Q4 2020 Viant Technology Inc Earnings Call
Margin as a percentage of revenue ex Tac of 17% to 18%.
Before turning the call back to Tim for closing remarks, I would like to briefly touch on a few housekeeping items relative to 2021.
First as indicated and our S. One we have converted our pre IPO of employee equity incentive plan into a new long term incentive plan, specifically, we converted the pre IPO of employee incentive units and Rs used at the time of the IPO.
As a result, our 2021 'twenty 'twenty. One results will include approximately $83 million of stock based compensation associated with these are of shoes of which approximately $14 million will be capitalized software development costs. We will also incur of payroll taxes and employee employer pay.
Whole taxes, and increased depreciation and amortization expense in connection with these brands.
The second item I want to point out is that as the result of the sizeable stock based compensation expense of 'twenty 'twenty. One we now expect to generate a tax benefit at the public entity in 2020 one the Si.
Neither of which will be determined and part based on the value of the Rs users like that.
If you recall, we used and up sea structure as part of our IPO of such that the public entity will be allocated approximately 20% of taxable income or loss based on the current share count so taxes apply to 20 per cent of taxable income with 80% of taxable income being passed through to the members of the LLC.
Our 2020, where results will also be impacted by increased overhead associated with being a public company connection with this we expect to incur an incremental $5 million to $6 million of costs in 2020, one with D&O insurance, representing the most significant component of such incremental expense.
With that I'll now turn the call back over to Tim.
Thank you Larry just Wanna comment on closing our focus moving forward is to increase the number of active customers using our software while continuing to increase revenue ex Tac generated per active customer, we intend to increase our investment and sales and marketing in 2020 one to drive our growth.
As you've seen from our guidance, we expect to accelerate growth in 2020, one over 2020 levels, while continuing to generate solid adjusted EBITDA, while our company is well established we believe that we have significant opportunity for continued growth we have significant technology architectural and any.
Actual property advantages that create a strong competitive low and the very significant trends towards the people based approach and the continued rise of connected TV and present material growth opportunities for volume.
We intend to be very active with regard to investor and analyst interaction and look forward to keeping you updated on our progress.
In closing we are very pleased with our results and the fourth quarter and look forward to building on and this momentum and our first year as the public company I will now turn the call back over to the moderator to begin Q&A.
Yeah.
Most of the term I would like to turn around and capital on the please move the race and function located at the bottom of your screen and pass the question.
Okay.
Okay.
The first question comes from the line.
The Murray and Ray.
Canaccord.
And the one where all of the room.
Yeah.
So it need laden and I think how much from taking my questions and congrats on strong results and.
So first of your revenue guidance implies really healthy acceleration through the year, which is great to see and on this and some of that is easier comps to what extent do you expect the sales force expansion sort of to contribute to revenue strength in the first half versus the second half of the year and can you maybe update us on your progress and turn.
On the sales force expansion, so far and then I have a quick follow up.
Great Larry do you on a handle that.
We certainly do I mean, we are looking to increase the total sales team by approximately 50% and 2021.
Which is a pretty sizable investment today, we'd probably.
<unk> the about 40% of that so we've been very active and recruiting.
And have had success so far I think generally speaking it takes a new seller approximately six months to truly be it and ramp in terms of them being able to truly drive revenue. So I think we definitely will see some benefit really beginning in Q3, and then perhaps more.
Salaries and a bit more on Q4, but we will not see the full benefit obviously of the full sales force with vision and in 2020, one, but we will see we will begin to see it and the second half of the search for sure.
Great. Thank you, Larry and just as the clinical op and just wanted to ask you about your supply chain and you talked about extending into the Amazon connect it to the marketplace can you maybe talk about where you are and the causes how linked the is it and what kinds of milestones as youre working through it.
For us as the D. S P who works on behalf of the market or we want to integrate wherever the market or once the spend our advertising. So we can electronically by and measure it and Amazon fire TV is obviously, a large and growing platform out there we do not have of direct integration with Amazon fire TV today, but we do integrate with <unk>.
Content owners, who are distributing their content over of fire TV or over roku. Both so a lot of times theres different entry points for that inventories are today, we would be interested but we are not integrated and the Amazon fire TV today.
Great and just so much.
And your next question comes from Eric Sheridan and E E on.
And Eric here on the line.
Thanks for taking the question guys, maybe two if I can.
Moving on from just the sales force from and I do want to wrap that into the broader question. What do you see as sort of the critical investments you need to make and 21 and 22 against the broader goals, you're trying to sort of the <unk>.
Solve for the platform over the medium to long term just to maybe reframe that for investors. So they have a better understanding of what your sort of scaling after and how it's kind of show up on the investment side and then the more granular with Q4 can you give us any sense of the new advertiser and new client growth.
In the quarter and how we should think about the industry breakdown of maybe the product breakdown of some of that growth you saw in the and the most recent period. Thanks so much.
Got it thanks, Eric I'll take the first part of that question, our sales and marketing investment really is just about putting more feet on the street.
We believe sales and the contacts for wilmar in front of more and more clients educating them around our solution around people. This.
And we know that our close rates are increasing so we want to continue to have more and more of those conversations on this year is definitely continuing to educate so putting more investment in the sales and marketing side across the country is going to help us educate more clients and like I said are our close rates have been increasing so we're excited to do that.
I would say our sales and marketing investment largely is aimed at and adding that really and the first half of the year, which we're well on our way to do that.
I would address the part of the second part of your question in terms of the client growth, we did see a nice uptick in Q4.
As we said we ended the year of 264 at the customers that was up from Q4 from Q3 I think we were at 258.
And what we've seen of late is two things one we're seeing.
The increased level of testing, which we did have a bit of a low during spring and summer with.
And we're also seeing the conversion from a low fixed price customers into the percentage of spend customers and we saw quite a bit of that and Q4.
Thank you.
Yeah.
Your next question comes from Laura Martin Needham Laura on the.
One of them.
Okay.
And.
Can you hear me okay.
Yep Yep.
On semi first line I'm curious as to what you say to investors. The same lock their competitive advantage is having a faster replacement of cookies, but the pushback with the lock if you're moving towards CTV and the speed of light because youre doing 70% growth and CTV versus 9% reported growth does that matter since the since <unk>.
Holly HDTV the cookie less environments. So aren't you moving away from your competitive advantage and CTV becomes a bigger part of your total revenue.
Yeah.
Well I would say what market has earned up to the our focus on and CTV is they still want to do targeting and measurement of CTV, So and and not just the T V across all of their investments, they're really we're bringing them a more holistic offering so it's a longer sales cycle to help them understand every channel and they can buy and every channel and they can target and and how.
And how the measurement works across both so I guess certainly CTV growth. It's happening. It's there. It's why we're a natural choice because of our intellectual property there and we will we have been growing above market rates and CTV for quite some time, but I think there is backwards compatibility they still want to understand website visitors they still.
And to understand how do I re target and do targeting across mobile and desktop on Apple devices that are cookie less today, so a lot of education and the market going on on how our solution works and each channel and I think that's the slow education process and even just within mobile at the different ideas and the N app ecosystem versus Safari.
And so getting marketers to understand all of that but it's the same story over and over our household I D has huge penetration and Q4 at work on 75% of all AD request, whether it was CTV and App safari or chrome or the cookie exist today. It is a consistent scaled solution and that's what I think we're trying to educate the marketers.
We don't want to be on one channel DSP, we want to actually serve the marketers entire AD spend either dashboard for them to target and measure of what they're getting from their money.
And I'll just add one little piece on the Lora as cookie less environments grow that's the tailwind for us. So CTV is the natural place of his curriculum.
Partitive platforms really are of cooking they use cookie based approaches so theyre looking for and I E. The many times is not there the arno cookies and that space. So the cookie less environments is really where we're able to show the massive differentiation that we have both in platform and overall from a people based framework perspective.
So as as these cooking on cookie loss environment to continue to grow that's right and our wheelhouse.
Super Helpful and you guys and my second one would be about on the margins were quite a bit better and when you're tack area of your Tac was quite a bit lower than we thought and a really robust margins and my question is did that come because like what Larry was just saying that the transfer and faster in the percent of spend which does have higher margins than.
Because it doesn't attack its reported net or is that because you're getting more of these that third revenue stream that subscription revenue like when you have the Activision direct revenue stream or are we seeing sort of outsized growth of that one or all of the act and all of the extra upside come from percent of spend customers mix.
I can think of Allen, Laura and I apologize I hopefully you can hear me and I lost my video.
And in the case, yes. The the margin is almost entirely driven by the significant growth and the percentage of spend on the percentage of strength side.
That's really what contributed to the healthy EBITDA margin.
I would also just want to add just wanted to add one thing is on our mediator of product, which is helping us lower our Q P. S costs or the servers to handle all of this our engineering team has had a huge breakthroughs and we've seen three X efficiency that we've talked about compared from the year over year period, and we expect that to further scale Q P. S. As is.
The significant costs for all programmatic players and we've had substantial breakthroughs that are actually lowering our costs, while our Q P. S is rising and so we see that continuing to play out of this year.
Thank you very much great quarter, you guys congratulations.
Okay.
Your next question comes from Ron Josey of JMP Ronny on the line.
Great. Thanks for taking the question and I appreciate it great great to see the results here I wanted to ask a little bit more Tim on the verticals. You just mentioned continued headwinds and autos retail travel, but youre seeing some benefits I think of some some some of the that coming back and the first quarter. So can you just talk a little bit more about when you might expect to see this rebound here or how are you.
And we're thinking about that just on the newer verticals and then sort of following up on on the question earlier, Larry you mentioned, just the ramp and percentage of spend and the quarter and the benefits to be of high retention rates. So now you've got 264 clients on the platform maybe talk about just the length of those clients on the platform just because I think from a just a lifetime.
<unk> of usage on volume right the longer you're on maybe you go more percentage of standard and how that might impact your thoughts and guidance going forward. Thank you.
Yeah.
Ron I'll take the are the first part of that question, so as far as the verticals and timing of them coming back.
We're really saying I would say travel we are we are in discussion with with our travel customers.
I would say and was not heavy buying signals.
And really it's I think it's largely dependent of everyone's kind of thing and the really the same song there which is dependent on the vaccine rollout Jim.
To be clear travel typically does a lot of their spending and the first half of the year of Q1, and Q2 and they're trying to capture that summer travel.
I do expect that really we're looking really that I think that there will be more normalizing on spend levels on the back half of the year, but we do expect them to start to spend some and.
And the first half.
On the retail I would set up the similar thing as economies open backup stay at home orders are released we think that that retail comes back of specifically around all of it.
The safe food retail and restaurants and things like that.
And the last one around automotive and really really saying some of it around the production side right now are low.
Out of the plants really aren't able to get certain components of I believe.
And then most recently and the micro chips and the shortage of thereof for them when they don't have production and they can't put those on the law. Therefore, the AD spending typically will lag so, but I expect that and we're hopeful of that returns to normal levels and the back half as well.
Larry do you want to take the side of your question on the what intent on volume share in terms of the percentage of spend customers. Yes, we are seeing that.
The increasing even in Q4 and two.
Some of the number of customers using the percentage of spring platform as.
And as we've talked about before I mean, typically what happens and the first year, they're spending modest budgets getting used to the platform getting used to its capabilities and reporting and then as they move forward and to your to the budget typically increases pretty significantly decreases further and the third year. So many of our customers.
<unk> really had been on the platform. Since 2019, we definitely have added a bunch of 2020 on the percentage of spend side. So we definitely look forward to an uplift in terms of over time uplift in terms of the average revenue ex Tac per active customer and.
And that definitely will come from the percentage of spend clients, which are definitely stickier in terms of once they are on the platform and they get comfortable with it because the continued to consolidate budgets as they move forward. So we expect kind of trend to continue.
Got it thanks, guys appreciate it.
Yes.
Your next question comes from Matt Schindler at the at home.
They're on line.
Great. Thank you.
So going back to the discussion that you had about Google It sounds like Google made of very clear the distaste for and their belief that regulators will not allow and the future.
Individualized targa.
Targeting the rollout of personalization, but the him.
Obviously for Google's is pushing at their own concept with block, but they won't allow individualization and that was clearly a dig unified IV to auto and digital fingerprinting and the other concepts that are out there that you are not doing but are related to how you get to the single person.
And as for that person.
How do you think longer term they will look at household data and the household the analysis and.
More of regulators themselves is there a way they could.
Affect what you're doing and.
And could Google go against what Youre doing.
As well.
Yeah. Thanks for the question and I'll take the first part I think Google and Google for the most part of highlighted around the kind of.
And the alternate ideas around around getting email for logged in and I think the first thing that made and most notably says the they believe the lack scale on.
Sunday.
For us at the probably the largest challenge that our view is as well.
I would say the look marketers arent looking to track individual consumers and they just want to measure of what they're getting for their advertising investment.
I think that that email inherently has all the challenges in terms of of measurement as well, but specifically around regulation.
Our view is and said does regulation continue I think that we saw with CPA and California, There's a new one on the about the share of that was CPR a miss.
And this is something to all platforms will have to contend with I believe that more disclosure. We've learned more disclosure is better to the consumer of more informed consumer is going to be better for everyone.
So we're not really worried about it from a.
The regulation standpoint, because more of disclosure to the consumer and the trend that we've been saying so we expect that to continue as far as our approach around the households, we think it's better and we think it's better for consumers.
We're not doing individual tracking of consumers.
About it it is somewhat in line with what Google is talking about around these cohorts, they're not doing individuals' Butler backing it up a level. That's the same exact similar concept with our household I would say the difference is is that we are still enabling marketers to use their own their own first party data, we're still enabling really the.
Targeting of certain households that are and market or matched to a data segment that they are interested in but ultimately we're allowing them to measure the effectiveness of their advertising on our platform. That's what marketers want and that's what they care about people based platform like ours really enables them to do that its not black box and it is not.
Walled off but just to add to that too I do expect data regulation to continue around the side, where youre seeing individual states come up with their own approach and so I do think and the long term there will be some unified national approach to this but more and more if you look at Apple is the leader in this space one of the Apple saying they.
Said that at any consumer who who will allow you or opt into personalized advertising you can do whatever you you know you want as long as the consumer says allows so it's more disclosure and then you have the consumer saying low and that's where the and app ecosystem across Apple. So I would say that that's probably the farthest.
Aggressive approach, which is an opt in from a consumer on their platform. So more and more of I think these are good for consumers. They get made more aware of what data is available and how it actually works, but as Chris mentioned, we think our household approach is similar to Google's block approach, whereas the cohort of users, while we're not tying it to keywords or interest.
Categories, we're making it around household themselves more of like direct mail is used.
And.
One more follow up on this just do you think this announcement they made about their distaste for sort of other formats that are coming up and and being used to make them.
More or less likely to ever opened up their walled garden of Youtube properties and alike, and how do you think those will be addressed on the longer term basis both by.
Google and by regulators.
Yeah Yeah.
Yeah I'll take the first part of the we don't expect that the.
And you changed on the walled off for quite some time, a Google search and a very similar we don't expect that to reverse course.
Really by any means and so I think that is going to remain unchanged.
Okay, great. Thank you.
Okay.
Your last question comes from Aaron I'm sorry.
And at Raymond James.
And you're on the line.
Okay and on mute there as well thank you a.
Couple of question of interest first.
Any sense for the advertiser of reaction since kind of Google of made their announcement that theyre not going to be supporting and kind of alternative Ids are you seeing kind of increased <unk>.
From advertisers are around kind of your people based approach and then it'd be good to get your thoughts on kind of marry CTV growth outlook for 2021 thoughts on maybe the inventory levels of expanding I think the historically has been one of the supply constrained, but then and we also may have some headwinds from less stay at home throughout 2021, just overall and get your thoughts on the.
CTV growth rates and how we should be thinking about that for 2021. Thank you.
Sorry, Aaron and I was writing too much what was your first question again I'll take that on.
And just kind of are you seeing increased conversations since kind of Google free P cookies.
They are not supporting alternative ideas.
What I will definitely say the spend huge positive for us. So we've and we've been out evangelizing people base for years, and the fact of the cookies going away.
This was probably for US. This is one of the biggest announcements I would say and our history and this space.
And believe it is opening up and a tremendous amount of opportunity for us.
I would also just sort.
And from that aspect and we definitely got a lot of clients.
And we've been speaking to and new outreach that are the validated our top track around people based on our focus on the household that building a foundation on cookies.
Really wasn't going to be a recipe for the future. However, what I'll also say is that a lot of people trying to code what Google said, what we didn't say, we haven't been really that caught up and that because we've been we've been I don't want to say predict and we've been talking about the fact that cookies coming due on and means of certain of.
And that means certain things so for instance.
If youre doing cookie based use cases, if you're a marketer re targeting and individual consumers laptop or phone that will go away and that's significant dollars in the marketplace. Both on D V $3 60, and competitive platforms. We believe those dollars and needing to go somewhere else. So we think the this increases.
The competition.
I think it's the good thing, we think we're going to be a beneficiary of those dollars.
So I would say it's been a it's been quite of bit of a positive the lots of pieces.
Marketers and it really our clients they need the the education level for exactly what this means what activities will they not be able to do going forward and what solutions are going to be right for them on a go forward basis.
It's something we talk to our came about every day, we believe that our clients need to hear from us and they need that perspective.
But we expect this to be of big tailwind for us this year.
Larry do you want to take the CTV growth for 2021 question, Yeah, I mean, we're not giving specifics around it but certainly going into Q1. We're now most of the way through the growth rates that we had in Q4 and 2020 continued.
It's still a big big driver and we expect that the continued throughout the year.
It is a.
I think that will be a big part of our growth and 2021 and maybe just quickly your thoughts on the industry growth for CTV as more and.
On more of the question on steel.
So it's on CTV growth in 2020 for the industry.
For the industry I mean, I think I don't I don't remember the exact industry estimates, but I think the it's going to continue to grow and industry rates.
Think we're gaining market share and connected TV, because our competitors have blind spots and due to the cookie less environment and I think the big use cases I show on add on connected TV some of them pulls out of their smartphone or laptop and visits the marketers website. It is our ability to measure of that interaction and that's really key for our growth being above the <unk>.
But I think the markets no doubt the advertisers are excited about connected TV consumers are excited about connected TV and so now that all of the content is kind of on the direct to consumer streaming platforms and I would expect more of the same but I think that market feels just as someone who's in it and it and it's been a founder of the Zuma business on the other.
Side of this market feels like it's unbound and exploding kind of on every angle of the content the consumers and the marketers all really coming to this new internet connected device. It feels very similar to the mobile smartphone Revolution, when Apple first introduced the smartphone and Android came really at work.
Felt let limitless and the explosion of that the connected TV and I would expect to be more of the same similar to the to the smartphone or just you want to add one point on there to add color that I think is unique and the back half of 'twenty and moving into 'twenty, one which is around content and as Tim was mentioning and when we first started the GMO the big limiter for us was getting <unk>.
Content typically really out of the studios and if you think of the Windows that large studios monetize content AD supported or streaming was either not on their thought process or at the very tail end of those windows and now you're seeing companies like Disney and going direct to streaming you're saying Warner.
And they are gone and director streaming, you're saying that with NBC Comcast as well. So the fact and they are taking you know the the straight out of the studio and Theyre, putting them into the streaming platforms. I think is huge for consumers and it's really going to continue to increase streaming and really the dollars are really going to follow there.
Great. That's helpful. Thanks, guys and congrats on the quarter.
Thank you. Thank you.
Alright, and I believe that was our last question I just at this time.
I want to thank our employees again for all of their dedication and hard work. We are here today because of their efforts and contributions. So thank you to all of our team members of buying and and new investors and analysts we look forward and interacting with you more and in the future. Thank you very much have a great day.
Okay.
Yeah.