Hello, everyone. And welcome to Viant’s Fourth Quarter 2022 Earnings Webinar. My name is Kelsey, and I will be your operator today. Before I turn the webinar over to the Viant leadership team, I’d like to go over just a few housekeeping notes for the program. As a reminder, today's webinar is being recorded. Attendees, are in a view and listen-only mode, but following the speaker's remarks, there will be a question-and-answer session. [Operator Instructions] We thank you for your attendance today and I will now turn things over to Nicole Borsje from The Blueshirt Group.

Thank you, Kelsey. Good afternoon. And welcome to Viant Technologies fourth quarter 2022 financial results 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 our guidance for Q1 2023 that are based on assumptions and subject to future events, risks and uncertainties that could cause actual results to differ materially from those projected. We undertake no obligation to update 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 registration statement on Form 10-K for the year end of December 31, 2022, under the heading Risk Factors and 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 GAAP to non-GAAP measures are included in the news release we issued today 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?

Thanks Nicole and thanks everyone for joining us today. I'm pleased to report that we finished the year with Q4 Advertiser spend revenue and contribution ex-TAC tech results consistent with our guidance and adjusted EBITDA significantly exceeding our guidance, which is a testament to the hard work of our teams managing expenses in driving operational efficiencies. Last month, mark the two year anniversary of Viant’s IPO, A notable milestone for the company. While the past covid market environment has been volatile to say the least, our mission and purpose has remained consistent to provide advertisers with a market leading solution to buy and measure omnichannel digital advertising as the industry puts more emphasis on privacy protection and moves away from cookies and device identifiers. We've been steadfast in executing on this mission, introducing new capabilities to our platform, including our world without cookies release, as well as numerous other features and data solutions to help advertisers with measurement and attribution using our household ID technology. There is no question that Viant has already been skating to where the puck is going in the programmatic advertising industry and we feel very confident in our positioning and market opportunity for the future. Looking ahead, there are three key trends that we believe will continue to shape the ad industry and our business in 2023 and beyond. I'll touch on these trends and why I believe we are well positioned to benefit in this evolving landscape. The first is the growing importance of AI and machine learning, or as we have previously described, our vision as autonomous advertising. At Viant, we are focused on delivering products that take away the laborious tasks of humans using these programmatic ad platforms tasks like creating an ad campaign or ad format and selecting channel device publisher,…

Thanks, Tim. We had a strong end of the year with active customers increasing 6% year-over-year to 326 in Q4, driven by growth in mid-market ad agencies and client direct customer segments which help drive advertiser spend per active customer by 9% year-over-year. Additionally, we continue to see growth in emerging channels in Q4 with digital at-home increasing 55% year-over-year and streaming audio increasing 38% year-over-year. As many of you know, our primary focus is on mid-market agencies and direct advertisers. I wanted to highlight our strong growth in this area in 2022 for full year 2022. These two customer segments represented about 65% of our total advertisers spend. I'd like to unpack this a bit more and talk about why we are succeeding in these market segments. First, mid-market agencies not only select us based on our innovative programmatic ad buying platform, our proprietary data services and forward programs like electricity, but they also value our flexible engagement models and our keen focus on customer success and support. Our scale competitors often evolve to a one size fits all model geared towards the largest most resource companies and the five largest ad agency holding companies. According to statistics, there are, there are over 14,000 advertising agencies in the us, which means there is a very large mid-market opportunity that exists today. Most of these agencies sit outside the few large agency holding company groups, yet they control a large portion of the total advertising spend market. Mid-Market agencies have become an increasingly popular choice for many brands and advertisers in recent years. This is because these agencies often provide more flexible engagement models that cater to the unique needs of mid-size businesses, while also offering a more tailored approach to advertising and marketing services. Additionally, the mid-market agencies tend…

Thanks, Chris, and thank you everyone for joining us today. Before I begin, I'd like to remind everyone that we have posted a presentation to our investor relations website with supplemental financial information to accompany today's presentation. As Tim mentioned, we are pleased to report that our Q4 performance was within our previously issued guidance for advertiser spend, growth, revenue, and contribution ex-TAC, and for the quarter we exceeded the high end of our previously issued adjusted EBITDA guidance by 160%. I will talk more about this in a moment, but during the quarter we remained extremely focused on driving operational efficiencies in the business, which we believe sets us up for meaningful adjusted EBITDA profitability in 2023. For the fourth quarter advertiser spend across our platform decreased 13% over the prior year while increasing 9% over Q3. For the full year advertiser spend increased 15% year-over-year. In the fourth quarter, revenue was $54.5 million, a decrease of 34% versus the prior year period and an increase of 12% versus Q3 for the year revenue totaled to $197.2 million, representing a decrease of 12% year-over-year. Contribution ex-TAC for the fourth quarter was $33.4 million, a decrease of 31% versus the prior year period and an increase of 4% over Q3 for the year contribution ex-TAC totaled to $124.7 million, representing a year-over-year de decrease of 12%. There are several key points I'd like to highlight relative to both Q4 and the full year 2022 top line performance. To begin with. We started 2022 with accelerating growth and spend across our platform advertiser spending Q1 increased 44% well above industry growth rates. That momentum continued in Q2 and we again saw strong growth of 32% for the quarter. We began seeing the early stages of a pullback and spend by some…

Thank you so much Larry, and again, we will now move into taking your questions. [Operator instructions] Our first question will come from Nat Schindler with B of A.

Great. Hey, thanks guys. So Larry, you said that you as the comps ease on because the macro concerns affected your business mostly in the second half of last year, that you'd ha see growth improving throughout the year. We're still really kind of waiting for this recession that everybody's been calling for. What would happen to your customer base and their spending habits if we really saw a consumer begin to feel this recession and consumer spending fall off?

Yeah, I mean our, our, our, the, the comments I gave on the '23 guide really assume a somewhat of an improvement in the second half. It doesn't assume a full improvement in the second half by any means. Certainly if if things turn out worse based on what's going on in the economy, we could have further softness. But you know, we're, we're pretty comfortable right now based on what we put out that I, you know, I think that is are realistic targets at this point for us.

Now, this is Tim. I would just add to that programmatic advertising, generally speaking is a leading indicator for recessions, just ad spending in general. It's one of the variable expenses, given the nature of programmatic that you can hit pause or scale back at any moment. And so I, I always view us as a forward indicator and I think we, as you see us start to rebound or other players in the space, that would be a leading indicator for the economy.

And if you look across a lot of the online brand spend players, they, they took it in the worst around Q3. Things and your predictions coming into Q4, you got better than you expected. What was happening, call it September, October versus what was happening November, December, January, February. That kind of changes the view of what, how advertisers are acting?

I would call it stabilized. I would say it's slow, but stable is the best classification that I would call it where we saw in the back half of 2022 a deceleration continuing. So the first month of the quarter would start out and it would continually weaken throughout the quarter. I would just classify it as starting to stabilize at this point, still slow, but stable.

And I, and I'm just clearly if any of us are talking about the economy, we're only pontificating. However, what I do think is based on a lot of our discussions with clients and just hearing other, other companies I think that it, everyone was waiting for the other shoe to drop last year and it was going to be a lot worse. And I think in the fourth quarter, especially if you look at retail they expected a huge consumer pullback. I don't think we necessarily saw that. And there was some instability there. Definitely de-sell and instability in the outlook, but I think what's different, what we're seeing right now is stability in the outlook, although it's a slow start to the year management teams were slow to get budget set and, and therefore delayed ad spending that's just across the board. You're hearing that everywhere. But I do, I would characterize it that I, I don't think the outlook is as unstable as it was in Q4 and I think it has stabilized and we do see that there is going to be a pickup. I mean, we're seeing it we saw it in in February, we, we saw a nice bounce from January and you know, that was pretty strong. And we think that that continues, but again, I think we're being pretty realistic in our outlook.

Yeah, one, one other data point that I would give you Nat, is so retail, which is our largest customer vertical was down pretty significantly in Q4. While it's still down in Q1, it is not down nearly as much as it was down in Q4. So, you know, that speaks to the kind of stabilization of what we're seeing across our clients.

And we will now move on to Laura Martin with Needham and Company.

Hi there you guys. So just a couple from me. Loved all the new business stuff. So data direct access, which I'm going to call open path because that's what trade does calls it. And measurement, my question is business models, are those up-sells, are they just going to be wrecked into the platform so you get new business faster or can we like make more money from a new revenue stream from some of these what do you think?

So you had, you had said data, data platform. Okay. So I mean e each of them are a little different. I think that direct access is less of a is less of an opportunity where we're looking to make more money but really simplify the supply chamber, hearing it from a ton of clients around that. I see that as us being able to win new customers. That's the first comment on that one measurement. So the, the big thing on measurement is if you go back, you know, the digital marketer in years past just had this easy report and it was in double click and they could look at all, they could, they could attribute all of their sales or conversions to all of their impressions, so to speak. And over the last, you know, 18 months, that is no longer the case. Marketers have a hard time understanding when they spend money, what are they getting, what are they getting in return. And so they're looking at platforms like us to do more. And we really stand out there. And that actually is a bit of an up-sell that is, that is more of a premium offering that we get paid a little bit more for. So I think that that you know, for us is a, is more of a driver there. And I would say data platform, data platform is really going to be meant the, the why, so the, the change of the name one and then two of the feature sets that we're, we're really adding on is really going to drive, it's going to allow customers, all of these customers of ours that have signed up to companies like Snowflake and you know, all these other clean rooms, they've all done it and the data's there, but they have no idea how to get it out of there and put it to use in advertising. Same thing we're seeing with content owners. They have, you know, large authenticated user bases, you know, watching CTV but they don't know how to connect that data in a privacy friendly way with market or first party data for targeting and then also for, for measurement. So again, I think that what we're, what we're doing is making it very seamless from publisher to advertiser to match first party data sets to really drive the buying that I see is a massive differentiator. And it's going, that's also in the active customer growth bucket.

Super helpful. And then one of the things that leaned last year on revenue growth was this transition from managed service to self-service. Are we through that or is that continued into Q4 and continuing going directly to self-service from managed service?

Yeah, in Q1 we've pretty much lapsed the, the impact that, that accelerated mix, mix shift that happened in '22. So in Q1 our, our growth rates, because what happened last year, you could see that our spend growth rates far exceeded or significantly exceeded our growth and revenue and our growth. And ex-TAC in '23 that is not going to be the case. They're going to be much closer because the mix shift really occurred all throughout last year. It will continue to some degree this year, but on a much smaller scale.

Andrew Boone with JMP has the next question.

Hi guys, thanks so much for taking my questions. I want to try two industry questions. So one of which is can you guys just talk about how clients are speaking about the DOJ case against Google? What are they saying to you? How are you guys thinking about that? And then secondly on CTV, Disney is now live with their ad products, so is Netflix, as you guys are starting to see more supply coming to the market, are you guys seeing any changes there as just consumption on the user side continues to ramp with avod[ph]? Thanks so much.

I'll take the DOJ piece. I think it that with a, with a player the size of Google I think if there was any smaller player that was caught with their hand in the cookie jar the way that they were, you know, they would major punishment right away. But because of the size of Google I think that that was slower. And I don't think that any of this was news cause a lot of this was leaked out there already. But it is so clear when talking to clients that you, that Google is so conflicted and when you, when you have the level of market power that they do that they use it to their own benefit. And I believe that that is driving a big push for more independence and why buy side only, at least for us, I think plays really well. We're definitely seeing that. I definitely believe that they've been losing share on the DSP side because of those concerns. But now I, I think it's really come to the foray and clients are looking, I do believe there will be a lot of switching there that, that clients want an independent buy side to represent them as the buyer of the ad and they don't want someone conflicted on the sell side as well. So I think that that plays really well for us especially on continuing to grow active customers this year. On the supply question, just around Disney and Netflix adding their supply, I mean, what does increased supply like that mean for connected TV It means it's more competitive this year versus compared to last year when against linear tv. And again, linear TV is the budget that all of us are focused on pulling from to drive our CTV growth figures. And so now with Netflix that isn't available on linear TV, that's going to cause more budget to shift from linear to CTV. But I think all content owners are pretty much aligned at this point. The major media companies that streaming is the future linear television, the traditional cable and satellite is the past. And so I think even when you look at their content selections, they're putting content on their streaming apps first, which then reinforces that consumer demand to go there to get it. So for us, the increase in supplies and increase in competitiveness, I think when you couple the increase of supply with the ad recession that we're currently going through, that's a big win for programmatic advertising because we are usually plugged in to fill that gap in demand. And I, I see that as a big positive for DSPs and programmatic in general this year.

And we will now hear from Maurizio Munoz with Raymond James.

Thank you for taking my question. This is Maurizio for Andrew today. Just wondering if, if you could talk about the competitive landscape it looks like 4K marks the second consecutive quarter of sequential declines in active customers. Is this more of a macro driven advertisers pullback or are you seeing any optic in spending consolidation across advertisers and agencies that are maybe looking to reduce their number of active partners? So if you could provide some color on that, please?

Yeah, I, could take the talk about the active customers. So we did see in Q4, 2% quarter on a quarter decline, a net reduction of eight customers. This was primarily related to the fixed price side of our business. So for the year, our percentage of spent customers increased 16%. The number of active customers and fixed price decreased 6%. In Q4 in particular as we talked about on the, on the prepared remarks across our jobs in employment vertical, that's that vertical customers in that vertical spent significantly in '21 and largely went dark in 2022 for the reason. So those fell out of the, the customer count. We think they will come back when their businesses improve. But generally speaking, we did see weakness across fixed price especially in the second half of the year. And we believe that's due to the, the macro concerns. Fixed price tends to be a bit more discretionary in nature. So as it's easier for the marketers to kind of pull those, cut those budgets when they're look looking to reduce spend. So I think it's really a macro issue specifically tied to the fixed price side of our business. But again, that, you know, that being said, we, we feel pretty confident that we can get these customers back once they start re-engaging in spending.

That's very helpful, thank you. And then I have one on capital allocation. So you currently have $200 million in cash and, and no debt. And it looks like you are cautiously optimistic about a potential rebound sometimes in the second half of 2023. So with the understanding that you'll remain disciplined on, on spending while you navigate through the current environment, maybe you could talk about investments opportunities that you're envisioning in the year that will probably or per perhaps allow you to capitalize on a potential rebound later in 2023? Thank you.

Yep. I'll take that. I mean, just from a capital allocation perspective, we do have a fantastic balance sheet with the amount of cash that we have and no debt. And this year we're estimating positive adjusted EBITDA. So we feel very comfortable in that our balance sheet is protected. The primary uses of that capital will be towards m and a. We're active in the market. We have been for some time looking for the right combination of businesses that can increase our value to our customers itself. And so again, these would be independent buy-side assets. As Chris talked about, we think that independence is key but certainly gives us a great ability to execute on m and a in the back half of the year.

And our next question will come from Cal Bartyzal with Craig-Hallum.

Hey, just stepping on here for Jason. A couple questions from me. So first just wanted to talk could you go a little bit deeper on what you're seeing in CTV and maybe any potential signals of a rebound coming in that? And then secondly, you know, you talked about some progress in digital ought to home and audio and those emerging categories, but just wanted to know if you had any more color on any progressions in the video game advertising. We're just trying to understand if you think the industry's ready for this, and if there's really any real volumes of impressions available for you guys to monetize? Thanks.

Yeah. Around CTV rebound, I mean, I, I think that as far as the market goes, we're going to see a significant amount of new money from linear shifting to CTV that's undeniable. So regardless of what the total industry does CTV is definitely going to grow. And, and for us, I think that we have, we feel really confident around CTV. We have a lot of differentiation there, Tim talked in our prepared remarks around our household ID and really the efficiencies of that drives for marketers being able to control their spending, which, what we call frequency capping, and then also measuring what their, what their impact is. I think also our, our direct access, not to get too far ahead of that, but our direct access program's squarely going to be aimed at that. We have a lot of content owners that are looking at our customer base. I mean, think of people, if you think of large premium content owners, they are already, and they've been working with, you know, the biggest brands in the world, you know, the biggest CPG brands. They've been working with these companies for 50 years. A lot of them have rates that are more than 30 years old. And when they look at someone like Viant and they look at our differentiation as a demand source and the market that we serve in the mid-market, those are not the, those are not the top 25 to 50 spenders in the U.S. So that is really, we are like differentiated demand for them, and that's new money coming to them. If I'm a large C B G company talking to these premium content owners, like they're the ones striking those deals. If you look at our customers in the mid-market, they're…

We have time for one additional question, which will come from Chris Kuntarich with UBS.

Hi, thanks for taking the question here. I may have missed it, but is there any ad spin guide implied in the 1Q revenue guide?

We actually did not put that out yet, or, or put it out this quarter. And really, what, what's going on there? As I mentioned earlier in 2023, the spend growth will be much closer to revenue growth and ex-TAC growth. So the fact that our growth rates are starting to align, which was not the case last year last year. We specifically would put out spend growth guides because it was so much different than the revenue and ex-TAC guide because of the mix shift that was happening this year. We're not going to see that. So we did not put a, a spend growth number out, but it will be within the range or pretty close to the revenue guide we gave Growth guide and ex-TAC Growth guide.

Okay. So, so definitely still declining. I guess as we think about the re-acceleration in the, in the second half of the year. Like what, what would need to happen in order for ad spend to re-accelerate to 20% ad growth?

It's really, I mean, you, you think about it, the, the, we were impacted in the second half of 2022. So the comps, as I said earlier, are a lot easier to beat. And the business really is about, you know, we, we are growing notwithstanding what's happening, the, the impact of the economic situation is impacting our growth, but we are still doing well. So as we start getting into lapping the macro impact on our prior quarters, you know, it's really not, we're not expecting huge growth we're, or a huge improvement in the economy. We're really expecting a stabilization to happen as we move into the second half, which we think can drive growth based on the comps that we have for last year.

And Chris, just to add a little bit more color, just a little bit more tactically what we're doing on, on the business side what we ended up doing as part of our cost realignment, we also ended up realigning our sales force. We talked a lot about and had been talking a lot about the mid-market. And we actually continue, we, we do this every couple years where we kind of assess where we, where we seeing the most penetration. Some of that might be geographic markets, but in this case, what we're seeing is that we're doing so well in the mid-market, both agencies and client X that we had a re-alignment there. And so I think that is going to add to new customer wins. So I expect that as part of our, the reacceleration of growth. That's one. Two, as we talked about both Tim and I did around some of these new, new innovation that we're going to be launching this year around AI feature sets within, within the platform, really what that is, those are all things that are going to improve campaign performance. And I don't care what market we're in when campaigns perform, the budgets continue to they, they will continue to grow if you're hitting customer acquisition targets, return on ad spend targets. So I I, we have some things in the works that, that we'll see the light of day here pretty shortly that are going to improve. And then again, the last piece I'll say, yes, we're, it's a slow start, but it is stable. And then just again, to focus people around the, regardless of what the macro looks like, the shift of linear into CTV is naturally a big growth tail end, and that's going to be another leg of growth for us. So I think those three things are tactically what we're, what we're expecting to reac accelerate growth into the areas that you talked about.

Got it. And as, and just one last question here. You called out the mid-market opportunity re-accelerating customer growth. Should we be thinking about customers growing in one queue on a sequential basis? And just as we're thinking about '23 and kind of the scope of this opportunity with mid-market, you grew by, if I have this right 17 customers in, in '22 on a year-over-year basis, that's down from where you were in '21. Should we be thinking about kind of like low double digit high teams? How should we think about the scope of that opportunity and, and how that factors into 1Q?

It's hard to, it's hard to say exactly when customers make the switch. And so I think on an annualized basis it's pretty consistent within any given quarter. It could be choppy, some might not be ready to go in Q1, some might be ready to go in Q1. So it really just depends on where the customers are at in their cycle and so to me, I don't look at it on a, on a quarter by quarter, but more of an annualized basis. But certainly that's the focus of our organization is on those mid-market agencies winning new customers. And then with our current customers, consolidating that ad spend more and more to grow the average spend per customer. And so that's going to be our focus. I wouldn't read into any one quarter or the other, but we're, we're very focused on getting those customers into the percenta spend model because that's when they enter our cohort and we have more predictability into the future.

One other point I'd like to make on the customer account. So when we were setting up priorities for '23, we took a, a close look at our customer base. And what we found was that we had a handful of customers that were not scaling on the platform. Now the large majority of our customers, especially on the percentage, percentage of spend side, consistently scale, they spend more in year two after year one and so forth. So as we cycle through some of those low spending customers, there will be some negative impact on the customer count as we move through 23. Although we don't expect it to be that significant the impact from cycling through those customers will not be significant on from a spend perspective though. But it could impact customer account on a quarter, over a quarter basis.

And, and Chris, just to put that, those customers, although hit the, the minimum thresholds, we don't see the sp what what we call the spend ability in future years. And when Larry's saying cycle, we're cycling them out. And the impact that you then see might be some small dominous amount on, there's some noise on customer count, but you'll see the spend proactive customer actually then grow.

And again, that does conclude our Q&A session for today. Larry, Chris, Tim, any closing comments?

That’s it. Thanks everyone for joining the call and we will see you next quarter.

Again, this does conclude today’s earnings webinar. Again we thank you all for your participation and you may now disconnect.