Q2 2024 Innovid Corp Earnings Call
Speaker Change: Greetings and welcome to the Innovid Q2 2024 earnings call.
Operator: At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and then zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Lauren Hartman. Thank you, you may begin.
Speaker Change: At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation.
Speaker Change: If anyone should require operator assistance during the conference, please press star and then zero on your telephone keypad.
Speaker Change: As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Lauren Hartman. Thank you. You may begin.
Lauren Hartman: Thank you, Operator. Before we begin, I'll remind you that today's call may contain forward-looking statements and that the forward-looking statement disclaimer included in today's earnings release, available on our Investor Relations page, also applies to this call. These forward-looking statements may include, without limitation, predictions, expectations, targets, or estimates regarding our anticipated financial performance, business plans and objectives, future events, and developments. Changes in our business, competitive landscape, technological or regulatory environment, and other factors could cause actual results to differ materially from those expressed by our forward-looking statements made today.
Lauren Hartman: Thank you, Operator. Before we begin, I'll remind you that today's call may contain forward-looking statements and that the forward-looking statement disclaimer included in today's earnings release available on our Investor Relations page also pertains to this call.
Lauren Hartman: These forward-looking statements may include, without limitation, predictions, expectations, targets, or estimates, regarding our anticipated financial performance, business plans and objectives, future events and developments.
Lauren Hartman: Changes in our business, competitive landscape, technological or regulatory environment, and other factors could cause actual results to differ materially from those expressed by our forward-looking statements made today.
Lauren Hartman: Our historical results are not necessarily indicative of future performance, and as such, we can give no assurance as to the accuracy of our forward-looking statements and assume no obligation to update them, except as required by law.
Lauren Hartman: Our historical results are not necessarily indicative of future performance, and as such, we can give no assurance as to the accuracy of our forward-looking statements and assume no obligation to update them, except as required by law.
Lauren Hartman: In addition, today's call will include non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margins, and free cash flow. We use these non-GAAP measures in managing the business and believe they provide useful information to our investors. These measures should be considered in addition to and not as a substitute for our GAAP results. Reconciliations of the non-GAAP measures to their corresponding GAAP measures, where appropriate, can be found in the earnings release available on our website and in our filings with the SEC. Hosting today's call are Zvika Netter, Innovid's co-founder and CEO, as well as Anthony Callini, Innovid's CFO, both of whom will participate in our Q&A session. I will now turn the call over to Zvika to begin.
Lauren Hartman: In addition, today's call will include non-GAAP financial measures including adjusted EBITDA, adjusted EBITDA margins, and free cash flow. We use these non-GAAP measures in managing the business and believe they provide useful information to our investors.
Lauren Hartman: These measures should be considered in addition to and not as a substitute for our GAAP results.
Lauren Hartman: Reconciliations of the non-GAAP measures to their corresponding GAAP measures, where appropriate, can be found in the earnings release available on our website and in our filings with the SEC.
Speaker Change: Hosting today's call are Zvika Netter, Innovid's co-founder and CEO , as well as Anthony Callini, Innovid's CFO , both of whom will participate in our Q&A session. I will now turn the call over to Zvika to begin.
Zvika Netter: Thanks Lauren, and welcome everyone to our 2024 Second Quarter Earnings Talk. Today, I'll review our second quarter results and provide an update regarding our ongoing strategic initiatives and progress in the market. I'll then turn the call over to our Chief Financial Officer, Tony Callini, who will provide further details with respect to our Q2 results and full year 2024 outlook, followed by Q&A. We're proud to deliver another quarter of double-digit growth and improving margin. Revenue grew 10% year-over-year in the second quarter to $38 million, and adjusted EBITDA grew 29% to $5.9 million. The Adjusted EBITDA margin increased to 15.5%, up from 13% in the prior year.
Zvika Netter: Thanks Lauren, and welcome everyone to our 2024 Second Quarters Earnings Call.
Speaker Change: Today, I'll review our second quarter results and provide an update regarding our ongoing strategic initiatives and progress in the market.
Speaker Change: I'll then turn the call over to our Chief Financial Officer, Tony Callini, who will provide further details with respect to our Q2 results and full year 2024 outlook, followed by Q&A.
Tony Callini: We're proud to deliver another quarter of double-digit growth and improving margin. Revenue grew 10% year-over-year in the second quarter to $38 million.
Tony Callini: Adjusted EBITDA grew 29% to $5.9 million. Adjusted EBITDA margin increased to 15.5%
Tony Callini: Up from 13% in the prior year, CTV Impressions, our key growth driver, increased by 21% over last year. The solid business momentum we delivered in the first half of the year
Zvika Netter: CTV Impressions, our key growth driver, increased by 21% over last year. The solid business momentum we delivered in the first half of the year keeps us on track to execute against our long-term targets and in line with our full-year financial guidance. Our adjusted EBITDA margin expansion also demonstrates our ability and commitment to delivering profitable growth while continuing to invest in strategic innovation for the future of CTV. We have made momentous progress since the beginning of 2024, including the launch of our Strategic Harmony Initiative and new partnerships with world-leading players in the market.
Tony Callini: Keeps us on track to execute against our long-term targets and in line with our full-year financial guidance. Our adjusted EBITDA margin expansion also demonstrates our ability and commitment to delivering profitable growth while continuing to invest in strategic innovation for the future of CTV.
Zvika Netter: As we shared last quarter, in April 2024, we launched the Harmony Initiative and product launch. We created Harmony to solve some of the biggest challenges facing CTV advertising today and to build a better CTV advertising for the future of tomorrow. As TV rapidly transitions to a fully digital future, our aim is to optimize CTV advertising at the infrastructure level to improve efficiency and ROI, enhance transparency and control, reduce carbon emissions, and provide a better viewing experience for consumers.
Tony Callini: We created Harmony to solve some of the biggest challenges facing CTV advertising today.
Tony Callini: and to build a better CTV advertising for future of tomorrow.
Zvika Netter: I'm excited to share that we've seen great progress in the last couple of months with clients, publishers, and partners. As part of the Harmony launch in April, we introduced a new product called Harmony Direct, which streamlines the supply path, making it more sustainable and transparent. Supply path optimization helps advertisers ensure more of their dollars go towards working media, and helps publishers increase revenue opportunity. The data from our early results have been positive. Our beta partners saw a benefit of up to 15% improved yield and an average increase of 8% in working media.
Tony Callini: I'm excited to share that we've seen great progress in the last couple of months with clients, publishers, and partners.
Tony Callini: As part of a Harmony launch in April , we introduced a new product called Harmony Direct, which streamlines the supply path, making it more sustainable and transparent. Supply path optimization helps advertisers ensure more of their dollars go towards working media.
Tony Callini: and Helps Publisher Increase Revenue Opportunities.
Tony Callini: The data from our early results have been positive. Our beta partners saw a benefit of up to 15% improved yield and an average increase of 8% in working media. We are encouraged that more and more forward-thinking industry leaders are adopting Harmony Direct to help address the complexities of the CTV ecosystem.
Zvika Netter: We are encouraged that more and more forward-thinking industry leaders are adopting Harmony Direct to help address the complexities of the CTV acquisition. A few weeks ago, we announced that Goodway Group and Vizio joined the Harmony Initiative, alongside previously announced partners like Roku, PMG, Assembly, and the CMI Media Group. And in light of the successful results, PMG, an early agency adopter, is now rolling out Harmony Direct across its portfolio of clients. In addition to Harmony Direct, we announced last week that we launched our Harmony Frequency product, the first holistic frequency management solution for CTV and digital advertising.
Tony Callini: A few weeks ago, we announced that Goodway Group and Vizio joined the Harmony Initiative.
Zvika Netter: Frequency management remains a consistent challenge for advertisers. Until now, advertisers and media providers have had to separately manage frequency with each publisher or DSP platform. This led to ads being shown repeatedly to the same audiences and left key audiences under-exposed.
Zvika Netter: Through our ad server, we're able to see every impression, publisher, platform, device, and household across the entire ecosystem, on both direct and programmatic media bias. Advertisers adopting Harmony Frequency can now prevent overexposure, maximize budget by reallocating spend to underexposed households, and improve the viewing experience by limiting ad fatigue. We're currently in beta testing for Harmony Frequency with CTV platforms, brand partners, and some of the leading DSPs in the world. We're especially excited to include Yahoo DSP as one of our first-to-market partners. We anticipate moving to general availability later this year.
Tony Callini: on both direct and programmatic media buys.
Tony Callini: Advertisers adopting Harmony Frequency can now prevent overexposure, maximize budget by reallocating spend to underexposed households, and improve the viewing experience by limiting ad fatigue.
Zvika Netter: The strategic importance of the Harmony Initiative, and specifically Harmony Frequency, has been a key topic of discussion among industry leaders. In June, I had the pleasure of attending the Cannes Lion Festival, together with my Innovid colleagues, where we met with leading brands, publishers, and industry partners. Many of our conversations reaffirm the long-term potential of our Harmony Initiative. To reinforce that point, I am also excited to announce a new strategic collaboration that demonstrates our central position in the market and the power of the Innovid platform, which is used by some of the leading global advertisers and publishers. With that, I'll ask Tony to take us through the numbers and provide some insights into Q3 and full year expectations.
Tony Callini: The strategic importance of the Harmony Initiative, and specifically Harmony Frequency, have been a key topic of discussion among industry leaders. In June , I had the pleasure of attending the Cannes Lion Festival, together with my Innovid colleagues, where we met with leading brands, publishers, and industry partners.
Tony Callini: Many of our conversations reaffirmed the long-term potential of our Harmony Initiative.
Tony Callini: In addition to conversations about harmony, there were many discussions at Cannes focused on the expanding CTV market. I am very encouraged by these conversations and the elevated strategic position that Innovid holds as a critical and leading player in the industry.
Tony Callini: To reinforce that point, I am also excited to announce a new strategic collaboration that demonstrates our essential position in the market and the power of the Innovid platform.
Tony Callini: Earlier this morning, we shared that we are collaborating with Nielsen, a global leader in audience measurement, with the aim of providing a seamless workflow and holistic view of the cross-media ads universe.
Tony Callini: By leveraging Innovid's ad-serving infrastructure to access Nielsen One, Nielsen and Innovid together would provide a seamless workflow, ultimately driving greater usability and coverage for ad measurement.
Tony Callini: Together, we aim to provide the industry with a holistic, comprehensive view of cross-media ad campaigns.
Tony Callini: By integrating directly with Nielsen's established currency solution.
Speaker Change: Innovid will enhance its position as a vital player for TV and digital advertising, opening new avenues for growth.
Speaker Change: Nielsen and Innovid will be testing the technical integration in the coming months and we look forward to updating you all on our progress.
Speaker Change: In addition to this exciting collaboration with Nielsen, we remain committed to investing in Innovid's own measurement solutions.
Speaker Change: which are used by some of the leading global advertisers and publishers.
Speaker Change: We also are introducing more and more real-time optimization solutions with Harmony, powered by our evolving measurement solution.
Speaker Change: Finally, I am pleased to share some customer wins and expansions from the second quarter. We signed new clients and expanded our relationship with leading brands such as WNBA, Eli Lilly, Lunderback, Purple Innovation, Habit Burger, and The Wonderful Company.
Speaker Change: We're particularly excited about the expanded partnership with leading publishers Amazon and Spectrum. We remain very focused on delivering value for our clients across our suite of products and are committed to driving impact for their businesses.
Speaker Change: None of these partnerships, accomplishments, or growth would have been possible without their world-class team.
Speaker Change: I want to thank our employees for all their hard work and for creating a workplace that balances innovation and culture. Our unique culture has been a driving force behind our ability to lead industry change.
Speaker Change: I am very pleased with the progress we have made so far in 2024. I am excited about our sustained business momentum.
Speaker Change: Our Harmony Initiative continues to be well received and adopted by industry leaders. We are well positioned to benefit from the secular CTV trends and are confident in Innovid's underlying business strength.
Speaker Change: Our second quarter results keep us on track to execute in 2024 and deliver double-digit profitable growth over the long term.
Speaker Change: With that, I'll ask Tony to take us through the numbers and provide some insights into Q3 and full year expectations.
Tony Callini: On a year-over-year basis, Q2 marks the third consecutive quarter of double-digit revenue growth, eighth straight quarter of adjusted EBITDA margin expansion, and fourth consecutive quarter of free cash flow improvement.
Tony Callini: Now, let's dig into the numbers.
Tony Callini: The growth in ad serving and personalization reflects the continued shift to CTV and some level of stabilization in ad spending as compared to last Q2.
Speaker Change: In fact, CTV revenue from ad serving and personalization grew 21% over the second quarter of 2023.
Speaker Change: Within this category, CTV impression volume increased 21% as more impressions continued to transition to CTV.
Tony Callini: This is the second consecutive quarter where both CTV impressions and CTV revenue from ad serving and personalization grew by more than 20% on a year-over-year basis.
Tony Callini: And as a percentage of total video impressions, CTV represented 54% as compared to 51% in last Q2.
Tony Callini: That said, all three of these devices represent consumers watching streaming applications, so it's also helpful to look at the total video impression served, which grew 14% overall in the second quarter as compared to the second quarter of 2023.
Tony Callini: Moving to measurement. The consistent growth in measurement revenue reflects the ongoing value of our measurement capabilities as a key part of the Innovid platform.
Tony Callini: Not only did measurement revenue grow 6% over last Q2, we also grew 7% sequentially from Q1.
Tony Callini: As the measurement business model is more subscription oriented than the ad serving business, we see an opportunity to steadily grow the customer base over time and add more committed revenue to our business.
Tony Callini: We expect our unique ability to combine creative, delivery, and measurement solutions to provide differentiated client value and be a catalyst for continued revenue growth.
Tony Callini: Further, the Nielsen partnership we announced this morning is another positive data point of the power of our platform for the future of TV measurement.
Tony Callini: All in the midst of an inconsistent macro environment, as some verticals have resumed normal spending levels, while others remain cautious with their advertising spending.
Tony Callini: In the second half of the year, we anticipate continued uncertainty augmented by the U.S. election cycle, which is reflected in our outlook for the remainder of 2024.
Tony Callini: Now, moving on to costs and expenses.
Tony Callini: Our margins continue to improve as the business scales, reflecting the operating leverage embedded in our business model. As we include more automation and AI into our offerings, we expect this to be a continued catalyst for margin expansion.
Tony Callini: Employee count at the end of June was 463, as compared with 450 at the end of Q2 2023.
Tony Callini: We remain committed to managing our cost base while making strategic investments in high-growth areas to drive improved profitability and generate long-term value creation for our shareholders.
Tony Callini: Q2 net loss was $10.5 million or a per share loss of $0.07.
Tony Callini: This compares with a net loss of $19 million and a per share loss of $0.14 in Q2 2023.
Tony Callini: The outstanding common share count at quarter close was 145.8 million shares.
Tony Callini: Adjusted EBITDA in the second quarter was $5.9 million, a $1.3 million improvement or 29% increase as compared to $4.5 million in Q2 last year.
Tony Callini: As I mentioned earlier, this is the eighth consecutive quarter of year-over-year adjusted EBITDA margin expansion, as our margin improved to 15.5% this past quarter, as compared to 13% last year.
Tony Callini: These improvements reflect the impact of sustained revenue growth, lower cost of revenues as a percentage of revenue, and operating costs that grew nominally over the prior year, demonstrating the leverage inherent in our operating model.
Speaker Change: I'll now turn to the balance sheet and cash flow.
Speaker Change: We ended Q2 in a strong financial position with $30.6 million in cash and cash equivalents and no outstanding balance on our revolving debt facility.
Speaker Change: As a reminder, we have $50 million available on that debt facility.
Speaker Change: On a net cash basis, or, to say it another way, cash and cash equivalents less outstanding revolver balance.
Speaker Change: The $30.6 million on hand at the end of Q2 2024 is a 31% improvement as compared to the $23.4 million of net cash at the end of Q2 2023.
Speaker Change: During the quarter, net cash provided by operating activities was $1.2 million, and free cash flow was a use of $1.3 million, a 38% improvement over the $2 million of free cash flow used in Q2 2023.
Speaker Change: If we looked at free cash flow on a trailing 12-month basis, we have seen an improvement of $14 million as compared to the same 12-month period ended June 30, 2023.
Speaker Change: Finally, let me touch on our outlook for the third quarter and provide an update for the full year 2024.
Speaker Change: We are proud of our ability to continue to execute in an uncertain economic environment, and are confident in the underlying strength of our business, opportunities for disruption, and ability to grow revenue in a profitable way.
Speaker Change: We remain committed to our long-term financial target of 20-plus percent annual revenue growth and 30-plus percent adjusted EBITDA margin.
Speaker Change: As I mentioned earlier, we anticipate continued uncertainty in the second half of 2024, amplified by the current U.S. election cycle.
Speaker Change: We will continue to monitor ad market dynamics, but have already factored in some level of ongoing uncertainty in our guidance and are reaffirming our full year expectations today.
Speaker Change: In the third quarter of 2024, we expect total revenue in a range of $40 to $42 million, representing 13% year-over-year growth at the midpoint.
Speaker Change: We expect Q3 adjusted EBITDA in a range of 6.5 to 8.5 million, as compared to 6.5 million in the third quarter of last year.
Speaker Change: For the full year, we are reiterating our prior guidance of $156 to $163 million in revenue, reflecting 14% annual growth at the midpoint, and adjusted EBITDA between $24 and $29 million.
Speaker Change: We had another strong quarter of consistent double-digit revenue growth, margin expansion, and free cash flow improvement, putting us another step closer to achieving our long-term targets.
Speaker Change: We remain encouraged by the secular market dynamics driving CTV growth and new product offerings like Harmony. We continue to invest in long-term sustainable growth while efficiently managing our cost structure and strengthening our financial condition.
Speaker Change: This concludes our prepared remarks. Zvika and I are now happy to take your questions. Operator, please begin the Q&A session.
Speaker Change: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star and then 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.
Speaker Change: You may press star and then 2 if you would like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: One moment please, while we poll for questions.
Speaker Change: The first question we have is from Matthew Cost of Morgan Stanley . Please go ahead.
Matthew Kost: Hi, everybody. Thanks for taking the questions. I have two. Zvika, you know, you mentioned a couple of new customer wins in the quarter, and I was wondering if you could just walk through kind of the common thread between those new customer wins. What are the pain points?
Speaker Change: Integrated Business Productsedied theme that they are seeing that are causing them to work with you and generally, are there, you know, are the entry points for them, is it on the ad-serving side, or are they coming in with a broader group of product.
Tony Callini: And then for Tony, just on the guidance for the second half, I think, you know, there's a decent amount of acceleration in terms of just the dollar ad sequentially in 2Q, sorry, in 3Q, and then again in 4Q based on the quarterly and full year guidance you gave, I guess.
Speaker Change: Maybe walk us through the drivers of that and your level of confidence in being able to achieve that sort of sequential acceleration between here and the end of the year. Thank you.
Tony Callini: [inaudible]
Tony Callini: Sequential guidance going from Q2 to Q3 to Q4. Yeah, Matt, I think, you know, as we looked at the year, I mean, we had always anticipated that this would be a year where momentum would be building.
Tony Callini: You know, over the course of the year, and I think if you look at the different drivers that we have between, you know, volume increases, you know, cross selling success.
Tony Callini: Upselling Success and those sorts of things, and we're kind of living that as we go through the year. And so, you know, as we think about the second half,
Tony Callini: And as we've mentioned, I mean, there's we're trying to balance some of the, you know, potential uncertainties of just some of the macros and, you know, the election in particular with, you know, some of the more tailwinds that we're seeing. So I think, you know, from our perspective, we feel we feel confident in the full year
Tony Callini: I'm pleased with our second quarter results and as we look at that sequential,
Tony Callini: I mean, that's kind of what we're seeing in the business.
Tony Callini: That, you know, most pronounced in just the CTV specific growth, which is where CTV video impressions and CTV video revenue growth grew over 20% for this for the second straight quarter.
Tony Callini: So, you know, that that is something that we've always said is our primary growth driver, you know, gets weighed down by some other things, specifically, you know, desktop, mobile has been a little bit more inconsistent.
Tony Callini: But
Tony Callini: That CTV growth of the 20 plus percent is one of the things that gives us the most confidence.
Tony Callini: You know, and as we look out, you know, we really feel strongly like we haven't really seen that inflection point yet where
Tony Callini: There's going to be a bend in the curve. Things like LiveSports and more ad-supported streaming come online. And so, our strategy all along has just been to put ourselves in the best position to take advantage of that when that ultimately comes.
Tony Callini: Tony, do you want me to take also the...
Tony Callini: Yeah, maybe take the one on the, I think that was directed at you for the new customer if there's any common threads.
Tony Callini: So, clearly we are known for being an ad server, specifically with a focus on CTV, online video, though we support other omni-channels, so in case there's an RFP or somebody's looking for it, it's rare that there's an RFP.
Tony Callini: Somebody's looking to switch from mainly Google to a more advanced ad server, especially if somebody's Branding invest more and more in CTV
Tony Callini: As it grows, they will switch to us or look to switch. So that's the most common. Though we definitely have cases where customers, and then from there we cross-sell and up-sell.
Tony Callini: But we definitely had cases where people with brands and agencies start with the measurement or DCO on top of using our products on top of the Google ad server and then eventually switch to Innovid.
Tony Callini: And the reason we win, it's basically by our focus on product, you know, being really the best around CTV and video in terms of the delivery, the creative tools, the measurement, and the other one is neutrality.
Tony Callini: And I think there was another development in the suits against Google in terms of antitrust. That is a tailwind for us.
Speaker Change: Great, thank you.
Speaker Change: Tanya Andreev, Brinlea Johnson, Anthony Callini, Zvika Netter
Tony Callini: The next question we have is from Jayan Patel of Susquehanna. Please go ahead.
Tony Callini: Good morning. This is Jason on for Sean. Thank you for taking our questions.
Jayan Patel: Maybe a couple from me. One on new CTV inventory coming into the ecosystem.
Speaker Change: Can you just talk about the impact that new CTV inventories had on the ecosystem and maybe how much of a driver Amazon's Prime Video has been for CTV impressions overall?
Speaker Change: Sure. So in terms of new inventory,
Speaker Change: by two axes, right? So one is people are spending more and more time in front of...
Speaker Change: Connected TV, in front of the television and general consuming content.
Tony Callini: Through an IP connection gonna connect a T P and at the same time. There are more and more, which is connected of course more and more options
Speaker Change: And more content to watch. Primarily, I would say, beyond, you know, Netflix, of course, and Disney+, and HBO, and Amazon, investing heavily in the space, live sports is a massive, massive driver.
Speaker Change: Because live sports tends to be exclusive.
Speaker Change: There's a very unique place where you can consume it.
Speaker Change: And clearly it's...
Speaker Change: It's live, right?
Speaker Change: So...
Speaker Change: That's a huge driver and we're seeing more and more deals around live sports and CTV and that drives volume also.
Speaker Change: And as Tony mentioned, we saw in the second half, sorry, in the second quarter,
Tony Callini: 21% volume increase in terms of the number of ads we deliver year over year, and that's given the environment we're in, that's a very nice growth.
Speaker Change: So, that's how it impacts us. In terms of specific, and clearly, you know, in a better environment, we will expect to see even higher numbers. Remember that eventually, we believe 100% of television will all be CTV.
Speaker Change: So there's still plenty of room for growth in the coming years.
Speaker Change: In terms of specific verticals, Tony, do you want to take that? Yeah, yeah, I can certainly take that. I mean, you know, it's continuing the trends that we've seen.
Tony Callini: CPG and pharma have been strong and continue to be strong. You know, auto is an interesting one where
Tony Callini: A year ago, that was really challenged, and we've seen that kind of sequentially improve every quarter, and it continues to do so.
Speaker Change: You know, that's that's one that makes us, you know, we're pretty bullish on on auto at this point, you know, at the same time, you know, retail, and that's probably not surprising, given some of the macro news out there, you know, retail was probably the category this this quarter that was
Speaker Change: that was off the most.
Speaker Change: You know, finance, insurance, tech and telecom all being off, I mean, they're kind of a mixed bag there. None of them are really growing.
Speaker Change: You know, tremendously that some of them are continuing to decline in small amounts, but I would say that's kind of stabilized, you know, retail is the one that
Speaker Change: of the categories that we look at was probably the most disappointing. And again, as I said, I mean, if we're all kind of paying attention to the Macro News out there, seeing similar terms across the retail sector, but you know, to end on a positive, I think, you know, auto is the one that continues to strengthen and we feel pretty good about.
Speaker Change: Great, thank you very much.
Speaker Change: [inaudible]
Speaker Change: The next question we have is from Matt Condon of J&P Securities. Please go ahead.
Matt Condon: Thank you for taking my questions. My first one is just on the strategic collaboration with Nielsen. Can you just talk about
Matt Condon: What your goal is here and maybe what you expect, what effect do you expect this to have on your platform?
Speaker Change: And then my follow-up is, Tony, just, you know, with the Harmony Initiative rolling out, and I think most of the R&D investments are made, can you just talk about maybe what are the investments that you expect going forward, and then...
Speaker Change: You know how we expect just spend across the OPEX lines the trend going forward. Thank you so much
Tony Callini: Thanks, Matt.
Speaker Change: Clearly we are extremely excited about the partnership with Nielsen and the plan to partner around integrating our platform with the Nielsen platform.
Speaker Change: You know, Nielsen is a leading, I think almost a household brand, definitely in this industry, all over the world.
Speaker Change: around currency for television and measurement of television, kind of the...
Speaker Change: The Legacy of Television, and Innovid is extremely focused on the future of television, hence CTV. So the fact that we're joining forces to create a much more streamlined workflow for our customers, so basically all our customers are also using Nielsen.
Speaker Change: So to create a better integration, a better workflow between the platforms as we look into the future of measurement for television.
Speaker Change: It's something we're extremely proud of and excited.
Speaker Change: I believe also together with the Nielsen team, and we plan to spend the next months further integrating and exploring ways that it's pretty clear for us that we can generate additional value for our mutual customers. It's a long-term contributor for growth.
Speaker Change: Clearly, there's the expectation that there will be a monetary upside on top of everything else we're doing, but that's definitely in the long term.
Speaker Change: I would argue in the short term it's a clear signal, you know, there are several companies in the measurement space, several contenders.
Speaker Change: [inaudible]
Speaker Change: Nielsen is looting the currency for TV measurement, Innovid never...
Speaker Change: Try to be a currency.
Speaker Change: So, the fact that they chose us and we chose them to partner.
Speaker Change: and really address all the needs of the industry around measurement of TV and CTV, I believe goes a long way also on the short term in terms of potentially influencing or at least signaling to the brands and agencies.
Speaker Change: who we are, what we do, what we're heading, and that somebody like Nielsen is comfortable to partner with us towards their core business, which is measurement.
Speaker Change: And the other question I think I'll give to Tony.
Tanya Andreev: Yeah, I can take that. I mean, this was the question, if I understand it right, was just
Tanya Andreev: to talk a little bit broadly about investments, maybe more specifically about investments and harmony. Yeah. And, you know, Matt, great question. We've always said that, you know, we're...
Speaker Change: The investment in Harmony really was just part of our normal run rate for our development team. We're very blessed that we have a very talented and gifted team.
Speaker Change: Development Team, and you know, innovation is in our name. And that's what we always always do. So
Tanya Andreev: And looking at our financials, you can clearly see there is no significant uptick in R&D as we went through this initiative and we were able to really kind of support this with the existing team. There is still more development work to do. This is...
Speaker Change: We're just getting the kind of the frequency.
Tanya Andreev: Product into market now, so there's a little bit to do but I would say overall zooming out. It's going to be the same
Tanya Andreev: and we're going to continue to kind of focus on driving innovation with the team we have.
Tanya Andreev: You know, how to think about spending going forward, you know, and one of the things I've always really loved about this business is just how much leverage there is in the operating model and, you know, is pretty much pure software play.
Tanya Andreev: We can scale pretty well, and the unit economics are great. And so I would imagine that as we grow, there'll be some growth-oriented investments that we'll make. We've been very thoughtful to not get out ahead of ourselves in terms of investing ahead of revenue.
Tanya Andreev: And so, you know, expect more of that as we go forward, and I think that that's reflected in both our results.
Tanya Andreev: With the EBITDA expansion over the last eight quarters, and then also the long term targets, which ultimately, you know, we believe we should be able to get to a 30, 30 plus percent EBITDA margin.
Speaker Change: Great. Thank you so much. Yep.
Speaker Change: Tanya Andreev, Brinlea Johnson, Anthony Callini, Zvika Netter
Speaker Change: Thank you. The next question we have is from Laura Martin of Needham & Co. Please go ahead.
Laura Martin: Hi there. Yeah, two questions. One is, one of the big valuation upsides of Innovid is that it serves ads into both walled gardens and into the open internet. But I was curious, do you guys actually serve ads into Amazon Prime Video?
Speaker Change: One question? I think you said...
Laura Martin: Was there one or two questions just to make sure? Yeah, that's so that's my first one Do you actually have the right to serve into Amazon Prime Video? I'm curious about that and then my other
Speaker Change: My other question was on your slide that's called the four growth drivers. I really like this notion that you guys have talked about a lot where you have a product and then you're going to up-sell and you're going to cross-sell.
Speaker Change: products to get like more revenue per customer. And maybe I don't understand Harmony correctly, but I thought Harmony actually called on the sell-side clients, the publisher clients, which would mean you really couldn't sell it to your buy-side clients, but do I understand the target universe for Harmony incorrectly?
Laura Martin: Okay.
Speaker Change: First of all, hi, and thank you for the questions. I'll take the first one. Amazon, yes, we are not only serving ads into the Amazon platform, we are also, Amazon is also a customer around measurement and other products, and you should definitely expect to see more.
Speaker Change: Even on Harmony, more between Innovid and Amazon. Sometimes people ask, even if we serve ads into YouTube, given the fact that Google owns a competitive ad server, the Google campaign manager, and clearly they own YouTube.
Laura Martin: And the answer, we also serve there.
Laura Martin: Without, you know, if you look at our, you know, large customers like General Motors and Verizon, their ads...
Speaker Change: I'm not going to be delivered and then hence they're not going to pay if the ads are not delivered into all these platforms. So it's a must.
Speaker Change: that we will actually deliver and then measure everything that goes through our system.
Speaker Change: And the reason we can do it, because we're not a DSP, and we'll connect this to the harmony question in a second, since we're not buying or selling media, we're not buying or selling data, the world gardens are open to us as we deliver billions and billions of impressions.
Speaker Change: which turns into billions of dollars of media for those platforms.
Speaker Change: As to harmony, self-side, bi-side, both.
Speaker Change: The Beautiful Harmony is going to harmonize the entire industry and it must create value
Speaker Change: both for the buy side and the sell side. Actually, a lot of the inefficiency is exactly there. It's between the buy side and the sell side, whether it's HarmonyDirect with supply path optimization, minimizing the...
Speaker Change: You know the tax that you need to pay along the way and and the number of hops and also it's a greener solution
Speaker Change: We just announced Frequency, and that is generating more money for publishers, but it's also in that way, that money, when it goes directly to the publisher, is then used.
Speaker Change: Thank you.
Speaker Change: You're paying for more impressions, so...
Speaker Change: From a brand perspective, you spend a million dollars by using Harmony Direct.
Speaker Change: You actually get more of those dollars, let's say, instead of having only $800,000, $850,000, you can get $950,000. In workroom media, in this case, everybody's happy, at least the buy side and the sell side are happy. And with the frequency management...
Speaker Change: Same thing, it's the, actually, this one benefits the DSPs, of course it benefits the customers, but what we did there, Laura is, and that's a very recent release.
Speaker Change: It's in beta now, and with some of the largest DSPs out there, we announced a partnership with Yao DSP. Basically what it does, it measures frequency across the entire campaign, walled gardens, open internet, programmatic, non-programmatic, biddable, non-biddable.
Speaker Change: and then looks at frequency in areas where there's overfrequency, it caps them.
Speaker Change: And then when there's underexposure...
Speaker Change: It actually signals to the DSP to buy those impressions, it signals to the industry, to the publishers and DSP, stop.
Speaker Change: Spending money here.
Speaker Change: But you should spend more money in this area, which they are underexposed.
Speaker Change: So then in a way, not in a way, there's way less waste.
Speaker Change: There's more efficiency.
Speaker Change: that the customer is not paying a single dollar more than they planned, but the certain publishers are getting more demand for certain underexposed audiences.
Speaker Change: And that's something that only Innovid can do because we see everything, right? The DSPC is part of it.
Speaker Change: But the DSP is happy because we're sending them the signal. So the reason we call it harmony, it's exactly because of this. It's a win-win-win situation.
Speaker Change: And it sounds odd, but there is actually a way to configure this industry that everybody will make more, you know, will get more value out of CTV and hopefully that will drive more faster linear dollars into CTV, which I think everybody's going to be happy about.
Speaker Change: Super helpful. Thank you very much.
Speaker Change: Ladies and gentlemen, we have reached the end of our question and answer session and I would like to turn the floor back over to Zvika Netter for any closing comments.
Zvika Netter: Thank you. And again, thank you all for joining us today. We're extremely proud of the momentum.
Speaker Change: We signed a second quarter where we continue to deliver, you know, profitable double-digit.
Zvika Netter: Double-digit growth with profitable growth while we keep investing in things like Harmony Direct and Harmony Frequency Management. And there's a whole roadmap coming ahead of it, more integrations with some of the largest streaming platforms.
Speaker Change: In the world, including some that we didn't mention today, and hopefully we'll mention in the future. We talked about the Nielsen integration and partnership and with the goal to deliver a lot more value. So doing all of that, while keep increasing quarter after quarter, increasing our EBITDA.
Speaker Change: And having WTLG growth in an environment like this is something that we're very proud of. And again, I want to thank our employees, our customers, and partners all over the world. And thank you all for joining us today, and we're going to keep you posted about our progress. Have a great day. Bye.
Speaker Change: That concludes today's conference. Thank you for joining us. You may now disconnect your lines.