Well, hello, everyone, and welcome to Viant Technology's First Quarter 2024 Earnings Conference Call. 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. [Operator Instructions] We thank you all for your attendance today. And I will now turn the webinar over to Nicole Kunzman with The Blue Shirt Group. Nicole, over to you.

Thank you, Kelsey. Good afternoon, and welcome to Viant Technology's first 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'll make forward-looking statements on our call today, including, but not limited to, our guidance for Q2 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-Q for the year ended March 31st, 2024, 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. We had a very strong start to the year with results ahead of our expectations in the first quarter. Revenue in Q1 grew 28% year-over-year, while contribution ex-TAC grew 22%, driving adjusted EBITDA of more than $3 million in the quarter. The momentum we saw in the second half of last year has carried into 2024 as expected. Our strong results in Q1 were driven by accelerating momentum in CTV, which outpaced the market with more than 50% growth year-over-year as we continue to take share, capturing a larger percentage of our customers' budgets. Simultaneously, we are continuing to improve the ease-of-use and efficiency of our platform by delivering on our vision of autonomous advertising through ongoing releases of AI-related platform enhancements and products. The rapid adoption of our patented household ID is driving strong campaign performance and measurement results for our customers. CTV was again a bright spot for us this quarter, and the success we're having is a testament to the value we're driving for our customers through this channel. As advertisers are looking for more impactful formats and channels to drive the biggest return on their ad dollars, we are capturing market share in CTV. This increase in share is due in part to our Direct Access program, which connects our customers directly with premium CTV inventory from the likes of Disney and Paramount. And this is becoming a notable driver of CTV spend on our platform. With more than $60 billion in linear TV budgets shifting to Connected TV, we are -- we see our strong foothold in CTV as a significant long-term tailwind for Viant. Chris will elaborate on this a bit more in a minute. Another area of strength for us in Q1 was streaming…

Thanks, Tim. I'll spend a few minutes today revisiting our strategic priorities for 2024 and some recent updates in a few key areas. We remain extremely encouraged by the customer activity we are seeing across our business, both in winning more share of wallet with existing customers and building on our pipeline of new larger customers. Our vision for autonomous advertising is a big part of what's driving this as the new products and features we've recently added are attracting larger customers to our platform. We're onboarding new customers who are more quickly adopting our newer products, which we believe is further evidence that our strong product market fit will continue to drive more advertising dollars to our platform over time. Our pipeline of customers coming into Q1 was as promising as ever. We've now seen a number of these larger customers get onboarded and expect them to become meaningful spenders with Viant over the course of this year. A key area of differentiation for us is our AI product suite, which includes AI bid optimizer, chat with data and AI recommendations. These tools together are designed to allow for simplified yet more effective media buying and campaign execution for our customers. We've highlighted AI bid optimizer on recent calls, and I'm excited that we will be releasing version 2.0 of AI Bid Optimizer, ahead of schedule in June. Bid Optimizer 1.0 has historically been able to help customers achieve 35% average savings from a CPM standpoint. And we're excited about the updated version because we expect it to drive even more savings for our customers. Bid Optimizer has been one of the key products that new customers are really gravitating to. And we're pleased to be able to help them lower their media costs and drive higher return on…

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. As Tim discussed, we had a very strong start to the year, with Q1 results coming in towards the high end of our guidance, or better, across all key metrics. Many of the trends that drove our strength in 2023 continued into the first quarter of 2024. Most notably, the progress we've made in the last year towards our vision of autonomous advertising is resonating with both existing and prospective customers. The AI-based features and products that we've rolled out in recent quarters are driving both increased efficiency and higher return on ad spend for our customers. In turn, our customers are consolidating more of their ad spend onto our platform. We are also having more discussions than ever with large potential customers, leveraging these early success stories. We intend to continue investing to further drive our innovation engine. And as Chris mentioned, we have some exciting new AI-based features and products coming in the months ahead. In terms of customer growth, during the quarter, we continued to scale our existing customers while also adding new, larger mid-market customers to our platform. On a trailing 12-month basis, the number of customers generating over $1 million of contribution ex-TAC increased by nearly 20% on a year-over-year basis, and the number of percent of spend customers generating over $500,000 of contribution ex-TAC increased more than 30% on a year-over-year basis. Moreover, contribution ex-TAC across our top 100 customers grew an impressive 25% on a trailing 12-month basis as of the end of Q1. These positive customer trends have enabled us to continue outpacing overall market growth. With that said, I'll now turn…

[Operator Instructions] And our first question is going to come from Matt Condon with Citizens.

Maybe first, could you just give us some color around just the linearity of demand in the quarter? And then maybe as we think about heading into the back half of the year, is there anything you can give us as far as the visibility that you have as you think about maybe just a full year of 3Q and 4Q? And then my second question is just on with The Trade Desk announcing a partnership with Roku this morning. It's giving them access to their data. What opportunities do you guys have maybe to launch similar partnerships that can give you access to unique data that can help drive performance, particularly in CTV, as it becomes a larger portion of your business?

Larry, do you want to take the first one?

Yes. In terms of linearity of demand, Matt, essentially Q1, we typically see the quarter build throughout the 3 months, with each month being better than the prior month. That held true this year. It was a little bit different last year where it was very slow at the beginning of the quarter. But we started the quarter very strong and that momentum continued throughout.

In relation to the Roku partnership, I didn't get a chance to read the full extent of it. We have a strong partnership with Roku as well. We have an integration with them that leverages the Roku ID matched to the Viant Household ID. So I didn't get a chance to read that. But I do know that our customers are serving addressable advertising into Roku and their whole user base. So I'd have to check back with you on that.

And just to close the loop on the first part of your question. So in terms of the second half of 2024, as you know, we haven't given guidance in terms of what we think we will do. But what we have said is we do expect to continue to outpace the market. I think market expectations for U.S. Programmatic are in the 15% to 16% growth rate this year. And we believe certainly for the full year, we will outpace that growth.

Andrew Marok with Raymond James has the next question.

You talked a little bit about the cookie deprecation deadline push earlier. I guess I kind of wanted to get your thoughts at all, like given the scale of the CMA's problems with the Privacy Sandbox, I think it's almost 80 complaints that they brought up. Do you see this impact ever being solved? And if it's not, kind of how does that impact the evolution of usage of the Household ID?

Yes, I think just the implementation, just getting to Google's deprecation of third-party cookies, there's lots of decision makers at the table. And so I think they're kind of stuck in between that decision. So it's not a shock that it continues to get delayed there. I do think there will be resolution one way or the other. And I think that resolution will fall on the side of more privacy-friendly approaches to Internet advertising just in the long run. So we think the Household ID, if you look at it today, we mentioned in the prepared remarks, less than 10% of ad spend utilizes cookies across our platform today. One thing that most people forget about is third-party cookies really are just the Google Chrome web browser. When it comes to an omni-channel DSP like ourselves, that's less than available ad opportunities on the platform. So our customers are spending, utilizing the Household ID 90% of the time across the platform. And it's because of the strength that that offers them. And that strength is it works across channels, across websites and apps and ties both in-store and e-commerce sales. And a third-party cookie just doesn't deliver that. So that's why we mentioned that so much. More and more customers are choosing Household ID because of those benefits I just described.

Great. And if I could sneak one in on streaming audio.

Yes.

I guess, what are some of the drivers behind that outsized growth in that channel? Is there something about it that maybe appeals more strongly to kind of the smaller and midsized clients that you tend to over index with? Is it maybe less lift from a creative perspective? Anything behind that?

Yes. I think, #1, the clients are just seeing really good results. They see the results because there's not a lot of ad clutter. I would say, #1, if you're listening to a podcast or you're streaming music, it's really a dedicated listener. So I think that's #1. I think the ad recall rates are extremely high. So customers are seeing it in the results. The second thing I'll say is that much like any emerging channel, the more and more supply that comes online or is available and programmatic, that also adds to the growth. So we saw a tremendous amount of supply towards the end of last year that would be coming online for '24. So I think that added as well across all major audio platforms, both podcasts and in music and radio.

Yes, I would just add to that. It's the scale, the premium nature of the content and the targeting capabilities. Very similar to connected television.

Moving on to Maria Ripps with Canaccord.

So first, you called out momentum in the public services vertical. And I feel like you sort of called out strength there for several consecutive quarters now. Is there any additional color maybe you can provide with regards to what's driving this incremental spend? Are there any specific types of government agencies or municipalities? Or I think you called out universities last quarter that sort of you're seeing momentum with -- just more color would be great.

Yes, I think a lot of the customers in that vertical have historically been direct response, display based advertisers that really focus and use the cookie. And I think that they've seen their results precipitously decline over the last 3 or 4 years. So many of them are heavy in CTV and now they're able to see returns when buying television like advertising. So I think that's really the biggest -- that's the biggest area, specifically around other organizations, whether it be universities or different municipalities. Sustainability has been a nice focus for them as well. And so our efforts around our electricity program has definitely helped in that area. We have a big leadership position around sustainability, something we're pretty serious about. And that's also led to some client wins as well.

And maybe one more if I could. It seems like you're having a lot of success sort of moving upstream with the mid-market segment. So as more SMBs sort of adopt generative AI sort of supported creative tools and sort of more fully embrace digital advertising. Can you maybe just talk about how at this point you view sort of engaging with the long tail of smaller advertisers that will still meet your sort of minimum spend thresholds?

Yes. We're not really focused on the SMB segment. I think that when we think about creative and AI, we think that's very, very, very early stages just in the industry. We do think there's incredible promise for it. And we think there's going to be a lot of innovation in that space. And it's going to be big for small businesses, because that's kind of I think that's for small businesses to buy across the Open Web. And when you think about video, that's something that they don't have readily accessible. They can easily create a search ad or they can easily create, a social ad. So, I think as an industry that is something that's still on deck. As far as our customers, though, and really moving up market within the mid market, we're really just it's the results and us being in market for as long as we have and gaining more and more trust from our clients. They're just continuing to increase spend. And then word of mouth spreads. The divine platform is getting great results. So that's getting us more and more new customers.

We'll now hear from Craig-Hallum's Jason Kreyer.

So, just on 2 questions on CTV. So just curious, if you can kind of define what's driving the inflection and the share gains that you're seeing there? And then also, when you're onboarding Direct Access customers, are you bringing CTV advertisers directly to Direct Access or is that the more mature CTV advertisers adopting Direct Access?

It's really, with the most recent stats in the quarter that over 50% of our total of our customers, CTV spend is going towards direct access partners. That really is, it's widespread. And so it's across the board. And really what's driving that, they all want if you think about there isn't there's not the same type of long tail and CTV apps like there is in websites. There's, I don't know, 25 million websites. There is a much smaller, I think it's 50,000 CTV apps. So it is a lot of the viewership is going to be aimed at the premium end of the market. And that is really, if you ask customers, where do they want to be? That's where they want to be. Number one, I think we make it a lot more palatable for them, because we're connecting directly with those content owners and they're seeing lower CPMs as a result. And they're also winning ad auctions at a higher rate. So net-net, those content owners are getting higher CPMs, even though previously when customers would bid through other platforms, through intermediaries, they were spending more. So, I think that's #1, the CPM savings is big. Number 2, over the top of that is our Household ID. Across other platforms, this isn't widely understood. There's not a standard identifier like a cookie and CTV. So marketers are buying other platforms typically end up experiencing over frequency and not reaching as many people. Therefore, the results aren't good. And so when they use Household ID and it's available in excess of 90% of the time and CTV in our platform, they're controlling frequency near perfectly. That means they're reaching the intended amount of households that they and really just maxing out there and it's driving better results. It's pretty simple. So if I can get you a better price that's direct to large content owners and then you're controlling reach and frequency, I mean, that's advertising. I mean, just getting to defining the growth and connected television and what's driving it. It's more simple than you would think. I mean, we say this over and over, but we have walled the garden level address ability, but not on user generated content like social. It's on the world's most premium content. And I think that overarching the combination of the 2 things is what's fueling the growth of connected television, the targeting, the measurement and the sight, sound and motion of that big shared device in the room really moves consumer behavior. So, for CTV growth, we really don't see that slowing down, we feel very good about it now that address ability is brought to television, I think you're just going to see the budgets continue to flow.

And our last question will come from Chris Kuntarich with UBS.

Maybe just going back to Direct Access and your ability to expand beyond Disney and Paramount, could you maybe just help us think about timeline there, how those conversations are going and maybe how that could potentially factor into the back half of the year? And then the second question would be just around cash expenses. 2Q guide was a little bit ahead of our expectations. Can you just talk a little bit about what's driving this sequential growth in 2Q and maybe how we should be thinking about the second half of year expenses? Not sure if the work that you guys have done to pull forward the timeline on the AI bid optimizer has maybe pulled forward some expenses.

I'll take the first one just on Direct Access and that program and the growth of that. Disney and Paramount were early ones in there, but there's many more in there. I didn't want it to sound like it was just we have 2 partners and they're driving that. We are focused on all the premium end of CTV. I do see that there'll be more and more partners that are continuing to be added to that every single quarter. And one of the things is, is that what those partners have, yes, they have incredible content, but they also have subscribers that are logged in. And today's ecosystem with DSPs, they have no ability to, many of them have no ability to bid and buy off of. In the case of Disney, they have something called a Nebula ID. Most platforms have nothing. They don't know what to do with that. So when those partners integrate with our Household ID, and that's really essentially you're matching on subscriber data. So when we say walled garden level addressability, we're actually one of the few DSPs out there that can actually bid on that. And actually, these content owners are getting higher CPMs as a result. And it's because marketers are seeing better returns. So they're bidding more on those. So it's really it's a self-fulfilling prophecy here. More and more of these large content owners are coming at us. I expect that to continue to gain even more steam throughout the year. We're remaining focused on CTV for now, but there's no reason why this wouldn't happen across other channels as well. Larry, can you take the question related to cash expenses through the end?

So, on the Q2 guide, we did guide $32 million to $33 million of OpEx for second quarter, which at the midpoint would be up 21% year-over-year. But what I would say is the 21% percent growth is not reflective of what annual growth will be. Q2 2023 was the low point of our overhead last year. We had essentially no or very little in the way of discretionary investment or spend. For the full year, I think we've said this before, we expect overhead or non-GAAP OpEx to grow in the low-teens percentage in 2024 for the full year. We will continue to make investments, as we said, but we will be very pragmatic and diligent about what we're doing. We always have the opportunity to dial it up or dial it down, but we're expecting overhead growth in the low teen percentages for the full year.

And maybe if I could just squeeze one more in. Just curious, how are you thinking about political? Can you just talk to us about how that's trended year to date versus kind of your expectations and kind of visibility into back half of the year budgets?

Yes, political, we've made great progress in this category. We've got an established office and have hired dedicated staff for this vertical. So we do have high hopes for political. A lot of our discussions with clients, they do believe digital will be a significant beneficiary this year relative to linear television, kind of very similar to other vertical categories that we're seeing. So we do think political could have an opportunity to contribute to our revenue growth more so this year, as it was pretty insignificant in the prior years.

Well, that does conclude our Q&A session for today. Chris and Tim, I'll turn it back to you for closing comments.

Great. Thank you very much for joining the earnings call. And I just want to say thank you to all the Viant employees who helped us have an exceptional first quarter and a great kickoff to 2024. We'll see you next quarter. Thank you.