Q3 2023 AdTheorent Holding Co Inc Earnings Call
Okay.
Speaker 1: Ladies and gentlemen, thank you for standing by and welcome to Addy Aronster Quarter 2023 Earnings Call. At this time, all participants are...
Ladies and gentlemen, thank you for standing by and welcome to Deere registered quarter 'twenty 'twenty earnings call.
At this time all participants are in a listen only mode.
Speaker 1: After the speaker's presentation, there will be a question and answer session. Please be advised that this...
After the speaker's presentation, there will be a question and answer session.
Please be advised that this conference is being recorded.
Speaker 1: I would now like to turn the conference over to your first speaker, David Stepano, investor relations.
I would now like to turn the conference over to your first speaker.
David The Stefano Investor Relations.
You did.
Please go ahead.
Okay.
Speaker 2: Good afternoon and welcome to Ad Theorant's third quarter 2023 earnings call. We will be discussing results announced in our press release issued after the market closed today. With me today are Ad Theorant's Chief Executive Officer, Jim Lawson, and Chief Financial Officer, Patrick Elliott.
Good afternoon, and welcome to <unk> third quarter 2023 earnings call, we will be discussing the results announced in our press release issued after the market close today with me today are at their Chief Executive Officer, Jim Wilson, and Chief Financial Officer, Patrick Elliott.
Speaker 2: Before we begin today, I'd like to remind you that today's conference call will include forward-looking statements based on the company's current expectations.
Before we begin today I'd like to remind you that today's conference call will include forward looking statements based on the company's current expectations.
Speaker 2: These forward-looking statements are subject to a number of significant risks and uncertainties.
These forward looking statements are subject to a number of significant risks and uncertainties and our actual results may differ materially for a discussion of factors that could affect our future financial results and business. Please refer to the disclosure in today's earnings release, and our other reports and filings with the Securities and Exchange Commission.
Speaker 2: and our actual results may differ materially. For discussion of factors that could affect our future financial results and business, please refer to the disclosure in today's earnings release and our other reports and filings with the Securities and Exchange Commission.
Speaker 2: All of today's statements are made based upon information available to us today, and we assume no obligation to update any such statements except as required by law.
All of today's statements are made based upon the information available to us today, and we assume no obligation to update any such statements except as required by law.
Speaker 2: We will also refer to both GAP and non- GAAP financial measures during the call. You can find the reconciliation of our GAP and non- GAAP measures included in our press release posted to the Investor Relations section of our website at www.adthera.com. All of our non-revenue financial measures we discussed today are non-GAP unless we state otherwise. With that, let me turn the call over to...
We will also refer to both GAAP and non-GAAP financial measures. During the call you can find the reconciliation of our GAAP to non-GAAP measures included in our press release posted to the Investor Relations section of our website at.
Www Dot dot com.
All of our non revenue financial measures will be discussed today are non-GAAP, unless we state otherwise with that let me turn the call over to Jim.
Speaker 3: Thank you, David, and good afternoon, everyone. Thank you for joining our third quarter, 2023 earnings call. During today's call, I will discuss our high-level results for the third quarter, provide a progress update on our ongoing investment initiatives, highlight recent and upcoming product innovation, and briefly comment on the macroeconomic and the issue backdrop. I will then turn the call over to Patrick, who will provide a more detailed look at results, and provide guidance for the fourth quarter in full year, 2000.
Thank you David and good afternoon, everyone. Thank you for joining our third quarter 2023 earnings call. During today's call I will discuss our high level results for the third quarter provide a progress update on our ongoing investment initiatives highlight recent and upcoming product innovation and briefly comment on the macro.
The economic and industry backdrop.
I will then turn the call over to Patrick who will provide a more detailed look at results and provide guidance for the fourth quarter and full year 2023.
Speaker 3: I am pleased to report that Ad Daren's third quarter performance met or exceeded our financial objectives. Our unique machine learning offerings continue to attract elevated interest and uptake, driving an increase in demos, evaluations, new contracts, and ultimately more spend on the platform.
I am pleased to report that during third quarter performance met or exceeded our financial objectives. Our unique machine learning offerings continue to attract elevated interest and uptake driving an increase in demos evaluations new contracts and ultimately more spend on the platform.
Speaker 3: Third quarter revenue of $40.9 million was above the midpoint of our guidance range and a return to year-over-year growth, up 9% versus Q3 2020.
Third quarter revenue of $40 $9 million was above the midpoint of our guidance range and a return to year over year growth up 9% versus Q3 2022.
Speaker 3: Thanks to the hard work and strong execution of the ad guaranteeing, we remain on pace to deliver revenue growth for the full year of 2023. We also drove operating leverage during the quarter, delivering $4.7 million of adjusted EBITDA, an 11.6% margin above the high end of our guidance range, and up 32% year-over-year Money boom is expected.
For the hard work and strong execution of the <unk> team, we remain on pace to deliver revenue growth for the full year of 2023. We also drove operating leverage during the quarter delivering $4 $7 million of adjusted EBITDA and 11, 6% margin above the high end of our guidance range and up 32% year over year driven by higher <unk>.
Adjusted gross profit margin and continued cost discipline.
Speaker 3: Results were especially robust in areas of investment, including self-service, ad-daren health, and our algorithm-based predictive-audient solutions, all of which saw exceptional growth during the quarter as customers responded enthusiastically to our differentiated offerings. I'll discuss each area of investments.
Results were especially robust and areas of investment, including self service AD Darren health and our algorithm based predictive audience solutions, all of which saw exceptional growth during the quarter as customers responded enthusiastically to our differentiated offerings I'll discuss each area of investment in more detail.
Speaker 3: Beginning with self-service, we believe we have the best performance oriented DSP in the market, and we are confident that continued self-service adoption will drive long-term growth.
Beginning with self service, we believe we have the best performance oriented DSP in the market and we are confident that continued self service adoption will drive long term growth. We saw record activity again in the third quarter driven by a strong mix of new logo wins and increased wallet share.
Speaker 3: We saw record activity again in the third quarter, driven by a strong mix of new logo wins and increased wallet share. As advertisers gravitated to our cost efficient and transparent self-service platform for both media buying and audience creation. Compared to Q2.
Advertisers gravitated to our cost efficient and transparent self service platform for both media buying and audience creation compared to Q2.
Speaker 3: Health service revenue increased 28%, impressions purchased through the platform increased 36%, an advertiser count increased 57%.
Service revenue increased 28% impressions purchased through the platform increased 36% in advertiser count increased 57%. We also saw very high retention rates and expanding pipeline of established agencies and brands and outstanding customer satisfaction.
Speaker 3: We also saw very high retention rates, an expanding pipeline of established agencies and brands, and outstanding customer satisfaction. This gives us confidence that self-service momentum will continue.
This gives us confidence that self service momentum will continue.
Speaker 3: In addition, in the coming days, we will announce a strategic partnership with Hero Media that establishes the first Black-Own DSP in programmatic advertising, Hero One. This audience-focused programmatic offering will combine ad-darence award-winning platform and technology with Hero Media's media network, exclusive properties, and unique data and insights, allowing us to reach diverse audiences at scale. Our work through Hero One will elevate multicultural programmatic advertising beyond the sumptuous based retargetes.
In addition in the coming days, we will announce a strategic partnership with hero media that establishes the first black on DSP and programmatic advertising hero one.
Audience focused programmatic offering will combine adherence award winning platform and technology with Euro media media network exclusive properties and unique data and insights, allowing us to reach diverse audiences at scale.
Our work through hero, one will elevate multicultural programmatic advertising beyond assumptions based re targeting.
Speaker 3: This exciting opportunity will accelerate adoption of our platform within multicultural segment targeting. A $12 billion market in 2022, the media trade organization Portata estimates will reach over $16 billion by $2,027.
This exciting opportunity will accelerate adoption of our platform within multicultural segment targeting a $12 billion market in 2022, the immediate trade organization for Tata estimates will reach over $16 billion by 2027.
Speaker 3: This market is also perfect for our algorithm-based audience creation.
This market is also perfect for our algorithm based audience creation tools using aggregated self declared rates and efficacy data, we can target multicultural users with a level of thoughtfulness and insight into multicultural families and culture not seen with any other product in the industry.
Speaker 3: using aggregated self-declared race and ethnicity data. We can target multicultural users with a level of thoughtfulness and insight into multicultural families and culture not seen with any other product in the industry.
Speaker 3: This horizontal opportunity, available for both managed and self-service customers, will add multicultural depth to each of our verdicts.
This horizontal opportunity available for both managed and self service customers will add multicultural depth to each of our verticals.
Speaker 3: Moving to add their in health, our uniquely tailored solution and privacy forward architecture have proven highly effective and are driving tremendous success in the complex healthcare sector, where privacy regulations are a specialist strict.
Moving to add Darren health, our uniquely tailored solution and privacy, Florida architecture have proven highly effective and are driving tremendous success in the complex health care sector, where privacy regulations are specialty strict.
Speaker 3: In our view, adhering specialized techniques and safeguards, most notably leveraging machine learning algorithms, instead of relying on targetable user ID.
Our view add darrin specialized techniques and safeguards, most notably leveraging machine learning algorithms instead of relying on targeted bolt user Ids give us a sustainable advantage relative to large generalists dsp's.
Speaker 3: Give us a sustainable, advanced, relative to large, generalist DSP.
Speaker 3: These embedded advantages, an hour track record of delivering superior campaign outcomes, drove 28% year-over-year revenue growth, and a 51% year-over-year increase in advertiser count during the quarter. Looking ahead, we expect even greater revenue growth from at their health in the fourth quarter.
These embedded advantages and our track record of delivering superior campaign outcomes drove 28% year over year revenue growth and 51% year over year increase in advertiser count during the quarter. Looking ahead, we expect even greater revenue growth for Matt there in health in the fourth quarter.
Speaker 3: The number of active campaigns running out there in health audiences also increased meaningfully in Q3. Up 89% to 36 versus 19 in Q2. I will briefly talk about two of these campaigns.
The number of active campaigns running out there and help audiences also increased meaningfully in Q3 up 89% to 36 versus <unk> 19 in Q2, I will briefly talk about two of these campaigns.
Speaker 3: First, for a former client looking to target patients with a rare medical condition, at-ear and health audiences outperformed all campaign benchmarks as measured by an independent third party, including 60% outperformance on the cost benchmark, and 40% outperformance on audience quality.
First for our pharma clients looking to target patients with a rare medical condition at their health audience has outperformed all campaign benchmarks as measured by an independent third party, including 60% outperformance on the cost benchmark and 40% outperformance on audience quality.
Speaker 3: Second, for another pharmaclyan, looking to target condition sufferers with unfilled prescriptions. At their health audiences grow of a 34% more efficient conversion rate than benchmark, has measured by an independent third party.
For another pharma client looking to target condition suffers with unfilled prescriptions out there and help audiences drove a 34% more efficient conversion rate than benchmark as measured by an independent third party.
Speaker 3: We are also making great progress bringing HADY, our health audience creation tool to self-service use.
We are also making great progress, bringing haddon, our health audience creation tool to self service users through heavy self service users can explore de identified health records in real time based on diagnosis procedures prescribed medication health care specialty and many other attributes.
Speaker 3: Through Havvy, self-service users can explore the identified health records in real time, based on diagnosis.
Speaker 3: Procedures, prescribed medication, healthcare specialty, and many other after-
Speaker 3: Based on the attributes selected, users can see a variety of health insights, such as top diagnosis, top prescribed medication, top procedures performed, age, gender, and geographical breakdown. This allows advertisers to create and activate custom health audiences on the platform that are tailored to their unique objectives.
Based on the attributes selected users can see a variety of health insights such as top diagnosis top prescribed medication top procedures performed age gender and geographical breakdown. This allows advertisers to create and activate custom health audiences on the platform that are tailored to their unique objectives.
Speaker 3: We couldn't be more pleased with the customer interest generated in such a short period of time. In Q3, we conducted 26 product demos and one month into the fourth quarter we have another 15 already completed or committed. The Ad There and Health ESB combines three of our largest market opportunities, health, self-service, and algorithmic audience creation. We are extremely excited about this opportunity and look forward to providing more of...
We couldnt be more pleased with the customer interest generated in such a short period of time.
Q3, we conducted 26 product demos and one month into the fourth quarter, we have another 15 already completed or committed.
They're in health DSP combined three of our largest market opportunities health self service and algorithmic audience creation. We're extremely excited about this opportunity and look forward to providing more updates.
Speaker 3: Finally, in Q3 received valuable third party validation for our health audiences with Newtonians and QI data quality certification. Based on our superior capabilities in areas including consent and compliance, data quality and sourcing transparency, privacy and performance.
Finally in Q3, we received valuable third party validation for our health audiences with Newtonian Nty data quality certification based on our superior capabilities in areas, including consent and compliance.
Data quality and sourcing transparency privacy and performance. This follows our receipt last quarter of a new journey and certification for our non health predictive audience solutions. The <unk> health certification involved an extremely comprehensive review of the underlying health data feeding adherence proprietary machine learning modeling processes.
Speaker 3: This follows our receipt last quarter of a Nutrownian certification for our non-health predictive-alliant solutions. The NQI Health Certification involves an extremely comprehensive review of the underlying health data feeding at DERN's proprietary machine learning modeling process.
Speaker 3: validating adherence position as a leader in privacy forward in the industry compliant health care solution.
Elevating adherence position as a leader in privacy forward in the industry compliant health care solutions and it distinguishes us as a high quality provider in the healthcare industry.
Speaker 3: And it distinguishes us as a high quality provider in the healthcare industry.
Speaker 3: switching gears to ad-daren predictive audiences. Across verticals, customers are leveraging our proprietary ID independent methodology for audience creation that delivers superior engagement rates while eliminating the expense of third-party audiences. During the quarter, there were 66 active campaigns running ad-daren predictive audiences. A 32% increase relative to the 50 active in Q2. To ribbon by our ability to repeatedly demonstrate uplift and campaign performance versus third-party audience.
Switching gears to add Darren predictive audiences.
Across verticals customers are leveraging our proprietary independent methodology for audience creation that deliver superior engagement rates, while eliminating the expense of third party audiences. During the quarter. There were 66 active campaigns running add darrin predictive audiences, a 32% increase relative to the 50 active.
In Q2, driven by our ability to repeatedly demonstrate uplift and campaigned performance versus third party audiences. Thank.
Speaker 3: In Q3, as part of a controlled test with a holding company partner, ad-tier predictive audiences went head-to-head with a major DSP competitor, utilizing third-party audience targeting in the CPG industry.
In Q3 as part of a controlled test with a holding company partner at their predictive audiences went head to head with a major DSP competitor utilizing third party audience targeting and the CPG industry.
Speaker 3: The results validated the performance we see regularly across our customer campaigns. This particular task concluded, with AdDAR and outperforming the competitor across all metrics, delivering a 43% higher click-through rate, at a cost per click, there was 51% more efficient than the competitor. AdDAR and predictive audiences are an important part of our strategy. This products we invite deep collaboration and data sharing with customers.
The results validated the performance, we see regularly across our customer campaigns. This particular test concluded with Darin outperforming the competitor across all metrics delivering a 43% higher click through rate at a cost per click that was 51% more efficient than the competitor.
Their predictive audiences are an important part of our strategy. This product suite invites deep collaboration and data sharing with customers and showcases our market superiority in the area of machine learning and algorithmic targeting.
Speaker 3: and showcases our market superiority in the area of machine learning and the algorithmic targeting. In the short time since we've introduced our audience products, they have become a focal point of our strategic trail them.
In the short time since we've introduced our audience products. They have become a focal point of our strategic sales efforts.
Speaker 3: Finally, we continue to expand our premium CTV offering. During the quarter, we added additional avod inventory with Max, Discovery, Roku, Viacom, Aini, and more. And we'll be adding Hulu in Q4. This builds upon our live sports and the live addressable TV offering that we rolled out last.
Finally, we continue to expand our premium CTV offering during the quarter, we added additional Avon inventory with Max Discovery Roku Viacom.
And more and we will be adding Hulu and Q4. This builds upon our live sports and live addressable TV offering that we rolled out last quarter, enabling buyers to target live premium inventory across a greater variety of online cable apps in Q4, we will continue to expand our content metadata.
Speaker 3: Enabling virus for target live premium inventory across a greater variety of online cable apps.
Speaker 3: in Q4, we will continue to expand our content metadata initiative to include network and channel information. As we have said before, much of the data in the CTV bitstream is not standardized or normalized. Having network and channel data differentiates out there in CTV, making it performance-oriented and enabling clients to target, model, and report out on more granular content.
Initiatives to include network and channel information as we've said before much of the data and the CTD midstream is not standardized or normalized having network and channel data differentiator out there in CTV, making it performance oriented and enabling clients to target model and report out on more granular content signals.
Speaker 3: our ML based models for targeting, pricing and optimization facilitate smarter media buying and the additional data further improves these models generating measurable improvement in RL.
Our ml based models for targeting pricing and optimization facilitate smarter media buying and the additional data further improves these models generating measurable improvement in ROI.
Speaker 3: CTV performance was particularly strong within our self-service offering, where revenue increased sequentially 172% compared to the second quarter of 2023. As a result of this mixed shift, overall CTV revenues grew just 1%. You're...
CTV performance was particularly strong within our self service offering where revenue increased sequentially, 172% compared to the second quarter of 2023.
As a result of this mix shift overall CTV revenues grew just 1% year over year, but self service adoption continues to increase and our new and innovative solutions are brought to market, we're confident CTV or return to robust growth.
Speaker 3: But self-service adoption continues to increase, and our new and innovative solutions are brought to market. We are confident CTV will return to robust growth.
Speaker 3: I would also like to make a few comments about the ongoing work of our world-class technology product and R&D teams. Who's ongoing contributions are expanding our competitive-
I would also like to make a few comments about the ongoing work of our world class technology product and R&D teams.
Ongoing contributions or expanding our competitive mode.
Our mission.
Speaker 3: is to make programmatic advertising more valuable and efficient for marketers by deploying advanced machine learning technology and data science solutions, leading the programmatic advertising industry into a privacy-forward future, not dependent on the ID-based user retargeting. I'd like to briefly talk about two impactful innovations launched during the third quarter that advanced this mission.
Is to make programmatic advertising more valuable and efficient for marketers by deploying advanced machine learning technology and data science solutions, leading the programmatic advertising industry into a privacy forward future not dependent on the IV based user re targeting.
To briefly talk about too impactful innovations launched during the third quarter that advance this mission.
Speaker 3: First, building on our natural language processing capabilities, we expanded keyword targeting beyond URL analysis to the page level. A travel client looking to target keywords that contain airlines or flight...
First building on our natural language processing capabilities, we expanded keyword targeting beyond <unk> analysis to the page level, a travel client looking to target keywords that contain airlines or flight deals can now do so based on both the page Urls and in page content across the open Internet.
Speaker 3: Can I do so based on both the page URL and in-page content across the opening?
Speaker 3: our predictive models. We'll also pick up these keywords during the campaign and we'll optimize towards those that are driving the strongest performance.
Our predictive models will also pick up these keywords during the campaign and we will optimize towards those that are driving the strongest performance.
Speaker 3: Second, as we previewed last quarter, we rolled out our themes taxonomy, which organizes our inventory into themes based on common keyword vectors. So that same travel client can utilize our themes capability to target travel content as a whole, in addition to using our robust keyword targeting capability.
As we previewed last quarter, we rolled out our themes taxonomy, which organizes our inventory in the feeds based on common keyword vectors does that same travel clients can utilize our themes capability to target travel content as a whole in addition to using our robust keyword targeting capabilities.
Speaker 3: These NLP solutions are an important part of that there is product suite. As they offer advertisers highly effective targeting methods that are machine learning-based, privacy-forward, and not reliant on user, I do.
These NLP solutions are an important part of that <unk> product suite as they offer advertisers highly effective targeting methods that our machine learning based privacy forward and not reliant on user Ids.
Speaker 3: We also continue to receive more industry recognition for our achievements. Notably, we won the Digiday Technology Award for Best By-Side Programmatic Platform.
We also continue to receive more industry recognition for our achievements, notably we Wonder did you de Technology Award for best buy side programmatic platform.
Speaker 3: and we remain in a cranes best places to work for the 10th consecutive
And we remain at Greens Best places to work for.
For the 10th consecutive year.
Speaker 3: As we move into the fourth quarter and into 2024, we are pleased with our momentum and growth process.
As we move into the fourth quarter and into 2024, we are pleased with our momentum and growth prospects, even though advertiser outlook for AD spending remains mixed with ongoing concerns about the macro economy, we have strong momentum behind our core offerings, which we have enhanced materially in the past four quarters as we execute our.
Speaker 3: even though advertiser outlook for ad spending remains mixed, with ongoing concerns about the macroeconomy, we have strong momentum behind our core offerings, which we have enhanced materially in the past four quarters as we execute our strategy. Our budget and spending approach heading into 2024 will reflect the broader advertising caution, but we are positioning for a solid year of profitable growth in 2024.
Strategy, our budget and spending approach heading into 2024 will reflect the broader advertising caution, but we're positioning for a solid year of profitable growth in 2024.
Speaker 3: Across our primary growth sectors, we're witnessing increased engagement from brands and agencies, and our sales pipeline has never been more promising.
Across our primary growth vectors, we are witnessing increased engagement from brands and agencies and our sales pipeline has never been more promising we.
Speaker 3: We have never been more confident in our ability to capture a growing share of programmatic ad budgets by delivering consistently superior campaign performance, using cutting edge machine learning and data products, and verticalized solutions, and in the process, leading the industry in data flexibility, ID independence, and pricing transparency.
We have never been more confident in our ability to capture a growing share programmatic ad budgets.
Delivering consistently superior campaign performance using cutting edge machine learning and data products and vertical solutions and in the process, leading the industry and data flexibility independents and pricing transparency, we have made tangible progress during the quarter due to the patience and persistence.
Speaker 3: We have made tangible progress during the quarter due to the patience and persistence of our world-class.
Our world class team focused around a strategy, which has successfully positioning out there for sustained market leadership. We expect this momentum to continue we remain on track to meet or exceed our full year projections for 2023, and we are looking ahead to 2024 with optimism.
Speaker 3: focused around a strategy which is successfully positioning out there for sustained market leadership. We expect this momentum to continue, remain on track to meet or exceed our full year projections for 2023, and we are looking ahead to 2024 with optimism.
Speaker 3: Thank you for your support and confidence in AdDuring. Now I turn the call over to back.
Thank you for your support and confidence and add Darren now I'll turn the call over to Patrick.
Speaker 2: Thanks Jim and good afternoon everyone. We are pleased to deliver strong Q3 results as ad their return to solid year-to-year revenue.
Thanks, Jim and good afternoon, everyone.
We are pleased to deliver strong Q3 results as adherent returned to solid year over year revenue growth.
Speaker 4: The quarters revenue exceeded the midpoint of our outlook and adjusted to even surpass the high end of our previous
The quarter's revenue exceeded the midpoint of our outlook and adjusted EBITDA surpassed the high end of our previous outlook.
Speaker 4: In the third quarter, revenue was $40.9 million, an increase of 3.3 million, or 8.8%, compared to the third quarter of the previous year, driven by a continued momentum in our healthcare platform and from self-service advocates.
In the third quarter revenue was $40 9 million, an increase of $3 3 million or eight 8% compared to the third quarter of the previous year driven by continued momentum in our healthcare platform and from self service advertisers.
Speaker 4: While we continue to see a challenging environment for ad budgets, particularly in verticals impacted by higher age.
While we continue to see a challenging environment for AD budgets, particularly in verticals impacted by higher interest rates.
Speaker 4: This was more than offset by excellent execution and strength in our core areas of
This was more than offset by excellent execution and strength in our core areas of investments.
Speaker 4: Q3 at their health revenues grew 28% from Q3 2022. And the number of health brands advertising on the platform increased over 50% year-over-year.
In Q3 at their in House revenues grew 28% from Q3 2022.
And the number of health brands advertising on the platform increased over 50% year over year.
Speaker 4: As Jim pointed out, there is a significant increase in the number of advertisers utilizing AdShare and Health Audio.
As Jim pointed out there was a significant increase in the number of advertisers utilizing at their audiences.
Speaker 4: We also drove continued expansion and self-service revenue, which we've seen every quarter of this year, with a sequential increase of 28% compared to Q220.
We also drove continued expansion in self service revenue, which we've seen every quarter. This year with a sequential increase of 28% compared to Q2 2023.
Speaker 4: This growth can be attributed to a 57% sequential rise in the number of advertisers using self-service.
This growth can be attributed to a 57% sequential rise in the number of advertisers using self service.
Speaker 4: Coupled with increased spending on the platform from existing advertisers.
With increased spending on our platform from existing advertisers.
Turning now to expenses.
Speaker 4: In the third quarter, our adjusted gross profit calculated as gap revenue, less traffic acquisition costs, was $26.4 million, or 64.5% of revenue, up 50 basis points from Q2.
In the third quarter, our adjusted gross profit calculated as GAAP revenue less traffic acquisition costs was $26 4 million or <unk> 64, 5% of revenue up 50 basis points from Q2.
Speaker 4: The sequential increase in AGP margin is due to a higher mix of ad-parent health audiences, which are less reliant on expensive third-party data.
The sequential increase in AGP margin is due to a higher mix of Advair and health audiences, which are less reliant on expensive third party data.
Speaker 4: On a year-over-year basis, the HEP margin declined from 55.8% of...
On a year over year basis, the AGP margin declined from 65, 8% of revenue due to competitive introductory pricing to encourage self service adoption and a shift in mix the CTV offerings.
Speaker 4: due to competitive introductory pricing to encourage self-service adoption and a shift in mix to CTV offerings.
Speaker 4: Partially offset by the increase in health audiences and other predicts.
Actually offset by the increase in health audiences and other predictive audiences.
Speaker 4: Total gap operating expenses were $41 million in the third quarter.
Total GAAP operating expenses were $41 million in the third quarter.
Speaker 4: up $1.7 million or 4.2% from Q3 2021.
Up $1 7 million or four 2% from Q3 2022.
Speaker 4: The increase in operating expenses was driven by higher traffic acquisition costs and hosting expense.
The increase in operating expenses was driven by higher traffic acquisition costs and hosting expense to support the higher revenue base, partially offset by reductions in technology and development and general and administrative expenses.
Speaker 4: partially offset by reductions in technology and development in general and administrative
Speaker 4: Stock compensation expense in the third quarter was $2.6 million for a decrease of $0.2 million or 7.2% compared to the $2.8 million recorded in Q3 2020.
Stock compensation expense in the third quarter was $2 6 million for a decrease of <unk> 2 million or seven 2% compared to the $2 8 million recorded in Q3 2022.
Speaker 4: Adjusted EBITDA for the quarter was $4.7 million. Up $1.1 million or 32% compared to the third quarter of 2022.
Adjusted EBITDA for the quarter was $4 7 million.
Up $1 1 million, 32% compared to the third quarter of 2022.
Speaker 4: primarily due to the increases in year-over-year revenue and AGP offset by higher operating
Primarily due to the increases in year over year revenue and AGP offset by higher operating expenses consistent with our track record of cost discipline and commitment to prioritizing profitability. We once again exceeded the high end of our quarterly EBITDA outlook.
Speaker 4: Consistent with our track record of cost discipline and commitment to prioritizing profitability We once again exceeded the high end of our quarterly EBITDA outlook
Turning to our cash flow.
Speaker 4: We reported $1.2 million in free cash flow for the quarter versus $4.3 million in Q3 of last year. Primarily due to the time you know work.
We reported $1 2 million and free cash flow for the quarter versus $4 3 million in Q3 of last year, primarily due to the timing of working capital year to date free cash flow was $1 $8 million compared to $6 1 million for the first nine months of the year, mainly attributed to reduced revenue.
Speaker 4: Year to date, free cash flow at $1.8 million, compared to $6.1 million for the first nine months of the year. Mainly it's your...
Speaker 4: It's worth noting that similar to Q2, capitalized software costs increase to support our ongoing product and platform initiatives.
It's worth noting that similar to Q2 capitalized software costs increased to support our ongoing product and platform initiatives with year to date capitalized software development costs of $2 million versus the prior year.
Speaker 4: With your today capitalized software development costs up $2 million versus the parry.
Speaker 4: It's also important to keep in mind that a significant portion of our annual cash flow is generated in this
It's also important to keep in mind that a significant portion of our annual cash flow is generated in the fourth quarter.
Speaker 4: We exited Q3 with a strong cache in the Quiddity position.
We exited Q3 with a strong cash and liquidity position.
Speaker 4: At the end of the third quarter, we had $74.3 million in cash versus $72.6 million at the end of 20...
At the end of the third quarter.
$74 $3 million in cash versus $72 6 million at the end of 2022.
Speaker 4: We have no debt on the balance sheet, but continue to have access to $40 million on a revolving credit facility.
We have no debt on the balance sheet, we continue to have access to $40 million on our revolving credit facility.
Now turning to our outlook for Q4 and the full year.
Speaker 4: The positive revenue growth momentum we saw in Q3 will continue into Q4, driven by strong demand for our new products across various verticals.
The positive revenue growth momentum we saw in Q3 will continue into Q4, driven by strong demand for our new products across various verticals.
Speaker 4: The progress in our key investment areas, including our self-service platform, ad-parent health and audience builder products, and CTV offerings, is driving improved results on a year-over-year basis.
The progress on our key investment areas, including our self service platform at their health and audience builder products and CTV offerings is driving improved results on a year over year basis.
Speaker 4: Our forecast assumes no significant changes in the macroeconomic environment.
Our forecast assumes no significant changes in the macroeconomic environment.
Speaker 4: For Q4, we expect revenue to be between $55 million and $57 million, representing 8% revenue growth at the midpoint compared to Q4 20-
For Q4, we expect revenues to be between $55 million and $57 million.
<unk>, 8% revenue growth at the midpoint compared to Q4 2022.
Speaker 4: The adjusted gross profit for Q4 is expected to be at least 64% ever.
The adjusted gross profit for Q4 is expected to be at least 64% of revenue and.
Speaker 4: And we anticipate adjusted EBITDA to be between $10 million and $11.5 million for the fourth quarter, or a 30% adjusted EBITDA margin at the midpoint, reflecting our significant operating...
And we anticipate adjusted EBITDA to be between $10 million and $11 5 million for the fourth quarter.
Or a 30% adjusted EBITDA margin at the midpoint, reflecting our significant operating leverage.
Speaker 4: Regarding our outlet for the full year 2023, we've previously provided projections for revenue, AGP and adjusted EBITOP, which contemplated revenue growth, adjusted gross profit between 64% and 65% of revenue, and adjust EBITOP within 16% and 19% of adjusted gross profit.
Regarding our outlook for the full year 2023.
Previously provided projections for revenue and adjusted EBITDA, which contemplated revenue growth adjusted gross profit between 64% and 65% of revenue and adjusted EBITDA within 16% and 19% of adjusted gross profit.
Speaker 4: Today, based on year-to-date actuals through Q3 and our Q4 outlook, we can be more specific about our full year-
Today based on year to date actuals through Q3, and our Q4 outlook, we can be more specific about our full year expectations.
Speaker 4: For the full year, we expect revenue to grow approximately 1% at the midpoint of our range.
For the full year, we expect revenue to grow approximately 1% at the midpoint of our range.
Speaker 4: AGP to be approximately $107 million, and adjusted EBITDA to be approximately 19 million, or at any...
<unk> to be approximately $107 million and adjusted EBITDA to be approximately $19 million or at an 18% margin.
Speaker 4: And in summary, we are encouraged by our return to growth in Q3 and the many growth opportunities that lie ahead for us.
In summary, we are encouraged by our return to growth in Q3, and the many growth opportunities that lie ahead for Advair.
Speaker 4: across our key growth pillars, we see enthusiasm from brands and agencies, and the sales pipeline has never been.
Across our key growth pillars, we see enthusiasm from brands and agencies and the sales pipeline has never been better.
The business continues to track toward our longer term goals and we expect to sustain in the second half growth momentum into 2024.
At this time.
We would like to transition to the Q&A session moderated by the operator.
Thank you.
Floor is now open for your questions.
Speaker 1: So as a question this time, please press star to the number one on your telephone keypad. We'll pause for just a moment.
Can I ask a question. This time. Please press Star then the number one on your telephone keypad.
We'll pause for just a moment to compile the Q&A roster.
Yes.
Okay.
Our first question comes from the line of Maria risks.
Thank God.
Line is now open.
Speaker 5: Great good afternoon and thanks for taking my questions. First, is there anything incremental you can share with us in terms of the state of the advertising market in Q4 and I guess how much conservatism is embedded in your guidance? And more broadly, what's the tone of your conversations with some of your key clients?
Great. Good afternoon, and thanks for taking my questions first is there anything incremental you could share with us in terms of the state of the advertising market in Q4, and I guess, how much conservatism is embedded in your guidance and more broadly what's the tone of your conversations with some of your key clients.
Yes. Thank you Maury I appreciate the question.
We.
Speaker 3: Our sensing has very improved dynamic with a lot of our customers. There's a lot of enthusiasm and optimism around the products that we've brought to market in the last few quarters. In terms of incremental, incremental has always been a big part of the fourth quarter in our business. And we've already received and enjoyed some incremental that that has been a nice change from past quarters.
Our sensing very improved dynamic with a lot of our customers.
A lot of enthusiasm and optimism around the products that we brought to market in the last few quarters.
In terms of incremental incremental has always been a big part of the fourth quarter in our business and we've already received and enjoyed some incremental.
That has been a nice change from from past quarters.
Speaker 3: And I think that our guidance should be noted that our guidance does not.
And I think that.
Our guidance should be it should be noted that our guidance does not contemplate any unknown or kind of like unexpected incremental guidance.
Speaker 3: contemplate any unknown or kind of like
Speaker 3: Unexpected incremental or our guidance Incremental would be of additive to to what we've guided the street
Incremental would be additive to what we've guided the street. So we feel good about where we are we feel like the enthusiasm from our customers as is.
Speaker 3: So we feel good about where we are. We feel like the enthusiasm from our customers is a positive change from prior quarters. I think some of that's due to macro improvement. I think some of that's due to, frankly, the time and market with a number of our new products that we've talked about. And...
Is it a positive change from from prior quarters.
Some of Thats due to macro improvements I think some of thats due to frankly the.
The time in market with a number of our new products that we've talked about in our prepared remarks, our health offerings, our self service offerings, our audience algorithm off.
Speaker 3: In our prepared remarks, our health offerings, our self-service offerings, our audience.
Speaker 3: algorithm based audience offering.
Algorithm based audience offerings, so I think that the enthusiasm and adoption of those is driving a lot of the momentum that we're seeing but we are also seeing improvements in the macro Patrick would you want to add anything to that I mean I can just.
Speaker 6: So I think that the enthusiasm and adoption of those is driving a lot of the momentum that we're seeing. But we are also seeing improvements in the macro. Patrick, would you want to add anything to that? I mean, I can just give some more color that are Q4 guidance, the range, really is dependent on slippage or our expectations around whether or not campaigns get moved to the future quarter.
Give some more color that our Q4 guidance the range really is dependent on.
Slippage or.
Expectations around whether or not campaigns get moved to the future quarter.
Speaker 6: or canceled, whereas any additional incremental would be upside to our guidance range for Q4.
Or cancelled, whereas any additional incremental would be upside to our guidance range for Q4.
Speaker 5: Got it, that's very helpful. And then, technically, Jim, you sound pretty optimistic about next year and you mentioned a strong pipeline. So given all the progress on the product side so far, how do you think about your ability to grow and take share relative to the broader advertising space next year?
Got it that's very helpful. And then secondly, Jim you sound pretty optimistic about next year and you mentioned a strong pipeline. So given all the progress on the product side. So far how do you think about sort of your ability to grow and take share relative to the broader advertising space next year.
Speaker 3: Yeah, thank you for that question. So last year at this time, we were looking forward to a 2023 where we had less certainty.
Yes. Thank you for that question. So so last year at this time, we were looking forward to 2023, where we had less certainty.
Speaker 3: around growth and commitments from a number of our customers, because our self-service offering at that time was close to being out of data.
Around growth and commitments from a number of our customers because our self service offering at that time was <unk>.
Most to being out of beta in.
Speaker 3: In 2023 looking into 2024, it is a completely different picture. We have a self-service offering that has not only gone through beta, but has been incredible and driven incredible results for our early customers. And we have a lot of enthusiasm around us.
In 2023 looking into 2024 it is a completely different picture, we have a self service offering that has not only gone through beta, but it has been incredible and driven incredible results for our early customers and we have a lot of enthusiasm around customers seeking to deploy.
Speaker 3: seeking to deploy ad-garen self-service as part of their media buying strategies. So I think when we look into the 24 buying period, we have more commitments.
Roy add Garen self service.
As part of their media buying strategy. So I think when we look into the 'twenty four buying period, we have more commitments.
Speaker 3: we have more visibility into revenue and we have just a much greater level of confidence.
We have more visibility into revenue and we have.
Just a much greater level of confidence as to the revenue Foundation that we bring from 'twenty three into 'twenty four on top of which we will drive growth. So when we add.
Speaker 3: as to the revenue foundation that we bring from 23 into 24 on on top of which we will drive growth. So when we had you know if in 23 22 going to 23 we had a customer that wanted to move into self-service.
If in 'twenty three 'twenty two go into 'twenty, three we had a customer that wanted to move into self service.
Speaker 3: And we had a very early innings version of self service. We didn't get that opportunity. And that was that impacted us. And that impact impacted our ability to drive meaningful growth at the beginning of the year, especially.
And we had a very early innings version a self service, we didn't get that opportunity and that was that impacted us and that impact impacted our ability to drive meaningful growth at the beginning of the year, especially its.
Speaker 3: It's a different picture going into 24. I believe we have a self-service platform that can compete with any self-service platform. And moreover, we have a highly differentiated verticalized.
It's a different picture going into 'twenty four I believe we have a self service platform that can compete with any self service platform and Moreover, we have a highly differentiated verticalizing set of capability, especially in health, where we have a significant advantage in our view relative to other platforms and we believe we'll capture a significant portion.
Speaker 3: set of capabilities, especially in health, where we have a significant advantage in our view, relative to other platforms, and we believe we'll capture a significant portion of that opportunity. So we couldn't feel better as we sit at the end of the year looking into next year. So we're excited to keep you posted. Great, thank you so much. I'm good luck with...
Of that opportunity. So we couldnt feel better as we sit at the end of the year looking into next year. So we're excited to keep you posted.
Great. Thank you so much good luck with the rest of the quarter.
Thank you Maria.
Speaker 1: Next question comes from the line of Flora Martin with Meetam. The line is now open.
Our next question comes from the line of slower Martin.
Your line is now open.
Jim can you hear me okay.
Speaker 7: Yes, thank you, Laura. Great. Hi. OK, so I wanted to drill down on Hero 1 first because
Yes, Thank you Laura right.
Okay. So I wanted to drill down on hero, one first because.
Speaker 7: From reading the press release, I'd like to learn a little more about that because sometimes I'm reading the press release, you're going to have sort of exclusive access to content in addition to data instance sites, which sounds like you've done a deal with a supply side and you've been a pure play DSP today. So, am I just reading that wrong about what Hero 1 is, please?
From reading the press release, I would like to learn a little number that cause it sounds like.
The press release Youre going to have sort of exclusive access to contents. In addition to data incident.
Which sounds like you've done a deal with that with the supply side.
And you've been a pure play DSP today, so that am I, just reading that wrong about what you're one is please.
Speaker 3: Thank you for that question. We're really excited about our partnership with Hero in creating the first Black-O-N-D-S-P in partnership with Hero. We're very excited about tapping into our audience building, capabilities, our algorithm, audience building capabilities. Hero brings to the table a number of things. They're a multicultural agency. They have access to a number of data assets.
Thank you for that question, we're really excited about our partnership with hero <unk>.
In creating the first black on DSP and in partnership with Euro.
We're very excited about tapping into our audience building capabilities.
Our algorithm audience building capabilities hero brings to the table a number of things there.
Multicultural agency they have access to a number of data assets.
Speaker 3: Supply side assets that will be very valuable in creating multicultural
Supply side assets that will be very valuable.
Creating multicultural offerings.
Speaker 3: and fueling data and algorithms that we can use to provide thoughtful audience targeting in multicultural context, rather than just the methods that are being used now, which again are largely assumptions driven, ID targeting based on one off content.
And fueling data and algorithms that we can use to provide thoughtful audience targeting and multi cultural context, rather than just the methods that are being used now, which again are largely assumption assumptions driven.
Targeting based on one of content consumption.
Speaker 3: So I think Hero brings a wealth of expertise about the communities in which they advertise and work and the clients and customers with whom they work, as well as a publisher network that they have where we'll get unique access to inventory that we have not had in our network before.
Thank <unk>.
Wealth of expertise about the communities in which they advertise on work in the clients and customers with whom they work as well as publisher network that they have will get unique access to inventory that we have not had in our network before so.
Speaker 3: So we're not shifting to be on the supply side. We're clearly doubling down, tripling down on our demand side capabilities and our ability to deliver value on the buy side, but we're partnering with a...
So we're not shifting to be on the supply side, we're clearly.
Doubling down tripling down on our demand side capabilities and our ability to deliver value on the buy side, but we're partnering with a.
Speaker 3: a partner in hero that will allow us to fuel our data assets, our models, our audiences with unique data and to give us unique destinations for multicultural advertising.
Our partner in hero that will allow us to fuel our data assets our models, our audiences with unique data and and they give us unique destinations for multicultural advertisements.
Speaker 7: Super, okay, so you're still a dual-play DFT. Very helpful. My other question was on C.
Yes.
Joe if I DLC I'm very helpful. My other correct.
Speaker 7: My other question was on CTV gym. So you said that the self-service CTV grew by 127%, but that total CTV grew by 1%. So is the implication of that? That all we did is substitute managed service CTV for self-service and kill our take rate. Am I reading and I interpreting that properly?
My other question was on CTV, Jim. So you said that the self service in Q2 grew by 127% what that total CTV grew by 1%.
No.
Please note that all we did a substitute managed service ATB for self service and kill our take rate.
Am I reading and interpreting that properly.
Speaker 3: Now, there's a shift mix in self-service self. With regard to CTV, you're going to have a more self-service skill.
No.
Shift mix in self service, so with regard to ETV youre going to have a more self service SKU.
Speaker 3: And I think that's good. I think we knew that that self-service and CTV were going to go very well together.
I think thats good.
We knew that that self service and CTV, we're going to go very well together.
Speaker 3: So no, we're encouraged by that. I mean, I think we're gonna see growth across both managed and self-service when it comes to CT.
So we're encouraged by that I mean, I think we're going to see growth across both managed and self service when it comes to CTV, but at this point in time, it's the law of small numbers.
Speaker 3: At this point in time, it's a law of small numbers. I mean, we're seeing,
Seeing.
Speaker 3: that we've had much more growth in this particular quarter through self-service. I think there will be quarters where we'll have a lot of growth across managed. But at the end of the day, the longer term view is that we have a fantastic data-driven machine learning driven self-service offering.
That we've had much more growth in this particular quarter through self service I think there will be quarters, where we will have a lot of growth across managed but at the end of the day. The longer term view is that we have a fantastic data driven machine learning driven self service offering.
Speaker 3: and being able to provide that to both self-service buyers.
And being able to provide that to both self service buyers and manage buyers is going to be a key to growth. So I don't view it as a one quarter.
Speaker 3: and managed buyers is going to be a key to growth. So I don't view it as a one-quarter story. I view it as the beginning of laying a foundation.
Story I view it as the beginning of laying a foundation for driving growth across CTV and self service is going to be obviously, a very big part of that.
Speaker 3: for driving growth across BTV and self-service is going to be obviously a very big part of that.
Speaker 7: Okay, and then my last question is, I look Google is actually gonna finally duplicate Hussie in the first half of next two. Does that act as a catalyst to push more campaigns or do what you're opinion on?
Okay and then my last question is.
Google is actually going to finally deprecate.
Does that act as a catalyst to push more capital or do you what's your opinion on that.
Speaker 3: Yes, 100%. We feel very good about where we sit relative to the post-cookie world. We've talked a lot in our prepared remarks and in our prior quarters about the audience.
Yes, 100%, we feel very good about where we sit relative to the post cookie world.
We've talked a lot in our prepared remarks and in our prior quarters about the audience algo.
Speaker 3: Algorithmic audience capabilities that we've built. We talked about our contextual advancements and contextual advertising with keyword and natural language processing inputs to our data science models. And we're also working with additional partners to create more one-to-one insights so that we have one-to-one data as well. But at the end of the day, the cookie deprecation is coming. I also believe that there are other IDs that are
Algorithmic audience capabilities that we've built we've talked about our contextual advancements in contextual advertising with key word and natural language processing inputs to our data science models and we're also working with additional partners to create more one to one insights that we have one to one data as well, but at the end of the day.
The cookie deprecation is coming and I also believe that there are other ideas that are <unk>.
Speaker 3: things that need to be thought about and when you when you look forward.
Things that need to be thought about and when you when you look forward.
Speaker 3: Being in a machine learning world where we can score impressions and we can understand data using statistics.
Being in a machine learning World, where we can score impressions and we can understand data using statistics and we can have more than just an IV based approach gives us a significant advantage.
Speaker 3: And we can have more than just an ID-based approach, gives us a significant advantage.
Speaker 3: And, you know, there are a lot of platforms talking about, you know, their household graphs and those types of things. We have great household graphs. Many of them are tied back to IP addresses. We also are thinking beyond the IP address. We're thinking beyond other data signals. So it's not just about the cookie for us. We want to bring to the market a really future-proof solution.
<unk>.
There are a lot of platform is talking about.
They're household grafts and those types of things we have great household graphs. There many of them are tied back to IP addresses.
We also are thinking beyond the IP address we're thinking beyond other data signals.
So it's not just about the cookie for us we want to bring to the market a really future proof solution for targeted advertising that Leverages machine learning and goes beyond not just the cookie, but beyond a lot of the signals that are taken for granted right now and I think we're going to be in a very exciting place to share some of that information and I look forward.
Speaker 3: for targeted advertising that leverages machine learning and goes beyond not just the cookie, but beyond a lot of these signals that are taken for granted right now.
Speaker 3: And I think we're going to be in a very exciting place to share some of that information. And I look forward to doing that. Thanks very much.
In doing that.
Thanks very much thank you.
Thanks, Laura.
Speaker 1: Our next question comes from the line of Andrew Boone with J.M. Police Security Security. Your line is now.
Our next question comes from the line of Andrew Boone with JMP Securities. Your line is now open.
Speaker 8: Great, thanks so much. This is Brianna online for Andrew Boone. Thanks so much for taking my question. Keep questions for me on CTV. What have you learned through this year? What CTV trajectory was like for 2020? And then are there any impact from the potential deprecation of IP addresses by Google?
Great. Thanks, so much this is brianna online for <unk>. Thanks, So much for taking my question two questions for me on <unk>, what have you learned through this year.
TV trajectory with Blackberry.
And then are there any impacts from the potential densification of <unk>.
<unk> addresses Michael.
Thanks.
Speaker 3: Thank you. Yeah. Thank you for your question. We feel we feel good about the CTV growth. Again, we were.
Yes. Thank you for your question, we feel we feel good about the CTV growth again, we were.
Speaker 3: We were talking about the fact that there's a bit of a mix shift to self-service with CTV and we think that's a good thing. We think it's actually going to drive a lot of adoption of our self-service platform. We've increased our inventory, reach our A-Bud inventory with max discovery.
We were you were talking about the fact that there is there is a bit of a mix shift to self service with CTV and we think Thats a good thing we think it's actually going to drive a lot of adoption of our self service platform, we've increased our inventory.
Reach our Avon inventory with Max Discovery Roku Viacom, We've recently added live sports live addressable and we're adding Hulu and in the fourth quarter. We're also continuing to make investments in understanding the content object metadata in the CTV world So that our.
Speaker 3: Roku, Viacom. We've recently added Live Sports, Live Addressable, and we're adding Hulu in the fourth quarter. We're also continuing to make investments in understanding the content object metadata in the CTV world so that our machine learning algorithms can use CTV signals in the bid requests so that we can score those impressions and drive performance and make CTV more of a performance-oriented.
Machine learning algorithms can use CTV signals in the bid request. So that we can score those impressions and drive performance and make CTV more of a performance oriented engine. So I think I think we feel really good about it I think the growth rates are going to be there we're going to again, we're early innings relative to other more established platforms on.
Speaker 3: So I think we feel really good about it. I think the growth rates are going to be there. We're going to, again, we're early innings relative to other more established platforms on self-service.
Speaker 3: So, as we scale self-service, I think we're going to really see great numbers on CTV. It's a big part of our strategy going forward and we feel very optimistic about that regarding the deprecation of the cookie. As I just mentioned the Laura, we feel really good about where at the at their in his position. We are not an ID.
Self service so as we scale self service I think we're going to really see great numbers on CTV, It's a big part of our strategy going forward and we feel very optimistic about that regarding the deprecation of the cookie.
As I just mentioned, Laura we feel really good about where AD add Darrin is positioned we are not in.
Key focused company, we did not emphasize the the one to one nature of targeting we have a lot of different capabilities.
Speaker 3: Company, we do not emphasize the one-to-one nature of targeting. We have a lot of different capabilities.
Speaker 3: We focus on signals and bid requests, understanding those signals using machine learning algorithms.
We focus on signals and bid requests understanding those signals using machine learning algorithms to predict the outcome of serving and add to an impression with given data on it rather than just re targeting Ids, whether thats, a cookie I'd or other I'd.
Speaker 3: to predict the outcome of serving an ad to an impression with given data on it, rather than just retargeting IDs, whether that's a cookie ID or other IDs. So we have a number of stress-
So we have a number of strategies that were excited to share as we get a little further along in the year, we will share our view on the way that the post cookie world will exist and adherence role in that and why we believe that we have an opportunity to take full advantage.
Speaker 3: that we're excited to share, as we get a little further along in the year, we will share our view on the way that the post-cookie world will exist and add clearance role in that, and why we believe that we have an opportunity to take full advantage of those changes that are happening. We're not waiting for Google to make those changes, we're actively working.
<unk> of those changes that are happening, we're not waiting for Google to make those changes were actively working on building a future for add Darren that gives us the advantage of being a machine learning company in a world dominated by I'd base, one to one targeting and I think it's a great great opportunity for add Darren in a <unk>.
Speaker 3: on building a future for ad parent that gives us...
Speaker 3: the advantage of being a machine learning company in a world dominated by ID-based one-to-one targeting. And I think it's a great, great opportunity for Adtheren and a great time to be a stakeholder in Adtheren for that reason.
Time to be.
A stakeholder in out there for that reason.
Next question please.
Speaker 1: Thank you and our next question comes from the line of Michael Kupinski from Noble Capital Market. So, the line is now...
Thank you and our next question comes from the line of Michael Kaplinsky from Noble capital markets. Your line is now open.
Speaker 6: Thank you for taking the question. I just have a couple of things. One that you had mentioned about all the new products and initiatives that you are bringing to the market and so forth.
Thank you for taking the question I just have a couple of things one that you had mentioned about all the new products and initiatives that you are.
Bringing to the market and so forth.
Speaker 9: In terms of your guide in the fourth quarter, I was just wondering if it was a way to quantify
In terms of your guide in the fourth quarter I was just wondering if it was a way to quantify the the new products that debt.
Speaker 9: the new products and the take rates of those new products relative to your guide. I'm just trying to get a sense of the tone of the marketplace, the advertising marketplace.
Take rates of those news products relative to your guide I'm, just trying to get a sense of the tone of the marketplace. The advertising marketplace versus some of the new initiatives that you have and just trying to kind of gauge what the key drivers are across the across that.
Speaker 9: versus some of the new initiatives that you have and just trying to kind of gauge
Speaker 9: what what what the key drivers are across the across that the marketplace.
Marketplace.
Yes, thanks for the question.
Speaker 6: Yeah, you know, we're very encouraged by our return to growth in Q3 and then we see persisting in Q4 and in the future. We do believe that this is primarily driven in this macro environment by our new product initiatives and our investments in our key strategic growth areas, including health and audiences, self-service, CTV, so.
Yes, we're very encouraged by our return to growth in Q3, and then we see persisting in Q4 and into the future. We do believe that this is primarily driven in this macro environment by our new product initiatives and our investments in our key strategic growth areas, including health.
And audiences self service CTV so.
Speaker 6: It is difficult. We haven't provided a lot of detail on, you know, parsing between growth from new initiatives versus other, but I could say a majority of our growth is from our new initiatives. A rebound in the macro environment would be a bonus for us.
Yes.
It is difficult we haven't provided a lot of detail on parsing between.
Gross new initiatives versus other but I would say a majority of our our growth is from our new initiatives a rebound in the macro environment would be a bonus for us.
Speaker 6: You know, in Q3, not only were our number of customers, the active customers higher, for our average spend per customer was up seven, seven percent year over year. So that is indicating that what we're doing with our customers is resonating.
Yeah.
In Q3, not only were our number of customers active customers higher for our average spend per customer was up seven 7% year over year, so that that is indicating that.
What we're doing with our customers is resonating.
Speaker 3: Yeah, I would ask that that we also have a lot of confidence that our margins will continue to to remain strong and potentially get even stronger as we go with these new offerings. With the ability to utilize.
Yes, I would add to that that we also have a lot of confidence that our margins will continue to remain strong in and potentially get even stronger as we go with these new offerings.
With the ability to utilize algo.
Speaker 3: algorithmic audiences, utilizing our tools in our platform, utilizing the data that we have, rather than over-relying on purchasing third-party audience segments.
Algorithmic audiences utilizing our tools in our platform utilizing the data that we have rather than over relying on purchasing third party audience segments. It's incremental margin for us. We're excited about that and I also think that the use of those in the adoption of those that we're seeing in self service has.
Speaker 3: It's incremental margin for us. We're excited about that. And I also think that the use of those and the adoption of those that we're seeing in self-service.
Speaker 3: has been very, very positive. Seeing the adoption by a self-service user, who can either choose or not choose to use a ad-theorem-based audience, I think it's quite impactful and an indication.
Been very very positive seeing the adoption by our self service user who can either choose or not choose to use a adherent based audience I think it's quite impactful.
Speaker 3: of the future margin, improvements and sustainability that we see at this point given our new offering.
An indication of the.
The future margin improvements and sustainability that we see at this point given our new offerings.
Speaker 9: Thanks for the color and just one more further question, just talking about as you indicated, the rebound we're still awaiting for a rebound in the total ad market. There's been some reports out there that.
Thanks for the color and just one further question.
Talking about as you indicated the rebound we're still waiting for a rebound in the total AD market. There's been some reports out there that the advertising environment is being fueled by the largest advertisers and that there is still a large number of smaller advertisers that are still struggling and not really spending is.
Speaker 9: the advertising environment is being fueled by the largest advertisers and that there's still a large number of smaller advertisers that are still struggling and not really spending. Is that the sense that you have or in what regards where you refer to just a rebound, just overall volume increase or just the breadth of advertisers? I'm just trying to understand.
Is that the sense is that the sense that you have or.
In what regards were you referring to just a rebound just overall volume increase or just the breadth of advertisers I'm just trying to understand.
Speaker 6: that what you're saying. Yeah, I mean, you know, specific to us.
That what you are saying.
Specific to us.
<unk>.
Speaker 6: And as Jim mentioned earlier, as we go into Q4 and into 2024, we do have...
And as Jim mentioned earlier as we go into Q4 and into 2024, we do have higher level of confidence.
Speaker 6: higher level of confidence in the sustainability of our second half growth.
And the sustainability of our second half growth.
Speaker 6: Uh persisting in 24 because we have we're having better discussions. Uh, we're seeing
Persistently 24, because we haven't we're having better discussions were.
Speaker 6: come through already, even Q4. And our spend commitments from our existing customers and the visibility into their spend for next year is at a higher level than it was last year at this time. So there is some incremental visibility and positivity there that we're seeing kind of
Seeing incrementals come through already in Q4 and.
Our spend commitments from our from our existing customers and the visibility into their spend for next year is at a higher level than it was last year. At this time. So there is some incremental visibility and positivity there that we're seeing kind of.
Speaker 6: across our customer base, but I would say that, you know, as we pointed to, you know, the areas of
Across our customer base, but I would say that yes.
As we pointed to.
Yes.
Areas of.
Speaker 6: Bigger growth, health, self-service, is where we're seeing this.
Bigger growth health self service is.
Is where we're seeing this.
Speaker 3: our areas investment really, really materialized. I would also add that it a lot of that, a lot of the answer to your question depends to some extent on the verticals that you're talking about. I mean, with health and pharma, we saw a lot of demand and government. our blxide.
Our areas of investment really really materialized I would also add that.
A lot of that the answer to your question depends to some extent on the vertical that you are talking about any withheld and pharma, we saw a lot of demand and government.
Speaker 3: Really strong and we're really pleased with that.
CPG.
Really strong and we're really pleased with that there was some weakness in banking financial services and insurance. There are a number of I think offerings and products that were challenged.
Speaker 3: There was some weakness in banking financial services and insurance. There are a number of...
Speaker 3: I think offerings and products that were challenged or under pressure because of high interest rates and other macro considerations. But I think...
Challenged are under pressure because of high interest rates and other macro considerations, but I think.
Speaker 3: The bottom line is, we feel really good. We have a very diverse set of vertical clients.
The bottom line is we feel really good we have a very diverse set of vertical clients.
Speaker 3: We have large clients. We have more large clients than we've ever had. We have great middle market base independent agencies and brand-direct relationships that are really strong and growing nicely. And we're really trying to focus on those.
Large clients we have been.
We have more large clients than we've ever had we have great middle market base independent agencies.
<unk> brand direct relationships that are really strong and growing nicely.
And we're really trying to focus on those those independents in middle market opportunities as well as we've made a lot of great strides with some of the largest media buyers in the world and those those arrangements don't happen overnight and you don't get there overnight, but we're really happy with the progress, we're making getting our platform in front of those.
Speaker 3: those independents in middle market opportunities as well as, you know, we've made a lot of great strides with some of the largest media fighters in the world. And those those arrangements don't happen overnight and you don't get there overnight, but we're really happy with the progress we're making, um, getting our platform in front of those types of organizations. And I think it's going to be a really exciting 2024.
So organizations and I think it's going to be a really exciting 2024.
Speaker 9: For ethics, thanks for asking and answering the questions. Appreciate that.
Terrific. Thanks, Thanks for asking and answering the questions I appreciate that.
Sure. Thank you.
Speaker 1: There are no further questions at this time. I'll turn the call back over to Mr. James Lawson. See you.
There are no further questions at this time I'll turn the call back over to Mr. James Allison CEO.
Speaker 3: Thank you and in closing, I would just like to thank everybody for joining us today at all. I would also like to thank. At guarantee members are.
Thank you in closing I would just like to thank everybody for joining us today at all I would also like to thank.
As guarantee members our customers and clients.
Speaker 3: and our shareholders who have made it possible for us to deliver strong results which we believe are only a beginning. We are very excited about the momentum in the business and the future of AdLearn. We look forward to speaking with many of you on the road and to sharing the AdLearn story and our future plans. To that end, we've posted an investor presentation to the IR section of our website which we plan to update quarterly. Again, thank you.
And our shareholders, who have made it possible for us to deliver strong results, which we believe are only beginning we are very excited about the momentum in the business and the future of add Darrin. We look forward to speaking with many of you on the road and to sharing that Theyre in story and our future plans to that end, we have posted an investor presentation.
<unk> to the IR section of our website, which we plan to update quarterly.
Again, thank you and have a great evening.
[music].
Yes.
Okay.