Innovid Corp.

Greetings and welcome to InnoVid Q3 2023 Earnings Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Trinlea Johnson. Thank you, Mrs. Johnson. You may begin.

Thank you, Operator. Before we begin, I remind you that today's call may contain forward-looking statements and that the forward-looking statement disclaimer included in our today's earnings release, available on our investor relations page, also pertains to this call. These forward-looking statements may include, without limitation, predictions, expectations, targets or estimates regarding our anticipated financial performance, business plans and objectives, future events and developments. 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, and 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, today's call will include non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margins, and free cash flow. We use these non-GAAP measures in managing the business and believe they provide useful information for our investors. These measures should be considered in addition to and not as a substitute for our GAAP results. Reconciliations of the non-GAAP measures to their corresponding GAAP measures, where appropriate, can be found in the earnings release available on our website and in our filings with the SEC. Hosting today's call are Zika Nader, Innovid's co-founder and CEO, as well as Anthony Collini, Innovid's CFO. both who won't participate in our Q&A session. And now I'll turn the call over to Zvika to begin. Zvika, go ahead.

Thanks, Brindley, and thank you all for joining the call today. Before I begin, I would like to thank our teams around the world for their hard work. We reported an excellent quarter in our own track to close out a great year. As many of you know, one of our development teams is located in Israel and would like to give a special thanks to them for continuing to deliver on track despite the heartbreaking situation in the region. I will start our call with our third quarter results and provide some recent business updates and highlights. I will then turn it over to our newly appointed Chief Financial Officer, Anthony Kalini, who will provide further details on our Q3 performance and share updated guidance, followed by Q&A. I am pleased to report we deliver a strong third quarter, exceeding our prior guidance for both revenue and adjusted EBITDA. We are well positioned for continued execution in the fourth quarter to deliver a solid full year 2023. As a result, we are raising our full year revenue and adjusted EBITDA guidance and now expect adjusted EBITDA margins of at least 12% compared to 10% prior. This is the third consecutive quarter of outperforming our guidance. and I'm proud of the team's ability to execute as we continue to improve financial metrics on all fronts. We remain committed to expanding our margins and positioning ourselves for accelerated growth as the macro environment improves. Looking at the quarter, our Q3 revenue grew 5% year-over-year, and importantly, we more than doubled our adjusted EBITDA to $6.5 million compared to last Q3. This follows a strong Q2 in which our adjusted EBITDA margin grew from negative 5% in Q2 of 2022 to 13% last quarter. Additionally, as our operation profitability increased, we generated $4.1 million in positive free cash flow this quarter. Our improving bottom line results over the last few quarters demonstrate that our products are profitable at their core. We have a business model where we generate margin expansion even as we continue to invest in exciting new and innovative technologies. We have a strong competitive mode and are capitalizing on our inevitable transformation of the market as more and more viewers watch television through CTV. We continue to see more streaming platforms implementing ad-supported offerings. Recently, Amazon Prime Video announced it will join the overall ad-supported CTV trend and will introduce ads into Prime Video next year. This creates huge value for the industry, our partners, and innovation. There's also been a rapid shift in TV viewership. This quarter, it was widely reported that linear TV viewership fell below 50% in the U.S. for the first time, which is a major milestone. Even in a world where ad budgets continue to be impacted by the macro environment, we expect that advertising dollars will meaningfully shift to align with eyeballs and time spent on CTV platforms. Innovate CTV revenue from ad serving and personalization grew 9% over last year, outpacing our overall revenue growth. We believe the inertia behind the trend will continue to accelerate. Position us to benefit once ad budgets normalize and we can capitalize on this massive opportunity as more impressions transition to CTV. Another growth driver, Innovate XP, our measurement offering, grew 8% as compared to last year. representing 23% of total revenue in the third quarter. We are pleased with a ramp-up in measurement as we continue to cross-sell and extend usage. Growth this quarter was also fueled by significant new customer wins, including Revlon, Fanatics, Box Health, and On Running. In addition, existing large publisher partners such as NBC Universal have expanded their commitment for usage of our measurement solutions to help prove the value of their inventory. Turning to our platform, we continue to invest in new functionality to power the future of TV and how brands can reach consumers in new and powerful ways using the latest breakthroughs in AI technologies. Innovit is a data-rich business that generates an unparalleled CTV data set. This data set is the optimal foundation for sophisticated AI tools that can deliver exceptional value to our clients. I'm excited to announce that we have implemented leading generative AI engines into our platform. Using these AI engines, our clients will be able to generate images, videos, voiceover, and ad copy based on the first and third-party data feeds. Those never-seen-before unique creative ads are then streamed, measured, and optimized by Innovate Platform based on customer set strategies. We have also implemented a natural language query engine into our platform that will allow our clients to gain valuable information and insights about the CTV campaigns via a conversation-like interface. Now, I would like to share with you a few words regarding our 2024 product strategy. Innovit's ability to apply AI algorithms to our ad server data uniquely positions us to optimize CTV ad investments. In October, we launched instant optimization a machine learning solution that empowers converged TV advertisers to immediately improve ad performance. Our instant optimization solution goes beyond measurement by intelligently selecting the most impactful creatives to serve at the delivery time. We see considerable opportunity to optimize the CTV market to drive outcomes for lower investments using our proprietary data and technology. We are excited about the momentum we've seen over the last few quarters with increasing revenues, expanding adjusted EBITDA margins, and improved positive free cash flow. We continue to roll out the valuable product enhancements, sign new clients, and expand our existing partnerships. Although the market has not fully rebounded and we are experiencing different spend levels across our verticals, we are encouraged by the continued shift in viewership from linear to CTV. and believe we are well positioned for growth. Once the market normalizes, we expect higher future growth rates and higher profitability margins. As we've demonstrated over the last few quarters, we remain committed to operational execution and expanding margins. We plan to share more about our excitement around 2024, including our product innovation and pipeline in which CTD performance optimization is the main theme at our upcoming Investor Day on November 30th in New York City. Before I turn the call over to Anthony Calini, our new Chief Financial Officer, I want to thank Tanya for all her contributions to Innovid over the last 11 years. Tanya has been a key pillar in our success to date and has built a strong finance team during her tenure. Tanya, I wish you all the best in your future endeavors. I am excited to welcome Tony to his first Innovid earnings call as our new Chief Financial Officer. Tony has over 20 years of financial experience at leading private and public technology companies. He possesses deep experience in helping growth companies scale in a sustainable way and bring extensive SaaS and enterprise software experience to our team. Tony, welcome to Innovit.