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Greetings, ladies and gentlemen, and welcome to the

Thank you, operator. Hello, everyone, and thank you for joining us for

Thank you, Scott. Good afternoon everyone, and thank you for joining us today. The second quarter of 2023 marked our two-year anniversary as a public company, and I’m extremely proud to announce we have exceeded consensus estimates and raised our outlook every quarter since we’ve gone public with Q2 continuing this pattern. In the quarter, we delivered revenue of $172 million, up 25% year-over-year with adjusted EBITDA of $27 million up 45% year-over-year. This translates into an adjusted EBITDA margin of 16%, up 210 basis points year-over-year. We generated $21 million of cash from operating activities up 41% with free cash flow of $13 million up 110% year-over-year. We have generated positive free cash flow in each of the eight quarters since our IPO. Driving this level of consistent growth and profitability is only possible if you’re developing exceptional products that deliver exceptional value to your customers. At

Thank you, David, and good afternoon everyone. I’ll cover three themes highlighting another very strong set of results. First, we extended our track record to eight straight beat-and-raised quarters, and once again exceeded the top and bottom line compound annual growth rates required to achieve our

Thank you, sir. [Operator Instructions] Our first question comes from Arjun Bhatia of William Blair.

Hi, this is Chris on for Arjun. Congrats on the quarter and thanks for taking the question. First, I wanted to touch on what the customer response has been so far to some of the newer AI offerings that launched just before the end of last quarter and if you had plans to directly monetize those products or if they were primarily a lever for customer acquisition or a lower cost to serve.

Well, thank you Chris. We appreciate your being on. When we rolled out the new generative AI tools, which really help all of our clients to add additional horsepower to their own team, it’s effectively virtual data scientists living inside of the platform that give additional capabilities in real world simplistic answers. We rolled it out to everybody at once, and I don’t think we’ve ever rolled out a product that I’ve personally gotten more people saying they loved and were excited about. It’s still early days and we’ll continue to fine tune it and we’ll continue to make it better. But as you know, we’ve always been on the cutting-edge of artificial intelligence. We started patenting machine learning algorithms as much as seven years to 10 years ago, and we have a meaningful patent portfolio around machine learning and artificial intelligence. So as we made sort of the leap to go from using AI to help our clients get to the highest level of intent-based score as to whether somebody would want to purchase a product and have the, not just intent to buying it, but because the data’s all deterministic would have the ability to know if the person could be approved for it. To taking that to building tools that allow CMOs to make questions like, what is my most valuable audience or which of my customers are buying additional products from my competitors, and how do I capture that? By adding those types of tools, we’re starting to see clients getting even stickier and we think that will add to the stickiness of the platform in the years to come.

Great, thank you. That’s very helpful color. And then other thing I wanted to touch on was the acquisition of WhatCounts just kind of where this fits in with

So I think, thematically, we’re always looking for great teams, great data, and great technology. When we look at M&A, we’ve never bought a company focused on the revenue growth associated with it. It’s just not been our MO. In this case WhatCounts is a very unique boutique email service provisioning business. It allowed us to integrate their technology into our tech stack and bring some incredible human capital into our business. And obviously we felt like it had created a little bit of confusion around our first quarter, which is why we’ve gone so much further in breaking it out and really showing how small an acquisition it is. The other thing I think has really been important about our M&A strategy has been the level of accelerated profitability. We’ve been able to drive through M&A by taking out expenses on both sides. In this case, we picked up some incredible people around sales and engineering, and as we looked at cutting team members on our own team, we were able to take certain headcounts out here, which resulted in greater profitability than you would see for the revenue that this particular business brought in. So great people, great tech, and additional profit acceleration all came out of this very small acquisition.

Thank you, operator. Next question, please.

Thank you very much, sir. The next question comes from Richard Baldry of ROTH MKM.

Thanks. I wondering if you could talk about the competitive win rates. You noted that you’re still seeing record pipeline record RFPs, so you wondering if that’s moving at all? Maybe with respect to pricing environment, you’re seeing people like Salesforce openly talk about 10% price increases, so you think that impacts win rates, or is it something that you could also, follow suit with some sort of pricing power of your own? Thanks.

Yes, thanks, Rich. So we continue. So, I always sort of said, as the pipeline grew and as

Thanks. Congrats on a great quarter.

Thank you, Rich. Next question, please. Operator?

The next question comes from

Yep. Thanks. David and Chris thanks for taking my questions and then congrats again on another strong quarter. I just really wanted to ask about sales productivity, I mean with headcount being flat quarter-over-quarter, but really having no impact to what you’re seeing on the sales execution side. So can you just talk through your approach to sales productivity and what’s really driving the success that you’re seeing with your reps?

Thanks,

Understood. And just one follow up question from me is really just around the feedback you’ve been hearing from customers. So great to see the upside here in Q2 and that flow through into your guidance for second half of this year. But David, I was just curious in terms of conversations you’re having with customers, is there still challenges around what budget they have allocated for marketing initiatives? Or what’s kind of the overall sentiment you’re hearing from customers?

We have not seen that

$715 million don’t get ahead of us.

Sorry, $715 million, I apologize, don’t kill me on that later. I, sorry. Thank you Chris to reiterate, $715 million at the middle of the range. But the reality is that what we are seeing is that marketers are being smarter, they’re focused on efficiency, but we’re not seeing a cutting back. Now, I do think as we go into some of the upfront cycle buying for linear TV over the next few months, I think you’re going to see people migrating away from upfront linear purchasing to keeping more dry powder on hand and focusing more on digital, which I think will be a nice tailwind for us. But as we talk to clients, we have not seen a cutback quite frankly, and we continue to see clients saying, how do we spend more?

Understood. Well, thanks for taking my questions and best of luck in the coming quarter.

Thanks,

Thank you. The next question comes from Ryan MacDonald of Needham and Company.

Hi, thanks for taking my questions and congrats on another great quarter. Wanted to ask about ARPU trends with scaled customers. I noticed, on the slide deck obviously the dated 2025 forecast is assuming about a 14% CAGR, last two quarters now around the 10% growth range. Just wondering, if you’re seeing anything in terms of changing patterns or in terms of expansion activity, with your customers that might be sort of slowing that pace of expansion versus your expectations.

Hey, Ryan and thank you for the congrats on the quarter. I’m glad you asked the question because I could see how, that could be a path that would be followed. But I think it’s a different case. First, every quarter since we announced

And of course, collectively between the massive overproduction of large new customers, even with the ARPU being different, we’re still mathematically far ahead against our 2025 plan.

I appreciate all the color there. Maybe just as a quick follow up on the QCRs obviously great to hear you’re focused on sort of making sure you’re driving sales productivity and sort of cutting under performers, but given the commentary around, record, continued record levels of RFPs, strong deal environment, should we expect

Yes, I also want to point out, because I think Chris speaks to this better than I do, but the duck’s feet are moving very rapidly under the water here. We added 11 new reps in the quarter. We just took out 11 reps that weren’t hitting the productivity levels that we would’ve wanted. So, I wouldn’t be that focused on the 130 versus 132. I think what you’ve got to focus on is by keeping the people who are really doing well while continuing to add new people who can evolve and grow with us. The trick is not just adding people or keeping people. I mean, we could have kept people and the number could have been much higher, but our percentage of SG&A would’ve been higher then. So we feel very, very good about what we’ve been doing inside of the Salesforce and if you look at the win rates, we are well ahead of where we expect it to be at this point. Chris?

That’s a great color. David. you’re right, Ryan. Over the last two years, we’ve added between 20% and 25% more sellers. I do not anticipate that we need to add as many in the second half of this year, but we will add, and we’re, what we’re watching very closely is what is the number of opportunities that each hunter is pursuing and what are the number of accounts that each farmer is managing in our scaled universe and making sure we keep a smart balance. But as David said, continuing to be guided by quality and our sales productivity metrics.

Excellent. Congrats again.

Thank you. The next question comes from Jason Kreyer of Craig-Hallum.

Great, thank you guys. I wanted to ask about market share trends on the activation side, there’s a little bit of a

Yes, so I mean, I know people like to break this into two parts. It’s obviously not how we think about it because we’re really looking at how our data and our AI drive enterprises clients’ ability to create, maintain, and monetize customers, right? So across the board, sometimes that’s through CRM and sometimes that’s through activation and different methodologies. Our businesses that you would associate with advertising technology are growing substantially faster than the market is itself substantially faster. And I know we don’t break that out separately, but the reason I think they’re growing substantially faster is because when you take our data and you’re using our artificial intelligence to build the highest quality deterministic audiences across the platform, you’re able to effectively eliminate 50% of what the marketing would’ve cost before the enterprise goes into market. So you can say, these people are interested, these people will be credit approved, these people are not interested, these people will not be credit approved, do not run marketing to them, right? So in an environment like we’re currently in where you’re seeing marketers who are looking at the most complex marketing ecosystem that’s ever existed in an environment where they’re under more pressure than ever to do more with less when they look at the

Let me just jump in Jason, because I think it opens up an opportunity to make sure that we emphasize something that I covered in my prepared remarks around how we’re evolving, how buyers who’ve traditionally use

Great color there guys. Thank you for that. Chris, one follow-up for you appreciate all the detail you gave on Slide 14, breaking out the guide, what stands out to me there is the EBITDA guide for Q3. You’re seeing a lot more leverage in Q3 with over 300 basis point improvement than I can remember seeing in the last few years. Is there anything specific to call out on why the ramp in profitability in Q3 or Q4?

It’s a good call out. So you’re right. In the second quarter our adjusted EBITDA margins expanded year-over-year by 210 basis points. By the way, there’s a 10th straight quarter in which they’ve grown year-over-year. And you’re right, accelerates to over 300 basis points of adjusted EBITDA margin expansion. I think what’s impressive about that is it’s been done up to this point in the absence of getting leverage out of our cost of revenue, which by the way, I think, you know, I think that eases in the second half of the year that headwind. What’s been driving it is a really balanced OpEx cost discipline that we have within the company getting good leverage, as I mentioned on sales and marketing, I talked about how the number of quota carriers we’ve added compared to the number of scaled customers we’ve added over the last 12 months and 24 months. There’s a substantial step up in sales productivity. At the same time, we utilize our global capabilities across our engineers and data scientists to get scale and efficiency out of our R&D line, and we firmly believe that we’re going to create value for shareholders and customers by investing in sellers and product. What’s in the middle is G&A and we’re going to keep being very efficient on that front. I’m excited about going forward. I mean, we have a unique headwind to this year with the new agencies we brought on in terms of gross margin. I wouldn’t be surprised if that headwind eases and it becomes even more leverageable going forward.

Yes, we’re – I mean, we’re just, we’re seeing the market come to us, right? And as a part of that, we’ve been disciplined about sales, marketing, and all of our operating expenses. And as a part of that discipline, you’re just naturally seeing a greater incremental margin dropped to the bottom line. And the other thing I want to point out here is, we have beat and raised eight quarters in a row. So you can assume we had a high degree of confidence in our ability to deliver on that increase in operating margin, or we wouldn’t be putting it out there.

Thanks gentlemen.

The next question comes from Ryan MacWilliams of Barclays.

Thanks for taking the question. David, how do you see the macro outlook impacting

Yes, we are definitely seeing a lot of what we saw last year around nervousness dissipating, and we are seeing, we’re closing bigger deals than we’ve ever closed before in the corporate history. And we’re seeing bigger deals come in than we’ve ever seen before. The other thing we’re starting to see is, we’re starting to see the sales cycle is shortening a bit. A lot of that is around the nervousness that I think had been going around was starting to dissipate. Now obviously there was a little bit of news in the global markets today, but the truth of the matter is for us, we are seeing marketers be more aggressive and looking to do more in the back half of this year than obviously we originally expected. And obviously that is showing up in our increased projections for Q3 and rippling in through the entire year.

I appreciate that color and I honestly, just to follow up on that. Are you seeing like the emergence of generative AI put more onus on heads of marketing or chief marketing officers to make that decision to upgrade their platform? Like do they feel like, okay, now’s the time, this is the killer app that is getting these large enterprises like more comfortable with making the big switch here?

Yes, and I mean, listen, there’s no question. The generative AI has created a buzz that I have not seen around the technology in quite some time. So this is, and unlike some of the last few technologies, we saw a lot of buzz, and yes, I’m looking at the metaverse, we’re seeing real business tools and real business capabilities come out of this one, which is not to say the metaverse won’t, but that was, I was trying to be a little tongue in cheek. But the reality is that I think what you’re seeing now is it’s being discussed everywhere. I don’t think it’s being implemented everywhere yet. And I think it’s just starting to drive a sales cycle. And as we look across the landscape, we believe over the next year we’re going to see one of the largest replacement cycles in the history of the marketing cloud, because you’ve got all these marketing clouds that are coming up for renewal that have been in place for two years, three years, four years coming up. And when we lead with generative AI, which we do, when we lead with not just large language models, which quite frankly make a lot of enterprises nervous because they don’t want their data to share back, we are really focused on what we call small language models, which allow the algorithm to live inside of the CDP and see just their data and the

Great to hear. It should be fun next year. Thanks for the color.

The next question comes from Matt Saltzman of Morgan Stanley.

Hey guys, this is Matt on for Elizabeth Porter. So CDP’s been area focus, you just mentioned it, and it’s a relatively newer offering, so it’d be great to just get some color around what mix of customers are using your CDP today, kind of how it’s progressed? And then just, when you think about the CDP opportunities, is it largely greenfield or are you actually seeing displacement of other vendors? Thanks.

So thank you. I will answer your second question first. It is almost all greenfield. I mean, there are so few companies out there that have implemented the technology over the last year or two that are changing it out. So most of what we are seeing is greenfield opportunity. What I would tell you is the vast majority of our enterprise clients are using our CDP in some component of the tech stack that we have delivered to them. It’s really becoming table stakes inside of the

Got it. Thank you. That’s helpful. And then just as a quick follow up, you mentioned that in the quarter you want a 100% of the RFPs where either Salesforce, Oracle or Adobe were also involved. I’m curious like what the typical customer size looked like there, if there’s kind of any indication you can give for us or if it was very – if it was varied across customer size.

Yes, I just want to quantify what I said, and you’re very close, but what I said was in a 100% of the RFPs, we beat one of those guys. I don’t want it to sound like we displaced them in all of them in some cases there was another legacy solution in there and they competed against us and then we won. I can’t give the exact size against those particular players. I just, we don’t give guidance to that and we don’t get down to that micro level. What I can tell you is, the deals that we’re seeing today are the biggest deal opportunities we have ever seen as a company. And we continue to be incredibly honored to get invited into these RFP processes for Fortune 500, Fortune 1000 companies that we are incredibly excited to not just be involved, but to be winning on a consistent basis greater than 50% of the time against competitors like we compete with.

Understood. Thank you. And thank you for the clarification.

Yes, thank you very much.

Thank you. The next question comes from Koji Ikeda of Bank of America.

Yes, hey guys. Thanks so much for taking the question and squeezing me in here. A couple from me. Just thinking about the super-scaled customer cohort increasing by eight, that that’s, I think one of the best you’ve ever done there from a quarterly perspective. But also the scaled customers we’re also up a bunch too, plus 14 in the quarter. So, I would think with such a nice super-scaled ad, maybe the scaled would be a bit softer, which wasn’t the case this quarter. So, what’s going on with that a 100K plus number strength? Is that due to customers quickly scaling into that cohort? Or you did mention customers signing bigger now, I mean, is that a bigger driver of that number for the scaled customers?

Yeah, no, first of all, yes, that is, that is the short answer. The medium answer is, I think the best insights come from zooming out on this metric. And as I mentioned earlier, we added over the last 12 months, 52 scaled customers. What’s interesting to us is, it’s also a case of the pilot. So our agile intelligence solution really resonating. It’s the hook, right? The hook gets set as a wedge, then that leads to the first, second, third channel utilization of the data cloud, which then drives them to move up in revenue bans. So out of that 52 that we’ve added over the last year, 32, we’re still in that less than 500K, 100K to 500K cohort, which is a really exciting future pipeline. And they’re not far off from getting to that a million plus. So we’re really pleased with what we saw, and I think it’s even more evident when you even zoom out.

Yes, and I do think that it’s a credit to our team that we are seeing bigger deals and we are closing a greater percentage of them. So you’re seeing these bigger companies that scale faster and you really is usually nail – usually nailed it, Koji, we really were proud of that super-scaled number going up simultaneously the scaled customer number going up. So we’re feeling like we’re delivering on all metrics here as a company.

Got it. Got it. No, that’s super helpful. Thanks guys. And just to follow up here, and kind of a hypothetical question, but just thinking about your 2025 targets and your outpacing both revenue and EBITDA seems like, but what happens if demand continues to increase? Just like, let’s just say it goes off the charts for

Hey Koji, I think it’s this; it’s one of the biggest misnomers. Growth does not have to be sacrificed for operating leverage. And you’re right, I mean, on Slide 7, we actually brought in a new slide into the earnings supplemental, and I think it is, look, we have a chip on our shoulder, we put it in the script. I do not believe it is fully appreciated just how firmly we’re tracking ahead of plan when we established

And quite frankly, for a number of years now, we’ve been able to grow revenue at a substantially faster pace than our competitors and people expected us to while simultaneously consistently adding meaningfully to our operating margin. The big question here, and I probably shouldn’t even throw this out yet, is when do we throw out the

Thanks so much for taking the questions.

Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session. I’ll now hand over to David Steinberg for closing remarks.

Not a 100% sure she introduced me, but I’ll assume it was me. So listen to, in summary, we continue to accelerate profit growth while driving the business. I am incredibly proud of this team and while we’re growing the business, we’re also seeing incremental margin dropping at a disproportionate pace. I want to say again, we beat-and-raised eight quarters in a row. We, at this point would not be putting out projections that we didn’t have a high degree of confidence in. We’re ahead of our