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Hello, again, everyone, and welcome to Viant Technology's Third Quarter 2023 Earnings Webinar. My name is Kelsey, and I will be your operator today. Well, before I begin the webinar or turn it over to the Viant leadership team, I'd like to go over just a few housekeeping notes for the program. As a reminder, today's webinar is being recorded. Attendees are in a view and listen-only mode. Following the speakers' remarks, there will be a question-and-answer session. If you'd like to ask a question please click on the Raise Hand tab located at the bottom of your screen and please ensure your

Good afternoon and welcome to Viant Technology's third quarter 2023 earnings conference call. On the call today are Tim Vanderhook, Co-Founder and Chief Executive Officer; Chris Vanderhook, Co-Founder and Chief Operating Officer; and Larry Madden, Chief Financial Officer. I I'd like to remind you that we will make forward-looking statements on our call today, including but not limited to our guidance for Q4 2023 and our platform development initiatives that are based on assumptions and subject to future events, risks, and uncertainties that could cause actual results to differ materially from those projected. These forward-looking statements speak only as of today, and we undertake no obligation to update or revise these statements except as required by law. For more information about factors that may cause actual results to differ materially from forward-looking statements and our entire safe harbor statement. Please refer to the news release issued today as well as the risks and uncertainties described in our quarterly report on Form 10-Q for the quarter ended September 30, 2023 under the heading risk factors and other filings with the SEC. During today's call, we will also present both GAAP and non-GAAP financial measures. Additional disclosures regarding these non-GAAP measures, including a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the news release issued today, which has been posted on the investor relations page of the company's website and in our SEC filings. I would now like to turn the call over to Tim Vanderhook, Chief Executive Officer of Viant. Tim?

Thanks, Casey, and thanks, everyone, for joining us today. We wrapped up a very strong third quarter with accelerating growth across our business and results that exceeded our guided range on all key metrics. We continue to win larger shares of budgets from our clients, by offering best-in-class products supported by industry-leading AI. We have focused execution and a commitment to enabling mid-market advertisers to get the highest return on their ad spend. As we look to the fourth quarter and beyond, we continue to see a number of favorable drivers of the business. Most notably, the ongoing migration and accelerating transition of approximately $60 billion of linear television advertising moving into connected TV. Second is the pending signal loss due to Google's deletion of cookies in 2024; and third is the application of artificial intelligence and generative AI, which we discussed in detail during our inaugural Innovation Day event on October 26. And I want to share more on each of those areas and provide more clarity on how we see them driving our long-term growth and profitability. I'll start with the continued shift from traditional linear TV to connected TV. Linear TV represents an additional $60 billion of ad spend coming into the programmatic ad market as this trend accelerates. Our growth is outpacing the market, and we believe a big driver of our success comes from our Household ID technology. This enables us to deliver addressable advertising as well as provide attribution and reporting in this cookieless environment. In CTV, Household ID is available on over 85% of all ad requests, Q3 saw us deliver another quarter of strong double-digit growth in Connected TV, again, outpacing the market, and Chris will talk more about that growth in this channel later on. I also want to take a moment to share some of the ways that we're leveraging AI to develop the most advanced DSP in the market. And for anyone who wasn't able to attend our innovation day event, I highly encourage you to check out the video replay, that link is available on our Investor Relations website. The primary objective of our Innovation Day was to highlight the progress we're making in our journey towards our north star of autonomous advertising. We're bringing the ease of use of advertising on search and social media to the purchase and measurement of advertising in the programmatic ecosystem. We believe we can leverage AI to reduce the friction involved in onboarding a customer into a DSP, saving them days or even weeks of ramp-up time, enabling them to more quickly utilize the full suite of tools and features available on our platform. Our push to further simplify and automate our platform should continue to expand our addressable market to millions of midsized advertisers that can now use our DSP to reach new customers and expand their businesses. I want to highlight how we're helping our customers solve two widespread challenges in the programmatic ad market. The first is choice overload and the second is campaign optimization, both of which are tied to the same dilemma. The programmatic ecosystem is moving too fast or even a seasoned trader. Never mind a new entrant entering this space. How can we use AI to provide a platform that helps ad buyers to easily and efficiently maximize their campaign performance? During our Innovation Day event, we explained what we call choice overload. Traders today are forced to deal with an insurmountable number of options when planning an ad campaign, making decisions across channels, audiences, devices and ad formats. They are faced with countless combinations. One way we've helped to address this challenge is with our recently announced AI recommendations engine, which is capable of processing and optimizing these options at a speed the human brain simply can't match. The result is actionable suggestions that save time while improving campaign performance and ultimately, trader productivity. The second topic from our Innovation Day event, I want to highlight is our AI Bid Optimizer solution. It uses artificial intelligence to analyze historical bid opportunities to predict the lowest media costs for all of these ad opportunities without sacrificing any ad performance. We first announced this new feature over the summer, and I'm pleased to report that adoption to date has far exceeded our expectations. Over half of our customers are currently utilizing AI Bid Optimizer, and we're continuing to see an average savings of 35% of their CPMs. This is notable for multiple reasons. First, it allows our customers to concentrate their time on strategic tasks rather than the time-consuming ones. They don't have to manually adjust their bids and last, it speaks to the advantage of a buy-side only DSP like ours. Any technology provider representing both the buy and sell side of the transaction has an inherent disincentive to drive down CPMs. Our customers recognize this misalignment and this is contributing to our growth. The final driver of our momentum is Google's deletion of cookies, which is reported to begin in Q1 2024. Viant has long been a leader in this space through the use of our patented Household ID, a scalable, interoperable and privacy-compliant identifier present in over 80% of ad requests. We believe that Google's deletion of cookies and other identifiers will further accelerate the growth of ad spend flowing through Viant as we offer one of the only scalable and now proven solutions available today in the form of our Household ID. We look forward to continuing our growth momentum into the fourth quarter. And I now will hand the call over to Chris to discuss more around our products and our customers.

Thanks, Tim. I want to start to talk about the Viant Data Platform, which has long been a massive advantage for those customers who have the vision and expertise to leverage its potential. Our data platform offers the ability to safely and seamlessly join first-party data with all the top third-party data providers in a privacy-friendly way. And it should come as no surprise that the insights, reporting and attribution opportunities here are substantial. . It must also be noted that historically, the barrier of data skills necessary to access these insights has also been very high. At our recent Innovation Day event, we announced a new product called Chat with Data. This product allows our customers to unlock the power of the data platform simply and easily through a natural language set of commands. We believe Chat with Data makes our data platform more accessible for even the most novice data analysts and business people. And more importantly, it means a programmatic trader with no background in data science or engineering can simply and efficiently unlock critical insights from their data in real time ultimately driving a higher return on ad spend as they execute their campaigns. 7 out of our top 10 spending customers rely on the Viant Data Platform and now Chat with Data will democratize access to the Viant Data Platform to marketers of all sizes and provide them with a competitive advantage in data. The Viant Data Platform is further differentiated by integrations with dozens of industry-leading data providers as well as the top clean room such as Snowflake. These data and clean room integrations, combined with our new Chat with Data product, unlock the value of first-party data using simple natural language access while providing the required data privacy and protection. The Viant Data Platform and Chat with Data are unrivaled and provide for a winning combination. The AI-enabled tools that we are rolling out are designed to allow marketers and their agencies of any size to deliver high-performing campaigns while enabling customers with best-in-class attribution. But where these tools really provide an advantage is in Viant's historical area of strength, the mid-market. There are several reasons why we've been successful within this market segment, and it begins with product performance. Our investments in AI-enabled solutions like AI Bid Optimizer and our buyside-only strategy has consistently allowed us to deliver lower CPMs than our competitors, and that results in superior campaign performance for our customers. That's important for any customer, but particularly when budgets are more demanding. Similarly, we believe we offer the best attribution and reporting capabilities available. That means better tracking of return on ad spend and ultimately more efficient spending as campaigns can be consistently adjusted to ensure objectives are being met and effective spend -- or excuse me, ineffective spend can be redirected. Now add to that a powerful product like the Viant Data Platform. With the depth of insights it provides a capability many of our mid-market customers have never dreamed of being able to access because of the high data and analytics skill set historically required. And we've now leveled the playing field in a truly unprecedented way. Finally, I want to dive into what's become a hot topic in the programmatic advertising industry: Supply path optimization. Put simply, how can the industry streamline the path between advertiser and publisher and ensure we are removing waste in the middle. As with many topics in the ad tech space, this can be confusing. We often get the question, is Viant trying to develop an SSP or eliminate the SSP? The answer is emphatically no. We're working hard to eliminate the additional cost to advertisers, resulting from the unnecessary reselling of inventory amongst middlemen with our ultimate objective of being -- of providing a tighter connection between advertisers and publishers. Earlier this year, we launched our supply path optimization program called Direct Access, where we partnered with leading CTV publishers to create a more cost-efficient direct path to premium inventory. These are the largest publishers in the CTV space and represent a majority of the premium inventory available. Direct Access is a program that provides clear benefits to both the buy side and the sell side. The digital supply chain is unnecessarily complicated by resellers who drive up the tech tax while delivering no added value to the customer. With Direct Access, we're removing resellers from the process and delivering lower immediate cost for the advertiser, along with tighter -- or excuse me, higher revenue for the publisher. Our primary focus of Direct Access is in CTV. And Q3 saw us again outperform the inherently high-growth CTV market. In Q3, over 25% of our CTV spend was through Direct Access publishers, a figure that continues to grow as we move through the year. Last month, we hosted an industry event in New York called the future of supply path optimization in CTV. Many of the leading CTV publishers and advertisers were in attendance. And the message could not have been clear from both parties. They want to streamline what has become an unnecessarily complex supply path. That complexity leads to financial waste, higher instances of fraud and less favorable viewing experiences for consumers. And Direct Access is injecting efficiency, transparency and ultimately improvement to the entire ecosystem. Our unique approach with Direct Access enables seamless access to premium CTV inventory at no additional cost to publishers while other supply path optimization solutions focus on web and display inventory while layering on fees. As part of our program growth, we recently expanded our Direct Access partnership with Disney to include the launch of their biddable CTV inventory, inclusive of Hulu, ESPN+ and Disney+. Direct Access is picking up steam with an increasing amount of premium CTV publishers looking to connect directly to our customers' demand, while more and more marketers recognize Direct Access as a way to maximize the value of their CTV ad spend with Viant. We will continue to drive innovation and the supply path for our customers as we represent their interest in the market. And with that, I'll close by saying we had an excellent first 3 quarters of the year. We believe we're well positioned to continue to take share amidst a broader market landscape that is continuing to trend upward. We are focused on delivering best-in-class product solutions and support to our clients, and we believe the gains we've made so far this year will only continue to increase in the coming quarters. Thank you, and I'll now turn it over to Larry to provide more details on our financial performance.

Thanks, Chris. Before I begin, I'd like to remind everyone that we have posted a presentation to our Investor Relations website that includes supplemental financial information to accompany today's call. As Tim shared, we delivered a very strong third quarter, exceeding the high end of our guidance on all key metrics. Revenue for the quarter was $59.6 million, an increase of 22% versus the prior year period. Contribution ex tax for the quarter was $39.1 million, also an increase of 22% versus the prior year period and 16% higher than Q2. These strong top line results were propelled by our continued success in capturing market share within the mid-market segment. This success was also bolstered by a steady cadence of new product releases and adoption including the Viant Household ID, our Advanced Reporting suite, the Viant Data Platform, Direct Access and AI Bid Optimizer. Customer adoption continued to grow across all of these products in Q3, contributing to meaningful revenue and contribution ex TAC in the quarter. Notably, in Q3, we witnessed record levels of spend, revenue and contribution ex TAC across our percentage of spend offering further underscoring the growing momentum we are establishing with our mid-market customers. In terms of customer verticals, growth in the quarter was primarily driven by continued gains across our retail, consumer goods and travel customer verticals. From a channel perspective, we delivered another impressive quarter in CTV, again, outpacing the market with robust double-digit growth. Our continued success in CTV can be attributed to the widespread adoption and effectiveness of the Viant Household ID in this inherently cookieless environment. Furthermore, the substantial impact of our Direct Access program, as previously highlighted by Chris also played a pivotal role in driving CTV spend during the quarter. Notably, in the third quarter, CTV represented more than 1/3 of total ad spend on our platform, retaining its status as our fastest-growing channel. Turning to formats, video, which includes both mobile video and CTV, accounted for well over half of the spend on our platform during the quarter, underscoring our strength in this high-growth format. Likewise, streaming audio continues to emerge as a promising category experiencing strong double-digit growth in the quarter once again. Advertiser spend per active customer increased 11% on a trailing 12-month basis, and we ended the quarter with 301 active customers, a net decline of 13 customers during the period. This decline is consistent with our previous communication regarding our customer growth strategy, which focuses on fostering deeper relationships with high-quality customers capable of increased spending levels. As part of our strategy, we are deliberately shifting our focus away from lower spend customer segments while actively attracting and onboarding customers with greater long-term value potential. Turning now to operating expenses for the quarter. Our non-GAAP operating expenses totaled $29.4 million, marking a significant 13% year-over-year reduction. This reduction highlights our ongoing commitment to driving operational efficiencies across the organization. As we've mentioned in previous quarters, we're achieving this operating leverage while concurrently making substantial investments in the business. This is exemplified by a more than 30% increase in the size of our product and engineering teams over this period. Our approach is to strike a balance between realizing efficiency gains and investing in the teams and technologies that will drive our long-term success. The substantial role of AI in fueling many of these productivity enhancements instills a high level of confidence in the sustainability of our progress. We are pleased to report continued acceleration in revenue per employee, which increased 32% in the quarter, an indication of our improving efficiency as an organization. We believe the investments we're making in AI are enabling us to enhance the efficiency of our entire team, positioning us to generate sustained operating leverage in the quarters ahead. For the third quarter, we generated adjusted EBITDA of $9.7 million, well above the high end of our guidance, representing an increase of $11.5 million from the prior year period. Adjusted EBITDA margin as a percent of contribution ex TAC was 25% for the quarter, an improvement of more than 30 percentage points from the prior year period. For the third quarter, non-GAAP net income, which excludes stock-based compensation and other items, totaled $7.6 million, which compares to a non-GAAP net loss of $4.4 million in the prior year period. Non-GAAP earnings per Class A share totaled $0.08 in the current quarter, which compares to a loss of $0.06 in the prior year period. In terms of share count, we ended the quarter with 62.6 million Class A and Class B common shares outstanding. We also ended the quarter with $203 million in cash and cash equivalents which translates to a noteworthy $3.24 per share outstanding. We had $227 million of positive working capital and no debt at quarter end, and we continue to have access to a $75 million undrawn credit facility. This solid financial foundation positions us extremely well to fully capitalize on the substantial market opportunity in front of us. As we look ahead to Q4, we expect to continue our momentum taking share, particularly in the mid-market and benefiting from the continued stabilization in the U.S. advertising environment. For the fourth quarter of 2023, we expect revenue in the range of $64 million to $67 million, representing a year-over-year increase of 20% at the midpoint. We expect contribution ex TAC in the range of $41 million to $43 million, a year-over-year increase of 26% at the midpoint. Non-GAAP operating expenses are expected to be $30.5 million to $31.5 million, representing a year-over-year increase of 1% at the midpoint. And finally, we expect adjusted EBITDA to be in the range of $10.5 million to $11.5 million, which represents a year-over-year increase of 318% or $8.4 million at the midpoint. Adjusted EBITDA margin as a percentage of contribution ex TAC is expected to be 26% for Q4 at the midpoint of guidance, an improvement of more than 18 percentage points from the prior year period. In summary, we delivered strong double-digit top line growth in Q3 while simultaneously managing a double-digit reduction in operating expenses on a year-over-year basis. resulting in significant margin expansion in the quarter. For the quarter, contribution ex TAC grew 22% and our adjusted EBITDA margin as a percentage of contribution ex TAC totaled 25%. The sum of these two metrics often referred to as the Rule of 40 was an impressive 47% in Q3. Based on the midpoint of our guidance for Q4, we expect this metric to further increase in Q4 to 52%. Our market share gains in Q3 exemplified a substantial impact and effectiveness of our products and our unparalleled service. As I previously mentioned, we maintained a steady cadence of new product launches throughout 2023, and are very excited about what we have coming in 2024. In Q3, we saw a steady increase in customer adoption across these newer products, driving meaningful incremental revenue and contribution ex TAC in the quarter. We expect this positive trend to continue as customer adoption continues to build across these products and as new products come to market in 2024. And finally, we have a robust financial profile, an unwavering focus on execution and a product portfolio propelled by innovation, consistently setting us ahead of the competition. We remain focused on continuing to deliver strong top line growth and adjusted EBITDA margin expansion in the quarters ahead, all while creating enduring value for both our customers and valued shareholders. And with that, I'll pass it back to Tim for final comments.

Thanks, Larry. I want to close our prepared remarks by reiterating that our strong performance this quarter was driven by the significant progress we've made across our technology initiatives that are translating directly into value for our customers. But I'm most excited that our Q3 results show investors the strength of our business model and the operating leverage we have achieved. Viant is a great company that we believe offers a compelling opportunity for investors. We delivered 22% revenue growth in the quarter. We have over $200 million in cash on the balance sheet, accelerating profitability and are structurally positioned to capture the opportunity of the enormous tailwind of the $60 billion of linear TV ad spend coming into Connected TV. We look forward to wrapping up the year with another strong quarter. I'll now turn it back over to the operator to open the video to questions. Operator?

[Operator Instructions] We'll hear first from Andrew Boone with JMP.

I wanted to touch on just the advertiser can right? We attended an Innovation Day, all of the new features that you guys had sounded very impressive. Yet at the same time, we're seeing customers down 13%. So is there anything you can help us understand in terms of either the top of funnel as you guys speak to these mid-market agencies? Or any other way that we understand the traction that you guys are getting with us as we are watching the customer count fall down sequentially.

Yes. Thanks, Andrew, for the question. Just to reiterate what we've said, I think it's been about this time last year, we started talking about this. It's really just our focus on the large spending customers in the mid-market. We have a lot of early vintage customers from, call it, 2018 that just haven't kept pace. From a spend basis, many of those, we require new minimums or increased pricing as a result -- and really, that's -- so we were really just pointing ahead that we knew we'd have some lower end customer churn. And that's really what -- a lot of what you're seeing. We think that, that really relent around Q1, where a lot of those MSAs that are on 12-month kind of rolling agreements, but we largely eat through a lot of that in Q1. What I will say is though we are continuing at the top of the funnel, we're gaining just a lot of traction in the mid-market. A lot of the things that we talked about, our solutions around CTV, Direct Access, our focus on measurement with the Viant Data Platform and our Advanced Reporting, a lot of that is really what's driving new customer acquisition as well as the growth of existing customers. So, we feel that the advertiser cap going down, you can see it really has -- and we highlighted this, it has a de minimis impact on really, we shed the kind of lower end of the customer base that really doesn't have a lot of value.

And then I wanted to ask again on the AI tools, but it really brings friction out of the buying process for ad buyers. Talk about the opportunity there in terms of agencies as well as brands in housing. What happens as ad buyers just become more efficient? Where are you guys seeing more traction there? Anything else you can share about that process?

Yes. I'll start. I mean it's not really about in-housing. Anyone who works in the programmatic space, whether you're a trader or in-house or ad an agency or an independent company. These are just complex systems to be able to manage and due to the many, many choices that the traders are faced with when planning a campaign and then, of course, optimizing from there. So we try and focus on tools that just make it a lot more simpler, and the north star there is search and social ad buying across those platforms, where you're not choosing every single feature and functionality to a very in-depth level. And so the tools that we brought forward, AI recommendations, giving you site list recommendations, time of day recommendations, location, all basic things that a programmatic trader does, but being able to analyze trillions of different combinations that are out there and simplifying that. Being able to speed up the process of a customer coming on to Adelphic and understanding how to use it, that ultimately drive a spend and revenue growth and that's been our primary focus.

Yes, I would add that if you break it out, I'll put it into two segments, larger customers really, there -- the traders there, they focus a lot around the usability and the UX of the platforms. We hear a lot about that, have for years. Anything we can do to make it easier for them to manage spend if they can do that, manage more spend per trader. That's what they want to do. It drives a lot of efficiencies for them. And if ours is easier to use, we think -- we know that, that draws more and more campaign dollars to us. However, in the -- I think in the kind of mid-sized enterprise to all the way to the SMBs, we talk a lot about search and social and why it's so easy to use because it has to be. Really, if you look at search and social, all businesses in theory are available to them. And historically, open web programmatic small businesses don't -- aren't going to DSPs and Open Web programmatic because of the complexity. We're trying to bring down that complexity to really open up the total addressable market. And that's really where we see what the opportunity is by providing more and more of these tools, it's going to help the higher end of the market, but also the millions and millions of businesses out there that buy search and social.

Yes. And we -- I mean, to sum it up, we think most businesses should buy search, most businesses should buy social and most businesses should buy TV because that's what drives those other two channels as well.

Sorry. And then I'm going to sneak one last one. Larry, was there a spend number for the quarter in terms of aggregate total spend growth?

We did -- we stopped disclosing that a couple of quarters ago. If you recall last year, there was a sizable delta in the growth rate of spend versus revenue versus contribution ex TAC. And that has converged since we got through that mix shift that we went through in 2022. So the numbers are all very similar. So in Q3, we grew revenue 22%, c ex-T 22% spend would be approximately about that amount as well.

And Andrew Marok with Raymond James has the next question.

Kind of some follow-ups to the last two in some of your commentary in the prepared remarks. So one of the things you did touch on, both in the prepared remarks and in the Innovation Day, is that impact that the types of data enhanced and AI-enhanced products can have on relatively novice users. I guess the question I would have as a result is how do you just tailor your go-to-market strategy to these types of users? And what's the impact on sales cycles? Are they kind of longer because there's a longer education or proving out period?

Yes. Great question. All right. Really what -- just -- you're talking about the accessibility of the Viant Data Platform, I mentioned 7 out of our 10 -- our top 10 customers used the Viant Data Platform. And it's really because of the insights they're able to generate, but they can only generate those insights because they have in-house data science teams. That's sort of the prerequisite. Many of our customers do not have in-house data science teams. Therefore, it's a very -- when we showcase it, customers love it. It's a wow factor. However, we're typically talking to trading teams, and they don't know what to do with it because they can't -- they don't write SQL query. They don't have an engineering skill set. So really, what we've tried to do is lower the barrier there, and that's really where natural language comes in. You can issue a prompt, ask any question of the data, structured or unstructured data, and they then have the power of a data scientist to be able to gain insights. That's typically -- that's the largest use case of what's happening. Those customers that use it, they onboard their CRM file, all their sales data, all their campaign impression logs, there's an incredible amount of data at their fingertips, and then they then query, they look for insights and then they change really their optimization strategies. We're now being able to do that instead of writing a complex SQL query, you could just write natural language commands and gain those insights. So, we really see the go-to-market now is every one of those customers that didn't have a data science team -- we're now offering it to those traders that they all have access now. They don't have to write SQL query, and we think it's going to be really big. And what -- the big thing on how it plays out is with better data, they're getting better strategies and they're ultimately going to get better returns. So we think that, that just increases the amount of spend that they spend with us.

But yes, Andrew, ultimately, just to sum it up, we focus on the user interface. That chat user interface is one that Chris described is available to all. The self-service user interface that we offer today, every day, we wake up and think about how to simplify the ad buying process through that interface as well. So it's a journey that we're on, but the chat application certainly has a lot of legs to it, both in data exploration and campaign setup and optimization.

I appreciate the info really helpful. And then one other question that we get now kind of with the cookie loss appearing to be happening and appearing to be getting closer and closer. Just kind of if you can give us a little bit of a refresher because I know you've talked about this a bit in the past around some of the Apple iOS privacy changes. But how does the technology like the Household ID behave if the IP were at risk for signal, particularly for CTV?

Yes. So when we talk about our data platform, we're built on a completely non-digital identifier structure. And what we mean by people-based advertising is name, address, phone number, e-mail address. And so when we say household IP that's not tying it to an IP address, it's tying all 4 of those data points together at the physical household. So to us, we don't really see this causing any disruption in our technology. It certainly is a big change for the industry, which we do believe accelerates our growth into 2024 as these environments come out. The positive of the delay, the first time of when Google did delay this post our IPO is that we're now -- we've now had a solution in market for many years that many mid-market and large holding companies have been able to test, see the scale, see the accuracy and understand its differences. And so we think we're really well positioned to grow and accelerate that growth in '24 once this event takes place.

Moving on to Maria Ripps with Canaccord.

Chris, you mentioned continued stabilization in the ad environment in Q4, but maybe can you expand on how you would classify market sentiment so far in Q4 compared to maybe the previous holiday periods? And are you seeing any sort of conservatism around ad budgets as a result of some brands sort of leaning more heavily into promotions?

We're not seeing a lot -- Maria, we're not really seeing a lot of that. We're certainly seeing accelerating growth from the third into the fourth quarter, which is what we typically see. This time last year, I would say the environment to us seems much different, much more positive this year. Retail continues to be strong as well as really just broadly across all verticals. A lot of it -- I would say -- so we definitely see a good ad environment out there. I would say the next piece would just be our focus in the company around mid-market, continuing all year long and servicing that customer segment, really proving it out on campaign performance. As I stated earlier, performance matters a ton and they're going to allocate more of their money to the higher-performing channels. So that's number one. But I would say in the -- really the open web around programmatic, it's getting a lot more premium, the performance ever since Apple came out with changes well over a year ago. It's really highlighted a lot of spend that could go to the Open Web programmatic, and that's benefiting us certainly. And we really see a strong fourth quarter.

Got it. That makes sense. And just following up on cookie deletion. So as you move closer to -- I think it's slated for Q1 of '24, could you maybe talk about how you're positioned -- positioning your sales force and whether the topic is being discussed in your conversations with brands and agencies at this point?

Yes. I'll go and start that. I mean we've obviously been -- we've clearly been in a market and this is the sign out front for us in our go-to-market is around all around signal loss. And the reality is that for a long time, -- and this isn't going to be new come January. Many marketers are definitely aware. They used to be able to match up all of their conversions on their website to all of their ad impressions. They used to be able to match those up at very, very high scale, 90-plus percentiles. But on the average customer, we see they're only able to match about 30% of their transactions to their ad impressions. So there's many marketers that are out there and have been out there for well over, call it, a year or two searching for measurement solutions. So that's really helped us. We have a big focus around measurement that drives customer adoption, and they really look to our tools to be able to help them with measuring their ad spend. So our go-to-market really isn't really going to change. I do think it is going to be enhanced. Many of the things that we talked about on our Innovation Day. All of those products, a lot of them are aimed around measurement and the accessibility of measurement to make it easier for customers to measure their ad spends. But it's -- we're not really in market talking to a customer who's unaware that signal loss is affecting them. They all readily have that problem, and I do believe many, if not all, are searching for solutions. So we think that although it's only going to be 1% of traffic on Google Chrome starting in Q1, Google themselves has been out there pretty heavily saying it's for real this time. So we think it will be a strong year for us again.

Yes, I would just add to that. I think 1 thing that's often overlooked is the integrated product that we bring customers that's really a differentiator. There's a signal loss problem, and we've answered that with Household ID. There's -- you now have to move from pixels firing all across the web to clean rooms and our data platform plays huge important areas there, and you can instantly activate across the demand side platform. And it's that integrated nature of the product offering for the buy-side advertiser, that really is a phenomenal solution in market. That's driven our market share gains in '23 that we think will accelerate in '24.

Chris Kuntarich has the next question.

Can you guys hear me?

Yes.

Maybe just quick questions. Could you just give us a bit more color on how the quarter progressed on a monthly basis to CTV and kind of how those trends were through October. I think you had called out stabilization but considering the conflict that we had in the Middle East. Just curious if that was any impact there. And then maybe just 1 on the expense side. I think you guys had called out that product and engineering teams were up about 30% year-over-year. And I think you guys had cash expenses growing sequentially this quarter at about 10% and then the guide is for another 7%. So just curious, is how we should be thinking about staffing levels and engineering and kind of some of the other roles within the team here for the opportunity that you guys see ahead in '24?

Larry, do you want to take both those?

Yes, I can take them. Thanks, Chris. So in terms of the quarter, we did see pretty steady growth throughout the quarter. Definitely, the last month of the quarter typically is the biggest month. So that was even more pronounced. But it was steady throughout the quarter. And we're seeing it across CTV. We're seeing it across video more broadly, retail and consumer goods, we are seeing solid strengths, which again, to us, speaks a lot about the stabilization that we're seeing. So I think it was a steady quarter. When we say stabilization, the only reason we're couching it a bit that way is we don't think the full power of the growth rate that existed prior to the kind of recession that we went through earlier this year and last year has fully returned yet but it's definitely a lot more stable than it was 2 to 3 quarters ago, for sure. And then on the expense front, yes, I mean, we certainly are investing and expenses will grow quarter-over-quarter at this point. When we look into next year, we would think, one, you have the annualization of the investments we made in 2023 and the annualizing the impact of that 24 will impact expenses. But the clear focus is to grow expenses slower -- quite a bit slower than we're growing our top line. So, that's how we're looking at it. We will continue to make selected investments going forward into '24, but you will see somewhat of an increase in OpEx different. Obviously -- this year, we did significant cuts last December. So '23, you're seeing a decline, but we will see modest increases next year.

And our next question will come from Jason Kreyer with Craig-Hallum.

Thank you. This is Cal Bartyzal on for Jason. So just a couple for me, I guess, to start. Can you just kind of talk about the CTV growth potential as Direct Access continues to gain adoption?

Yes. I would just say specifically within CTV, that's where our Direct Access Program is focused -- it's not something that we're looking to take fees on. We're really just trying to give the most optimized path and the most direct path for our customers to get more working media dollars to premium content owners and probably the most exciting channel in many years. So that's really the focus, and it's definitely -- it's in every single conversation that we're having with marketers. Especially, this was a great year to be able to launch that and really drive it because the budgets are a lot more demanding, especially if you think about coming out of Q4 last year -- it really started to turn heads. We've been really pleased with the growth of that. So as we stated, it's more than 25% of CTV spending. We see that, and we expect it to continue to grow. One of the -- one is just -- it makes complete financial sense. It's more working media dollars to the publisher that's more reach and more potential new customers for our clients. That's a big one and really just the directness nature of it, market and the savings there. Marketers really see the value in that. There's also some, I think, some more exciting things that will come out of Direct Access. As these premium content owners are continually looking to get more and more access to our clients' demand, I think that's going to open up a lot more opportunities things around data driven. Disney came out recently last week with an announcement that included us all around more data-driven products and bidding. So a more biddable supply. I would say, this time last year, there was a concern in the market that CTV was all going to be kind of direct IOs and it's not data-driven. We didn't -- we expected the opposite and we're seeing that. You're seeing the largest content owner in the world there. opening up data-driven, biddable inventory. So we expect that to continue to grow. So we think that Direct Access is really going to play a huge role in us keep outpacing industry CTV growth.

Perfect. And then just last 1 for me. As these AI tools continue to roll out, how do you expect that to manifest in the P&L? Are these discrete revenue drivers? Or are they more so differentiators to drive more share gain and wallet gain, things like that?

Yes. No, they are revenue drivers. So Bid Optimizer has been producing revenue. We launched it in June. The way we drive revenue there, is we keep 20% of the CPM savings that we produce. So it's based off the value that we create. And they've been big drivers, all these products in aggregate, drive our contribution ex-TAC up ultimately if they're adopted. Larry, would you add anything from there?

Yes. I would also add, the direct revenue drivers, but they also help us win incremental business with our customers as well, putting more dollars to work based on certain elements of our product line. So we're winning incremental business, but we're also seeing a modest increase in the revenue and contribution ex TAC as a result of using these products as well.

And that is all the time that we have today for questions. So Chris and Tim, I'll turn it back to you for closing remarks.