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.

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?

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…

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, 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…

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…

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.

Okay. Can you hear me okay?

Yeah. Hi, Laura.

Hi, Laura.

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.

Larry, you want to take the?

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.

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?

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.

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.

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.

Fantastic. Great numbers you guys. Thanks for taking the questions.

Thank you.

Thanks, Laura.

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

Can you guys hear me?

Yes.

Hey, Jason.

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.

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. 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, 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.

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.

Right, perfect. Thank you, guys.

Thanks, Jason.

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

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?

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.

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.

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.

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.

Mobile apps.

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.

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.

Thank you.

Thanks, Matt.

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

Hi, Chris.

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.

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.

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.

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?

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.

Super helpful. Thank you. Nice quarter.

Thanks.

Thanks, Chris.

Thank you. And our next question comes from Mauricio Munoz from Raymond James.

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

Yeah.

Yes, we can.

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.

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

In the swing states.

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.

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

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

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.

Great. Thank you.

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

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.