Q3 2023 Viant Technology Inc Earnings Call

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Okay.

Well, Hello, again, everyone and welcome to <unk> Technologies' third quarter 2023 earnings Webinar. My name is Kelsey and I will be your operator today, well before I begin the webinar or turn it over to the <unk> leadership team I'd like to go over just a few housekeeping notes for the program as a reminder, today's webinar is being recorded.

Attendees are in our view and listen only mode, but following the Speakers' remarks, there will be a question and answer session. If you'd like to ask a question. Please click on the raise hand tab located at the bottom of your screen and please ensure your zoom name reflects your full name and firm. We thank you for joining us today and I will now turn the webinar over to Casey Currie.

Via technology, good afternoon, and welcome to Biotechnologies third quarter 2023 earnings conference call on the call today are Kim <unk> co founder and Chief Executive Officer, Chris <unk>, Co founder and Chief operating Officer, and Larry <unk> Chief Financial Officer.

I'd like to remind you that we will make forward looking statements on our call today, including but not limited to you our guidance for Q4 2023, and our platform development initiatives that are based on assumptions and subject to future events risks and uncertainties that could cause actual results to differ materially from those projected.

These forward looking statements speak only as of today and we undertake no obligation to update or revise these statements except as required by law.

For more information about factors that may cause actual results to differ materially from forward looking statements and our entire safe Harbor statement. Please refer to the news release issued today as well as the risks and uncertainties described in our quarterly report on Form 10-Q for the quarter ended September 32023 under the heading risk factors and other.

Their filings with the SEC.

During today's call. We will also present, both GAAP and non-GAAP financial lenders additional disclosures regarding these non-GAAP measures, including a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the news release issued today, which has been posted on the Investor Relations page of the company's website and in our SEC.

I would now like to turn the call over to you Tien Vanderhoof, Chief Executive Officer of Bio <unk> Jim.

Thanks, Casey and thanks, everyone for joining us today.

We wrapped up a very strong third quarter with accelerating growth across our business and results that exceeded our guided range on all key metrics. We continue to win larger shares of budgets from our clients by offering best in class products supported by industry, leading AI.

We are focused execution and a commitment to enabling mid market advertisers to get the highest return on their ad spend.

As we look to the fourth quarter and beyond we continue to see a number of favorable drivers of the business, most notably the ongoing migration and accelerating transition of approximately $60 billion of linear television advertising moving into connected TV set.

<unk> is the pending signal loss due to Google's deletion of cookies in 2024, and third is the application of artificial intelligence and generative AI, which we discussed in detail during our inaugural innovation day event on October 26th.

I want to share more on each of those areas and provide more clarity on how we see them driving our long term growth and profitability.

I'll start with the continued shift from traditional linear TV to connected TV.

Linear TV represents an additional 60 billion of AD spend coming into the programmatic AD market as this trend accelerates.

Our growth is outpacing the market and we believe a big driver of our success comes from our household I D. Technology. This enables us to deliver addressable advertising as well as provide attribution of reporting in this cookie less environment.

In CTV household ideas available on over 85% of all AD requests.

Q3 saw us deliver another quarter of strong double digit growth in connected TV again, outpacing the market and Chris will talk more about that growth in this channel later on.

I also want to take a moment to share some of the ways that we're leveraging AI to develop the most advanced D. S. P in the market.

And for anyone who wasn't able to attend our innovation day event I highly encourage you to check out the video replay that link is available on our Investor Relations website.

The primary objective of our innovation day was to highlight the progress we're making in our journey towards our North star of autonomous advertising, we're bringing the ease of use of advertising on search and social media to the purchase and measurement of advertising in the programmatic ecosystem.

We believe we can leverage AI to reduce the friction involved in onboarding a customer into a D. S. P saving them days or even weeks of ramp up time, enabling them to more quickly utilized the full suite of tools and features available on our platform.

Our approach to further simplify and automate our platform should continue to expand our addressable market to millions of mid sized advertisers that can now use our D. S P to reach new customers and expand their businesses.

I want to highlight how we are helping our customers solve to widespread challenges and the programmatic ad market.

The first is choice overload and the second is campaign optimization, both of which are tied to the same dilemma. The programmatic ecosystem is moving too fast for even a seasoned traders never mind and new entrants entering this space.

How can we use AI to provide a platform that helps add buyers to easily and efficiently maximize their campaign performance.

During our innovation day event, we explained what we call choice overload.

Traders today are forced to deal with an insurmountable number of options when planning an AD campaign.

Making decisions across channels audiences devices and AD formats, they are faced with countless combinations.

One way we've helped to address this challenge it is with our recently announced AI recommendations engine, which is capable of processing and optimizing these options at a speed the human brain simply can't match.

The result is actionable suggestions that save time, while improving campaign performance and ultimately trader productivity.

The second topic from our innovation day event I want to highlight is our AI bid optimizer solution. It uses artificial intelligence to analyze historical bid opportunities to predict the lowest media costs for all of these ad opportunities without sacrificing any ad performance.

We first announced this new feature over the summer and I'm pleased to report that adoption today has far exceeded our expectations.

Over half of our customers are currently utilizing AI bid optimizer and we're continuing to see in average savings of 35% of their C. P. M.

This is notable for multiple reasons.

First it allows our customers to conscience concentrate their time on strategic task rather than the time consuming ones.

They don't have to manually adjust their bids and lasse. It speaks to the advantage of a buy side only D. S. P like ours.

Any technology provider, representing both the buy and sell side of the transaction has an inherent disincentives to drive down cpm's, our customer our customers recognize this misalignment and this is contributing to our growth.

The final driver of our momentum is google's deletion of cookies, which is reported to begin in Q1 2024 mines.

<unk> has long been a leader in this space through the use of our patented household I D are scalable and interoperable and privacy compliant identifier present in over 80% of AD requests.

We believe that Google's deletion of cookies and other identifiers will further accelerate the growth of AD spend flowing through volume as we offer one of the only scalable and now proven solutions available today in the form of our household I D.

We look forward to continuing our growth momentum into the fourth quarter and I now will hand, the call over to Chris to discuss more around our products and our customers.

Thanks, Tim.

Want to start to talk about the via data platform, which has long been a massive advantage for those customers, who have the vision and expertise to leverage its potential.

Our data platform offers the ability to safely and seamlessly joined first party data with all the top third party data providers and our privacy friendly way and it should come as no surprise that the insides reporting and attribution opportunities here are substantial.

It must also be noted that historically the barrier of data skills necessary to access. These insights has also been very hot.

At our recent innovation day event, we announced a new product called shack with data.

This product allows our customers to unlock the power of the data platform simply and easily through a natural language set of commands.

We believe chat with data makes our data platform more accessible for even the most novice data analysts and business people and more importantly, it means a programmatic trader with no background in data science or engineering can simply and efficiently unlock critical insights from their data in real time, ultimately driving a higher return on.

<unk> been as they execute their campaigns.

Seven out of our top 10 spending customers rely on the <unk> data platform.

And now chat with data will democratize access to the via data platform to marketers of all sizes and provide them with a competitive and competitive advantage in data.

The via data platform is further differentiated by integrations with dozens of industry, leading data providers as well as the top clean room, such a snowflake.

These data and clean room integrations combined with our new chat with data product unlock the value of first party data using simple natural language access while providing the required data privacy and protection.

The via data platform and chat with data are unrivaled and provide for a winning combination.

The AI enabled tools that we're rolling out our design to allow marketers and their agencies of any size to deliver high performing campaigns, while enabling customers with best in class attribution.

But were these tools really provide an advantage is and why its historical area of strength the mid market.

There are there are several reasons why we've been successful within this market segment and it begins with product performance our investments in AI enabled solutions like AI bit optimizer, and our buy side only strategy has consistently allowed us to deliver lower CPM than our competitors and that results in superior camp.

Pam performance for our customers.

That's important for any customer, but particularly when budgets are more demanding sim.

Similarly, we believe we offer the best attribution and reporting capabilities available.

That means better tracking of return on AD spend and ultimately more efficient spending as campaigns can be consistently adjusted to ensure objectives are being met and effective spend erg excuse me ineffective spend can be redirected.

Now add to that a powerful products like the via data platform with the depth of insight. It provides a capability many of our mid market customers have never dreamed of being able to access because of the high data and analytic skill set historically required and we've now leveled the playing field and a truly unprecedented.

It anyway.

Finally, I want to dive in what has become a hot topic in the programmatic advertising industry supply path optimization put simply how can the industry streamline the path between advertiser and publisher and ensure we are removing waste in the middle.

As with many topics in the AD Tech space. This can be confusing we often get the question.

As via trying to develop an S. S P or eliminate the SSP. The answer is emphatically no. We're working hard to eliminate the additional costs to advertisers, resulting from the unnecessary reselling of inventory amongst middle men with our ultimate objective.

Of being eight of providing a tighter connection between advertisers and publishers.

Earlier this year, we launched our supply path optimization program called direct access where we partner with leading CTV publishers to create a more cost efficient direct path to premium inventory.

These are the largest publishers in the CTV space and represent a majority of the premium inventory available.

Direct access is a program that provides clear benefits to both the buy side and the sell side.

The digital supply chain is unnecessarily complicated by resellers, who drive up the tech tax while delivering no added value to the customer.

With direct access we're removing reseller from the process and delivering lower media costs for the advertiser, along with tighter or excuse me higher revenue for the publisher.

Our primary focus of direct access is in CTV.

And Q3 sauce again outperformed the inherently high growth CTV market.

In Q3 over 25% of our CTV spend was through direct access publishers.

That continues to grow as we move through the year.

Last month, we hosted an industry event in New York called the future the future of supply path optimization in CTV.

Many of the leading CTV publishers and advertisers were in attendance and the message could not have been clear from both parties.

They want to streamline what has become an unnecessarily complex supply path.

That complexity leads the financial waste higher instances of fraud, and less favorable viewing experiences for consumers and direct access is injecting efficiency transparency and ultimately improvements of the entire ecosystem.

Our unique approach with direct access enables seamless access to premium CTV inventory at no additional cost to publishers, while other supply path optimization solutions focus on web and display inventory while layering on fees.

As part of our program growth, we recently expanded our direct access partnership with Disney to include the launch of their Biddable CTV inventory inclusive of Hulu E. S. P M plus and Disney plus.

Direct access is picking up steam with an increasing amount of premium CTV publishers looking to connect directly to our customers' demand, while more and more marketers recognize direct access as a way to maximize the value of their CTV ads bandwidth via.

We will continue to drive innovation and the supply path for our customers as we represent their interest in the market.

And with that I'll close by saying, we had an excellent first three quarters of year.

We believe we're well positioned to continue to take share amidst a broader market landscape is continuing to trend upward.

We are focused on delivering best in class product solutions and support to our clients and we believe the gains we've made so far this year will only continue to increase in the coming quarters.

Thank you and I'll now turn it over to Larry to provide more details on our financial performance.

Thanks, Chris before I begin I'd like to remind everyone that we've posted a presentation to our investor Relations website that includes supplemental financial information to accompany today's call.

As Tim shared we delivered a very strong third quarter exceeding the high end of our guidance on all key metrics.

Revenue for the quarter was $59 6 million, an increase of 22% versus the prior year period.

Contribution ex Tac for the quarter was 39.1 million also an increase of 22% versus the prior year period, and 16% higher than Q2.

The strong topline results were propelled by our continued success in capturing market share within the mid market segment.

This success was also bolstered by a steady cadence of new product releases and adoption, including the volume household IV or advanced reporting suite, the volume data platform direct access and AI did optimizer.

Customer adoption continued to grow across all of these products in Q3 contributing to meaningful revenue and contribution ex Tac in the quarter.

Notably in Q3, we witnessed record levels of spend revenue and contribution ex Tac across our percentage of spend offering further underscoring the growing momentum we are establishing with them with our mid market customers.

In terms of customer verticals growth in the quarter was primarily driven by continued gains across our retail consumer goods and travel customer verticals.

From a channel perspective, we delivered another impressive quarter in CTV again, outpacing the market with robust double digit growth.

Our continued success in C. D. CTV can be attributed to the widespread adoption and effectiveness of our volumes household I D. In this inherently cookie less environments.

Furthermore, the substantial impact of our direct access program as previously highlighted by Chris also played a pivotal role in driving CTV spend during the quarter.

Notably in the third quarter CTV, representing more than a third of total AD spend on our platform retaining its status as our fastest growing channel.

Turning to formats video, which includes both mobile video and CTV accounted for well over half of our spend on our platform during the quarter underscoring our strength in this high growth format.

Likewise streaming audio continues to emerge as a promising category experiencing strong double digit growth in the quarter once again.

Act advertiser spend per active customer increased 11% on a trailing 12 month basis, and we ended the quarter with 301 active customers a net decline of 13 customers during the period.

This decline is consistent with our previous communication regarding our customer growth strategy, which focuses on fostering deeper relationships with high quality customers capable of increased spending levels.

As part of our strategy, we are deliberately shifting our focus away from lower spend customer segments, while actively attracting and onboarding customers with greater long term value potential.

Turning now to operating expenses for the quarter, our non-GAAP operating expenses totaled $29.4 million, marking a significant 13% year over year reduction.

This reduction highlights our ongoing commitment to driving operational efficiencies across the organization.

As we've mentioned in previous quarters, we're achieving this operating leverage while concurrently making substantial investments in the business.

This is exemplified by our more than 30% increase in the size of our product and engineering teams over this period.

Our approach is to strike a balance between realizing efficiency gains and investing in the teams and technologies that will drive our long term success.

With substantial role of AI is viewing many of these project productivity enhancements instilled the high level of confidence in the sustainability of our progress.

We are pleased to report continued acceleration in revenue per employee, which increased 32% in the quarter, an indication of our improving efficiency as an organization.

We believe the investments, we're making in AI and AI are enabling us to enhance the efficiency of our entire team positioning us to generate sustained operating leverage in the quarters ahead.

For the third quarter, we generated adjusted EBITDA of 9.7 million well above the high end of our guidance, representing an increase of $11 5 million from the prior year period.

Adjusted EBITDA margin as a percent of contribution ex Tac was 25% for the quarter an improvement of more than 30 percentage points from the prior year period.

For the third quarter, non-GAAP, net income, which excludes stock based compensation and other items totaled 7.6 million, which compares to a non-GAAP net loss of $4.4 million in the prior year period.

non-GAAP earnings per class a share totaled eight cents in the current quarter, which compares to a loss of six cents in the prior year period.

In terms of share count we ended the quarter with $62 6 million class, a and class B common shares outstanding.

We also ended the quarter with $203 million of cash and cash equivalents, which translates to a noteworthy $3.24 per share outstanding.

We had $227 million of positive working capital and no debt at quarter end and we continue to have act have access to a 75 million Undrawn credit facility facility.

The solid financial foundation positions us extremely well to fully capitalize on the substantial market opportunity in front of us.

As we look ahead to Q4, we expect to continue our momentum taking share, particularly in the mid market and benefit benefiting from the continued stabilized stabilization in the U S advertising environment.

For the fourth quarter of 2023, we expect revenue in the range of $64 million to $67 million, representing a year over year increase of 20% at the midpoint, we expect contribution ex Tac in the range of $41 million to $43 million a year over year increase of 26% at the midpoint.

non-GAAP operating expenses are expected to be $35 million to $31.5 million, representing a year over year increase of 1% at the midpoint and finally, we expect adjusted EBITDA to be in the range of $10.5 million to $11.5 million, which represents a year over year increase of.

318% or $8.4 million at the midpoint.

Adjusted EBITDA margin as a percentage of contribution ex Tac is expected to be 26% for Q4 at the midpoint of guidance an improvement of more than 18 percentage points from the prior year period.

In summary, we delivered strong double digit topline growth in Q3, while simultaneously managing a double digit reduction in operating expenses on a year over year basis, resulting in significant margin expansion in the quarter.

For the quarter contribution ex Tac grew 22% and our adjusted EBITDA margin as a percentage of contribution ex Tac totaled 25%.

The sum of these two metrics often referred to as the rule of 40 was an impressive 47% in Q3.

Based on the midpoint of our guidance for Q4, we expect this metric to further increase in Q4 to 52%.

Our market share gains in Q3 exemplify the substantial impact in effecting the effectiveness of our products and our unparalleled service as.

As I previously mentioned, we made maintained a steady cadence of new product launches throughout 2023 and are very excited about what we have coming in 2024 in.

In Q3, we saw a steady increase in customer adoption across these newer products driving meaningful incremental revenue and contribution ex Tac in the quarter. We expect this positive trend to continue as customer adoption continues to build across these products and as new products come to market in 2024.

Sure.

And finally, we have enrolled robust financial profile, an unwavering focus on execution and our product portfolio propelled by innovation consistently setting us ahead of the competition.

We remain focused on continuing to deliver strong topline growth and adjusted EBITDA margin expansion in the quarters ahead, all while while creating enduring value for both our customers and valued shareholders.

And with that I'll pass it back to Jim for final comments.

Thanks, Larry I want to close our prepared remarks by reiterating that our strong performance. This quarter was driven by the significant progress we've made across our technology initiatives that are translating directly into value for our customers.

But I'm most excited that our Q3 Q3 results show investors the strength of our business model and the operating leverage we have achieved via is a great company that we believe offers a compelling opportunity for investors.

We delivered 22% revenue growth in the quarter, we have over $200 million in cash on the balance sheet accelerating profitability and are structurally positioned to capture the opportunity of the enormous tailwind of the 60 billion of linear TV AD spend coming into connected TV, we look forward to wrapping up the year with.

Another strong quarter I'll now turn it back over to the operator to open the video to questions. Operator. Thank you. So much time and again, we will now move to taking your questions. As a reminder, please click the raise hands have located at the bottom of your screen to ask a question.

And again, please click raise your hands to go ahead and ask your question, we will hear first from Andrew Bond with JMP.

Good afternoon, guys and thanks for taking the questions.

I wanted to touch on just the advertiser count right.

We attended an innovation day all of the New features do you guys have done a very impressive yet at the same time, we're seeing customers down 13%.

There anything you can help us understand in terms of either the top of funnel as you guys speak to these mid market agencies or any other way that we understand the traction that you guys are gaining with us and we are watching the customer count fall down sequentially.

Yes, I think Andrew for the question.

Just to reiterate what I've, what we've said I think it's been about this time last year, we started.

Started talking about this it's really just our focus on the large spending customers in the mid market. We have a lot of early vintage customers from call. It in our 2018 that just haven't kept pace.

From a spend basis many of those we require no minimums or increased pricing as a result.

And really that's the so we were really just pointing ahead, we knew we'd have some lower end customer churn that's really required a lot of what you are saying, we think of that subs that really relies around Q1, where.

Where a lot of those msas around 12 month kind of rolling agreements, but we largely eat through a lot of that in Q1, what I will say is though we are we're continuing at the top of the funnel. We're gaining just a lot of traction in the mid market a lot of things that we talked about.

Our solutions around CTV direct access our focus on measurement our via data platform and are advanced reporting a lot of that is really what's driving new customer acquisition as well as the growth of the existing existing customers. So we feel that the the advertiser kept going down and you can see it really has and we highly.

Lot of this as a de Minimis impact.

On revenue is really we shed the kind of lower end of the customer base that really doesn't have a lot of value.

And then I wanted to ask again on the AI tools, but it really brings friction out of the buying process for our buyers.

Talk about the opportunity there in terms of agencies as well as brands and housing.

What happens as AD buyers, just become more efficient where youre going to see more traction there and anything else you can share about that process. Thanks, so much.

Yeah, I'll start I mean, it's not really about in housing anyone who works in the programmatic space, whether you're a trader in house or add an agency or an independent company. These are just complex systems to be able to manage and due to that the many many choices that the traders are faced with when planning a campaign and then of course optimizing from there.

So we try and focus on tools that just make it a lot more simpler in the Northstar there is search and social.

AD buying across those platforms, where youre not choosing every single feature and functionality to a very in depth level and so the tools that we brought forward AI recommendations, giving new site lists recommendations time of day recommendations location.

All basic things at a programmatic trader does but being able to analyze trillions of different combinations that are out there and simplifying that.

Being able to speed up the process of a customer coming onto a delta and understanding how to use it that ultimately drives our spend and revenue growth and that's that's been our primary focus I would also jud yeah. I would add is if you break it out I'll put it into two segments larger customers.

Really there the traders there they focus a lot around the usability and the UX of the platforms. We hear a lot about that had for years or anything we can do to make it easier for them to manage spend if they can do that you know manage more spend.

Per trader or that's what they want to do it drives a lot of efficiencies for them and as far as is easier to use we think we know that that draws more and more campaign dollars to us. However in the I think in the kind of mid size enterprise to all the way to the F. N B as we talk a lot about search and social and why it's so easy to use because it has to be.

Really you look at search and social all businesses in theory are available to them and historically open web programmatic.

Small businesses adult are going to D. S. P. As an open web programmatic because of the complexity, we're trying to bring down that complexity to really open up the total addressable market and that's really where we see what the opportunity is by providing more and more of these tools can help the higher end of the market, but also the millions and millions of businesses out there.

By search and social Yeah, and we I mean to sum it up we think most businesses should buy surge most businesses should by social and most businesses should buy Tvs, because that's what drives those other two channels as well.

Sorry, and then I'm going to sneak one last one Larry was there a spend number for the quarter in terms of aggregate total spec rate.

We did have stopped disclosing that a couple of quarters ago. If you recall last year. There was a sizable delta in the growth rate of spend versus revenue versus contribution ex Tac and that has to converge since we got through that mix shift that we went through in 2022.

So the numbers are all very similar.

So in Q3, we grew revenue, 23% CX, 222% spend would be approximately about amounts as well.

Thanks, so much.

Thanks, Andrew.

And Andrew Merrick with.

Raymond James has the next question.

Great. Thanks for taking my questions kind of some follow ups to the last two and some of your commentary in the prepared remarks, it's one of the things you did touch on both in the prepared remarks and in the innovation day is that impact that the types of data enhanced in AI enhanced products can have on relatively novice users I guess the <unk>.

And I would have as a resolve this how do you adjust and tailor your tailor your go to market strategy to these types of users and what's the impact on sales cycles or are they kind of longer because theres a longer education are proving out period.

Yeah, Great question arent really what you're.

You're talking about the accessibility of the Avaya data platform I mentioned seven out of our 10 top our top 10 customers use the <unk> data platform and it's really because of the insights they were able to generate but they can only generate goes insights because they have in house data science teams that sort of the prerequisite.

Many of our customers do not have in house data science team. So therefore, it's a very when we showcase it customers love in essence, it's a wow factor, however, where we're typically talking to trading teams and they don't know what to do with it because they can't they don't write sequel quarry. They don't have an engineering.

Skillset, so really what we've tried to do is lower the barrier there and that's really where natural language comes in you can issue a prompt asked any question of the data structured around structured data and then have the power of our data scientists to be able to gain insights that typically is the largest use case of what's happening.

Those customers that use as they onboard there their CRM file all of their sales data all of their campaign impression logs theres, an incredible amount of data at their fingertips and then he then worry they look for insights and in a change.

Really their optimization strategies, we're now being able to do that instead of writing a complex April Gary if you could just write natural language commands and gain those insights. So we really see the go to market now is everyone of those customers that didn't have a day or five Sam we're now offering until those traders that they all have access now they don't have the right Chico quarry.

And we think it's going to be really big and what the big thing of how it plays out as you know with better with better data, they're getting better strategies and are ultimately going to get better returns. So we think that that just increases the amount of spend that they spend with us via Andrew ultimately just to sum it up we focus on the user interface that chat user interface is one that Chris described is.

All the all the self service user interface that we offer today every day, we wake up and think about how to simplify the AD buying process through that interface as well. So it's a journey that we're on but the chat application certainly has a lot of legs to it both in data exploration and campaign setup and optimization.

I appreciate the info really helpful. And then one other question that we get now kind of with the with the cookie loss, appearing to be happening and appearing to be getting closer and closer I'm just kind of if you can give us a little bit of a refresher because I know you've talked about this a bit in the past around some of the Apple iOS privacy changes, but how does that.

The technology like the household I D behave.

If the IP, we're at risk for signal, particularly for CTV.

Yep. So when we talk about our data platform were built on in a completely non digital identifier structure and what we mean by people based advertising his name address phone number email address and so when we say household I D. That's not tying it to an IP address it's tying all four of those data points together.

They're at the physical household so to us we don't really see this causing any disruption in our technology. It certainly is a big change for the industry, which we do believe accelerates our growth into 2024 as these environments come out the positives of the delay the first time of one Google did delay this costar.

The IPO is that we're now we've now had a solution in market for many years that many mid market and large holding companies have been able to test see this scale C D accuracy and understand its differences and so we think we're really well positioned to grow and accelerate that growth in 'twenty four once this event takes place.

Great. Thank you. Thank you.

On Tia Maria reps with Canaccord.

Great. Thanks, so much for taking my questions. First you mentioned continued stabilization in the AD environment in Q4, but maybe can you expand on how you would classify market sentiment so far in Q4 <unk> mainly to previous.

Holiday periods and are you seeing any sort of conservatism around AD budgets as a result of some brands sort of leaning more heavily into promotions.

We're not seeing a lot Maria we're not really seeing a lot of hours certainly seeing accelerating growth.

From third into the fourth quarter, which is what we typically see.

This time last year, I would say the environment to us seems much different it is much more positive this year.

Retail continues to be strong as well as really just broadly across all verticals.

A lot of it I.

And I wouldn't say, so we definitely see a good AD environment out there I would say the next piece would just be our focus in the company around med market, continuing all year long and servicing that customer segment really proving it out on campaign performance as I stated earlier performance matters, a ton and they're going to allocate more of their money to the.

Higher performing channels. So that's number one but I would say in the really the open web.

Around programmatic, it's getting a lot more premium b performance ever since Apple came out with changes well over a year ago. It's really highlight a lot of spend that could go to the two open web programmatic and that's benefiting us certainly and we really see us rockwork border.

Got it that makes sense and just following up on cookie deletion. So as you move close since you are I think it's slated for Q1 of 'twenty or could you maybe talk about how you are positioned possess.

Positioning yourselves force and whether the topic has been discussed in your conversations with brands and agencies at this point.

Yeah, argon start that I mean.

We've obviously been M. We've clearly been a market and this is is this is the this is the sign out front for us in the in our go to market.

Is around all around signal loss and the reality is that for a long time and this isn't going to be new come January. Many marketers are are definitely aware they used to be able to match up all of their conversions on their website to all of their AD impressions. They at least be able to match those up at very very high scale 90, plus percentile.

But on the average customer we see they're only able to match about 30% of their transactions to their AD impression. So those many marketers that are out there had been out there for well over call. It a year or two searching for measurement solutions. So that's really helped us we have a big focus around measurement that drives customer adoption and they really love.

Two our tools to be able to help them with measuring their AD spend so are our go to market really isn't really going to change I do think it is going to be enhanced many of the things that we that we talked about on our innovation day all of those products a lot of them are aimed around measurement and the accessibility of mezz.

<unk> to make it easier for customers to measure their ad spend but we're.

We're not really in market talking to a customer who's unaware that signal losses is affecting them. They all hot readily have that problem and I do believe.

Many if not all are are searching for solutions. So we think that although it's only 1% of traffic on a Google chrome starting in Q1 you know.

Google themselves has been out there you know pretty heavily saying knowledge for real this time. So we think that it'll it'll be a strong year for US again I would just add to that I think one thing that's often overlooked is the integrated product that we bring customers. That's really a differentiator there's a signal loss problem we've answered that.

With household I D. Theres you now have the move from pixels firing all across the web to clean rooms, and in our data platform plays a huge important areas. There and you can instantly activate across the demand side platform and it's that integrated nature of the product offering for the buy side advertiser that.

He is a phenomenal solution a market that has driven our market share gains in 23 that we think will accelerate in 'twenty four.

Got it thanks, so much for the color. Thank you. Thank you.

Yes, Chris Chris <unk>, which has the next question Chris. Please go ahead.

Hi, Greg can you guys here.

Hi, Chris.

Hey.

Maybe just two quick questions.

Could you just give us a bit more color on how the quarter progressed on a monthly basis.

CTV and kind of how those trends were through October I think you had called out stabilization by considering the complex that we've had in the middle East just curious if that was any impact there and then maybe just one on the expense side. I think you guys had called out that product and engineering teams were up about 30% year over year.

And I think you guys had cash expenses growing sequentially this quarter at about 10% and then the guidance for another 7%. So just curious how we should be thinking about staffing levels and engineering and kind of some of the other.

Roles within the team here for the opportunity that you guys see ahead in <unk> and 'twenty four.

Larry do you want to take both US yeah, I can take a take them.

Chris So in terms of the quarter, we did see pretty steady growth throughout the quarter.

They're definitely the last month of the quarter typically is the biggest month, so that was even more pronounced but it was it was steady throughout the quarter and we're seeing it across CTV, we're seeing across video or more broadly.

Retail and consumer goods, we're seeing solid strengths, which again to us speaks a lot about the stabilization that we're seeing.

So I think it was a steady quarter and when we say stabilization. The only reason work we're counting it a bit that way is we don't think the full power of the growth rate that existed prior to the kind of recession that we went through earlier this year than last year.

He has fully returned yet.

But it's definitely a lot more stable than it than it was two to three quarters ago for sure.

And then on the expense front, yes, I mean, we certainly are investing.

And the expenses will grow quarter over quarter at this point.

When we look into next year, we would think one you have the annualized nation of the investments we made in 2023 and the Annualizing the impact of the amount of 24 will impact expenses.

But the clear focus is to grow expenses slower quite a bit slower than we're growing our top line. So.

That's that's how we're looking at it we will continue to make selected investments going forward into 'twenty four.

But you will see somewhat of an increase in opex different obviously this year. We did we did significant cuts last December so weaker twenty-three youre seeing a decline, but we will see modest increases next year.

Got it really helpful. Thanks, Larry.

And our next question will come from Jason Cryo with Craig Hallum.

Thank you. This is Cal Bart is all on for Jason.

Just a couple from me I guess to start can you just kind of talk about the CTV growth potential as direct access continues to gain adoption.

Yeah.

I would say specifically, who then CTV, that's where our direct access program is focused.

It's not a it's not something that we're looking to take fees on we're really just trying to give the most optimized path most direct path for our customers to get more working media dollars to premium content owners and probably the most exciting channel in many years. So that's really the focus and it's definitely it's in every single conversation that we're having.

With marketers.

Specialty this was a great year to be able to launch that and really really drive it because of the budgets are a lot more demanding especially if you think about coming out of Q4 last year in Q1, and it really started to turn heads we've been really pleased with the growth of that so as we stated it's more than 25% of CTV spending we see where we see.

That and we expect it to continue to grow one of them. One is it make complete financial sense, it's more working media dollars.

So the publisher that's you know more reach and more potential new customers for our clients. That's a big one and really just the directness nature of it our market and the savings there marketers really see the value enough. There's also some I think some more exciting things that will come out of direct access.

These premium content owners are continually looking to get more and more access.

To our clients demand I think that's going to open up a lot more opportunities are things around data driven Disney came out recently last week with an announcement that included us.

We'll all around more data driven products and bidding.

So a more biddable supply I would say this time last year there was concern in the market.

CTV was all going to be kind of direct I OS and star data driven we didn't we expect that the opposite were saying that you are saying you know the largest content owner in the world, They're opening up data driven biddable AR inventory. So we expect that to continue to grow. So we think that direct access is really going to play a huge role.

In us keep outpacing industry.

CTV growth.

Perfect. Thank you and then just last one for me you know as these AI tools continue to rollout how do you expect that to manifest in the P&L. You know are these discrete revenue drivers or are they more so differentiators to drive more share gain in wallet gain things like that thanks.

Yeah, I know they are revenue drivers. So bid optimizer has been producing revenue we launched here in June the way we drive revenue. There is we keep 20% of the C. P. M savings that we produce so it's a base off of the value that we create and they've been big drivers all of these products in aggregate drive our contribution ex Tac.

Ultimately if they are adopted Larry would you would you add anything from the hour also adds yet the direct revenue drivers, but they also help us win incremental business with our customers as well.

Putting more dollars to work based on certain elements of our product line. So.

So we're winning incremental business, but we're also seeing a modest increase in the revenue contribution ex Tac as a result of using these products as well.

Perfect. Thank you, yes, yes grandson.

And that is all the time that we have today for questions, So Chris and Tim I'll turn it back to you for closing remarks. Thank you everyone for joining our third quarter call and thank you to all the buy and employees that produced a terrific quarter. Thanks, a lot most of you at our next quarterly earnings.