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Earnings call: Viant Technology reports robust Q3 2024 results, acquires IRIS.TV

EditorAhmed Abdulazez Abdulkadir
Published 11/15/2024, 05:32 PM
DSP
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Viant Technology Inc. (DSP), a leading advertising technology company, reported strong third-quarter results for 2024, with a 34% increase in revenue and a record $14.7 million in adjusted EBITDA. The company's recent acquisition of IRIS.TV, a content identification platform, is set to enhance its Connected TV (CTV) targeting capabilities.

The integration of IRIS_ID will improve ad targeting and measurement, which has already shown significant results in campaigns such as Carl's Jr.'s, which achieved a 300% lift in ad recall and a 152% increase in sales. Looking ahead, Viant forecasts Q4 revenue between $82 million and $85 million and expects to maintain strong growth into 2025.

Key Takeaways

  • Viant Technology's Q3 revenue rose to $79.9 million, a 34% year-over-year increase.
  • The company's contribution ex-TAC was up by 21%, reaching $47.4 million.
  • Adjusted EBITDA hit a record $14.7 million, a 52% increase from the previous year.
  • CTV spend on Viant's platform grew nearly 50% year-over-year.
  • Viant acquired IRIS.TV to enhance CTV targeting and measurement capabilities.
  • ViantAI, the new AI-driven advertising platform, is expected to democratize programmatic advertising.
  • Q4 revenue is projected to be between $82 million and $85 million, with adjusted EBITDA anticipated between $16 million and $17 million.

Company Outlook

  • Q4 2024 revenue is projected to be between $82 million and $85 million.
  • Contribution ex-TAC for Q4 is expected to range from $51 million to $53 million.
  • Non-GAAP operating expenses for Q4 are forecasted between $35 million and $36 million.
  • Full-year revenue growth is expected to be 27%, with adjusted EBITDA growth of 51%.
  • Management remains optimistic about finishing 2024 strong and building momentum into 2025.

Bearish Highlights

  • The company anticipates low-double-digit to low-teens growth in operating expenses for 2025 due to the acquisition adding overhead.

Bullish Highlights

  • Over 30 new customers were added in Q3, each generating an average of $400,000 in contribution ex-TAC.
  • ViantAI is expected to open up programmatic advertising to small and mid-sized businesses.
  • The acquisition of IRIS.TV is foreseen as a significant enhancer for CTV advertising capabilities.

Misses

  • There were no significant misses reported in the Q3 earnings call.

Q&A Highlights

  • The integration of IRIS_ID and Viant Household ID is expected to improve ad targeting and performance.
  • Political advertising has led to a modest increase in CPMs, particularly in swing states, but has not caused significant pullbacks from advertisers.
  • Political ads are projected to have minimal impact on Q1 growth, representing a small portion of overall CTV spending.

Viant Technology's third-quarter performance has set a positive tone for the company's future, with strategic acquisitions and innovative platforms like ViantAI poised to drive continued growth in the dynamic advertising technology market.

InvestingPro Insights

Viant Technology Inc. (DSP) has shown impressive financial performance in Q3 2024, and the InvestingPro data further supports the company's strong position in the market. The company's market capitalization stands at $247.14 million, reflecting investor confidence in its growth potential.

One of the most striking InvestingPro data points is the company's revenue growth. For the last twelve months as of Q3 2024, Viant's revenue grew by 23.73%, aligning with the reported 34% year-over-year increase in Q3 revenue. This robust growth is further emphasized by the quarterly revenue growth of 34.13% in Q3 2024, demonstrating the company's ability to consistently expand its market share.

InvestingPro Tips highlight that Viant's net income is expected to grow this year, which is consistent with the company's positive outlook for Q4 and into 2025. Additionally, the tip indicating that Viant holds more cash than debt on its balance sheet suggests a strong financial position, which could support future growth initiatives and acquisitions like the recent IRIS.TV purchase.

The company's stock performance has been particularly noteworthy. InvestingPro data shows a significant 169.23% price total return over the past year, with a 64% return over the last six months. This aligns with the company's strong financial results and positive market reception of its strategic moves in the CTV space.

It's worth noting that while Viant's growth story is compelling, the company is trading at a high P/E ratio of 216.44, which may indicate high growth expectations already priced into the stock. However, this should be considered in the context of the company's rapid revenue growth and expanding market opportunities.

For investors seeking a deeper understanding of Viant's financial health and growth prospects, InvestingPro offers 15 additional tips, providing a comprehensive analysis to inform investment decisions.

Full transcript - Viant Technology Inc (DSP) Q3 2024:

Operator: Hello, everyone, and welcome to Viant Technology's Third Quarter 2024 Earnings Conference Call. My name is Catherine and I will be your operator today. Before I hand the call over to Viant's leadership team, I'd like to go over just a few housekeeping notes for the program. As a reminder, this call is being recorded. After the speaker's remarks, there will be a question-and-answer session. [Operator Instructions] Thank you for your attendance today. I will now turn the call over to Nick Zangler, VP of Investor Relations for Viant.

Nick Zangler: Thank you, Catherine. Good afternoon, and welcome to Viant Technology's third quarter 2024 earnings conference call. On the call today are Tim Vanderhook, Co-Founder and Chief Executive Officer; Chris Vanderhook, Co-Founder and Chief Operating Officer; and Larry Madden, Chief Financial Officer. I'd like to remind you that we will make forward-looking statements on our call today, including but not limited to our guidance for Q4 2024, our platform development initiatives, and industry trends that are based on assumptions and subject to future events, risks, and uncertainties that could cause actual results to differ materially from those projected. These forward-looking statements speak only as of today and we undertake no obligation to update or revise these statements except as required by law. For more information about factors that may cause actual results to differ materially from forward-looking statements and our entire Safe Harbor statement, please refer to the news release issued today as well as the risks and uncertainties described in our quarterly report on Form 10-Q for the quarter ended September 30th, 2024, under the heading Risk Factors and in our other filings with the SEC. During today's call, we will also present both GAAP and non-GAAP financial measures. Additional disclosures regarding these non-GAAP measures, including a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the news release issued today and in our earnings presentation which have been posted on the Investor Relations page of the company's website and in our filings with the SEC. I would now like to turn the call over to Tim Vanderhook, Chief Executive Officer of Viant. Tim?

Tim Vanderhook: Thanks, Nick, and thanks, everyone, for joining us today. We had a fantastic third quarter with results well ahead of our guidance across all key metrics. Once again, we achieved a new quarterly record for platform spend while revenue and contribution ex-TAC grew 34% and 21% respectively year-over-year. We also delivered record Q3 adjusted EBITDA of $14.7 million. I'm also very excited to discuss our acquisition of IRIS.TV, which we announced earlier today. IRIS.TV is a content identification platform built for Connected TV which provides a global content ID across Connected TV applications. I will expand more on the IRIS announcement in a moment. The strength we saw in the third quarter is further demonstration that Viant's product suite and overall value proposition for advertisers continues to resonate with customers. Our focus on enabling advertisers to buy programmatic advertising in smarter and more efficient ways is continuing to drive incremental spend to our platform. Our rollout of ViantAI, which we first announced on our Q2 earnings call is garnering notable attention from our customers, prospects, and industry partners across the programmatic landscape. We believe our commitment to innovation and customer success positions us extremely well to continue growing our market share and capitalize on the ever-expanding market for programmatic advertising. I'll spend some time today digging further into our vision for ViantAI, how this is translating into better tools for advertisers and how this is driving spend to our platform and growth for Viant. There has been a lot of thought and investment across the tech industry as a whole in terms of how generative AI can really benefit end users of software and applications. Some businesses have turned this AI euphoria into real solutions for users, while others are still figuring out how to exactly and effectively incorporate AI into their product roadmaps. At Viant, we believe AI is transforming the programmatic ad industry as a whole. We believe this new AI-enabled era in programmatic is as monumental as the movement 20 years ago from licensed software to cloud-based software-as-a-service models, which has since completely changed the software industry. At Viant, we have created ViantAI which is transforming every aspect of programmatic ad buying. ViantAI is the first fully autonomous advertising software platform driven by the powerful capabilities of generative AI. The user interface of the platform is extremely intuitive and enables any individual within an agency or marketing organization to plan and buy complex programmatic campaigns without any prior experience or training. ViantAI works straight out of the box and advertisers can see results of their campaign planning strategies immediately with limited effort upfront. We believe ViantAI is especially transformative in that it enables the whole agency, not just programmatic traders, to use the software to plan campaigns. Everyone within an organization from C-level executives down to strategy and planning teams can now interface with our platform and contribute to the planning, buying and measurement of programmatic campaigns in real time. In addition to the speed and ease of use, ViantAI brings an additional level of sophistication to the campaign planning process. Leveraging years of data from thousands of campaigns executed through our platform ViantAI is faster, smarter and more precise in its planning capabilities compared to traditional planning software. The AI-generated campaign strategies have gone through extensive testing with a number of experienced advertising customers and the reactions have been universally positive, often with the proposed plans recommending strategies that even experienced professionals themselves might not have considered. We expect ViantAI to accelerate our market share gains and expand our total addressable market. For major agency holding companies and national advertisers, ViantAI provides substantial workflow and operational efficiencies along with improved return on ad spend across executed ad campaigns and for the 10 million plus small to mid-sized businesses actively marketing across search and social advertising, the simplicity and ease of use offered by ViantAI provides an opportunity to participate in open Internet programmatic advertising in a way that has not been possible until now. ViantAI democratizes programmatic advertising, enabling any advertiser to market their product or service to any household in the US. While we are still in the very early stages of the launch and rollout of ViantAI, we're extremely excited about the long-term prospects of what our AI can do for advertisers and their agencies. The more campaigns that are run through our platform, the more our AI model will learn and adapt to customer preferences and campaign performance over time. And we are already releasing updates and enhancements to ViantAI which are expanding its capabilities. We see a significant opportunity to add deeper integrations, more robust analysis, and enhanced capabilities, to name a few. And we expect our ongoing innovation will keep ViantAI at the forefront of the AI revolution. Switching topics, today, we are thrilled to announce the acquisition of IRIS.TV, a leader in solving a critical challenge within the Connected TV ecosystem. The IRIS team has developed an exceptional platform that addresses the lack of standardization in video content signals across content producers, TV OEMs, video apps, and programmatic resellers, an issue that has long created operational inefficiencies in the industry. At the core of their innovation is the IRIS_ID, a proprietary global content identifier seamlessly integrated into the OpenRTB bid stream. The IRIS_ID is an anonymous universal identifier that allows advertisers to go beyond targeting at the CTV app level, enabling precise targeting down to the individual video file where their ads will run, all in a privacy-compliant manner. Beyond this, IRIS enriches the IRIS_ID with powerful data-driven insights including contextual segments, emotional sentiment analysis, and brand suitability data. This added layer of context provides advertisers with a richer understanding of the videos accompanying their ads, empowering safer, smarter, and more impactful CTV ad campaigns. By combining IRIS's cutting-edge technology with our DSP, we are poised to elevate the CTV channel to new heights, making it safer, more transparent, and more effective for advertisers. IRIS's mission to enhance the value of premium CTV content aligns perfectly with our vision for the future and we are excited to partner with their team to lead the industry at the intersection of CTV, AI, and adtech. We have an opportunity to lead the industry into a new era of programmatic advertising where AI drives every aspect of the process, making it more accessible, scalable and efficient for advertisers of all sizes. While we aren't looking to eliminate humans from the process, we're excited to make individuals more efficient and effective at their jobs with the help of AI and continue to increase return on ad spend for our customers. We are at a pivotal time as advertisers push into AI and at the same time are looking for alternatives to the largest DSPs in the market. We have always offered the most cutting-edge technology to advertisers and the acquisition of IRIS.TV will widen our lead when it comes to Connected TV. This focus on innovation-led growth has created the strongest pipeline of customer demand we have seen in our history and continues to drive record spend on our platform as a result. We aren't taking this opportunity lightly and are committed to expand upon our already award-winning platform to make programmatic ad buying easier and more effective while delivering market-leading innovation to our customers. With that I'll turn it over to Chris.

Chris Vanderhook: Thanks, Tim. The success we saw in Q3 was driven by our ongoing focus on innovation and investments in the fast-growing areas of programmatic, notably CTV and streaming audio, while we are beginning to see notable contributions from our ViantAI product suite. CTV spend across our platform remained very strong and was up nearly 50% year-over-year in the quarter, while streaming audio continued to see strong double-digit growth. These channels together represented approximately 50% of spend on our platform in the quarter, consistent with what we saw in Q2. Many of the themes we have highlighted in recent quarters have continued to drive spend growth on our platform. Direct Access provides clients with access to the world's most premium content, eliminating non-value-add middlemen and enabling walled gardener-level addressability by targeting logged-in CTV users with our Household ID. We continue to see strong adoption of our Direct Access program as more than half of our CTV spend came through Direct Access in the quarter. As advertisers are increasingly seeing the value of incorporating premium CTV content into their omnichannel programmatic campaigns. We regularly hear from our clients that Direct Access combined with the scale of our Household ID is one of our biggest competitive differentiators. We recently hosted a very successful Direct Access CTV event in New York with a number of our publisher and media partners to discuss how CTV continues to accelerate in its strategic importance for advertisers. We had a number of participants from across the industry join in the conversation and we heard insightful perspectives from some of our agency partners along with senior executives from the likes of Disney (NYSE:DIS), Paramount and NBC. The overarching takeaway from the event was that CTV is becoming increasingly is becoming an increasingly critical channel for advertisers as they are shifting more budgets into CTV and away from linear, a trend which we expect will only further accelerate. While CTV as a whole is generally recognized as a high-value channel due to its targeting, addressability and measurement capabilities, we're excited to be adding even more contextual intelligence and targeting sophistication to our CTV offering with the acquisition of IRIS.TV which Tim mentioned just earlier. IRIS has heavily invested into their technology to build out the distribution of their global content ID for CTV called the IRIS_ID. The IRIS_ID is now integrated with an impressive network of CCTV content owners, TV OEM platforms, and over 1,400 content management systems who are currently building on top of the IRIS_ID. These integrations will enable Viant to enhance our Direct Access program by making the IRIS_ID available to our marketers. As Tim mentioned today, marketers are still in the very early stages of CTV buying. Most CTV buying is done by just targeting the app name. The problem with this is that marketers are not able to easily target specific types of content and they can't measure which types of content drives the best results. This is where the IRIS_ID comes in. IRIS suggests millions of CTV content files and normalizes all of the metadata associated with that video so marketers have a standard taxonomy to target against in CTV regardless of what app or platform that video is consumed in. Marketers love to buy data-driven advertising and the IRIS_ID enables them to see which video within a CTV app is driving better return on ad spend. From there, marketers will then bid up the price of those high-performing videos resulting in content owners getting higher CPMs. For example, Carl's Jr. was recently looking to reach younger adult males who were watching anime content and certain titles of video game content in their CTV campaign. Carl's Jr. leveraged the IRIS_ID to easily buy this content and programmatic across a range of CTV apps and platforms by using the IRIS_ID. The results were amazing. As the campaign leveraging the IRIS_ID generated a 300% lift in ad recall, a 35% lift in incremental store visits and a staggering 152% lift in incremental sales. CKE Restaurants' CMO, Jennifer Tate stated that they are always looking for strategies that drive business outcomes at scale and that IRIS.TV delivers a unique combination of targeting ability, contextual relevance and high ROI. We think that the IRIS_ID is an important part of the mission for the open ecosystem and CTV in particular. We believe that the IRIS_ID will enable content owners to create more compelling ad products that will rival the walled gardens and ultimately increase the share of spend tilting back to the open ecosystem. We're really excited to further develop this technology and expand IRIS' reach to deliver best-in-class CTV products for our customers and the industry. We believe that with the addition of IRIS.TV to our already robust Direct Access program for CTV, Viant is becoming the DSP of choice for advertisers looking to spend more in CTV. Our customers have seamless access to much of the market's most premium inventory and through our Direct Access program are able to buy CTV at better pricing compared to the rest of the industry. Coupled with our advancements in measurement and reporting, our customers are driving superior returns on their ad spend through the Viant platform. Another major appeal for our customers is that we are making programmatic advertising much easier and effective to use through our advanced suite of AI-enabled products. As Tim discussed, we are still in the very early innings of the ViantAI rollout, but initial receptivity has been overwhelmingly positive and our go-to-market effort around the product has been extremely effective. In mid-September, we released a 12-minute launch video across a number of social media channels to showcase ViantAI's media planning capabilities. The video garnered over 150,000 views in just the first couple of days post-launch and it's driven over 500 Early Access signups. We have already begun enabling access to many of our current customers and the response has been incredible. Many customers are generating high-impact media plans in seconds which is saving them countless hours and the early customers are seeing campaigns that are generating better performance. And on the point of efficiency and return on ad spend, AI Bidding, formerly known as Bid Optimizer, is a key product within the ViantAI portfolio which is continuing to garner strong adoption from our customer base. Approximately 90% of our customers are currently leveraging the product, which is delivering significant cost savings to our customers through our AI-driven bidding technology. With the official launch of our end-to-end ViantAI platform, we have AI-powered tools that drive better efficiency across the four key areas of programmatic ad buying planning, bidding, measurement and decisioning. With the enthusiasm behind this new product rollout, our engineering and sales teams are firing on all cylinders and we are poised to continue growing our market share into 2025 and beyond. We are seeing a number of positive indications across our business that give us confidence in our opportunity with ViantAI. First, we are having more meaningful discussions with larger brands. While our sweet spot has always been with mid-market agencies and brands, we see an opportunity to move up-market and partner with larger advertisers given the ease of use and improving efficiency we offer through ViantAI. Also, these larger brands that are leaning into Viant have historically defaulted to the legacy industry players, but now with the recent Google (NASDAQ:GOOGL) adtech monopoly trial and the rising negative sentiment with The Trade Desk (NASDAQ:TTD), they are taking a look at alternative options in the market and Viant is frequently becoming an alternative these larger brands are turning to. Second, we are continuing to expand our partner network with larger and more influential partners in the programmatic ecosystem. And finally, we believe our full suite of ViantAI products expands our addressable market by enabling us to serve a larger customer base. Although we are currently winning with larger brands today, we believe that products like ViantAI will ultimately attract the millions of smaller advertisers that are currently confined to search and social media channels. We believe we can help the open ecosystem create superior ad products that compete with the walled gardens for market share. We are extremely excited about our progress and look forward to announcing more updates to ViantAI in the near future. With that, I'll turn it over to Larry to provide more detail on our financial performance. Larry?

Larry Madden: Thanks, Chris. Before I begin, I'd like to remind everyone that we have posted a presentation to our Investor Relations website that includes supplemental financial information to accompany today's call. We had a very strong third quarter, surpassing our guidance across the board and setting a new high watermark with record spend on our platform in the quarter. CTV has been a consistent bright spot for us and Q3 was no exception. We once again achieved record levels of CTV spend on the platform with CTV spend growing nearly 50% in the quarter. Streaming Audio also showed continued strength, delivering solid double-digit growth in the quarter. Together, CTV and Streaming Audio accounted for approximately 50% of spend on the platform in Q3 and remain our fastest-growing channels. The strong adoption of ViantAI is also driving notable incremental revenue and contribution ex-TAC. A prime example of this is AI Bidding. In the quarter, AI Bidding achieved record-breaking revenue and contribution ex-TAC with revenue and contribution ex-TAC growing 35% across both metrics on a quarter-over-quarter basis while simultaneously providing substantial cost savings for our customers, a clear win-win outcome. In terms of customers, on a trailing 12-month basis through Q3, we've seen impressive growth in the number of customers generating significant contribution ex-TAC. Specifically, the number of percent of spend customers generating over 500,000 and over 1 million in contribution ex-TAC each grew by nearly 30% year-over-year. In the quarter, contribution ex-TAC across our 100 largest customers also grew by nearly 30%. We are equally encouraged by the rapid expansion of our new customer base. The top 30 customers added over the past year generated on average more than $400,000 of contribution ex-TAC during the period. These strong customer trends, both from existing and new customers position us extremely well to continue outpacing overall market growth. With that, I'll now turn to the results for the third quarter. Revenue for the quarter was $79.9 million, an increase of 34% versus the prior year period and exceeding the upper end of our guidance range by more than 10%. Sequentially, revenue increased 21% from Q2. This impressive growth was partially driven by several new customers onboarding and initiating their use of the platform during the quarter. In these instances, we typically provide an increased level of service given the customers are new to the platform, which in turn triggers gross revenue accounting, further driving our revenue growth rate relative to our growth in contribution ex-TAC. Contribution ex-TAC for the quarter was $47.4 million, increasing 21% from the same period last year and also above the high end of our guidance range. Compared to Q2, contribution ex-TAC increased 14%. Notably, Q3 marks our fifth consecutive quarter of 20% year-over-year growth in contribution ex-TAC. I would also point out that the 21% growth in contribution ex-TAC this quarter was achieved despite being measured against 22% growth in the prior year period, demonstrating strong performance against a more challenging comparison. In terms of customer verticals, our mix remained relatively steady in Q3 with healthcare, consumer goods, travel and automotive representing the biggest areas of growth for us. Political in the quarter was slightly ahead of our expectations of 2% to 3% of contribution ex-TAC indicative of ongoing shifts in ad spend to programmatic platforms, addressable audiences and CTV. Channel-wise, CTV remains a cornerstone of our growth strategy. In Q3, CTV reached a new record with spend growing nearly 50% year-over-year, an acceleration from the 40% growth in Q2 and represented over 40% of total platform spend. Streaming Audio, which is also a strategic growth area, achieved another record of solid double-digit year-over-year growth as the channel continues to scale. Our customers continue leveraging our Household ID technology to execute their omnichannel campaigns across these two high-engagement cookieless channels. In terms of formats, Video, which includes CTV was again more than 60% of total spend on our platform in the quarter. Turning now to operating expenses for the quarter, our non-GAAP operating expenses totaled $32.7 million in Q3 representing a 11% year-over-year increase and 2% sequentially. We remain focused on making strategic investments in our business specifically around our technology and AI initiatives to best position ourselves for long-term market share gains and increasing profitability. As we invest, we also remain hyper-focused on driving efficiencies internally, and to that end, we have been able to increase contribution ex-TAC per employee by nearly 20% over the past 12 months. For the third quarter, we generated record adjusted EBITDA of $14.7 million, above the high end of our guidance and representing an increase of 52% over the prior year period. Notably, Q3 represents our seventh consecutive quarter of adjusted EBITDA growth of over 40%. Adjusted EBITDA margin as a percentage of contribution ex-TAC was 31% for the quarter, an improvement of six percentage points from the prior year period and six percentage points from the prior quarter. For the third quarter, GAAP net income totaled $6.5 million, which compares to a GAAP net loss of $672,000 in the prior year period. GAAP earnings per Class A share was $0.09 in the third quarter, which compares to a GAAP loss per Class A share of $0.03 in the prior year period. Non-GAAP net income, which excludes stock-based compensation and other items totaled $12.3 million for the quarter, which compares to non-GAAP net income in the prior year period of $7.6 million, representing an improvement of 61% year-over-year. Non-GAAP earnings per Class A share totaled $0.15 in the third quarter, which compares to $0.08 in the prior year period. In terms of share count, we ended the quarter with 63.1 million shares outstanding, consisting of 16.2 million Class A shares and 46.9 million Class B shares. We ended the quarter with $214.6 million in cash and cash equivalents. We had $230.2 million of positive working capital and no debt at quarter-end and we continue to have access to a $75 million undrawn credit facility. In Q3, we also generated $17.1 million of cash flow from operations and $12.4 million of free cash flow. Since the inception of our share repurchase program in early May 2024, we repurchased a total of 1.4 million shares of Class A common stock using $14.2 million in cash through November 8th. We have $35.8 million remaining on our $50 million authorized repurchase program. Turning now to our outlook. For the fourth quarter of 2024, we currently expect revenue in the range of $82 million to $85 million, representing a year-over-year increase of 30% and a quarter-over-quarter increase of 4% at the midpoint. Contribution ex-TAC is expected to be in the range of $51 million to $53 million, representing year-over-year growth of 22% and quarter-over-quarter growth of 10% at the midpoint. In Q4, we expect Political to be similar to Q3 as a percent of total contribution ex-TAC. Non-GAAP operating expenses is expected to be between $35 million and $36 million, representing a year-over-year increase of 20% and a quarter-over-quarter increase of 9% at the midpoint. We expect adjusted EBITDA to be in the range of $16 million to $17 million, which represents a year-over-year increase of 27% and a quarter-over-quarter increase of 12% at the midpoint. And finally, we expect an adjusted EBITDA margin as a percentage of contribution ex-TAC of 32% at the midpoint. Based on the midpoint of our Q4 guide, we now expect full-year 2024 revenue growth of 27%, contribution ex-TAC growth of 22%, and adjusted EBITDA growth of 51%. I do want to point out that the impact of the IRIS.TV acquisition is reflected in our Q4 guidance. Given the timing of the acquisition of IRIS.TV and the relatively small size of the business, IRIS.TV is expected to have limited impact on our Q4 operating results. As Tim and Chris mentioned, IRIS represents a strategic investment in further enhancing our suite of CTV targeting and measurement capabilities which we believe can lead to longer-term growth opportunities. In closing, we look forward to finishing out 2024 on a high note and are extremely encouraged by the numerous tailwinds driving our growth. Our messaging and value proposition around ViantAI is clearly resonating with advertisers and driving interest and spend to the Viant platform at an overwhelmingly positive rate and you can see it in the customer metrics I spoke to earlier. We are very well positioned to capitalize on the strong growth of high-value channels such as CTV and Streaming Audio and are committed to making our customers' spend across all channels even more efficient and effective. We look forward to continuing to build on this momentum as we move into 2025. And with that I will now turn it back over to the operator to open the call for questions. Operator?

Operator: Thank you. We will now take this time to move into our Q&A portion of our call today. Our first question comes from Laura Martin from Needham. Go ahead, Laura.

Laura Martin: Okay. Can you hear me okay?

Tim Vanderhook: Yeah. Hi, Laura.

Chris Vanderhook: Hi, Laura.

Laura Martin: See, I don't know if I can turn on my picture, but anyway, it's okay, no problem. So I have two. The first one is, if I remember right, you grew the, let me call it, gross spend by 34%, but your ex-TAC number by 21%. The TAC went through the roof and it looks to me like it was about 95% of the fixed-price revenue, which begs the question a) Larry, is my math right? And b) Chris and Tim, why are we in a business where we give away 95% of the top-line? Like I'm lost as to why we're doing fixed-price if 95% of it is a contra account.

Tim Vanderhook: Larry, you want to take the?

Larry Madden: It's not 95%. And as I said on the prepared remarks, it really have to do with a handful of new customers that we were providing services for that we ultimately had a book accounting gross. To put it in perspective, if you do, let's say $5 million of incremental gross in the quarter, that's about 9% incremental revenue growth in the quarter. So, again, we're focused certainly on the CxT, which is what we keep. We don't have a 5% margin on our managed service side of the -- or the services side of our business. And the good news about this, this particular instance is, it's brand new customers that are pretty spending quite heavily within a given quarter.

Laura Martin: Okay. So the reason that we're in the fixed-price business is because this is a metric for new customers, new logo wins. That's how we should take this?

Larry Madden: If you go back, it's how we onboard customers, it usually starts in fixed-price and then we move to percent of spend. It shortens the sales cycle to get them in the door.

Laura Martin: Okay. All right, so that's a good number then because it's up 51%. Okay. And then my other question is, when I think about your growth drivers is, if I try to rank them, is it that this ViantAI, which sounds awesome, is that the core driver here, or is it that you're getting more spending from existing clients or are you getting new clients or is Direct Access the core driver, if it was 50%, it was actually 40% of total spending on the platform like I'm trying to sort of sort out of the growth drivers, which ones are driving the most growth and which ones are not.

Chris Vanderhook: Yes. So, let me just start. So, it is a cohort-driven model. The longer that we retain customers, each year we retain, they're spending more and more each -- every year they're on platform. So, I think with the scale of our customer size, I think in terms of total dollars, much of the growth, a lot of the growth is existing customers scaling their spend. That's probably one. A sub-bowl of that would be them moving more and more money into CTV. As we have better products and market in CTV, they're choosing to spend those dollars with Viant versus competitors. And Direct Access is squarely in that because it's -- Direct Access is centered on CTV. And then I would say we're doing really, really well with new customers, as Larry was just highlighting the new customers we're onboarding. And I would say that a lot of that certainly is the attention around ViantAI since we rolled that out, that certainly has been there. So I think we're continuing to do well on all those fronts.

Laura Martin: Fantastic. Great numbers you guys. Thanks for taking the questions.

Chris Vanderhook: Thank you.

Tim Vanderhook: Thanks, Laura.

Operator: Thank you. And our next question will be from Jason Kreyer from Craig-Hallum. Jason, your line is open.

Jason Kreyer: Can you guys hear me?

Tim Vanderhook: Yes.

Chris Vanderhook: Hey, Jason.

Jason Kreyer: Okay, great. Thank you. Two questions on IRIS.TV. So, first, Chris, you talked about how this helps you create an alternative to walled gardens. So, just curious if you can give more details around the concept there. And then just wanted to better understand, excuse me, understand if there's interoperability between the IRIS_ID and the Household ID like how you can peg those two together going forward. Thanks.

Chris Vanderhook: Yes, great. Yes, I think if you take a look at Meta, who I believe is a leader in making ads that are relevant to the content that you're consuming, let's say in reels. You certainly see this in other platforms like TikTok, but what they are doing is customizing the ad. They're using AI to customize ads to match the content, not only just the genre or what the content is about, but making the ad very similar to the content. It's the contextual relevance that they're able to provide that we believe is what's really boosting their ads business. They used to be only about identity and that was why people worked with, let's say, Facebook (NASDAQ:META). But today it really is because of their capabilities and understanding the content and then making ads very relevant to that content. If you think about CTV today, most of the market is just buying CTV apps. It's money from linear shifting into streaming and really they're just buying apps. I'm going to choose to buy Paramount or Disney and Warner Brother's Discovery (NASDAQ:WBD), whatever it may be, and it's because it's still early innings in the CTV landscape. Now, we believe that IRIS, where their unique connection point is with publishers, the platforms like the television OEMs and device manufacturers, as well as content management systems. All of those entities are sending their video files to IRIS and IRIS is then breaking down that video file and providing contextual relevance then to the buy side to be able to customize the ads so that they match the content. An easy example would be is if a piece of content was about fishing, you could easily match a Cabela's ad or a Bass Pro Shop's ad with that. That's just an easy example. We see that the performance boost in CTV by matching add to content is, if you look at the Carl's Jr. example we gave, the results are through the roof and it makes a lot of sense. We think that there's a lot more advancements that we can help bring to the IRIS offering and to our customers. So, we're really excited about it.

Tim Vanderhook: On the second question, Jason, just around, is there a future of IRIS_ID and Viant's Household ID and how do those work together. We do see those two things playing together. What IRIS_ID gives you is data about the content and it's structured many ways, contextual, emotional sentiment, brand suitability for an advertiser who doesn't want advertisers if there's nudity in a show or something like that. So it's a whole bunch of extra data that is about the content. Viant Household ID is data about the household, what products they've purchased, what their, I guess, purchase intent is. And we do see IRIS_ID and Household ID being used in combination in the future. They can be used separately, but certainly, there's strength when you put both of those together.

Jason Kreyer: Right, perfect. Thank you, guys.

Tim Vanderhook: Thanks, Jason.

Operator: Thank you. And our next questionwill be from Matt Condon from JMP. Matt, your line is open.

Matthew Condon: Thank you so much for taking my questions. My first one is just on IRIS as well. Just wanted to think about just the contextual signal that you guys are receiving from that and maybe incorporating that into your AI Bidder. Is there opportunity there to just enhance your bidding capabilities with the signal that you're receiving from IRIS?

Chris Vanderhook: Absolutely. One, you mentioned it with AI Bidding, really, if you -- today when we receive a signal, let's say from a certain app, from a content owner, we're just receiving predominantly the app name and maybe we might get genre or publisher, what's known as publisher-provided metadata. But you don't really know what the show is. You don't know what it's about, you don't know the actors in it, you don't know the setting, you don't know the mood. And so, with IRIS, they really enable -- they enable all that data to flow through about the content. When a marketer, if you think of a publisher like Disney, think of the size of their library, you don't know exactly which video you may be buying. And with IRIS, you know much more about the content. So, if a marketer, in the example I gave earlier around Bass Pro Shops, knows that this video, which is about fishing, it does -- it performs extremely well. The next time they see that same video file, that same IRIS_ID come across, they're able -- they're then able to bid that up because they understand the performance increase that that video actually provides them. This is where we really see as a huge opportunity for CTV content owners, but also for the marketers. And one other point too. We really -- this is in partnership with the content owners and we believe that CTV is the open ecosystem's greatest channel and we want to bolster these content owners to help them create better ad products to rival those of the walled gardens in search and social. So this is why we think this acquisition is really important.

Tim Vanderhook: Yes. And just on the question, just to follow up on that, around bidding, it's not just driving price down, it's also driving price up where there is a lot of customers for that advertiser to be able to make sure we're engaging those audiences too. So, we see that, yes, I could drive pricing down, but we're just seeing more bids in general when this content signal is in place.

Matthew Condon: Great. That's super helpful. And then my second one is just on ViantAI and you guys talking about that unlocking the long tail of advertisers and bringing them access to the open Internet. Can you just talk about do you have the go-to-market muscle there or what needs to change from investment perspective just to service those types of advertisers? Thank you so much.

Chris Vanderhook: Yes. I mean we really do believe in that opportunity. The accessibility of the open ecosystem is not very accessible. I think it's probably the number of advertisers is in the tens of thousands. If you look at Google Search or Meta or anything in social, they're in the $5 million to $10 million mark, right, all of them. But I would say that the, if you look at their revenue, I would imagine that it's probably -- it's really the -- it's not the local pizza shop per se that's driving their business. I believe it's a lot of the e-commerce, the direct-to-consumer companies. Just think of your own experience in those channels.

Larry Madden: Mobile apps.

Chris Vanderhook: So, we think that that's probably, mobile apps and we think that that's the meat of the opportunity. But why would they not, if they're having success in social short-form videos, we absolutely believe that they'll have success in CTV. IRIS, the IRIS acquisition is part of that. Certainly, ViantAI is part of that, to make the buying tools more accessible, more easy to use. So, absolutely, we think that we can deliver that. We don't believe that we're going to have a hundred thousand sales reps calling on these businesses. We need to do all of this through automation and we think we can do that.

Tim Vanderhook: Yes. And basically, that same ViantAI interface that customers are interacting with, we do think the local pizza store will be able to use that interface to generate and target an ad campaign that will propel their business. So huge opportunity towards small and mid-size. We do have some work to do continually on ViantAI making it more robust and we think we'll complete that at some point next year.

Matthew Condon: Thank you.

Tim Vanderhook: Thanks, Matt.

Operator: Thank you. [Operator Instructions] I will now open up the line of Chris Kuntarich from UBS.

Tim Vanderhook: Hi, Chris.

Chris Kuntarich: Hey. Great. Thanks for taking the question here. Maybe two questions from me. First would just be kind of as we think about the growth that you've delivered here, very strong in 3Q and just the idea of Viant outgrowing the broader digital space in '25 and the broader digital space growing somewhere high-single-digits, low-double-digits. Like how should we think about the potential for Viant to outgrow CTV which could be growing more in the high-teens and '25, which would still be a deceleration from where you're at in 2Q and where you're guiding for 3Q or sorry 4Q.

Chris Vanderhook: Yes. Thanks, Chris. Well, one, I think that we do believe we're going to continue to grow above market and I would say because we are a DSP, there's only four real DSPs in market, two of which are buy-side only. We happen to be one of those. So, you're definitely seeing customers understanding the value and the importance of having a buy-side-only platform. I would say that's one. Two, we think that we continue to grow above market and CTV because we have better products in market and we think the continuation of that's going to be with IRIS. We think that's important. But I think that what most people miss is the amount of money moving over from linear is, that's what the projected growth of CTV is. But we believe there's a second derivative or another wave of growth that CTV is enjoying in certain platforms that have better products and offer the measurement to prove that it's driving incremental sales for our advertisers. And we do that really well, which is why I believe that we're continuing to grow at the rates we are in CTV and we think that will continue in '25.

Larry Madden: Yeah. And just to add to that, Chris, I think what this quarter proved is on a tough comp last year of north of 20% growth, we were able to put up north of 20% growth again. And I do see that continuing for the foreseeable future.

Chris Kuntarich: Got it. Very helpful. And Larry maybe just one on the expense side. I think you had talked last quarter about low-double-digit to low-teens growth in '25. Is that still the right way to be thinking about that considering the acquisition and a bit faster expense growth in 4Q as it relates to the guidance?

Larry Madden: Yes. I mean, the acquisition certainly will add some overhead to next year. You're talking about 2025. But we still remain committed to having overhead or non-GAAP operating expenses grow slower than CxT next year. So I think the estimate that we gave you last quarter is a little bit higher, basically because of the acquisition, but we think we can more than offset that with incremental CxT.

Chris Kuntarich: Super helpful. Thank you. Nice quarter.

Larry Madden: Thanks.

Tim Vanderhook: Thanks, Chris.

Operator: Thank you. And our next question comes from Mauricio Munoz from Raymond (NS:RYMD) James.

Mauricio Munoz: Hi. Thank you for taking my question. Can you guys hear me okay?

Larry Madden: Yeah.

Tim Vanderhook: Yes, we can.

Mauricio Munoz: Great. Just wanted to ask you about the contributions for what was a very strong political season particularly for CTV. So maybe you can talk about that and any dynamics you might have experienced from political ads maybe crowding the market, which could have driven advertisers to pull back on CTV spending in 4Q. And then a related one for Larry. Maybe you can help us or give us some guidance of how do we think about these sort of aspects into, as we look into 1Q, coming off of a very strong political season. Thanks. Thank you.

Chris Vanderhook: I'll take the topline mark about political's effect. We definitely saw a rise in CPMs.

Larry Madden: In the swing states.

Chris Vanderhook: Yes, definitely in the swing states. It did have an impact in the market. I don't believe we had any material pullbacks from advertisers who wanted to sit it out, at least not during the quarter. Maybe that happened above us that we just didn't see. But we didn't have any -- we didn't see any impact of that. I think that our expectation for political was somewhat modest. We slightly outdid that. It's not a huge area for us. We'd like to continue to do better and we're certainly going to put our best efforts at it, but we had modest expectations for it and we slightly outdid those.

Larry Madden: And on your second question, Mauricio, was it around the impact of political on Q1?

Mauricio Munoz: Well, coming off of a strong political season, are there any seasonal aspects we should take into consideration when we're in Q1?

Larry Madden: Not really. I mean, political impacted the second half primarily. Typically we do about, political is maybe 1% of CxT a year. As we said in the second half, both with Q3 actual and the Q4 guide, we think it's a little bit over 3%. So, I don't think it's going to impact Q1 growth. There'll be a little bit of a delta in the second half of '25, but at most, it's 2% of CxT. So we think we can more than offset that as we move through 2025.

Mauricio Munoz: Great. Thank you.

Operator: Thank you. And that concludes today's Q&A portion.

Tim Vanderhook: All right. Thanks, everyone, for joining this quarter's earnings call, and I'd like to thank the Viant team for a fantastic quarter in the third quarter and we look forward to talking to everybody again soon. Thank you.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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