Release Date: November 12, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Integral Ad Science Holding Corp (NASDAQ:IAS) reported a double-digit increase in total revenue for Q3 2024, with growth across optimization, measurement, and publisher businesses.
• The company exceeded its adjusted EBITDA expectations for the third quarter, achieving a record adjusted EBITDA margin of 38%.
• IAS secured significant new business, including over 75 new Oracle customers, representing a 72% win rate on Oracle opportunities.
• The company launched innovative products, such as the first-to-market prebid optimization solution on Meta, enhancing its product offerings.
• IAS expanded its executive leadership team with strategic hires, strengthening its customer-first approach and product development capabilities.

Negative Points

• Revenue growth was limited by a slowdown in volume growth, particularly in the CPG and retail sectors, due to budget cuts and delays in digital media spending.
• The adoption and monetization of several new products were slower than anticipated, impacting revenue expectations.
• There was a softening in brand spend leading up to the US elections, affecting the company's financial outlook.
• The company faced competitive pressure during the Oracle customer transition, which may have impacted pricing strategies.
• IAS's fourth-quarter revenue outlook assumes continued lower volume growth and lower-than-expected monetization of new products.

Q & A Highlights

• Warning! GuruFocus has detected 4 Warning Signs with BODI.

Q: Can you provide more details on the dynamics in the 3rd and 4th quarters that impacted the outlook, particularly in retail and CPG sectors? A: We observed a slowdown in volume growth, especially in CPG and retail, due to budget cuts and delays in digital media spending. Additionally, the adoption of new products was slower than expected. However, our publisher growth outperformed, with a 26% increase as we scaled new CTV products. Some products have seen tremendous adoption, but the ramp-up is taking longer than anticipated.

Q: What are the key learnings from the early integration of Oracle customers, and how will this contribute to next year's revenue growth? A: We achieved a 72% win rate on Oracle opportunities, onboarding 75 new Oracle customers. Listening closely to customer needs and having a dedicated team for integration were crucial. The revenue contribution from Oracle is factored into our fourth-quarter guidance, and we expect it to support double-digit revenue growth next year.

Q: Are there still advertisers evaluating their plans post-Oracle shutdown, and how are you addressing potential new business? A: We are focused on onboarding and integrating the 75+ Oracle customers, which include brands, publishers, and platforms. There is still potential to win more business, and our team is concentrating on cross-selling and upselling, especially since Oracle lacked a robust brand safety solution.

Q: How are advertisers responding to the Meta optimization product, and how does it compare to existing post-bid tools? A: The feedback on the Meta prebid optimization product has been very positive. Advertisers have been eagerly awaiting its launch, and we are ensuring they see its value. Prebid social is estimated to be a twofold revenue opportunity compared to post-bid measurement.

Q: Can you elaborate on the launch of IAS Curation within Google Ad Manager and its potential impact? A: The IAS Curation launch with Google Ad Manager allows brands to consolidate bidding on high-quality inventory and target contextually relevant content more precisely. This partnership with Google demonstrates our ongoing innovation and commitment to providing valuable solutions.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.