Yahoo Finance Innovid Corp. (NYSE:CTV) Q1 2024 Earnings Call Transcript
Innovid Corp. (NYSE:CTV) Q1 2024 Earnings Call Transcript May 11, 2024
Innovid Corp. isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day, ladies and gentlemen, and welcome to the Innovid First Quarter 2024 earnings call. Our host for today's call is Brinlea Johnson. At this time, all participants are in a listen only mode. Later we will conduct a question and answer session. I would now like to turn the call over to your host, Brinlea Johnson. You may begin.
Brinlea Johnson : Thank you, operator. Before I begin, I would like to 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 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 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 our earnings release available on our website and in our filings with the SEC.
Hosting today's call are Zvika Netter, Innovid’s Co-Founder and CEO as well as Anthony Callini, Innovid CFO, both of whom will participate in our Q&A session. And now I'll turn the call over to Zvika to begin. Go ahead.
Zvika Netter : Thanks, Brinlea, and thank you all for joining the call today. We had a strong start to 2024. As Q1 revenue grew over 20% and adjusted EBITDA significantly improved compared to Q1 last year. Most recently, we launched our Harmony initiative and related product suite to optimize the CTV advertising ecosystem as we seek to keep TV open for everyone and controlled by no one. Today, I'll review our first quarter results, provide several exciting business updates, unpack the Harmony initiative and share some thoughts on the rest of the year. I'll then turn it over to our Chief Financial Officer, Tony Callini, who will provide further details on our Q1 financials, update on the financial guidance, and we'll finish with Q&A.
I am pleased to report first quarter revenue of $36.7 million, reflecting 21% growth over the last year. Adjusted EBITDA improved from effectively breakeven last Q1 to $4.4 million in the first quarter of 2024, reflecting an adjusted EBITDA margin of 12% as operation profitability continues to improve. We also delivered another quarter of positive free cash flow at $2 million, a $4.8 million improvement over Q1 of last year. In the first quarter, we signed new client wins, product expansion and renewals with leading brands such as Eli Lilly, Helion, Homes.com and Verizon, as well as publishers like the Tennis Channel owned by Sinclair. Our financial results and client wins are gratifying reflection of our team's hard work and the power of our platform.
Another important part of what makes Innovid unique is our focus on innovation. We push the boundaries of what's possible in the fast growing CTV industry and Today, I'll share a few highlights of what we accomplished in Q1. In February, we launched a series of first-to-market interactive as in partnership with Paramount plus. During Super Bowl, 58, the most streamed Super Bowl ever that engaged consumers with a new ad to watch list units to promote Paramount plus content. We also develop interactive ads for Pfizer, which will viewers to their Let’s Outdo Cancer website. As live sports and other high-value content continues to shift to streaming platform. We believe this will further accelerate the increase in CTV viewership and advertising spend.
More recently, we were recognized as the Best Measurement Tool by Digiday in 2024 for Digital Video and TV awards, which highlights the Company's campaigns and technologies, modernizing video and TV. This recognition exemplifies the power of our platform and the value our measurement solution provides to brands and publishers. We do not only help measure the efficiency and effectiveness of CTV advertising, but we also empower them to act on that intelligence to optimize their investments. Next, I'm very excited to share more about our new strategic initiatives at Innovid. A few weeks ago, we were joined by clients and industry partners, including [Amy, the Four ACE and the IV] at the New York Stock Exchange and we had global webcast as we launch our Harmony initiative and products.
Our Harmony initiative was created to address some of the biggest challenges facing CTV advertising today by optimizing CTV advertising at the infrastructure level, we believe we can improve efficiency, enhance transparency and control, reduce carbon emissions and increase ROI to ultimately provide better viewing experience that will benefit advertisers, publishers, ad tech platforms and of course, CTV viewers every day. Every day, our ad serving capabilities, our award-winning creative technology and our measurement capabilities help us deliver exceptional value to our clients. Now with Harmony we are adding an activation and optimization there, powered by our CTV dataset and our unique position in the ecosystem. On the data front, we deliver 1.3 billion TV ads a day and see trillions of data points giving us an unrivaled view of the ecosystem that covers programmatic and direct buys, the open web and walled gardens.
This means we sit in a unique position to be able to deliver and as a result, see and understand 100% of what our clients run in CTV. In addition, since we don't buy, bid on or sell media, we are a media agnostic and unbiased, which puts us in the best position together with our partners to solve the biggest challenges in CTV, we are releasing a series of product innovation throughout 2024 under the Harmony product suite umbrella to openly share our unique data-driven CTV intelligence with the industry. We believe this will help make the entire CTV advertising ecosystem better for the benefit of all advertisers, publishers, DSPs and SSPs. And of course, the viewers at home, one of the first product innovations to be released as part of the initiative is Harmony Direct which connects the Innovid buy-side ad server directly to the publisher ad server for the delivery of guaranteed nonbillable CTV ad impressions.
This streamlines the workflow for these types of campaigns to its purest for removing all friction points, including technology hubs, fees and energy waste with fewer hops and less budget going to intermediate, advertisers can drive better outcomes from the same investment because more is going to actual working media. Harmony Direct also aims to lower the risk of latency in front, provide a greener supply path and improved fill rates for publishers. Agency and publisher partners, including Assembly, CMI Media Group, PMG, RPA, and Roku are among the first to use Harman Direct. In line with our commitment to stay an unbiased true partner to our customers and publisher partners. we are offering an impression based software pricing model for our Harmony product suite rather than a percentage of media model.
For Harmony Direct in particular, having a flat fee per impression model versus a take rate is increasing the amount of working media dollars that actually make their way from the advertiser to the publisher. This is a true win-win, brands will have more dollars of working media and publishers will have more revenue opportunities from the exact same budget. As I mentioned earlier, we have a roadmap of Harmony products that will continue to be released throughout 2024. We believe Harmony will better balance the value creation CTV, which will accelerate budget shifting from linear TV to CTV. While still in early days, we expect the Harmony strategy to help drive revenue growth over the long term by enhancing our cross-sell opportunities and strengthening our strategic positioning.
Our products are becoming more and more connected and integrated, increasing the overall stickiness of the Innovid platform. However, since this initiative and product are still new, any commercial impact is not yet reflected in our 2024 guidance. In summary, we had a great start to 2024 and are excited about the opportunities ahead of us. We continue to innovate and release exciting new optimization capabilities to support and further drive the shift from linear to CTV. Financially, we are trending towards our long-term financial goals of over 20% sustained growth and 30% adjusted EBITDA margins. We believe we are well positioned to become the essential technology infrastructure for the future of TV advertising and to experience outsized growth when ad spend returns to its historic levels.
We remain committed to innovation and value creation for our customers and shareholders. With that, I'll ask Tony to take us through the numbers and provide some insight into Q2 and full year expectations. Tony?
Anthony Callini: Thank you, Zvika, and good morning, everyone. There was another strong quarter of profitable growth and an encouraging start to 2024. We're pleased to report our second consecutive quarter of double-digit growth, our seventh straight quarter of year-over-year adjusted EBITDA margin expansion and third consecutive quarter of positive free cash flow, all contributing to continued business momentum entering 2024. Now let me dig a little more into the numbers. First quarter revenue grew 21% year-over- year to $36.7 million. Breaking that down further, ad serving and personalization revenues were up 23% year-over- year, while measurement revenue grew 11%. As a percentage of revenue ad serving and personalization made up 79%, while measurement accounted for 21%.
Growth in ad serving and personalization reflects the emerging stabilization of advertising spend and continued shift to CTV. In fact, CTV revenue from ad serving and personalization grew 22% over last Q1. As a reminder, Innovid ad serving and personalization revenue closely correlates with ad impression volume served through our platform. Within this category, CTV impression volume increased 21% as more impressions continue to transition to CTV and represented 52% of all video impressions. Mobile video volume grew by 38% and represented 37% of all video impressions, while desktop volume increased by 12% and reflected 11% of all video impressions. Both mobile and desktop have been inconsistent throughout 2023, but demonstrated meaningful growth in the fourth quarter, and we are pleased to see that trend continue into the first quarter of 2024.
All three of these devices represent consumers watching streaming applications. So it's also helpful to look at total video impressions, which grew 25% overall in the first quarter as compared to the first quarter of 2023. The double digit growth in measurement revenues reflects the continued enhancement of our measurement capabilities to take full advantage of the valuable dataset generated from the ad serving side of the business. While the measurement business model is more subscription oriented than ad serving, there is some seasonality with an anticipated step down from Q4 to Q1. As Zvika mentioned, we expect our unique ability to combine creative, delivery and measurement solutions to provide differentiated client value and be a catalyst for continued revenue growth.
It should be noted however, that while we are pleased with this quarter's revenue growth, ad spend in Q1 2023 was materially impacted by a challenging macroenvironment. While we experienced a meaningful year-over-year improvement in the first quarter. We don't expect a continued sequential improvement in quarterly growth going forward as the quarterly comps continue to improve. Now moving on to costs and expense. Revenue less cost of revenue, calculated out to 76% of revenue, improving from 73% in Q1 last year. Our margins continued to improve as the business scales, reflecting the operating leverage embedded in our business model. Q1 total operating expenses, excluding depreciation, amortization and impairment, totaled $37.2 million, an increase of 1% from $36.7 million last year, but supporting 21% more revenue than in 2023.
Employee count at the end of March was 472 as compared with 465 at the end of Q1 2023. We remain committed to managing our cost base while making strategic investments in high-growth areas to drive improved profitability and generate long-term value creation for our shareholders. Q1 net loss was $6.2 million or a per share loss of $0.04. This compares with a net loss of $8.6 million and per share loss of $0.06 in Q1 2023. The outstanding common share count at quarter close was 143.9 million shares. Adjusted EBITDA in the first quarter was $4.4 million, representing a 12% adjusted EBITDA margin, a $4.3 million improvement as compared to adjusted EBITDA of just $100,000 or 0.1% adjusted EBITDA margin in Q1 last year. You may remember that adjusted EBITDA margin each quarter in 2023 was an improvement over its equivalent quarter in 2022, and we have continued that trend in the first quarter of 2024.
These improvements reflect the impact of sustained revenue growth, lower cost of revenues as a percentage of revenue and operating cost that grew nominally over the prior year, demonstrating the leverage inherent and the operating model. Turning to the balance sheet and cash flow. We ended Q1 in a strong financial position with $31.6 million in cash and cash equivalents with no outstanding balance on our revolving debt facility. As a reminder, we have $50 million available on that debt facility. On a net cash basis or to say it another way, cash and cash equivalents less outstanding revolver balance, the $31.6 million on hand at the end of Q1 2024 is an improvement compared to the $29.6 million on hand at the end of 2023 and $25 million at the end of Q1 2023.
During the quarter, operating cash flow was $4.7 million and free cash flow was $2 million, an improvement of $4.8 million over the $2.8 million of free cash flow used in Q1 2023. If we look at free cash flow on a trailing 12 month basis, we have seen an improvement of $22.1 million as compared to the same 12 month period ended March 31st, 2023. Finally, let me touch on our outlook for the second quarter and an update for the full year 2024. We are encouraged by both the strong finish to 2023 and continued momentum into 2024 and remain committed to our long-term financial target of 20 plus percent annual revenue growth and 30 plus percent adjusted EBITDA margin. We are confident in the underlying strength of our business, opportunities for disruption in the market and our ability to grow revenue in a profitable way.
We see 2024 as a meaningful step towards achieving our long-term target. In the second quarter of 2024, we expect total revenue in the range of $37.5 million to $39.5 million, representing 9% to 14% year-over-year growth. We expect Q2 adjusted EBITDA in a range of $5 million to $6 million as compared to $4.5 million in the second quarter of last year. For the full year, we expect revenue of $157 million to $163 million, reflecting 12% to 17% annual growth and adjusted EBITDA between $24 million and $29 million. We had a strong start to the new year with continued revenue growth, margin expansion and free cash flow generation with exciting new product offerings like Harmony added to our existing capabilities, we believe we can continue to bring more value to our clients and reimagine what's possible in the industry.
We are proud of our accomplishments and look forward to taking a leading role in improving the ecosystem for everyone. As Zvika mentioned, we remain committed to continued execution, innovation and value creation for our customers and our shareholders. This concludes our prepared remarks. Zvika and I are now happy to take some questions. Operator, please begin the Q&A session.
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