AdTheorent Holding Company Inc. Q1 2023 Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to ask friends first for 2023 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session. Please be advised that this conference is being recorded.
I'd now like to turn the conference over to your first Speaker, David Distefano Investor Relations. David. Please go ahead.
Good afternoon, and welcome to ads or its first quarter 2023 earnings call.
We will be discussing the results announced in our press release issued after the market close today.
With me today are Ed <unk>.
Chief Executive Officer, Jim Watson.
Chief Financial Officer, Patrick Elliott.
Before we begin I'd like to remind you that today's conference call will include forward looking statements.
Based on the Companys current expectations.
Forward looking statements are subject to a number of significant risks and uncertainties.
Our actual results may differ materially.
For a discussion of factors that could affect our future financial results and business.
Please refer to the disclosure in today's earnings release, and our other reports and filings with the Securities and Exchange Commission.
All of today's statements are made based upon the information available to us today, and we assume no obligation to update any such statements except as required by law.
We will also refer to both GAAP and non-GAAP financial measures. During the call you can find the reconciliation of our GAAP to non-GAAP measures included in our press release posted to the Investor Relations section of our website at Www Dot Dot com.
All of our non revenue financial measures. We discussed today are non-GAAP , unless we state otherwise with that let me turn the call over to Jim.
Thank you David.
Thank you to everyone for joining our first quarter 2023 earnings call.
Today, I will discuss our high level results for the first quarter walk through some highlights and update you on macro and industry factors than.
And then I will turn the call over to Patrick who will provide a more detailed look at results.
And provide guidance for the second quarter and full year 2023.
I am pleased to announce that adherence revenue performance in the first quarter of 2023 was near the high end of our guidance range active customers grew by 31 or 10% year over year to 346 as of March 31 2023.
We exceeded our guidance for adjusted EBITDA, and we surpassed sell side expectations on both revenue and adjusted EBITDA.
As we look back on the quarter I am proud of what we accomplished as I discuss every quarter our broader business mission is clear and that is to capture a growing share of programmatic AD budgets by offering our media buying platform that drives both greater performance for brands and greater efficiency for media buyers.
The market wants our data flexibility independents.
Independents bidding performance and advanced optimization tools and.
And pricing transparency.
Our more advanced media buying platform Leverages machine learning technology, and statistical data driven learnings instead of relying on outdated user I'd re targeting methods the demand for our unprecedented capabilities continues to grow as we consistently deliver superior campaign out.
For our customers.
This competitive advantage gets stronger every quarter as we lean into innovation and expand our technological advantage over other DSP.
Our go to market efforts continue to center around four key areas of investment with increased focus on larger and more strategic customer opportunities and these investments are paying off and laying a strong foundation for meaningful revenue growth.
Notably direct access revenue grew 19% versus the fourth quarter of last year.
Television revenue increased 17% year over year, our health vertical grew 19% year over year and our audience pillar offerings are driving stronger pipeline generation.
To make a few comments about each of these focus areas.
First we are pleased to see enthusiastic early adoption of self service or direct access on our platform.
Our direct access offering.
Mix the industry's best programmatic brand available to media buying traders combined with our full service offering we are now scaling in market with a one add darrin solution that caters to the demands of both self service and manage customers doubling our market opportunity.
Q1 was our most active quarter to date for self service adoption showing impressive growth inactive customers new clients total client spend media purchased and impressions purchased with activity spanning key verticals, including CPG travel health and education as.
We scale direct access new customers and a growing pipeline are validating our purposeful differentiation from other dsp's opening bigger opportunities customers are choosing us because we can drive cost efficiencies and superior Kpis performance since our performance models do not rely on expensive.
Third party audiences and as a result, our platform can put more media to work for advertisers.
In the past I've shared details about our differentiated tech, including our suite of platform Optimizer and why they're special here briefly I'd like to tie that back to why it matters, how it wins us business we.
We are seeing this as we scale our self service offering.
Our platforms price optimization tools helped push beyond conventional bidding tactics like so-called bid shading within a given auction. Unlike traditional bid shading tools. Our platform Optimizer is also insure the buyers did and the optimal auctions to realize maximum savings.
In other words buyers place their desired bid and our platform, where it will automatically move towards more efficient prices passing all of the savings to the customer all of this takes place with transparency and both targeting and costs with users having full control over how precise or selective the platform is in its disk.
<unk> media buyers seeking performance and cost efficiencies are choosing us because of these deep capabilities.
As promised we also introduced multi currency support for direct access opening up new client opportunities in Canada and setting the foundation for future International expansion.
And we have a big launch mid year with our advanced health DSP, and our enhanced and streamlined user interface.
Second.
We are driving strong growth and innovation in the health care vertical.
Health is an important beachhead for out there.
Our advantages are even more obvious here since large generalist dsp's lack the techniques.
Safe guards or solutions to operate effectively in this vertical due to stringent privacy laws and industry specific data use rules.
During the quarter. These advantages drove 19% growth in our healthcare vertical including strong growth from our health audience builder or hobby.
We won 16 heavy campaigns driving great results for customers across a variety of kpis.
Including prescription lift site action and brand awareness lift.
For example, during the quarter. We ran a have you built predictive audience campaign for an over the counter skincare customer that drove a 6% brand awareness lift outperforming third party audiences on the same campaign have you built predictive audiences outperformed third party audience segments by <unk>.
3% and 32% respectively on cross device video completion rate or VCR.
And CTV VCR benchmarks.
Additionally, during the quarter, a pharmaceutical company partnered with us to reach patients diagnosed with type one diabetes.
With the goal of converting them to this company's prescription medication.
Using happy we created <unk>.
Predictive health audience is targeting type one diabetes patients who have received treatment.
Commercial insurance utilizing in stream video and cross device banner ads to reach patients when they're most receptive to making treatment decisions.
At year end exceeded the client's display prescription lift benchmark by 230% and the client video prescription lift benchmark by 120%.
Also interesting to note here is that we did a head to head test with two third party audiences and 85% of Advair and health audience reach was unique demonstrating that the audience is built using hobby are more successfully reaching the target audience.
As discussed last quarter, our heavy product broadens and elevates adherence offering providing health advertisers with truly data driven ways to create and execute highly customized and precisely targeted programmatic digital ad campaigns.
The deals in our pipeline are materially larger and more recurring in nature due to the merits of the had the offering itself. The successes we are demonstrating in tests.
And the nature of the commercial contracts, we are pursuing looking.
Looking ahead, we will further strengthen our health vertical by launching in early Q3, the industry's most advanced self service DSP for health and during the summer pharma planning season, we believe we will be well positioned to earn year long commitments for 2024.
Third we are very happy with our progress bringing to market, our audience builder or abbvie product across a variety of verticals following last quarter's launch.
Our ml powered predictive audiences generated by Abbvie continue to see great success in adoption.
Landing 14, new campaigns during Q1 and driving superior performance for customers for.
For example for an auto brand our predictive audiences delivered a 55% more efficient CPA compared to third party I'd based audiences and drove 61% of the onsite conversions.
Quite equal budgets.
For a travel brand, we achieved a 21% higher VCR or video completion rate.
And for our utilities brand, we drove a 466% engagement lift over the third party audience segments.
Looking ahead, we expect to continue to drive great results with predictive audiences and we're working to incorporate third party verification.
That will validate the effectiveness of this new method of audience targeting which should drive more rapid adoption of our platform.
We are actively speaking to media buyers about partnering at scale to sell our superior method of audience targeting and educating them about how this would be commercially beneficial to them. These large media buyers need and want a technology partner, who can use ml to analyze inactivate immense datasets.
Theres hours or third party data.
And they want to recapture the full benefit of their media purchasing power.
Fourth we are continuing to ramp our specialized performance Cte business through our platform.
Our CTV offering wins, because we offer a unique product that delivers superior return on ad spend.
Danced attribution strict privacy protections and seamless omnichannel coordination.
No other programmatic platform offers better outcomes based CTV capabilities.
And our commitment to CTV innovation drove 17% growth to $2 9 million in Q1 2023.
CTV is now 9% of AD revenue versus just six 1% in full year 2021.
Strength was driven by new CTD deals in our new CTV supply side platform partnership with freewheel.
<unk> company that allows us to offer a more comprehensive suite of video advertising solutions.
Additionally, we initiated a data partnership with ice spot that gives our models access to data from millions of smart Tvs, helping us measure the impact of CTV on business outcomes compared to linear TV, we continue to invest behind CTV, including our recent development of connected lives CTV off.
Offerings, which.
Which feature live premium broadcasting with the benefit of out there and targeted ads.
Our data driven ml capabilities, including forthcoming program specific targeting and reporting coupled with the greater consumer receptivity to live TV AD formats as demonstrated by our performance data will make connected lives CTV another growth pillar for add Darrin, we expect CTV strength and growth to continue.
New and accelerate as our platform is adopted at scale.
Switching to innovation.
Very notable and disruptive leader in AD Tech with a steady stream of meaningful innovations that are driving demonstrably improved ROI for our customers.
Each quarter I would like to share progress made by our hardworking and entrepreneurial team to build and deliver transformative products. During the quarter. We advanced several innovations that should improve return on AD spend for customers and enhance our growth trajectory, including natural language processing in our models predicted <unk>.
<unk> and our new product catalog feature cut.
Customers are excited about these innovations and we expect them to contribute to our growth as we progress through 2023.
Let me talk very briefly about each of these.
First I've previously discussed our incorporation of natural language processing or MLP into our predictive models and I would like to provide an update about how that is advancing our business goals.
L. P is a subset of machine learning that allows us to analyze the text of web and App inventory through a variety of methods. We use one of those methods page categorization to inform our models about the most important and unique keywords within the inventory of bid requests.
In a short time since conclusion of AB testing in Q3, NLP has organically become a major data point referenced by our CPA models because of its ability to pinpoint high valued impressions for our clients in real time.
We've seen conversion increases as high as 39% when compared to models without MLP.
This is another example of adherent leveraging industry, leading technology to our clients benefit without reliance on cookies or persistent Ids.
During the quarter, we also developed and introduced into market, our adherent predictive extension solution.
Which is a proprietary method to use search and social media engagement data to inform our predictive models and improve our programmatic impression scoring.
Other words using this solution, we can incorporate engagement data from meta or Youtube or Google search as additional signals significantly improving our models for example, and a campaign we ran for a large health care advertiser consumers exposed to adherence programmatic as before Google search converter.
We had a 94% higher rate than those exposed to search and social alone. This offering is another way add Derek connects otherwise disparate data elements to offer real value to advertisers finally, as we previewed in our last call. We successfully launched our product catalog feature.
During the quarter, which enables remarketing of products to individuals based on their interactions with an advertiser's website.
For example, if a consumer views of specific car model on an auto website that consumer can be re targeted at a later time with a unique brand AD that is dynamically created featuring that specific car.
This flexible framework has significantly improved AD performance and driven exceptional results for customers.
<unk> remains committed to introducing additional solutions to enhance its growth trajectory and drive value for its investors and we believe that our continued focus on innovation and improving customer our ROI position.
Position us for success in the rapidly evolving digital advertising industry.
Part of what enables us to continue investing behind innovative product enhancements and drive more value for our customers is our very strong balance sheet and highly favorable margin and cash flow characteristics on a trailing 12 month basis, <unk> delivered 20% adjusted EBITDA margins and 11%.
<unk> free cash flow margins, we have now generated positive adjusted EBITDA every quarter since going public and we remain debt free.
This affords us the ability to maintain the investment cadence necessary to execute our product roadmap and establish the foundation on which we will generate durable long term revenue growth.
Before I conclude let.
Let me update you on what we're seeing from an industry and macro perspective, while some of the near term dynamics, we have been discussing persist, including reduced or deferred AD budgets campaign delays and vendor consolidation, which protract sales cycles. We are pleased to see consistent and strong month over month pipeline generation.
And customer enthusiasm for our offerings.
We are increasingly driving adoption of our platform across larger media buying organizations and the.
Establishing long term commitments.
This pursuit of bigger and more strategic commercial deals comes with a longer sales cycle RFID evaluations platform diligence.
But we are confident our efforts will pay off and this work will put us in a strong position when macro conditions improve.
So in conclusion.
We are happy with our progress in Q1 2023, our financial performance came in near the high end of our guidance range for revenue.
Active customers grew 10% year over year, we exceeded our guidance for adjusted EBITDA, and we surpassed sell side expectations on both revenue growth and adjusted EBITDA.
We're also seeing continued strength in areas of investment such as self service, our audience builder products health verticals Asian, and CTV and as always we're making steady and significant progress in our efforts to improve platform based return on AD spend for customers, which in the end drives adoption.
That their DSP and revenue growth, we are confident in our ability to continue to deliver exceptional results for our customers and drive long term value for our investors.
Thank you for your support and confidence in out there and now I will turn it over to Patrick.
Thanks, Jim and good afternoon, everyone.
As you've seen in our results 2023 has started as we anticipated and we achieved our revenue and EBITDA goals for Q1, despite the challenging macro environment.
First quarter revenue was $32 7 million down $1 6 million or four 6% versus the prior year.
This decline in revenue reflects continued pressure from challenging economic conditions and constrained advertising budgets that started in the second half of 2022.
This was partially offset by strength in our areas of investment, including CTV health and direct access.
CTV grew 17% year over year.
The health care vertical delivered 19% growth driven by the introduction of heavy and health predictive audiences and.
Impressively.
Correct access grew 19% sequentially from Q4, despite Q4 being a seasonally strong quarter for advertising relative to Q1.
We are encouraged to see the positive response to our self service offering with an.
<unk> number of key players switching their campaigns from competitors to us. These trends continue to support the direction of our strategic investments and we remain committed to investing in the tremendous opportunities for growth ahead of us.
Turning now to expenses.
Our disciplined approach to managing expenses, while investing in strategic initiatives allowed us to deliver solid financial results in the first quarter.
Adjusted gross profit for the first quarter defined as GAAP revenue less traffic acquisition costs.
It was $20 9 million, representing 64% of revenue.
This compares to 67% of revenue in the same period of the prior year.
Lower AGP percentage was due to impacts from softer pricing on some campaigns given the current macro weakness.
Total operating expenses, including tax and stock based compensation were $35 9 million in the first quarter down $2 1 million or five 4% from Q1 2022.
The reduction in operating expenses was driven by modestly lower head count and.
Lower insurance and professional fees related to initial public company costs in the first quarter of 2022.
Offsetting these declines were impacts from inflationary environment related to labor data and.
And TNT and from new investments in our platform data as we create expanded performance driven vertical EIS solutions.
Adjusted EBITDA for the quarter was 470000.
Down 830000 compared to the first quarter of 2022.
Largely due to the modest declines in year over year revenue.
Building on our historical track record of prioritizing profitability, we successfully managed operating expenses and exceeded our Q1 EBITDA outlook.
Moving to the cash flow.
We generated $2 9 million of free cash flow in the quarter compared to $2 1 million in Q1 of last year.
This increase was largely due to less cash paid for professional services and the elimination of cash interest on our debt.
We also capitalized an incremental 570000 in software development costs related to our platform investments for direct access and other initiatives.
Despite these investments we were able to convert a higher percentage of adjusted EBITDA into free cash flow in Q1, consistent with our historical trends due to the collection of customer receivables from revenue generated in our seasonally higher fourth quarter.
We exited Q1 with a strong cash and liquidity position to pursue growth opportunities.
At the end of the first quarter, we had $75 3 million in cash versus $72 6 million at the end of Q4 to $2 7 million increase.
We have no debt on the balance sheet.
And we continue to have access to $40 million on our revolving credit facility with Silicon Valley Bank now a division of first citizens Bank.
Moving to our outlook.
For the full year, we reaffirmed the outlook we provided at the start of the year across revenue AGP and adjusted EBITDA.
We expect revenue to grow in the second half of the year and for the full year driven by strong demand for our new products from customers across a variety of verticals.
We are encouraged by progress in our key investment areas as our health and audience builder products CTV and direct access revenues offset macro pressures.
This forecast assumes no further degradation in the macroeconomic environment.
For the full year, we continue to anticipate adjusted gross profit to be between 64%, 65% of revenue compared to 66, 1% in 2022.
We anticipate adjusted EBITDA to be between 16% and 19% adjusted gross profit.
Bear to 23% in 2022.
This is due to investments, we are making to enhance our platform offering and accelerate our time to market.
We see significant opportunities ahead, and we will continue to invest strategically in the business.
Looking to the more immediate future, we expect the difficult macro conditions pressure on customer AD budgets and timing of campaigns to persist in the second quarter.
For the full year 2023, we expect the quarterly seasonal revenue composition to look more like 2021 and 2022.
This translates to a roughly 9% revenue decrease in Q2 2023 versus Q2 2022.
Adjusted gross profit for the second quarter of 2023 is expected to be consistent with Q1 at approximately 64% of revenue.
From 66, 7% in the second quarter of 2022.
We expect adjusted EBITDA in Q2 to be down similarly to Q1 on a year over year basis.
In summary, we are pleased to have achieved our revenue and EBITDA goals for Q1, despite the challenging macroeconomic conditions.
We continue to see growth opportunities ahead, particularly in our areas of investments such as CTV health and direct access.
We are committed to investing in our platform and creating an expanded performance driven vertical solutions to support our long term growth.
Although we anticipate continued pressure on customer AD budgets and challenging macro conditions in the second quarter.
We remain confident in our ability to achieve our full year outlook.
<unk> has remained consistently profitable and generated positive free cash flow, enabling us to strategically invest in growth opportunities to enhance shareholder value in 2023 and beyond.
At this time, we'd like to transition to the Q&A session moderated by the operator.
At this time I would like to remind everyone that in order to ask a question. Please press Star then the number one on your telephone keypad well pause for just a moment to compile the Q&A roster.
Our first question comes from the line of Dan Medina from Needham.
Your line is open.
Thank you Hi, Jim Hi, Patrick.
Thank you for taking the question.
One question is can you guys talk a little about what you see as the.
Impact of generate AI like chat GPT on your business for the rest of 'twenty, three and then going into 'twenty four 'twenty five thank you.
Dan Thanks for the question as a company whose.
DNA is built around machine learning, we are quite interested in aware of the developments in discussions and proposals around these new AI capabilities.
No the contemplated changes to the business community are quite new and quite in.
In the idea stage at this point I think from our perspective.
The ability to take the machine learning and tap into advertising and the data available in the ecosystem and programmatic and activate that in the real world for the benefit of advertisers is an example.
How.
AI in this case the division of AI being machine learning can be used in very very valuable ways to make performance better to make costs lower so we're quite excited by these innovations.
It's very early we are paying close attention to these innovations and we're looking at them.
I believe that as leaders within our attack of.
This type of machine learning capability that that there will be ways that we can incorporate this into our business, but at this point. It does it does feel more like a future.
A future impact so we're really heads down on taking our AML capabilities and driving value for for our customers.
At this point.
Very helpful. Thank you.
Our next question comes from the line of Maria reps from Canaccord Genuity Maria Your line is open.
Great. Thanks for taking my questions.
First in sort of understanding that macro remains challenging.
But maybe can you talk about sort of some of the trends that you saw throughout Q1, and maybe just talk about what you have seen here in Q2, so far and I guess, how much visibility do you currently have.
Timna advertiser budgets at this point.
Thank you Maria.
We feel quite good I mean, the macro environment and the economy, obviously is not outstanding.
But we feel good I mean, the pipeline that we're generating right now is as strong as it's been in quite some time, we believe that the market is reacting very favorably to the new products that we've brought to market that we've talked about.
The interest in what we're doing.
Motivates us I think that we're excited about the future. That's the reason why we are reiterating in confirming our full year guidance.
Again, there are macro there are macro concerns that's one of the reasons why we don't have as much visibility into for example, Q4.
Incremental which is a big source of revenue for us historically, but the good news is we've done a lot of work to in our view insulate ourselves from some of that we've gotten kind of essentially accustomed to the macro that we're in and we've developed new products. We've developed capabilities that are driving growth even in this.
Macro we saw 17% growth in CTV, we saw 19% growth in health, we saw our active customers grew by 10% our audience builder products are driving a lot of demand our pipeline is breaking records. So towards the end of the first quarter and even now we're seeing a lot more demand and interest from our.
<unk> our pipeline is strong so I think we're just going to focus on that remained conservative remain.
Prudent and cautious in our forward looking view, but there is a lot of optimism in the building. It out there we have never had more.
Larger scale commercial opportunities than we have now and are headed down focused on executing on those opportunities.
Got it that's very helpful and maybe if I could ask one more.
I mentioned that sort of <unk> sales cycles are continuing here are you seeing sort of an improvement on the margin at all and then maybe more broadly how do you feel about the structure and the size of your sales force going forward given the current operating environment.
I'll talk about the thank you Barry I'll talk about the sales cycle first with the good side. The good side to the conversations that we're having now is that there are much longer term in nature of the commitments that we're pursuing they're bigger in nature of the customers are bigger they have bigger media budgets. The downside is there is a level of.
Diligent there's a level of evaluation, there's a level of integration work.
We're actively engaged in that work, we're quite excited to be doing that it's exactly why we're here that's the goal.
So I think we're quite excited that that.
That those opportunities are now available to us when we were purely a manage programmatic.
Platform, we had essentially access to half of the market now with a self service offering that is.
I have confidence and passion for selling the products that we have in market. We did make a couple of reductions in the last few months, but we think that in the end we have an efficient team of high performing team one more fully ramped seller than we had at the end of last year and as the situation permits we will be looking to to me.
<unk> additions.
Two the team, especially on the direct access side, where.
There.
The the scale and the speed of adoption is increasing and I would also mentioned that on the direct access side.
Sales and execution and delivery or are more closely aligned where we have contracts and then its a question of.
Supporting those those opportunities to get them to to onboard as fast as possible and to get the campaign spending.
So we're although those are not sellers. They are revenue driving members of our team that we brought on to support adoption of self service revenue growth.
Got it that's very helpful. Thank you very much for the color.
Thank you Maria.
Yeah.
Our next question comes from the line of John Blackledge from TD Cowen John Your line is open.
Hey, guys. Thanks for the question, it's Logan on for John .
Two questions.
One on the ocular active customer growth, which was strong again this quarter.
Can you discuss the potential trajectory as we work through the year and then also the impact from the launch of those customized audience build their tools.
And then also you mentioned the progress in Canada.
Could you talk about any plans for future international growth as well thanks.
Thank you Logan for the question.
With regard to Canada, we have.
I'll go in reverse order.
We have a multi currency.
Functionality now that we're quite happy with we have a great team in Canada, we're confident that that this will make.
Our ability to grow our business in Canada, more successful and will help us scale more rapidly. There. So we are quite happy and excited about our Canadian opportunity.
Are you still there could not be more excited about that that's something we talked about in our.
Our prior release.
During the during the quarter, we landed 14 new deals.
Based on our audience builder functionality.
The ability for us to customize.
Predictive audiences with our customers that are transparent not black box in nature, where we can sit down with a customer and say who is your audience and then we can use data that we have in our platform to build algorithms that ensure that the ads are going to go to those customers and then on top of that have the kpis.
Optimization.
Ml techniques that have made out there and what we are today. The combination of those two things is quite exciting. So we're seeing really strong adoption of the audience builder Bolton and our standard business as well as in health.
Just a couple of examples for audience builder for an audit automotive brand I mentioned earlier.
Our predictive audiences are already delivering great results, we had a 55% more efficient CPA compared to a third party I'd based audience, we drove 61% of onsite conversion as compared to a competitive third party audience. Despite equal budgets, we're driving great results I could go through a number of examples but we are quite high.
With the initial results from the market, having just launched this very recently already winning 14 deals with audience builder and then I'll mentioned 16 deals on on the health audience builder product with equally strong results and again. These results are just driving more demand from our from our customers I did forget your first question what was the first one.
Yes. It was just kind of building off of the audience build there.
Potential impact to like customer growth throughout the year and then just more broadly speaking.
Actual trajectory on customer growth throughout the year this year.
Okay.
This is Patrick.
Talking about active customers.
As we mentioned, we're up 10% on an LTM basis.
In Q1.
Great result for us, while we continue to grow our customer base.
We have done historically.
And when the macro environment normalizes, we're going to be in a really good position to take wallet.
Sure.
With these customers I think for the rest of the year.
I haven't guided to a specific customer growth, but we are confident.
Our long our full year guidance and.
We believe that.
Whether that's from new product innovation that we're seeing the pipeline that we're seeing.
It may come in new customers, who may come from.
Spend with existing customers. So it's a little difficult to give you some guidance there, but we're very positive on our outlook with our active customers and Logan and what I would add to that is.
Our head is really focused on the bigger strategic commercial integrations that are going to drive meaningful revenue growth.
Active customers are a great measure of our penetration of the market, we're very excited to be out in the market and making.
Making our case and winning deals and getting our seat.
With significant and savvy media buyers.
But at the same time, we're really focused on making sure that our efforts are focused towards driving strategic commercial relationships that are going to transform add Darren from the business that it is now to the business that we want it to be and we're very encouraged by that I think the reason why we talk.
A lot in these calls about our technology, our capabilities in our products and the work and the effort and the investment that we're putting into that is because it is at the end of the day. The most important thing that we can do to ensure the success of our business if customers media buyers.
Receive.
Good outcomes when they invest their media dollars without Darren they will come back and that is what we have been singularly focused on doing and we will continue to do that and we're very pleased to see that those results are exactly where we want them to be so we are excited to be in a position to be growing the pipeline as we are and to have the opportunities that we have.
I haven't even talked about the health pipeline and the opportunity to grow there, but we're quite confident that the active customer list will continue to grow as we continue to tell our story in the marketplace.
That's super helpful. Thank you guys.
Thank you.
Our next question comes from the line of Andrew <unk> of JMP Securities. Andrew. Please go ahead.
Good afternoon, and thanks for taking my question, it's great to see CTV growth, 17% can you talk a little bit about attracting more brand budgets are more awareness objective type campaigns.
And then just as we think about the 2023 guide and understood positive growth.
But is there anything you guys can share around assumptions around macro for that or seasonality, maybe as we think about the cadence of the year. Thank you so much.
Thank you Andrew.
Yes, CTV, we love CTV as a part of our business.
It's going to be a driver for self service adoption, it's been very.
It's been very impactful to our managed programmatic business.
We just think that our ability to take CTV and turned it into a more of a performance channel has been quite impactful one of the things we talked about this quarter was some of our integrations to have more premium inventory life premium inventory sports et cetera.
Really excited about the ability to do that on the awareness side I think for us. It's a it's a full funnel holistic view of the programmatic opportunity. So when we have.
Hopper funnel awareness campaigns, and we're able to tap into the learnings from those campaigns and utilize them in the lower funnel to drive conversion activity and then we can report out on the influence of upper funnel on lower funnel customers come back and the budgets increase so we continue to do that I think that CTV is not.
Not just a awareness channel it can be both and I think that advertisers are are realizing that with the data available through programmatic CTV, there really should be an expectation frankly of more than just.
Spending money to get ads.
<unk> I think you need to expect.
ROI return on AD spend and that's what we're trying to educate our customers about so that they can be more.
They can they can be more exacting and they can be more demanding frankly of their programmatic partners to make sure that they get return on an investment when it comes to CTV media dollars.
Yes, and then take your question on on the outlook for the year.
In our in our.
Outlook, we're not we're not expecting a.
Better macro environment so.
But we are expecting that the seasonal makeup of our revenue profile would be more akin to 2021 and 2022.
Quarterly revenue in 2022 was it was an anomaly due to the macro deterioration in the second half. So 2021 is more more appropriate as a comparison.
Sure.
Yeah.
I think what we're seeing is that Q2 second half of the year will provide better comps easier comps for for our for our business and we are continue to see the momentum in health da and CTV and the increased active customer.
Growth.
Really.
Along with our better pipeline being the key drivers for second half growth.
Thank you.
Thank you Andrew.
Yeah.
Our next question comes from the line of John Ray of Watertown Research John . Please go ahead.
Thank you Jim.
When you talk about transparency being a benefit to advertisers.
Can you give me a little color on what you mean by that and what does that really trying to say I didn't like it.
Thank you John I appreciate the question when.
When we talk about transparency.
We're really talking about a couple of things.
First.
Pricing transparency there is no more transparent DSP in the programmatic industry then add there.
And this means that advertisers know exactly where their media investment is going.
Our technology is designed to put the customer first for example, our sophisticated price optimizer.
Are designed to ensure that customers do not overpay for their media. Unlike some other platforms, we pass on price optimizer savings directly and completely to the customer nor do we have any incentive for the initial price to be high so that we can lower for the customer and then take a cut.
That's not what we do we believe that there is a huge opportunity in this market for that type of transparency.
The second opportunity for transparency as a business.
As a business differentiator is in the area of data other dsp's rely on imprecise black box audience segments fraud targeting it is often not known how these audiences were generated or win.
The <unk>.
<unk> accuracy of those audiences never approved.
<unk> is proud to offer an alternative to this our audience solar products, we've talked about them last quarter, we talked about them now we're seeing a lot of great responses to them by markets.
By the market.
Our audience holders are fully transparent there are built collaboratively collaboratively with our customers.
And they ensure that data used to build audience segments is fully disclosed and shared so I think when you when it comes down to it John I think the market is smarter than it used to be and I think that in order to be competitive in order to make a splash in in order to make a difference.
<unk> is taking the high road and we're being very transparent on pricing, where the dollars are flowing where their media dollars are flowing and what is the data what data is being used how is it being used and what is the impact and effect of that data. We are the most privacy forward platform that exists in programmatic, we do not require it to <unk>.
And I think that shining a spotlight on that is going to be a big part of our future growth.
Great maybe as a follow up you had talked about.
Direct access.
Kind of opening up things for you do you really see that as broadening your Tam your addressable Tam.
Absolutely. It is exactly why we're doing it when we approach a market and our customer has a trading team and they have a wherewithal and they have the skills and they have a desire to build a media trading profit center for their business.
Lack of platform theyre, not going to send an io to add Darren and ask us to execute they're going to want to onboard a new enterprise software platform that they can use to transact media themselves.
And that is what we've brought to market and we didn't just bring a solution to market. We brought what we believe is the best solution to market.
You care about performance and you care about transparency.
So yes, I believe we more than double our Tam, it's not going to happen overnight. It has not happened overnight, but they are working with that we're having the conversations that we need to have the elevated and and escalate our.
Our future growth.
And it's all about being one add darrin in the marketplace. If a customer wants us to provide a full service solution, including creative and strategy and add ops and client services.
And campaign optimization, we can do that and we love to do that and we're very good at it because of our ability to do that we've been able to build the most intelligent breen in programmatic and with that permit programmatic brain now we have layered on top of that a user experience that is more seamless.
And less intimidating to kind of.
<unk> advanced users, that's why we were patient and bring it to market along those lines I'm very excited to kind of reiterate that in the summer we're going to be bringing the best.
Health focused audience DSP to market.
<unk> first self service users, we believe that it will be a huge part of our growth and we believe that as the pharmaceutical companies review their options for 2024 as they do in the summer we will be very well positioned to capture a large share of those budgets.
Yeah.
Great. Thanks for the color.
Thank you for the question.
There are no further questions at this time I will now turn the call back over to Jim Lawson CEO for closing comments.
Thank you very much before before we wrap I just want to reiterate our excitement around the direction of our business.
Our performance in the first quarter of 2023 reflects our ongoing commitment to innovation and customer success and.
And we believe it is an important step in the direction of our much bigger goals.
While the operating environment has been challenging we are guiding for growth in the second half of the year and we believe that we have the pipeline and the customer interest to support that I'd also like to take this opportunity to thank the incredible team at add Darren for working tirelessly to deliver on our commitments to our customers.
And our shareholders. We know that this is the beginning of something significant to investors and analysts. Thank you for joining us. This afternoon and thank you for your trust and support we look forward to sharing further updates.
In the near future.
Yeah.
This concludes today's conference call you may now disconnect.
Okay.
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