Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Q1 exceeded expectations on both top and bottom lines, with revenue at $176 million and operating income at $27 million.
- Annual recurring revenue (ARR) grew by $11 million quarter-on-quarter, marking the third consecutive quarter of double-digit millions net new ARR.
- Subscription net retention increased by 2 points quarter-on-quarter to 105%, indicating strong performance with existing customers.
- Marketplace revenue grew 28%, reflecting strong demand across digital advertising tactics, including CTV.
- Integration of Habu has been smooth, contributing roughly $3 million in revenue and showing robust pipeline interest.
Negative Points
- Q1 deal cycles remained elongated versus historical norms, with customers cautious due to macroeconomic uncertainty.
- Operating cash flow was negative $9 million, down from positive $26 million a year ago, due to seasonal working capital movements.
- Stock-based compensation increased to $28 million, up from $13 million a year ago, impacting GAAP operating income.
- The selling environment remains mixed, with overall software budgets under greater scrutiny and customers being more cautious.
- Despite strong performance, the company maintained a wide guidance range for FY25 due to the challenging selling environment and uncertain macroeconomic conditions.
Q & A Highlights
Q: You provided positive stats and case studies on performance uplift from using RampID and ATS versus cookies. What needs to happen for advertisers to better understand this and drive broader adoption?
A: Scott Howe, CEO: The biggest challenge is evangelizing the benefits. Google's Chrome announcement lessens urgency, but the uncertain economic environment makes the results noteworthy. We are tightening our data collaboration story and emphasizing the return on ad spend to accelerate adoption.
Q: Data Marketplace growth was strong, up about 20%. Any additional color on this segment and its future outlook?
A: Lauren Dillard, CFO: We were pleased with the marketplace performance. The digital ad market was healthy, and our exposure to fast-growing segments like CTV, which doubled year-on-year, contributed to this growth. Initiatives to make data buying and selling easier are paying off.
Q: Can you provide an update on the Habu integration and how it is shaping up versus expectations?
A: Scott Howe, CEO: The integration has been smooth, and the pipeline interest is robust. We are on track with our deal model and focused on building network density. Lauren Dillard, CFO: We remain on track for $18 million in synergized revenue this year, with Habu expected to be roughly breakeven.
Q: Why maintain a wider range for full-year revenue guidance despite raising it?
A: Lauren Dillard, CFO: Given the challenging selling environment and uncertain macro conditions, it is prudent to maintain a wide range. About 30% of our revenue is variable and sensitive to macro conditions, so we built in a wider range of outcomes.
Q: Can you elaborate on additional use cases for your technology and their potential to drive bookings?
A: Scott Howe, CEO: We are standardizing queries for common use cases like shopping cart analysis and customer journey mapping. This standardization will help scale data collaboration. We are also seeing opportunities in verticals like travel and financial services, beyond retail and CPG.
Q: What are you hearing about the macro environment and its impact on sales cycles?
A: Scott Howe, CEO: Clients are cautious due to macro-economic uncertainty, leading to elongated sales cycles. We had deals slip due to client layoffs and pauses on new initiatives. However, we are not losing business, just experiencing delays.
Q: Can you provide an update on the Oracle marketplace pipeline and its revenue opportunity?
A: Scott Howe, CEO: We expect incremental Data Marketplace gains to outweigh the committed subscription revenue. Oracle's exit from the data business presents a net positive opportunity for us. Lauren Dillard, CFO: The pipeline is still early, and we have not built much upside into our guidance yet.
Q: How does Google's new approach to cookies and consent impact client commitment and conversion potential?
A: Scott Howe, CEO: Existing customers using ATS and RampID are unaffected. Prospective customers see the same end state, just delayed. The market forces, such as the need for authentication in CTV and better performance without cookies, will drive adoption over time.
Q: What is your perspective on Google's incentive to make Google PAIR work, given the cookie deprecation cancellation and other challenges?
A: Scott Howe, CEO: Google ads is fully committed to PAIR, and we have a strong relationship with them. The Chrome decision does not impact this commitment. Antitrust remedies take time, so we are focused on near-term opportunities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
