leaders in innovation. This trend is rapidly playing out across the broadcast industry, resulting in a shift from traditional, guaranteed upfront media buying to a scatter market or programmatic approach. Publishers, including large CTV publishers, are following suit in order to maintain access to advertiser budgets. As we predicted at the time of our 2020 IPO, we are seeing the programmatic disruption of CTV take hold. As a result, we delivered over 30% growth in CTV, and our pipeline of tier 1 streamers is growing. We are in active conversations with dozens of CTV publishers, including some of the biggest names in streaming media. We have new and expanded partnerships with premium video providers, including AMC Networks, DIRECTV, Fox Digital, TiVo, and Warner Bros. Discovery EMEA. Accelerating this pipeline is Activate, which provides publishers with unique buyer demand not available elsewhere. As buyers continue to consolidate via supply path optimization, we've increased our sales focus and investments in this area. As a result, activity from SPO continues to climb. In the 2Q, SPO made up over 40% of activity on our platform, an all-time high. Our long-term expectation has been that SPO would eventually reach 50% or more of total activity, we are well on our way to reaching this milestone. Not only is SPO a significant contributor to top-line growth, it's an important driver of incremental long-term margin expansion. Our continuous reinvestment of profit into targeted innovation underpins our long-term growth strategy. With generative AI, we can further expand and accelerate our innovation. While still early, we are seeing gains in engineering productivity across many use cases, including building proofs of concept for future products. We're also seeing greater efficiencies through use of generative AI to increase automation, such as software testing. As we have already started to shift hiring away from software testing years to feature development engineers. It's still very early in the application of generative AI, and we continue to experiment with many different opportunities. Exactly three months ago, we launched Activate, our end-to-end SPO solution that enables buyers to execute non-vetted direct deals on PubMatic's platform while accessing CTV and premium video inventory at scale. Activate represents a nearly $65 billion expansion of our total addressable market. We couldn't be more pleased with the industry reception and interest that this highly innovative product has received. We're seeing traction and enthusiasm across every region and have active agency and advertiser discussions with several dozen accounts. We are hard at work building more features into the platform based on our vision and customer input. While we are scaling up existing customers and adding new ones, we are investing in building out a global customer success team to help our customers expand their usage of Activate. Over the next couple of months, we will extend the availability of Activate from the Americas and EMEA regions into APAC. Two weeks ago, we launched Convert, our unified solution for commerce media that leverages our global infrastructure, ad monetization expertise, and customer relationships. Over the years, we've built relationships with retail and commerce customers and have gained a deep understanding of the unique technological challenges they must solve for in order to build out their multi-pronged ad businesses. One of the biggest challenges that these retailers or commerce media participants face is the fragmentation of the advertising ecosystem and the complexity that it creates. For example, a grocery store chain may use one platform for their on-site sponsored listings, another for on-site display and video ads, and yet another for off-site audience extension across the open internet. Not only does this require their teams to learn multiple systems, but their advertising data is also proliferated across various partners, causing challenges for closed-loop reporting and optimization, in addition to privacy or data security concerns. For advertisers, this challenge is multiplied across the different retailers they want to work with. Our latest offering, Convert, is built to solve these challenges by centralizing commerce media capabilities in a single self-service platform that offers on-site and off-site monetization across a variety of ad formats, including our newly available sponsored listings capability. For the past two years, we have been building the new platform to work for both traditional retailers as well as high transaction businesses, such as transportation or food delivery providers, travel companies, or any scaled commerce company that processes transactions. We have seen strong interest among commerce companies around the globe, including rideshare provider, Lyft, and Wallapop, a leading European classified listing site. By integrating sponsored listings into our existing omni-channel solutions, CTV, video, and display, all onto a single platform, agencies and advertisers can easily access all available inventory and programmatically deploy working media dollars with the same transparency and fee and pricing structures that PubMatic is known for. Major media buyers like dentsu, IPG, and MiQ are partnering with us to help their advertisers more efficiently scale access to commerce media inventory and data. With the addition of Convert to our growing software suite, including our SSP and Connect, we now offer a comprehensive solution for commerce media that allows commerce media networks to tap into PubMatic's nearly two decades of success, helping media and data owners safely and securely monetize their assets programmatically. With this launch, we are significantly expanding our total addressable market by $10 billion and growing. Much of this TAM expansion is from performance marketing budgets, which will allow us to further diversify our business beyond brand ad spend. I'm extremely proud of our team and all that we've accomplished so far this year. We've increased suppression capacity to accelerate the shift in our business towards higher value formats and channels, while also significantly expanding our TAM with the launch of two innovative solutions. Our land and expand strategy is proving successful, adding more publishers to the platform and building stickier relationships with existing customers and partners. We remain a leader in a rapidly evolving industry, and our investments and achievements today strategically position PubMatic for long-term, durable growth. We believe the industry will continue to consolidate, strengthening the leaders in the space that provide omni-channel global scale, and creating more opportunities along the way for technology innovation to play an even bigger role across the ecosystem. I'll now hand it over to Steve for the financial details. Thank you, Rajeev. Welcome everyone. Q2 revenue was $63.3 million, above guidance, and Adjusted EBITDA was $12 million, which includes an unexpected bad debt expense related to the bankruptcy of a top 10 buyer. Excluding this one-time expense, Adjusted EBITDA would have been $17.7 million, or 28% margin. In Q2, we prioritized the initiatives that strengthened the foundation of our business and positioned us well for long-term growth. We focused on operational excellence, customer relationships, and innovation. We delivered incremental efficiencies from our owned and operated infrastructure and generated $10.8 million in free cash flow. We increased activity from SPO deals to over 40%, an all-time high. Importantly, we launched high-value product innovation with the recent launch of Convert, a unified self-service platform for commerce media, and our buyer-focused Activate offering last quarter. These two new areas are expected to increase our long-term TAM by over $75 billion. Turning to the key revenue drivers in Q2, monetized impressions increased year-over-year, while CPMs were lower. Reflective of the cross currents we are seeing in the macro environment by region and ad vertical, trends varied by format and channel. CTV continued to be a high-growth channel for us, driven by an increase in monetized impressions, partially offset by lower CPMs. Overall, CTV revenues increased over 30% year-over-year. Online video monetized impressions across mobile and desktop also increased, but experienced double-digit% CPM declines that pushed revenues down more than 10% year-over-year. Total omni-channel video revenues, which span across mobile, desktop, and CTV devices, declined 4% year-over-year and represented approximately 31% of total revenues. Display monetized impressions across mobile and desktop grew year-over-year, while CPMs declined. Overall, display revenues were down -1% year-over-year, as compared to -8% in Q1. Display revenues represented 69% of total revenues. In terms of ad verticals, while the top 10 grew 8% year-over-year, we saw a divergence of trends across categories. 4 of the top 10 verticals increased double-digit percentages year-over-year, led by the food and drink vertical at over 30% growth. 5 of the top 10 grew in the low to mid-single-digit percentages, while shopping was the only top 10 vertical that declined year-over-year in the high single digits. On a regional basis, EMEA grew over 16% year-over-year, while the Americas declined by 1%. In terms of the monthly progression through the quarter, April revenues were flat, and May revenues increased year-over-year. June revenues declined, driven by the softness in both online video and display CPMs. Turning to our operational strength. Our Q2 financial results benefited from increased efficiencies and optimization of our owned and operated infrastructure. Overall, impression processing capacity increased over 30% year-over-year, largely driven by software optimizations with minimal incremental CapEx. On a trailing 12-month basis, our cost of revenue per million impressions processed declined by 12%. The combined impact of our operational efficiency and our business model leverage enabled us to achieve outstanding marginal profitability. Approximately 85% of every incremental revenue dollar above Q1's level converted to gross profit in Q2. This capability is a key differentiator for us and has enabled us to achieve consistent profitability for a decade while building the foundation for future growth. In terms of operating expenses, Q2 GAAP OpEx was $45.4 million. Included in this total were incremental costs of $2.1 million related to our acquisition of Martin in September last year, and $5.7 million in bad debt expense related to the bankruptcy of one of our buyers. Excluding these incremental costs, operating expenses increased less than 10% year-over-year. In Q2, GAAP net loss was $5.7 million, or -$0.11 per diluted share. Excluding the impact of the bad debt expense, we would have delivered GAAP net loss of $49,000. Q2 non-GAAP net income, which adjusts for unrealized gain or loss on equity investments, stock-based compensation expense, acquisition-related other expenses, and related adjustments for income taxes, was $1.3 million, or $0.02 per diluted share. Excluding the $5.7 million of bad debt expense, non-GAAP net income would have been $7 million. Turning to cash, we are in excellent financial shape and ended the quarter with $170.9 million in cash and mark of securities and no debt. We generated $15.8 million in cash from operations and $10.8 million in free cash flow. Our consistent cash generation is an important driver for our long-term growth and market share gains, as it allows us to consistently invest in innovation. As of July 31st, we have repurchased 1.8 million shares of our Class A common stock for $27.5 million in cash. We have $47.5 million remaining in the repurchase program. Now turning to our outlook. In light of recent trends, we remain cautious about the next couple of quarters. On the one hand, many advertisers, particularly brand centric, remain cautious about the economic environment and are tightly managing ad budgets in case of potential recession. On the other hand, current ad supply growth is outpacing ad budget growth. In June and July, we saw the impact of these factors with both softening of ad spending by vertical and pressure on CPMs. To illustrate this point, for the combined April, May periods, ad spending for our top 10 ad verticals grew 9% versus the same period last year. For the June, July period, the top 10 ad verticals slowed to 1% year-over-year. A notable change in trajectory was observed in four consumer-centric verticals: shopping, technology, personal finance, and arts and entertainment. In aggregate, they were down several% for the June, July period versus the same period last year. Video CPMs took a 10% step down in July versus June. Display CPMs showed a similar pattern of softening in July. Our outlook for August and September assumes that CPMs remain relatively flat to what we saw in July. Given the progression of CPMs over the last 12 months on a year-over-year basis, this translates to roughly 20% lower CPMs for video and 10% lower CPMs for display in Q3. On the positive side, monetized impressions continued to grow in July sequentially versus June and versus last year. July online video impressions increased over 20% year-over-year. CTV impressions increased in the single-digit percentage range as they were lapping approximately 300% volume growth in the prior July, and display impressions increased 5% over last year. We anticipate these volume trends will continue through Q3. As a reminder, we are proactively taking steps to diversify our revenue mix by adding more higher growth formats and channels. For the first half of 2023, we increased the number of high-value omni-channel video impressions monetized by 15% over the first half of 2022, while monetized display impressions increased 2% over the same time period. While these efforts will provide long-term durable growth and margin expansion, they will not outweigh the soft CPMs that we project for Q3. We anticipate that Q3 revenue will be in the range of $58 million-$61 million. The format and channel projections underpinning this guidance are: display revenues will decline in the single-digit% range, online video revenues will decline by approximately 10% year-over-year, similar to what we saw in Q2, and CTV revenue, which grew over 150% last year, will decline on a year-over-year basis. Also influencing our near-term outlook is the recent bankruptcy of one of our top 10 DSP buyers on June 30th. We estimate that it will take several months for this ad spend to be fully redistributed to other buyers already integrated on our platform. This transition will reduce our second half revenue by $ several million. In the long run, we do not expect this development to have a material effect on our business. Assuming macro conditions do not worsen, we estimate that Q4 revenue will grow sequentially from Q3, consistent with the lower end of typical seasonal trends. In terms of potential upsides, if CPMs declined at roughly half the rate we are currently assuming, we estimate it would add $3 million of incremental revenue per quarter. On the cost side, we've been taking actions to drive incremental productivity across every aspect of our business, and you can see the positive results in our Q2 financials. For example, we successfully added approximately 20% incremental processing capacity by the end of Q2 without a corresponding step-up in CapEx. This accomplishment means that we expect our second half GAAP cost of revenue on an absolute dollar basis, will exhibit very limited quarter-to-quarter sequential cost increases, despite impressions continuing to grow. As a byproduct of our leveraged business model, in the near term, we expect any uptick in CPMs beyond our current expectations to result in strong marginal profitability. We anticipate that over the long run, these efficiencies will have a compounding effect and will drive higher gross margins for us. As previously noted, our Q2 GAAP OpEx includes a one-time incremental bad debt expense of $5.7 million. Adjusting out this cost, we anticipate that Q3 OpEx will be roughly flat compared to Q2. We anticipate that Q4 OpEx will increase sequentially from Q3 in the low single-digit% range, as we add incremental innovation investments supporting our Activate and Convert products. Given our revenue guidance and our optimized cost structure, we expect Q3 adjusted EBITDA will be between $13 million and $15 million, or approximately 23% margin at the midpoint. Turning to CapEx, our capacity optimizations and operational efforts to drive higher value impressions onto our platform have been going well. We expect a further reduction in full year CapEx and now project CapEx at $10 million-$13 million. This would be a reduction of more than 70% compared to our 2022 CapEx of $36 million. We expect these initiatives and others in the pipeline will enable us to incrementally increase free cash flow over time. To summarize, over many years, we've built a resilient and durable business that is one of the world's leading scale global SSPs. In Q2, we continued making progress on the three operating priorities that I outlined last quarter. Number one, generate significant free cash flow. Through the first half of 2023, we have delivered more than 40% of last year's level. It should be noted that with the recent DSP bankruptcy, we expect Q3 free cash flow will be below normal trends, but we anticipate a return to robust free cash flow in Q4. Number two, position ourselves for revenue acceleration when ad spend and CPM stabilize. Despite near-term pressure on CPMs, we remain confident in our long-term growth opportunity, as evidenced by our ability to continue increasing monetized impressions. We are building deeper relationships with publishers and ad buyers, expanding our TAM by bringing innovative new products like Activate and Convert to market, and scaling higher value formats like CTV and online video. We anticipate that our new product offerings will add to our revenue growth in the second half of 2024. Number 3, establish a new level of efficiency in our cost structure that will lead to margin expansion in 2024 and beyond. With that, I'll now turn the call over to Stacie for Q&A. Thank you, Steve. As a reminder, you can ask a question by raising your hand located on the dashboard, or if you're on your phone, please press star nine. In the interest of time, we ask that you please limit your question to one and one follow-up. Let's dive into Q&A. We will first start with Matt Swanson from RBC. Please go ahead, Matt. Yeah, thank you guys so much for taking questions, and congratulations on battling through the math there. I, I guess the first thing is, it really and Convert, and obviously conceptually, it makes a ton of sense for all the value this can add. Maybe building some context for us around that $75 billion. Could, could you just talk about the use cases and customer types that maybe make the most sense early on, and kind of parts of those broad markets you're focused on? Sure. Hey, Matt, good to hear from you. Yeah, let me, let me take that. You know, what we're really focused on, as we've talked about, I think, for the last several quarters in this kind of slower economic period, is really innovating to have the right solutions in place for where we anticipate ad spend growth is really going to take off when, when the market stabilizes. Key amongst those are supply path optimization and omni-channel video, including CTV with Activate, and then commerce media with Convert. Combined, it's about a $75 billion TAM expansion, about $65 billion of that coming from Activate, and then $10 billion and growing pretty rapidly in the commerce media space. I think it's worth noting that, combined, those two more than double, our existing, or double the, the total TAM. Pretty significant increase in, in TAM for us. In terms of the use cases, you know, it really comes down to helping the industry build a more transparent, efficient, and data privacy or data secure, and effective digital advertising supply chain. All of the use cases are, you know, variants of how buyers can get closer to the owners of media, whether that's a retailer or, or commerce media player, or it's a publisher, or how they can get closer to data that could, again, come from a commerce media customer, could come from a publisher or from a third-party data owner, and do, and do that in a, in a, privacy-safe way. By focusing on that efficiency, so, you know, with omni-channel video and Activate, connecting PMPs and PG deals, or in commerce media, helping with on-site monetization of sponsored listings or display and video or offsite monetization, it's really about, you know, helping drive the ROI for buyers so they spend more on our platform, then helping drive more revenue from the media and data, drive more revenue for the media and data owners. We feel really good about how we're using our single platform, single omni-channel and global platform, to extend further into these use cases and also leveraging, you know, a vast array of existing customer relationships. You look at, for instance, our Convert launch, it's IPG, dentsu, MiQ on the, on the demand side, all existing customers, as well as a combination of new and existing folks like Wallapop and Lyft and eBay, some of which we've been working with for many years and some of which are new. If I could ask my follow-up, kind of an actual follow-up on that. When we're thinking about SPO and kind of the traction when you're signing up new customers, like, do you think having a more well-rounded and kind of future-proof platform, having some of these additional solutions like an Activate or a Convert or some of the headway you're making in CTV, when people want to standardize, are those all things that are coming into these conversations? Maybe, you know, benefiting even before they start to really monetize. Yeah, absolutely. You know, a prime example of this is the Convert launch. You see IPG and dentsu. These are, you know, big buyer customers that we previously announced, supply path optimization deals with. We've had a number of conversations with agencies where they've said, "Hey, we need to figure out, we as the agency, you know, what our play is in commerce media. Thematic, what you've just announced sounds great. We're already pushing more of our spend onto your platform, through non-commerce media-oriented, advertising, as well as through Activate. Come in and let's talk more about the commerce media opportunity and how we can do more with you." I think this is kind of part and parcel of what we typically see in an economic cycle, which is everybody has to figure out how to get more efficient, how to do more with less resources, and a key part of that in our industry is relying on fewer, bigger partners. That's why we always are talking about being omni-channel, being global, and having a single integrated platform. Advertisers and agencies want to rely on fewer platforms that are self-service and transparent to help them, you know. Grow their business and become operationally more efficient, and we think we can really play a, a key role in that and use this time frame, when ad spend growth is muted, to really lay the groundwork for outsized share gains in the future. Thank you. Our next question comes from James Heaney, from Jefferies. Please go ahead, James. Great, thanks for the questions. Steve, could you just talk about just the reasons for why omni-channel video is declining at a steeper rate than the display business? I think you mentioned that CTV revenue would decline in Q3, but wanted to make sure I heard that correctly? Just one for, for Rajiv. Realize it's still early, but could you just talk about how you anticipate commerce media to benefit your business in the holiday quarter? Just anything around your, your partnership with Kroger, and how that's evolved over the last year? Thank you. Great. Nice to reconnect, James. With respect to the trends that we're seeing, you know, what we shared in our prepared remarks is, you know, we actually had a pretty solid Q2. April was stable, May was up. We start to see softness in June, particularly in what we describe as sort of brand centric advertising. That speaks right to video, predominantly online and CTV. We saw a couple things going on. Number one, CPMs were becoming softer. We started to see that in June. We saw it take a step down in July. With that sort of combined effect, you have sort of one category of downward pressure. The other effect is that overall, that pressure on CPMs has been building up on a year-over-year basis, so it looks more extreme on a year-over-year basis than it, than it otherwise would look. At the end of the day, what our focus been is sure that we are getting, you know, more a share in the market, and one of the measures that we really track very closely is monetized impressions. While CPMs have been soft for video, our monetized impressions have been quite robust, as I, I called out, you know, +20%, +20%. You know, at the end of the day, you know, we're going through a short-term cycle here, where brand advertisers are being more cautious. You can also see that in the ad spend verticals, shopping, and down for a couple quarters, as has a couple consumer-centric verticals, you know, technology, personal finance. So all of those do have, you know, impact on the video segment. Now, the positive that I called out in Q2 was display trends were starting to improve, you know, in terms of revenue, -1% versus the prior year, and it was -8% in Q1. The benefit of having a diverse platform, as we do, omni-channel platform, allows us to take advantage of the different trends in the business. Reality is, at the end of the day, we have built a very scaled system, we're broadly exposed to all the ad verticals. It is sort of a function of macro pressures, but we're doing all the right things to make sure that we are well positioned when ad spend stabilizes. You know, Rajeev just described the investments and the outcomes in terms of new products. That will be a big positive benefit for us in 2024 and beyond. I'm not overly concerned about current CPM pressures, because they inevitably will recover. Great. James, let me turn to, to questions for me around commerce media. We are not anticipating any material revenue contribution from our commerce media solution this year. Obviously, we've, you know, just announced the product a couple weeks back. We're really at the point of, you know, bringing initial customers on and obviously, getting more feedback from those customers on features and capabilities they're interested in. We, we aren't anticipating material revenue, but I think there are absolutely some upsides there, and maybe Kroger's a good example of that. With Kroger, we have been working with them for several quarters, and primarily in one of the four commerce media use cases that we're focused on, which is inventory extension, or, you know, finding users to bring back to their shopping website, that maybe, you know, looked at a shopping cart or looked at a product, and abandoned that without purchasing. With our new release, we anticipate being able to add more use cases to that relationship, and to be able to expand that revenue set. It may be worth me just commenting briefly on what are those four key use cases. Two of them are related to on-site monetization. First is on-site monetization via sponsored listings. This is a very common, you know, shopping specific ad format that you see on, on commerce websites, and that is a new capability that we've launched. Second is on-site monetization of display and video ads, and we're already doing this with folks like eBay, but now more recently announced TripAdvisor, Lyft, and Lollapalooza. Third is the inventory extension opportunity that I mentioned with Kroger. Then the fourth is using our Connect data platform, to monetize first-party data with audiences, attaching that to other media that's going through our platform. Companies like Epsilon and Iota are using that capability. We've been building, you know, these components now for 2 years, and so we feel like now we can bring all of this together in a single, self-service platform and be able to now upsell and cross-sell across a variety of different customers that are using single use cases, cross-sell them into, into multiple use cases. Thank you. Thanks, Rajiv. Our next question comes from Jason Helfstein, Oppenheimer. Go ahead, Jason. Hey, guys. I just want to unpack the CPM weakness a little more. First, does MediaMath have anything to do with it in the third quarter? Are they, like, can you call that out as a headwind, and if so, how much? Sure. You know, just unpacking it some more, I mean, the reality is, as I shared a moment ago, we are broadly exposed to many ad verticals, many advertisers, particularly brand advertisers. We do believe that there's just general caution, people, keeping a very tight rein on ad budgets. You know, in any, supply-demand, ecosystem as we operate real time, you know, when, supply, let's say, expands and demand declines, the equilibrium point, of course, drops, i.e., the CPM. That's really broadly what we're seeing. Now, in terms of MediaMath, you know, from our perspective, it does not have any long-term effect at all on our business. It's really a function of just resetting that spend that had been going through that DSP, and then getting it redistributed. Because if you imagine you have advertisers who had programs all lined up to go run on MediaMath, and now they need to decide where they're going to put that spend, and it takes time to do that. We fully expect, given that we're integrated with every major DSP in the world, that that spend is going to come back to us. In the short term, we do see $2 million of revenue being deferred, you know, over the next 2 months, but, you know, I would expect that to be fully repopulated onto our platform down the road. Then just one last one. Let's say it's a few million MediaMath, we can do the math on that. Are you seeing specific weakness in tech and telecom, and then any concern about media and advertising because of the Hollywood strike? We are. You know, one of the stats that I shared in the prepared comments was I took a look at the 4 consumer-centric verticals: shopping, personal finance, technology, arts and entertainment. I took a look at the June-July period combined and compared it to the same June-July period in the prior year. On that comparable, with that group of spend is down 7%. Clearly, arguably, a lot of those factors are feeding into that because that is a pretty striking change, because the prior period in April, let's call it April-May timeframe, it was slightly positive. There's been a shift pretty significantly in the near term. Again, these are short-term dynamics, we believe, and at the end of the day, because we are diversified across many verticals, you know, we're going to get some upsides. I called out the fact that, you know, food and drink is up strongly. You know, as we head into the fourth quarter, I do expect seasonal uptick in both monetized impressions and CPMs. Not as strongly as we've seen historically, but I do expect that seasonality occur specifically because we are exposed to, you know, things like travel, style and fashion, and health and fitness. There are weak verticals that I just called out. Could you just let us. Look, I think everyone's going to compare and contrast. Obviously, YouTube called out strength in brand. They're a 100,000-pound gorilla. They're, you know, they're, they're everywhere, right? Obviously, you don't have the same geographic coverage of them, but just. Look, I mean, retail media has been really strong, so I don't know to what extent you, you might be seeing some weakness in consumer products. Maybe we're seeing just a more aggressive share shift into retail media, you know, out of, like, more traditional or more legacy categories. Just, you know, retail media for you is just still building, and so you don't get to capture that. I don't know. You don't have to comment on that, but just wondering. I think it's a great question, but let me just. I want to comment on it. You know, from our perspective, you know, the shopping vertical has been under pressure for about a year. You know, we called out on the fourth quarter, first quarter, and if you really look under, you know, look under the headlines, the consumer in the U.S. is really going to face increasing pressure as a lot of the pandemic dollars dry up. With shopping out, I'll call it the, is the canary in the coal mine. With respect to retail media, I think it's very early days for anybody to be gaining significant share. There's a lot of white space, and one of the big drivers of us getting into that space is it helps us diversify our business. We are today a brand-centric platform. When we expand and grow in retail media, we're going to be taking out performance advertising, which will then will be another big positive. You may recall, in the most recent earnings cycle, the performance advertisers did fine, you know, not great, but they did fine. Brand-centric, all struggled in terms of CPMs, by the way, Google Network business, which is the most comparable to us, was down -5% in Q2 relative to our being flat. I would say there's not any share shift going on. It's still a The retail media is a young market. We are feeling really good about the tools that we built, and now it's just about ramping them over time. Thanks, Steve. Our next question comes from Dan Day at New Street Research. Please go ahead, Dan. We can't hear you, Dan, if you're talking. Can you hear me now? Yes, we can. Okay, great. Sorry about that. I, I just had a question with, with you launching Convert, you haven't, you know, to my... To the best of my knowledge, a traditional SSP hasn't gotten into sort of sponsored content listing, sale of that inventory. Just how much more technically challenging is that than the typical display ads? Like, I'd imagine you have to have databases of the advertiser SKUs versus retailer inventory. Have you, have you been sort of preparing for this for a while, and, and, and built through that? Or, maybe some growing pains early as you, as you expanded into this category? Sure. Hey, Dan. I think I would agree with the premise of your question. The technology, specifically for sponsored listings, which is one of the four use cases that I called out earlier, is pretty different. It's a more performance-oriented, as Steve called out, and in some ways more search-oriented, ad tech stack, right? Where you might be on a, on a retailer's website, and you search, you know, if it's Home Depot, maybe you're searching for shovels or, mulch or something like that. That type of response there is going to be quite different than the type of technology needed to build that, than brand, brand advertising. As you said, it requires, you know, SKU level integration into the retailer's product catalog, requires being able to associate the search term with the right ad units, et cetera. It is something that has been a high degree of focus for us over the, you know, I mentioned, about 2 years to build out these capabilities. I would say broadly, we've been building towards this moment. Our data platform, Connect, which has been built over the last several years, also plays a key role. Our core SSP for on-site video and display monetization to sponsored listings was really, I would say, the key kind of missing technology component. That's an area where we've been ramping an engineering team and, you know, really focused on building technology in this area. You know, look, this is the launch, I want to, you know, make sure to kind of calibrate correctly. We think there's going to be multiple years of ongoing innovation as we go deeper and deeper into this area to build performance, build capabilities, build, you know, feature breadth, et cetera. I think that's one of the things that we are really good at. So we look forward to that challenge and that opportunity. We note that it is, you know, significant TAM expansion, and it's really core to many of the customers that we already work with, right? Doing on-site monetization for display and video for dozens of retailers, you know, building, working with the buy side through supply path optimization. These are kind of the building blocks that, you know, give us confidence that we can really deploy and scale up a technology here. Great. Thanks. That's a very detailed answer. Just one follow-up. I'm sure you know, one of the hot topics, kind of, across the ad tech vendors right now is this move towards attention, as the new kind of metric people are looking at for, for campaign measurement. Just wondering, if you guys see a role there for you to play, as people move towards attention, whether that's sort of just, kind of the middleman passing along through the bid stream, or if there's kind of a, a way you can, play in the monetization of that? Yeah. We are very much playing in the monetization of attention metrics today. We've announced partnerships with a couple of different platforms or, or technology providers like, I believe Adelaide, Plate360, a few others, where they have the measurement or attention data. We integrate that into our platform, and then we can deliver private marketplace deals or open exchange inventory, that, you know, meets a buyer's needs for a particular, you know, attention metric. It could be, could be based on, some audience cohort, could be based on, you know, time and view, ads. There's a variety of different ways that, you know, each of these, these technology providers measure, and I think that's a kind of exciting platform aspects to our business, which is we have the media, we have the buyers, we integrated the attention metric vendors, and then, you know, the buyers can find the inventory that they're looking for on our platform, and we can make it easy for them, you know, to access that media. And we are able to generate, you know, revenue stream, both in terms of technology fees as well as, you know, our typical SSP fee in the process. Great. Thanks, guys. I'll turn it over. Thank you, Dan. Our next question comes from Tim Nollen at Macquarie. Please go ahead, Tim. Hi, guys. I'd like to ask about the CTV topic again, if I could. You know, a number of the traditional media groups have talked about some pretty good growth in their connected TV, you know, streaming advertising. We all know linear is weak, but seems like CTV are taking share from linear. So it's kind of surprising to hear you talk about CTV man falling at the moment. What I'm wondering is, how much of this might be related to supply of impressions? Which I'm trying to understand what that really means. Is this supply relative to demand is going up, or the absolute supply of impressions is going up, which could mean all of these fast channels, like Pluto TV and Tubi and all of that, Netflix with ads, Disney+ with ads, all that stuff. Can you just help us understand a bit more what's going on with the supply and demand component within CTV? Sure. Rajiv and I can tag team on this, but let me start out just to clarify a point. we're talking about on a relative basis, right? We've been growing Q2 of last year. In Q3, we grew over 150% in terms of CTV revenue. We're obviously topping some pretty major changes. In the third quarter of last year, we grew our CTV impressions, monetized impressions by 300%. The point is that we're not going to grow our CTV impressions 300% this quarter, Q3 2023. That's the impact that you're seeing. It's an, let's call it a very challenging comparable. The underlying trends of CTV are very robust. We continue to add more publishers to the mix. We can. You know, as I think, you alluded to, is the opportunity to monetize CTV dramatically is really where the future is going, and that's the core solution that we've built. I would not read anything into our current results other than sort of the short-term pressures of CPMs, right? Because CPMs have been declining, due to sort of the macro pressures over the course of a year, a little bit each quarter. You see, on a year-over-year basis, a bigger delta. Going forward, the areas we're invested in are all about driving CTV. Activate is a core part of our ability to drive CTV business. We are expanding our SPO relationships. As we called out, we hit an all-time high of 40% of our activity. Many of those SPO relationships are directly linked to, you know, high-value formats like online video and CTV. We are absolutely feeling like we're on track. The monetized impressions are growing. In this quarter, and potentially next, you know, we're facing some big comps, but we have, we're very confident in the future trajectory. Anything you want to add, Rajiv? Yeah. Tim, just one other quick thing to add, you know, on your question about supply impressions. You know, I think there's significant supply growth in, let's say, the, the alternatives that ad buyers might buy. You know, not only FAST and kind of traditional streaming, as you mentioned. If you think about reels and shorts from, you know, from Meta and YouTube, they call that big growth in supply. I think all that, you know, growth in supply in a environment where ad budget growth is relatively muted, you know, that's a formula for some downward pressure on CPMs in the near term, which I think is not, you know, not a huge surprise. Thanks. Could, could I just follow up a little more, which is, you both kind of alluded to this already, but I wonder if these, these, dynamics going on right now maybe drive more, more demand for the SPO work that you guys do, CTV specifically? Yeah, I think in general, we see a lot of demand for SPO. You know, there's a variety of factors for it. Buyers wanting to get more efficient, buyers wanting to get closer to the supply, you know, buyers wanting to make sure that as much of their dollar as possible is going towards, you know, the, the things that they care about. There's, I think, you know, a variety of different factors. The transparency, I think oftentimes they're concerned about if I put my budget into a walled garden. You know, there was this recent article, or more than an article, but research report about, you know, ad spend in a particular walled garden. You know, where does your inventory, where does your ad budget actually run? All of these things, I think, are drivers for, for SPO and our continued, growth there. Yeah. Yeah. Okay, great. Thanks a lot. Yeah. Thanks. Our next question comes from Shweta Khajuria at Evercore. Please go ahead, Shweta. Okay, thanks, Stacie. Thanks for taking my question. I, on cookie deprecation for next year, the Google is sticking with the plan. Could you-- and we've talked about this in the past when that was the topic of the day, but could you please remind everybody how you're thinking about the potential impact, especially beginning next half, next. Excuse me, beginning back half of next year and then beyond, as it actually goes through? Thank you. Sure. Yeah, I think there's been a lot of history, as you, as you noted, Shweta, on cookie deprecation. Look, I think, you know, Google is seems like pretty adamant about their timeline. I think the industry probably is less clear on that timeline, given, you know, it's become a antitrust authority process as well, where the antitrust authorities are ensuring that there's an even playing field. There's a number of frameworks that Google has announced, pledge, and topics about Sandbox. We are actively participating and testing those. I think there's a number of open questions related to the technology that Google is rolling out. I think the, the, I would say, the independent verification online is, is yet to be yet to be determined. All that being said, we think it's prudent to plan for deprecation, whether it's on Google's timeline or, or otherwise. We've been hard at work, you know, investing in a portfolio of different solutions, contextual targeting, private marketplace deals, using modeled cohorts of audiences. A variety of different solutions, whether that's beyond the cookie identity data with our identity evolution. I think the, the challenge, I would say, writ large in this environment, is that as long as there's uncertainty around that deprecation timeline, there's different levels of participation with publishers and with buyers around, you know, rolling out these solutions, testing and kind of laying the groundwork has been completed. I think it will take some time, once the timelines are clear for the entire industry to kind of get on and move in lockstep towards adoption. A process that we are focused on day in and day out. Okay, thank you, Rajeev. Anything to follow by, but anything you say in terms of the magnitude of the impact? I mean, even, even if you could talk about how much of your business is exposed to cookies today, if you can share that, or what, you know, what gives you comfort that you're not going to be impacted meaningfully? Yeah. The revenue on our platform has alternative to the cookie. We have, you know, through those mechanisms that I mentioned earlier, you know, a variety of different ways to deliver a targeted impression without relying on a cookie. That gives us a degree of comfort that once cookie deprecation, you know, will be, you know, well, well hedged in that sense. There's quite a bit of upside, which is that as we move the cookie, more, delivery against opt-in consumers. CTV is a good example of that, where specifically you're logged into your streaming or TV device, and then there's an email address or some other mechanism for identity that's being shared. The CPMs, because of the ability, the ability to target is superior, tend to be significantly higher, you know, by several multiples than, than when there's a cookie present. So we think actually the cookie deprecation process, once it's ultimately sorted, could lead to a significant tailwind to the business in terms of delivering more relevant ads to the consumer, and doing so at a higher CPM. Okay, thank you. Yeah. Our next question comes from Andrew Boone at JP. Please go ahead, Andrew. Great. Thanks for taking my questions. I wanted to go back to CPMs. Steve or Rajiv, is there a way to compare current CPMs or CPMs to historical levels? Like, are they 10% below 2019? How about that versus kind of historical kind of trends? Sure. Obviously, we look at trends back at the time, and one of the things that I think is a testimony to the strength of our partners, I think our overall CPMs over the last five years is sort of across all formats and all channels, and it's been remarkably stable. The times when it has deviated a bit from that is in terms of macro environments that we're seeing right now. Big picture, the reason why is that we have a diversified platform and we continue to invest in those growth areas that have higher value to them. As things, you know, shift and sort of value creation occurs elsewhere, we are, we have the capability to monetize that. That's why we've been able to have quite a bit of CPM stability overall. Now, when I take a look at the high value format like video, omni-channel video, CTV, et cetera. What's been going on basically over the last year is that there's been a little bit of what I call cost haircuts every quarter as you go along. Cumulatively, when you just look at a point in time, Q2 or Q3 versus last year, that's why you're seeing this 20% delta. Big picture, the CPMs, you know, obviously, you know, different market environment back in 2019, haven't dated significantly over that time, but we're going through what describes a dip in the cycle. Fully expect to there to be sort of a recovery. Now, the extent of the recovery, the timing, magnitude, TBD. What I can be confident about is our ability to basically navigate that by continuing and making sure that we are always pointing our resources towards the higher value opportunity. That's why we've been able to deliver, you know, relatively stable CPMs. The latter point is, of course, throughout that time, we've been monetizing and growing our impressions, that's really gives us the long-term confidence about what we're doing and, you know, the progression and the opportunity for us in the future. With a couple of quarters with some highs, that's not a huge deal for us because we are very well capitalized. $170 million in cash, debt, and an ability to continue to innovate. We think this is a perfect opportunity for a company like ours, who position, position ourselves for when ad spend becomes stable and more share. You know, obviously a lot, a lot going on in the market today, but, if anything, it gives us more confidence about the trajectory that we're on. Price run, there is a relationship because we operate in a real-time environment, and so if there's softness in demand, the clearing price at supply and demand curve comes down. That's just Econ 101. With demand down, supply either staying the same or going up, CPMs are the equilibrium point. That's why, you know, we feel confident that we're on the right track because we're driving our volumes, which is really the health metric o-of our business. In turn, you know, we've got more and more efficient, as I called out on our call, we've reduced the amount of CapEx, and so we are setting ourself, ourselves up very well for when CPMs do recover, the marginal profitability will be quite robust. Thank you. Thank you. Our next question comes from Matt McKay with Riley Street. Please go ahead, Matt. Hey, guys, just one from me. I know you guys are hurt in this quarter by that bad debt expense, and it's going to kind of trail off for the next few quarters. My question is more, I guess, the 2024 question, but some other initiatives maybe you plan to implement to increase profitability over the next coming year? Thanks. Yeah, absolutely. There are many things that we're doing to drive profitability. We've already done things that we're working on. Number one is, as a company, we've always had the mind growth and profitability, and last quarter, Q2, was our 20th straight with Adjusted EBITDA profitability. Big picture, we know how to run a profitable business. The things that we've done here with some of the pressures in the macro, is we've actually been forced to find more efficiencies. We increased our capacity, this overall capacity, by over 30%, with minimal incremental CapEx, and we did that through software engineering. Why is that important for the future of margin opportunities? Sort of that capacity becomes embedded, but we don't have the corollary of the depreciation of CapEx, so margins will naturally expand as revenues grow. Number two, we've been obviously been very careful to manage our costs. As a point of reference, we kept our total headcount flat for the last couple of quarters. It isn't that we're not hiring people, we're hiring a lot of people, but we're putting them in positions and repurposing folks towards innovation. Again, that makes us more efficient going to the future. As we continue to drive bigger mix of value formats, higher CPMs, relatively the same costs, that will naturally have a positive impact on our gross margin and our bottom line. That's really how we think, and that's, why, why I've said in the past, things like, SO, efficiencies, software optimization, all give us the confidence that we're going to be able to, extend margins in 2024 and beyond. Thanks, Steve. We are over time, so I'm going to go ahead and turn it over to Steve for some closing remarks. I want to thank everyone for joining us today. We continue to drive the business forward through a long-term lens. Our investment in XP and high-growth formats and channels are delivering growth. We're deepening customer and relationships and adding solutions that more than double the TAM. We also continue to diversify our business beyond display and centric ad spend. Monetized impressions are up as we continue to add more supply to our platform. Ad spend will inevitably return and CPMs will normalize. We believe that the areas we remain focused on will drive outsized gains over the long term. We look forward to seeing many of you at our upcoming investor events, including Oppenheimer's Virtual Conference tomorrow, August ninth, and Lake Street Growth Conference on September fourteenth. We'll also be hosting in-person meetings in the Midwest and the East Coast. Please reach out directly to Stacie to request a meeting. Thank you for joining us today. Thank you. The recording has stopped.