VerticalScope Holdings Inc.

Hello everyone and welcome to the Vertical Scope Holdings Incorporated Q3 2024 earnings call. My name is Emily and I'll be coordinating your call today. After the presentation, there will be the opportunity for you to ask any questions, which you can do so by pressing star followed by the number one on your telephone keypad. I will now hand over to our host, Diane Yu, Chief Legal Officer to begin. Please go ahead.

Thank you, Operator. Good morning, everyone, and welcome to Vertical Scope Holding's third quarter 2024 earnings call. I'm joined by Rob Laidlaw, our founder, chair, and chief executive officer, Vince Bellissimo, our chief financial officer, and Chris Goodrich, our president and chief operating officer. We'll begin with commentary on the quarter before opening the floor to questions. Before we begin, I'd like to remind everyone that today's presentation contains forward-looking information that involves known and unknown risks, and uncertainties and other factors that could cause actual events to differ materially from current expectations. These statements should not be read as assurances of future performance or results. Such statements involve known and unknown risks, uncertainties, and other factors that may cause actual results, performance, or achievements to be materially different from those implied by such statements. A more complete discussion of the risks and uncertainties facing the company appears in the company's management discussion analysis for the three and nine month periods ended September 30th, 2024, which is available under the company's profile on CEDR Plus, as well as on the company's website. We were cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this presentation. The company disclaims any intention or obligation except to the extent required by law to update and revise any forward-looking statements as a result of new information, future events, or for any other reason. Our discussion today will include references to adjusted financial measures, including adjusted EBITDA, free cash flow, free cash flow conversion, and MAU, which are non-IFRS measures. All references to currency in this presentation shall refer to USD unless otherwise specified. Now, I will turn the call over to Rob Laidlaw, founder, chair, and CEO of VerticalScope. Rob?

Thanks, Anne. Good morning, everyone, and thank you for joining us today. Our business performed well in the third quarter of this year, growing revenue by 15%, while serving a record 122 million MAUs, up 21% over last year. There is very strong demand for our communities right now, and while we expect to lap some strong quarters from 2023, we continue to see positive MAU growth headed into Q4 and 2025. AI content and AI overviews are continuing to drive more users to seek out the authentic content that is found on Fora, Reddit, and other user-generated content communities, while traffic from AI search bots is just beginning but is also growing rapidly. We believe this will be a years-long trend as user behavior has shifted. As we break down our revenue growth, we saw digital advertising grow by 22%. with strong demand for programmatic advertising leading to a 36% increase. Programmatic is one of the core strengths of our team and platform and allows us to capitalize on increased MAUs and scales effortlessly. It is high margin and now makes up 71% of the channel. On the direct advertising side, we were flat for the quarter but concluded Q3 with some strong momentum as we signed a major automotive OEM for Q4 and have another in the works for late Q4, Q1. We expect to see direct return to double-digit growth as we start to recognize these revenues. Overall, last quarter I mentioned the ad market was tepid, and I would say this narrative is finally improving. With a run-up to the U.S. election, CPMs began Q4 very strong, and we are seeing nice momentum building into the holiday shopping season, and as mentioned previously, with some key direct sales clients. We are hopeful that this time the momentum in the ad market will carry forward and feel this is likely with a new administration bringing out a greater risk and investment appetite in the United States. Turning our attention to our profitable business model, our adjusted EBITDA grew 9% versus last year, coming in at 7.4 million, while free cash flow increased 7% to 6.4 million. This level of free cash flow is sustainable and gives us a wide variety of options to grow our business organically and through M&A. Speaking of M&A, we are close to making our second small token acquisition while ramping up our team size. We think there is a better deal-making environment around the corner and will be prepared to close on an increased number of transactions. Interestingly, we are seeing some fast-growing upstart communities that are new on our radar. Some are break-offs of subreddits, and others are entrepreneurs just starting out. There's more interest in the sector, and it is great to see, and that is leading to more opportunities. Our pipeline is growing, and we think 2025 will be fruitful for Forum Tuckin. We are building an impressive financial position at Vertical Scope. Our debt is down to less than $40 million as of this call, and we are now at 1.3 times leverage. We have plenty of dry powder available on our balance sheet and through our new credit facility to make deals happen. We will be patient to only take swings on deals we love, and that will be immediately accretive to our business. Product wise, we are continuing to invest in our For All mobile app and exploring more deeply some of the opportunities available to us around product ownership, user created communities, and emerging technologies, including both AI and blockchain. We view both of these fast emerging technologies as providing us with credible opportunities to grow our user base, improve retention, and increase engagement. We are in the very early days of exploring opportunities around further enhancing and verifying the authenticity of our users, potentially using blockchain technology. We think it could help to further differentiate our communities from Reddit, and highlight the verified authenticity of our users and the products they own. Similar to Reddit, we are seeing a lot of the same growth opportunities with AI technology, including using it to increase engagement and also drive new audiences, including international audiences. AI provides us a lot of opportunities with a 2 billion plus post content corpus. and we look to report back some concrete results in future quarters. Lastly, we did not sign any LLM deals in the quarter. The process towards finding the right licensing arrangements will continue into 2025, and we remain patient and steadfast in our belief that this will one day be a meaningful contributor to our business. We do not intend to provide any further comments on the timing or quantum of potential deals in our pipeline. With that, I'll turn it over to Vince and Chris.

Thanks, Rob, and good morning, everyone. As Rob noted, Q3 saw continued strength in our advertising business, which posted another quarter of double-digit organic growth driven by higher impression volumes from our growing base of MAUs, stronger display CPMs, and incremental contributions from video. Total revenue in Q3 was $17.8 million, up 15% organically compared to prior year, driven by accelerating growth in our advertising business. E-commerce revenue was flat compared to Q2, and it ceased to be a drag on our operating results. Year to date, total revenue across all channels is $49.2 million, up 14% compared to prior year. Journaling into our advertising results, ad revenue was $15.6 million in Q3, up 22% compared to prior year, improving from the 20% growth rate we saw in Q2. Year to date, advertising is 42.6 million, up 23% compared to prior year. Programmatic continues to set the pace for the business, increasing by 36% in Q3 and marking the third consecutive quarter with growth exceeding 35%. And programmatic made up 71% of our total ad revenue in the quarter. Our programmatic technology continues to make great strides with a number of initiatives taking shape, including identity solutions, price flooring algorithms, ad rendering improvements, and direct DSP connections like our partnership with Trade Desk. We have an outstanding team and a deep pipeline of opportunities that will continue to push this part of our business forward. We are also still in the early innings with our video solution, which to date has been primarily monetized against desktop traffic. We're working on mobile experiences where the bulk of our audience is that will drive incremental revenue without compromising user experience. Turning to our direct advertising business, DREC made up 29% of our ad revenue and was flat in Q3. However, we experienced a pickup in demand as the quarter progressed, and we've seen this activity carry into Q4. Power sports and outdoor advertisers have been very consistent with their spending throughout the year, and this was the case again in Q3. And notably, as Rob mentioned, we're starting to see more direct activity from automotive OEMs that will support growth in Q4 and into next year. Turning to e-commerce, As you mentioned off the top, e-commerce is no longer a headwind to our overall revenue. Representing only 12% of total revenue in Q3, e-commerce was $2.1 million, down 20% from prior year, but flat compared to Q2. And 65% of our e-commerce revenue in Q3 was subscription-based. Looking ahead, Q4 is showing strong momentum, with October bringing accelerating advertising growth, driven by continued robust programmatic performance and an uptick in direct advertising. We anticipate continued organic revenue growth in advertising throughout the remainder of the year. And turning briefly to M&A, as Rob mentioned, our pipeline is strengthening and we're working on a handful of tuck-and-form acquisitions that should close in Q4. Inbound activity is also picked up and valuation gaps are narrowing. With our strengthened balance sheet, we expect M&A to be a bigger driver of growth in 2025. And with that, I'll turn it over to Vince to walk you through the rest of our financial results.

Thanks, Chris, and good morning, everyone. The organic growth trends in our business remain strong, and we continue to strengthen our financial position and deliver on results. In Q3, we beat market consensus across all of our core KPIs and are excited about the trends we are seeing to start the fourth quarter. So let's dive right in. We had another quarter of strong performance, with 15% top-line revenue growth driving $1.2 million net income and an earnings per share of $0.06 for the period. compared to a net loss of $516,000 in the prior year. Adjusted EBITDA on the quarter increased by 9% to $7.4 million, while our adjusted EBITDA margin declined slightly to 42% compared to 44% in the prior year. This was primarily due to higher performance-based incentives and investments in technology and new partnerships that will drive future growth for our business. The increase in performance-based accruals is reflective of our strong year-to-date results and increased confidence in achieving our growth targets. These accruals are a positive indicator for our business and the alignment of our incentive plans with our long-term growth strategy. In the period, we also harness new technology and partnerships that will drive growth in our programmatic channel. While these solutions have added incremental costs to the period, we expect these investments will drive long-term benefits, including increased efficiency and revenue growth. For the year, we have recognized adjusted with our margins of 40% and expect to deliver margins of 40% or better in Q4 on seasonally strong results. Our total operating expenses in the quarter were in line with prior year, increasing by 2% with increases in wages and consultant costs offset by lower share-based compensation and a reduction in the rate of amortization related to acquired intangibles. Our operating expenses also continue to experience a benefit from the strengthening U.S. dollar relative to the Canadian dollar in Israeli New Shekel, with offices and 65% of our workforce residing in these two geographies. Our profitability continues to transit into robust free cash flow for our business that is redeployed towards strengthening our balance sheet and returning capital to our shareholders through share buybacks under our NCIB. Free cash flow in the quarter grew by 7% to $6.4 million for a conversion of 86%, compared to an 88% conversion in the prior year. The slight decrease in conversion for the period is as a result of higher cash taxes in the quarter, offset by a reduction in capex related to internally developed software. Excluding $418,000 in refunds relating to prior period returns, cash taxes paid on a year-to-day basis were 26% lower than prior year, as a result of ongoing optimizations to our global tax structure. On a year-to-date basis, our business has generated $18.1 million in free cash flow of 45% from a prior year for a conversion of 92%. So far this year, we have repurchased 326,000 shares at an average price of $7.79 Canadian per share under NCIB and have made $14.8 million in voluntary debt repayments bring our net leverage ratio to 1.3 times as defined by our credit agreement, compared to 2.1 times leverage at the start of the year. In October, we amended our credit agreement, extending the term by two years to October 2028, and expanded the revolver to 100 million, giving us increased flexibility to quickly execute on M&A when the right accretive opportunities arise. We also increased the strength of our lending syndicate with the addition of Citibank, which joins Capital One World Bank, and National Bank as our lenders. This is a well-rounded lending group that supports and understands our business and gives us a very strong presence in both the U.S. and Canadian markets. There is currently over $60 million available to draw on the Revolver. We are encouraged by the strong performance of our digital advertising channel as we head into Q4, driven by impressive growth in programmatic and improving trends in direct. We expect the momentum in the channel to continue contributing low to mid double-digit growth in Q4. E-commerce remains a small but stabilized component of our business, with new leadership hyper-focused on exploring new products and initiatives that will drive long-term growth in the channel. As we look ahead to Q4 and beyond, we remain confident about our growth trajectory. In Q4, we anticipate MAU will continue to grow as we elapse a strong, comparable, and accelerated growth period that began in the second half of 2023. As a management team, we are committed to delivering sustainable, long-term growth. We will continue to invest in our core business and explore new opportunities to drive profitable results and long-term value for our shareholders and employees. And with that, I will pass it back to Rob for some closing remarks.

Thanks, Vince. we're excited about the future of the Flora platform and continuing to deliver long-term growth for our shareholders. That will open it up for questions.

Thank you.

We will now begin the question and answer session. As a reminder, if you would like to ask a question today, please do so now by pressing start, followed by the number one on your telephone keypad. If you change your mind or you feel like your question has already been answered, you can withdraw yourself from the queue by pressing start, followed by two. Our first question today comes from Aravinda Ghalapatige with Canaccord Genuity. Please go ahead, Aravinda.

Good morning. Thanks for taking my questions. Congrats on the quarter and the overall results. Two for me. First of all, Rob, you talked a little bit about the outlook for NAU growth. It seems promising. I think you mentioned you expect a years-long trend in terms of MAU growth. Maybe give us a little bit more about what's driving that confidence. I know you talked about the underlying trends. Is there anything more in terms of categories where you're seeing certain categories have sharper growth that give us some insights as to what the underlying drivers are? And then my second question, perhaps a little related, I know that you talked about increasing engagement and translating MAUs to DAUs. Any kind of progress on that and maybe some of the technologies that you've highlighted that you can build on that in terms of sort of driving that conversion rate? Thank you.

Thanks, Aravinda, for the questions. Really good questions around the MAU growth. Just kind of repeating myself a little bit around the, I think, just confidence that we have in our community sites. That's where we're seeing the strength is on the Fora platform. And really the kind of, I'm going to call it macro interest, kind of widespread, not just with, you know, Vertical Scope and our Fora communities, but, you know, Reddit and other user generated communities. And I think a lot of that goes back to some of the low quality content and AI generated content that was out there. And I think AI has its place, but it's also driving a lot of interest to these communities. So in terms of a category, it's really not verticalized. It's not just automotive or outdoors or power sports. It's really across all of our community websites. Certainly, I think where we have benefited is around particularly the product-based communities. We're very, very strong in that I think from the early outset of when we started doing acquisitions and getting into the community space, we were always very focused on large ticket items, things that people are really passionate about, where their hobbies are, where they spend a lot of their money. And I think that's the area where these enthusiasts can really see through AI generated or even just, you know, kind of these desk written product reviews. And, you know, they come to our communities because they're looking for that authenticity and those perspectives that can really only be ascertained from, you know, human to human connection. So I think those connections are driving the long-term growth and the confidence that we have in the business and the model. And I would say that the challenge for our team, as you mentioned, is converting more of those MAUs to DAUs. And we're using a variety of tactics, email, the mobile app, and even some kind of early AI driven algorithms and experiments to try and get that traffic coming back on a daily basis, not just when they're looking to make their next product purchase. So that's a real opportunity for us. As you know, the mobile app opens up the opportunity for our enthusiast users to be a member of many communities. We've talked, albeit very briefly, about user-created communities and the ability for users to create their own communities like they would on Reddit on our platform. And I think that's an exciting kind of growth opportunity once that gets kind of more off the ground. So overall, MAUs are something we're feeling very confident. I know there's been some noise in the market around uh maus but um you know we've just come off a record quarter um we've again i think said that we we expect uh growth in q4 even though we're lapping some very very strong quarters from last year and um you know going into 2025 obviously um you know we continue to think that the types of content that we own and are on our platform are very well positioned given the macro outlook.

Thanks very much. I'll pass the line.

The next question comes from Vince Valentini with TD Cohen. Please go ahead, Vince.

Thanks very much. First, can I just clarify growth in MAU in the fourth quarter? Are you just talking year over year or do you think you can grow it from where you were in the third quarter?

Hey Vince, we're always talking year over year because of the seasonality and those seasonal trends in our business. So I haven't looked specifically at the quarter over quarter. in depth, but definitely year-over-year growth is what we'll always be focused on.

Okay. And in terms of the revenue, Vince, thanks for the guidance, if I can call it that, on advertising revenue versus e-commerce. If you package those two together, still have visibility to double-digit total revenue growth on a year-over-year basis in the fourth quarter? yes yeah we still have visibility to double digit overall growth in the fourth quarter okay and then looking out to next year the comps get tougher i assume you wouldn't want to commit at this point to double digit organic revenue growth throughout 2025 but if if we include these tuck-ins that the pipeline seems to be improving on and you got lots of cash to execute on them if if we include

not huge acquisitions but just the regular cadence of tuck-ins plus organic could we possibly see double-digit revenue growth again in 2025 yeah yeah i think i think i think we could vince and it sort of speaks to you know some of the trends we're seeing right now and and uh especially in direct uh coming out of q4 um signing uh these automotive oems and and others on the horizon uh we expect that will benefit the channel into the first half of next year, coupled with the trends we're seeing in programmatic and e-commerce being stable. I think it is possible that we will see, you know, double digit organic growth, low double digit organic growth in next year.

Okay. So even better than what I sort of tried to lead you to, Vince, you think on an organic basis with no acquisitions, it could be.

Yeah. It could be that and layering in some of these tokens would obviously accelerate that growth rate.

And last, I appreciate the direct deals that you seem to be signing recently. That may negate some of my concern here, but is there any risk that the huge momentum that Reddit seems to have? I mean, your revenue growth is great, but I'm sure you've seen their numbers. It's quite a bit higher than yours, even off a larger base. Would we see market share shifts in direct more than programmatic if they were doing a better job convincing advertisers to do direct deals with them to reach these kind of community audiences? And it takes a little while for you guys to catch up and convince people you're just as relevant, or am I reading too much into the relative revenue for them versus you?

Yeah. Hey, Vince, it's Chris here. Go ahead, Chris. Sorry, Rob, didn't mean to speak over there. Vince, so quickly on that, I think there's a couple of things to think about. First of all, the digital ad market is massive and incredibly fragmented, right? So you're not necessarily running into any one competitor at a given time. The other thing I think, so there's a couple of things to think about. Reddit provides incredible validation for our model. with the market, with agencies, with big advertisers. You know, if there was any reluctance to go and invest ad dollars against a community like user-generated experience, Reddit's really helping to kind of push through that. So we see that as, you know, we see ourselves as a net beneficiary as more and more advertisers come around to seeing the benefits of investing alongside communities. And then the last thing I would say is, you know, in the categories we serve, we go incredibly deep. And so we can fulfill, you know, a little bit of a different purpose for an advertiser in categories like automotive or outdoors where we have all this concentrated expertise. So, you know, we see Reddit as very positive for the space and for ourselves. And we think we can also compete really effectively in the categories where we have scale.

If I can paraphrase, Chris, the opportunity is really for both of you and for the whole category to take mindshare from media buyers and maybe take some share from the other mega digital platforms to prove out the that this is a great category to advertise in, as opposed to worrying too much about how much goes to them versus how much goes to you.

Yeah, that's well said, Vince.

I'll pass the mic.

Thank you.

The next question comes from Adir Kaze with eight capital. Please go ahead.

Hey, thanks for this morning. Thanks for taking my question. This is Kieran on third year. To start, I just wanted to, you've spoken on platform enhancements before with video ads and ad placements. Would that lead to an increase in ARP who are ahead? Just trying to unpack how you are improving the monetization with these larger MAUs.

Yeah, Chris here again. That's exactly it. I mean, that's where you'll see, as video starts to ramp more, that's where you'll see the benefits come through that we're monetizing that user base better. Like we've said throughout, since we've been having these calls, we're always balancing that against the user experience and the authenticity of the platform. So we're very deliberate with the testing that we do, but when we find the right formula, we'll scale it up quickly. Again, that's the benefit of the common platform. When we find something that works, we can move quickly. And so the video and the continued rollout of video will be no different.

Thanks for the call, Chris. And then for my second here, given that free cash flow and your commentary on a higher velocity with deals than before, I mean, you also called out some new startup communities. Curious if target profiles would change and maybe there are larger companies out there you'd like to own. Just some broad color would help. Thank you.

Yeah, I mean, like our pipeline, we've built a pipeline over many, many years of doing deals and they come in all shapes and sizes. And we're certainly not afraid of doing many, many small deals because we have the processes in place to make the acquisition process go quickly and painlessly for the seller, but then also to integrate the acquisitions we make. There are some bigger players, by no means large, as far as individual aggregators that exist that own maybe 20 or 30 sites without common technology, but they just happen to own a collection of communities. There's several of those there in our pipeline, and as the M&A conditions improve, there'll be opportunities for us to consolidate there. So we're not... afraid of doing lots of small acquisitions because we think they can deliver tremendous value um but you know there will also be some opportunities to pull in some some consolidators too over time our next question comes from drew rick reynolds with rbc drew please go ahead yeah thanks very much good morning um

Just following up on the M&A question, maybe, Chris, in terms of kind of valuation multiples in the past, you've done some pretty accretive M&A. Just thoughts on how that's evolved in the current environment. And then second, maybe for you, Vince, just on the margin profile, as you look out into next year on an annual basis, you've spoken about investments going back into the business, and you've been through a kind of cost-cutting phase. when the environment was weak, you know, over the past kind of 18 months. So how does it all kind of shake out in terms of a normalized kind of margin trajectory when you look out maybe the next couple of years? Thank you.

Hey, Drew, just on the first question, then I'll pass to Vince. So on the M&A environment, so one thing to remember and reflect on is oftentimes we're dealing with individual sellers, right? You know, they aren't structured processes. And so the conditions around a sale can be, you know, different than you'd expect in kind of a normal kind of larger M&A transaction. So, you know, there's that to keep in mind. But, you know, we do see more inbound activity. You know, there's more people reaching out to us to look to do deals, which is often the case because, you know, we build the pipeline over time. And when we first approach a target, they are not always necessarily ready to to transact and it can be other events that cause them to want to do so. And so, you know, we're just seeing more and more of that materialize. And so when you have that inbound activity, I think, you know, the multiple expectations when the outreach is on the other side, I think shift a little bit. So I think, you know, we'll see, I think we're seeing a better, a better opportunity to acquire than we've seen in the last two years.

Yeah, and hey Drew, this is Vince, just on the margin profile. So yeah, as you saw in Q3, we continue to invest in organic growth in our business. I called out the new partners as well as sort of investing in people. We think that investment will continue into the outer years when you think of things like AI layering on expertise across our business in order to drive organic growth in those key areas, whether it's engagement growth or top line revenue growth. So far, it appears to be working. So I would say from a baseline perspective, you know, low 40s from a margin is what we're targeting as we continue to reinvest. And that margin will take up, you know, as we layer on, you know, M&A to the platform. Got it.

Yep, that's helpful. Thank you.

The next question comes from David McFadden with Cormac Securities. David, please go ahead.

OK, thank you. Couple questions. So you talked about how you expect the advertising to be up low, low double digit in the fourth quarter. Should we expect that the direct advertising could also maybe move up to that range as well in the fourth quarter? And what do you think the outlook would be for 25?

Yeah, David, Chris here. like we said, like the quarter started really strong with direct and was in that low double digit range, which is really what we've been trying to target all year. And so, you know, we're starting to see it happen. And so it's certainly possible that the quarter could finish that way. And, you know, it's hard to have full visibility on total 2025 in that channel. But, You know, as we enter Q1, which is a seasonally slower period for advertising generally, as you come off of a higher Q4, you know, the bookings we're seeing, and again, the positive signals we're seeing from the automotive space, you know, give us confidence that we're going to start 2025 on a really good foot.

Okay, okay, that's great. So when we look at the digital advertising, you know, it's being driven primarily, well, it's being driven all by growth in MAUs. Just wondering, what would it take to get the ARPU growing as well, and that way you could have that revenue line grow faster than MAUs? Is it solely contingent upon the video success? I'm just wondering what you think it would take to get the ARPU to grow on that segment.

I think there's a couple of things there, David, just to unpack. Like we've mentioned, you know, programmatic's grown at around 35% this year, right? So programmatic itself has grown at a higher rate than overall MAU growth. Some of that is video. Some of it is the tech improvements we've been talking about. Some of it is just stronger demand, you know, CPMs, you know, particularly in the most recent quarter. um so so there's there's that that's that's been a positive contributor to ARPU um direct you know as we know has been relatively flat uh so far this year and so it hasn't been additive to to ARPU as the MAU growth has been there but as we see direct you know really start to uptick we think that can be a positive contributor and then exactly as you mentioned video is a really good example of a relatively new ad format for us it's been you know, roughly a year of rolling that out and engaging how users respond, you know, and we do think there's opportunities to kind of further evolve that and improve it to drive ARPU higher, you know, in the coming quarters from advertising.

Okay. All right. Thanks, guys. The next question comes from Valerie Heckel with CIBC World Markets. Please go ahead, Valerie.

Hi, good morning. This is Valerie on for Todd Copeland. Thanks for taking my question. So I'm also curious about your MAU trends, which held up front with levels from last quarter and was nice to see. You talked a little bit about your efforts of converting MAUs to DAUs, and I was wondering if you could characterize how those efforts are trending relative to your expectations, and if there are any milestones we should be looking out for to assess these trends.

Thanks for the question, Valerie. Yeah, MAU to DAU trends are improving. I would say that ultimately, you know, DAUs will, you know, first kind of shine through with our member traffic. And then it's a matter of kind of converting more of that guest traffic into member traffic. So getting, you know, especially when users come from things like search engines, getting them moved over onto a membership basis. And then obviously using a lot of our retention techniques to drive DAUs. So we are seeing really impressive growth in registered members. And I think the one nugget of information I can share there is just our growth in registered members last month in October was plus 29% year over year. So again, it's a focus area for us and for the team. And we continue to really push forward on improving engagement. I don't want to get into the weeds on a whole number of initiatives that we're running internally to increase that, but it is a focus area for us. And I think throughout 2025, it will continue to be kind of top of mind for us.

OK, I really appreciate that. Thank you. I'll pass the line. Our next question comes from Gabriel Leung with Beacon Securities.

Please go ahead.

Hi, good morning, and thanks for taking my questions. Just two follow-ups. First, I'm just curious if you're able to provide some talking points around how the integration with Trade Desk is going, you know, whether it's been added to overall revenues and ARPUs.

Yeah. Hey, Gabriel. It's Chris here. Yeah, so Trade Desk has been terrific for us you know we started to see it you know we just really got it integrated towards the end of q2 and we see you know a nice pickup in that line it's certainly contributing incrementally to those those growth numbers you're you're seeing the other thing that it does is it creates auction pressure right so because you just have another bidder in play so it's harder to quantify that impact precisely, but you certainly see Trade Desk being one of the biggest ad buying platforms in the world. Having that direct connection is really powerful. What it's also led us to explore is additional DSP, direct DSP connections that have that same sort of efficiency associated with them where you don't have as many players in the value chain going through SSPs and exchanges and everything else. We've got a few of those in the works. And we think, you know, similarly, although not at the same size and scale of Trade Desk, you know, we string together a couple of those. And we think that can be, you know, another catalyst for programmatic growth next year.

Gotcha. No, thanks for that. Second question is around your direct advertising business. So I appreciate the commentary around the new automotive OEM. So I'm curious, though, If I look back over the last quarter or so, what does the composition of your direct advertiser base look like? Is it largely recurring advertisers or are you constantly putting in new direct advertisers every quarter? And just curious about how you think about direct advertising, ARPUs, I guess, what it's looked like over the past year and what your expectations are over the coming quarters. Thanks for that.

Yeah, so it's a mix, you know, as far as, you know, advertisers, direct advertisers are concerned, you know, we have some that that do annual deals. More commonly, we see, you know, quarterly planning that that tends to be. So we have some insight, you know, entering a quarter with those types of advertisers. um um you know and that tends to be more the norm and then you do have a handful that that run kind of more on a on a month a month-to-month basis um with respect to the the you know the arpu um you know i don't think we'll break it down specifically to an arpu number from from direct but um what i would say is you know if you think about it being you know roughly 30 right now of the of the overall as we see that you know, direct growing, the higher CPMs that it attracts and everything else, it will be additive to our output going forward. Now, you'll see, of course, seasonality. You know, we do have Q4. I just want to remind everyone we do have Q4 being our strongest quarter, Q1 being our weakest, and then Q2 and Q3 being kind of somewhere in the middle.

Gotcha. I appreciate the feedback and congrats on the progress. Thanks, Gabriel.

We have no further questions, and so I'll turn the call back to Rob for closing remarks.

Great. Thank you all for the great questions, and please feel free to reach out to management if you have further questions. We're available to answer your calls. To close, we're very excited about Q4 and 2025 and look forward to delivering strong results for our shareholders. Have a great rest of your week.

Thank you everyone for joining us today. This concludes our call and you may now disconnect your lines.