Okay. Hello, everyone, and welcome to Viant's Fourth Quarter 2023 Earnings Conference Call. My name is David and I will be your operator today. Before I hand the call over to the Viant leadership team, I'd like to go over a few housekeeping notes for the program. As a reminder, this webinar is being recorded. After the speakers' remarks, there will be a Q&A session. [Operator Instructions] And with that out of the way, I would now like to turn the call over to Nicole Kunzman with The Blueshirt Group.

Thank you, David. Good afternoon and welcome to Viant Technology's fourth quarter 2023 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'll make forward-looking statements on our call today, including, but not limited to, our guidance for Q1 2024 and our platform development initiatives that are based on assumptions and subject to future events, risks, and uncertainties that could cause actual results to differ materially from those projected. These forward-looking statements speak only as of today and we undertake no obligation to update or revise these statements, except as required by law. For more information about factors that may cause actual results to differ materially from forward-looking statements in our entire safe harbor statement, please refer to the news release issued today, as well as the risks and uncertainties described in our annual report on Form 10-K for the year ended December 31st, 2023, 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 non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the news release issued today, which has been posted on the Investor Relations page of the company's website and in our 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 extremely pleased with our results in the fourth quarter, which reflect the accelerating momentum we are seeing across our business. Revenue in the fourth quarter grew 18% year-over-year, while contribution ex-TAC grew 28%, resulting in an almost 400% increase in adjusted EBITDA for the quarter. Our growth in contribution ex-TAC was the highest we've had since the post-COVID recovery spike in 2021. This was driven by a record quarter for total ad spend on our platform, as we continue to grow our market share and capture more of our customers' ad budgets. I'm pleased with our team's commitment to execution, as we closed out a strong year of growth and innovation for Viant. The success we are having today is a result of the strategic role we play in the programmatic ad ecosystem, as an independent buy-side platform, coupled with our ability to capitalize on this position with our strong product market fit. Viant is one of only four enterprise-grade self-service demand-side platforms in the market and one of only two platforms that are buy-side only, meaning that we are completely independent from representing any publisher inventory. We believe marketers are becoming more acutely aware that they need an omnichannel platform that doesn't also service publishers to achieve their desired campaign outcomes. Viant fits squarely with what advertisers today are looking for, particularly with mid-market businesses that require a more data-driven platform that can achieve better outcomes, along with a higher level of support compared to one-size-fits-all platforms that cater to large multinational brands. We continue to see increasing traction with larger mid-market customers as we become their go-to platform. One of the notable highlights from the fourth quarter was our strong double-digit growth in Connected TV, representing almost 40%…

Thanks Tim. I'd like to take a few minutes today discussing our top priorities for 2024 that frame our strategy for growing our market share in the quarters and years ahead. The first priority is continuing to integrate more AI and machine learning into our platform to deliver a better experience for our customers. We had a strong year of incorporating premium AI products into our platform in 2023 that have been delivering on customer happiness, as they continue to see better results and a more efficient user experience. This point can't be overstated, as customers of DSPs look for platforms that are easy to use, hit their KPIs, and are supported by someone that only serves their interest. On that note, in 2023, we rolled out two key initiatives that further leverage the power of AI to make our platform better and easier to use for customers. The first is our AI Bid Optimizer offering, and the second is our Viant Data platform. I'd like to elaborate further on both, specifically how we're leveraging AI and machine learning to make improvements to our customers' experience by getting them more return on their ad dollars. At the same time, these products are priced to help drive our revenue, while saving money for our customers. We launched our AI powered Bid Optimizer in Q2 of 2023 and we've seen strong adoption from our customer base. We've seen incredible adoption with this product because it has helped our customers achieve 35% average savings from a CPM standpoint. Bid Optimizer leverages AI to find the best pricing on publisher ad inventory, while also driving higher win rates for customers and ad options. We believe that passing this efficiency and cost savings along to our customer, all -- not only increases their return on…

Thank you, 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. As Tim discussed, we had a strong fourth quarter, which capped a year of accelerating growth for Viant. I'll provide a high-level update on the full year before getting into the detailed fourth quarter results. For the full year 2023, revenue totaled $222.9 million, an increase of 13% over 2022. Contribution ex-TAC was up 15% over last year, totaling $143.4 million. Non-GAAP operating expenses totaled $114.3 million in 2023, a decrease of over 13% over 2022. And adjusted EBITDA totaled $29.1 million in 2023, up over $35 million on a year-over-year basis. Our strong results this year were a function of both our ability to deliver a comprehensive platform, perfectly tailored to meet the needs of advertisers in this ever-changing landscape, as well as a stable macro environment. As the year unfolded, we saw a consistent acceleration in growth rates, as we continue to execute and gain market share. Notably, our year-over-year contribution ex-TAC growth rates showed remarkable progress quarter-by-quarter in 2023, starting at 2% growth in Q1 and 6% growth in Q2 and increasing to an impressive 22% growth in Q3 and 28% growth in Q4. In 2023, we remain focused on providing the performance and support that our mid-market clients require and they responded by scaling their advertising budgets on our platform. Our ability to deliver high-performing campaigns, while enabling best-in-class attribution and reporting is particularly vital in an environment, where advertising budgets are under increased scrutiny. Specifically in the mid-market, where ad dollars must work harder, our platform's ability to track return on ad spend in real-time allows for continual campaign adjustments, so that our customers'…

Thanks Larry. In summary, we are really pleased with the progress we made in 2023, and we wouldn't be where we are without the hard work of our employees and the relationships we've built with our partners and customers. We have many irons in the fire, and we're excited about the opportunities ahead for Viant, as we roll out more offerings in our AI product suite and continue to capitalize on the mindset change of advertisers, amid the deprecation of cookies. We are confident in our ability to execute on our targets, as we did consistently in 2023, and we look forward to continuing our momentum in the year ahead. I'd like to hand it back to the operator to open the line for questions.

Thank you, Tim. We will now move to taking your questions. [Operator Instructions] And our first question comes from Laura Martin with Needham.

Hi there guys. Great numbers. Congratulations.

Thanks Laura.

Thank you.

Great. So, I want to first focus, in your prepared remarks, Tim, you talked about the competitive advantage of your Household ID compared to cookies, but could you please remind us how that -- how your Household ID is compared to the privacy sandbox by Google and UID 2.0 by Trade Desk. Remind us why yours is better than those two?

Yes. Really good question. As it relates to privacy sandbox, one thing to keep in mind, privacy sandbox is only the Chrome web browser. So, you're talking about desktop or laptops and smartphones and that's where it's really focused on kind of showing an ad to that device and that same device purchasing the product from the advertiser and it helps tie that together, similar to what programmatic advertising has been all about. But we view privacy sandbox as limiting to only the Chrome ecosystem. The Household ID -- getting to the second part of the question, Household ID works across devices. And in Connected Television, one thing you have to do is you're going to expose an ad on a CTV, but consumers can't purchase the product through Connected Televisions yet. They're either going to use their smartphone or go in store and purchase the product itself. Household ID ties both e-commerce transactions from another device or in-store pickups, and we do that by using the first-party data and tying it to the Household ID, first-party data from the advertiser, many advertisers if you buy a product or shipping it to your home or you're a part of the program, like you're a loyalty member and those get added in. So, by ingesting the advertiser's first-party information and just to go back to a Household ID, effectively, what that is, is your home physical address. That's what we anchor all of our ID to. So, when you think of your physical address, it's not tied to big tech, like e-mail addresses potentially could be that are here today, but could be taken away tomorrow. So, we believe that building on top of Household ID is the correct way forward, not just for the near-term, while cookies get deleted, but for the long-term because it's a data point that big tech doesn't control.

One other point, Laura, I just want to mention the difference between really the Household ID and many other solutions out there is the current penetration of our Household ID in market. On average, it's north of 80% of all ad requests that we handle -- our DSP handles and specifically in connected TV, it's over 90%. So, over 90% of the time when marketers buy CTV through our platform, they're able to leverage the Household ID. And I'm not aware of any other alternative identifier or other source out there that has that level of scale.

Great point.

Okay, great. And then my second one is, I'm really interested that you're sort of jettisoning your smaller clients, and that ties into Direct Access. Is it your feeling that Direct Access, where you tie in directly to these walled gardens is disintermediating a lot of those cost intermediaries, but in the end, it's of this -- like play this out over three years, do we end up with just a lot fewer players in the open Internet and small guys on both sides of the wall, the SSPs and DSPs just go away because they can't affect -- they can't actually spend the money to do like to keep up with some of these technological developments?

Well, I would say that certainly, Direct Access, ours is focused on the largest content owners in the world and specifically in CTV. They want to connect direct with our customers' demand and I think there's a few reasons for that. But most notably, they want to connect with our customers' demand because that's incremental demand to them and those are typically customers, who are not doing large upfronts that they've done linear television upfronts with for 30 years, 40 years. Our mid-market customers are a way to bring new revenue to their platform. So, that's why we see such a great response. For marketers, it's a no-brainer. Do you want to buy through a middleman or do you want to buy direct? It's quite simple. So, I don't think it's so much about weeding out smaller players or anything like that. But I just think it's an efficiency play. Marketers are always going to choose a path that gets them more of their budgets going towards working media nonetheless. So, that's why we think that the response is so high.

And one of this so -- and this is my last one, just building on that comment. So, Chris, what's the CPM uplift. You guys said that there was a higher -- more money went to the publisher and your clients save money. What's the CPM uplift when you do this direct -- when you cut out the intermediaries?

So, it's a great point. So, great question. It's interesting because when a marketer buys through Direct Access, they actually are achieving lower CPMs. So, they're getting lower CPMs, but they're winning their auctions at a higher percentage. And why is that? That's because the publisher themselves -- the publishers within Direct Access are actually seeing the meaningful CPM increase. That's why the auctions are being won at a higher percentage. We see those really in CTV, we're seeing those upwards of 20% higher CPMs in CTV. These are some of the most premium players in the market. So, it's incredible results for publishers that are part of Direct Access and it's great for our customers, again, they're getting lower CPMs in market.

Okay, that's just what I wanted. Thank you, guys. Congratulations again.

Thank you, Laura.

Okay. Our next question comes from Andrew Marok with Raymond James.

Thanks for taking my questions. You talked a bit in your prepared remarks about getting into the larger end of the mid-market and the strength of your customer pipeline. Can you maybe elaborate, has there been any impact to the mid-market on the testing of cookie deprecation that we've seen so far that has catalyzed maybe the strength of your pipeline over the last couple of months since that's been implemented?

Yes. Andrew, thanks for the question. Certainly, in the mid-market, we always editorialize a bit around the fact that the dollars have to work harder in the mid-market. We also find that mid-market advertisers are much more data-driven and the results just matter to them more. And so, without a doubt, any time somebody is testing our Household ID versus, say, cookies, they are able to see higher return on investment really because we are measuring at the household level. And they're all -- when you do that, you're not just seeing e-commerce transactions, you're also seeing physical, retail being brought in. So, they see the true impact of what ads have, again, not just on e-commerce, but on e-commerce plus in-store.

One thing, Andrew, just in terms of the strength of the pipeline, I think that is really owed to the mindset shift by marketers that they're actually choosing new platforms now, given the reality of cookie deprecation has started. Whereas in the prior years, there was a lot of education, and you know what will make a decision when Google eventually does delete the Chrome cookie. So, I think there's a lot of activity that's happening. There's that mindset shift by the advertisers that the time is now and the cookie deprecation is real. And so, they're more active in their decision-making versus prior.

Great. Thank you. And for my second, maybe a bit of a different topic. Obviously, the AI product suite is a point of emphasis and internally developed to this point. So, as you kind of build up your cash balance and continue to be cash generative, how do you think about the build versus buy decision in AI, as you seek to further scale that suite?

Yes. Well, I would say, when it comes to the newer AI technologies like generative AI, there's not really a lot to go out and acquire. And so, all these ideas are new. The technology is still new. We found the fastest way to market in that area was certainly to build, especially given the expertise we have in-house, as it relates to data and our ability to apply AI to data. Our Viant Data platform, it's really like no other in the marketplace. We don't have a lot of competition when it comes to that product itself. And so, for us, it was a pretty easy decision to actually build that product from scratch, given we have world-class expertise in-house, and we've got many, many customers already on the Data platform. And again, I said it previously, but I'll state it, it all the AI that's taking place is happening inside of our data platform. That is where 98% of the AI is getting applied. And so, any customer already live, we have a huge advantage of being able to scale new products out. When it comes to M&A, we're always on the lookout for complementary products and services that we think we could attach to our customers at a high rate. And so we will continue to look at M&A, but when it specifically comes to AI, it certainly the build made a heck of a lot more sense for our first set of products that we brought out. If things change and something shows up, that looks like we believe could have a high attach rate to what customers are using our DSP or Data Platform for, we'll certainly take a hard look at it.

Well, I'm clear. Appreciate the detail. Thank you.

Thank you.

Okay. Our next question comes from Chris Kuntarich with UBS.

Great. Thanks for taking the question. Could we just talk a little bit about how you guys see the visibility into sustaining 20% revenue growth throughout 2024? And maybe how that compares versus kind of where your visibility was at, at this point last year?

Yes, thanks for the question, Chris. I can tell you, I think at the beginning of -- towards the end of 2022, moving into 2023, I think the whole landscape, there's a lot of customer uncertainty out there and really just around the economy. What we see is that clients are much more resilient this time around moving into 2024, much more confident and certainly around their budget planning. So, we feel really good around that. As Tim mentioned, and Larry did as well, this is the best pipeline and largest customer pipeline we've seen of some of our larger customers out there. As we continue to move up market within the mid-market still, but more and more customers coming on board that have that what we call spendability, the ability to continue to increase our spending year-over-year when they have success on the platform. So, we're extremely confident in the outlook for 2024, so excited to get the year kicked off.

I would add a couple of things to that, Chris. Although we didn't give guidance for 2024, we did on our last earnings call, give some kind of signals. We basically said that in 2024, we expect to grow faster than the overall market, continuing to grow market share especially in the mid-market. We also expect revenue in C-ex-T [ph] to grow faster than non-GAAP operating expense, which will drive incremental EBITDA and EBITDA margin expansion. So, we certainly are very bullish on 2024. We haven't put out a number, but we do expect to grow faster than the market.

Got it, very helpful. And you guys kind of dovetail nicely into the -- to my follow-up question, which was on the strength of the pipeline. Can you just maybe remind us how we should be thinking about the time from when a new client is coming on board to when they're really kind of up and running kind of the variability of that and maybe whether or not we -- any of the 1Q guide is a function of a couple of these key customers ramping? Thanks.

I don't think we have any outsized one customer. I know we don't have some outsized one customer, there's no swing in there for that. So, I think that as we look to grow throughout the year, we have -- like we said, we think that the onboarding process is relatively quick. And -- but typically, I will just say this one thing. Typically, in year one, a customer is testing and it's usually in the second year, we see them really amp their spending up. We see 1.5 times to 3 times increase that they spent in the first year. It's that year-over-year impact that we see. And the great thing just to remind you about this is these DSPs, they have extremely high -- very sticky rates with customers. We retain a really, really large percentage. And every year on platform, they continue to add more and more budgets. That's one of the reasons why at the end of 2022, moving into 2023, we really turned our focus on some of these larger customers that have that ability to continue to spend multiples more every year they're on platform.

Got it. Thank you very much.

Okay. Our next question comes from Matt Condon with Citizens JMP.

Thank you for taking my questions. My first one is just on the second generation of the AI Bid Optimizer. What can we expect this to do to the model as far as is it another step function change as far as the 35% savings on CPMs with any color there would be helpful?

Yes, I don't want to share any specifics around that too early, but we would -- the second generation is aimed at how we generate larger cost savings for customers, number one. Number two, there's a bunch of other benefits that traders of these platforms that they're gaining by using AI Bid Optimizer. Yes, they get the savings. And yes, when you get savings, you're hitting -- you're actually getting a higher return on ad spend because your cost of media is lower to achieve the customer. But there's lots of other benefits of automation that we're introducing within this, just pacing their budgets, making sure they have the proper amount of media spend in market on a daily basis. That's very important for traders. And then traders have oftentimes multiple KPIs. It may not just be sales, it might be reaching a certain target of a certain percentage of a target, let's say, mails. They want to reach at the highest possible rate. There's lots of other benefits that we're focused on. But in the end, what we're looking to do, like we did with version, the first generation of AI Bid Optimizer, I talked about it in my comments, which is customer happiness. So, when they find their ease of use of the platforms is there and they're hitting their KPIs at accelerated rates, they continue to spend more. So that's really our focus. But more to come on the second generation of AI Bid Optimizer. We're really looking to see can we save our customers even more and deliver more bigger wins for them.

Awesome. That's super helpful. And then maybe just for my second one. On Direct Access, now over 40% of CTV spend, where can this get to over time? Any color there also would be helpful? Thank you guys.

Well, I think certainly, Direct Access when it comes to Connected Television, it can get in the very, very high percentages, north of 80%, I think, can make sense. There -- when you think of contrast that to the open web of display and the number of websites available there versus the number of apps in the CTV environments is substantially less. So, in terms of managing these direct integrations, we think it can get as high north of 80% of spend going Direct Access. It's really all driven by our customers. They have choice -- of course, have choice in how they purchase their media, but more and more, we're seeing that the preferred way would be direct.

Okay. Our next question comes from Jason Kreyer with Craig-Hallum.

Perfect. Thank you guys. I just want to go back to the AI topic. You introduced several solutions late last year, and I think more coming this year. But just wondering if you could unpack like the rate of new customer adoption or willingness of customers to move over more budgets and utilize that -- those AI functions with a bigger component of their spend?

Yes, I would say that when it comes to AI adoption, there is hesitancy and so -- but the great part about these platforms is that you can test it with a small amount of budget, see the actual results and then make -- how do you scale into it. I will certainly -- I'll tell you that no one has selected it and then shut it off that I'm aware of. More and more, as soon as you start to get the testing, we see adoption move pretty rapidly throughout the quarter because it makes their lives easier and more reliability on hitting your results of the KPI. So, I think it's the reliability factor that people are testing. Is it consistent? Does it do anything negative and then they usually ramp within the quarter. So, we've seen tremendous adoption through Q4 of 2023 and we expect a similar rate of adoption throughout 2024 for the remaining customers, who haven't selected it. And as we release Generation 2 of Bid Optimizer and the results become even more compelling, we do think the vast, vast majority of our customers will be using that new technology.

One other point there, Jason, back in October at our Innovation Day, you see that we kind of pre-launched ahead of time some of these new products, these AI products that we have out in the market. Why are we doing that? We want to help educate our customers, we want to help get them familiar with products, understand the value and the benefits to them. We always know that as a DSP, you have to give the customers a choice. You have -- we're not going to -- we don't make the decisions. They self-direct everything they're going to do. So, we want to make sure that we're out there in market with our customers, helping educate on the benefits. And we think that's an easier way and it's one of the reasons why I think we've seen such good adoption today.

Thank you. A follow-up for me. Just on cookie deprecation. Just curious, you're -- if you've seen anything notable kind of in the first 60 days here, and I know it's just 1%. And then overall, just in terms of customer behavior, what are the things that you're seeing in your business that gives you confidence that you're going to benefit and take on more budget, as we go down the path of deprecation more widespread?

Yes, I think one of the early things we've seen is a -- we've seen a lot of RFIs and RFPs for re-platforming. Marketers understand and I think overall in the market, there is way too large of a dependence by some -- by a lot of marketers on cookie-based display advertising. They're way too overly indexed there from a budget perspective and marketers are now realizing -- and they've seen in 2023, the value of CTV. And I think this is an important point because there's a lot of growth figures around CTV, I think eMarketer has it pegged at 23% growth in 2024. But what's not factored and that's predominantly just linear budgets moving into streaming. But what no one's paying attention to is, as cookie deprecation goes, what's going to be hit are these lower funnel direct response, cookie-based display advertising budgets that are in the many tens of billions that are -- we believe are going to get re-platformed. They're going to move to other channels that deliver on customer KPIs truly delivered. And we have -- there's been a recent study that also came out that marketers, the number one form of value -- what's going to help a marketer hit their KPIs, what channel is that? The number one channel was CTV. It wasn't search, it wasn't social, and it certainly wasn't display advertising. So, we think that there's an even larger growth opportunity in CTV. As cookies continue to deprecate, marketers are going to move that money to what's going to hit KPIs, and CTV is going to be a big winner there. So, we're seeing a large amount of customers looking to re-platform towards platforms that are really, really garnered towards CTV, but also in measurement, who's going to restore their vision on measurement when cookies go away. So, that bodes really well for us.

Okay. At this time, there are no more questions.

Great. Thank you, everyone, for joining the Q4 2023 earnings call and we look forward to talking to you again next quarter.

This concludes today's webinar. Thank you so much for joining us.