Total revenue increased 13% to $113.7 million
Net income of $7.7 million, or $0.05 per share, at a 7% margin; adjusted EBITDA increased to $37.4 million at a 33% margin
NEW YORK, Aug. 3, 2023 /PRNewswire/ — Integral Ad Science Holding Corp. (Nasdaq: IAS), a leading global media measurement and optimization platform, today announced financial results for the second quarter ended June 30, 2023.
“We continue to execute on our growth strategy with results for the second quarter ahead of our prior expectations,” said Lisa Utzschneider, CEO of IAS. “We are leading with innovation as we scale our products to new markets with our platform partners and unlock valuable insights with increasingly actionable data. Our global business momentum continues with several new brand logos added recently.”
Second Quarter 2023 Financial Highlights
Total revenue was $113.7 million, a 13% increase compared to $100.3 million in the prior-year period.Optimization revenue (f/k/a programmatic) was $52.8 million, a 10% increase compared to $47.9 million in the prior-year period.Measurement revenue (f/k/a advertiser direct) was $44.9 million, a 23% increase compared to $36.6 million in the prior-year period.Publisher revenue (f/k/a supply side) was $15.9 million, a 1% increase compared to $15.8 million in the prior-year period.International revenue, excluding the Americas, was $34.7 million, a 10% increase compared to $31.6 million in the prior-year period, or 30% of total revenue for the second quarter of 2023.Gross profit was $89.8 million, a 9% increase compared to $82.2 million in the prior-year period. Gross profit margin was 79% for the second quarter of 2023.Net income was $7.7 million, or $0.05 per share, compared to net income of $2.0 million, or $0.01 per share, in the prior-year-period. Net income margin was 7% for the second quarter of 2023. Net income for the second quarter of 2023 includes $23.5 million of stock-based compensation expense related to return-target options as well as an income tax benefit of $29.1 million in the period.Adjusted EBITDA* increased to $37.4 million, an 18% increase compared to $31.6 million in the prior-year period. Adjusted EBITDA* margin was 33% for the second quarter of 2023.Cash and cash equivalents were $98.8 million at June 30, 2023.
Recent Business Highlights
TikTok Expansion – During the quarter, IAS announced a significant expansion with TikTok of its Total Media Quality (TMQ) brand safety and suitability measurement product. TMQ is now available to advertisers in more than 30 markets.Meta Partnership – In June, IAS rolled out Viewability measurement tools for Facebook and Instagram Reels. IAS will now provide viewability and invalid traffic measurement (IVT) for Meta’s rapidly growing Reels video feed inventory.Google Video Partners (GVP) Integration – In July, IAS expanded its TMQ solution for GVP. IAS is first-to-market providing GARM-aligned brand safety and suitability measurement on GVP inventory.YouTube Shorts Integration – In July, IAS expanded its measurement capabilities to YouTube Shorts. IAS will provide viewability and IVT measurement for YouTube Shorts’ inventory.Roku Integration – IAS announced a partnership with Roku to help advertisers accelerate their shift to TV streaming with confidence. IAS integrated its IVT pre-bid filters on Roku’s OneView DSP. In addition, IAS supports Roku’s Advertising Watermark to combat device spoofing on CTV.IRIS.TV Partnership – IAS partnered with IRIS.TV to launch TMQ for CTV brand safety and suitability, the industry’s first video-level brand suitability measurement for CTV. IAS will provide marketers with reporting on CTV buys aligned to the GARM framework.MRC Accreditation – IAS received the industry’s first accreditation for CTV viewable impressions from the Media Rating Council (MRC). IAS is the only company to date to have earned this accreditation as well as also receiving MRC accreditation for CTV-rendered impressions.Criteo Partnership – IAS announced a first-to-market partnership with Criteo. IAS will enable onsite viewability and IVT measurement across Criteo’s network of retail media partners.Uber Integration – IAS is partnering with Uber’s advertising division to validate performance and effectiveness of Journey Ads campaigns on Uber’s mobility platform. IAS will verify viewability, fraud, and brand safety to bring further transparency to Uber’s brand clients.Anzu Expansion – IAS strengthened its partnership with Anzu to provide the industry’s first independent measurement solution for 3D in-game advertising.Strategic Hire – IAS announced the appointment of Sam Cox as Senior Vice President of Product Management. Cox oversees global product strategy and execution for IAS’s programmatic and optimization solutions. He brings nearly two decades of experience in advertising technology and exchange-based trading and joins IAS most recently from Amazon and Google. IAS also announced separately that Tom Sharma, Chief Product Officer, departed IAS effective August 3rd.
Financial Outlook
“Our financial performance in the second quarter reflects our ability to meet our customers’ needs with diverse offerings across the digital media ecosystem,” said Tania Secor, CFO of IAS. “We expanded our margins during the quarter while investing in key growth areas. We continued to generate strong cash flow, which enabled us to pay down $20 million of debt in the period. We are on track to deliver a healthy mix of revenue growth and profitability for the full year.”
IAS is introducing the following financial outlook for the third quarter of 2023 and increasing the midpoint of its full year 2023 outlook for revenue and adjusted EBITDA:
Third Quarter Ending September 30, 2023:
Total revenue of $112 million to $114 millionAdjusted EBITDA* of $35 million to $37 million
Year Ending December 31, 2023:
Total revenue of $459 million to $465 millionAdjusted EBITDA* of $149 million to $153 million
* See “Supplemental Disclosure Regarding Non-GAAP Financial Information” section herein for an explanation of these measures. IAS is unable to provide a reconciliation for forward-looking guidance of Adjusted EBITDA and corresponding margin to net income (loss), the most closely comparable GAAP measures without unreasonable effort, because certain material reconciling items, such as depreciation and amortization, interest expense, income tax expense (benefit) and acquisition, restructuring and integration expenses, cannot be estimated due to factors outside of IAS’s control and could have a material impact on the reported results. However, IAS estimates stock-based compensation expense for the third quarter of 2023 in the range of $13.0 million to $14.0 million and for the full year 2023 in the range of $80.0 million to $82.0 million.
INTEGRAL AD SCIENCE HOLDING CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
June 30,
2023
December 31,
2022
ASSETS
Current assets:
Cash and cash equivalents
$ 98,799
$ 86,877
Restricted cash
70
45
Accounts receivable, net
73,187
67,884
Unbilled receivables
39,460
41,550
Prepaid expenses and other current assets
11,766
24,761
Due from related party
20
29
Total current assets
223,302
221,146
Property and equipment, net
3,837
2,412
Internal use software, net
31,746
23,642
Intangible assets, net
198,273
217,558
Goodwill
674,866
674,094
Operating lease right-of-use assets
23,572
22,787
Deferred tax asset, net
1,743
2,020
Other long-term assets
4,711
5,024
Total assets
$ 1,162,050
$ 1,168,683
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses
$ 50,322
$ 60,799
Due to related party
13
122
Deferred revenue
431
99
Operating lease liabilities, current
7,982
6,749
Total current liabilities
58,748
67,769
Net deferred tax liability
7,972
45,495
Long-term debt
193,493
223,262
Operating lease liabilities, non-current
22,461
22,875
Other long-term liabilities
1,162
1,066
Total liabilities
283,836
360,467
Commitments and Contingencies (Note 13)
Stockholders’ Equity
Preferred Stock, $0.001 par value, 50,000,000 shares authorized at June 30, 2023; 0
shares issued and outstanding at June 30, 2023 and December 31, 2022.
—
—
Common Stock, $0.001 par value, 500,000,000 shares authorized, 156,279,075 and
153,990,128 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively.
156
154
Additional paid-in-capital
867,490
810,186
Accumulated other comprehensive loss
(1,971)
(2,899)
Retained earnings
12,539
775
Total stockholders’ equity
878,214
808,216
Total liabilities and stockholders’ equity
$ 1,162,050
$ 1,168,683
INTEGRAL AD SCIENCE HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
Three Months Ended June 30,
Six Months Ended June 30,
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
2023
2022
2023
2022
Revenue
$ 113,651
$ 100,328
$ 219,743
$ 189,570
Operating expenses:
Cost of revenue (excluding depreciation and amortization shown below)
23,819
18,132
45,501
34,693
Sales and marketing
31,702
26,691
57,962
49,771
Technology and development
21,110
17,624
36,639
34,611
General and administrative
42,339
19,137
63,062
35,932
Depreciation and amortization
13,521
12,510
26,346
24,968
Foreign exchange gain, net (1)
(631)
(512)
(1,147)
(561)
Total operating expenses
131,860
93,582
228,363
179,414
Operating income (loss)
(18,209)
6,746
(8,620)
10,156
Interest expense, net
(3,221)
(1,814)
(6,638)
(3,240)
Net income (loss) before income taxes
(21,430)
4,932
(15,258)
6,916
Benefit (provision) from income taxes
29,107
(2,971)
26,081
(3,796)
Net income
$ 7,677
$ 1,961
$ 10,823
$ 3,120
Net income per share – basic and diluted
$ 0.05
$ 0.01
$ 0.07
$ 0.02
Weighted average shares outstanding:
Basic
155,425,264
155,140,684
155,267,531
154,812,037
Diluted
162,634,310
156,973,684
160,850,434
157,309,858
Other comprehensive income (loss):
Foreign currency translation adjustments
(221)
(6,996)
928
(7,970)
Total comprehensive income (loss)
$ 7,456
$ (5,035)
$ 11,751
$ (4,850)
(1) Prior period amounts have been reclassified to conform to current period presentation.
Stock-Based Compensation
(UNAUDITED)
(IN THOUSANDS)
Three Months Ended,
Six Months Ended,
June 30, 2023
June 30, 2022
June 30, 2023
June 30, 2022
Cost of revenue
$ 126
$ 101
$ 210
$ 157
Sales and marketing
8,258
3,662
12,145
6,193
Technology and development
7,362
2,276
10,532
3,811
General and administrative
24,689
4,682
28,854
8,699
Total stock-based compensation
$ 40,435
$ 10,721
$ 51,741
$ 18,860
During the three months ended June 30, 2023, with the filing of a “shelf” registration statement on Form S-3, the market condition and the implied performance condition relating to the Return-Target Options were deemed to be probable and the Company recognized $23,450 of stock-based compensation expense for such options. Included within total stock-based compensation for the three and six months ended June 30, 2023 is the below expense related to Return-Target Options:
(IN THOUSANDS)
Stock based
compensation
for Return-Target
options
Cost of revenue
$ —
Sales and marketing
2,099
Technology and development
2,568
General and administrative
18,783
Total stock-based compensation
$ 23,450
INTEGRAL AD SCIENCE HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(UNAUDITED)
Three Months Ended June 30, 2023
Common Stock
(IN THOUSANDS, EXCEPT SHARES)
Shares
Amount
Additional
paid-in
capital
Accumulated
other
comprehensive loss
Retained
earnings
Total
stockholders’
equity
Balance, April 1, 2023
154,811,980
$ 154
$ 824,498
$ (1,750)
$ 4,862
$ 827,764
RSUs and MSUs vested
1,218,542
2
—
—
—
2
Option exercises
248,553
—
2,878
—
—
2,878
Stock-based compensation
—
—
40,114
—
—
40,114
Foreign currency translation adjustment
—
—
—
(221)
—
(221)
Net income
—
—
—
—
7,677
7,677
Balance, June 30, 2023
156,279,075
$ 156
$ 867,490
$ (1,971)
$ 12,539
$ 878,214
Six Months Ended June 30, 2023
Common Stock
(IN THOUSANDS, EXCEPT SHARES)
Shares
Amount
Additional
paid-in
capital
Accumulated
other
comprehensive loss
Retained
earnings
Total
stockholders’
equity
Balance, January 1, 2023
153,990,128
$ 154
$ 810,186
$ (2,899)
$ 775
$ 808,216
RSUs and MSUs vested
1,590,282
2
—
—
—
2
Option exercises
587,502
—
4,993
—
—
4,993
ESPP purchase
111,163
—
882
—
—
882
Stock-based compensation
—
—
51,429
—
—
51,429
Foreign currency translation adjustment
—
—
—
928
—
928
Adoption of ASC 326, net of tax
—
—
—
—
941
941
Net income
—
—
—
—
10,823
10,823
Balance, June 30, 2023
156,279,075
$ 156
$ 867,490
$ (1,971)
$ 12,539
$ 878,214
Three Months Ended June 30, 2022
Common Stock
(IN THOUSANDS, EXCEPT UNITS AND SHARES)
Shares
Amount
Additional
paid-in
capital
Accumulated
other
comprehensive loss
Accumulated
deficit
Total
stockholders’
equity
Balance, April 1, 2022
155,016,271
$ 155
$ 792,616
$ (1,289)
$ (13,441)
$ 778,041
RSUs vested
277,119
—
—
—
—
—
Option exercises
205,314
—
850
—
—
850
Stock-based compensation
—
—
10,709
—
—
10,709
Foreign currency translation adjustment
—
—
—
(6,996)
—
(6,996)
Net income
—
—
—
—
1,961
1,961
Balance, June 30, 2022
155,498,704
$ 155
$ 804,175
$ (8,285)
$ (11,479)
$ 784,566
Six Months Ended June 30, 2022
Common Stock
(IN THOUSANDS, EXCEPT UNITS AND SHARES)
Shares
Amount
Additional
paid-in
capital
Accumulated
other
comprehensive loss
Accumulated
deficit
Total
stockholders’
equity
Balance, January 1, 2022
154,398,495
$ 154
$ 781,951
$ (315)
$ (14,600)
$ 767,190
RSUs vested
289,213
—
—
—
—
—
Option exercises
810,996
1
3,381
—
—
3,382
Stock-based compensation
—
—
18,843
—
—
18,843
Foreign currency translation adjustment
—
—
—
(7,970)
—
(7,970)
Net income
—
—
—
—
3,120
3,120
Balance, June 30, 2022
155,498,704
$ 155
$ 804,175
$ (8,285)
$ (11,479)
$ 784,566
INTEGRAL AD SCIENCE HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended June 30,
(IN THOUSANDS)
2023
2022
Cash flows from operating activities:
Net income
$ 10,823
$ 3,120
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization
26,346
24,968
Stock-based compensation
51,741
18,860
Foreign currency gain, net
(1,239)
—
Deferred tax benefit
(37,535)
(728)
Amortization of debt issuance costs
232
232
Allowance for credit losses
1,254
485
Impairment of assets
—
49
Changes in operating assets and liabilities:
Increase in accounts receivable
(4,483)
(9,654)
Decrease in unbilled receivables
2,272
1,639
Decrease (increase) in prepaid expenses and other current assets
12,619
(4,560)
Decrease (increase) in operating leases, net
25
(223)
Decrease (increase) in other long-term assets
4
(326)
Decrease in accounts payable and accrued expenses
(10,225)
(10,986)
Increase in deferred revenue
350
221
Increase (decrease) in due to/from related party
(118)
108
Net cash provided by operating activities
52,066
23,205
Cash flows from investing activities:
Payment for acquisitions, net of acquired cash
—
(1,604)
Purchase of property and equipment
(1,810)
(460)
Acquisition and development of internal use software and other
(14,928)
(6,124)
Net cash used in investing activities
(16,738)
(8,188)
Cash flows from financing activities:
Proceeds from the Revolver
75,000
—
Repayment of long-term debt
(105,000)
(10,000)
Repayment of short-term debt
—
(1,885)
Proceeds from exercise of stock options
4,993
3,381
Cash received from Employee Stock Purchase Program
1,409
—
Net cash used in financing activities
(23,598)
(8,504)
Net increase in cash, cash equivalents and restricted cash
11,730
6,513
Effect of exchange rate changes on cash, cash equivalents and restricted cash
(142)
(2,246)
Cash, cash equivalents and restricted cash at beginning of period
89,671
76,078
Cash, cash equivalents and restricted cash at end of period
$ 101,259
$ 80,345
Supplemental Disclosures:
Cash paid during the period for:
Interest
$ 5,862
$ 3,025
Taxes
$ 5,609
$ 10,098
Non-cash investing and financing activities:
Property and equipment acquired included in accounts payable
$ 140
$ 338
Internal use software acquired included in accounts payable
$ 1,159
$ 1,130
Lease liabilities arising from right of use assets
$ 30,443
$ 28,222
Supplemental Disclosure Regarding Non-GAAP Financial Information
We use supplemental measures of our performance, which are derived from our consolidated financial information, but which are not presented in our consolidated financial statements prepared in accordance with GAAP. Adjusted EBITDA is the primary financial performance measure used by management to evaluate our business and monitor ongoing results of operations. Adjusted EBITDA is defined as income before depreciation and amortization, stock-based compensation, interest expense, income taxes, acquisition, restructuring and integration costs, foreign exchange gain, net, asset impairments, and other one-time, non-recurring costs. Adjusted EBITDA margin represents the adjusted EBITDA for the applicable period divided by the revenue for that period presented in accordance with GAAP.
We use non-GAAP financial measures to supplement financial information presented on a GAAP basis. We believe that excluding certain items from our GAAP results allows management to better understand our consolidated financial performance from period to period and better project our future consolidated financial performance as forecasts are developed at a level of detail different from that used to prepare GAAP-based financial measures. Moreover, we believe these non-GAAP financial measures provide our shareholders with useful information to help them evaluate our operating results by facilitating an enhanced understanding of our operating performance and enabling them to make more meaningful period-to-period comparisons. Although we believe these measures are useful to investors and analysts for the same reasons they are useful to management, as discussed below, these measures are not a substitute for, or superior to, U.S. GAAP financial measures or disclosures. Our non-GAAP financial measures may not be comparable to similarly titled measures of other companies. Other companies, including companies in our industry, may calculate non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes.
Reconciliations of historical Adjusted EBITDA to its most directly comparable GAAP financial measure, net income/loss, are presented below. We encourage you to review the reconciliations in conjunction with the presentation of the non-GAAP financial measures for each of the periods presented. In future fiscal periods, we may exclude such items and may incur income and expenses similar to these excluded items.
Reconciliation of Adjusted EBITDA
Three Months Ended June 30,
Six Months Ended June 30,
(in thousands)
2023
2022
2023
2022
Net income
$ 7,677
$ 1,961
$ 10,823
$ 3,120
Depreciation and amortization
13,521
12,510
26,346
24,968
Stock-based compensation
40,435
10,721
51,741
18,860
Interest expense, net
3,221
1,814
6,638
3,240
Provision (benefit) from income taxes
(29,107)
2,971
(26,081)
3,796
Acquisition, restructuring and integration costs
809
2,129
1,621
2,878
Foreign exchange gain, net(1)
(631)
(512)
(1,147)
(512)
Asset impairments and other costs
1,469
—
1,506
49
Adjusted EBITDA
$ 37,394
$ 31,594
$ 71,447
$ 56,399
Revenue
$ 113,651
$ 100,328
$ 219,743
$ 189,570
Net income margin
7 %
2 %
5 %
2 %
Adjusted EBITDA margin
33 %
31 %
33 %
30 %
(1)
The adjustment for foreign exchange gain, net, was effective for the three months ended June 30, 2022 and periods thereafter. Adjusted EBITDA has not been recast for this adjustment for periods prior to June 30, 2022, because such adjustments would have been immaterial in such periods.
Conference Call and Webcast Information
IAS will host a conference call and live webcast to discuss its second quarter 2023 financial results today at 5:00 p.m. ET. To access the live webcast and conference call dial-in, please register under the “News & Events” section of IAS’s investor relations website. A replay will be available on IAS’s investor relations website following the live call: https://investors.integralads.com.
About Integral Ad Science
Integral Ad Science (IAS) is a leading global media measurement and optimization platform that delivers the industry’s most actionable data to drive superior results for the world’s largest advertisers, publishers, and media platforms. IAS’s software provides comprehensive and enriched data that ensures ads are seen by real people in safe and suitable environments, while improving return on ad spend for advertisers and yield for publishers. Our mission is to be the global benchmark for trust, safety, and transparency in digital media quality. For more information, visit integralads.com.
Forward-Looking Statements
This earnings press release contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact included in this press release are forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “will,” “should,” “can have,” “likely,” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. For example, all statements we make relating to our estimated and projected costs, expenditures, cash flows, growth rates and financial results or our plans and objectives for future operations, growth initiatives, or strategies are forward-looking statements. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected, including: (i) the adverse effect on our business, operating results, financial condition, and prospects from various macroeconomic factors including inflation, rising interest rates, potential recession, instability in geopolitical or market conditions generally and instability in the financial markets and banking industry; (ii) our dependence on the overall demand for advertising; (iii) a failure to innovate or make the right investment decisions; (iv) our failure to maintain or achieve industry accreditation standards; (v) our ability to compete successfully with our current or future competitors in an intensely competitive market; (vi) our dependence on integrations with advertising platforms, demand-side providers (“DSPs”) and proprietary platforms that we do not control; (vii) our international expansion; (viii) our ability to expand into new channels; (ix) our ability to sustain our profitability and revenue growth rate decline; (x) risks that our customers do not pay or choose to dispute their invoices; (xi) risks of material changes to revenue share agreements with certain DSPs; (xii) the impact that any future acquisitions, strategic investments, or alliances may have on our business, financial condition, and results of operations; (xiii) interruption by man-made problems such as terrorism, computer viruses, or social disruption impacting advertising spending; (xiv) the risk of failures in the systems and infrastructure supporting our solutions and operations; and (xv) other factors disclosed in our filings with the SEC. Given these factors, as well as other variables that may affect our operating results, you should not rely on forward-looking statements, assume that past financial performance will be a reliable indicator of future performance, or use historical trends to anticipate results or trends in future periods.
We derive many of our forward-looking statements from our operating budgets and forecasts, which are based on many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. The forward-looking statements included in this press release are made only as of the date hereof. We undertake no obligation to update or revise any forward- looking statement as a result of new information, future events or otherwise, except as otherwise required by law.
Investor Contact:
Jonathan Schaffer / Lauren Hartman
ir@integralads.com
Media Contact:
press@integralads.com
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SOURCE Integral Ad Science, Inc.