Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Integral Ad Science Holding Corp (IAS, Financial) reported a 14% increase in total revenue for Q2 2024, exceeding their prior outlook.
- Adjusted EBITDA increased to $46.2 million with a 36% margin, surpassing expectations.
- IAS secured significant global customer wins, including Orange and Telefonica, enhancing their international footprint.
- The company launched several AI-backed products, including the industry's first deepfake detection offering, meeting high customer demand.
- IAS raised its full-year financial outlook, expecting 14% revenue growth and a 34% adjusted EBITDA margin.
Negative Points
- Despite the positive results, the optimization business has shown some volatility, raising concerns about future visibility.
- The exit of Oracle from the advertising business presents both an opportunity and a challenge, requiring significant resources for transition planning.
- IAS's stock-based compensation expense remains high, impacting overall profitability.
- The company faces increased hosting costs related to their video offerings, which could affect gross profit margins.
- There is a potential risk in the integration and onboarding of new clients from Oracle, which may not fully contribute to revenue until 2025.
Q & A Highlights
Q: How is the visibility in the optimization business given its recent strong performance?
A: We continue to see strong momentum in the optimization business, with 11% growth in Q2. Specific verticals like finance and CPG have performed well, contributing to this growth. (Tania Secor, CFO)
Q: How much of the Oracle opportunity is still outstanding, and what positions IAS better as a go-forward vendor?
A: We are actively pursuing the Oracle opportunity and have already won several deals. We are currently involved in dozens of RFPs and have hired over 20 former Oracle employees to enhance our capabilities. One notable win is with OpenX. (Tania Secor, CFO)
Q: What percent of clients have deployed TMQ for Meta, and what is the outlook for Meta TMQ?
A: Over 50% of our social clients spend on Meta, and Meta volumes are up close to 50% since the launch of TMQ in February. We are seeing significant adoption across all major social platforms, particularly Meta. (Lisa Utzschneider, CEO)
Q: Can you discuss the tailwinds that give you confidence in your growth outlook for the fourth quarter?
A: We are expecting 17% growth in the second half of the year, driven by strong execution, new product launches, new logos, and contributions from Oracle clients. We also expect some moderate impact from the Olympics and political events. (Tania Secor, CFO)
Q: How is IAS participating in the new CTV inventory coming online with premium publishers like Amazon, Netflix, and Disney?
A: We have partnerships with premium players like Netflix, offering core verification solutions on CTV. We see opportunities in both high-quality content and programmatic revenue, and we are focused on providing transparency and solving frequency capping issues for brands. (Lisa Utzschneider, CEO)
Q: How has the mix of business on social and CTV impacted your go-to-market strategy?
A: Both brands and agencies are equally important in driving social adoption. We are focused on cross-selling and upselling to existing advertisers and pursuing new brands. We also see double-digit growth with mid-market clients and increased adoption of context control. (Lisa Utzschneider, CEO)
Q: Are there any specific areas of strength or weakness from a vertical perspective in the broader ad markets?
A: We are seeing strength across all verticals, with CPG and retail being the strongest in Q2. Nearly every vertical showed growth, and in optimization, CPG and finance were the top performers. (Lisa Utzschneider, CEO)
Q: What drove the significant EBITDA beat in Q2, and how should we think about margin expansion and revenue growth moving forward?
A: The EBITDA beat was driven by higher-than-expected revenues, higher capitalization of internally developed software, and better alignment of costs. We will continue to invest in the business for sustainable growth but do not expect the same level of capitalized software in the coming quarters. (Tania Secor, CFO)
Q: How is IAS addressing the demand for pre-bid solutions on social platforms?
A: Pre-bid solutions are in high demand, and we are live with pre-bid social on platforms like TikTok, X, and LinkedIn. We are poised to launch pre-bid solutions on other major social platforms as brands continue to request them. (Lisa Utzschneider, CEO)
Q: What solutions are driving the pricing improvements in the optimization business?
A: We have launched several new optimization products, including MFA and context control, which have seen great adoption. These products are driving the pricing improvements and overall growth in the optimization business. (Lisa Utzschneider, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
