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Greetings, and welcome to the

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

Thank you, Matt. Good afternoon, everyone, and thank you for joining us today. We delivered another quarter of industry-leading growth, fueled by demand for our AI-powered marketing platform. In the second quarter, revenue was $308 million, up 35% year- over-year, and adjusted EBITDA grew by 52% to $59 million, both above our guidance.

Thank you, David, and good afternoon, everyone. On our fourth quarter earnings call, we outlined an ambitious plan to surpass $2.1 billion in revenue by 2028 and expand our free cash flow margin by 700 basis points over the next 4 years. Our first half results put us firmly on track versus those goals. Compared to our initial guidance, excluding LiveIntent and political, first half revenue growth of 27% came in 600 basis points above expectations, and free cash flow conversion of 59% is 800 points ahead of our previous full year target. These first half results give us confidence to meaningfully raise our full year revenue guidance and significantly increase our free cash flow expectations. We also made great progress on our commitment to shareholders to reduce normal course equity dilution. And the changes we implemented earlier this year are already having a significant impact with ending second quarter share count flat with the first quarter. With that, let's dive into the details of the quarter. In Q2, we delivered revenue of $308 million, up 35% year-over-year or 27% when excluding the contribution from LiveIntent and political candidate revenue in the year ago period. Total revenue was $11 million or 4% better than the midpoint of our guidance. For context, when we provide quarterly revenue guidance, we typically try to leave ourselves 2 to 5 points of cushion relative to the midpoint. Total scaled customer count grew to 567, up 21% year-over-year and an addition of 19 customers sequentially. We had success in adding customers across an array of verticals with technology and media, consumer and retail, and advertising and marketing being the largest contributor. We had 168 super-scaled customers at the end of the second quarter, an increase of 17% year-over-year and 9% quarter-to-quarter. Scaled customer quarterly ARPU of $532,000 increased 11% year-over-year and super-scaled customer quarterly ARPU of $1.6 million increased 19% year-over-year. The higher ARPU was driven by increased agency expansion and channel and use case adoption. We saw the highest year-over-year growth in the number of customers leveraging 4 or more channels and significant growth in the number of customers using 2 or more use cases. On the agency front, the average number of scaled brands per large agency holding company increased 40% year-over-year in 2Q, a strong indicator of our sustained momentum within the agency ecosystem. This broader platform adoption points to the long runway ahead of us as evidenced by less than 20% of scaled customers using more than one use case, less than 20% using 4 or more channels and very early brand penetration with agencies. From an industry perspective, on a trailing 12-month basis, 6 of our top 10 verticals grew faster than 20% year-over-year. And like the first quarter, some of our fastest-growing verticals, those like consumer retail, travel and hospitality and technology and media, to name a few, continue to be with customers who are the most ROI-centric. We ended the quarter with 179 quota carriers, up 18% year-over-year and 6 heads sequentially, supported by an expanding sales pipeline. Our direct mix in the second quarter was 75%, up from 73% in the first quarter of 2025 and higher than 67% a year ago, resulting in direct revenue growth of 51% year-over-year. Higher usage of e-mail, agency direct-to-channel adoption and LiveIntent were the contributors to the increase in direct mix. On the back of higher direct mix, our GAAP cost of revenue in the quarter was 37.9%, a 120 basis point improvement sequentially and 200 basis points improvement from the second quarter of 2024. In the second quarter, we generated $58.8 million of adjusted EBITDA at a margin of 19.1%, 210 basis points higher year-over-year and $3.9 million better than the midpoint of our guidance. Lower cost of sales as a percentage of revenue and continued efficiency gains in our sales organization were the main drivers of margin improvement. This was our 18th straight quarter of expanding adjusted EBITDA margins year-over-year. Our GAAP net loss for the second quarter was $12.8 million, an improvement from a loss of $28.1 million in the second quarter of 2024. Second quarter net cash provided by operating activities was $42 million, up 35% year-over-year with free cash flow of $33.6 million, up 69% year-over-year, and representing a margin of 11%. This translated to a free cash flow conversion of 57%, a significant improvement from 51% in the second quarter of 2024. A key driver of our improving free cash flow conversion is disciplined capital expenditure spending, which was $7.5 million lower in the first half of 2025 versus 2024. We continue to have a working capital headwind from our growth with large agency holdcos but we expect it to lessen over time. To that end, if working capital was neutral, our free cash flow conversion would have been over 80% in the second quarter. We also repurchased 2.7 million shares for $32 million, accounting for 96% of our free cash flow generated in the quarter. Year-to- date, as of July 25, we have repurchased $69 million of our shares. We've utilized $85 million of our $100 million share repurchase authorization that was approved in November. And our Board just approved an additional $200 million 2-year share repurchase authorization. Now let's turn to our increased third quarter and 2025 outlook. Before getting to the numbers, let me highlight a few factors we considered when updating our outlook. First, since our last earnings call, customer behavior has remained consistent. Brands continue to invest in growth, and we are winning market share. Second, given our first half performance and strong pipeline, we have increased visibility and confidence in the back half of the year. Third, team

[Operator Instructions] The first question is from Scott Berg from Needham & Company.

David and Chris, really nice results here in the quarter. I guess several questions. David, you released a new AI module in the quarter. There's a lot of excitement, obviously, around technology and whatnot. But what are you seeing around interest level from customers and agencies. It sounds like you got out of the gate well with the product. But is the awareness where it needs to be with those customers and partners here in the short term to really kind of supercharge the results over the next couple of quarters? Or do you think it's really more of a fiscal '26 event than maybe a near-term '25 opportunity?

Well, first of all, thank you, Scott. We're obviously very proud of the quarter and feel like we did a pretty good job as an organization. I think a lot of what you're seeing when you see the financials at these rates, that's the output. The input is clients buying more of our products and getting more clients, right, and being efficient while running the business, which I think we did well. Our AI suite of products continues to be the lead and tip of the spear in driving additional growth to customers we're currently working with and new customers. So I think the awareness is good. I think we can continue to do better. And I think you're going to see all of this showcased at

Excellent. Looking forward to my first

Scott, I'll jump in. Good to be speaking with you. As we said at the earnings call in May, our April was every bit as strong as our March, and we saw consistent growth throughout the second quarter of April, May and June. And just kind of some evidence points of it that we spoke about in the prepared remarks, the same verticals that were our fastest growing in the first quarter continue to be our fastest growing in the second, and that was 6 out of 10 growing over 20%. Our fastest-growing cohorts of the company when you look at kind of the usage of the business where those customers using 4 or more channels. Obviously, channel expansion is a key part of our ARPU growth model. Our fastest-growing cohort, kind of a good reflection of the progress and traction we're getting under the One

And Scott, I would just add to it. We have found through the years that turbulence in the marketplace drives major adoption from our clients because unlike our competitors, our platform is so focused on return on investment and is so far superior to our competitors in return on investment, when there are lots of different moving parts in the economy, we have found that our growth rate has accelerated as I think you saw in the second quarter.

Understood. A really nice quarter.

Thank you, Scott.

The next question is from DJ Hynes from Canaccord Genuity.

This is Luke on for DJ. So Chris, we recently listened to a podcast that you were on, which was great, by the way. One of the things you said about

You and my mom and my dad, thank you for that.

I thought you were very good.

I appreciate that. Luke, thanks for the question. Look, the dials that we have most under our control really are in the cost of revenue and in the expense line. And what the sellers have been driving on the top line is really a great byproduct of converting on the pipeline. So I'll give you a few data points on the sales pipeline conversion, which speaks to sales productivity and what we're doing there. And then I'll share with you what drove the very strong margin improvement across the board. On the sales productivity front, as you know, we track our sellers in the class or in, if you will, the year in which they join

And we've also been smart about eliminating certain functions in the company that are not driving value to free up additional budget so we can bring in the quality of engineers and salespeople we want. And I think we've been very disciplined about that as a company.

Really, really great color. And then maybe just a follow-up. One of the themes to emerge from Amazon's recent earnings is that firm's momentum in advertising, which is obviously it's complementing its e-commerce and cloud business. But what do you see as their approach to embracing ecosystem partners? Is that a channel you work with today? And how do you think about them from a competitive standpoint?

So we partner with Amazon in a number of ways. We don't generally ever see them as a competitor. I think Amazon has done a really good job, I mean [Audio Gap] understatement, as it relates to monetizing their existing platform and data. I think that they're going to continue to focus on that. And the vast majority of their advertising dollars come from vendors that are selling products or sellers that are selling products inside their ecosystem. As they expand and certainly through Prime, where we run a considerable amount of marketing for connected television, they've been an incredible partner to us, and we see them as somebody who will be an expanding channel for us.

The next question is from Gabriela Borges from Goldman Sachs.

This is Callie on for Gabriela. First one for me is, we're hearing a lot across the ecosystem around the ROI that people are seeing from AI being incorporated in both AI ad and marketing campaigns. Did you notice a substantial increase in AI-driven campaigns in 2Q? And seeing any potential changes in customer behavior as a result of that?

Well, I'll take that, Gabriela (sic) [ Callie ]. I'm David. So what I would say is that we are seeing a massive adoption of our existing customers for our AI tools and platforms. And customers last year who adapted our AI Agent Studio grew at 44% versus our average, I believe, is 30% or 31% last year as a company. So we're seeing meaningful uptake, Gabriela (sic) [ Callie ], in that AI adoption. We're also seeing the return on investment for clients of ours who are adopting the AI Agent Studio. So they're running agentic workflows, the return on investment is substantially higher then the return on investment for our clients who have not yet adopted them. So from an ecosystem perspective, as you know, we've been programming in artificial intelligence since 2017, and we're the only marketing cloud that has AI and data as native to the application layer. So the latency that is created by the stepping out of the platform to the algorithm to do a query and then stepping out of the algorithm to do a data dip back to the algorithm back to the platform to make a decision, that latency destroys return on investment. Our platform is able to do what takes them 5 to 7 seconds in a millisecond in many cases. That allows us to substantially better target our clients' marketing and allows substantially higher interaction rates and substantially higher return on investment to our clients. So we do see a meaningful change in the marketplace, and we are exactly where the marketplace is turning to.

Really appreciate all the detail there. And then I wanted to ask on the investments in sales head count that are kind of behind that One

Geography primarily in this round, mostly to the U.S. From an industry vertical perspective, it really is very specific to who we are hiring. We don't hire industry generalists. We try to really be focused on where those individuals have had the most success. It's difficult to walk into a bank on a Monday and an airline on a Thursday, really deep credibility. David, I'll let you speak to the amazing job Ed is doing and...

Yes. So Gabriela (sic) [ Callie ], I think if you look at Ed See, who, as I'm sure you're aware, was one of the top global partners at McKinsey focused on their CMO practice. Ed joined us recently to effectively run our One

The next question is from Koji Ikeda from Bank of America.

I wanted to ask about your product strategy here? And which one of the three products is maybe driving better usage or net retention and which one is driving better land? Looking at the data management piece, the marketing automation piece and the engagement piece, is there one that's better than the other within those two categories? Or is it really about the One

I think we're seeing growth across the board, Koji. We're seeing growth in all use cases. We're seeing a higher number of channels being utilized by our clients than ever before. And as I've said before, the reason One

The other, Koji, metric that you could argue even more important than the financial metrics is NPS, Net Promoter Score, for customers that use more than one use case of

Got it. And Chris, a follow-up for you. It's on gross margins. And so maybe remind us if you've given us a target of where gross margins can go for the business? And the reason why I ask is direct revenue mix is now 75%, driving gross margins of 62.2%. Last quarter, 73% direct mix, driving 61%. It does feel like we're on that upward trajectory of gross margins. And so help us understand kind of the puts and takes there and where gross margins could go?

Thank you, Koji. That is such a good question. If you go back to our February earnings call, when we put out the

And Koji, I hate to say it this way, but it's exactly what we said was going to happen as most of our agency clients on board, they start in integrated platforms, and then they begin to test and see the return on investment in direct platforms. And it's really important to note that our clients see a substantially higher return on investment to them when they're on our direct platform versus integrated platforms. And the migration is really just beginning. So we feel very good about where we are.

The next question is from Terry Tillman from Truist Securities.

Great. David, Chris, Matt, this is Bobby Dee on for Terry. I'm curious if you all have seen a trend at all with brands starting to bring their marketing operations more and more in-house, particularly as a result of AI and AI agents helping folks do more with less? And if that is the case, how do you think that affects

So Bobby, great question. The funny thing is, and I hate to even say this, but the answer is really not yet. We continue to see most enterprises using very large or independent agencies to manage their marketing. That being said, I don't know one enterprise that is not currently testing internally with AI tools to better manage their marketing in partnership with their agencies and with others. And I think it's one of the reasons we continue to see the momentum and sustainability in our agency and independent, I guess, company, it's their agencies but I should say agency holdcos and independent agencies. Sorry, that's a mouthful but that's how I should put it. We continue to see incredible sustainability and growth there as evidenced by the fact we grew the brands we work with, with our current agency holdcos by 40% year-over-year. We're still only touching a miniscule percentage of the brands that they work with. And that's because the agencies are adopting our AI tools to better help their clients, and it's become a very symbiotic relationship between the enterprise, the agency and

Thanks, David. Also very much intrigued by the

Well, thanks. So we were very excited to get Nate Yohannes to come join us after being at Meta for many years, Microsoft for many years and at the White House. And really, for us, this is what I would call our innovation factory. It's going to be cranking out next- generation AI tools like we haven't before. And quite frankly, we're probably 18 months ahead of most of our competitors as it relates to agentic workflows, AI products, AI tooling, my goal is to continue to stay 18 to 24 months ahead of our competitors, and bringing in somebody like Nate to help Chris Monberg and help Neej Gore to really continue and drive innovation, I'm just incredibly excited about bringing him in. You'll see a lot of new releases and very exciting announcements from the

The next question is from Matthew Swanson from RBC.

I know this has kind of come up in bits and pieces during Q&A. But if we can just kind of double-click on the success that you're seeing with independent agencies and maybe looping in a previous question, are independent agencies, do you think, seeing more pressure to partner with

So Matt, to answer your second question first, absolutely. Independent agencies, which in the past were able to get by with having one really good function, so maybe they're incredible on creative or they're good on a media buying strategy or they're very, very good at seat management or planning and they're very good on relationships regionally. And as they are starting to come under pressure, it's very difficult for those agencies to make the type of investments into building AI in today's world that we have made. I think people forget that by starting building AI in 2017, we were able to buy a lot of the things that today are 5, 7, 10x more expensive, we were able to get those things in a much more reasonable cost, and we've been able to drive meaningful free cash flow growth because those investments have made. They were still very large investments over the years, it would be very difficult for the average independent agency to make that investment. So by partnering with

That's super helpful. And then maybe kind of following up in the same mindset, maybe it's a similar answer. But it seems like throughout the call, we talked about the strength of the pipeline over and over again. I know in Q1, there was some commentary about the best that you guys have ever felt about pipeline. Maybe thinking about how that pipeline gets filled compared to a couple of years ago and just the scale of the company and the brand recognition, how much has kind of the marketing go-to-market side changed in terms of how many people are coming to you already understanding what

So Matt, that's a big question. Let me start by saying that we feel like we are solidly moving from what we call

The next question is from

David and Chris, congrats on the strong results. Maybe just dove tailing a bit off of Matt's question around independent agencies. And maybe Chris, you can give more insight on this. But can you give us a sense of when you're landing one of these new independent agencies, what's the mix of direct versus indirect spend when you start out and kind of how does that evolve over the life of the relationship versus maybe one of your holdco companies?

Yes. As David mentioned, there's a lot of synergy with how we land an enterprise, frankly. Oftentimes, they'll start with pilots and proof of concepts just to get a sense of the capabilities of the platform, then they'll lead to a much larger, what we call platform deal, which, in our speak, means multiyear engagement and then usage around our direct channel. So in the independent agency side, it would be unusual to start heavily in social. It's much more common and the norm to begin first in direct.

Got it. That's helpful. And my one follow-up question geared towards David. Nice to hear the call out around the big public sector opportunity you had with the

Yes. We're very excited about the public sector. I would tell you that -- we've brought in a very solid team. As Chris always points out, it's very difficult to walk into a credit card company on Monday and an airline on Tuesday. So we have begun the process of building out a very experienced, highly capable team that is used to selling into the public sector. And interestingly enough, if you look at our political business, the relationships that we've built there are leading to other business as those candidates win. So it's been very interesting to look at it from a life cycle perspective. It's just getting started. But I think in the years to come, it's going to become a very meaningful business.

Understood. And looking forward to

We're looking forward to having you,

The next question is from Richard Baldry from ROTH Capital Partners.

If we look back a year ago in 2Q, you added 43 scaled customers year-over-year. Moving up to this year, that number is 99 on a year- over-year basis. Can you talk a little bit about how that's happening? Is it ARPU growth that's taking people up across that threshold a little faster? Or is it more about just new logo wins, is it win rates, accelerating pipeline, help us understand how extensible that is?

Yes, Rich, once again, we've meaningfully grown our sales force, as Chris can get into in a moment. And this movement from why -- from

Yes. It's clearly outpaced our expectations, which is a positive. I don't want to get too far ahead of ourselves. I mean, we put out the

And you talked briefly by saying there is -- you had a miniscule percentage of brands with the large agencies. Is there a way to put any numbers around that? And is this really applicable across their whole bases? And sort of where they maybe started, they started with small, midsized customers going up to large. How do we think about the growth path ahead with those agencies?

I'm going to take a wild guess here, and it is a wild guess, Rich. I would tell you in the United States, we are currently working with between 1% and 3% of the clients that the agency holdcos in this country represent. And maybe I'm off, maybe it's 4%, but it's not 10%. And yes, they generally start you with midsized customers. I mean, agency holdcos tend not to work with small customers, but they look at midsized customers who are spending $100 million a year and they look at large customers who are spending billions a year. We are now starting to break into their larger customers, which is one of the reasons I think you're seeing the sustainability and solid growth in the agency holdco business in addition to the other enterprise direct business growing nicely as well. So I think that the metric I point out and one of the metrics I like to talk about is today, our 567 global enterprise clients spend greater than $100 billion a year in marketing. At the middle of our range this year, we have approximately 125 basis points of wallet share. How do I get that to 500 basis points or 1,000 basis points of wallet share in the years to come? And I think the agency holdco penetration, which is so small, but growing, will be a meaningful part of that in the years to come.

Congrats on a great quarter.

Thank you, Rich.

The next question is from Elizabeth Porter from Morgan Stanley.

You've really accelerated the pace of AI products more recently. And we often hear just more broadly in the industry about AI solutions needing a lot more handholding or support with customers just to get them up and running. So I wanted to know if

That's a great question, Elizabeth. And I would say that we invested early in our learning and development group. And it's one of the most important and most unsung groups in

Great. And then a quick follow-up. At Cannes Lions, it certainly sounds like you were very busy. Historically, has that been a driver to the model at all, whether kind of seeing an inflection in customer changes. Is it something we should pay attention to more in the future just as kind of that brand recognition expands?

It's a new thing. And yes, I think it will be very impactful. We saw a meaningful increase to our pipeline coming out of Cannes Lions. And I would tell you that the praise for our team that did that activation was off the charts. It -- I mean we were right in the middle of the beach. So if you're angling to be able to come over to the south of France with us next summer, Elizabeth, then check this out, we're all in, we'd love to have you. And it is worthwhile because we see meaningful step-up there. I would go so far as to say right now, the two most important events of the year for

The next question is from Arjun Bhatia from William Blair & Company.

This is Alinda on the line for Arjun Bhatia. So in the past, you spoke on the full year guide with a layer of conservatism given the dynamic macro. Can you maybe comment on what the current guide contemplates in terms of the macro?

This is Chris. What I talked about in the prepared remarks, which is not a change from our prior practice, but just to put it out there with clarity, was in any quarter, we like to give ourselves 2 to 5 points of growth cushion or so on the top line guide. What we talked about, you're right, last quarter was we built in an extra $10 million of cushion. We put $5 million in the third quarter and $5 million in the first quarter, and we've removed that. That's based upon the good visibility that we have coming into the second half and then further bolstered by, as David mentioned, the very strong pipeline and the sales productivity behind it.

The next question is from Jason Kreyer from Craig-Hallum.

Just one question for me. [Technical Difficulty]

Pardon me. One moment, please, while we would reconnect to Jason.

You guys got me?

Yes, Jason, I'm sorry, we didn't hear any of your question, I apologize, other than you said just one question from me.

Okay. You can hear me now. So when you launched One

Let's talk about 567 customers, come on, we don't want to lose that last 67. In all seriousness, we are doing incredible case studies internally with existing clients who are using One

The next question is from Jackson Ader from KeyBanc.

The brand count within the agency customers being up 40%, I'm just curious like how much is that within your power like

I mean it's a joint relationship between us and the agency. And I think it's like any other business. The better you do, the more they give you. And the fact that we were able to grow brands 40% year-over-year while still being well under 5% of the brands that the agency holdcos in this country represent, I think, speaks to the sustainability and durability, Jackson, of our agency holdco business. And I think that we've got a team that's fully embedded. And every day, we're growing the brands we work with, and we are adding additional brands.

Okay. All right. I'll sneak one more in, I know it's getting late. At the outset of the year, autos and insurance, those two verticals were coming off exceptional 2024. And so part of like the growth rate assumption and guidance was like, look, these are not going to -- you can't run that back. But I guess my question is like, I'm surprised to see those two verticals in the top 5 growers so -- just given the strong '24. So what are like the durable trends driving those still being in the top half of your verticals even after unlikely sustainable 2024?

I mean, we're just so thinly penetrated into those two verticals. So I mean, by the way, again, another part of the business that exceeded where kind of our head space was. But you're right. They both not only lapped on really strong growth, but have sustained it, as have, by the way, lots of other verticals. But I think it more speaks to even though they're, call it, 4% on the automotive side, and on the insurance side, like 10%, 11%, 12% of revenue, those only represent -- remember, for a lot of those customers, we maybe only doing one use case. So there's ample room to sell not only within the existing customer base, but really a lot of new logos that we haven't yet reached out to either directly or through the agency.

I mean you're talking about two of the largest verticals for marketing globally, Jackson. So the fact that we're able to grow them when we have such small wallet share, I think, speaks to the sustainability of our platform and our ability to show return on investment.

Next question is from Clark Wright from D.A. Davidson.

Awesome. This quarter, you're firing all cylinders, and it seems like momentum with the agency business is very strong. I'd love to kind of understand where you expect that segment to be as a percentage of the business at year-end. And additionally, if you could exclude the agency business, what would ARPU growth have been this quarter?

Yes, those are two data points, Clark, that we -- I don't want to give guidance to that the -- especially on the where could agencies be front. I mean this year, they've, from 2023 to 2024, have effectively doubled in size, and they're really growing nicely. And yes, I'm not going to break it out that way.

And by the way, I think it's important to note, Clark, our enterprise business is growing nicely, too. So it's not like you just have the agency holdco business and the independent agency business growing and the enterprise business is not. So I think, as Chris said, we're not going to break it out. But I have said publicly, we think that agency business continues to be a minority component of our business for many, many, many years to come.