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spk03: Greetings. Welcome to InnoVid's third quarter 2022 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. Please note this conference is being recorded. I'll now turn the conference over to Brynlee Johnson with Investor Relations. Brynlee, you may now begin.
spk00: Thank you, operator, and everyone for joining us today. Welcome to InnoVid's third quarter 2022 conference call. Before we begin, I would like to remind our listeners that certain information provided on this call may contain forward-looking statements. The Safe Harbor statement contained in today's earnings release also pertains to this call. If you've not received a copy of the release, please direct yourself to the Investor Relations section of the company's website. Changes in our business, competitive landscape, technological or regulatory environment, and other factors could cause actual results to differ materially from those expressed by the forward-looking statements made today. Our historical results are not necessarily indicative of future performance. As such, we can give no assurance as to the accuracy of our forward-looking statements and assume no obligation to update them except as required by law. In addition, our discussion today will include references to certain supplemental non-GAAP financial measures which should be considered in addition to and not as a substitute for GAAP results. We use these non-GAAP measures in managing the business and believe they provide useful information to our investors. Reconciliations of the non-GAAP measures to the corresponding GAAP measures, where appropriate, can be found in the earnings presentation available on our website, as well as our earnings release and our filings with the SEC. Today we are joined by Zvika Netter, Innovid's co-founder and CEO, who will begin the call with a business update. Then he will turn the call over to Tanya Andreev-Taspin, Innovid's CFO, who will discuss the financials of the company. During the question and answer session, Tal Tolosin, co-founder and CTO, will also be joining. Lastly, I would like to highlight that we are planning to host our first Investor Day on Wednesday, November 16, 2022, in New York City. Please look for the details of the investor relations section of the company's website. And with that, I'd like to pass the call over to Zvika Netter. Zvika, please go ahead.
spk04: Thank you, Bruni. let me start by thanking all military veterans and of course their families for their service happy veterans day innovate produced strong results in the third quarter of 2022 delivering revenue at the high end of our guidance and extending ebitda expectations revenue increased by 47 percent year-over-year to 34.5 million dollars on an as reported basis and CTV continues to break records for the business accounting for 50% of the revenue excluding TV Squared in the third quarter. We also generated a net loss of $11.8 million and a positive adjusted EBITDA of $2.9 million. This exceeded our expected range of negative $2 million to break even, a testament to the proactive measures we have taken to improve margins through the post-merger synergies. We are pleased with our ability to deliver top-line growth despite ongoing economic uncertainty. We feel confident our business will continue to thrive due to our leadership position in the CTV and broader converged TV industry. During the third quarter, we strengthened our position through focus on expanding the scale of the innovative platform across the full gamut of delivery, personalization, and measurement by strengthening the existing partnership as well as introducing net new partnerships to drive incremental reach and impact. In particular, we see the plan to launch ad-supported offerings from leading streamers such as Disney+, Netflix, and Warner Brothers Discovery as fuel to drive the next wave of growth for our business. Inovit has been trusted time and time again to power tech automation for some of the biggest properties in TV advertising. This includes NBCU for ad delivery during the past and upcoming Olympic Games, CBS to power interactive apps during the Super Bowl, and Peacock, who relied on Innovate to implement creative compliance tools to achieve what we believe to be among the highest quality levels in the industry. I'm pleased to share that Innovate is working to be one of the few technology providers empowering to deliver ads on December 8th when Disney Plus launches its ad-supported tier. This expansion of our long-standing partnership with the Disney family dating back to our initial integration with Hulu over a decade ago. And it's symbolic of their confidence in our platform's quality controls and the ability to keep pace with the demands of concurrent live streaming. In support of Netflix's recent basic with ad launch, we have also updated our asset validated tool to adhere to Netflix's new creative specifications. This allows our advertiser clients to continue leveraging InnoVid for streamlined validation of TV ads and consistent workflow delivery across all major streamlined publishers, including Netflix. According to InnoVid's own recently commissioned study, one of advertisers' biggest pain points for converged TV advertising is fragmentation. We believe the market needs unification across platforms and inventory types, the open internet and walled gardens alike to deliver against the promise of the new TV landscape. We believe Innovate is uniquely suited to rise to this call due to our independent stance and the depth and the coverage of our software infrastructure across converged TV and digital. I'd now like to build on the update we provided in the past earning call and show more details on the current and future state of our business. Per usual, I will provide these updates within the context of our four key growth drivers, which are volume growth, product upsell, geographic coverage, and client-based retention and expansion. First, volume growth. Once again, CTV had a record-breaking quarter for Innovit, accounting for 54% of total video impressions volume, excluding TVSquare, reinforcing that the shift from traditional to streaming is growing and persistent. Our overall CTV volume grew 36% year-over-year, outfacing U.S. CTV ad spend according to eMarketer, which is projected to grow 23% year-over-year in 2022. The consensus is that linear TV advertising has passed its peak, which presents new opportunities for advertisers to adopt traditionally digital-centric strategies on the big screen in the home. We believe the demands for automated technology to help unify converged TV advertising will expand as viewership increasingly pivots to the streaming space. And Innovid will continue to deliver volume growth. Let's now move to our second growth engine, product upsell. We believe the power of our platform to unify delivery, personalization, and measurement in one place is a huge value add to marketers. And we are succeeding in upselling our products. In the third quarter, advanced creative revenue grew 24% year-over-year and measurement revenue grew 23% year-over-year. We're not including our TVSquared acquisition on a before-out basis. Last quarter, we discussed the launch of our expanded global cross-platform measurement offering, InnovateXP. We launched InnovateXP, the first global unified cross-platform measurement solution directly integrated with ad-serving data and creative personalization to solve advertisers' needs for simple, scalable, independent, and actionable view of their investment across all forms of television. Since then, Innovate XP has gained significant traction in the market and has been adopted in the past quarter by leading advertisers such as AstraZeneca, Diageo, eBay, Universal Parks, and more. In the third quarter, we onboarded several new large advertising clients, including American Family Insurance, to our personalization module. We also expanded our partnership with Verizon, a long-standing ad-serving client and one of the largest TV advertisers in the U.S., who chose to consolidate both delivery and personalization with InnoVid, moving away from siloed tech partners. Since growing their InnoVid partnerships into personalization, Verizon has been an early adopter of our recently-debuted advanced auto-optimization capabilities. These recent upgrades of our personalization offering allow advertisers to intelligently adjust what ad consumers are seeing based on statistically significant understanding of which combination of elements drive peak performance. In a recent announcement, Steve Murray, Director of Performance Marketing, MarTech, and Analytics at Verizon, said, and I quote, Innovate auto-optimization enables algorithmic decisioning to constantly iterate for the KPIs you care most about. Simply activated but highly customizable, Innovit is providing the technology needed to make everyday enhancements a reality." Our personalization capabilities were also expanded in the third quarter to support dynamic creative optimization via unique purchase data through the partnership with NCS Solutions. Through this collaboration, Innovit advertisers can now leverage real-time NCS data to shift dynamic creative delivery based on in-store sales. a revolutionary way to enable always-on intelligence for data-driven DCO campaigns. Another key and highly differentiated component of the Innovate platform is the CTV SDK. That enables advanced creative features such as personalization, commerce, and more in connected TV environment. This quarter, we are proud to share that we extended our deployment of the Innovate SDK to Paramount+, extending years of partnerships. We expect to continue to upsell and bring innovative new products to our impressive list of customers. Let's move on to our third growth engine, geographic expansion. We successfully introduced new capabilities beyond the US with global entities in the third quarter. Notably, we were selected by leading demand-side platform, the Trade Desk, to enable always-on incremental reach analysis across CTV campaigns in the UK and Germany. Powered by the InnovateXP measurement platform, selected users of the trade desk now have access to our suite of cross-platform incremental reach analysis insights for advertisers running campaigns on CTV. These insights allow advertisers to surface the incrementality of streaming beyond linear TV, as well as unique reach by publishers, including publisher-by-publisher analysis. By uncovering the overlap, these advertisers can maximize the household-level reach for their programmatic CTV strategies in a highly fragmented market. In the announcement of this integration, Steve Martin, Vice President of Data Partnership EMEA and APAC at the trade has said, quote, as CTV adoption steadily increases across the globe, we are making incremental reach analysis available to advertisers that have audiences fragmented across channels and screens. Directly within our platform, selected advertisers can now activate Innovate Always On automated measurement platform to ensure they reach the right audiences on the channels where they are actually watching their favorite TV content, end quote. Expansion into other European countries and Australia is expected in 2023. Now, let's move to our final growth pillar, expanding our client base. This past quarter, we onboarded over a dozen new advertising clients, many referenced throughout this call, to various models of our platform, spanning ad delivery personalization and, of course, measurement. We have also diversified our client base and have significantly grown our pipeline of mid-market advertiser opportunities. Before closing, I'd like to address the economy. Despite ongoing concerns about microeconomic conditions, innovative business has continued to grow, a testament to the strength of our market position and underlying product offerings. CTV continues to surge, boosted by the combination of new platforms and inventories such as Amazon Thursday Night Football moving into the streaming space. While we expect to continue to see positive growth overall, we remain mindful of the economic uncertainties that are impacting the advertising industry and are taking proactive measures to monitor and manage costs relative to the top-line growth. As we head into the last quarter of 2022, we remain committed to our core 2022 strategies and will continue to make investments we believe are important to capitalize on the growing Converge TV space. As always, we remain pragmatic in our investment approach and will continue to focus on driving efficiencies to boost both overall profitability of the business while we focus on continuing to grow top-line revenue. I now pass the call to Tanya, who will go into greater detail regarding financial performance and guidance. Tanya?
spk06: Thank you, Svika, and good morning, everyone. We are pleased with our third quarter results. We delivered substantial profitable growth. on an adjusted EBITDA basis. Our revenue increased by 47% year-over-year to 34.5 million. The growth was driven by a number of factors. First, revenue from measurement, which following the acquisition of TV Squared became a significant revenue driver for Innovid, generated 23% of the total quarterly revenue. That's up from 1% of the revenue in Q3 of 2021, and it grew 23% on the pro forma basis. Second, revenue from ad serving and personalization services contributed 77% of total quarterly revenue and grew 15% year-over-year in aggregate. Personalization grew at the higher rate of 24%. Our ad serving and personalization revenue closely correlates with the ad impressions volume served through InnoVid platform. In the third quarter, CTV impression volume accounted for 54% of all video impressions, up from 46% last year, and it grew 36% year over year. Mobile impression volume decreased by 1% and accounted for 33% of all video impressions, and desktop impressions increased by 6% and accounted for 13% of all video impressions. We expect CTV ad serving, personalization, and measurement offerings to continue to drive our growth. Turning now to geographic breakdown. The US is the main contributor to our revenue, accounting for 92% of total revenue and growing 48% year-over-year on as reported basis. The US is the global leader in CTV adoption and innovation and our main focus for deployment of investments. Our total international revenue grew 38% year-over-year on as reported basis, contributing 8% of the quarterly revenue. International revenue were impacted by the headwinds from straightening of the U.S. dollar, which also is expected to continue through the fourth quarter of the year. Moving to costs now. Total operating expenses for this third quarter, excluding depreciation, amortization, and impairment costs, were $38.6 million and grew 31% on as reported basis. Nearly 90% of that increase in the quarterly operating expenses is attributed to the inclusion of TV2 in our financials, an increase in stock-based compensation. In the third quarter, we activated post-merger synergies. It drove savings in operating expenses and benefited our bottom line. Focusing on operating efficiencies and the resource optimization is critical while navigating uncertain macroeconomic conditions. In addition to driving post-merger synergies, we will continue with measured headcount and operating expense growth while investing in innovation that further advances our leadership position in CPV space. Net loss in the third quarter was 11.8 million on an EPS of negative 0.09. It was impacted by finance expenses of 5 million primarily derived from our warrants being revalued due to market volatility affecting the company's share price. Adjusted EBITDA for the third quarter was $2.9 million, representing 8% adjusted EBITDA margin. An increase in adjusted EBITDA from $1.5 million in the third quarter of 2021 was a result of revenue growth, Improvement in overall operational efficiencies and synergies realized following the TVSquare acquisition. The impact of those operational efficiencies and synergies is not temporary. These actions will have a long-lasting effect. As a company, we are laser-focused on long-term profitability and margin growth. Moving to our balance sheet. Our cash and cash equivalents ending balance was $46.5 million. given our margin profile we believe that we are well capitalized in this at this time the total common stock outstanding is of september 30 2022 was 133.5 million finally i would like to go our overall guidance traditionally the holiday season and the fourth quarter are the strongest for our industry however this year macroeconomic uncertainty Inflationary pressure and still lingering supply chain issues may create strong enough headwinds to offset the standard seasonal increase in advertising spend. Considering the current macroeconomic environment, we are tightening our previously stated revenue range for the full year of 2022. We expect revenue to be in the range of 127 to 129 million. This guide reflects 41 to 43% year-over-year growth on as reported basis and 17 to 19% year-over-year growth on a performer basis. We're also pleased to share that we expect near break-even or positive adjusted EBITDA for the full year of 2022, an improvement from our previously shared guide of negative minus six or better. Consequently, for the fourth quarter of 2022, we expect revenue to be in the range of 34 to 36 million, reflecting 31 to 39% year-over-year growth on as-reported basis, and 6 to 12% year-over-year growth on a pro forma basis. We expect positive adjusted EBITDA in the range of 1 million to 3 million. With that, I would like to hand the call back over to Tzvika to take your questions. Thank you.
spk04: Thank you, Tanya, and thank you all for joining us on this call. We'll now open the line for questions. Operator, please go ahead.
spk03: Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question today, please press star 1 from your telephone keypad, and the confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants that are using speaker equipment, It may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Thank you, and our first question is from the line of Andrew Boone with JMP Securities. Please proceed with your questions.
spk01: Good morning, and thanks for taking my questions. I'm trying to back into organic growth for 3Q, and it assumes kind of on my numbers a mid-teens level. That feels like it's slower than CTV to me. So just help me understand what's going on with share. Is Google taking share? Is CTV growth being driven by smaller advertisers that you guys aren't addressing? Or is the CTV market overall just slowed down to some level that's below that? So anything on share would be helpful. And then as we start to think about next year, you guys highlighted the post-murder synergies that you enacted in 3Q. Help us understand how you're thinking about OpEx and costs for 23. Thanks so much.
spk04: Andrew, good morning. Thanks for the question. So in terms of the, and Tanya, I'll say a few words and I'll move to you. In terms of, actually in terms of share, we're the contrary. We're not seeing shrinking share. We're maintaining our very high core customer retention rate. That's, you know, sometimes it was between 95 to 98% earlier in the year when we reported it. And we actually closed more and more customers and logos as we shared. So we definitely by far win more customers than lose, and our share continues to increase. I would also say that CTV, in general, as a percentage, continues to grow. As we mentioned, and I believe it will continue every year, we'll break records with how much of our business is driven through CTV. So actually, while CTV continues to grow in spite of the headwinds, where you see a flat or a decline, you see it around mobile and desktop. As, by the way, I believe some other companies reported in Q3. So CTV is actually growing 36% year over year in the third quarter, which is higher than what eMarketer suggested for this year in spite of the headwinds. Actually, CTV, we believe, is more immune. to overall pressure than desktop, mobile, display, and other formats. I don't know, Tania, if you have anything to add to that, or we can move to the next question.
spk05: Absolutely. Thank you, Tzvika. CTV, as Tzvika mentioned, is remaining our strongest growing category if you compare it to desktop and mobile, and we believe it will continue this way. On the operating expenses, absolutely, we are very proud, as we mentioned, delivering great results, really profitable, sustainable growth in Q3. And that's actually due to the actions that we are taking and synergies, improving our operating efficiencies, and we expect the effect to be felt also in the following quarters.
spk04: And on, yes. Please go ahead, yes. Yes, on post-merger efficiencies, obviously, given the headwinds that we started seeing earlier in the year, we accelerated the integration of TV Squared from both cost efficiencies and process and organizational structure efficiencies, and we're already seeing the fruit of this labor. As we obviously are very attuned to what's going in the market, we have a very good perspective of the different verticals, the different publishers, wall gardens, programmatic, different devices. We see all the trends because we cover a massive part of the industry. So we're definitely seeing the pockets of softness and it's more volatility than softness. So what we're going to do is balance between the constant growth and we'll believe that we'll absolutely continue to see growth in CTV advertising because of the switch from linear to CTV and So the eyeballs are moving, time span is moving on ad-based model, especially with Netflix pushing forward, Disney Plus pushing forward. So we're definitely expecting to see that as a tailwind. At the same time, as we all know, there's some softness in overall spending on advertising. So we'll constantly need to monitor that. And we have plenty of levers that we can pull because, you know, innovate, invest massively innovation, sometimes two and three or four years ahead. And as we demonstrated in Q3, it's relatively easy for us to change some levers in terms of how we invest to make sure we stay with EBITDA positive at minimum.
spk03: Thank you. Our next question is from the line of Sean Patel with Susquehanna. Pleased to see you with your question.
spk08: Hey, guys. Nice job on the execution. I had a few questions. The first one, regarding your comments on Netflix, how do you guys think about the size of that opportunity? And two, I guess somewhat related, with the launch of all of the new large AVOD services that we've either seen or are going to see and the increase in available inventory, is that all positive? For you guys, given how you're more attached to kind of volume trends for CTV, or are there any risks that we should be aware of? And then last question, do you think that CTV advertising could be counter-cyclical in the sense that weakening macro could lead to more cord cutting and an accelerated shift towards CTV? Thank you, guys.
spk04: Thanks so much, Sam. Definitely, Netflix is a very exciting topic for us. We feel it's a huge win when Netflix for many years was opposed to ad-based model and was actually leading the anti-ad-based model for them to make this change. And this was kind of a headwind for us since our A round. What's going to happen? We always said, and it's now clear that AVOD won. that people want to have the options and definitely ad base, lower cost to free cost, a way to consume content at scale has always been part of the $200 billion of TV advertising in the TV industry. So absolutely, this is a very positive signal. So there are several benefits of Netflix doing ad base. To your point, the media prices, whether they go lowering media because of additional inventory, Not that I'm saying it necessarily will happen, but it actually doesn't really affect us. In theory, it actually allows more brands to participate and increase volume. So it's a classical supply and demand situation. So prices go down. If the budgets are set, which, by the way, they're not necessarily set right now, but if the budget is set, let's say, at $100 million, you can reach a broader audience. You can better target. So that actually means more volume. So since we're volume-based and not media percentage-based, there is no pressure on our pricing. And actually, you can and should see volume going up. So it's basically, you can see it as Netflix and Disney Plus and others pushing more and more people from linear television to connected television. Another benefit of both Disney Plus and Netflix is the global aspect. I believe Netflix started with 12 countries. A lot of people consume Netflix around the world. So until now, YouTube was the only kind of real mega power. but now Netflix will push CTV all over the world, and we have a global footprint. And then your last point in terms of downside, there's actually a third positive about this. It proves the point that the future of television is not about one or two major platforms, like Google for search, Facebook for social, Amazon for commerce, what we refer to big tech, where we believe that the future of television, it's at least several major, major platforms, um powers that are not going to be limited just to a couple so while you may see some of them building kind of what's referred to as walled gardens they're on analytics they're on creative etc large brands the type of our customers will always need a platform that is neutral that will be able to deliver to all these platforms you know netflix just released their own spec for creative and will be able to aggregate all the data back from all these platforms so if you're a procter and gamble or apple or verizon You have to have a platform which is a single point of contact for delivery, creative optimization, and measurement. And this is exactly what we do. And the other alternative is Google. So you can assume that if it's up to a Netflix or a Disney or Roku or Trade Desk, they would rather open their gates and have better workflow and efficiency with somebody who is not competing with them. And that is the nature of neutrality. So the bottom line of this is we're extremely excited about this. And Tal, do you want to take the counter-cyclical question?
spk09: Sure. So to your question, if we think CTV advertising is counter-cyclical, and we definitely agree with your point of view, is that with current economic state, it pushes more people to disconnect the cord. As many other people attest to, sport is probably the biggest driver for that. So as you've seen with Thursday Night Football launching on Amazon Prime, driving a lot of Prime subscription and Amazon hitting all-time highs of number of people watching streaming concurrently. All of those events are drivers of viewers into the streaming platform. And for us, this is all great tailwinds. As you mentioned in your question, we're a volume-based business, so we really don't care who wins. That's a very important point about our businesses that Svika mentioned as well. We're not leaning towards specifically a world garden or an open Internet. We monetize everything, and as long as volume goes up, it's positive for us. So we definitely think that CTV could be a winner even in the downturn.
spk04: Just one point. We care who wins. We care about our customers, the brands. who we believe can achieve more via CTV. And, you know, kind of actually a fragmented, non-monopolistic environment is good for everybody. And, of course, the end consumer, which we care a lot about, we believe the experience of watching television is going to get more, you know, better and better, less disruptive, more relevant, with a better ROI for both the user for the time, the viewers, and the marketers for their media dollars that will be better targeted, personalized, and better measurement in terms of effectiveness. So it's a win-win for all.
spk08: Great. Thank you, guys.
spk03: Thank you. Our next question is from the line of Shweta Kajaria with Evercore. Please proceed with your question.
spk07: Okay. Thank you. Zrika, could you please remind us how differentiated InnovateXP is? I mean, there are a lot of other emerging and competitive options for measurement and attribution in connected TV so how understood that you have the scale and data advantage because you cover a lot of households but remind us please how the measurement capability is different and why you would win in measurement and then second is how long does it take when supply comes on new supply comes in the market, so Disney+, it could be integrated with Disney+, so that you can serve Netflix, etc. What is the process like? Thank you.
spk04: Thank you so much, Shweta, for the questions. In terms of InnovateXP, just to remind everybody that InnovateXP is the outcome of the combination between our own CTV analytics product that's been available for more than two years now, that did not get a lot of traction because the feedback we got from our customers was, you know, CTV is great. It's the future. It's digital. But what's really, really interesting is C, linear versus CTV. If you want to see, like, reach and frequency, overlaps, attribution, efficiencies, all these things, you have to include both. And this is what led to the acquisition of TV Squared immediately right after our IPO and for the fast integration. So InnovateXP was launched in June. is the first version of those two worlds combined, the CTV world and the linear world to a joint product, and we're already seeing great adoption for this product. As you mentioned, Shweta, there are several, I'll call it, unfair advantages when we go to market. First of all, we have a very strong client base that already uses us, hundreds of advertisers, getting close to half of the top 200. So these are large advertisers that have been working with us for five, seven years. We have older CTV data, not just the future, we also have backwards older CTV impression by impression data. So from a data perspective, workflow perspective, efficiency perspective, those systems are already integrated and we believe in 2023 we're going to release further features that rely on this integration. And the reason I'm saying this is an unfair advantage because the chances that either even the largest measurement provider, the legacy one, or some of these kind of early challengers that you mentioned will have a very hard time to almost no chance to build the CTV, like an ad serving CTV infrastructure like we've been building for 15 years and winning share from Google. That combination, we believe, is very, very powerful. And we're already seeing... early adopters for that. I'm not fooling myself that to your point, there are other platforms in the market and definitely it's not going to be an overnight, we're going to crush the market, but we proved that we are very persistent and very focused. So between the combination of the ad serving, the measurement, and also the creative, we just mentioned the creative optimization with Verizon, not Verizon, we launched the feature, the optimization is actually can get signals also for measurement. So if you look at the future that we're constantly delivering personalized creative, measuring the outcomes across CTV and linear and optimizing. And this is something that is extremely unique and we don't believe there's any other company in the world right now that is doing the delivery, the creative optimization measurement without the media component, like a neutral. So from that perspective, we feel very comfortable and that's why we made the acquisition. And you said many. I would say there are actually not that many. And I believe the headwinds that are now in the industry that's impacting everybody will also impact the ability for smaller companies to raise additional funds, challenge those who are not profitable like we are. So I think there's also, in this type of economy, there will be the very significant headwinds to somebody who tries to enter either ad serving or management. Kyle, do you want to talk about the process of onboarding platforms like Disney Plus and others?
spk09: Of course. So thank you very much, Shweta, for the question. So for us, a very core component of Innovate and the value that we give our customers is the ability to deliver ads everywhere. So there's north of 8,000 different apps and services and devices that we're integrated with and we're constantly making sure that we're aligned with. C++ is one of them. And we're ahead of the launch, we're working with the team on aligning the quality of the ad, any other data access in terms of the device ID or any type of other component that we can get access to, and any other workflow tools that is needed. All of that is encapsulated in our UI that any of InnoVid customers want to deliver an ad across anywhere on the internet, as we said earlier, on an open internet platform, a walled garden, or any other place, it all encapsulated in a very simple workflow, and they don't care that under the hood there is very distinct integration. By the way, just a shameless plug, next week we're doing our investor day, and we're going to showcase what I'm describing right now as part of our demo.
spk07: Okay, thanks, Tal. Thanks, Fika.
spk04: Thanks, Shetla. Just to complete the answer, I believe you asked about how long it takes. Tal described the incentive. 90% of the answer, which is the incentive of those large platforms is because, I'll just give you an example. Based on the data that Netflix released and press released, that they named nine advertisers that are launch partners. Of those nine, seven of them are innovative ad serving customers. So the picture from that perspective is clear to them that we are definitely a significant force in the industry and we pose no threat to them. So you can imagine it's in their best interest, Disney+, Netflix, to partner with us to make it seamless for their customers to deliver ads into those environments from a workflow perspective, from a measurement perspective. So usually these conversations, to your question on timing, take place sometimes six months or earlier. And we both, I believe the destination platforms and definitely us, there is benefit to be partnering as close as possible to the launch of a platform, or at least the, let's say, post-beta launch, like the more scaled launch of a platform, we believe it makes sense to everybody that we will be part of that workflow because it doesn't cost the platform any addition dollars. It doesn't pose any threat. We don't do anything with their data and actually makes their work and their life much easier from a streamlined workflow perspective. So bottom line, we're talking six months to three months time frame, but the more important part is their incentive to do it and disincentive potentially to do it with others.
spk07: Okay, that makes sense. Thanks, Vika.
spk03: Thank you. Thank you. As a reminder, you can press star 1 to ask a question at this time. Our next question is from the line of Laura Martin with Needham Company. Please proceed with your question.
spk02: Hi there. So my first question is I'm going to follow up on Seth's question and ask the other side. What are the top three reasons people do not? adopt XP when you run into conflict of why they're not taking it? What are the top three negatives they give you?
spk04: Okay. Of course, I need to think, first of all, hi, Laura. I need to think harder on that because it's hard to imagine. Why would somebody not choose to? But, you know, joke aside, I mean, look, it is a new offering, right? If you remember, you know, TV Squared came from which is a great benefit to us mid-market. Their classical legacy clients will be more performance TV advertisers like Peloton or GoDaddy, which is a great place to be because I think you asked us in the previous calls, the future of CTV in terms of you're going to see more and more new entrants that are smaller, that are more going to be driving towards performance. So that's why TV Squared built a really phenomenal product to track performance, reach, and frequency. And what XP does is takes this and our go-to-market takes it to the large customers, right? And then enterprise sales is always anywhere between six to 12 to 14 months to begin with. You come to a large organization with a new solution, even if it's from an existing vendor, you have the relationship, but the actual adoption can take three to six to nine months easily. So we have that, you know, so from the time of release and So I would say it's time. Also, some of them already use, obviously, almost everybody's using Nielsen. So somebody's using already something. So it's about delivering a new platform, making clear what the benefits are from this new platform. So I would say that's either an incumbent that takes time, like a classical enterprise sale. And they're relatively new. The combined offering is very unique, but also relatively new. So there's the classical... graph of early adopters, late adopters, and all that stuff. The benefit is a very hot subject right now. It's something that everybody wants to talk about. So in terms of taking meetings, we have hundreds of meetings since the launch of XP, so there's a lot of interest in it. So there is engagement, there is interest, and then you get the classical sales cycle of enterprise sales. So I believe we're going to see more adoption and more growth throughout 2023.
spk02: Great. And then you guys, my second question is you guys are in a really great position to look at what's happening with different vertical delivery. So we're hearing from sort of mixed things about retail. Have you seen ad campaigns get pushed off and canceled in Q4? And what's going on? I would love your insight into when you're looking at your actual deliveries, what's going on with autos versus retail versus CPG. Could you give us just what's going on with the vertical mix? of your deliveries these days?
spk04: Yes. I would say it is more, maybe even quite tactical than strategic, and I'll explain what I mean. I mean, the last time we saw something very significant on a vertical basis, and that's probably, you remember, all of us remember, if we have scars from that, it's at the auto, which was this supply challenge issue with the microchips, and it was just like industry-wide, and everybody cut. Since then, we haven't seen a very dramatic, you know, shift, you know, and their entertainment kind of post-COVID entertainment and the movies like that. We're not seeing that type of volatility on a vertical basis. What we are seeing is specific brands, right? So if like we did, like all other, our colleagues in the industry did, when we look at our marketing budget, our efficiencies, we all want to be profitable. So does the, you know, the large organizations. So you see much more attention to ROI. You see much more attention to return on ad spend, to performance, to measurement, and much quicker. So sometimes it will be enough for us to see the spending in January, February with a brand and know how exactly the rest of the year is going to look like because they planned it a year ahead. Absolutely not one thing. If you get stuck without a product, you have supply chain issues, you have economical headwinds, even if you're a large brand, you make very quick adjustments, right? So I think what we'll see on a brand by brand, so you can be in the same vertical and one brand will decide to cut budgets and maybe another brand will decide to use this opportunity and be more aggressive. So we're seeing more volatility by large brand. And I would not say, I've seen it with other companies, but like reports from other companies, we don't see a very significant trend on a very specific, like we saw in a year ago. I think it's going to be more tactical on a brand by brand basis. And just in general, you know, auto is back. All the verticals that were very hurt, they're all back, but they're all, you know, it's the economy situation. It's more generic things, so there's softness overall.
spk02: Super interesting. Thanks so much for answering my question. Thank you.
spk03: Sure. Thank you. At this time, we've reached the end of our question and answer session. I'll now turn the floor back to management for closing remarks.
spk04: Okay, second. I was writing another answer here. So I just want to take the opportunity to, while these are economically interesting time and volatile, we're, as you may hear, we're extremely confident about the future of CTV, the future of Innovate. We're capitalizing on investments we've done for the last five and 10 years. So we feel actually very excited about the future of what we can bring to the market in an efficient and profitable way throughout the next year and service our clients. I want to thank you all for taking the time to join us today. You know, innovation is on the front lines of CTV, and we're preparing ourselves to continue to capitalize on the future of television and by no means at no point falling behind, but our job is to lead the innovation for the benefit, as we discussed today, the advertisers, the publishers, and, of course, the consumers for a better experience. We hope to see you all on the upcoming Investor Day next week at the New York Stock Exchange. I hear it's going to be exciting and interesting. We're going to discuss our vision, but we're also going to bring a live product demo on stage, so show you the actual product in action, which is always exciting. And we're going to unpack the CTV, how we see it, kind of back to Laura's questions. We're going to talk more about how we see the future of CTV. across this very exciting and complex landscape. As always, I want to like to thank our talented and dedicated employees during this period, loyal customer base, and, of course, the shareholders who are trusting us as we continue our mission to reimagine TV advertising. Thank you all, and have a great, happy Veterans Day. Bye-bye. This will conclude today's conference.
spk03: You may disconnect your lines at this time. Thank you for your participation.
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