AdTheorent Holding Company, Inc. (ADTH) on Q4 2021 Results - Earnings Call Transcript
Disclaimer*: This transcript is designed to be used alongside the freely available audio recording on this page. Timestamps within the transcript are designed to help you navigate the audio should the corresponding text be unclear. The machine-assisted output provided is partly edited and is designed as a guide.:
Operator: 00:03 Ladies and gentlemen thank you for standing by and welcome to the AdTheorent’s Fourth Quarter and Fiscal Year 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers presentation, there will be a question-and-answer session. Please be advised that this conference is being recorded. 00:21 I would now like to turn the conference over to your first speaker, David , Investor Relations.
Unidentified Company Representative: 00:36 Good afternoon and welcome to AdTheorent’s fourth quarter and fiscal year 2021 earnings call. We will be discussing the results announced in our press release issued after the market close today. With me are AdTheorent’s Chief Executive Officer, Jim Lawson; Chief Financial Officer, Chuck Jordan. 00:53 Before we begin, I’d like to remind you that today’s conference call will include forward-looking statements based on the company’s current expectation. These forward-looking statements are subject to a number of significant risk and uncertainties, and our actual results may differ materially. 01:08 For a discussion of factors that could affect our future financial results and business, please refer to the disclosure in today’s earnings release and other reports and filings we file from time to time with the Securities and Exchange Commission. All of our statements are made as of today, based on information available to us today and – expect as required by law, we assume no obligation to update any such statements. 01:31 We will also refer to both GAAP and non-GAAP financial measures during the call. You can find the reconciliation of our GAAP to non-GAAP measures included in our press release posted to the investor relations section of our website at www.adtheorent.com. All of our non-revenue financial measures we discuss today are non-GAAP unless we state that the measure is a GAAP measure. 01:55 With that, let me turn the call over to Jim.
Jim Lawson: 01:58 Thank you, David and good afternoon everyone. Thank you all for joining us for our fourth quarter and fiscal year 2021 earnings call. Our first as a public company. During today’s call, Chuck and I will provide an overview of company results of the fourth quarter and full-year 2021. 02:19 I will go through the business drivers in the fourth quarter, our immediate priorities, and our strategic focus areas before turning it over to Chuck for a more in-depth look at our results. We will close with a guidance for the first quarter and full-year 2022 and then take your questions. 02:37 We are extremely pleased with our performance. For the fourth quarter of 2021, we delivered 55 million in revenue, which represents 17% year-over-year growth. Adjusted EBITDA for Q4 came in at 15.2 million, representing 8% year-over-year growth, which included growth investments across all facets of the business and preparation for our public listing in December 2021. 03:07 For full-year 2021, revenue grew 37%, reaching 165.4 million, and adjusted EBITDA totaled 43 million. This materially exceeded our prior guidance, 161.6 million of revenue and at least 35 million of EBITDA, and was driven by multiple factors, including revenue outperformance and strong adjusted gross margin performance. 03:35 Later in the call, Chuck will walk through the drivers of our Rule of 55+ performance for the quarter and our Rule of 75+ performance for the full-year 2021. Before I dive into fourth quarter highlights, I would like to provide a brief overview of what we do, the market in which we compete, and how we win. At a high-level, AdTheorent is a demand side platform or DSP operating in a real-time digital ad auction system. 04:08 Our platform connects publishers looking to monetize digital real estate with advertisers looking to buy digital impressions as part of successful digital advertising campaigns. We are focused most on the performance subset of the digital advertising market, the so-called lower funnel of advertising, which deals with driving business conversions for advertiser customers. 04:33 Our advanced machine learning and verticals specific algorithms, allow advertisers to make the best possible media buying decisions in just micro second, optimizing ad buys, driving strong conversions, and providing superior ROI, all in a privacy forward way. And this is a big market. U.S. programmatic digital media is a $90 billion market and roughly $13 billion of that is hyper focused on those performance driving executions that AdTheorent is uniquely suited to serve. 05:09 This market is growing nearly 20% per year, and AdTheorent continues to outpace industry growth based on the strength of our technology and the power of our solutions and go to market organization. 05:24 Our strong results in the fourth quarter and full-year are driven by numerous factors. Most notably, the measurable value we are delivering to our brand and agency customers. Put very simply, AdTheorent powered digital campaigns drive more sales, store visits, registrations, travel bookings, online orders, drug prescriptions, insurance policies, the business outcomes, advertisers actually care about. 05:53 Campaign performance in ROI matter to advertisers, and our ability to deliver in this area has created great demand for what we are doing. In 2021, our average active customer spend increased by 19% and approximately 72% of our total active customer revenue was from long tenured customers defined as customers with tenure of three or more years versus 69% in 2020. 06:25 Additionally, we grew our client base from 270 as of December 31, 2020 to 309 as of December 31, 2021 among clients with $5,000 or more in revenue for the year. I would like to note a few platform and product enhancements, which drove customer success and demand in the fourth quarter. These include, first, continued advancements in our ability to attribute business conversions to add exposure in a privacy forward manner without dependence on user IDs. 07:00 Second, improvements to our first party visitation models, which allow AdTheorent to use device location in more nuanced ways to drive campaign performance. Third, enhancements to our highly differentiated CTV service, and fourth ongoing deployment of vertical specific products, which continue to drive advertiser ROI. 07:23 I'd like to take a moment to talk about each of these. First, furthering our independence from cookies and other device identifiers, we expanded our attribution modeling capabilities to include high performing, probabilistic models. Put more simply, we expanded our ability to prove the efficacy of our ad targeting methods. 07:47 Now more than ever, we can show that AdTheorent campaigns are causing desired business events without depending on user IDs to do that. Our probabilistic attribution methods use a proprietary combination of impression, site, and other data. We tested our probabilistic attribution models extensively, prior to deployment, analyzing, comparing datasets sets with both probabilistic and deterministic or ID based methods. 08:18 In addition to further positioning AdTheorent to thrive in a post cookie marketplace, these methods provide immediate benefits by allowing AdTheorent to capture and report on conversions that occur using cookie-less browsers such as Safari and Firefox. 08:35 Very recently, Google announced that it plans to deprecate the Android advertising ID within two years. As the volume of available cookies and mobile advertising IDs continues to erode, AdTheorent probabilistic attribution is positioned to fill the created gap, and our ID agnostic capabilities are helping us drive new demand for our services. 09:02 Also in the fourth quarter, we advanced the number of platform initiatives to further drive ad performance. For example, we deployed updated enhanced first party visitation modeling and attribution capabilities, which allow us to use physical location and point of interest or POI visitation, more precisely. Specifically, AdTheorent’s machine learning methods now more precisely distinguish meaningful physical world visitation from tangential or passing-through types of visitations, assigning confidence scores about whether a given device has visited a particular physical location or POI. 09:46 AdTheorent customer campaigns benefit from these precise insights in a number of important ways. Significantly, our platform uses the fact of visitation as an additional input or data object in our predictive models. In this sense, as part of our impression level scoring process, we can correlate a given point of interest. For example, presence in a Starbucks, with other bid request data object. 10:14 In addition, the output of our visitation modeling is incorporated into our attribution processes allowing AdTheorent to attribute ad exposure to verified brick and mortar visits by customers. The more precise and accurate are the model inputs, the more predictive value they will have. Our customers benefit from these ongoing improvements and as a result, they make greater investments in our offerings. 10:42 Recently, for a national dining customer, we utilized our enhanced visitation modeling and capabilities as part of a CTV campaign to supplement the brand's linear TV buy with the goal of driving customers to dining locations in key markets. In the markets with combined CTV and linear, we drove 3.2% higher in-store sales, and a more than 3% higher guest check average, as compared to markets with linear Tv only. 11:12 Third, in the fourth quarter, we continue to iterate and improve our ML powered Connected TV or CTV solution to drive differentiation and revenue growth in this rapidly dynamic and expanding channel. We're are moving fast to capitalize on this opportunity. During the fourth quarter, our CTV revenue grew 149% to 3.7 million versus 1.5 million in Q4 2020. 11:41 Before explaining one of our recent accomplishments in this area, I'd like to provide a bit of context regarding the status quo for programmatic CTV. A significant amount of CTV inventory in the programmatic space comes from pre-installed TV apps or apps from TV networks. 12:02 Unlike mobile app and site inventory, the information provided by content providers to programmatic partners has historically been insufficient, often limited to the CTV app name, such as Pluto TV, , AT&T TV etcetera. This data vacuum made programmatic CTV less appealing to advertisers. In a sense, advertisers were being asked to target ads with insufficient tools. 12:32 As of recently, CTV publishers have the ability to pass more granular content information in the bid request, but since this advancement is fairly new, there's has been no industry approach to normalize this more granular data or any mandate to pass it to programmatic partners. 12:51 In the fourth quarter of 2021, AdTheorent completed a number of development projects related to normalizing and activating this additional CTV content metadata. As a result of this work, we will make these additional signals available and actionable for real time targeting, including signals such as content genre, ad bundle, rating, language, etcetera. 13:15 In addition, we are able to leverage this CTV content data as object inputs for our predictive models, driving greater campaign performance, equally valuable. These signals enable more granular reporting regarding the type of content in which ads are played. This allows us to provide clients with a more linear Tv service while still leveraging the benefits of programmatic. 13:40 These advancements reflect our market leading efforts to make CTV a performance channel. These advancements also translate to positive customer experiences and revenue growth by way of example. In the fourth quarter, we executed a CTV campaign for a leading national CPG brand, which drove more than 35% point of sale lift. 14:07 I would like to note quickly three other Q4 advancements in our CTV capabilities. We continue to invest in anti-fraud capabilities, unique to CTV inventory, including proprietary pre-bid and post-bid machine learning techniques and third party integrations. As a result, our CTV fraud rate, 0.18% in the last four months according to a sample from our third party partner DoubleVerify is best-in-class and in Q4, we obtained DoubleVerify’s CTV targeting certification for programmatic platforms. 14:46 Also in the fourth quarter, we completed a partnership with Comscore. This enables us to leverage insights from their media consumption data. Through this partnership, we can customize audiences to obtain stronger match rates and in-turn drive, scale and better delivery for CT advertising clients. Utilizing the Comscore data in conjunction with our machine learning and predictive targeting, enables us to identify and reach those most likely to engage driving superior results for CTV advertising clients. 15:21 Finally, during the fourth quarter, we rolled out CTV with QR Code functionality. This is another way we are using CTV to drive measurable performance. It works like this. Our platform serves a CTV ad, which includes a QR Code overlay. The consumer opens his or her native camera app and scans the code. This then drives the consumer to a web landing page on his or her mobile device where the consumer can complete one or more actions desired by our advertiser customer. 15:54 We executed a number of great campaigns in Q4, where this QR Code functionality really brought performance CTV to life. For example, for a major CPG brand, we developed and executed a CTV campaign with a QR Code overlay, driving consumers to the product detail page of selected online stores. 16:17 The campaign included a third party measured sales lift report, which proved the efficacy of our approach. In addition to driving 26 million views and a high video completion rate of 95%, we drove 7.9% sales lift amongst the category non-brand buyers, defined as consumers who typically purchase competitive brand products we are continuing to roll out related capabilities, including interactive landing page content, and we exploring additional QR code capabilities, like click-to-cart and click-to-call. 16:52 In the end, these are additional ways for AdTheorent to make CTV more performance focused with a data feedback loop that allows us to optimize campaign delivery in real time. 17:04 Finally, I'd like to briefly highlight a few examples of our ongoing efforts to create and refine vertical specific offerings. As I mentioned previously, we completed our direct integration with Comscore to access their media consumption data, which allows us to offer compelling vertical specific solutions. 17:24 With this partnership, Comscore will inform AdTheorent’s machine learning models with cross-platform signals to enable customized solutions for each marketer and their respective industry vertical. Also during the fourth, we launched a first to market audience verification solution for the auto vertical, which for us is an early stage vertical opportunity with tremendous upside. 17:50 We are excited to share that we partnered with a leading data provider, which has access to 30+ years of vehicle transaction data from more than 700 data sources and 125 million U.S. households. We are now using this extensive data set to validate the effectiveness of our predictive targeting, confirming for our customers, that our campaigns are reaching in market auto shoppers. 18:16 As a result of this new partnership, our customers will gain a deeper understanding of in-market shopper campaign effectiveness, including insights such as matched in total end market impressions, matched in total end market households, buy rate of matched households, and number of purchases likely driven by the campaign. 18:38 In summary, we are proud of our results in the fourth quarter and full-year 2021. Prior to becoming a public company, we were already an established business with strong profitability and cash flow characteristics. We fully expect to maintain that efficiency and discipline that has contributed greatly to our success, but we became a public company for two primary reasons. 19:04 One, to expand our product and platform development to further differentiate our capabilities and get them to market faster. And two, to grow our revenue organization and sales presence in order to capture a greater piece of the rapidly growing digital advertising opportunity. 19:24 We enter 2022 with an unprecedented amount of opportunity. Our strong momentum from 2021 continues. As we scale our revenue teams, we are realizing company records for pipeline and opportunity generation, and our volume based customer spend agreements have never been greater at this point in the year. 19:45 We're in the early stages of implementing our growth strategy, following our public launch at the end of December 2021. As our new team members ramp throughout the year and as we market our new capabilities and offerings, we believe that we will convert our sharply growing customer pipeline and our rate of revenue growth will accelerate. 20:07 Like to take a moment to review the focused investments we're making in 2022 behind our go to market organization, our platform differentiation, our first party data infrastructure, and enhanced verticalized product offerings. These investments are each being made to position AdTheorent for sustained revenue and profitability growth beginning with a strong 2022. 20:33 First, we are actively expanding our sales footprint to keep up with the demand we are seeing for our solutions. In 2021, we increased our sales team by a net ad of 12 sales reps, close to a 23% increase. Of these 7 were added in the second half of the year. Given a typical ramp period of 6 months to 9 months, we expect this investment to materially support growth over the course of 2022 and we are seeing strong current pipeline generation trends accordingly. 21:07 In addition, our 2022 hiring plans include the addition of a similar number of net new sales reps. Perhaps most relevant to our 2022 outlook, by July 2022 we expect to have 14 more fully ramped quota carrying sales representatives than we had in January. 21:30 Second, we are continuing to invest in our platform and expanding our capabilities to roll out more products faster, generating even higher demand for our solutions. Earlier, I cited a few examples of our Q4 platform and product advancements. The high performing probabilistic models, the enhanced visitation models, our CTV development. These launches were all proven out in Q4 2021, but we will see a full-year contribution from them in our 2022 results. 22:03 Most exciting for the AdTheorent team. Our 2022 product roadmap is extensive and we have made significant investments in our tech, product, and data science organizations to support steady and impactful product deployments throughout the year. To that end, we are executing on a plan to increase team resources in these functional areas by over 35 full time employees in 2022, representing more than 60% year-over-year growth. This is approximately double the rate of already substantial investments made into 2021. And we expect new product and tech capabilities throughout 2022 to contribute to our 2022 financial results. 22:47 Within this context, I would also like to highlight a few of our most important immediate term platform and product priorities, each driven by market needs and built on top of core capabilities that AdTheorent is uniquely able to deliver. We will deploy these new capabilities and thus realize new opportunities as the year unfolds. These efforts will help us sustained strong, double-digit revenue growth for the foreseeable future, while maintaining extremely strong EBITDA margins. 23:18 First, CTV. I talked about our enhanced CTV offerings in reference to our fourth quarter highlights, but these efforts are ongoing and it is worth noting here the size of the long-term opportunity. In 2021, roughly two-thirds of the U.S. population had to connected TV, yet monetizing streaming content via ad placement is still in its infancy. 23:43 Our performance focused CTV product is being received enthusiastically by the market. I'm proud to report that we delivered 230% year-over-year growth, and the investments we have made to date have been limited with focused investment and additional product specialization, we can capture this opportunity even more quickly and at greater scale. 24:07 Second, I'm excited to talk about a number of new data and data infrastructure investments embedded in our 2022 plan. Each of these investments will yield new highly differentiated verticalized targeting, and measurement products in 2022. Also, we believe each of these investments will further our vertical specialization goals, which I'll briefly discuss in a moment. 24:31 The first is an exciting enhancement, to our efforts across the pharmaceutical vertical, AdTheorentRx, which we believe will further solidify AdTheorent as a leading provider of privacy forward, data driven, healthcare advertising. Given the size of the pharma advertising market opportunity, we believe that this offering alone would be a valuable foundation for a highly successful growth business. 24:55 In 2022, rolling out to the market in Q3, our platform will leverage more granular, anonymized medical data for use in a number of innovative ways, including audience creation and measurement. Our approach to audience creation will be rooted in machine learning and differentiated in the marketplace, addressing our customer’s demands for unique data in the pharma space. 25:19 Longer-term, we will also utilize this data to deliver custom measurement solutions that will provide insights into customer marketing efforts. Collectively, these capabilities address growing customer demand for HIPAA compliant and privacy forward methods to target pharma products to likely condition suffers, while proven campaign efficacy with accurate and complete data. 25:44 Our 2022 plan also contemplates several other exciting new investments, which will provide AdTheorent with unique datasets and AdTheorent predictive audiences to form the foundation for our verticalized offerings. 25:59 One such investment relates to licensing raw device location data to better understand real world visitation behavior for use and predictive modeling, another significant 2022 data investment relates to our access to robust new demographic data, which we will ingest and activate for a variety of campaign used cases. 26:21 Among other benefits, this will significantly multiply the number of data objects available as part of bid requests to be considered by AdTheorent predictive models. Programmatic advertisers are increasingly demanding unique first party and data insights, and AdTheorent’s ML capabilities have provided distinct advantages. 26:44 Now, with the benefit of significant new raw data and valuable seed datasets, we will be able to offer unique first party datasets that will further differentiate and advance our proprietary predictive modeling and measurement capabilities. 27:00 Third, I would like to talk about our ongoing efforts to expand significantly our current target addressable market through AdTheorent direct access. Historically, most customers have used AdTheorent as an end-to-end full service in-house digital partner, leveraging our various teams, including strategy, ad operations, campaign optimization and yield, client success, data and analytics, data science creative, and more. 27:29 We manage and optimize sophisticated campaigns and have many great client partnerships where we provide a variety of services and offerings to drive success for advertisers. We also recognized some customers, both agencies and brands have some of these media execution resources in-house. And in those cases, they may prefer to have their internal teams execute and manage campaigns with our platform. 27:54 Now, through AdTheorent Direct Access, we are able to transact with customers using an enterprise pure platform offering model, giving clients a choice. Direct Access clients have already begun to successfully tap the power of our platform. 28:11 A recent customer leverage direct access for a cross device campaign to drive online enrollments. The customer also ran a concurrent social campaign with another partner, Notably, the Direct Access campaign greatly outperformed the social campaign, driving 175% lower cost per lead. 28:32 We are excited to begin scaling AdTheorent Direct Access for a net new base of customers, which we have not engaged previously We think this is a significant market opportunity and we are already making the tech product and team investments needed to make our powerful offerings available for direct access users and a more self-service capacity. We are excited to roll out enhancements as 2022 progresses. 29:00 Another exciting long-term investment deals with our data processing infrastructure, and our exciting engagement with Palantir Technologies. We partnered with Palantir’s Foundry Platform to deliver data driven insights and products to internal end users in a more operational and cost efficient manner. 29:20 We are a data heavy business. Midstream data, first and third party data, platform delivery data, salesforce data, more, consolidating these data streams into a common ontology for real time informed decision making, will enable internal teams and customers to interface directly with data, models, and tools to further identify which machine learning model variables drive performance lift without the need for heavy technical resources or skills. We are excited to share more about this exciting opportunity. 29:56 Finally, we are actively expanding our vertical capabilities, focusing on making our offerings unique and value adding, including through the investments I've noted. We believe each vertical represents a discrete business opportunity and allows us to more deeply penetrate the customer base within these verticals and do more business with current customers that operate in them. 30:19 Past verticalization efforts in pharma and banking financial services and insurance or BFSI prove this out. We're excited to continue investing in new verticals, including unique datasets that improve modeling and targeting new inventory partnerships, plus new measurement and attribution partnerships, which prove the ROI, we drive for customers. The key is that we can create custom solutions based on each vertical. These custom vertical based hands on full service offerings are a big and sustainable differentiator for AdTheorent. 30:54 I would like to conclude my remarks by thanking the AdTheorent team. As with every other major accomplishment in our 10-year history, our significant successes in 2021 reflect a seamless group effort, but a smart, collegial, ambitious and scrappy team. It is very early in 2022, but our team has never been more motivated. 31:17 We have never had a more clear understanding of our immense opportunity, and we have never been more optimistic about what we can achieve. We are grateful for our investors, our customers, and our partners who have given this opportunity to us and we will continue to work tirelessly to drive our business to the next level of success, while generating meaningful incremental value for our stakeholders. 31:40 I now turn the call over to Chuck to talk about our financial results and the exciting momentum, we see in the business.
Chuck Jordan: 31:48 Thank you, Jim, and thanks again to everyone for joining us today. Before discussing detailed financial results, I'd like to point out in addition to our GAAP results, I'll be discussing certain non-GAAP results. 32:01 Our GAAP results along with the reconciliation between GAAP and non-GAAP results can be found in our earnings release that is posted on our website, which is at www.adtheorent.com. 32:15 As Jim mentioned, at the outset, we finished our 2021 as a company for Q4 and a performer for the full-year. Our revenues were up 37% year-over-year, driven by strong growth in our BFSI, Tourism and Travel, Government and Clinical, CPG and Pharma verticals. 32:37 Our margins were strong with adjusted gross profit as a percentage of revenues at 66.1% for the year. Alongside this growth, we maintain our focus on operational efficiency, delivering 39% adjusted EBITDA margins for the year. 32:53 Now, I'll walk you through our fourth quarter and full-year 2021 financial performance and then discuss our guidance for the first quarter and full-year 2022. Total revenue in the fourth quarter was 55 million, an increase of 7.9 million or 17% as compared to the fourth quarter of 2020. 33:12 Demand for our performance focused and privacy forward offerings was evidenced by our growth among both existing and new customers in our top verticals. AdTheorent CTV revenue grew 149% during the quarter to 3.7 million as compared to 1.5 million in the fourth quarter of 2020, fueled by expanded capabilities and integrations. 33:36 In discussing the remainder of the income statement, unless otherwise noted, our references to our expenses and operating results are on non-GAAP basis. You can find information on the most directly comparable GAAP metrics in our fourth quarter earnings press release. 33:52 Adjusted gross profit, a non-GAAP metric that removes traffic acquisition related platform operations costs in the fourth quarter was 36.3 million or 66.1% of revenue, compared to 65.7% in the same period of the prior year. 34:09 Moving down to the income statement to operating expenses. First, this is important to note, the fourth quarter operating expenses of 65.1 million, includes 17.2 million of non-recurring transaction costs and management fees. Adjusted for these non-recurring transaction costs and management fees, fourth quarter operating expenses were 47.9 million, an increase of 12.5 million or 35% versus the fourth quarter of 2020. 34:37 The major drivers of this increase include higher traffic acquisition costs and the substantial investment and they have the AdTheorent team over the course of 2021, which saw FTEs increase from 230 to 295 or an increase of 28% as we made strategic investments to support growth. 34:57 Moving to earnings, adjusted EBITDA in Q4 was 15.2 million, up 1.1 million versus Q4 2020 and represents an adjusted EBITDA margin for the quarter of 42%. 35:11 Now down for the full-year. Total revenue for the full-year 2021 was 165.4 million, an increase of 37% year-over-year, of 3.8 million or 2.3% versus previously provided guidance of 161.6 million. Revenue outperformance was driven by strength across a variety of vertical segments and growth within channels, such as CTV. 35:38 Adjusted gross profit for the full-year was 109.3 million or 66.1% of revenue, an increase of 38% compared to 79 million or 65.3% of revenue in 2020. For the full-year 2021, operating expenses were 164.4 million, which includes 21.2 million of nonrecurring transaction costs and management fees. Adjusted for these non-recurring expenses, operating expenses totaled 143.2 million, an increase of 36.6 million or 34%, as compared to 2020. 36:15 Adjusted EBITDA for the full-year was 43 million, 39% of adjusted gross profit. This represents an 18.1 million increase or 72% growth versus 2020 adjusted EBITDA of 24.9 million and is materially above our previously provided guidance of at least 35 million for fiscal year 2021 EBITDA. 36:40 Turning to our balance sheet. We ended the year with cash, cash equivalents, and short term increase of 77.3 million from the end of the third quarter of 2021. This is predominantly due to proceeds received as a part of our December go-public transaction. 36:59 Now, let's turn our focus to guidance for the first quarter and full-year of 2022. First quarter 2022 revenue is expected to be between 34 million and 34.9 million, representing an increase of 10% to 13% compared to the first quarter of 2021. We continue to see substantial growing demand from our customers across a diverse set of verticals, while also experiencing some timing impacts on spend with numerous customers who have been impacted by global supply chain challenges. 37:32 For the full-year, we expect revenue to be between 202.2 million and 206 million, representing an increase of 22% to 25% compared to 2021. We expect growth to increase materially over the course of the year as significant investments made in 2021 and our sales organization and platform further materialize. 37:55 First quarter 2022 adjusted gross profit is expected to be between 22.2 million and 22.9 million, representing an increase of 7% to 10%, compared to the first quarter of 2021. For the full-year, we expect adjusted gross profit to be between 131.5 million and 134.5 million, representing an increase of 20% to 23% compared to 2021. 38:23 First quarter 2022 adjusted EBITDA is expected to be between 1 million and 1.1 million, while full-year 2022 adjusted EBITDA is expected to be between 31.6 million and 32 million, or 5% and 24% of adjusted gross profit respectively. 38:43 Adjusted EBITDA is reflective of increased year-over-year operating expenses, driven by material growth investments made over the course of 2021, which should be recognized for the full-year in 2022, as well as the new 2022 growth focused investments to capture additional opportunities, some of which Jim described. 39:02 Among other areas, investments have been and are being made in sales and marketing to expand our footprint in order to keep up with demand, as well as technology and product to continue to enhance our platform and offerings and allow us to roll out more products faster. 39:18 Additionally, we are anticipating increased expenses in general administrative driven by investment and headcount, as well as a recognition of public company costs not incurred in 2021. 39:32 Finally, it’s worth noting that our 2022 guidance does not include any impact of potential M&A. In summary, we're delighted with our financial results, materially outperforming our guidance for the full-year, and exiting the year with a high growth, highly profitable business, and we are enthusiastic about our strong outlook for 2022 and beyond. 39:54 Now, I'd like to turn it over to the operator to moderate our Q&A session.
Operator: 40:00 Thank you. Our first question comes from the line of Maria Ripps with Canaccord. Your line is open. Please go ahead.
Maria Ripps: 40:20 Great. Congrats on your first quarter as a public company and thanks so much for taking my question. So, as we look at your revenue guidance for the year with growth sort of accelerating through the year, is it fair to assume that most of that acceleration will be driven by salesforce expansion? And I know you mentioned, sort of global supply chain challenges here in the near-term, so that's probably impacting, sort of numbers here. But I guess, is there anything in your guidance from new initiatives, sort of in the CTV space or product investments?
Jim Lawson: 40:53 Yes, thank you, Maria for the question. Yes, we are very confident in our 2022 guidance. We believe that our 2022 guidance and plan is appropriately prudent for first year public company. The guidance contemplates 23% revenue growth, 22% AGP growth, and as you may recall during the deep back process we beat and raised our guidance twice. 41:20 So, yes, we're very confident that the investments that we're making in both tech and sales and marketing will support our 2022 guidance and well beyond that. We believe that we have a transformational opportunity to take AdTheorent to the next level. And in order to do that, we decided that we needed to make some investments, both in that sales and marketing effort, as well as within our tech product, data science works so that our products and our capabilities, as I mentioned in my remarks continue to be on the front end, and that we can lead the post ID version of ad targeting and programmatic, and we believe the combination of performance and privacy forward, and the way that we use data, and the capabilities that we are working on investing in and the new market that we believe we can tap through, for example AdTheorent Direct Access, net new TAM. 42:20 We think all of that taken together is going to lead to a very, very successful outcome in 2022.
Maria Ripps: 42:29 Thank you so much, Jim. That's very helpful.
Jim Lawson: 42:32 Thank you , Maria.
Operator: 42:34 Thank you. And our next question comes from the line of John Blackledge with Cowen. Your line is open. Please go ahead.
John Blackledge: 42:41 Great. Thanks. Two questions. First on the 2022 investments. On the sales headcount growth, how is the hiring environment and kind of any particular where you're adding the sales headcount? And kind of similarly with the product headcount growth, just offer any more details on the hiring environment and what types of roles these hires will fill? And then the second question is on the video revenue, which was stronger than expected and CTV was stronger as well. 43:12 As we look into 2022, any thoughts on the trajectory of, kind of overall video growth and CTV revenue growth for 2022 and drivers there? Thank you.
Jim Lawson: 43:25 Yeah, John, thanks for the question. With respect to hiring, we acknowledge that the top hiring environment at present, but a lot of people want to work at AdTheorent. We believe it's a great place for smart ambitious people who enjoy working on something that is successful and preparing for something that is even bigger. 43:48 We have worked really hard to create a workplace that is desired. And therefore, we're having great success even in a tough market. So, from a hiring perspective, we feel very optimistic. We have, in fact, gotten ahead of it. With respect to on the sales side, for example, by the middle of the year, we will have more than – we will have about 14 net new full ramped quota carrying sales people in the organization. 44:28 And you can't hire a fully ramped person. So that requires the fact that we were doing some hiring in the fourth quarter and we've been hiring throughout this year, especially, but we will start to see return on investment on that hiring effort, not to mention our marketing effort, our marketing investments, but we will have 14 more fully ramped sellers, which we define as sellers who have been with the organization for 9 months conservatively. 45:03 And the good news as well a data point for context, we're seeing some very positive signals. We don't publish our pipeline. That's not something we disclose, but we're excited by the pipeline that our new revenue team members are generating. And as the year unfolds, we believe that these and other sellers will convert more and more of this greatly expanding pipeline because the opportunity that we have now has never been bigger. 45:31 The objective and the job that we have is to find more people in more markets to tell our story, and to make our capabilities more well known in the industry. We have historically spent very little money on marketing. We like to consider ourselves to best kept secret in ad tech, but it's time for that to change. We've made a number of very big investments in this business and we think that the time is now to go transform the trajectory of AdTheorent and really get a bigger piece of the market.
John Blackledge: 46:12 And any color on the video growth trajectory in 2022?
Jim Lawson: 46:17 And with respect to – sorry, I forgot about your second question. So, with respect to video, we had a fantastic year last year in the area of CTV and video. We're not currently publishing the target. Last year, we did publish a target and we achieved that. We grew in around 300%. As I outlined in my remarks, we implemented a number of significant enhancements to our CTV capability, which we believe give us a significant advantage, especially in the performance focused customer. 46:55 And we believe that we will be able to transform CTV as a performance focused channel for advertising in a way that's never been achieved before. The way that we are able now to leverage data and metadata that comes from content providers and use that data in real time to more effectively target, we believe we'll provide additional incentives for customers to spend their CTV dollars with us. 47:23 We believe that our focus and commitment to eliminating and the credentials and the validation that we've received for our IVT levels in is again, another example of the investment that we're making and having a sound and market leading products in CTV. 47:43 The data partnerships that we continue to make, we believe again will give us unique opportunities, unique data sets, unique AdTheorent predictive audiences that we can leverage to drive performance. If our customers continue to benefit, and we can, for example, I noted in my remarks, we had a campaign where we used a CTV campaign to outperform social, and we believe that in the performance arena, if you have enough data and the data is accurate and real in real time, you can use that data very effectively. 48:19 Much more effectively than relying upon , BlackBox IDs that are licensed from third parties and we believe that our method is the future and we're very excited about getting that out to more customers and the demand from those customers has been growing and very significant.
John Blackledge: 48:40 Thanks so much.
Jim Lawson: 48:42 Thank you, John.
Operator: 48:43 Thank you. And our next question comes from the line of Laura Martin with Needham. Your line is open. Please go ahead.
Laura Martin: 48:49 Hi there. I wanted to start on Direct Access. So, I agree that it is TAM expanding, but sticking to the economics and the impact on the P&L, how do you think about the investments? How long you have to invest in this? And when do we start sourcing the positive ROI on the Direct Access piece of your business?
Jim Lawson: 49:11 Thank you, Laura for that question. We are very excited about Direct Access in 2022. Last year was a year for a beta roll out. We were listening to the market. We learned a lot from our customers. We learned that our platform was really designed and architected for the super users who live at AdTheorent and we realized that there were a number of things that we needed to do to make the user experience a little more turnkey, make more decisions behind the scenes for the user. 49:46 We have a very powerful robust and complicated engine. And what we're doing now with Direct Access is, we are making a lot of this in an automated fashion within our user interface and workflow. And we're rolling those out in the first quarter, second quarter, third quarter, and we believe that we're going to see a real adoption increase in 2022. This is a year for Direct Access adoption. 50:14 We think that our enhanced user interface, some of the new data integrations, some of the unique first party audiences that AdTheorent there and going to bring into the table are really going to make our Direct Access offerings best-in-class for programmatic partners who are looking for performance. 50:31 So, yes, we're really excited about it. Last year was really more about learning. It was more about testing, listening to our customers. And then as we go, as far as the unit economics go, we're confident that our AGP will directly benefit from the growth of the Direct Access line of business and that over time, that will contribute to a very successful financial profile that will supplement an equally robust growth rate on the managed programmatic side, because the reason why it's exciting for us is because there is an incredible demand for both of these methods of transacting. 51:15 And the customers that have built out trained, experienced, programmatic traders, they have different need than customers that don't have those capabilities. And frankly, some of the incrementality and some of the more advanced , KPI campaigns that we run are probably best suited for a managed programmatic method of transactions, whereas there are a lot of customers that historically, we have not had the ability to engage with because we do not have a self-service product that was market ready, and that's changing and that's one of the reasons why we're very excited. 51:59 And one of the reasons frankly why we've made the investment that we've made in our tech and product, which is very front of the year heavy and very front loaded. So that, that EI opportunities is available to provide return on investment sooner in the year.
Laura Martin: 52:16 Okay. And then my second and last question, has to do with, so guidance, you're taking our guidance up for next year, compared to our numbers, I like it a the lot, like 5 million and then you're taking the EBITDA down, compared to where we started by about 5 million. So, there's a shift over the total year of about 10 million in extra cost. And I'm taking that numerical quantification and I'm marrying it with, I'm just wondering if I heard you right, it sounded like from your prepared remarks, you said that your clients wanted more when you're talking about device location data, and the predictive modeling, your clients for more demo data, they want more locations, they want more signals. So, I guess my question then becomes is your market becoming more competitive, and that's what's forcing the extra 10 million of expense?
Jim Lawson: 53:05 I wouldn't say – that's a great question, but I would not look at it that way. We don't believe that the market is becoming more competitive and it’s forcing anything. We see an opportunity to double down on something that works and really build a moat around what we're doing. We think that the data, the first party data solutions in the context of our engine, and the way that we use data to predictively determine, which media to buy, we currently rely on a number of data such that we – that are not unique or proprietary to AdTheorent. 53:45 We actually talk a lot to our customers about what they want and what would make, you know what would drive their business forward. And we believe very confidently that having our own raw data that we can use to create unique vertical specific data set and then drive vertical specific models and vertical specific attribution and reporting. With data that we license directly will create sustained differentiation for our business going forward. 54:20 So, I wouldn't say that the – there's a competitive increased competition is, kind of what is driving that as much as our recognition of the opportunity and the advantages that we have to capitalize on those now.
Operator: 54:39 Thank you. And our next question comes from the line of Andrew Boone with JPM. Your line is open. Please go ahead.
Andrew Boone: 54:47 Hi, good afternoon. Thanks for taking my questions. The first is, auto has been a large advertising vertical historically, how do we think about auto coming online? And then additionally, how do we think about additional verticals behind that? Whether that be whoever is next, whatever vertical is next? I’ll start there. Thanks.
Jim Lawson: 55:10 Thank you, Andrew. One of the great things about our business is that the core capabilities that we have around machine learning optimizations and the use of data, are very suitable to the creation of vertical specific products. With auto in the fourth quarter, we were very excited to roll out the in-market auto validation product. And the Comscore integration that I've mentioned in my remarks, potentially gives us more data to use the custom models and data driven optimizations as part of our freight targeting. 55:54 And then this is a first to market in-market auto audience verification. And the partnership that we have here allows us to have data insights from a partner that has 30 years plus of vehicle transaction data for more than 700 resources and 125 million households. When we can access that type of data, and this is just an example of the formula or the process that we take when we create a verticalized solution. 56:29 What unique data can we access? What unique measurement, what unique reporting can we access that will allow us to tackle that vertical problem? And in the auto vertical, what the customers are asking for is, do you want to reach in-market auto shoppers? And they want to believe that you're reaping in-market auto shoppers. And so by having the additional data from these providers, we will be able to more incredibly go to those auto advertisers with a solution that speak to their concerns and their opportunities, rather than having a generic ESP ad buying opportunity. 57:19 And the more that we can do that, it worked very well for us in the pharma space, it worked very well from us in the banking financial services and insurance space and that is one of our core go to market objectives. It is to understand the business KPIs that those verticals care about most. Ask ourselves hard questions about the inventory, the data, the measurement, and the attribution capabilities that are available in market and the different ways that we can use those capabilities to a, target more effectively; and then b, report out with more granularity and more precision to those customers, so they realize they're getting value. 58:00 If the customer is getting value from what we're doing, they will keep coming back. That’s our recipe for success. It applies to auto, and it applies frankly to another probably half dozen verticals that are top of our agenda for the year.
Operator: 58:19 Thank you. And our next question comes from the line of John Roy with Water Tower Research. Your line is open. Please go ahead.
John Roy: 58:26 Great. Thank you. So, 2022 is obviously looking for a lot of growth. When you go out there and you do lose, what are the reasons for that? Is it a lack of visibility? Is it, you don't have the products? Is it just, you’ve not been in the market long enough? What are you seeing out there from that perspective?
Jim Lawson: 58:46 Hey, John. Thank you for that question. Honestly, I think sometimes when we lose the part of the problem is the capabilities and the method of using data that we employ is frankly not well-known. I think that AdTheorent is, again kind of not as well-known, in the broader market as we believe it will be a year from now. So, I think, also I think sometimes there is a tendency on the part of some organizations to just do what they know. And based audience targeting has been around for a while and that's frankly what a lot of advertisers and media buyers, that's what they know. 59:42 And then I would say, there are a number of the platforms that exist in the market that make it quite easy for media to be purchased. And we need – the reason why we've chosen performance as our reason for getting out of that in the morning as a company is because we believe that we can do that better. And I think when we engage with brands and when we engage with agencies that are locked into the topic of performance and when they are thinking forward about a world where cookies, Android IDs, IDFAs, you name it, a world where those IDs are not everywhere, and they're thinking forward. 60:31 They're very interested in learning more about what AdTheorent has to offer. And one of the reasons why we're making the push that we're making, the reason why we're a public company right now is because we want to educate the market about this other way. Predictive advertising, we predict to score 87 billion impressions per second for the specific purpose of driving custom business outcomes for advertisers using programmatic. 60:58 The open internet can be a very powerful place to advertise, but you need to understand and be able to capture all of that data and make it usable. And I think we lose probably just because we're not as well-known as we wish we were, but that's something we're actively working on changing.
Operator: 61:19 Thank you. And our last question is going to come from the line of Dan Kurnos with Benchmark. Your line is open. Please go ahead.
Dan Kurnos: 61:26 Thanks. Have a couple. I’ll try to keep them quick. Jim, first of all, obviously good to chat with you again. Quick housekeeping for you guys. So, you had some pretty meaningful incremental efficiency impact in Q4. I'm just curious if that was driven by mixed increase and sort of benchmark CPA or deficiencies in the model? I want you to start with that, and then I'll ask a couple higher level questions
Jim Lawson: 61:51 Yes. I mean as we operate and as we have more data and as we switch some campaigns to CPAG, cost per action guarantee and as we have campaigns that we've been operating for more and more time, we have more data, we can be more efficient. Frankly, the fact that we're able to derive concessions from some of our supply partners based on volume base, ben helps us, the kind of the network-wide models that we've employed across our network so that we can avoid the pitfalls of impression for which we don't get paid, makes it efficient. 62:44 So, there are a number of things that are in our favor that help us become more efficient as we go. And then the more effective we are at driving EPAs, the more financial performance we enjoy, because at the end of the day it starts for us with driving the actions and then from there optimizing towards being the most efficient. So, I think it's a combination of all those factors that allowed us to have a strong year from that perspective.
Dan Kurnos: 63:19 Got it. And then just, I guess, first just to piggyback of Maria’s original question around the kind of backdrop with inflation and supply chain challenges that you guys called out although you're somewhat insulated given your verticalized approach, just curious how you're balancing your guidance against the we're seeing with Facebook and Google and the fact that it feels like channels like yours, higher quality performance channels are picking up share in that environment. And then the other part of it would be Jim, just theoretically, I have a suspicion how you'll answer this. You have a leading CTV measurement capability that's now been proven by DV, and I know that you want to drive advertisers and sort of the channel that it can be a performance channel, but do you consider it at any point further monetizing the product as a measurement solution that would gain broad acceptance immediately versus running it through your own channel? Thanks.
Jim Lawson: 64:20 Yeah. Thanks, All great questions. What was your first question again? I’m sorry, flipped my mind.
Dan Kurnos: 64:33 Yes. No, I was just curious about the backdrop balancing the mess between Facebook and Google, and kind of implementing the higher quality versus …
Jim Lawson: 64:40 Yeah. So on the supply chain side, I mean, we feel like we will capitalize on some of the challenges that a lot of the other bigger platforms are experiencing. We are quite agnostic to vertical. We have a very diversified approach when it comes to verticals. In the first quarter, like everybody, we had a couple of deals that moved to later in the year, due to the challenges that we're seeing with supply chain. 65:17 I mean, when you have the inability to manufacture your product, you're not going to be in a mode of advertising that product. And that's okay. I mean, we've seen this in 10 years of operating. We've seen that there's some with timing on campaigns and that's why we're not an organization that gets overly worked up about whether something lands in Q1 or whether Q3, Q3, Q4. At the end of the day, our plan and this one gets to the second part of your question, our plan is really focused on the full-year. 65:53 We do our best to estimate the quarter, it’s quite seasonal, it’s always been seasonal and the revenue that our 2022 plan assumes in the first quarter is directionally the same level of revenue in Q1 as it was in 2021. So, we know, generally speaking how it is going to shakeout, and we don’t get too worked up when things move from one quarter to the other because there's timing, timing issues are more engaged with those customers and we know that we have those partnerships and that the money is going to be spent with us and we feel good about that. 66:31 So, I think the way that we insulate ourselves from those macro trends, as we did during 2020 during the pandemic is to focus on what we can control, which is, if advertisers have limited budgets, they're going to spend those budgets with partners that are able to show return on investment and value creation. 66:57 If you're in a tough economic climate, but you have a partner that's helping you drive sales, that's an important partner. So, obviously we can't control, if you don't have the widgets to build your product, then you're probably not going to be spending a lot of money advertising them right now. But that's okay, because we have a number of verticals that are not impacted by that at all. The verticals that are impacted by that, we work with them on timing, we execute those campaigns when timing is right, because otherwise, we want to make sure that their media spend is valuable. 67:32 And at the end of the day, we believe our – as I said earlier, our 2022 forecast is an appropriately prudent forecast for a brand new public company that has a lot on its mind and wants to make sure that we live up to our commitments. And we're excited about the opportunity, but at the same time, we realize that the world is an interesting place and things happen that you don't expect, but we got through 2020 in quite a strong fashion, and we're through all that, and there's a lot of bullish sentiment from our customers. 68:09 They want to spend money on their advertising. They want to promote their products and services. We have a great number of travel and hospitality verticals, it's wonderful to see people out in the world again and traveling and spending money on those things and we're going to benefit from that. So, there's puts and calls and we'll optimize and be nimble and we'll take advantage of all of it.
Operator: 68:37 Thank you. And this does conclude today's question-and-answer session, and I would like to turn the conference back over to CEO, Jim Lawson for any further remarks.
Jim Lawson: 68:48 Thank you. Thank you very much everybody. Just wanted to say thank you for joining us today. Thank you to the AdTheorent team members, to our customers, to our clients and shareholders for this great opportunity. We appreciate having this chance to talk about our business, our 2021 success, and the exciting plan that we are pursuing to drive both revenue growth and profitability in 2022 and beyond. 69:14 We are a new public company, but we have a 10-year track record of delivering on our financial and other commitments. We believe we have a transformational opportunity and we believe that our performance first, privacy forward, programmatic ad targeting solutions represent the future for programmatic advertising. So, thank you very much for your support and have a great night.
Operator: 69:37 This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.
