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    INTEGRAL AD SCIENCE HOLDING (IAS)

    Q2 2024 Earnings Summary

    Reported on Aug 1, 2024 (After Market Close)
    Pre-Earnings Price$9.92Last close (Aug 1, 2024)
    Post-Earnings Price$11.38Open (Aug 2, 2024)
    Price Change
    $1.46(+14.72%)

    What went well

    • Strong opportunity from Oracle’s exit: IAS is actively pursuing Oracle’s exiting clients, exemplified by numerous RFPs, signed deals such as with OpenX, and the hiring of over 20 former Oracle employees to accelerate onboarding and integration, positioning IAS to capture incremental revenue as Oracle leaves the market.
    • Robust social media growth through TMQ adoption: The continued expansion of IAS’s TMQ solution, especially on major platforms like Meta where volumes have increased almost 50% since launch, and new partnerships with Snap, Pinterest, and upcoming launches, underscore a scalable revenue driver in international markets.
    • Expanding CTV presence with premium partnerships: IAS’s long-standing and growing involvement in CTV, including partnerships with Netflix and innovations through Publica to provide transparency and frequency capping solutions, supports a strong bull case by addressing the upswing in high-quality, programmatic CTV inventory.

    What went wrong

    • Reliance on Delayed Oracle Integration: Despite securing several Oracle-related wins, substantial incremental revenue is expected to be realized only later (mainly in 2025) after lengthy integration and onboarding—raising near-term uncertainty.
    • Execution Risks for New Product and Channel Expansion: Rapidly scaling offerings such as TMQ on social platforms and CTV verification relies on unproven, aggressive product adoption and execution against strong incumbents; any delays or lower-than-expected uptake could dampen growth.
    • Sensitivity to Broader Advertising Market Conditions: Mixed earnings results across the ad ecosystem and modest tailwinds (e.g., limited impact from the Olympics) underscore the risk that any adverse shift in macro conditions or ad spending could impact overall revenue momentum.

    Q&A Summary

    1. EBITDA Beat
      Q: EBITDA upside details?
      A: Management explained that robust execution and higher-than-expected revenue helped drive an adjusted EBITDA margin of 36%, supported by increased capitalization of internally developed software, delivering a solid beat.

    2. Oracle Opportunity
      Q: Oracle exit impact?
      A: IAS is actively pursuing the Oracle opportunity, having already secured several deals and hiring over 20 ex-Oracle employees; most wins are expected to be realized in 2025 due to integration timelines.

    3. Guidance Assumptions
      Q: Growth guidance assumptions?
      A: Management maintained a steady outlook with 14% revenue growth and expects measurement growth to accelerate while optimization grows at a slightly lower pace, reflecting a cautious balance in drivers.

    4. Meta TMQ & Moat Timing
      Q: Meta TMQ adoption progress?
      A: Strong traction is seen with Meta TMQ—over 50% of social clients now using it—and while revenue from Moat clients is being pursued, most onboarding is expected to extend into 2025.

    5. Social Dynamics
      Q: Social pricing and pre-bid ramp?
      A: The company is benefiting from rapid international adoption on social, driven by improved CPM pricing (up 9%) and vigorous pre-bid solution launches on platforms such as TikTok and LinkedIn, enhancing overall margins.

    6. GTM Adjustments
      Q: Go-to-market strategy shifts?
      A: Sales teams are now engaging both global brands and major agencies, intensifying efforts in the mid-market segment to cross-sell and develop integrated strategies on social.

    7. Publica in CTV
      Q: Publica’s CTV market role?
      A: Publica continues to fill a gap by providing greater transparency and solving frequency capping issues on CTV, with strong growth driven by strategic OEM partnerships like Samsung.

    8. Optimization Visibility
      Q: How's optimization business performing?
      A: The optimization segment shows solid momentum with 11% growth, particularly in finance and CPG, reflecting steady adoption and product uptake.

    9. Pricing Improvement
      Q: What drives CPM pricing increases?
      A: Enhanced product launches such as MFA and Context Control have contributed to a 9% increase in CPM pricing, underlining the strength of IAS’s value proposition.

    10. Ad Market Verticals
      Q: Which ad verticals are strongest?
      A: All verticals contributed positively with notably strong double-digit growth in CPG and retail, underscoring broad-based strength in both measurement and optimization efforts.

    Analyst Coverage

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