Innovid - Q2 2024

Executive Summary

• Delivered double-digit growth and profitability expansion: revenue $38.0M (+10% YoY), Adjusted EBITDA $5.9M (+29% YoY) with 15.5% margin (8th consecutive quarter of expansion). CTV impressions +21% YoY; total video impressions +14% YoY.
• Mix remains healthy: Ad Serving & Personalization 78% of revenue (up 11% YoY), Measurement 22% (+6% YoY). Management reiterated FY24 guidance and introduced Q3 outlook ($40–$42M revenue; $6.5–$8.5M Adj. EBITDA), citing macro uncertainty and the U.S. election cycle.
• Product and partnerships are a clear catalyst: launched Harmony Frequency (holistic frequency management) and announced a collaboration with Nielsen to integrate Innovid’s ad serving with Nielsen ONE; Yahoo DSP as a launch partner for Harmony Frequency.
• Liquidity remains solid: $30.6M cash and no revolver balance; Q2 operating cash flow $1.2M and free cash flow use $(1.3)M (38% YoY improvement), reflecting ongoing efficiency gains amid continued investment in Harmony.

What Went Well and What Went Wrong

• What Went Well

  • Consistent profitable growth: “another quarter of double-digit, profitable revenue growth,” with Adjusted EBITDA margin up to 15.5% and CTV impression volume +21% YoY.
  • Strategic momentum: Launched Harmony Frequency; Nielsen collaboration to provide a seamless cross-media workflow; additional Harmony partners (Goodway Group, Vizio; Yahoo DSP as partner).
  • Segment stability and scale benefits: Ad Serving & Personalization +11% YoY, Measurement +6% YoY; gross margin proxy (revenue less cost of revenue) improved to 76% of revenue as scale and automation/AI increase leverage.

• What Went Wrong

  • GAAP profitability lagged: net loss $(10.5)M; net loss margin (28%); tax on income spiked to $7.8M in Q2 (vs $1.3M in Q2’23), pressuring GAAP results despite non-GAAP margin expansion.
  • Mixed device trends: desktop impressions −9% YoY; mobile +13% YoY but inconsistent through cycles; macro variability across verticals continues (retail weak; CPG/pharma strong; auto improving).
  • Free cash flow consumption in Q2: FCF $(1.3)M) despite positive OCF, reflecting ongoing capex/internal software investment cadence.

Transcript

Operator (participant)

Greetings, and welcome to the Innovid Q2 2024 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and then zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Lauren Hartman. Thank you. You may begin.

Lauren Hartman (Head of Investor Relations)

Thank you, operator. Before we begin, I'll remind you that today's call may contain forward-looking statements and that the forward-looking statement disclaimer included in today's earnings release, available on our investor relations page, also pertains to this call. These forward-looking statements may include, without limitation, predictions, expectations, targets, or estimates regarding our anticipated financial performance, business plans and objectives, future events and developments. Changes in our business, competitive landscape, technological or regulatory environment, and other factors could cause actual results to differ materially from those expressed by our forward-looking statements made today. Our historical results are not necessarily indicative of future performance, and 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. In addition, today's call will include non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margins, and free cash flow.

We use these non-GAAP measures in managing the business and believe they provide useful information to our investors. These measures should be considered in addition to and not as a substitute for our GAAP results. Reconciliations of the non-GAAP measures to their corresponding GAAP measures, where appropriate, can be found in the earnings release available on our website and in our filings with the SEC. Hosting today's call are Zvika Netter, Innovid's co-founder and CEO, as well as Anthony Callini, Innovid's CFO, both of whom will participate in our Q&A session. I will now turn the call over to Zvika to begin.

Zvika Netter (CEO)

Thanks, Lauren, and welcome everyone to our 2024 second quarter's earnings call. Today, I'll review our second quarter results and provide an update regarding our ongoing strategic initiatives and progress in the market. I'll then turn the call over to our Chief Financial Officer, Tony Callini, who will provide further details with respect to our Q2 results and full year 2024 outlook, followed by Q&A. We're proud to deliver another quarter of double-digit growth and improving margin. Revenue grew 10% year-over-year in the second quarter to $38 million. Adjusted EBITDA grew 29% to $5.9 million. Adjusted EBITDA margin increased to 15.5%, up from 13% in the prior year. CTV impressions, our key growth driver, increased by 21% over last year.

The solid business momentum we delivered in the first half of the year keeps us on track to execute against our long-term targets and in line with our full-year financial guidance. Our Adjusted EBITDA margin expansion also demonstrate our ability and commitment to delivering profitable growth while continuing to invest in strategic innovation for the future of CTV. We have made momentous progress since the beginning of 2024, including the launch of our strategic Harmony Initiative and new partnerships with the world-leading players in the market. As we shared last quarter, in April 2024, we launched the Harmony Initiative and product suite. We created Harmony to solve some of the biggest challenges facing CTV advertising today, and to build a better CTV advertising for future of tomorrow.

As TV rapidly transitions to a fully digital future, our aim is to optimize CTV advertising at the infrastructure level, to improve efficiency and ROI, enhance transparency and control, reduce carbon emissions, and provide a better viewing experience for consumers. I am excited to share that we've seen great progress in the last couple of months with clients, publishers, and partners. As part of our Harmony launch in April, we introduced a new product called Harmony Direct, which streamlines the supply path, making it more sustainable and transparent. Supply path optimization helps advertisers ensure more of their dollars go towards working media and helps publishers increase revenue opportunities. The data from our early results have been positive. Our beta partners saw a benefit of up to 15% improved yield and an average increase of 8% in working media.

We are encouraged that more and more forward-thinking industry leaders are adopting Harmony Direct to help address the complexities of the CTV ecosystem. A few weeks ago, we announced that Goodway Group and Vizio joined the Harmony Initiative, alongside previously announced partners like Roku, PMG, Assembly, and the CMI Media Group. In light of the successful results, PMG, an early agency adopter, is now rolling out Harmony Direct across its portfolio of clients. In addition to Harmony Direct, we announced last week that we launched our Harmony Frequency product, the first holistic frequency management solution for CTV and digital advertising. Frequency management remains a consistent challenge for advertisers. Until now, advertisers and media providers have had to separately manage frequency with each publisher or DSP platform. This leads to ads being shown repeatedly to the same audiences and left key audiences underexposed.

Through our ad server, we're able to see every impression, publisher, platform, device, and household across the entire ecosystem on both direct and programmatic media buys. Advertisers adopting Harmony Frequency can now prevent overexposure, maximize budget by reallocating spend to underexposed households, and improve the viewing experience by limiting ad fatigue. We're currently in beta testing for Harmony Frequency with CTV platforms, brand partners, and some of the leading DSPs in the world. We're especially excited to include Yahoo DSP as one of our first two market partners. We anticipate moving to general availability later this year. The strategic importance of the Harmony Initiative, and specifically Harmony Frequency, have been a key topic of discussion among industry leaders. In June, I had the pleasure of attending the Cannes Lions Festival, together with my Innovid colleagues, where we met with leading brands, publishers, and industry partners.

Many of our conversations reaffirmed the long-term potential of our Harmony Initiative and validated our efforts to solve the problems in the CTV industry today. In addition to conversations about Harmony, there were many discussions at Cannes focused on the expanding CTV market. I am very encouraged by these conversations and the elevated strategic position that Innovid holds as a critical and leading player in the industry. To reinforce that point, I am also excited to announce a new strategic collaboration that demonstrate our essential position in the market and the power of the Innovid platform. Earlier this morning, we shared that we are collaborating with Nielsen, a global leader in audience measurement, with the aim of providing a seamless workflow and holistic view of the cross-media ads universe.

By leveraging Innovid's ad serving infrastructure to access Nielsen ONE, Nielsen and Innovid together will provide a seamless workflow, ultimately driving greater usability and coverage for ad measurement. Together, we aim to provide the industry with a holistic, comprehensive view of cross-media ad campaigns. By integrating directly with Nielsen's established currency solution, Innovid will enhance its position as a vital player for TV and digital advertising, opening new avenues for growth. Nielsen and Innovid will be testing the technical integration in the coming months, and we look forward to updating you all on our progress. In addition to this exciting collaboration with Nielsen, we remain committed to investing in Innovid's own measurement solutions, which are used by some of the leading global advertisers and publishers. We also are introducing more and more real-time optimization solutions with Harmony, powered by our evolving measurement solution.

Finally, I am pleased to share some customer wins and expansions from the second quarter. We signed new clients and expanded our relationship with leading brands such as WNBA, Eli Lilly, Lundbeck, Purple Innovation, Habit Burger, and The Wonderful Company. We're particularly excited about the expanded partnership with leading publishers, Amazon and Spectrum. We remain very focused on delivering value for our clients across our suite of products and are committed to driving impact for their businesses. None of these partnerships, accomplishments, or growth would have been possible without a world-class team, which is why I'm proud that Innovid was recently named on Inc's Best Workplaces list of 2024. I want to thank our employees for all their hard work and for creating a workplace that balances innovation and culture. Our unique culture has been a driving force behind our ability to lead industry change.

I am very pleased with the progress we have made so far in 2024. I am excited about our sustained business momentum. Our Harmony Initiative continues to be well-received and adopted by industry leaders. We are well positioned to benefit from the secular CTV trends and are confident in Innovid's underlying business strength. Our second quarter results keep us on track to execute in 2024 and deliver double-digit profitable growth over the long term. With that, I'll ask Tony to take us through the numbers and provide some insights into Q3 and full year expectations. Tony?

Anthony Callini (CFO)

Thank you, Zvika, and good morning, everyone. In addition to the inspiring business progress that Zvika just shared, we're also pleased to report another strong quarter of financial performance. On a year-over-year basis, Q2 marks the third consecutive quarter of double-digit revenue growth, eighth straight quarter of adjusted EBITDA margin expansion, and fourth consecutive quarter of free cash flow improvement. Now, let's dig into the numbers. Second quarter revenue grew 10% year-over-year to $38 million. Breaking that down further, ad serving and personalization revenue was up 11%, while measurement revenue grew 6%. As a percentage of revenue, ad serving and personalization made up 78%, while measurement accounted for 22%. The growth in ad serving and personalization reflects the continued shift to CTV and some level of stabilization in ad spending as compared to last Q2.

In fact, CTV revenue from ad serving and personalization grew 21% over the second quarter of 2023. As a reminder, Innovid's ad serving and personalization revenue closely correlates with ad impression volume served through our platform. Within this category, CTV impression volume increased 21% as more impressions continued to transition to CTV. This is the second consecutive quarter where both CTV impressions and CTV revenue from ad serving and personalization grew by more than 20% on a year-over-year basis. As a percentage of total video impressions, CTV represented 54% as compared to 51% in last Q2. Mobile video volume grew by 13% and represented 35% of all video impressions, while desktop volume decreased by 9% and reflected 11% of all video impressions.

As we've seen over the last few quarters, CTV impressions continued to consistently grow, while mobile and desktop have been more inconsistent. Going forward, we'd expect to see similar trends with both CTV and mobile growing and desktop being less predictable. That said, all three of these devices represent consumers watching streaming applications. So it's also helpful to look at the total video impressions served, which grew 14% overall in the second quarter as compared to the second quarter of 2023. Moving to measurement. The consistent growth in measurement revenue reflects the ongoing value of our measurement capabilities as a key part of the Innovid platform. Not only did measurement revenue grow 6% over last Q2, we also grew 7% sequentially from Q1.

As a measurement business model is more subscription-oriented than the ad-serving business, we see an opportunity to steadily grow the customer base over time and add more committed revenue to our business. We expect our unique ability to combine creative, delivery, and measurement solutions to provide differentiated client value and be a catalyst for continued revenue growth. Further, the Nielsen partnership we announced this morning is another positive data point of the power of our platform for the future of TV measurement. Stepping back and looking at overall revenue performance in Q2, we're proud to have grown revenue double digits for the third consecutive quarter and had 20%+ CTV revenue growth for the second consecutive quarter, all in the midst of an inconsistent macro environment, as some verticals have resumed normal spending levels, while others remain cautious with their advertising spending.

In the second half of the year, we anticipate continued uncertainty, augmented by the U.S. election cycle, which is reflected in our outlook for the remainder of 2024. Now, moving on to costs and expenses. Revenue, less cost of revenue, calculated out to 76% of revenue, improving from 75% in Q2 last year. Our margins continue to improve as the business scales, reflecting the operating leverage embedded in our business model. As we include more automation and AI into our offerings, we expect this to be a continued catalyst for margin expansion. Q2 total operating expenses, excluding depreciation, amortization, and impairment, totaled $37.9 million, an increase of 6% from $35.9 million last year. Employee count at the end of June was 463, as compared with 450 at the end of Q2 2023.

We remain committed to managing our cost base while making strategic investments in high-growth areas to drive improved profitability and generate long-term value creation for our shareholders. Q2 net loss was $10.5 million or a per-share loss of $0.07. This compares with a net loss of $19 million and a per-share loss of $0.14 in Q2 2023. The outstanding common share count at quarter close was 145.8 million shares. Adjusted EBITDA in the second quarter was $5.9 million, a $1.3 million improvement or 29% increase as compared to $4.5 million in Q2 last year. As I mentioned earlier, this is the eighth consecutive quarter of year-over-year adjusted EBITDA margin expansion, as our margin improved to 15.5% this past quarter as compared to 13% last year.

These improvements reflect the impact of sustained revenue growth, lower cost of revenues as a percentage of revenue, and operating costs that grew nominally over the prior year, demonstrating the leverage inherent in our operating model. I'll now turn to the balance sheet and cash flow. We ended Q2 in a strong financial position with $30.6 million in cash and cash equivalents and no outstanding balance on our revolving debt facility. As a reminder, we have $50 million available on that debt facility. On a net cash basis, or to say it another way, cash and cash equivalents, less outstanding revolver balance, the $30.6 million on hand at the end of Q2 2024 is a 31% improvement as compared to the $23.4 million of net cash at the end of Q2 2023.

During the quarter, net cash provided by operating activities was $1.2 million, and free cash flow was a use of $1.3 million, a 38% improvement over the $2 million of free cash flow used in Q2 2023. If we looked at free cash flow on a trailing twelve-month basis, we have seen an improvement of $14 million as compared to the same twelve-month period ended June 30, 2023. Finally, let me touch on our outlook for the third quarter and provide an update for the full year 2024. We are proud of our ability to continue to execute in an uncertain economic environment and are confident in the underlying strength of our business, opportunities for disruption, and ability to grow revenue in a profitable way.

We remain committed to our long-term financial target of 20%+ annual revenue growth and 30%+ adjusted EBITDA margin. As I mentioned earlier, we anticipate continued uncertainty in the second half of 2024, amplified by the current US election cycle. We will continue to monitor ad market dynamics, but have already factored in some level of ongoing uncertainty in our guidance and are reaffirming our full year expectations today. In the third quarter of 2024, we expect total revenue in a range of $40 million-$42 million, representing 13% year-over-year growth at the midpoint. We expect Q3 adjusted EBITDA in a range of $6.5 million-$8.5 million, as compared to $6.5 million in the third quarter of last year.

For the full year, we are reiterating our prior guidance of $156 million-$163 million in revenue, reflecting 14% annual growth at the midpoint, and adjusted EBITDA between $24 million and $29 million. We had another strong quarter of consistent double-digit revenue growth, margin expansion, and free cash flow improvement, putting us another step closer to achieving our long-term targets. We remain encouraged by the secular market dynamics driving CTV growth and new product offerings like Harmony. We continue to invest in long-term sustainable growth while efficiently managing our cost structure and strengthening our financial condition. This concludes our prepared remarks. Zvika and I are now happy to take your questions. Operator, please begin the Q&A session.

Operator (participant)

Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star and then one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and then two, if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. The first question we have is from Matthew Cost of Morgan Stanley. Please go ahead.

Matthew Cost (Executive Director in Equity Research)

Hi, everybody, thanks for taking the questions. I have two. Zvika, you know, you mentioned a couple of new customer wins in the quarter, and I was wondering if you could just walk through kind of the common thread between those new customer wins. What are the pain points that they're seeing that are causing them to work with you? And generally, are they, you know, is the entry point for them, is it on the ad serving side, or are they coming in kind of with a broader group of products?

And then for Tony, just on the guidance for the second half, I think, you know, there's a decent amount of acceleration in terms of just the dollar add sequentially in three Q, and then again in four Q, based on the quarterly and full year guidance you gave. I guess, maybe walk us through the drivers of that and your level of confidence in being able to achieve that sort of sequential acceleration between here and the end of the year. Thank you.

Anthony Callini (CFO)

Zvika, do you want me to take that? I can take the second one first. I think the question around the new customer wins was directed to you. But let me take the one on the sequential guidance going from Q2 to Q3 to Q4. Yeah, Matt, I think, you know, as we looked at the year, I mean, we had always anticipated that this would be a year where momentum would be building, you know, over the course of the year. And I think if you look at the different drivers that we have between you know, volume increases, you know, cross-selling success, upselling success, and those sorts of things, I mean, we're kind of living that as we go through the year.

And so, you know, as we think about the second half, and as we've mentioned, I mean, there's—we're trying to balance some of the, you know, potential uncertainties of just some of the macros and, you know, the election in particular with, you know, some of the more tailwinds that we're seeing. So I think, you know, from our perspective, we feel confident in the full year guidance, you know, pleased with our second quarter results. And, you know, as we look at that sequential uptick from quarter-over-quarter, I mean, that's kind of what we're seeing in the business. And the drivers are, again, kind of volume.

I think you're seeing that, you know, most pronounced in just the CTV specific growth, which is where CTV video impressions and CTV video revenue both grew over 20% for the second straight quarter. So, you know, that is something that we've always said is our primary growth driver. You know, it gets weighed down by some other things, specifically, you know, desktop. Mobile's been a little bit more inconsistent. But you know, that CTV growth of the 20%+ is one of the things that gives us the most confidence.

You know, and as we look out, you know, we really feel strongly like we haven't really seen that inflection point yet, where, you know, there's gonna be a bend in the curve, you know, as things like live sports and more ad-supported streaming come online. And so, you know, our strategy all along has just been to put ourselves in the best position to take advantage of that when that ultimately comes.

Zvika Netter (CEO)

Tony, do you want me to take also the-

Anthony Callini (CFO)

Yeah, you may, you may take the one on the... I think that was directed at you for the, for the new customer wins and if there's any common threads.

Zvika Netter (CEO)

Yep. In terms of the so clearly we are, you know, known for being an ad server, specifically with a focus on CTV, online video, that we support other omnichannels. So in case there's an RFP or somebody's looking for it, wherever there's an RFP, somebody's looking to switch from mainly Google to a more advanced ad server, especially if somebody's a brand, invest more and more in CTV as it grows, they will switch to us or look to switch. So that's the most common. Though we definitely have cases where customer and then from there, we cross-sell and upsell. But we definitely had cases when people with, with brands and agencies, starts with the measurement or DCO on top of, you know, using our products on top of the Google ad server and then eventually switch to Innovid.

And the reason we win, it's basically, by our focus on product, you know, being really the, the best around CTV and video, in terms of the delivery, the creative tools, the measurement. And the other one is neutrality. And I think there was another, development in the, you know, in the suits against Google in terms of antitrust. That is a tailwind for us.

Matthew Cost (Executive Director in Equity Research)

Great. Thank you.

Zvika Netter (CEO)

Thank you.

Operator (participant)

The next question we have is from Shyam Patil of Susquehanna. Please go ahead.

Speaker 7

Good morning. This is Jason on for Shyam. Thank you for taking our questions. Maybe a couple from me. One on new CTV inventory coming into the ecosystem. Can you just talk about the impact that new CTV inventory has had, on the ecosystem and, and maybe how much of a driver Amazon's Prime Video has been for CTV impressions overall? And then one on verticals. Can you dive in more specifically on any vertical trends that you observed in the second quarter? Are there any areas of particular strength or weakness that you would call out? Thank you.

Zvika Netter (CEO)

Sure. So in terms of new inventory, constantly, the inventory, the CTV is growing, you know, in, by two axes, right? So one is, people are spending more and more time, in front of, connected TV, in front of the television, in general, consuming content, through an IP connection, so a connected TV. And at the same time, there are more and more, which is connected, of course, more and more options and more content to watch. Primarily, I would say beyond, you know, Netflix, of course, and Disney+, and HBO and Amazon, investing heavily in the space, live sports is a massive, massive driver because live sports, tends to be exclusive. There's very, you know, unique in, a place where you can consume it, and clearly, it's live, right?

So, that's a huge driver, and we're seeing more and more deals around live sports and CTV, and that drives volume also. And, as Tony mentioned, we saw in the second half... Sorry, in the second quarter, 21% volume increase in terms of the number of ads we delivered year-over-year, and that's given the environment we're in, that's a very nice growth. So that's how it impacts us. In terms of specific, and clearly, you know, in a better environment, we will expect to see even higher numbers. Remember that eventually, we believe 100% of television will all be CTV. So, yeah, so there's still plenty of room for growth in the coming years. In terms of specific verticals, Tony, do you want to take that?

Anthony Callini (CFO)

Yeah, yeah, I can, I can certainly take that. I mean, it, you know, it's continuing the trends that we've, we've seen. Things like CPG and pharma have, have been strong and continue to be strong. You know, auto is an interesting one where, you know, a year ago, that, that was really challenged, and, and we've seen that kind of sequentially improve every quarter, and it, and it continues to do so. So, you know, that's, that's one that makes us, you know, we're, we're pretty bullish on, on auto at this point. You know, at the same time, you know, retail, and, and that's probably not surprising given some of the macro news out there. You know, retail was probably the category this, this quarter that was, that was off the, off the most.

You know, we've had – and I know we've talked about things like, you know, finance, insurance, tech and telecom all being off. I mean, they're kind of a mixed bag there. None of them are really growing, you know, tremendously. Some of them are continuing to decline in small amounts, but I would say that's kind of stabilized. You know, retail is the one that, you know, of the categories that we look at was probably the most disappointing. And again, as I said, I mean, as we're all kind of paying attention to the macro news out there, you know, and seeing similar terms across the retail sector.

But, you know, to end on a positive, I think, you know, auto is the one that continues to strengthen and we feel pretty good about.

Speaker 7

Great. Thank you very much.

Operator (participant)

The next question we have is from Matt Condon of JMP Securities. Please go ahead.

Matt Condon (Director of Equity Research)

Thank you for taking my questions. My first one is just on the strategic collaboration with Nielsen. Can you just talk about what your goal is here and maybe what you expect, what effect do you expect this to have on your platform? And then my, my follow-up is, Tony, just, you know, with, with the Harmony Initiative rolling out, and I think most of the R&D investments are made, can you just talk about maybe what are the investments that you expect going forward, and then, you know, just spend across the OpEx lines, the trend going forward? Thank you so much.

Zvika Netter (CEO)

Thanks, Matt. Clearly, we are extremely excited about the partnership with Nielsen and the plan to partner around integrating our platform with the Nielsen platform. You know, Nielsen is a leading, I think almost a household brand, definitely in this industry, all over the world, around currency for television and measurement of television, kind of the legacy of television, and innovative, extremely focused on the future of television, hence CTV. So the fact that we're joining forces to create a much more streamlined workflow for our customers. So basically, all our customers are also using Nielsen. So to create a better integration, a better workflow between the platforms as we look into the future of measurement for television is something we're extremely proud of and excited, I believe, also together with the Nielsen team.

And we plan to spend the next months, further integrating and exploring ways that, it's pretty clear for us that we can generate additional value for our mutual customers. It's a long-term contributor for growth. Clearly, there's the expectation that there will be a monetary upside, on top of everything else we're doing, but that's definitely in the long term, side of things. I would argue in the short term, it's a clear signal. You know, there's so many—there's several companies in the measurement space and several contenders run currency. Nielsen is leading the currency for TV measurement. Innovid never tried to be a currency.

The fact that they chose us and we chose them to partner and really address all the needs of the industry around measurement of TV and CTV, I believe, goes a long way also in the short term, in terms of potentially influencing or at least signaling to the brands and agencies, who we are, what we do, where we're heading, and that somebody like Nielsen is comfortable to partner with us, towards their core business, which is measurement. The other question, I think, I'll give to Tony.

Anthony Callini (CFO)

Yeah. Yeah, I can take that. I mean, this was the question, if I understand it right, was just kind of broadly about investments, maybe more specifically about investments in Harmony. Yeah, and, you know, Matt, great, great question. We’ve always said that, you know, we’re—the investment in Harmony really was just part of our normal run rate for, you know, for our development team. We’re very blessed that we have a very talented and gifted development team, and, you know, and innovation is in our name, and that’s what we always do.

So, you know, looking at our financials, you can clearly see there is no, you know, significant uptick in R&D as we went through this initiative, and we were able to really kind of support this with the existing team. You know, there's still more, there's still more development work to do. I mean, this is... We're just getting the kind of frequency product into market now, so there's a little bit to do. But I would say overall, zooming out, it's gonna be the same, you know, the same group, and we're gonna continue to kind of focus on driving innovation with the, you know, with the team we have.

In terms of, you know, how to think about spending going forward, you know, and one of the things I've always really loved about this business is just how much leverage there is in the operating model and, you know, is pretty much pure software play. You know, we can scale pretty well, and the unit economics are great. And so, you know, I would imagine that, you know, as we grow, there'll be some growth-oriented investments that we'll make. We've been very thoughtful to not get out ahead of ourselves in terms of investing ahead of revenue. And so, you know, expect more of that as we go forward. And I think that that's reflected in our...

both our results with the EBITDA expansion over the last eight quarters, and then also the long-term targets, which ultimately, you know, we believe we should be able to get to a 30%, 30+% EBITDA margin.

Matt Condon (Director of Equity Research)

Great. Thank you so much.

Anthony Callini (CFO)

Yep.

Operator (participant)

Thank you. The next question we have is from Laura Martin of Needham & Co. Please go ahead.

Laura Martin (Senior Entertainment and Internet Analyst)

Hi, there. Yeah, two questions. One is, one of the big, valuation upsides of Innovid is that, that it serves ads into both walled gardens and into the open internet. But I was curious, do you guys actually serve ads into Amazon Prime Video?

Zvika Netter (CEO)

One question? I think you said... Was there one or two questions, just to make sure?

Laura Martin (Senior Entertainment and Internet Analyst)

Yeah, that's so that's my first one. Do you actually have the right to serve into Amazon Prime Video?

Zvika Netter (CEO)

Yeah.

Laura Martin (Senior Entertainment and Internet Analyst)

I'm curious about that.

Zvika Netter (CEO)

Yes, yes.

Laura Martin (Senior Entertainment and Internet Analyst)

And then my other-

Zvika Netter (CEO)

Okay.

Laura Martin (Senior Entertainment and Internet Analyst)

My other question was on your slide that's called the four growth drivers. I really like this notion that you guys have talked about a lot, where you have a product, and then you're gonna upsell, and you're gonna cross-sell products to get, like, more revenue per customer. And maybe I don't understand Harmony correctly, but I thought Harmony actually called on the sell side clients, the publisher clients, which would mean you really couldn't sell it to your buy side clients. But do I understand the target universe for Harmony incorrectly?

Zvika Netter (CEO)

Okay. First of all, hi, and thank you for the question.

Laura Martin (Senior Entertainment and Internet Analyst)

Hi.

Zvika Netter (CEO)

So I'll take the first one. Amazon, yes, we are not only serving ads into the Amazon platform, we are also, Amazon is also a customer around measurement and other products, and you should definitely expect to see more, even on Harmony, more, between Innovid and, and Amazon. Sometimes people ask, even if we serve ads into YouTube, given the fact that Google owns a competitive ad server, the Google Campaign Manager, and clearly, they own YouTube. And the answer, we also serve there. So without, you know, if you look at our, you know, large customers like General Motors and Verizon, their ads are not gonna be delivered, and then, hence, they're not gonna pay if the ads are not delivered into all these platforms.

So, it's a must that we will actually deliver and then measure everything that goes through our system. And the reason we can do it, because we're not a DSP, and we'll connect us to the Harmony question in a second. Since we're not buying or selling media, we're not buying or selling data, the walled gardens are open to us, as we deliver, you know, billions and billions of impressions, which turns into $ billions of media for those platforms. As to Harmony, sell side, buy side, both. The beautiful Harmony is gonna harmonize the entire industry, and it must create value both for the buy side and the sell side. Actually, a lot of the inefficiency is exactly there.

It's between the buy side and the sell side, whether it's Harmony Direct with supply path optimization, minimizing, you know, the tax that you need to pay along the way and the number of hops, and also it's a greener solution. We just announced frequency, and that is generating more money for publishers, but it's also in that way, that money, when it goes directly to publisher, is then used to work in media. So you're paying, you're paying for more impressions. So from a brand perspective, you spend $1 million by using Harmony Direct, you actually get more of those dollars. Let's say, instead of having only $800,000, $850,000, you can get $950,000.

In working with media, in this case, everybody's happy, but at least the buy side and the sell side are happy. And with the frequency management, same thing, it's the—actually, this one benefits the DSPs. Of course, it benefits the customers. But what we did there, Laura, is, and that's a very recent release, is it's in beta now, and with some of the largest DSPs out there, we announced a partnership with the Yahoo DSP. Basically, what it does, it measures frequency across the entire campaign, walled gardens, open Internet, programmatic, non-programmatic, biddable, non-biddable, and then looks at frequency. In areas where there's over frequency, it caps them, and then when there's under exposure, it actually signals to the DSP to buy those impressions.

So it signals to the industry, to the publishers and DSP, "Stop spending money here, but you should spend more money in this area where they are underexposed." So then, in a way, not in a way, there's way less waste, there's more efficiency, that the customer is not paying a single dollar more than they planned, but certain publishers are getting more demand for certain underexposed audiences. And that's something that only Innovid can do, because we see everything, right? The DSP sees part of it, but the DSP is happy because we're sending them the signal. So the reason we call it Harmony, it's exactly because of this. It's a win-win-win situation. And it sounds odd, but there is actually a way to configure this industry that everybody will make more...

You know, will get more value out of CTV, and hopefully that will drive more faster linear dollars into CTV, which I think, everybody's gonna be happy about.

Laura Martin (Senior Entertainment and Internet Analyst)

Super helpful. Thank you very much.

Zvika Netter (CEO)

Thank you.

Operator (participant)

Ladies and gentlemen, we have reached the end of our question and answer session, and I would like to turn the floor back over to Zvika Netter for any closing comments.

Zvika Netter (CEO)

Thank you. And again, thank you all for joining us today. We're extremely proud of the momentum we saw in the second quarter, where we continue to deliver, you know, profitable double digital, double-digit growth with profitable growth, while we keep investing in things like Harmony Direct and Harmony Frequency Management. And there's a whole roadmap coming ahead of it. More integrations with some of the largest streaming platforms in the world, including some that we didn't mention today, and hopefully we'll mention in the future. We talked about the Nielsen integration and partnership, and with the goal to deliver a lot more value. So doing all of that, while keep increasing quarter after quarter, increasing our EBITDA, and having double-digit growth in an environment like this, is something that we're very proud of.

I wanna thank our employees, our customers, and partners all over the world. Thank you all for joining us today, and we're gonna keep you posted about our progress. Have a great day. Bye.

Operator (participant)

That concludes today's conference. Thank you for joining us. You may now disconnect your lines.