Integral Ad Science Holding Corp.

Good day and thank you for standing by. Welcome to the IAS Q3 2024 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Jonathan Schaffer, SVP of Investor Relations. Please go ahead.

Thank you. Good afternoon, and welcome to the IAS 2024 Third Quarter Financial Results Conference Call. I'm joined today by Lisa Utschneider, CEO, and Tanya Secor, CFO. Before we begin, please note that today's call and prepared remarks contain forward-looking statements. We refer you to the company's filings with the SEC posted on our investor relations site at investors.integralads.com for more details about important risks and uncertainties that could cause actual results to differ materially from our expectations. We will also refer to non-GAAP measures on today's call. A reconciliation of non-GAAP measures to the most directly comparable GAAP measures is contained in today's earnings release available on our investor relations site. All financial comparisons, unless noted otherwise, are based on the prior year period. So with these formalities out of the way, I'd now like to turn the call over to our CEO, Lisa Utschneider. Lisa, you may begin.

Thank you, Jonathan. Welcome, everyone, to our 2024 third quarter call. We reported a double-digit increase in total revenue for the quarter with growth across our optimization, measurement, and publisher businesses. We also advanced our technology and product innovation, expanded platform partnerships, including our first-to-market meta-optimization solution, won new customers, including from Oracle, and announced strategic senior-level hires. While we made significant progress towards positioning IES for long-term sustainable performance, our third-quarter revenue growth of 11% was limited by a slowdown in volume growth in the near term most notably in CPG and retail. As a result, we are taking a prudent approach to our fourth quarter and full year outlook and expect fourth quarter revenue growth of 11% consistent with the third quarter. The fourth quarter is expected to represent approximately 28% of full year 2024 revenue on par with last year's fourth quarter contribution. We exceeded our adjusted EBITDA expectations for the third quarter by diligently managing our costs. We reported a record third quarter adjusted EBITDA margin of 38%, which we expect to maintain in the fourth quarter. IES is a market leader based on our differentiated technology, including our suite of AI-backed products and our ability to deliver greater ROI and efficiency to brands on their advertising spend. In recent months, we have enhanced our executive leadership, platform partnerships, and product offerings to drive long-term growth. In September, we welcome Mark Hrabowski to IAS as Chief Operating Officer and Srishti Gupta as Chief Product Officer. The addition of Mark and Srishti to our leadership team strengthens our customer-first approach and advances our product development to meet the future needs of our customers and partners. Mark and Srishti's visionary leadership furthered IAS's commitment to customer obsession and superior product development. Mark brings extensive global leadership experience across the demand and supply sides of the advertising industry, spanning both enterprise and mid-market. He joined IAS from Oracle Advertising, where he led their global commercial organization for Oracle's advertising products, including Moat, DataLogix, BlueKai, and GrapeShot. He also brings senior-level leadership experience at Criteo, Perseo, and Yahoo. As COO, Mark leads our commercial organization encompassing global revenue, customer success, and marketing. Shristi has a proven track record of launching ad measurement and optimization products at global scale. At Amazon, Shristi spearheaded the creation of cross-channel measurement and optimization products. She also brings additional measurement experience from her tenure with IRI, now Sorkana, where she built products from the ground up. Most recently, she served as Chief Product Officer at ROCT, an e-commerce technology company, where she ensured a highly relevant experience across billions of e-commerce transactions. At IES, Shwisi leads our global product team, go-to-market initiatives, product marketing, and research and insights. Mark and Srisi have hit the ground running spending time with our customers, identifying opportunities to advance our go-to-market capabilities, and positioning IAS for success in 2025. We continue to maintain a strong pace of new business momentum, including greenfield opportunities with major global brands, as well as signed partnerships with advertisers, publishers, and platforms previously with Oracle. We won more than 75 new Oracle customers since June, representing a 72% win rate on Oracle opportunities in which we participated. We have hired over 30 former Oracle employees, which we believe gives us an advantage in securing and onboarding Oracle customers. New Oracle wins include brands such as Peacock, Heineken, and Emirates, platforms such as The Trade Desk, Quantcast, Nextdoor, Cargo, and Pandora, and publishers such as Dow Jones, Bloomberg, NASCAR, Condé Nast, and Triplelift. Let me provide some additional color on some of these recent wins. Peacock switched from Oracle Moat to IIS as part of the Moat deprecation, taking advantage of the seamless integration with auto-tagging and our CCB offerings. Heineken selected IES as their exclusive global strategic partner, replacing Oracle Moat. IES was awarded the opportunity based on our robust total visibility solution, which delivers transparency into media quality and costs across the programmatic supply chain, along with our full suite of core measurement solutions, including quality attention and sustainability. Emirates, the global airline based in Dubai, chose IAS as their global measurement and optimization provider following a competitive process. IAS won the Emirates opportunity based on our superior coverage, industry-leading CTV offerings, the strength of our product roadmap, commitment to technology innovation, and personal in-market service. In addition, we expanded our relationships with existing customers as part of several recent contract renewals. Volvo Cars renewed and expanded its global relationship with IAS. The expanded partnership includes post-bid total media quality, or TMQ, across social platforms, total visibility, and made-for-advertising reporting, as well as pre-bid brand safety, invalid traffic, and contextual avoidance. Opella, previously Sanofi CHC, a multinational healthcare company, renewed and expanded its global agreement with IAS. Our agreement with Opella now includes TMQ attention and sustainability measurement. Verizon recently expanded its relationship with IAS to include contextual avoidance across its business lines in the U.S. IAS's context control suite helps protect the Verizon brand across its programmatic channels. Verizon has been a valued IAS customer since 2016. and was most recently an early adopter of our total media quality product and major social platforms. IES is a trusted partner to brands as they embrace an omnichannel marketing strategy. TMQ, our AI-driven multimedia classification technology for social live feeds, continues to drive measurement performance. We have extended our TMQ capabilities on both new and existing platforms. With Meta, we are now supporting six additional languages for brand safety and suitability measurement for a total of 34 languages in over 100 countries. We recently expanded our TMQ offering on TikTok to include viewability, invalid traffic, and brand safety and suitability measurement across several new ad placements. These include TikTok's profile feed, following feed, search feed, and TikTok life. We are also expanding TMQ for TikTok, vertical sensitivity and category exclusion controls coverage to 75 plus markets by the end of 2024. In addition, we are live with TMQ on new platforms, including first to market with Snap, Pinterest, and Reddit scheduled to launch by the end of this year. At IAS, we lead with customer obsession. The voice of the customer informs everything we do. We build products based on customers' needs in areas that can drive accelerated revenue growth. Heading into this year's U.S. elections, marketers asked us to enhance our TMQ measurement offering to include misinformation detection in social media feeds, previously available only on the open web. We launched our misinformation detection capabilities on TikTok and Meta in April in advance of the general election and several months ahead of our nearest competitor. In September, we announced the launch of brand safety and suitability reporting for misinformation on YouTube. Pre-bid optimization in social media is another emerging area where we are meeting customer demand with industry-leading innovation. Using our pre-bid social products, brands can now optimize their ad placements, customize their suitability settings, eliminate waste, and increase ROI. The pre-bid solutions are integrated within our full optimization suite, so customers can apply their open web preferences seamlessly within social environments. Our differentiated classification technology has accelerated the rollout of our pre-bid optimization offering across the major social platforms. We were delighted that Meta selected IAS as their initial partner for the testing of our pre-bid optimization solutions on Meta. Our third-party content block listing solution for ads on Facebook and Instagram feed and reels offers global advertisers the ability to automatically avoid placing ads next to unsuitable content for their brands as aligned to industry standards. This launch closes the loop from pre-bid optimization to post-bid measurement on Meta. The launch of pre-bid optimization on Meta in October follows earlier pre-bid integrations with TikTok, LinkedIn, and X. Last month, we announced that we are currently in alpha testing in partnership with TikTok for our new video level exclusion list solution as we extend the reach of our pre-bid offerings on the platform. Pre-bid optimization more than doubles the size of our social opportunity and builds on our post-bid social media measurement revenue, which accounted for 22% of total revenue in the third quarter and over $100 million in annual revenue. Last week, we announced the launch of IAS Curation on Google Ad Manager. With IAS Curation, advertisers can now consolidate bidding on high-quality inventory and precisely target contextually relevant content to drive efficiency for their ad buys. This launch is the latest expansion of IAS's long-standing partnership with Google. IAS is currently the only verification provider supported in Google's curation launch. Last month, we announced the expansion of our quality attention post-bid measurement product to publishers and sell-side platforms. Leveraging our ML-backed models, quality attention weighs metrics into an actionable attention score which publishers and SSPs can use to take advantage of their best performing inventory. In CTV, we are investing in all layers of the stack, including device, publisher, and delivery with the goal of unlocking a projected $40 billion ad spend market by 2027, according to eMarketer. Our core customers are accessing the full suite of our publica products, which allows us to drive even greater optimization across demand sources. We have introduced new product features to increase bidding competition in ad auctions. Publica recently won the prestigious Video Week Award for Best CTV App Innovation, showcasing our superior technology and the commitment of our global team. Throughout 2024, we have also pursued strategic partnership discussions with prominent data providers, aiming to enrich our first-party media quality signals. We expect these collaborations will allow us to measure campaign outcomes at a deeper level while expanding IAS's monetization potential. Our goal is to enable advertisers to leverage IAS's data with trusted third-party data sets and optimize their campaigns to meet key performance objectives. This initiative underscores our commitment to providing measurable value and high-quality insights, and we look forward to building on our progress in 2025. To conclude, we deliver growth and profitability well above the rule of 40, and we're taking steps to improve business and performance. We've strengthened our senior leadership team with recent C-level appointments, and we are winning new revenue opportunities, including Oracle's former advertising customers. As highlighted by our first-to-market pre-bid optimization solution on Meta, we are leading with product innovation informed by the voice of the customer. We expect to benefit from these initiatives with a focus on delivering double-digit revenue growth in 2025. And with that, I'll turn the call over to Tanya to review the financials, and then we'll take your questions.

Thanks, Lisa, and welcome, everyone. We reported 11% revenue growth for the third quarter, with gains across our optimization measurement and publisher businesses. In addition, we reported record profitability, with an adjusted EBITDA margin of 38%. As Lisa noted, advertiser revenue growth for the quarter was limited by a slowdown in volume growth in the near term, most notably in CPG and retail. We attribute this to budget cuts and delays and digital media spending in these verticals in the second half of the quarter. In addition, while we're seeing healthy adoption of several new products launched this year, we experienced lower than anticipated monetization in the period. Total revenue in the third quarter increased 11% to $133.5 million. Optimization revenue grew 7% to $61.1 million in the third quarter. Optimization revenue growth in the period reflects increased adoption of our context control avoidance offerings, including QualitySync and Made for Advertising. Measurement revenue increased 11% to $52.9 million in the third quarter. Measurement growth was driven primarily by increased adoption of our premium TMQ offering across the global social platform. Social media revenue grew 21%, and represented 55% of measurement revenue, up from 53% in the second quarter of 2024. Social media revenue represented 22% of total revenue in the third quarter. Open web revenue, which represented 45% of measurement revenue, was consistent with the prior year period. Video grew 15% in the third quarter as a result of the growth of social media and accounted for 56% of measurement revenue. Total revenue from advertisers, which includes both optimization and measurement, represented 85% of total revenue in the third quarter. Publisher revenue increased 26% to $19.5 million, ahead of our growth expectations for the third quarter. We scaled new products in Publica, particularly with our large OEM partners, and saw some benefit from political spend. Non-CTV IAS publisher revenue also increased in the period. Publisher revenue represented 15% of total third quarter revenue. We believe our extensive global footprint continues to be a competitive differentiator. International growth of 11% benefited from adoption of our social media products, including TMQ, as well as the contribution from new logos. 31% of our total revenue in the third quarter or $41 million came from outside of the Americas. In addition, 44% of measurement revenue was from outside of the Americas. Gross profit margin for the third quarter was 80%, up from 79% in the prior year period. Gross margin performance reflects improved optimization of our hosting costs. Sales and marketing, technology and development, and general and administrative expenses combined increased 4% year over year. We continue to make strategic hires, including new Oracle talent, while closely managing costs. Stock-based compensation expense for the period was $16.4 million, in line with our prior outlook of $16 to $17 million. Adjusted EBITDA for the third quarter, which excludes stock-based compensation and one-time items, was $50.6 million, above our prior outlook of $48 to $50 million. Adjusted EBITDA margin increased to 38% from 34% last year. Higher gross profit margin, increased capitalization of internally developed software, and greater operating expense efficiencies contributed to our strong adjusted EBITDA margin in the third quarter. Net income for the third quarter was $16.1 million, or 10 cents per share, compared to a $13.7 million loss in the third quarter of 2023. The net loss in the prior year period was driven by the timing of our income tax provision related to stock-based compensation from the return target options expensed in the second quarter of 2023. Moving to our performance metrics, our third quarter net revenue retention, or NRR, was 108%, which reflects the trend of our overall advertising revenue growth rate for the trailing 12-month period. The total number of large advertising customers which includes both mid-tier and top-tier clients with annual revenue over $200,000, grew to 232 compared to 219 last year. Revenue from large advertising customers was 85% of total advertising revenue on a trailing 12-month basis. We continue to generate strong cash flows and maintain a healthy balance sheet with cash and cash equivalents at the end of the third quarter of $57 million. During the quarter, we reduced our long-term debt by $30 million to $65 million. As a result, our net debt at the end of the third quarter was $8 million. Turning to guidance. For the fourth quarter ending December 31, 2024, we expect total revenue in the range of $148 to $150 million, or 11% year-over-year growth at the midpoint. Our fourth quarter revenue outlook assumes the continuation of lower volume growth in the near term, most notably in CPG and retail. We have also factored in lower than anticipated monetization of new products in the fourth quarter. In addition, at the start of the quarter, we were impacted by softening brand spend leading up to the U.S. elections. Our fourth quarter outlook includes the anticipated contribution of the new Oracle wins discussed earlier. Adjusted EBITDA for the fourth quarter is expected in the range of $55 to $57 million, or a 38% margin at the midpoint. For the full year 2024, we are updating our revenue outlook to $525 to $527 million, or 11% year-over-year growth at the midpoint. We are increasing our full year adjusted EBITDA outlook to $185 to $187 million, or a 35 percent margin at the midpoint. A few additional modeling points. As a result of our strong gross margin performance, we now expect to achieve the upper end of our full year gross margin target of 77 to 79 percent. Fourth quarter stock-based compensation expense is expected in the range of 15 to 16 million dollars and 62 to 63 million dollars for the full year. We expect weighted average shares outstanding for the fourth quarter in the range of 162 to 163 million shares and 160.5 to 161.5 million shares for the full year. As we move into 2025, we will continue to focus on profitable growth. While we are not providing 2025 guidance today, we are planning for double-digit revenue growth in 2025, and we are expecting moderate growth in Q1 with a ramp through the year. We expect to benefit from the scaling of products launched in 2024, as well as the adoption of pre-bid optimization in social media, along with the full-year contribution from recently won Oracle Business. We will continue to invest in differentiated products in 2025 while managing our costs and maintaining strong profitability. We are targeting full-year adjusted EBITDA margin in 2025 similar to the forecasted margin of our 2024 outlook, which will keep us well above the rule of 40 for the fifth consecutive year since IPO. And with that, Lisa and I are now ready to take your questions. Operator?

Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from Matt Farrell of Piper Sandler. Your line is now open.

Thanks for letting me ask the question. My first one would just be I would love to hear any additional color you can provide regarding the dynamics in the third and fourth quarter that impacted the outlook. Was the retail and CPG dynamics broad-based, or was it isolated to a few customers? And would love to hear a little bit more as well about the slower than expected ramp of new products. Was that an internal driver? Was it a customer-specific driver? Anything you could add would be helpful. Thanks.

Sure. Happy to take that. So as we move through third quarter, we did see a slowdown in volume growth, particularly in CPG and retail verticals. We attribute the slowdown to a few things, budget cuts, delays in digital media spend in these verticals, and also slower than expected ramp of new product adoption. One highlight that I do want to call out for the quarter is our publisher growth of 26%. outperformed as we scaled new Publica CTB products with large OEM products. And in terms of the slower than expected ramp of the new product adoption, basically, as you might remember, we had a robust product roadmap. We had many new products that we've launched in 2024. Some have seen tremendous adoption. TMQ is a great example of that. as we launched on Meta in first quarter. With some of the other products, the brands are absolutely leaning in and adopting the products. They're just the ramp and the rate of adoption is taking a little longer than we had anticipated. But we're pleased with the fact that we're delivering value to the advertisers.

And then as a follow-up question, we'd just love to hear what the key learnings to date are with the early integration of Oracle customers, how are those ramping as we move through 2024, and how should we be thinking about the contribution to that double-digit revenue growth next year? Thank you.

Sure. Happy to talk about Oracle. As you might remember, it's the summer of Oracle. I'm really proud of the efforts of our sales team. I know that we just shared our win rate, but we saw a 72% win rate on the Oracle opportunities, and the team put 75 new Oracle customers on the board since Oracle announced that they were exiting the advertising business. What really helped both with bringing these customers on board, but I'd say more importantly with the integration, the activation, getting these customers live by October 1st, given that Oracle announced a September 30th exit date, what we found is listening very closely to the new customer needs, getting a focused and dedicated team in place to ensure that we were properly integrating, onboarding the customers, and getting them live and up and running in fourth quarter.

In terms of the ramp, Matt, the revenue contribution from Oracle is factored into our fourth quarter guide.

Thank you. Our next question comes from Andrew Merrick of Raymond James. Your line is now open.

Thank you for taking my questions as well. So we know that the Oracle shutdown went through on September 30th. But are there a significant volume of advertisers still outstanding that might still be evaluating their go-forward plans?

Yeah, so we are very focused with the current onboarding, integration, activation of the 75-plus customers that I just had mentioned. And I should call out these customers range from brands, publishers, and platforms. But there is still runway to win more business, and the team, again, they're very focused on activating the Oracle business, on focusing on cross-sell and up-sell, especially given the fact that Oracle did not have a robust brand safety and suitability solution. So the team's focused on that up-sell, cross-sell, but we're also going after more business to win.

Great, and then maybe one more if I could. We've seen some press reports over the last couple of weeks that IAS may have been raising prices on some of their solutions. One, if you could comment on that specifically, that would be great, but just kind of a holistic overall where you feel that your prices stand currently with respect to the value that you're providing for your clients and how that's contemplated into your 25 commentary. Thank you.

Sure. So we lead with value. We lead with demonstrating value of our differentiated products. We never leave with price first. It is a competitive marketplace, as we had just mentioned, the Oracle jump ball summer that's been happening over the last few months. But what's so important, especially with the products where we command a higher premium price, like a total media quality, that we're offering across all of the social platforms, that we are quantifying the value that we are offering to our customers. We are demonstrating to them how our products provide greater transparency, that we're helping them run their ads adjacent to higher quality media. TikTok alone, we're already proving out that we are ensuring that ads are running adjacent to 3x higher quality media that lead to higher ROI.

Thank you. Our next question comes from Jason Helpstein of Oppenheimer. Your line is now open.

Hi, this is Steve Roman on the line for Jason. So just one quick one from us. So you mentioned that Some advertisers started to, in leading up to the U.S. election, began moderating their spend. Just wonder, I know you gave 4Q guidance, but just wondering, you know, how those advertisers are now, whether they are spending or have sort of increased their spend back to normal levels post-U.S. election. Thanks.

So we did see a slowdown in advertising spend at the start of the fourth quarter leading up to the U.S. elections. It's too early to tell if there's any bounce back yet, but as we developed our fourth quarter guide, we were prudent in our approach in taking into consideration all of the factors that we reflected. and discuss like this start to October, as well as the moderating adoption of our new product offerings, as well as, you know, the pacing that we're seeing with volume overall, particularly in CPG and retail.

Great. Thanks.

Thank you. Our next question comes from James Heaney of Jefferies. Your line is now open.

Great. Thanks for taking the questions. Could you just talk a little bit more about, I realize it's not formal guidance, but the preliminary 2025 outlook of double-digit growth and what gives you the confidence that you can sustain that into next year, just hearing about some of the product momentum that you have and what you expect to track that growth. Thank you.

Sure, James. So a couple things about 2024 guidance. While we're not providing 2024 guidance today, we are planning for double-digit revenue growth in 2025, and we are expecting a moderate growth in Q1 with a ramp through the year. A couple of factors why we expect to benefit with this double-digit growth. The first is the scaling, activation, adoption of products that we launched in 2024. These are both products that we launched earlier in the year, like TMQ on Meta, and some of these newer products we rolled out in the back half of the year. Adoption of our pre-bid optimization in social media. I know we just spoke to that, the fact that Meta had selected IAS to launch the Highly demanded pre-bid social optimization product. We have already run that product through beta with a handful of advertisers, and we're live in GA in fourth quarter, and we're really pleased with the results and engagement that we're seeing. And then also another factor to 2025 guidance is the full-year contribution of recently won Oracle businesses and further Oracle wins. One other point to make is that we are targeting full-year adjusted EBITDA margin in 2025, similar to the forecasted margin of our 2024 outlook, which does keep us well above the rule of 40 for the fifth consecutive year since IPO.

Great. Thank you.

Thank you. Our next question comes from Omar Dasuki of Bank of America. Your line is now open.

Hi, thanks very much. I just wanted to backtrack a little bit on the third quarter and ask, you know, as the quarter progressed, you know, when did you start to see this dip in advertiser spending? I assume that the effect that you saw in the month of October leading up to the election, was preceded by some kind of effect in September and possibly August. You know, was it something that changed abruptly or was it more like a kind of consistent downward trend, you know, through July, August, and September?

The shift that we saw in volume growth started in the middle of the third quarter. So August was particularly soft, softer than usual. This was primarily with CPG and retail clients, as we saw reductions in their budgets and delays in their digital media spending. September is typically a strong seasonal month, and we were expecting an uptick in September, which did not materialize. And then as we saw, as we mentioned earlier, as we kicked off the beginning of the fourth quarter, we did see still softness in brand spending leading up to the elections.

And would you be able to give us a sense of what the growth was in the first half of that quarter, or is that too granular of a question?

Yeah, really just wanted to give you the talking points around what we saw from a growth perspective.

Okay.

For the second half. Yeah, we can't give specific numbers.

Okay. Thank you.

Thank you. Our next question comes from Jason Crayer of Craig Halloum Capital Group. Your line is now open.

Great. Thank you. This is Cal for Jason. So first question, sorry if this has been addressed already, but just what sort of feedback have you received from advertisers that have started testing the meta-optimization, and how are you looking at that opportunity and optimization versus, you know, your existing post-bid tools?

Sure. So it's early days with the pre-bid optimization product. As I mentioned before, we ran beta with a handful of advertisers. We received very positive feedback. And just given what high demand this product has been, I mean, we are currently running pre-bid with TikTok, with LinkedIn. But the advertisers have been patiently waiting for the launch with Meta. So the feedback has been quite positive, both from the beta advertisers and now the advertisers who are in GA. And the team's very focused on ensuring that these advertisers who are currently running the product, they see the value of the product, that we continue to activate and get more advertisers live. And the one other thing to call out in terms of the pre-bid opportunity is that pre-bid social, we estimate it's 2x opportunity from a revenue perspective versus post-bid measurement. And you might remember prior to any of these pre-bid products that I was referring to, everything that we've been running on TMQ up to this date has been post-bid measurement. We'll just continue to work with the brands, get the activation continuing to accelerate with pre-bid social optimization on meta, and ensure we kick off 2025 with that activation continuing to increase.

Great. And then just last one. Could you just expand on the launch of the IAS curation within GAMS? You know, what's the opportunity you see within curation given the data assets that you have? And could this be extended with similar integrations across other sell-side partners?

Yeah, sure. We were thrilled to announce first-to-market launch of IES curation with Google Ad Manager. And the way to think about that is leveraging IES's contextual data and embedding it in Google Ad Manager to ensure that brands are able to consolidate their bidding on higher quality inventory and target contextually relevant content in a more precise way. This one, too, it's early days, but it is a demonstration of a longstanding partnership with Google, and we're thrilled we're continuing to innovate with Google.

Perfect. Thank you.

Thank you.

Thank you. Our next question comes from Brian Pitts of BMO. Your line is now open.

Thanks for the question. I know you discussed previously that advertisers continue to seek transparency and efficiency and that broader shift from insurance to performance over the long run. Can you give us an update on the discussion and feedback during your sales processes? Is this something that most accounts or only a handful are really discussing or asking for right now. And then I know it's early, but maybe just a quick update on integration into video gaming platforms, notably Roblox. How's that going? Any feedback there? Thanks.

Sure, happy to answer that one. So the advertisers are absolutely very focused on all things related to efficiency and ROI, and this is more at a macro digital advertising perspective. Every single dollar that an advertiser invests in digital advertising, they want to get the best bang for their buck. So with that, the fact that IES is providing transparency providing solutions that help the brands reach higher quality media, offering pre-bid products, again, that drive that efficiency and drive higher ROI. The brands are very focused on that. I would also say at a macro level, heading into fourth quarter, Efficiency is the word that we repeatedly hear from the brands when it comes to advertising, their expectations around advertising. So this shift from insurance, ensuring that we protect brand equity, brand reputation for the Fortune 500 brands, that we're protecting that brand equity, but equally, if not more important, is that we're also helping the brands drive higher ROI. through the solutions and products that we're offering. So it's definitely top of mind for the brands. In terms of feedback on gaming, gaming continues to be an important emerging channel for the brands. Our ROBLOX partnership is a reflection of that. I would say from a channel perspective and how the brands prioritize the various channels and solutions, especially when it comes to IIS products, I would say it is social, optimization, retail media, audio, and then gaming.

Great. Thank you very much.

Thank you.

Thank you. Our next question comes from Matt Cost of Morgan Stanley. Your line is now open.

Great. Thanks for taking the question. I just wanted to ask about publisher revenue. It was a pretty meaningful acceleration this quarter, and it's actually followed, I think, you know, over a year of accelerating growth on the publisher side of the business. So I guess anything that you would call out that's changing their areas of strength or new adoption? Thank you.

Sure. So Publica in particular within our publisher business continued to post very strong growth in the third quarter of accelerating from the 20-plus percent growth we disclosed in the second quarter. We're really pleased with this performance as we continue to expand our partnerships. And we also – Publica did have a modest benefit from political advertising in the third quarter. The other call-out on our publisher business is that we did see growth in our non-CTV publisher business. due to some strength in that business as a reflection of some of the historical investments we've been making. As we move into the fourth quarter, we expect the publisher revenue growth to moderate a bit, given third quarter did have a modest benefit from political, but we are expecting mid-teen growth overall in our publisher business in the fourth quarter and bringing the full year to mid-teen growth.

Great. Thank you.

Thank you. Our next question comes from Robert Kuhlbrith of Evercore ISI. Your line is now open.

Great. Thank you for taking our questions. I wanted to ask on the pre-bid social tools. Have there been any customers who haven't used social measurement but where you think the pre-bid optimization tools could be an unlock to activate demand? And then a couple quick ones on Oracle. Anything you can tell us about the mix tool? of anticipated ex-oracle revenue between advertising and publishing revenue. And was there any contribution from anyone who moved over before end of life in Q3? Thank you.

Okay. So the first question around pre-bid social, do we anticipate any advertisers who have yet to use post-bid social to adapt pre-bids? It's early days for pre-bid social optimization. Ideally, we want all brands to use both pre-bid and post-bid. The ones that have currently engaged in pre-bid in both the beta and the GA are the larger Fortune 500 brands. But I would say that in terms of a type of advertiser, who would lean into pre-bid and has yet to activate post-bid would be mid-market. So mid-market being more performance-based marketers. And, again, the team is out. They're pitching the product hard, both to those big advertisers and the mid-market advertisers. And, yeah, and we'll just continue to drive the activation.

In terms of the mix of Oracle revenue, in the short term, we do expect to see an impact across our publisher business, also across our advertising business, particularly in measurement. As we scale over time, we do expect that mix to shift as the optimization opportunity becomes larger over time, and we continue to upsell and cross-sell our offerings.

Great. And can I ask a quick follow-up? Is there a way maybe to pitch this to some of those mid-market or performance-oriented advertisers, a sort of performance-based solution around pre-bid? Are there performance implications from utilizing the pre-bid optimization or benefits there? Thank you.

Yeah, great question. I would say that since we're in basically the first pitch of the first inning around pre-bid social optimization and meta, We would need to activate some of these pre-bid mid-market accounts in pre-bid social. So in 2025, once we have more data in terms of the performance and results, we're happy to provide more color. Got it.

Thank you. Thank you.

Thank you. Our next question comes from Yusuf Squali of Truist Securities. Your line is now open.

Thank you very much. Tonya, can you just unpack the Q4 guide a little bit on the top line and kind of what are you guys assuming in terms of the trend in optimization and measurement? And on measurement in particular, on the back of some of these wins that you got from Oracle, was there a pressure on pricing that maybe is also part of the – the pressure that you've talked about?

Sure. So I'll cover the first two, Lisa, if you want to handle the third. Our fourth quarter guide, just really kind of unpacking where we are from a revenue perspective, you know, the outlook assumes the continuation of the lower volume growth that we saw in the near term, particularly in CPG and retail, and we're just being thoughtful and prudent and adjusting our fourth quarter guidance to reflect that. We've also factored in the lower than expected monetization of the products we launched earlier this year. And as Lisa talked about, you know, we did have a very robust product roadmap. And, you know, we're still seeing really nice adoption, for example, TMQ on Meta, Meta accelerating growth in 2024 versus 2023, but not as large as we expected given some of the current market dynamics. And then finally, you know, we did see the softer than expected timeframe leading up to the election. So we've factored this all in. We also factored in the impact from the new Oracle wins. And, you know, overall, one metric that we also want to make sure we highlight with you is that the fourth quarter revenue contribution to the full year in our guide is about 28%. which is consistent with this period last year. It's also worth calling out, you know, we were really pleased to exceed our guidance on EBITDA because some of the strengths, particularly around our gross margin, improving year-over-year from the third quarter this year versus last year, and raising our EBITDA guidance for the fourth quarter. In terms of your – sorry.

I'll follow up on that. Yusuf, in terms of your question around any pricing pressure with the Oracle wins, a couple of notes there. Yes, it was a competitive jump ball process throughout the summer. Oracle offered a more basic level of product and service. We offered the customers that we won competitive rates with the opportunity to both upsell and cross-sell our premium offerings. And as I mentioned before, we always focus first on value. So we engaged with these prospects, demonstrated the differentiation of our technology and product, demonstrated the value we were offering, and, yes, we offered competitive rates.

One more thing, Jos, is to answer your second question specifically around the trend and measurement and optimization. We are expecting a slight uptick in the fourth quarter of the growth rate in our advertising revenue, both measurement and optimization. As I mentioned, publisher growth rate moderating. So midpoint of our guide is 11% in the fourth quarter, also 11% in the third quarter, but is there that dynamic with a slight uptick in advertising as publishers expected to moderate?

All right, that's helpful. Thank you both. Thank you.

Thank you. Our next question comes from Yoon Kim of Loop Capital Markets. Your line is now open.

Great. Thank you. Following up on last question, can you just talk about the overall pricing environment out there? And in regard to the price increase, are you able to get better pricing leverage when a customer adopts a certain product like pre-bid optimization versus if the customer is just a measurement customer? Thanks.

Sure. So during the third quarter, our change in our average CPM was as expected. In measurement, it was down 6%, which is slightly better than the first two quarters this year. Our CPMs and optimization were consistent with the prior year. And we do charge a material premium on optimization offerings versus measurement. given the value of the tech, and as we're rolling out pre-bid social, given the higher rates we charge for optimization, we do see a significant opportunity to cross-sell and up-sell and charge more for our pre-bid social optimization.

Okay, great. And, Tanya, also, for your double-digit revenue growth guide for next year, what are you expecting in terms of the optimization segment? Do you expect that to grow double digits as well? especially with the launch of all these new pre-bid optimization products?

So in 2025, we have shared today some guardrails of how to think about 2025. In terms of, you know, the growth drivers, you know, as we talked about, continuing to scale our 2024 product launches, so TMQ, continuing to scale that in 2025, that will benefit measurement. And in terms of optimization, we do see, you know, an opportunity to ramp our revenue from pre-bid social, which will be included in our optimization numbers next year. And then Oracle, as I mentioned, the contribution for Oracle will be across all of our offerings.

All right, great. Thank you so much.

This does conclude the question and answer session. I would now like to turn it back to Lisa Utz-Snyder of CEO for closing remarks.

Thanks, everyone, for joining today's call. Our investments in leading market technology are yielding results with first-to-market products and partnerships, as well as new business momentum, including Oracle WINS. We still have more work to do, but with an enhanced leadership team in place, we are focused on driving results for our customers and shareholders. Have a great night.

This does conclude the program you may now disconnect.