All right, we are at 10:20 A.M., so why don't we go ahead and get started? Hello everyone, and Welcome to the Raymond James TMT and Consumer Conference. I'm Andrew Marok, and I cover digital media and advertising technology here at RJ, and we're thrilled to have IAS in to join us today. And joining us from the company are CEO Lisa Utzschneider and CFO Tania Secor. Thank you for joining. We're really- Thank you Really excited to have everyone here. Thanks for having us, Andrew. So I have a few questions prepared, but if anyone in the audience has anything they'd like to pose to the team, we'll have a little bit of time for audience Q&A during the course of the presentation. So before we dig in, why don't we take the overview? Can you give us a little bit of background on IAS, the evolution of the story so far, and where you fit into the digital ad ecosystem? Sure. Andrew, thanks for having us, and hello, everyone. I'm Lisa Utzschneider, CEO of Integral Ad Science, and before we get going, I want to announce today is Tania's first year anniversary. Hey! At IAS. Thank you, Lisa. Yeah, great way to- Thank you -to celebrate your first year. So at IAS, we are a leading global measurement and optimization company, and our core customer base are Fortune 500 iconic brands like Coke and Nestlé. We also have a publisher business. And in a nutshell, what we do is we verify the quality of media where brands run their advertising. I'll summarize it in a minute. And what that means is, if you take Nestlé, Nestlé invests in digital advertising, let's say on YouTube. Nestlé is running a 30-second video ad. IAS's technology ensures that Nestlé's ad is viewed, it is viewed by a human and not a bot, there is no fraudulent activity, and also Nestlé's ad runs adjacent to brand safe and brand suitable content. That was less than 60 seconds. Quite impressive. I'm good at the elevator pitch, Andrew. Yeah, you know, I think you probably have it down by now. I do. Tania, congratulations. Thank you. Here's to, here's to many more. So we'd like to maybe get your perspective on the state of the macro environment. So IAS had a strong Q3 across its various lines of business, and I'd say most advertising and ad tech companies mostly concurred, though with maybe one notable exception toward the end of the cycle. From your seat, how do you see advertiser confidence, and how is that flowing through to IAS's business? Sure, I'm happy to answer the macro, and Tania, feel free to chime in. So when you take a look at the macro landscape today, and especially the back half of 2023, the feedback that I've been hearing directly from the CMOs, it's a couple of things. First, they are doubled down on ROI and efficiency. They really care about getting the best bang for every single dollar that they invest in digital advertising. And because IAS focuses on things like fraud detection, transparency, and supply path optimization, higher quality media, our products have never been as relevant as they are for brands today as they're doubling down on that, on the efficiency. The second thing that we hear from brands is that third, Q4, they're definitely doubling down their budgets in the platforms where they see the greatest success from an efficiency perspective. And then also, the feedback has been they want to invest less in the shiny objects and invest more in the known platforms and the known entities. Do you wanna add anything? Sure on Q3? Yeah. And earlier this year, the macro was more fluid, and we were really pleased to see a very strong Q3, where we benefited from the value that we're providing to our advertisers. We exceeded our guidance for the Q3, and we took up our full year guidance on revenue by $9 million. So it was really great to see and participate in the strength of the economy as well as advertisers' increased spend during the course of the year. Great, and I think one thing that really stood out in the Q3 results to us was kind of that rising momentum we're seeing with your social partnerships and your walled garden relationships. So can you give us a quick state of play on those agreements, and maybe what advertiser feedback has sounded like as you expand your footprint within those walled gardens? Sure. So we're thrilled with the tailwind we're seeing in our measurement business, with the social platforms in particular. We've talked a lot over the last few earnings calls about, multimedia classification technology that we've built. It's called Total Media Quality. TikTok was the first social platform last year to adopt the technology, and basically what TMQ does, it classifies real-time video, image, audio, text within the live feeds and social platforms. And the reason why that's so important for the brands is they see the explosive adoption of social platforms, short-form video in particular. They want to shift more and more of their digital advertising budgets or overall advertising budgets into the social platforms. But they just wanna make sure that their brands run adjacent to brand safe and suitable content, especially in a highly dynamic, user-generated live feed. So if you fast-forward to today, TikTok, we're running TMQ product in over 50 markets, over 90 languages, seeing strong adoption. We launched the same product, TMQ, in YouTube at the end of Q2 in 30 languages. We have also announced in August an exclusive partnership with X. It's a one year partnership where we are running pre-bid brand safety and suitability solution. It's currently in beta in the immersive video inventory within X. And then the final platform is Meta, and as we announced in our last earnings call, Meta, this Q4, we are focused on launching a beta within Facebook Live News Feed, Instagram Feed, and Meta Reels. So lots of excitement, lots of innovation in the social platforms. Yeah, lots is definitely the right word, and I did kinda wanna double-click on TikTok a little bit because they seem to be kind of the exemplar of the positive relationship that you have with social networks. What has made that relationship, in particular, so conducive? Sure. Well, we have strong relationships with all the social platforms. Of course, of course. But TikTok was the global platform to first raise their hand about two years ago, and they declared publicly they wanted to be the most transparent, global social platform on the planet. They were the first to raise their hand and say: "Yes, we want to partner with independent third-party verification companies, and we will open up our live feed." With TikTok, also just that path from the early days of the beta, when we first launched in three markets in three languages, to today, where it is a global solution, they move at a really fast pace. They have a really high bar, really high standard in terms of the quality of the technology that runs. And also, they want everything built according to the GARM standards, like all of the platforms, which are standardized taxonomy for the categories like adult, hate speech, to ensure that our technology is running according to those standards. Great. That's, that's really interesting. And then maybe also a little bit deeper on the Meta relationship and the coming News Feed integration. I know it's still early, but can you give any color for investors or kind of on a framework of how it might work once you hit general availability? Because we've seen kind of a step function in prior social relationships where a platform will give you some inventory, then expand to more markets, more languages, et cetera, et cetera. Is that kind of how we would expect the News Feed integration to work as well? Sure. As I like to say, we follow Meta's lead, and, as I mentioned before, we are heads down, marching towards beta in Q4. The beta entails integration. It also entails Meta signed off on us in our last earnings call to be able to share its all three of Facebook News Feed, Instagram, and, Meta Reels. I would think that the beta, will probably run longer than TikTok's. TikTok's ran for 8 weeks. If I were to make a bet, I'd bet Meta's will run longer. But the one other thing that I do think that it's important to add is when we launched TikTok, we didn't have a robust advertiser base on the TikTok platform using and adopting our verification solutions because it was so new for both the TikTok platform and for us. On Meta, we have a robust advertiser base that is already using our verification solutions across Meta. We also launched. We announced this in Q2 on Meta Reels. We launched viewability and invalid traffic. So with that beta launch and then turn it on live in the H1 of next year, I do think that switch on will probably move faster than it did in TikTok because we already have the advertiser base in place. And then the second thing is the technology's humming- Mm-hmm -on the other platforms. Hmm. That's a good point. That's a good set of considerations, I think, to keep in mind- Mm-hmm -as we get into that. And then maybe finally on the social side of things, you know, I know you mentioned your recent agreement with X, and, you know, we've seen recently a kind of a flurry of headlines over at X, that maybe have highlighted the challenges of brand safety on that platform in particular. How do these headlines kind of affect advertiser demand for brand safety solutions on X, or maybe on other user-generated content platforms in general? Great question. So with X, I want to reiterate where our beta is running today with a handful of advertisers is in immersive video, so it's video only. That is different than what we were talking about with TikTok before, where we are classifying video, image, audio, and text. And the other thing with X, X has been a phenomenal partner. They are leaning into brand safety and suitability. They have been, throughout the extent of our partnership, and we are doubling down with X, and we continue to innovate and ensure that we'll, you know, have the beta run its course and then launch GA in immersive video. At a macro level, I think it just raises greater awareness in the importance of brand safety and suitability, and again, macro, our products have never been as relevant as they are today. Great. And then maybe wanted to talk quickly about some of your newer or emerging products. Sure. Made some recent moves into new formats and metrics with things like attention measurement and the growing emphasis on targeting inefficient spend on made-for-advertising sites. How do you see those opportunities scaling and layering into the financials over time? Sure. So we've received a lot of demand and incoming interest from our advertisers to launch both attention and made-for-advertising, and we were thrilled to announce a partnership with Lumen. The way to think about Lumen, it's a third-party technology where they have eye-tracking technology and we're layering our Lumen insights, our insights from IAS with Lumen's technology and launching both pre-bid and post-bid capability. Incorporating their technology, it really matters to the marketers because it enhances our ability to offer richer insights into marketers in terms of attention metrics and how what's working, and helping them, again, find higher quality media and greater engagement. Great. And I guess maybe on the MFA point in particular, what was kind of the turning point that made you realize we need a product to address this? Like, to what extent is your product development maybe informed by some of your advertiser feedback? And to what extent is it you going out and saying, "Hey, this is a problem. You should probably pay attention to it, and we have a solution for you"? Sure. So we've been aware for the need for made-for-advertising product. We've been engaged, for example, with our client advisory council. We also have an agency advisory council, gathering the feedback both from agencies and brands. And we're thrilled that we are launching a product. But with that, with our product roadmap, we also ensure that we're resourcing and prioritizing in the areas where have the greatest demand and also the greatest runway in terms of accelerated growth for the business. And everything I spoke to before on the social platforms, when you take a look at that runway and opportunity, given the size and scope of the social platforms and size and scope of short-form video, like YouTube Shorts, Meta Reels, that was a big investment for us in 2023, and the parallel path or additional opportunities like MFA and attention. That's interesting, and I think while we're on the topic of these incremental products, new offerings, Tania, maybe for you, looking at the top-line drivers, how should we think about maybe in the background, the environment for pricing? Mm-hmm And some of the factors that enter into that equation, and then maybe the pricing multiplier effect that you get from layering on some of these new solutions. Mm-hmm And maybe some of your premium price products? Yeah. No, thanks, Andrew. We enter into 1-3-year contracts with our clients, and these are exclusive, many times global contracts, where we negotiate a CPM with these clients. These are fixed CPMs, but at times when we're introducing new technology, like TMQ, we're able to drive a bit of a price increase. Now, we're really focused on volume. We were really pleased in the Q3 to see our volume acceleration from the Q2. So volume growth across measurement and optimization were 25% and 19% respectively, which was up from the Q2, and we did that while pricing was still consistent, and so pleased to see that dynamic. In terms of the customer journey, the customer typically starts with measurement, and we're able to expand this, our optimization offering, which is a higher premium price product, given the value of our technology and the ROI. And you also see kind of the fundamentals of how we grow with our customers also in our NRR, which was 116% versus 115% in the Q2. Great. That's interesting. I think maybe if we want to poll and see if there are any questions in the audience, I still have a few prepared, but if anybody- Okay -in the audience has? Okay. We, we will bring up, I'm sure, some more topics that'll, that'll spur some interesting questions. But one other big opportunity you called out in your Investor Day earlier this year was pockets of opportunity that are maybe yet outstanding in that optimization business. An example was kind of mid-market is just one, increasing cross-sell into your existing user base is another. Can you just give us a sense of the scales of some of these white spaces and maybe any particular challenges that might apply as you move into them? Sure. So we see tremendous opportunity in the mid-market space. The way we define mid-market is north of our top 100 accounts, so typically spending between $100K and $1 million on IAS. Where we see mid-market is in a couple of areas. The first is within the six holding companies. There are lots of mid-market accounts that still haven't adopted verification. Secondly, in independent agencies outside of the six holding companies, we're seeing tremendous opportunity there. Signing contracts with agencies where we're literally signing up all of the mid-tier agencies, mid-tier accounts within the agency to adopt verification. A third area with mid-tier is retail media. We haven't even talked about that yet, Andrew. When you take a look at the retail media networks, and I spent six years at Amazon helping build the ad business, there's significant mid-tier and long tail within retail media, and it's so important that we continue to integrate within the retail media networks. Out of the top 10, we're integrated with 9 out of 10 today and continue to invest in mid-tier, and with mid-tier in particular, it is all about performance, so demonstrating how higher quality media leads to higher ROI and simplicity, simplicity of activation of our solution so that we can scale it. I'm glad you kind of prompted the retail media question there because I was going to explore that in a little bit greater detail. So my question to you would be kind of, how are you pitching the essential nature of IAS's solutions for retail media specifically, and how do you see that scaling over time? Because it feels like retail media is a bit like CTV in the respect that you have this big offline TAM, coming online, that may require some advertiser education to get those dollars to flow digitally? Yeah, great question. I do see the CTV space in mid-tier with retail, apples and oranges. Okay. But, with mid-tier in particular, again, it's all about performance. It's also all about simplicity, like I said before, and transparency in the ROI of their investments. And that's another, Andrew, another area, Andrew, we haven't even talked about, is optimization and the important work we're doing in bringing transparency to optimization or programmatic investments, both for the larger advertisers and mid-tier advertisers. And we have a product today called Total Visibility, where we provide transparency into the Supply Path Optimization, so that advertisers, whether they're mid-tier or large, can have a better understanding of the investments that they're making programmatically, again, to help them drive a higher ROI. And so maybe, Tania, this might be a great time to ask this question. We've heard Lisa talk about the diversity of opportunities- Mm-hmm in front of the company. Mm-hmm. So from your perspective, how do you look at the margin trajectory of the company? Mm and the need to balance investment against some of these tech capabilities, against dropping some of that to the bottom line? Yeah. Yeah, Andrew, in every quarter so far this year, we improved EBITDA versus last year, and that was really driven by two things. One is just overall our focus on efficiency and productivity, especially coming off of the restructuring we did in December of last year. But the second piece of that is we are capitalizing under GAAP a higher percentage of our internally developed software, and that has helped improve our EBITDA, and now we are at that level, and we expect that level to maintain, but we don't expect that benefit that we got in 2023 versus 2022 to continue into 2024. But at the end of the day, it's a balance between growth and profitability. We're focused; we have a large TAM; we have multiple avenues for growth. It's really important that we're driving this efficiency, but also reinvesting in go-to-market, reinvesting in R&D, reinvesting in data science, and balancing revenue growth and margins. Kind of maybe related to that on capital allocation, I mean, you've talked right there about so many of the organic opportunities and- Mm-hmm In terms of reinvestment into the business in front of you. I guess, as you think about the capabilities of IAS and looking at the competitive environment, is there anything that you feel like you need to address, or is it really just kind of the focus being on that internal drive forward? So we have a very strong balance sheet. Our debt, net of cash is $82-$83 million, which is less than 0.5x EBITDA, and as you can see, our cash flow has been very strong, and we've been paying down debt. We're pursuing a partner build/buy strategy. And you know, we've done 4 deals in the last 4 years. We're eager to continue to make investments, so long as they're synergistic and create value for shareholders. Great. I think now might be a good time to again poll the audience if there is anything on your mind. Go ahead. Pulling it all together, how, how big is your TAM? What's your opportunity to capture? What portion of the advertising market can you capture? For the webcast, the question was on what is the TAM and how can IAS capture more of that addressable market? Great question. So we've taken a couple of looks at different TAMs. One TAM, when you look at total digital advertising, minus search, minus China, $6 billion. Another cut, if you take a look at just measurement and optimization for the largest advertisers, $3 billion, roughly half and half. Half optimization, half measurement. But the TAM is quite sizable, especially, as I mentioned before, with these large platforms. You know, if you take a look at Google, Meta, and Amazon alone, they make up 75% of the total digital advertising universe today, roughly, what? $450 billion, and they continue to gain share. So really focusing on the large platforms, driving the integration and innovation, and extending our solutions beyond those top 100 advertisers into mid and tail. Great. Anybody else? Couple of questions to wind down here. We got the announcement of the secondary offering last night. Any commentary you can share kind of on how, you know, you're thinking about that and the impact going forward on that stake? Sure. So Vista continues to be a very supportive partner. We can't comment on their plans for the future, but they continue to be very supportive of the company, and they're still majority board for the company. And after last night's announcement, they still own roughly 42%. Great, and then we saw the release of the responsibility report this morning. I unfortunately have not had time to read it yet. Andrew, you got to read it. Given that I'm at the conference, but I will. But I will. Yeah. What would you think would be maybe the couple biggest highlights for investors out of that report that we should be keeping an eye on? Sure. So we were thrilled to announce our first, our inaugural, responsibility report that we released this morning, and I could spend an hour, Andrew—talking about our commitment to ESG, to diversity. Couple of highlights in the report: as a company, we're a female-majority board. We've been female-majority board since the launch of our IPO. You can see also we're a female leadership team with a female CEO and CFO. We're also very committed to diversity as a company. We've invested for years in our employee resource groups and ensuring we're creating a working environment where every employee can realize their potential. And then from a sustainability perspective, we have inked deals with players like Scope3, like Good-Loop, helping advertisers ensure that they reduce their overall footprint from an environmental perspective. Great. The last question I have, I like to ask it to all my companies at the end of the presentations: as we get into 2024, what looks to be a really interesting year in the digital advertising space, if you had to pick one aspect of the company that you feel investors should keep an eye on or is maybe misunderstood in the story as we get into 2024, what would it be? The fact that you have two executives up here means you get two shots at the question. Great! So I would say, science is in the name of Integral Ad Science. The products that we build for years are backed by ML and AI, and we continue to invest both for short-term innovation and long-term innovation. We aspire next year that our engineering organization, a third of our team will be data scientists. We recently announced publicly that we hired Kumaresh Singh, who's a leading data science leader from Meta, who helped build the Meta Reels model. He's in our house. So 2024 is investing in innovation, leveraging AI, and continuing to drive value for our customer base. Yeah. And, from my perspective, we are firing on all cylinders in terms of social. Social revenue growth was up 41% in the Q3, up from 33% growth in the Q2. We have deep integrations with the platform partners. You heard Lisa talk about it today. Our TMQ product, the tech is driving value for our customers. And we've seen, you know, a doubling and quadrupling of impressions on both TikTok and YouTube. And with the beta and the launch of brand safety and suitability in Meta next year, we view that as a driver as well, continuing on not only the friendly trends in the industry, but the value of our technology and driving value for advertisers as we head into 2024. Great. Yeah. Well, we'll definitely be keeping our eyes on the story. That was Integral Ad Science, IAS, and CEO Lisa Utzschneider and CFO Tania Secor. Yep. Thanks for joining us. Thank you, Andrew. Thank you. Thank you. Thanks, everyone.