Q3 2023 Innovid Corp Earnings Call
Greetings and welcome to the Q3 'twenty space for your earnings call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation.
Speaker 1: Greetings and welcome to Innovid Q3 2023 earnings call. At this time all participants are in a listen only mode. Please question
Speaker 1: If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Prunlija Jha.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
A reminder, this conference is being recorded Theres now my pleasure to introduce your host.
India Johnson. Thank you Mr. Johnson you may begin.
Thank you operator before we begin I'll remind you that today's call may contain forward looking statements and that the forward looking statement disclaimer included in our case earnings release available on our Investor Relations page also picking up to this call.
These statements may include without limitation predictions expectations targets or estimates regarding our anticipated financial performance business plans and objectives future events and developments.
And our business competitive landscape technological or regulatory environment and other factors could cause actual results to differ materially from those expressed by the forward looking statements made today, our historical results are not necessarily indicative of future requirements and as such we can give no assurance as to the accuracy of our forward looking statements and assume no obligation to update them.
As required by law.
Speaker 2: In addition, today's call will include non-GAAP financial measures including adjusted EBITDA, adjusted EBITDA margins, and free cash flow. We use these non-GAAP measures in managing the business and believe they provide useful information for our investors.
In addition, today's call will include non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin and free cash flow. We use these non-GAAP measures managing the business and believe they provide useful information for investors. These measures should be considered in addition to and not as a substitute for our GAAP results reconciliations of the non-GAAP measures.
Speaker 2: These measures should be considered in addition to and not as a substitute for our gap results. Reconciliation of the non- GAAP measures to their corresponding GAAP measures where appropriate can be found in the earnings release available on our website and in our filings with the SEC. Hosting today's call are Zika Netters and it is co-founder and CEO , as well as Anthony Collini, and it is CSO, both to one participate in our Q&A session. And now I'll turn the call over to Zika to begin. Zika, go ahead. Money See PRES Wait A week
Corresponding GAAP measures, where appropriate and can be found in the earnings release available on our website and in our filings with the SEC.
Hosting today's call as he cannot or and if it's co founder and CEO as well as Anthony Coline innovative CFO both of them participate in our Q&A session and now I'll turn the call over to Zika to begin Zika go ahead.
Thanks, Billy and thank you all for joining the call today.
Speaker 3: Before I begin, I would like to thank our teams around the world for their hard work.
Before I begin I would like to thank our teams around the world for their hard work.
Speaker 3: We reported an excellent quarter in our own track to close out a great year.
We reported an excellent quarter and are on track to close out a great year.
As many of you know one of our development teams is located in Israel, and we'd like to give a special thanks to them for continuing to deliver on track. Despite the heartbreaking situation in the region.
Speaker 3: As many of you know, one of our development teams is located in Israel. And we'd like to give a special thanks to them for continuing to deliver on track despite the heartbreaking situation in the region.
I will start our call with our third quarter results and provide some recent business updates and highlights.
Speaker 3: I will start our call with our third quarter results and provide some recent business updates and highlights. It will then turn it over to our newly appointed chief financial officer, Anthony Kalini, who will provide further details on our Q3 performance in share updated guidance, followed by Q&A.
I'll, then turn it over to our newly appointed Chief Financial Officer, Anthony cleaning.
We'll provide further details on our Q3 performance and share updated guidance followed by Q&A.
I am pleased to report, we deliver a strong third quarter exceeding our prior guidance for both revenue and adjusted EBITDA.
Speaker 3: I am pleased to report with deliver a strong third quarter, exceeding our prior guidance for both revenue and adjusted EBITDA. We are well positioned for continued execution in the fourth quarter to deliver a solid full year 2023.
We are well positioned for continued execution in the fourth quarter to deliver a solid full year 2023.
Speaker 3: As a result, we are raising our full year revenue and adjusted EBITDA guidance and now expect adjusted EBITDA margins of at least 12% compared to 10% prior.
As a result, we are raising our full year revenue and adjusted EBITDA guidance and now expect adjusted EBITDA margins of at least 12% compared to 10% prior.
Speaker 3: This is the third consecutive quarter of outperforming our guidance. And I'm proud of the team's ability to execute as we continue to improve financial metrics on all fronts.
This is the third consecutive quarter of outperforming our guidance and I'm proud of the team's ability to execute as we continued to improve financial metrics on all fronts.
Speaker 3: We remain committed to expanding our margins and positioning ourselves for accelerated growth as the macroenvironment improves. Looking at the quarter, our Q3 revenue grew 5% year by year, and importantly, we more than doubled our adjusted EBDA to $6.5 million compared to last Q3.
We remain committed to expanding our margins and positioning ourselves for accelerated growth as the macro environment improves looking at the quarter. Our Q3 revenue grew 5% year over year and importantly, we more than doubled our adjusted EBITDA to $6 $5 million compared to last Q3.
This follows a strong Q2 in which our adjusted EBITDA margin grew from negative 5% in Q2 of 'twenty 'twenty, 2% to 13% last quarter. Additionally, as operation profitability increased we generated $4 $1 million in positive free cash flow this quarter.
Speaker 3: This follows a strong Q2 in which our adjusted EBDA margin grew from negative 5% in Q2 of 2022 to 13% last quarter. Additionally, as our operation profitability increased, we generated $4.1 million in positive free cash flow this quarter.
Speaker 3: Our improving bottom line results over the last few quarters demonstrate that our products are profitable at their core.
Our improving bottom line results over the last few quarters demonstrate that our products are profitable at the airport.
We have a business model, where we generate margin expansion, even as we continued to invest in exciting new and innovative technologies, we have a strong competitive moat and are capitalizing on our inevitable transformation of the market as more and more viewers watch television through CTV we.
Speaker 3: We have a business model where we generate margin expansion, even as we continue to invest in exciting new and innovative technology.
Speaker 3: We have a strong competitive mode in our capitalizing on our inevitable transformation of the market as more and more viewers watch television through CTV.
Speaker 3: We continue to see more streaming platforms implementing ad supported offerings. Recently, Amazon Prime Video announced it will join the overall ad supported CTV trend and will introduce ads into Prime Video next year. This creates huge value for the industry, our partners, and innovators.
We continue to see more streaming platforms implementing AD supported offerings recently, Amazon Prime video announced it will join the overall AD supported CTV trend and will introduce ads into prime video in next year.
This creates huge value for the industry, our partners and innovate.
Speaker 3: There's also been a rapid shift in TV viewership. This quarter, it was widely reported that linear TV viewership fell below 50% in the US for the first time, which is a major month.
There's also been a rapid shift in TV viewership. This quarter. It was widely reported that linear TV viewership fell below 50% in the U S. For the first time, which is a major milestone.
Speaker 3: Even in a world where Ed budgets continue to be impacted by the macro environment, we expect that advertising dollars will meaningfully shift to align with eyeballs and time spent on CTV platforms.
Even in a world where AD budgets continue to be impacted by the macro environment. We expect that advertising dollars will meaningfully shift to align with eyeballs and time spent on CTV platforms intervene CTV revenue from AD, serving and personalization grew 9% over last year outpacing overall revenue growth.
Speaker 3: Innovative CTV revenue from adsorbing and personalization grew 9% over last year, outpacing our overall revenue growth. We believe the inertia behind the trend will continue to accelerate, position us to benefit once-ed budgets normalize and we can capitalize on this massive opportunity as more impressions transition to CTV.
We believe the inertia behind the trend will continue to accelerate position us to benefit once it budgets normalize and we can capitalize on this massive opportunity as more impressions transition to CTV.
Another growth driver innovate XP or a measurement offering grew 8% as compared to last year, representing 23% of total revenue in the third quarter. We are pleased with the ramp up in measurement as we continue to cross sell and extend usage.
Speaker 3: Another growth driver in a bit XP, our measurement offering, through 8% as compared to last year, representing 23% of total revenue in the third quarter. We are pleased with a ramp up in measurement as we continue to cross sell and extend use.
Speaker 3: Growth this quarter was also fueled by significant new customer wins including Revlon, Fanatics, Brawx Health, and on-running.
Growth. This quarter was also fueled by significant new customer wins, including Revlon fanatics, Bulks health and on running.
In addition, existing large publisher partners such as NBC Universal have expanded their commitment for usage of our measurement solutions to help prove the value of their inventory.
Speaker 3: In addition, existing large publisher partners such as NPC Universal have expanded their commitment for usage of our measurement solutions to help prove the value of their inventory.
Turning to our platform.
Speaker 3: We continue to invest in new functionality to power the future of TV, and how brands can reach consumers in new and powerful ways using the latest breakthroughs in AI technology.
We continue to invest in new functionality to power the future of TV and.
And how brands can reach consumers in new and powerful ways using the latest breakthroughs in AI technologies.
Speaker 3: Innovate is a data which business that generates an unparalleled CTV data set. This data set is the optimal foundation for sophisticated AI tools that can deliver exceptional value to our clients.
Innovate is a data which business that generates an unparalleled CTV dataset. This dataset is the optimal foundation for sophisticated AI tools that can deliver exceptional value to our clients.
Speaker 3: I'm excited to announce that we have implemented leading generative AI engines into our platform.
I'm excited to announce that we have implemented leading generative AI engines into our platform.
Speaker 3: Using these AI engines, our clients will be able to generate images, videos, voiceover, and add copy based on the first and third party data.
Using these AI engines, our clients will be able to generate images videos voice over and Ed copy based on the first and third party data feeds.
Speaker 3: Those never-seen-before unique creatives ads are then streamed, measured, and optimized by Innovate platform based on customer-set strategies.
Dose never seen before unique creative ads are then streamed measure and optimize by innovate platform based on customer set strategies.
Speaker 3: We have also implemented a natural language you queer engine into our platform that will allow our clients to gain valuable information and insights about the CTV campaigns via conversations like inter-
We have also implemented and natural language query engine into our platform that will allow our clients to gain valuable information and insights about the CTV campaigns via a conversation like interface.
Speaker 3: Now, I would like to share with you a few words regarding our 2024 product strategy.
Now I would like to share with you a few words regarding our 2024 product strategy.
And if its ability to apply AI algorithms to our AD server data uniquely positions us to optimize CTV ad investments.
Speaker 3: Inevitability to apply AI algorithms to our adservate data uniquely positions us to optimize CTV ad invest.
Speaker 3: In October , we launched instant optimization, a machine learning solution that empowered its converged TV advertisers to immediately improve ad performance. Our instant optimization solution goes beyond measurement by intelligently selecting the most impactful creatives to serve at the delivery.
In October.
We launched instant optimization.
In machine learning solution that empowers converged TV advertisers to immediately improved AD performance are instead optimization solution goes beyond measurement by intelligently selecting the most impactful creative to serve at the delivery times.
Speaker 3: we see considerable opportunity to optimize the CTV market to drive outcomes for lower investment.
We see considerable opportunity to optimize the CTV market to drive outcomes for lower investments using our proprietary data and technology.
Speaker 3: using our proprietary data and technology. We are excited about the momentum we've seen over the last few quarters with increasing revenues, expanding adjusted EBITDA margins and improved positive free cash flow.
We are excited about the momentum we've seen over the last few quarters with increasing revenues expanding adjusted EBITDA margins and improved positive free cash flow.
Speaker 3: We continue to roll out the valuable product enhancements, sign new clients, and expand our existing partnerships.
We continue to rollout the value old product enhancements sign new clients and expand our existing partnerships.
Speaker 3: Although the market has not fully rebounded and we are experiencing different spend levels across our verticals, we are encouraged by the continued shift in viewership from linear to CTV and believe we are well positioned for growth.
Although the market is not fully rebounded and we are experiencing different spend levels across our verticals. We are encouraged by the continued shift in viewership from linear to CTV and believe we are well positioned for growth.
Once the market normalizes, we expect higher future growth rates and higher profitability margins.
Speaker 3: Once the market normalizes, we expect higher future growth rates and higher profitability margins.
Speaker 3: As we've demonstrated over the last few quarters, we remain committed to operational execution and expanding margins.
As we've demonstrated over the last few quarters.
We remain committed to operational execution and expanding margins.
Speaker 3: We plan to share more about our excitement around 2024, including our product innovation and pipeline, in which CTV performance optimization is the main theme at our upcoming Investor Day on November 30 in New York City.
We plan to share more about over excitement around 2024, including our product innovation and pipeline and which CTV performance optimization is the main theme at our upcoming Investor Day on November 30th in New York City.
Speaker 3: Before I turn the call over to Anthony Calini, our new Chief Financial Officer.
Before I turn the call over to Anthony Colony, our new Chief Financial Officer, I want to thank Tanya.
Speaker 3: I want to thank Tanya for all her contributions to innovate over the last 11 years.
For all of her contributions to innovate over the last 11 years, Tony has been a key pillar in our success to date and has built a strong finance team. During her tenure Tonya I wish you all the best in your future endeavors.
Speaker 3: Tanya has been a key pillar in our success to date, and has built a strong finance team during her tenure. Tanya, I wish you all the best in your future endeavors.
I am excited to welcome Tony to his first innovate earnings call as our new Chief Financial Officer.
Speaker 3: I am excited to welcome Tony to his first Innovate earnings call as our new Chief Financial Officer.
Speaker 3: Tony has over 20 years of financial experience at leading private and public technology companies.
Tony has over 20 years of financial experience at leading private and public technology companies.
Speaker 3: He possesses deep experience in helping growth companies scale in a sustainable way and bring extensive SaaS and enterprise software experience to our team. Tony.
He possesses deep experience in helping growth companies scale in a sustainable way and bring extensive SaaS and enterprise software experience to our team.
Tony welcome to innovate.
Thank you for the warm welcome Zika and good morning, everyone I'm incredibly excited to join innovate and be part of this experienced and passionate team.
Speaker 4: Thank you for the warm welcome, Zvika, and good morning, everyone. I'm incredibly excited to join InnoVid and be part of this experienced and passionate team. It's only been a few weeks, but the opportunity here is clearly apparent.
Only been a few weeks, but the opportunity here is clearly apparent to me the combination of a growing business strong secular trends in CTV migration, a leading platform world class customers and our Leverages will operating model are all powerful attributes that contribute to creating sustainable long term value.
Speaker 4: The combination of a growing business, strong secular trends in CTV migration, a leading platform, world-class customers, and a leverageable operating model are all powerful attributes that contribute to creating sustainable, long-term value.
As you just heard from Zika, our dedication to driving profitable growth is once again evident in our results.
Speaker 4: As you just heard from Zvika, our dedication to driving profitable growth is once again evident in our results.
Speaker 4: We beat the top end of the revenue guidance range by 3.5 percent and delivered an adjusted EBITDA margin of 18 percent, the second straight quarter of EBITDA expansion.
We beat the top end of the revenue guidance range by three 5% and delivered an adjusted EBITDA margin of 18% the second straight quarter of EBITDA expansion.
Now, let me dig a little more into the numbers.
Speaker 4: Q3 revenue grew 5% year over year to $36.2 million.
Q3 revenue grew 5% year over year to $36 2 million.
Speaker 4: If we break that down further, ad serving and personalization revenues were up 4% year over year, reflecting the continued pressure on ad spend in the broader market.
If we break that down further AD, serving and personalization revenues were up 4% year over year.
Collecting the continued pressure on AD spend and the broader market.
As a reminder, innovative AD, serving and personalization revenue closely correlates with AD impression volume served through our platform.
Speaker 4: As a reminder, Innovids ad serving and personalization revenue closely correlates with ad impression volumes served through our platform.
Speaker 4: Within this category, CTV revenue, which comes from ad serving and personalization, increased 9% as more impressions continue to transition to connected TV.
Within this category CTV revenue, which comes from AD, serving and personalization increased 9% as more impressions continue to transition to connected TV.
Measurement revenue grew 8% as compared to last Q3, as we continued to build out our products to take full advantage of the valuable data set generated from the AD serving side of the business.
Speaker 4: Measurement revenue grew 8% as compared to last Q3 as we continue to build out our product to take full advantage of the valuable data set generated from the ad serving side of the business.
Speaker 4: As a percentage of revenue in Q3, ad serving and personalization made up 77%, while measurement accounted for 23%. A few more comments on the CTVS.
As a percentage of revenue in Q3 AD, serving and personalization made up 77% while measurement accounted for 23% a.
A few more comments on the CTV activity this quarter.
Speaker 4: Q3 CTV revenue, excluding measurement, grew 9% over last year, and CTV video impression volume grew 7%.
Q3, CTV revenue, excluding measurement grew 9% over last year and CTV video impression volume grew 7%.
Speaker 4: Additionally, we reached another high point this quarter with 55% of all video impressions coming in via CTV.
Additionally, we reached another high point this quarter with 55% of all video impressions coming in the S. E T V.
Speaker 4: Mobile volume grew by 8% and represented 35% of all video impressions.
Mobile volume grew by 8% and represented 35% of all video impressions, while desktop volume decreased by 12% and reflected 10% of all video impressions.
Speaker 4: while desktop volume decreased by 12% and reflected 10% of all video.
Speaker 4: Both mobile and desktop have been inconsistent in the first three quarters of 2023, while CTV has continued gaining share of total video impressions and demonstrated constant growth even against the backdrop of the uncertainty in the market.
Both mobile and desktop have been inconsistent and the first three quarters of 2023, while CTV has continued gaining share of total video impression and demonstrated constant growth even against the backdrop of the uncertainty in the market.
Revenue less cost of revenue calculated out to 77% of revenue.
Speaker 4: Revenue, less cost of revenue, calculated out to 77% of revenue, improving from 75% in Q3 last year.
Improving from 75% in Q3 last year as.
Speaker 4: As the business scales, our margins continue to improve, reflecting the operating leverage embedded in our business model.
As the business scales, our margins continued to improve reflecting the operating leverage embedded in our business model.
Speaker 4: Now moving on to expenses. We're pleased to report that we are continuing to see the impact of efficiency efforts and the integration of the TV squared acquisition. As Q3 total operating expenses excluding depreciation, amortization, and impairment totaled $35.8 million, a decrease of 7% from $38.6 million last year.
Now moving on to expenses. We're pleased to report that we are continuing to see the impact of efficiency efforts and the integration of the T V squared acquisition as Q3 total operating expenses, excluding depreciation amortization and impairment totaled $35 8 million a deal.
Greece of 7% from $38 6 million last year.
Speaker 4: employee count at quarter end was 460, a 14% decrease compared to the previous year, and resulted in a 16% reduction in compensation expenses, excluding stock-based
Employee count at quarter end was 460% to 14% decrease compared to the previous year and resulted in a 16% reduction in compensation expenses, excluding stock based comp.
Speaker 4: We remain committed to managing our cost base while protecting investment in high growth areas to drive improved profitability and long-term value creation for our shareholders.
We remain committed to managing our cost base, while protecting investment in high growth areas to drive improved profitability and long term value creation for our shareholders.
Speaker 4: Q3 net loss was $2.7 million, or a per share loss of $2.7 million.
Q3, net loss was $2 7 million or a per share loss of Tucson.
Speaker 4: The outstanding common share count at the end of the quarter was 140.1 million shares.
The outstanding common share count at the end of the quarter was 141 million shares.
Adjusted EBITDA was $6 5 million, representing an 18% adjusted EBITDA margin as compared to just 8% in Q3 last year and 13% in Q2.
Speaker 4: But just at EBITDA was 6.5 million, representing an 18% adjusted EBITDA margin, as compared to just 8% in Q3 last year and 13% in Q2.
Speaker 4: This improvement reflects the impact of our modest revenue growth, lower cost of revenues as a percentage of revenue, and lower operating costs.
This improvement reflects the impact of our modest revenue growth lower cost of revenues as a percentage of revenue and lower operating costs.
Speaker 4: We ended Q3 in a strong financial position with $47.7 million in cash and cash equivalents and $20 million drawn on our evolving debt facility, with an additional $30 million available on that line.
We ended Q3 in a strong financial position with $47 7 million in cash and cash equivalents and $20 million drawn on our revolving debt facility with an additional $30 million available on that line.
Speaker 4: And during the quarter, we generated $4.1 million in positive free cash flow, an improvement of 78% from $2.3 million in Q3 2022.
And during the quarter, we generated $4 1 million and positive free cash flow an improvement of 78% from $2 3 million in Q3 2022.
Speaker 4: Finally, let me touch on our outlook for the fourth quarter and the full year 2023.
Finally, let me touch on our outlook for the fourth quarter and full year 2023.
We are confident in the underlying strength of our business and anticipate continued strong financial performance given recent trends over the last few quarters as well as early returns thus far in Q4.
Speaker 4: We are confident in the underlying strength of our business and anticipate continued strong financial performance given recent trends over the last few quarters as well as early returns thus far in Q4.
Speaker 4: We expect Q4 total revenue in a range of $35 to $37 million, representing 4 to 10% year-over-year growth.
We expect Q4 total revenue in a range of $35 million to $37 million, representing 4% to 10% year over year growth.
We expect Q4 adjusted EBITDA in a range of 5.5 to $7 5 million as compared to $2 9 million in the fourth quarter last year.
Speaker 4: We expect Q4 adjusted EBITDA in a range of 5.5 to 7.5 million, as compared to 2.9 million in the fourth quarter last year.
Speaker 4: For the full year, we expect revenue of $136 to $138 million, reflecting 7% to 9% annual growth, and EBITDA between $16.6 and $18.6 million, reflecting an adjusted EBITDA margin of at least 12%.
For the full year, we expect revenue of $136 million to $138 million, reflecting 7% to 9% annual growth in EBITDA between $16, six and $18 6 million, reflecting an adjusted EBITDA margin of at least 12%.
Speaker 4: In conclusion, we are proud of the team's work and encouraged by our third quarter results and the momentum we are seeing in the business, even in light of the broader uncertainty across the ad market. We believe we are well positioned to become the essential technology infrastructure for the future of TV advertising and to experience outsized growth as ad spend returns to more historic levels.
In conclusion, we are proud of the team's work and encouraged by our third quarter results and the momentum we are seeing in the business even in light of the broader uncertainty across the ad market.
We believe we are well positioned to become the essential technology infrastructure for the future of TV advertising and to experience outsized growth as AD spend returns to more historic levels.
We remain committed to innovation and value creation for our customers and shareholders.
Speaker 4: We remain committed to innovation and value creation for our customers and shareholders.
This concludes our prepared remarks, Zika and I are now happy to take some questions. Operator, please begin the Q&A session.
Speaker 4: This concludes our prepared remarks. Zvika and I are now happy to take some questions. Operator, please begin the Q&A session.
Speaker 1: Thank you. We will now be conducting a question and answer session.
Thank you.
We will now be conducting a question and answer session.
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One moment please poll for questions.
Our first question comes from the line of Andrew Boone with JMP Securities. Please go ahead.
Speaker 1: First question comes from the line of Andrew Boone with GNP Securities, please go ahead.
Speaker 5: Thank you guys for taking my question. This is Matt on for Andrew. My first one is just about instant optimization. Can you just tell us how frame the opportunity for us and then also just bring it back to the model and how can we expect it to influence results and when? And then Tony, welcome aboard. And I just want to get your thoughts here on your philosophy between pro-opinability and what we should expect heading in the 2020 quarter. Thank you.
Thank you guys for taking my question. This is Matt on for Andrew My first one is just on instant optimization can you just.
How does it frame the opportunity for US and then also just bring it back to the model and how can we expect it to influence results and why and then Tony welcome aboard and I just wanted to get your thoughts here on your philosophy between growth and profitability.
Would expect heading into 2024 here. Thank you.
Thanks, Matt.
Speaker 3: Thanks, Matt. Yes, so you definitely picked on an important topic for us that we worked a lot on this year, but even so will be a major.
Yeah. So it definitely picked on unimportant topic for US are that we've worked a lot on this year, but even so it will be a major theme for 'twenty 'twenty, four and not pushing forward on on optimization and in a way it closing a flywheel. If you zoom out do you see that we have the AD server.
Speaker 3: for 2024 and not pushing forward on optimization. And in a way, closing a flywheel. If you zoom out, you see that we have, you know, the adsorbered the core of the key delivery engine that generates massive amount of data. The input into it is creative and campaign strategy. The output is the data, but then, you know, post the acquisition and the release of innovative XP or measurement and outcome solution. Now we can see the results.
Four of the key delivery engine that generates massive amount of data the input into it is creative and campaign strategy the output as the data, but then you know post the acquisition and the release of the XP, our measurement and outcome solution now we can see the results. So the the the next step.
Speaker 3: So the next step, which is the big major step, is connecting all these three platforms together, which was done this year, to allow to understand based on the output, based on the output.
Which is the big major step is connecting all the three platforms forget it which was done this year to allow to understand based on the output based on the outcome.
Speaker 3: and all the data that we have that is very unique to us, I think kind of unprecedented outside of the Google universe, the data set that we have is to impact then the campaign strategy, basically to close the loop. And that's where optimization and the heart of it, you know, the AI models that can constantly do that. And the release of instant optimization is not just here's some recommendation, but actually to be able to affect the creative, the messaging and the campaign strategy in real time.
And all the data that we have that is very unique to us I think kind of an unprecedented outside of the Google universe. The dataset that we have is to impact than the campaign strategy basically to close the loop and that's where optimization in the heart of it you know on the AI models that can constantly do with it and the release of instead of organization.
It's not just here's some recommendation, but actually to be able to affect the creative the messaging in the campaign strategy in real time.
And this is just the initial release.
Speaker 3: And this is just the initial release. We're definitely looking forward to meet investors and analysts at the end of this month. And our investor there, we're going to actually demo live some of these technologies, including some live AI demos. So it will give a better sense. So in terms of opportunity, we think there's a massive opportunity to generate value for our customers and partners.
We're definitely looking forward to meet our investors and analysts at the end of this month in our Investor day, we're going to actually demo live. Some of these are technology, including some like AI demo. So he will give a better sense. So in terms of opportunity. We think there's a there's a massive opportunity to generate value for our customers and partners.
Speaker 3: We're not talking yet about next year, but this is definitely a path to additional revenue generation the way we see it, and hence the significance of it.
We were not talking yet about next year, but this is definitely up.
Hum a path to additional revenue generation the way, we see it and hence the significant investment.
Okay.
Yeah.
Thanks Vic.
Speaker 4: Thanks, Mika. Hey, Matt, how are you? Yeah, so here's how I think about the balance between growth and profitability, and I'll tell you that.
Hey, Matt how are you.
Yeah. So.
Here's how to think about.
The balance between growth and profitability and I'll tell you that's.
Speaker 4: Really one of the main reasons why this was such an attractive opportunity for me is you know the company's done a lot of work over the last year or so to expand margin.
Really one of the main reasons why why this was such an attractive.
<unk> for me is.
The company has done a lot of work over the last year or so to expand margins.
Speaker 4: And at the same time, represents some growth, even in a market that's been challenging, or just due to some of the macro trends.
And at the same time represent some growth even in a market. That's that's been challenging just due to some of the macro trends. So my personal belief is really the best way to create value for our shareholders and really all stakeholders is through sustainable long term profitable growth and I think we.
Speaker 4: So, you know, my personal belief is really the best way to create value for shareholders and really all stakeholders is through sustainable, long-term, profitable growth. And I think...
We've done the hard work to really set ourselves up for that and it's nice to see that coming through in the numbers over the last couple of quarters and even as we look to Q4.
Speaker 4: the hard work to really set ourselves up for that and it's nice to see that coming through in the numbers over the last couple quarters and even as we look to Q4.
Speaker 6: Um, and, and some of the guidance that we gave there kind of expanding.
And some of the guidance that we gave there are kind of expanding margins.
Speaker 6: margins showing higher growth there. So I think as we think forward, we're very mindful of balancing those two things. I do think there's the opportunity for some breakout growth as the market turns around because of our position in the CTV space.
Showing showing higher growth there. So I think as we think forward, we're very mindful of balancing those two things I do think theres the opportunity for some breakout growth as the market turns around because because of our position in the CTV space.
But <unk>.
Speaker 6: driving profitability, expanding margins is kind of key to developing that long-term value for shareholder. So that's kind of my personal thoughts and just we use on the company in general and what I've seen here just over a relatively short time.
Driving profitability.
Banding margins as kind of key right.
Developing now that long term value for shareholders. So that's kind of my personal thoughts and just we use on the company in general and what I've seen here just over a.
Relatively short time.
Great. Thank you.
Thank you.
Speaker 1: Thank you. Next question comes to the line of Shambh Ghatil Lubit. Sath Kuhana. Peace be upon you.
Next question comes from the line of Shum gotten little bit Susquehanna. Please go ahead.
Hi, This is Aaron Samuels on for Shyam Patil. Thank you for taking our questions maybe.
Speaker 7: Hi, this is Aaron Samuels on Pershambatil. Thank you for taking our questions.
Speaker 7: Maybe first just on the fourth quarter guidance.
Maybe first just on the fourth quarter guidance could you unpack a bit what that assumes in terms of the macro and AD environment are you expecting things to generally remained steady from where they were in the third quarter or is that suggesting maybe a little bit of improvement and also if you have any color.
Speaker 7: Could you unpack a bit what that assumes in terms of the macro and ad environment? Are you expecting things to generally remain steady from where they were in the third quarter or is that suggesting maybe a little bit of improvement? And also if you have any color to share on...
To share on how October looked just from an AD demand environment that that would be helpful as well.
Speaker 6: How October looked just from an ad demand environment? That would be helpful as well. And I have a follow up as well. Yeah, Aaron, I can try to take this and see if you could certainly add some color. So yeah, I think as we look at Q4.
And I have a follow up as well thank you.
Yeah, Erinn I can I can try to take this and Zika concerns me add some color so yes.
Yes, I mean, I think as we look at Q4.
Speaker 6: There's some things that are encouraging to us and there's some things that there's uncertainty in the broader market. So I think the increase in the guide and certainly reflects our confidence that while we have in turn to sharp corner, and it's not up until the right yet in terms of the macro, that we're...
There are some things that are encouraging to us and there are some things that.
Certainty in the broader market. So I think the increase in the guidance certainly.
It reflects our confidence.
While we havent turned a sharp corner and it's it's not up into the right yet in terms of the macro that were.
Speaker 6: or we're starting to see, you know, some signs. So I would say cautiously optimistic.
We're starting to see some time, so I would say cautiously optimistic.
Speaker 6: You know, there's some verticals that are positive, there's some verticals that haven't quite rebounded yet. You know, traditionally, fourth quarter is where you see a lot of seasonality from a...
There are some verticals that are that are positive there are some verticals that haven't quite rebounded yet.
Traditionally fourth quarter is where you see a lot of seasonality from a from a positive tailwind perspective.
Speaker 6: perspective that historically the company seen and didn't see last year. And so, you know, we're October , it kind of gives us confidence in terms of our guidance, but we haven't seen November and December really that seasonality hitch yet. So, trying to balance all of those things. So, you know, a number of different data points, but what I would say is we feel confident enough to be able to increase the guidance the way that we did.
Historically, the company has seen and didn't see last year and so.
October kind of gives us confidence in terms of our guidance, but we havent seen November and December really that seasonality hits, yet so trying to balance all of those things. So you know a number of different data points, but what I would say is we feel confident enough to be able to increase the guidance the way that we did.
Okay.
Excellent and then maybe one question for speaker.
Speaker 7: Excellent. And then maybe one question for Sika. I think in the past we've talked about sort of the big media trends right now being CTV and retail media. Obviously, Innovat has substantial CTV exposure. Can you refresh us on Innovat exposure to retail media and how you're thinking about that opportunity more broadly? Thanks.
I think in the past we've talked about startup that the big media trends right now being C. T V and retail media, obviously in or it has substantial CTV exposure can you refresh us on any of its exposure to retail media and how you're thinking about that opportunity more broadly. Thank you.
Sure.
Speaker 3: Sure. In terms of, you know, with retail media, what's unique, of course, it's the data sets. So we have been
In terms of either.
With retail media, what's unique of course, it's the datasets.
So we have been.
Breaking down some of the large retailers are actually customers of the AD serving data and you know and so we already had the relationships in place as retail major comes in and to become data platforms and media platforms. They're now on the other side of the equation is as partners definitely.
Speaker 3: Striking though, some of the large retailers are actually customers of the ad-serving data and so we already had the relationship in place.
Speaker 3: as retail media comes in and to become data platforms and media platforms, they're now on the other side of the equation as partners. Definitely using data to personalize and target better target ads that we deliver into those platforms, measurements is a product that's being used more and more to prove our why to their customers. And so we have already several partnerships in that space.
<unk> data to personalize and target better target ads that we deliver and towards platforms measurement is a product that's being used more and more to prove our ROI to their customers and so we have already several partnership in that in that space I believe again, if we look into the future that we're going to see much more.
Speaker 3: I believe, and then if we look into the future, that we're gonna see much more.
Closing the ability to do shopper Bowl ads and as you know and really closing the loop. If you think about what we talked about the thesis and our strategy for 'twenty 'twenty four for optimization working with those platform that you can actually close the loop, so better target better target the messaging target the audience to a specific product.
Speaker 3: including the ability to do shoppable ads and really closing the loop. If you think about what we talked about the thesis and our strategy for 2024 for optimization, working with those platforms that you can actually close the loop, so better target, better target the messaging, target the audience, to a specific product, be able to create a shoppable environment and then close the loop and see what's working and based on that.
Be able to create a sharper point environment, and then close the loop and see what's working and based on that not only execute on retail media, but also execute later in other areas, but use the very unique datasets that those platform have to understand what's working and what's not working and then implement this outside of REIT.
Speaker 3: not only execute on retail media, but also execute later in other areas, but use the very unique data sets that those platforms have to understand what's working and what's not working, and then implement this outside of retail media. So absolutely, any data reach environment and data environment that can give our customers feedback on the outcome is something that can dramatically improve the optimization, which is the key theme here for us for 2024.
Media, so absolutely any data rich.
Fireman and data environment that can give our customers feedback on the outcome.
Is something that can dramatically improve the optimization, which is the key theme here for us for 2024.
Great. Thank you very much I appreciate that answers.
Speaker 1: Thank you. A reminder to all the participants that you may press star 1 to ask a question.
Thank you.
A reminder to all the participants studying my press star one to ask a question.
Speaker 1: Next question comes on the line of Schwetta Kajuvia with Avakor ISI.
Next question comes from the line of Shred, the could you be a bit.
Evercore ISI. Please go ahead.
Okay. Thank you for taking my questions could you. Please comment I just at a high level what do you.
Speaker 8: Okay, thank you for taking my questions. Could you please comment at just at a high level, what you...
Speaker 8: experience and what you're hearing in terms of brand advertiser sentiment right now. You talked a little bit about October and your confidence in giving and raising the guidance for the fourth quarter but any more granularity on whether.
Our experience and what you're hearing in terms of brand Advertiser sentiment right now you talked a little bit about October and then your confidence in giving end and raising the guidance for the fourth quarter, but any more granularity on weather.
Speaker 8: on certain verticals. And I know in one of the prior fourth quarters you had the auto vertical head went. So where do you stand now given the strike versus perhaps CPG or some of the other key verticals? If you could...
On certain verticals.
No in one of the prior fourth quarters, you had the auto vertical headwind to where do you stand now given the strike versus perhaps CPG or some of the other key vertical does he could provide some comments and then have you seen any political spend start to flow and in terms of political advertising.
Speaker 8: provide some comments. And then have you seen any political spent start to flow in in terms of political advertising, ad serving in the fourth quarter? Thank you.
<unk> survey in the fourth quarter. Thank you.
Sure. Thanks, what sort of so in terms of it and as Tony mentioned regarding the fourth quarter. We feel you know are pretty.
Speaker 3: Sure, thanks, Schwaeda. So in terms, as Tony mentioned regarding the fourth quarter, we feel pretty comfortable in terms of the trend. We have not seen last year. We started seeing a tipping at the end of the third quarter. And of course,
Pretty comfortable in terms of the trend we have not seen last year, we started in <unk>.
You know seeing a tipping at the end of the third quarter and of course this.
Speaker 3: This year, quantum code behaves normal, so it's a surpassed normal.
This year quote unquote behaves normal sorts of surpassed normal that's it's definitely there are customers that they reduced their spending on brand advertising on television advertising television advertising declined in general, but what helps you know with CTV is the fact that the audience continues to move from linear to CTV, so that keeps pushing the number.
Speaker 3: Definitely there are customers that reduce their spending on brand advertising on TV advertising
Speaker 3: TV advertising declined in general, but what helps with CTV is the fact that the audience continues to move from linear to CTV, so that keeps pushing the numbers.
Speaker 3: up into the right in terms of your ship so the budget is even if a certain brand contract.
<unk> up into the right in terms of your ships with the budget, even if a certain brand contract you can see increase in their T. C. CTV spend from that perspective now in terms of specific verticals.
Speaker 3: you can see increase in their TCTD spend from that perspective. Now, in terms of specific verticals,
Speaker 3: We're seeing a pretty consistent behavior where some verticals like CPG and pharma are continued to invest, I would say more aggressively compared to others and we see nice year-to-year growth compared to last year, even compared to the healthy part of last year. And other areas like financial services, insurance company, technology companies, we are seeing a decrease.
We're seeing a pretty consistent behavior, where some verticals like CPG and pharma.
Continue to invest I would say more aggressively compared to others and we see nice year over year growth compared to last year, even compared to the healthy part of last year and other areas like you know.
Financial services insurance company technology companies.
We are seeing a decrease.
Speaker 3: Overall, it's a positive, you know, it's still a positive. We're obviously looking forward that all, all verticals will go up into the right. And to your comment about auto, we're not seeing anything, you know, back, back those days, it was more related to supply in like vertical specific dynamic.
Overall, it's a positive you know it's still a positive. We're obviously looking forward that all all verticals will go up into the right and to your comment about auto we're not seeing anything in the back back those days it was more related to our supply and like vertical specific dynamics.
What we're seeing now it's general economy dynamics and we're also following closely you know some of our largest customers, earning calls and in there there are giving some indication in terms of their spend and.
Speaker 3: What we're seeing now is general economy dynamics. And we're also following closely some of our largest customers, earning calls, and they are giving some indication in terms of their spend and investment in marketing. So that helps us. So overall, we feel pretty comfortable about Q4. And overall, for next year also, while we're not providing guidance, we're not seeing significant volatility. We're not seeing.
And investment in marketing so that helps us. So overall, we feel pretty comfortable about Q4.
And overall for next year also while we're not providing guidance we are not seeing significant volatility we're not seeing.
Speaker 3: sudden extreme decisions by our customers. So that helps us plan both with top line and bottom.
Sudden extreme decisions by our customers so that helps us plan, both topline and bottom line.
And regarding our political ads.
Speaker 3: And regarding political ads, on that front, political ads is not an area that we're heavily focused on. It comes and goes and it will be more performance oriented. We work with, on the measurement side, on the sales side with publishers, in terms of creative tools, personalization, things like measurement, that's an area that we definitely see an uptick in. And it will be more performance oriented.
On that front the political ads is not an area that we're heavily focused on it comes and goes and they tend to be more performance oriented we work with on the measurement side on the sales side with the publishers are in terms of creative tools personalization things like measurement, that's that's an area.
That we definitely see an uptick in.
Speaker 3: in political revenue, but on the brand, if you want to quote the brand itself, it's not necessarily an area that we heavily invest.
And in political revenue.
But the on the on the on the brands to quote unquote. The brands itself. It is not in this usually an area that we heavily invest.
Yeah.
Okay. Thank you very much.
Thank you.
Speaker 1: Thank you. Next question comes on the line of Shiam Ghatil with Sarskuhana. Please go ahead.
Thank you next question comes from the line of Sham got them.
Susquehanna. Please go ahead.
Thanks for taking out one more question. This is for Tony clearly <unk> seen some nice margin expansion.
Speaker 7: Thanks for taking one more question. This is for Tony, clearly, Innovates seen some nice margin expansion over this year. I know you're not providing guidance for 2024 at this point, but just wanted to see if there's any additional color you can share about how to think about Innovates margin profile going forward. Thank you.
Over this year I know youre not providing guidance for 2024 at this point, but just wanted to see if there's any additional color you can share about how to think about it if its margin profile going forward. Thank you.
Speaker 6: Yeah, no problem at all. Yeah, I mean, obviously it's something that we give a lot of thought to as well. And I think we've said in the past that we see this business, you know, really being a 30 plus.
Yeah, no problem at all.
Yeah, I mean, obviously, it's something we'd be can you give a lot of thought to as well and I think we've said in the past that we see this business really being at 30 plus percent.
Speaker 6: adjusted EBITDA, margin, business, and continuing to march forward to that. You know, you're right, we haven't talked about 2024 guidance yet, but this is a scalable model, and the underlying business is profitable and
Adjusted EBITDA margin business and continuing to March forward to that.
You're right, we haven't talked about 2024 four guidance yet.
But this is a scalable model and the underlying business is profitable and as you combine.
Speaker 6: you know, as you combine the ad servings, GTV with the measurement.
It's serving CTV with.
With the measurement.
Speaker 6: you know, that's kind of a nice combination. And as I mentioned before, once we see the market turn, I think we're going to be in a position to really...
Yeah, that's that's kind of a nice combination and as I mentioned before once the once that we see the market churn I think you know we're going to be in a position to.
Really growing.
Growing a nice way.
Speaker 6: growing a nice way and with that you'll see a larger and larger amount of that growth kind of fall through to the bottom line. Again, it is a leverageable business model. Nice, healthy margins from Costa Revenue as a percentage of revenue. And so there's no reason why this shouldn't be a healthy grower and 30 plus percent margin.
With that you'll see a larger and larger amount of that growth kind of fall through to the bottom line.
Again, it has a leveraged business model.
Nice nice healthy margins from from cost of revenues.
As a percentage of revenue and so theres no reason why this shouldn't be a healthy grower and 30 plus percent margin business.
Yeah.
Speaker 7: Really helpful. Thank you. And then just one last question.
Really helpful. Thank you.
And then just one last question.
Speaker 7: Life sports have become increasingly available through streaming and CTV, and in more and more cases, more exclusively available through those channels. Could you speak about how IneVid may benefit from these trends, and do you view this as a significant driver for CTV viewership growth, and maybe an accelerant of the court-cutting phenomenon?
Live sports has become increasingly available through streaming and CTV and in more and more cases more exclusively available through those channels.
Could you speak about how it did may benefit from these trends and do you view this as a significant driver for CTV viewership growth and maybe an accelerant of the cord cutting phenomenon.
Speaker 3: Absolutely, I mean this is an inailed sport than life sports.
Absolutely I mean, this is a and you nailed it sports and lifestyle. It's a massive driver of behavior viewership behavior and the more rights that are being bought by some of the streaming platforms and that includes you know digi.
Speaker 3: or a massive driver of behavior, of your shape behavior. And the more rights that are being bought by some of the streaming platforms, and that include digital, kind of digital native like Apple and Amazon.
What kind of a digital native like Apple and Amazon Google through Youtube as long as these are available also on seeming indefinitely exclusively on streaming that is a major driver to get more and more people. The first thing you want to get people is not to cut cable completely or something that's at least get.
Speaker 3: Google through YouTube, as long as these are available also on streaming and definitely exclusively on streaming That is a major drive to get more and more people. The first thing when I get people is not to cut cable Completely or something is
Speaker 3: At least get them to start connecting to the Wi-Fi, running the app, getting comfortable with using that, like moving from an analog phone to a smartphone. Once you're in that smart environment, you're getting still more and more apps and really you're basically getting more users to adopt a CTV, connected TV is a main viewership platform. So
Them to start you know connecting to Wi Fi running the up getting comfortable with using that like moving from an analog phone to a smartphone once you're in that smart environment, you're getting storing more and more apps and really you're basically getting more users to adopt the CTV as a matter of connected TV as a main.
Your ship platform so.
Speaker 3: That's one thing, clearly sports is where a lot of brand advertising takes place. These are kind of lucrative.
That's one thing clearly sports is where a lot of brand advertising takes place. The these are kind of lucrative spot. So our focus is on those larger brands. So there are definitely spenders or not and so that that is also helpful and also the ability to better target and.
Speaker 3: spots so our focus is on those large brands so they're definitely spenders and not so that is also helpful and also the ability to you know better target in real time
And in real time.
Speaker 3: And as you're going to an ad break instead of showing the same ad like a super ball situation to everybody
As you're going to an AD break instead of showing the same AD like a super bowl situations to everybody the ability to.
Speaker 3: the ability to segment the audience and from a publisher perspective, sell that segment for a higher CPM.
Segment, the audience and from a publisher perspective sell that segment for a higher C. P. M for their relevant whether it's auto and tenders or families with kids or toddlers at home you can imagine how you can generate more revenue by segmenting the audience and sending the right creative to the right. The household and that is impossible to do.
Speaker 3: for the relevant, whether it's auto-intenders or families with kids or toddlers at home, you can imagine how you can generate more revenue by segmenting the audience and sending the right creative to the right household and not as impossible to do with live broadcasting. It's absolutely possible to do streaming. And if you think about it, it requires very unique technology because you're getting like a million, you know, or 10 or 50 million hits, literally the same split second.
With live broadcasting, it's absolutely possible to doing streaming and if you think about it requires very unique technology, because you're getting like a million or 10 or 50 million hits literally the same split second. So this is an area where we heavily invested it we were partners in the Olympics and.
Speaker 3: So this is an area where we heavily invested it, we were partners in the Olympics, and this is something that's extremely exciting for us, moving forward.
This is something that's extremely exciting for us moving forward.
Great. Thank you again.
Thank you.
Speaker 1: Thank you. There are no further questions at this time. I would now like to turn the floor over to Speaker Netter for closing.
There are no further questions at this time I would now like to turn the floor or to speak continental for closing comments.
Speaker 3: Thank you all for joining us this morning. I would like to first thank our team around the world.
Thank you all for joining us this morning.
Two first also thanks again to our team around the world for exceeding all expectations are this year and hopefully moving forward.
Speaker 3: for exceeding all expectations this year and hopefully moving forward.
Speaker 3: in this challenging environment from different reasons.
In this challenging environment from different reasons I'm really excited as we just spoke about sports I'm really excited about all the opportunities ahead as more and more inventories moving to TV streaming and we can generate more value to our advertisers and our partners are I'd like to highlight and remind you all about our investor day.
Speaker 3: I'm really excited, as we just spoke about sports, I'm really excited about all the opportunities ahead as more and more inventories moving to television streaming and we can generate more value to our advertisers and our partners.
Speaker 3: I'd like to highlight and remind you all about our investor day coming up later this month on November 30th where we're going to present more of our products and more of our teams our business strategy and In order to get more information and register for that you can email us at investors at innovate.com
Coming up later this month on November 30th where we're going to present.
More of our products and more of our teams or business strategy.
And and in order to get more information and register for that you can email us at investors at <unk> Dot com.
Speaker 3: Looking forward to see you all there. Have a great day.
Looking forward to see you all there have a great day.
Thank you.
Speaker 1: Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Okay.
Okay.
Speaker 9: chinstant
Sure.
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