Innovid Corp. (CTV) on Q4 2021 Results - Earnings Call Transcript
Operator: Hello, and welcome to the Innovid Q4 and Full Year 2021 Earnings Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to , Investor Relations.
Unidentified Company Representative: Good morning. Thank you, operator and everyone for joining us today. Welcome to Innovid fourth quarter and full year 2021 conference call. Before we begin, I would like to remind our listeners that certain information provided on this call may contain forward-looking statements. And the safe harbor outlined in today's earnings release also pertains to this call. If you've not received a copy of the release, please direct yourself to the Investor Relations section of the company's website. Changes in business, competitive, technological, regulatory and other factors could cause actual results to differ materially from these expressed by the forward-looking statements made today. Our historical results are not necessarily indicative of future performance. As such, we can give no assurance as to the accuracy of our forward-looking statements and assume no obligation to update them except as required by law. Today we have joined by Zvika Netter, Innovid's Co Founder and CEO, who’ll begin the call with a business update. Then he will turn the call over to Tanya Andreev-Kaspin, Innovid's CFO, who will discuss the financials of the company. During the question-and-answer session, Tal Chalozin, Co-Founder and CTO will be joining as well. And with that I'd like to pass a call over to Zvika Netter. Zvika, please go ahead.
Zvika Netter: Good morning, everyone. And thank you for joining us today for Innovid's first earnings call as a publicly traded company. I want to start by expressing our deep appreciation to our investors, our customers and our partners who have put their passion and trust into Innovid over the past 15 years. I'd also like to thank our new public stakeholders for their investment in our future. I'm incredibly proud of the Innovid team, and believe our 2021 growth was driven by the embodiment of our company's values and the unbeatable, daring and generous spirit they bring to our business each and every day. Our recent public listing was a major milestone. But in practice, we see it as just the beginning of the next phase in the evolution of Innovid. We look forward to sharing more details around our financials and growth trajectory today. Since this is our inaugural earnings call, before we dive into the numbers, I'd like to take a few moments to share our value proposition and why we feel confident about the future success of Innovid. Innovid's vision is to reimagine TV advertising. Our name stands for innovation in video and originated from the desire to change how the world engages with TV and video advertising. Our mission is to provide the infrastructure empowering TV advertisers to connect with consumers in a more personalized data driven and in directed manner. The digital migration of television has revolutionized the $200 billion TV advertising industry. As consumers rapidly shift their viewing from traditional linear TV to streaming TV, marketers and agencies are recognizing the opportunity in CTV and the corresponding need for new digital infrastructure and technology to support this evolving ecosystem. This is why we believe Innovid is mission critical for the growth of CTV. Our addressable market is large and expanding. According to eMarketer, in 2021, U.S. CTV ad spending reached $14.4 billion dollars, which is 18.2% of total TV spending, up from just 3.6% five years ago. That figure is projected to more than triple by 2025. Demonstrating significant upside CTV adoption is growing rapidly outside the U.S. as well. Innovid's non-U.S. CTV volume grew 137% year-over-year, and we believe CTV's poised for global adoption. Innovid currently powers many of the leading advertisers globally through our integrated solutions across CTV, mobile TV, desktop TV, display and other channel. The Innovid platform consists of three core offerings: Ad Serving; Creative Personalization and Measurement. Together, these offerings allow brands and agencies to effectively deliver to audiences around the world personalized ads and measure the effectiveness across all major TV mediums. While we expect to benefit from the secular trend of overall rising CTV ad spend, we believe our purpose-built technology for CTV and open platform approach, combined with our position as an independent infrastructure provider, positions Innovid to consistently grow market share in the CTV space. Our strategy consists of four primary growth engines, delivery volume growth, product upsell, geographic expansion and expanding client base. In 2021, we experienced growth across all four of these stated growth engines. Let's start by digging into the results for full year 2021. Our 2021 business fundamentals were strong. Full year 2021 revenue grew 31% year-over-year to $90.3 million. While adjusted EBITDA grew by 110% year-over-year. We picked CTV as our ticker as CTV is the center of all that we do, and our 2021 results showed that. CTV once again accounted for the lion's share of our revenue, and was also our highest growth channel. I'd like to elaborate on the momentum we gain across our four growth engines during 2021, that allowed us to achieve these results: volume; product upsell; geography, and client expansion. I will go over them one by one. The first growth engine is volume. As more viewers switch to watching TV through connected device, additional volume and revenue is naturally driven through Innovid’s platform. Volume growth continues to be driven by the move from linear TV to CTV. By 2021 CTV volume grew at a rate of 47% year-over-year. Throughout 2021, we secured several cross industry collaborations to support the maturing CTV ecosystem. We expanded integrations with DoubleVerify and Integral Ad Science to ensure strong senior CTV fraud protection. We also partnered with the TradeDesk, Magnite and others to enable the delivery of interactive CTV ads programmatic. Additionally, during Q3 of '21 we launched Innovid Key, our infrastructure approach to identity management. This solution unlocks data across Innovid’s expansive ad serving footprint of over 95 million households in the U.S., a near census view of 108 million U.S. CTV homes to enable brands such as Molson Coors, to enhance cross screen adjustability and measurement. The second growth engine is product upsell. The close platform relationships we have built with our customers have allowed to expand beyond ad serving into two primary upsell opportunities: The adoption of our personalization product has increased rapidly across more and more advertisers growing our advanced creative revenue 49% year-over-year; Utilization of our CTV measurement capabilities also grew significantly from a smaller 2020 base, with 38 new advertisers leveraging Innovid’s advanced measurement throughout 2021. We plan to continue to introduce opportunities for advertisers to tap into advanced capabilities through our homegrown products or acquisitions. I'll share more details around our pending acquisition of a leading converged TV measurement platform, TV squared, and we'll also talk about the impact we believe this will have on our measurement business momentarily. The third growth engine is geographical expansion. Innovid's footprint spans over 75 countries. We have a large roster of global advertising clients and solid pipeline of brands seeking to consolidate more regions around the world under a single CTV platform. During Q4 and '21 we expanded our capabilities into the world's second largest media market, China, and appointed former Google Platform' Country Manager, David Chen, to lead the region. We have successfully launched global campaigns for top tier advertisers. For example, a large multinational consumer electronics brand is currently partnering with Innovid for campaign orchestration and measurement across 27 countries, including China. Our total 2021 international revenue defined as ads delivered for clients outside the U.S. grew 39% year of the year to $8.4 million in 2021. Last but not least, our fourth growth engine, expanding our client base. During 2021, we onboarded onto our platform top TV advertisers such as CVS Pharmacy, Target, Mercedes-Benz and Sanofi, one of the largest pharma companies in the world. Our core client base defines advertisers who generated at least 100,000 a year growing number during 2021 to 109. We also achieved the record high retention rate of 97% and net revenue retention of 127% for core platform clients, defined as advertisers who exclusively partnered with Innovid for ad delivery and/or personalization technology. This is evidence of our strengths of the underlying business, our loyal customer base and our strong market position. Throughout 2021, we were not impacted by the industry's ongoing concerns around privacy, iOS changes and IDFA. As I just shared with you, in 2021, we continue to see growth across all four growth engines throughout the year. Having said that, at next slide to call your attention to a temporary slowdown we saw in volume growth during Q4, which is seasonally the strongest quarter of the year. The slowdown was driven by supply chain issues from some of our largest customer across verticals such as automotive, consumer package goods and consumer electronics, which in turn affected their TV and CTV short-term advertising spend. For example, the automotive vertical was notably impacted by microchip supply chain shortages. During the first three quarters of 2021, our automotive client base experienced average year-over-year volume growth of 44.4%. However, during Q4 '21 specifically, while retaining a 100%, not just retaining, but actually even winning another auto client, we saw a 30.9% decline in Q4 year-over-year volume. The uncertainty in the market during Q4 also resulted in several new business opportunities being pushed to 2022. We project the supply chain related short-term declines some advertisers had to face will continue into the beginning of the current fiscal year. To reflect the impact of TV advertising budgets, we have adjusted our current 2022 guidance to be more conservative until visibility improves. Looking ahead, we are seeing an encouraging start for 2022. Despite the short-term industry headwinds in verticals such as automotive, we expect the larger macro trend of TV advertising budgets shifting to CTV in 2022 and beyond. Innovid is well-positioned to benefit from these secular trends. Ad supported CTV content is poised for growth, propelled by large sports license changes such as the NFL's announcement that Thursday Night would be exclusively broadcast on Amazon Prime and continued tailwinds through new streaming apps and platforms such as Paramount+ and Discovery+. In this environment, we anticipate the need for an independent ad serving creative personalization and measurement platform will only intensify overtime. By way of example, just yesterday, we announced that Mondelez International, the global leader in snacking, selected Innovid as its preferred global technology solution for personalization across CTV among other channels. Jon Halvorson, Global VP of Consumer Experience in Mondelez International shared the mission of data driven brands. To quote him directly, “at Mondelez, we are committed to delivering the most relevant experiences to our customer base wherever they may be, and across any channel, device or screen, including CTV.” We believe this challenge many brands are facing and that Innovid will remain an industry leader in solving it. We are confident about 2022 and our long-term focus and strategy. On top of that, we believe expanding our offering to include converged TV measurements via the acquisition of TVSquared will prove to be a strategic in nature as early as this year. While it's only been a few weeks since the announcement. We are extremely encouraged by the positive feedback from our partners and customers. I'd like to expand on the strategy behind the acquisition and next steps. The global $200 billion TV market is being transformed through tech innovation and IT based delivery. At the same time, incumbent predominantly panel-based means of measurements are being disrupted, introducing a new opportunity for software companies such as Innovid to take a leading position in the new TV measurement marketplace by adding value to advertisers through more real time, transparent and accountable TV measure. More than two years ago, in 2019, we made a strategic decision to enter the measurement market, a multibillion dollar total addressable market with an initial focus on real time census level measurements of CTV advertising. Since then, demand has matured and advertisers started seeking a converged measurement solution that provides a full view of both linear and CTV, together. To that end, we announced earlier this month that Innovid is acquiring TVSquared, and its dependent global measurement and attribution platform for converged TV for $100 million in cash and 12.5 million shares of Innovid. I'm extremely excited about this acquisition, as it represents a monumental step to rapidly meet the modern needs of both the buy and sell-side by bringing linear TV, CTV and digital together in one independent platform. TVSquared represents the ideal partner and a perfect complement to Innovid’s core capabilities and market position. TVSquared is a mature player in the measurement space, who, similar to Innovid, is a true technology company at its core with fast growing products that are complementary to Innovid. We have a shared mission, and that is to reimagine TV measurement. Over the years, Innovid has acquired and successfully integrated multiple companies as we believe culture fit is critical to a successful integration. The culture of TVSquared is very similar to Innovid: they have a startup mentality; they are disruptors; they are smart; they have endurance and have grit, and we are confident both teams and technology will mesh well together. The TVSquared platform will advance Innovid's offering in four key areas: linear TV measurement; business outcomes; global growth and client based diversification. I'll go over these four items. First one, linear TV measurement, expanded measurement across linear TV and CTV, including both Programmatic and Direct Buy. Business outcomes, we gained the ability to correlate TV and CTV investments to business outcomes such as website engagement, app downloads, online purchases, and store traffic, just to name a few. Global growth, the acquisition rapidly expands Innovid’s measurement presence across international markets. The TVSquared measurement platform currently offers measurements for local, regional, national and global advertisers worldwide in over 75 markets. This in turn expected to increase our ratio of revenue originating outside of the U.S. Four, client based diversification. TVSquaredd expands Innovid business into new client segments, introducing a broader serviceable market, including direct-to-consumer, e-commerce focused brands, local advertisers, and also large MVPDs and publishers such as Sky, Spectrum and Comcast owned Effectv. We’ll try to fully integrate TVSquared’s product into Innovid's platforms, so clients will gain the ability to work with one independent partner for ad serving, creative personalization and measurement to improve advertising effectiveness for the total TV in the digital universe. TVSquared generated approximately $20 million to $22 million in 2021 revenue with growth exceeding 40% year-over-year. We are looking forward to the acquisition closing soon, at which point we intend to accelerate sales of the TVSquared engagement platform. Once closed, we plan to share more about the anticipated impact of the combined companies in an upcoming call. In summary, when viewing our full year 2021, despite a challenging environment in the fourth quarter, we were able to achieve 31% full year revenue growth while staying profitable. We are confident in our future and in how the TVSquared acquisition will enhance our overall business. This is a greatest period of innovation that TV industry has ever seen, and we are proud to be at the center of it. I will now hand it over to Tanya our CFO, who will dive deeper into our financial performance and guidance. Tanya?
Tanya Andreev-Kaspin: Thank you, Zvika and welcome everyone. I would like to review our financial results in more detail. In the fourth quarter of 2021 revenue increased by 13% year-over-year to 26 million. For the full year, revenue increased by 31% to 90.3 million. CTV represented 45% of total revenue and grew by 48% in 2021. Mobile contributed 39% and desktop 16% of the total revenue and grew respectively, 21% and 19% year-over-year. We expect the growth in CTV to continue to be a deep revenue driver and for the CTV segment we’re confident increasing share of our revenue mix. Sticking on the geographical breakdown, the U.S. TV is the main contributor to our revenue accounting for 91% of total revenue. Our international operations including the APAC, EMEA and LatAm regions currently represents 9% of total revenue. Our total 2021 international revenue defined as ads delivered for clients outside the U.S. grew 39% year-over-year. As part of our growth strategy we aim to expand our global presence by targeting emerging markets and increasing measurement and deliver services in areas to accelerate its CTV growth. Offer trends in the digital advertising space, especially in CTV continues, in some cases even accelerated through the pandemic, has positively benefited us during the year. We believe that these trends will continue in the long run. And they’re accelerated between the quarters for transitory slowdown in growth rate during certain periods as we experienced in Q4, 2021, the growth in digital advertising will continue to drive Innovid’s performance in the future. Speaking about operations. Gross profit in the fourth quarter was $20.6 million, a 7% year-over-year increase. Gross profit for the full year of 2021 was $72.5 million, and grew 28% year-over-year. Despite lower than usual growth in Q4, we maintained high gross margin of 79% in the fourth quarter and 80% for the full year of 2021 as a result of our highly-profitable core business. Total operating expenses for Q4 were $27.3 million and $78.4 million for the full year of 2021. Our annual operating expenses were up 42% from a year ago, approximately 40% of the growth in operating expenses were driven by share-based compensation and one-time transaction related expenses, related to the deSPAC transaction closed in Q4. In 2021, excluding stock-based compensation and transaction related expenses, our operating expenses grew 24% year-over-year. On a GAAP basis, net loss in the fourth quarter was $7.6 million or EPS of minus 0.59. Net adjusted EBIDA for the fourth quarter was $1.8 million and $5.4 million for the full year of 2021, representing 7% adjusted EBITDA margin and 6% adjusted EBITDA margin, respectively. While Q4 adjusted EBITDA declined by 71% year-over-year our annual adjusted EBITDA increased by 110% from the same period last year, showing the leverage in our business model and our ability to manage the business profitably. Now I would like to review some of our operational KPIs that we reported in today's release. Our target brands are composed from largest TV advertisers. We define a core client as an advertiser that generates at least $100,000 of annual revenue. In 2021, our core clients have generated approximately 91% of our annual revenue, up from 89% last year. The number of core clients in 2021 grew to 109 from 95 in 2020. We define a core platform client as a core client that uses our platform as an ad server of record and/or for personalization services. Core platform clients’ annual retention rate grew from 94% to 97% in 2021, a solid indication of the stickiness of our solutions and loyalty of our customers. Annual core platform clients net revenue retention grew to 127%, up from 121% in 2020. This provides us with a stable baseline revenue stream, and enable to the investment in our R&D pipeline to strengthened our deliver platform, measuring services and overall reach, therefore increasing the number of core clients per year in our customer retention rate. Moving to our balance sheet. Net profits to Innovid from deSPAC that closed in Q4 were approximately 150 million. Our cash and cash equivalents ending balance as of December 31st, 2021 was $157 million. After the quarter close, we announced the acquisition of TVSquared. The purchase price was $100 million in cash from our balance sheet and 12.5 million shares of Innovid. Finally, I would like to go over our guidance for the first quarter of 2022. As a result of what we saw in the market at the end of Q4 and current market conditions, we expect revenue to be in the range of $21 million to $22 million, reflecting 17% to 22% year-over-year growth. And adjusted EBITDA in the range of minus $4.5 million to minus $3.5 million. For the full year of 2022, we expect revenue growth in the range between 22% to 28% year-over-year with positive adjusted EBITDA. This is one of the effect and contribution from the acquisition of TVSquared. We will be happy to share more information during the conference call following the closing the deal. With that, I'd like to hand the call back over to Zvika to take your questions. Thank you.
Zvika Netter: Thanks, Tanya. Before we open the lines to questions, I would like to take this opportunity to thank you again for all of you for joining on this call. I'm sure as you can tell, we are extremely passionate and committed to changing the way people experience television. We're excited to take our first steps as a public company and we look forward to building a partnership with many of you as we continue to expand and cement our leadership into the CTV acquisition. And with that, I'm looking forward for your questions. Operator, please go ahead.
Operator: Thank you. We'll now be conducting a question-and-answer session. Our first question today is coming from Laura Martin from Needham & Company.
Laura Martin : I'll just talk to, what is measurement? Could you give us an update on what you think the total investment in the measurements line extension into this new revenue stream in 2022 will be, total?
Zvika Netter: In terms of when you say, investment from our P&L perspective?
Laura Martin: Yes.
Zvika Netter: Well, obviously the, first of all, again, good morning, Laura. The major investment reason we decided to go to acquisition is obviously the acquisition where we're onboarding 100 plus people that are all dedicated to the converged TV measurement, including with about, I would say, 30 people from our own team, who are focusing on measurement. So in total, we'll have about 160 people just focusing on measurement. I would say from a high level, somewhere between a third to almost half of our resources will be dedicated to extending the measurement line of business. Obviously, we're very bullish and excited and believe there’s a immense opportunity in the converge TV measurement. And that's why we decided to expand our offerings during acquisition.
Laura Martin : And revenue, I know that TVSquared makes money, but revenue -- when do you expect to get a positive return on all of the spending that occurred to you, half of your total expenses are going to be in measurement and do we see a return on capital on that?
Zvika Netter: What we're going to do is, since we've not closed it, we hope to close pretty soon. When we'll do, we'll share more numbers of how we see the combined entity outlook, we'll continue to report also on the organic numbers, but we want to -- once we close, we’ll provide a pro forma outlook on revenue streams, and from there we can go back and see in terms of ROI. We obviously see the return investment not just by the measurement revenue but since Innovid we believe will be the only platform out there dedicated to CTV that will provide delivery services -- not services, deliver infrastructure, creative tools and measurement for the future of television. And with that combination, we see measurement helping and supporting the client acquisition and retention of our core business, the active and creative, where in that case, our main competitor is Google, and I don't think anybody thinks that Google's going to be a measurement platform for the future of sales. So we believe that will contribute directly and indirectly to our top line and bottom line.
Laura Martin : And then my last question is, I know you saw weakness in that auto vertical sort of up 24% to down 30% in the fourth quarter, could you talk about what you've seen in Q1 and how long you think it's going to last weakness in autos and any other strengths? I'm really looking for strength coming back into Q1 to date of verticals that were weak in Q4?
Zvika Netter: So the strengths are still there, they never went away. There's four growth engines and all of them except the volume for Q4, performed extremely well. We actually not only did not lose a single auto client in Q4, we also closed Mercedes Benz and hopefully we'll be able to share more information about other deals that are pending, some got pushed to this year. But we did not lose a client, we actually grew in client base, the upscale side of the business in terms of personalization, adoption of measurement went up and we also expanded globally. The only thing that was hit was based on a macro trend, and that's a short-term dropping spend. So to your question, all those -- the positive KPIs are continuing in to 2022, including in Q1. We believe as inventory and supply chain issues will be more or less impactful to some of those verticals, it was mostly auto and CPG, it will start seeing the growth rate and CTV going back to the, “normal levels” that we expect. Since obviously, the transition from linear TV to CTV is driven not by the spending, its actually driven by user behavior, and that did not change. So strategically we believe and we're seeing that the transition continues all the time. And certain marketers, as they have a better outlook in terms of their inventory, will probably increase their spending back to normal seasonality. We feel very comfortable with the numbers and actually pretty optimistic about where we are today and where the trend is going.
Operator: Next question today is coming from Andrew Boone from JMP Securities.
Andrew Boone: Two please. So on TVSquared I understood that you guys are transforming the panel-based measurement into a more holistic accurate version. Can you just talk about more of a competitive set of why you guys are different from some of the other nextgen measurement players like, what -- where do you guys win share how you guys differentiate yourself from a product perspective? And then secondly, on TVSquared, you talked about extending to DPC and e-commerce focused brands. That strikes me as being a smaller set of marketers than what you've historically talked about as your core clientele? Can you talk about the potential to go down markets from larger client base today? Thank you so much.
Zvika Netter: So I will speak to your answer in two parts, and then I'll use my Co-Founder and CTO, Tal, who’s on the call. So on the second part of the question, in terms of diversification is client base. The way we see it, we're not -- as we probably in our calls, as you remember Innovid is focused on the top 200 advertisers, the largest brands, the autos, the pharma, the CPGs, as they represent 75% of the spend in linear television. So that's kind of where we see, we believe, we'll see and we are seeing most rapid growth of CTV. And just to remind us all, before Q4, we saw 65% year-over-year growth in CTV revenue. So, putting aside the supply chain challenges, it's massive growth. So, we believe in that strategy. At the same time, what we are inheriting together with TVSquared and we want keep that is that, they actually have a product that caters to performance minded also to performance type advertisers, such as direct-to-consumer that we've been asked the last day during the IPO process direct-to-consumer, e-commerce local advertisers. So for them, our ad serving offering and our personalization offering is less of a fit, but the self-service measurement, performance measurement of linear television and CTV is a great product that can support a longer tail. So, we are not giving up anything. We are gaining more. And of course our focus will be to take this product and offer it to our clients, the largest clients. But we absolutely want to continue and enjoy the diversification of the client base. So, we'll have support and engagement in the longer tail of the client base. But currently, we are not going to take our core ad service business and go and sell it to the long tail, we don't believe we are going to do it this year, maybe longer-term if it's an opportunity. But it's a great way to diversify the revenue stream. And also from a global perspective, they bring that. And I love how you separated between kind of the legacy, you know who we are talking about, kind of TV, panel-based legacy measurement platform versus the new challenges. And with that, I'll switch to Tal to explain why we believe our offering -- the combined offering will be very different than what's already out there.
Tal Chalozin: I'll speak quickly to the advantage that, what you asked about our advantage in the measurement landscape. So the future of television, the most exciting part of it is that, television will have the ability to report back from each and every device to a holistic server. So, you don't need a sample, you could rely on almost a census of actual measurement. But collecting that census data is not an easy thing, and here comes our unfair advantage is, by being the edge server, the platform that actually deliver and stream the ads, we have the actual data, we don't need access to it from anyone else to collect that data of the viewership who watched what and on what device. So that allows us to get access to all of it. That's a big unfair advantage. And the second part that I think is very unique about TVSquared combination with Innovid is adding the outcome component. So, not only that we can measure reach and frequency, but we can also have a -- we have a very big focus on measuring outcome, which is very key to the new crop of marketers that are extremely data driven.
Operator: Thank you. Next question today is coming from Shweta Khajuria from Evercore ISI. Your line is now live.
Zvika Netter: Hey, Shweta?
Operator: Our next question is coming from Dan Salmon from BMO Capital Market. Your line is now live.
Dan Salmon: So I just had a couple of questions. You've given us first quarter and full year revenue growth guidance? Does that continue to be driven largely by volume growth? Is there any assumption for CPM growth in there? And then just any broad comments you can share on how your clients are looking at CTV ad volume through the year? I know you said visibility as well. So, I'm asking less about what your quarterly trends are expected to be, but more about what your clients are looking for to ramp back up to normal levels. Is that entirely about supply chain issues, or are there other variables there? And then a second one, just can you tell us a little bit more about the opportunity in China? It's a very big advertising market. Do you expect that to be a big business for Innovid one day?
Zvika Netter: So in terms of CTV volumes going back up, and you asked about the CPM. So first, on the -- on everything that's not volume. As I mentioned, we're seeing great progress in terms of number of clients, we saw their – our growth there, retention record high 97%, I don't know how we can top that. Next year the core clients, in part of upsell for the personalization up 50% year-over-year. So all these trends in terms of new product adoption to your point, that can -- that is charged for a higher CPM, and new logos, global expansions, all of these KPIs are moving up into the right even during Q4, during Q1, and we expect this to continue and we'll hope to see this continuing through the year. The only thing that you see in the guidance in Q1 over on 2022 that is different than what we saw in Q3, or in the beginning of Q4, this volume drop, which is basically media drop, we don't charge the media, obviously, which is volume. So it's those large advertisers that are significant for us, verticals like auto and CPG, slowing down their investment, is that their cutting down their investments in a very rapid pace towards the end of the year, November, December, mostly. So while we cannot share what they're doing in Q1. We do know that the auto supply chain issue, the microchip did not disappear, but we know it's coming towards an end. So that's why we're -- on one side, very optimistic, because once that -- it's fully back, we believe unless any other surprises coming on a macro perspective, we're back to the normal situation. Even without this, we’re still seeing 22% to 20% growth in the profitable business. We believe there's more out there. It's not in our hands from that perspective. So optimism across all KPIs. On volume, it's at the end of the day up to them. It's a similar way that we could not -- nobody told us about what they planning and how they're planning to execute this on the end of Q4. What we're hearing from them now is they're seeing the light, they're -- you can see it also on television, they're starting to run more and more ads. And when exactly, they'll go back to full capacity, it's not something that they shared with us and we can share here. So that's on that side and -- but again, on our long-term perspective work, we're extremely bullish and optimistic. I would say -- by the way, slight comment, because when you say the average CPM, you can see a situation we're thinking how we're going to share information later on. We can see a situation where we're selling more upsell product, but still the average CPM goes down, because once we onboard large customers, they first onboard their entire spend, so we get massive volume in basic delivery and then we go into upsell. So it's an interesting situation where you can sell more revenue upsell, but still the average CPM will stay the same. So we'll share more probably -- more insight in our next call. China is definitely interesting. We've been looking at China for four years, because it’s a huge market. And we decided for many, many years not to go in, it's a very complex environment to build infrastructure. The reason we decided, which is always the reason to almost everything we do, including the acquisition is what our customers are asking us. We have massive global brands working with U.S. Some of them are looking to expand with us globally, which we just mentioned Mondelez, that were already operating on a global scale with Mondelez. China is not about them. But we have other brands, similar scale, that asked us to support atleast their measurement efforts to deliver measurement efforts all over the world, including China. So once we had enough demand for a specific type of product and offering in China, we decided to move forward, hired a team there. And this is solely to support the global -- the demand from our global clients, that mostly are either U.S., large corporates or European. So this is not about selling in China locally, it's about delivering as -- on every corner of the world PDIs, every corner of the world, including China.
Operator: Our next question is coming from Shweta Khajuria from Evercore ISI.
Shweta Khajuria: Two for me, please. How -- so the measurement products through the acquisition, how do they monetize currently? And do you expect to change pricing on that product? And how does that compare to what's out there already in the market? And then the second is Innovid Key, that product. Could you please elaborate on that, what it is? And how differentiated that is? Thank you.
Zvika Netter: On the product pricing of TVSquared, the way they price is most of their revenue -- Innovid is coming from the digital side. The CTV world CPM base. TVSquared was born on the -- it's kind of hybrid of digital and -- but what they're mostly measuring is television, linear television, which doesn't have a CPM model because there's no actual serving. So it's a proxy based on the spin. It's not percentage of spin, but based on the budget that a certain brand have to run a certain campaign or an annual spin, that's from the height of how it's been priced on an -- usually on an annual contract with renewal. So that's obviously as we converge the offerings. We also have CTV measurement capabilities and that's exactly where we plan to plug in all our CTV measurement and our CTV data to combine offering, and after we'll close, we'll announce the updated or upgraded pricing model that will include both linear television and CTV. From a high level, it's always an outcome of the size of the client. At the end of the day, obviously, we will look for annual type contracts, stable and renewed. So that's on the pricing side of things. On the Innovid Key, I'll switch to Tal.
Tal Chalozin: Thank you, Zvika. So on Innovid Key, I’d say few things. First of all, Innovid Key is what we call an identity framework as a product that allows marketers to connect multiple identifiers together and get access to their first party data connected to the ad exposure. Essentially, the word doesn't need another identifier. There is clearly a lot of problems with identifiers, but we don't think that we need to create a new ID and new identifier, but we do need to create some type of a crosswalk between different type of identifier out there, and connect all of them to the ads that we serve and the measurement that we offer. So for example, within Q4, we announced partnership we have with LiveRamp. And, we shared that Molson Coors as a joint customer, but because of that combination we saw an uplift in the ability to identify connected television impression by 55% versus what they had before. So, that's the byproduct of Innovid Key and why we think that this is a very important, and very key, pun intended, to the offering.
Operator: Thanks. Our next question today is coming from Shyam Patil, your line is now live, from SIG.
Unidentified Analyst: This is Jared on for Shyam. You touched on this a little bit with the TVSquared acquisition, but you guys have commented on your focus on the top 200 advertisers in the U.S. Can you maybe talk about how this plays into your international growth story and also how this impacts your market opportunity overall? And then, second one if you don't mind, can you just speak to your interaction with large CTV walled garden, mainly YouTube, Prime Video and Roku and how that impacts your value prop?
Zvika Netter: So on the TVSquared offering, it's interesting to see they are moving. So we'll share slide in our investor deck eventually. There is a nice slide there that describes how we're coming from the two separate ends and connecting in the middle. One, they're coming from linear. Obviously, we come from CTV. Also on the segmentation of customer base, competing -- TVSquared competing with Nielsen could be a tough exercise and selling directly to large brands and agencies as we know, Innovid is a very -- definitely to penetrate the market, is a very high resource, long-term investment that Innovid was successful. TVSquared entered the market from linear and mostly focusing on the smaller brands and the performance-oriented brands based on their outcome business. So, looking at linear and looking what result -- the outcomes, the linear spend drove such as app download, website visitation, so -- which cater good to performance advertisers, and we're basically meeting in the middle. So it's a question of strategy, right? So, we decided from a strategic perspective and definitely after what we see in the world that there is some volatility in times of supply chain, pandemics and hopefully not the war. So, it's good have a diverse client base as long as we have an offering that can cater to that client base and keep our growth margin, keep the fast growth, keep the profitability. We actually love the fact that, they're bringing a very fresh mindset on advertising down the funnels. So, it's not just brand advertising. It goes all the way down to performance for TV advertise. So, we love that fit. And of course, as investors and shareholder, we also love the diversification of revenue sources. Same thing goes for global. Innovid is about 90% revenue from the U.S. base and 10% -- almost 10% from the outside. With TVSquared there is more and we're sure that later after closing, there is more revenue coming outside of the U.S. serving more than – I think more than 70 countries around the world, which is rare for measurement, a challenger, right? Most of them are U.S. based, so the fact that they have a European line of business for measurement for linear and partnership with platforms like Sky as a client is very interesting for us as a global company. So that's another diversification. In terms of their CTV walled garden. Tal, I think maybe you should answer that.
Tal Chalozin: So, I can even generalize on the walled garden even beyond connected television, but in general part of the offering of Innovid is an orchestration layer across all the different outlets. So it doesn't matter how media is being purchased through programmatic through IO and an upfront or is it an open internet or a walled garden, that's actually the core of our values. Like the market becomes more fragmented, that's beneficial, or increase the value proposition of a centralized ad serving platform. Specifically to your question about YouTube, Amazon and Roku or others, we’re fully integrated with all of them, we’re ad serving and contributing value into them. And we don't see that changing anytime in the future. We don't compete with those walled garden, we don't take their data and resell their data, we don't retarget those users. We're truly an infrastructure layer that helps marketers really, “take advantage of the fragmentation and benefit everywhere.” So we’re fully functioning and we actually think that in the future, we will increase our integration with those walled garden and probably it will be even more. That’s all I’ve got.
Operator: We reached out of our question-and-answer session. I'd like to turn the floor back over to management for further closing comments.
Zvika Netter : Thanks, Kevin. And thank you everybody for joining. Obviously, as you can hear, we're extremely passionate and excited. This is also our first earning call, hopefully, out of many. You can hear in our voices, Tal and myself as Co-Founders for 15 years now in this company, and it sounds like and it feels like we started yesterday. Still exciting, still passionate, you can see it also with our team -- both the decision to go public and in an environment like this, and the acquisition of TVSquared -- following acquisition of TVSquared. These are long-term investments, these are long term thesis, that we're looking at the future of television. We started 15 years ago, looking at $200 billion market, and seeing where it's going to be disrupted and what parts we want to take in it. We want to change the way people view video, view television, engage with television, the value exchange, there's so many things we want to do. But we also were very patient and persistent. So that's how we got where we are now competing with very large, big tech vendors out there and succeeding. So we're very encouraged by the success that we're seeing. And we're looking forward for a very productive 2022 year for us. I want to thank you all for your time, for your investment, for your questions. And look forward to check in with you again, post closing with TVSquared and of course in our Q1 earnings call. Thank you so much, and have a lovely day.
Operator: Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.
