Innovid Corp.

Greetings. Welcome to the end of the third quarter 2024 earnings call. This time all participants will be in listen-only mode. A question and answer session will follow today's formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. Now my pleasure to introduce Lauren Hartman with Investor Relations. Thank you. You may now begin.

Thank you, operator. Before we begin, I'll remind you that today's call may contain forward-looking statements and that the forward-looking statement disclaimer included in 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 margins, free cash flow, and net cash. We use these non-GAAP measures in managing the business and believe they provide useful information to 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 SEC. Posing today's call are Zvika Nutter, Innovits co-founder and CEO, as well as Anthony Kalini, and Ovid CFO, both of whom will participate in the Q&A session. I'll now turn the call over to Zbiko to begin.

Thanks, Lauren, and welcome everyone to our 2024 Third Quarter Earnings Call. Today, I'll review our third quarter results and provide an update regarding ongoing strategic initiatives and progress in the market. I'll then turn the call over to our Chief Financial Officer, Tony Calini, who will provide further details with respect to our Q3 results and full-year 2024 outlook, followed by Q&A. Revenue for the third quarter grew 6% year-over-year to $38 million. And I'll explain the drivers momentarily. We continue to focus on driving revenue growth while expanding margins. Adjusted EBITDA grew 29% to $8 million, at a 22% adjusted EBITDA margin this quarter. CTV ad serving and personalization revenue led the quarterly growth with a 12% year-over-year improvement, and CTV's share of total video impressions reached a new record high of 58%. We're encouraged that these CTV numbers continue to increase, which gives us confidence in the future growth prospects of connected television. The growth we're seeing in CTV is fueled by the continuous shift of our clients' budgets from linear to connected TV, and by more ad-supported platforms existing anew, gaining scale. While we saw strong CTV growth, this growth was offsetted by lower mobile impressions, which were down by 2%, and desktop video impressions, which were also weaker than expected, up only 5%. Total revenue by the third quarter came in below our expectations as a result of three main factors. First, when inflated demand for media in the market, driven by the influx of political ads for the US election, Many brands slowed their ad spending during this period and at a greater than anticipated rate. Since our customers are brands and not political advertisers, brand spending softened after the election due to political dollars crowding out the traditional spend. There were more dollars that were spent in this election cycle than ever before. This pressured our growth this quarter and was the primary reason for the slower revenue growth. While the election cycle now behind us, We're anticipating more normalized ad spend moving forward, although we still expect to see some effect on our fourth quarter and full year revenue. Second, we also saw slower than anticipated growth in the cross-sell of additional products to our clients. While we have driven broader product adoption with a number of large global brands and publishers, this happened at a slower rate than expected. Accordingly, our measurement offering delivered 1% growth this quarter. We remain confident that we are well positioned to drive enhanced value for our clients and have taken concrete steps to address our growth objectives, taking into account these factors and controlling what we can. We are actively realigning the sales organization and overall go-to-market strategy to take better advantage of the cross-sell opportunity, and accordingly, we expect to see an improvement in our cross-sell motion in the coming quarters. Lastly, we have multiple layers of service available on top of our technology, depending on how much support a client needs. As we invest in AI and workflow automation, we're seeing an increase in the number of clients that are leveraging our technology directly without an additional service layer. The software-only model has both favorable unit economics and is a way for us to extend our reach to smaller advertisers, as this lower price option is an attractive alternative. In the third quarter, adoption of this offering accelerated and impressions from those using our platforms without an additional service layer grew 50% over the same period last year. While we expect some near-term revenue pressure from this ongoing mix shift, a software-only offering inherently has a better margin is one of the reasons why our profitability was strong this past quarter. We believe having flexibility in our offerings that meet the various needs of the market is a strategic differentiator, especially considering Google's antitrust lawsuit and the uncertainty it brings to its customers. We are pleased to have a suite of offerings that can support a broad range of clients. We expect each of these three revenue headwinds to persist in the fourth quarter, and therefore, we have brought down our full-year revenue guidance accordingly, but we remain encouraged by our long-term opportunities. and the growth of our core CTV product. The overall CTV market has significant room for expansion, and we have strategically positioned Innovate to capitalize on its expected growth. As mentioned earlier, CTV video impressions have now reached 58% of all video impressions, and we expect that number to continue to increase. Additionally, there are strong industry trends that are working in our favor, including the increasing number of ad-supported streaming platforms, growing viewership, and the expected shift of live sports from linear to CTV, not to mention the increased number of partners in our Harmony initiative as I'll discuss momentarily. We fully expect that revenue growth will re-accelerate in 2025 as we execute on several key initiatives, including cross-sell go-to-market enhancement, Harmony adoption, and continued development of strategic partnerships. These initiatives should drive more normalized top-line growth and set the stage for stronger performance. In addition to the CTV growth this quarter, I am proud of our improved operational profitability. Adjusted EBITDA grew 29%, hitting the higher end of our guidance, and adjusted EBITDA margin expanded to 22%, up from 18% in the prior year. As we shared previously, our business model is scalable and efficient at its core. Importantly, the team has delivered margin expansion even in a lower growth environment. If market conditions improve and our revenue growth re-accelerates, we expect to see a continued increase in profitability and remain committed to our long-term goal of surpassing 30% adjusted EBITDA margin. As part of our continued drive for operational efficiency, we are expanding the implementation of AI into innovative platforms. Over the last couple of quarters, AI has been implemented into our workflow, supporting faster and more seamless ways to create, monitor, and ensure quality of campaigns. The implementation of AI is already starting to pay off, and it's having a positive effect on operational efficiency. Now I'd like to share some additional highlights from the quarter. First, we signed new clients and expanded our relationship with leading brands such as Toyota, Dollar General, ITV, American Signature, AbbVie, among others. We also launched and expanded our partnership with Netflix, one of the world's largest streaming services. As Netflix rolled out its ad supported tier, Inivid was selected as one of the two partners for impression verification within Netflix ad supported platform. This allows our clients to activate their Netflix campaign while leveraging the Innovate platform. We look forward to continuing to work closely with Netflix as they grow their ad-supported business and build their technology further to benefit advertisers. This new partnership with Netflix is a testimony to the strong industry position Innovate holds and to the critical infrastructure we provide to key players in the market. This collaboration not only amplifies our visibility, it also increases the number of ads we can serve as major ad-supported platforms like Netflix gain scale. Additionally, last quarter we announced our planned strategic collaboration with Nielsen, a global leader in audience measurement. Nielsen is integrating Innovate's workflow solution in Nielsen One with the aim of providing seamless workflow and holistic view of the cross media ads universe. We're working together on defining and building the optimal path to provide the industry with a complete comprehensive measurement offering and are pleased with the progress underway. Earlier this year, we launched our strategic harmony initiative with a goal to optimize CTV advertising at the infrastructure level. We've been focused on expanding Harmony's adoption and launching new capabilities under the Harmony umbrella. We recently announced that LG AdSolutions is the latest partner to join the Harmony initiative, joining other top CTV platforms such as Roku and Vizio. The agency PMG, an early adopter of Harmony, is also running out our Harmony Direct solution across its full portfolio of clients. In July, we launched our Harmony Frequency solution in beta, and we have already seen clear evidence of its effectiveness. Initial Harmony Frequency campaigns that were launched with DSP partners and some of the world's largest advertisers revealed a reduction of over 50% in audiences who were overexposed to the same ads. These initial results have several market-defining implications. First, the ability to manage frequency over different publishers and media execution types can meaningfully reduce media waste for advertisers. Second, limiting the number of times that a viewer sees the same ad creates a better viewer experience for streaming services subscribers. We're delighted to lead the charge in shaping the future of TV advertising and to be recognized for it. During the quarter, Innovid won 2024 AdExchanger Award of Most Innovative TV Advertising Technology for the Harmony Initiative. I want to thank our partners, clients, and team for their innovation and efforts to make TV better. In summary, I am proud of the team for delivering another quarter of growth while expanding margins, despite a more challenging environment. our team is continuing to develop strategic partnerships and products to create an open and thriving CTV market while expanding operational profitability and increasing margins. We anticipate continued CTV growth, and as we exit the U.S. election cycle and focus on more effective cross-sell go-to-market motions, we expect to see revenue growth improvement and continued expansion in our business. Finally, Our executive team and board of directors remain confident in Innovit's long-term strategy and growth potential, and today we are announcing a stock repurchase program, reinforcing our commitment to delivering both short and long-term shareholder value. We do not believe our current stock price reflects the value of our business today or its long-term prospects. Rather, we expect that the combination of our financial position highly differentiated product offering, market expertise, and strategic investments will allow us to enhance shareholder value in the quarters and years ahead. With that, I'll ask Tony to take us through the numbers and provide some insights into Q4 and full year expectations.